<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
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<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
For the fiscal year ended DECEMBER 25, 1999
OR
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<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
For the transition period from ______________ to ______________
Commision file number 0-3701
VALMONT INDUSTRIES, INC.
-----------------------------------------------------------
(Exact name if registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 47-0351813
--------------------------------------------------- -------------------------------
State or other jurisdiction of Incorporation or organization (I.R.S. Employer Identification No.)
ONE VALMONT PLAZA, OMAHA, NEBRASKA 68154-5215
--------------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (402) 963-1000
Securities registered pursuant to Section 12(g) of the Act:
<TABLE>
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Title of each class
COMMON STOCK $1.00 PAR VALUE NASDAQ (SYMBOL VALM)
- --------------------------------------------- ---------------------------------------------
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 ninety 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 March 3, 2000 there were outstanding 23,316,298 common shares of the
Company. The aggregate market value of the voting stock held by non-affiliates
of the Company on March 3, 2000 was $229,701,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's annual report to shareholders for the fiscal year
ended December 25, 1999 (the "Annual Report") are incorporated by reference in
Parts I and II, and portions of the Company's proxy statement for its annual
meeting of shareholders to be held on April 26, 2000 (the "Proxy Statement") are
incorporated by reference in Part III.
Index to Exhibits, Page 13
<PAGE>
VALMONT INDUSTRIES, INC.
Annual Report Pursuant to Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Fiscal Year Ended December 25, 1999
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C> <C>
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 5
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 6
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 7
Item 6. Selected Financial Data..................................... 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 7
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 7
Item 8. Financial Statements and Supplementary Data................. 7
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 7
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 8
Item 11. Executive Compensation...................................... 8
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 8
Item 13. Certain Relationships and Related Transactions.............. 8
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
10-K...................................................... 8
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS.
(A) GENERAL DESCRIPTION OF BUSINESS
Valmont Industries, Inc., a Delaware Corporation, was incorporated as a
Nebraska corporation on March 8, 1946. Subsequently the Company changed its
state of incorporation to be under the laws of Delaware in 1974 and together
with its subsidiaries (the "Company" or "Valmont") is engaged in the
Infrastructure and Irrigation businesses. The description of Valmont's
businesses set forth on pages 8 through 25 of the Company's 1999 Annual Report
is incorporated herein by reference. The Company entered the Irrigation market
in 1953 from its manufacturing location in Valley, Nebraska. The Infrastructure
segment began producing and marketing engineered metal structures in the early
1960's.
Valmont has grown internally and by acquisition and has also divested
certain businesses. Valmont's business expansions during the past five years
include (i) the acquisition of Microflect Company, Inc. in 1995, a manufacturer
and installer of microwave communication structures, (ii) the 1996 acquisitions
of TelecCentre, S.A., a French manufacturer of communication towers, and of
Valmont Mastbau, KG, a German manufacturer and distributor of pole structures
for the lighting market, (iii) the 1997 construction of a new galvanizing plant
in West Point, Nebraska, (iv) the 1997 formation of a 70% owned joint venture
with a Brazilian manufacturer of mechanized irrigation equipment, (v) the
acquisition of two galvanizing facilities in Tualatin, Oregon and in Lindon,
Utah in January of 1998, (vi) the expansion during 1998 of facilities in
Siedlce, Poland, (vii) the acquisition during 1998 of two additional galvanizing
facilities in Long Beach, California and Tulsa, Oklahoma and the purchase of
Cascade Earth Sciences, Ltd., a firm providing consulting services for
environmental and wastewater management projects headquartered in Albany,
Oregon, (viii) investment in two retail irrigation outlets during 1999 in
California and Colorado, (ix) the 1999 investment in an irrigation manufacturing
facility in McCook, Nebraska and (x) the first quarter 2000 acquisitions of
three coatings facilities and an aluminum pole manufacturing plant. Divestitures
during the past five years include the January 1997 cash sale of the stock of
Valmont Electric, Inc., a lighting ballast manufacturing business and the first
quarter 1999 sale of stock of an investment in an irrigation technology
development business.
(B) OPERATING SEGMENTS
During the first quarter of 1999 the Company reorganized its businesses on a
worldwide product line basis. Accordingly the 1997 and 1998 segment information
has been reclassified to conform to the 1999 presentation. The Company has two
reportable segments:
IRRIGATION: This segment consists of the manufacture and distribution of
agricultural irrigation equipment, tubular products and related parts and
services; and
INFRASTRUCTURE: This segment includes the manufacture and distribution of
engineered metal structures and coating services for the lighting, utility and
wireless communications industries.
In addition to these two reportable segments, the Company has other
businesses that individually are not more than 10% of consolidated sales.
Amounts of revenues, operating income and total assets attributable to each
Segment information for each of the last three years is set forth on page 49 of
the Annual Report and incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED.
The information called for by this item is incorporated by reference to
pages 8 through 25 in the Company's Annual Report.
3
<PAGE>
SUPPLIERS AND AVAILABILITY OF RAW MATERIALS.
Hot rolled steel coil, zinc and other carbon steel products are the primary
raw materials utilized in the manufacture of finished products for the
Infrastructure and Irrigation segments. These essential items are purchased from
steel mills, zinc producers and steel service centers and are readily available.
It is not likely that key raw materials would be unavailable for extended
periods.
PATENTS, LICENSES, FRANCHISES AND CONCESSIONS.
Valmont has a number of patents for its manufacturing machinery, poles and
irrigation designs. The Company also has a number of registered trademarks.
Management believes the loss of any individual patent would not have a material
adverse effect on the financial condition of the Company.
SEASONAL FACTORS IN BUSINESS.
Sales can be somewhat seasonal based upon the agricultural growing season
and the infrastructure construction season.
CUSTOMERS.
The Company is not dependent for a material part of its business upon a
single customer, or upon very few customers, the loss of any one of which would
have a material adverse effect on the financial condition of the Company.
BACKLOG.
The backlog of orders for the principal products manufactured and marketed
was approximately $129.9 million at the end of the 1999 fiscal year and $106.3
million at the close of 1998. It is anticipated that most of the backlog of
orders will be filled during fiscal year 2000. At year-end, the backlog by
segment was as follows (dollar amounts in millions):
<TABLE>
<CAPTION>
DEC. 25, DEC. 26,
1999 1998
--------- ---------
<S> <C> <C>
Infrastructure.............................................. $100.2 79.8
Irrigation.................................................. 23.1 21.1
Other....................................................... 6.6 5.4
------ -----
$129.9 106.3
====== =====
</TABLE>
COMPETITIVE CONDITIONS.
In the Infrastructure segment, Valmont is a major manufacturer and supplier
of engineered metal structures to the lighting and traffic, utility and wireless
communication industries and supplies custom coating services. The Irrigation
segment involves the development, manufacture and distribution of mechanized
irrigation equipment, tubular steel products and related products for both the
U.S. and international markets. The Company manufactures and distributes
pressure vessels, machine tool accessories and industrial fasteners. The Company
has significant competitors in each of its industry segments. The key
competitive strategy used by the Company in each segment is one of high quality
and service.
RESEARCH ACTIVITIES.
The information called for by this item is incorporated by reference to the
"Research and Development" on page 48 in the Company's Annual Report.
4
<PAGE>
ENVIRONMENTAL DISCLOSURE.
The Company is subject to various federal, state and local laws and
regulations pertaining to environmental protection and the discharge of
materials into the environment. Although the Company continues to incur expenses
and to make capital expenditures related to environmental protection, it does
not anticipate that future expenditures will materially impact the financial
condition of the Company.
NUMBER OF EMPLOYEES.
At December 25, 1999, the Company had 3,948 employees.
GEOGRAPHIC AREAS.
Valmont's international sales activity encompasses over one hundred foreign
countries. The information called for by this item is incorporated by reference
to "Summary by Geographical Area" on page 49 in the Annual Report.
ITEM 2. PROPERTIES
The Company's corporate headquarters are located in a leased facility in
Omaha, Nebraska. The headquarters and principal operating locations of each
business are set forth on the following list of "Valmont Locations." Some
locations have shared facilities.
Most principal manufacturing facilities are held in fee. However, certain
parcels of land and machinery and buildings are leased. A map depicting
27 plants can be found on pages 6 and 7 in the Annual Report.
VALMONT LOCATIONS
A. INFRASTRUCTURE SEGMENT
POLES DIVISION
Headquarters in Valley, Nebraska.
12 plants operated in Nebraska, Texas, Oklahoma, Indiana (all owned), Utah,
Canada, France, the Netherlands, Germany, Poland and China (leased).
COMMUNICATION DIVISION
Headquarters at the Salem, Oregon facility which is leased.
Manufacturing capabilities located in Nebraska, Oregon, Texas, France (all
owned), Brazil and China(both leased). Sales and engineering located in
Nebraska (owned) and Oregon (leased).
COATINGS DIVISION
Headquarters in Valley, Nebraska.
Six processing facilities in California, Nebraska, Oklahoma, Oregon, and
Utah. Facilities in Nebraska and Oklahoma are owned with real estate being
leased at the other sites.
5
<PAGE>
B. IRRIGATION SEGMENT
IRRIGATION SYSTEM AND PARTS DIVISION
Headquarters and sales offices in Valley, Nebraska.
Five manufacturing facilities in Nebraska, Spain, Brazil (leased facility)
and South Africa (leased facility).
RETAIL DIVISION
Headquarters in Valley, Nebraska.
Three sales facilities leased in California, Colorado and Washington.
ENVIRONMENTAL ENGINEERING DIVISION
Headquarters in Albany, Oregon.
Eight offices providing water and soil management services in Idaho,
Washington, Oregon (leased) and Nebraska (owned).
TUBING DIVISION
Headquartered in Valley, Nebraska.
One plant in Nebraska (owned).
C. OTHER
INDUSTRIAL PRODUCTS DIVISION
Headquarters in Valley, Nebraska.
Three manufacturing plants in Oklahoma (owned), Oregon and France (both
leased).
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to, nor is any of its property subject to, any
material legal proceedings. The Company is from time to time engaged in routine
litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stockholders during the fourth
quarter of 1999.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company at December 25, 1999, their ages,
positions held, and the business experience of each during the past five years
are, as follows:
Mogens C. Bay, Age 51, Chairman and Chief Executive Officer of the Company
since January 1997. President and Chief Executive Officer of the Company from
August 1993 to December 1996 and Director of the Company since October 1993.
Vincent T. Corso, Age 52, Senior Vice President and Chief Operating Officer
of the Company since September of 1998. Group President and Chief Operating
Officer--Irrigation & Coatings Group of the Company from December 1996 until
September 1998. Vice President--Operations from June 1994 until December 1996.
6
<PAGE>
Thomas P. Egan, Jr., Age 51, Vice President, Corporate Counsel and Secretary
of the Company since 1984.
Terry J. McClain, Age 52, Senior Vice President and Chief Financial Officer
since January 1997. Previously Vice President and Chief Financial Officer of the
Company from January 1994 until December 1996.
E. Robert Meaney, Age 52, Senior Vice President--International since
September 1998. President and Chief Operating Officer--Valmont International
from February 1994 to September 1998.
Brian C. Stanley, Age 57, Vice President--Controller of the Company since
January 1994.
Mark E. Treinen Age 44, Vice President--Business Development since January
1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information called for by items 5, 6 and 7 is incorporated by reference
to the following captioned paragraphs (at the pages indicated) in the Company's
Annual Report:
<TABLE>
<CAPTION>
PAGE(S)
IN
ANNUAL
ITEM CAPTION IN ANNUAL REPORT REPORT
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5 Stock Trading............................................... 52
5 Stock Market Price and Dividends Declared................... 50
5 Approximate Number of Shareholders.......................... 38 - 39
5&6 Selected Eleven Year Financial Data......................... 38 - 39
7 Management's Discussion and Analysis........................ 33 - 37
</TABLE>
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by item 7A is incorporated by reference to the
captioned paragraph, "Risk Management", in the Company's Annual Report on
Page 36.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements called for by this item are incorporated by
reference to the Company's Annual Report as set forth on pages 40 through 49,
together with the independent auditors' report on page 51. The supplemental
quarterly financial information is incorporated herein by reference to page 50
of the Company's Annual Report
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
7
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except for the information relating to the executive officers of the Company
set forth in Part I of this 10-K Report, the information called for by
items 10, 11, 12 and 13 is incorporated by reference to the sections entitled
"Certain Shareholders", "Election of Directors", "Summary Compensation Table",
"Stock Option Grants in Fiscal Year 1999", "Options Exercised in Fiscal Year
1999 and Fiscal Year End Values", and "Long-Term Incentive Plans" in the
Company's Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
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(a)(1)(2) FINANCIAL STATEMENTS AND SCHEDULES.
See index to financial statements and schedules on
page F-1.
(a)(3) EXHIBITS.
See exhibit index, incorporated herein by reference.
(b) REPORTS ON FORM 8-K.
The Company filed no reports on Form 8-K during the fiscal
quarter ended December 25, 1999.
</TABLE>
8
<PAGE>
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedules
Consolidated Financial Statements
The following consolidated financial statements of Valmont Industries, Inc.
and subsidiaries have been incorporated by reference to pages 40 to 49 of the
Company's Annual Report to Shareholders for the year ended December 25, 1999:
Independent Auditors' Report--Page 51 of the annual report.
Consolidated Balance Sheets--December 25, 1999 and December 26, 1998
Consolidated Statements of Operations--Three-Year Period Ended
December 25, 1999
Consolidated Statements of Shareholders' Equity--Three-Year Period Ended
December 25, 1999
Consolidated Statements of Cash Flows--Three-Year Period Ended
December 25, 1999
Notes to Consolidated Financial Statements--Three-Year Period Ended
December 25, 1999
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Consolidated Financial Statement Schedule Supporting
Consolidated Financial Statement
SCHEDULE II--Valuation and Qualifying Accounts.......... F-4
</TABLE>
All other schedules have been omitted as the required information is
inapplicable or the information is included in the consolidated financial
statements or related notes.
Separate financial statements of the Registrant have been omitted because
the Registrant meets the requirements which permit omission.
F-1
9
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Valmont Industries, Inc.
We have audited the consolidated financial statements of Valmont
Industries, Inc. and Subsidiaries (the Company) as of December 25, 1999 and
December 26, 1998, and for each of the three years in the period ended
December 25,1999, and have issued our report thereon dated February 4, 2000;
such financial statements and report are included in your 1999 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of the Company listed in Item 14 of this
Form 10-K. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 4, 2000
F-2
10
<PAGE>
Schedule II
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED DEDUCTIONS BALANCE
BEGINNING OF TO PROFIT FROM AT CLOSE
PERIOD AND LOSS RESERVES* OF PERIOD
------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
Fifty-two weeks ended December 25, 1999
Reserve deducted in balance sheet from the asset
to which it applies--
Allowance for doubtful receivables................ $3,421 1,136 1,354 3,203
====== ===== ===== =====
Fifty-three weeks ended December 26, 1998
Reserve deducted in balance sheet from the asset
to which it applies--
Allowance for doubtful receivables................ $2,132 1,522 233 3,421
====== ===== ===== =====
Fifty-two weeks ended December 27, 1997
Reserve deducted in balance sheet from the asset
to which it applies--
Allowance for doubtful receivables................ $2,299 194 361 2,132
====== ===== ===== =====
</TABLE>
- ------------------------
* The deductions from reserves are net of recoveries.
F-4
11
<PAGE>
SIGNATURES
The Registrant. 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, in the
City of Omaha, State of Nebraska, on the 15th day of March, 2000.
<TABLE>
<S> <C>
Valmont Industries, Inc.
By /s/ Mogens C. Bay
-----------------------------------------
Mogens C. Bay
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Valmont
Industries, Inc. and in the capacities indicated on the dates indicated.
<TABLE>
<C> <S> <C>
/s/ Mogens C. Bay Director, President and 3/15/00
---------------------------- Chief Executive Officer --------
Mogens C. Bay (Principal Executive Officer) Date
/s/ Terry J. McClain Vice President and 3/15/00
---------------------------- Senior Chief Financial Officer --------
Terry J. McClain (Principal Financial Officer) Date
/s/ Brian C. Stanley 3/15/00
---------------------------- Vice President and Controller --------
Brian C. Stanley (Principal Accounting Officer) Date
</TABLE>
<TABLE>
<S> <C>
Robert B. Daugherty* John E. Jones *
Charles M. Harper* Kenneth E. Stinson*
Walter Scott, Jr.* Bruce Rohde*
Thomas F. Madison* Charles D. Pebler, Jr.*
</TABLE>
* Mogens C. Bay, by signing his name hereto, signs the Annual Report on behalf
of each of the directors indicated on this 15th day of March, 2000. A Power of
Attorney authorizing Mogens C. Bay to sign the Annual Report of Form 10-K on
behalf of each of the indicated directors of Valmont Industries, Inc. has been
filed herein as Exhibit 24.
<TABLE>
<S> <C>
By /s/ Mogens C. Bay
-----------------------------------------
Mogens C. Bay
Attorney-in-Fact
</TABLE>
12
<PAGE>
INDEX TO EXHIBITS
This Exhibit Index relates to exhibits filed as a part of this Report.
Numbers are assigned to exhibits in accordance with Item 601 of Regulation S-K.
<TABLE>
<S> <C> <C>
Exhibit 3(i) -- The Company's Certificate of Incorporation, as amended. This
document was filed with the Company's Quarterly Report on
Form 10-Q for the quarter ended March 28, 1998 and is
incorporated herein by reference.
Exhibit 3(ii) -- The Company's By-Laws, as amended. This document was filed
as Exhibit 3(ii) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 26, 1998 and is
incorporated herein by reference.
Exhibit 4(i)* -- Rights Agreement dated as of December 19, 1995 between the
Company and First National Bank of Omaha as Rights Agent,
with Certificate of Adjustment.
Exhibit 4(ii) -- The Company's Credit Agreement with The Bank of New York
dated October 7, 1997 as amended. This document was filed as
Exhibit 4(iii) with the Company's Annual Report on
Form 10-K for fiscal year ended December 26, 1998 and is
incorporated herein by reference.
Exhibit 4(iii)* -- The Company's Credit Agreement with Prudential Insurance
Company of America dated September 10, 1999.
Exhibit 10(i) -- The Company's 1988 Stock Plan and certain amendments. This
document was filed as Exhibit 10(a) with the Company's
Annual Report on Form 10-K for fiscal year ended
December 27, 1997 and is incorporated herein by reference.
Exhibit 10(ii)* -- The Company's 1996 Stock Plan.
Exhibit 10(iii) -- The Company's 1999 Stock Plan. This document was filed as
Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 27, 1999 and is
incorporated herein by reference.
Exhibit 10(iv)* -- The Valmont Executive Incentive Plan.
Exhibit 10(v) -- The Amended Unfunded Deferred Compensation Plan for
Nonemployee Directors. This document was filed as
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 28, 1998 and is
incorporated herein by reference.
Exhibit 13* -- The Company's Annual Report to Shareholders for its fiscal
year ended December 25, 1999.
Exhibit 21* -- Subsidiaries of the Company.
Exhibit 23* -- Consent of Deloitte and Touche LLP.
Exhibit 24* -- Power of Attorney.
Exhibit 27* -- Financial Data Schedule.
</TABLE>
Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with
respect to Valmont Industries' long-term debt are not filed with this
Form 10-K. Valmont will furnish a copy of such long-term debt agreements to the
Securities and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as exhibits 10(i)
through 10(v).
* Filed herewith.
13
<PAGE>
Exhibit 4 (i)
VALMONT INDUSTRIES, INC.
and
FIRST NATIONAL BANK OF OMAHA, as Rights Agent
RIGHTS AGREEMENT
Dated as of December 19, 1995
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C> <C>
Section 1. Certain Definitions ..................................... 1
Section 2. Appointment of Rights Agent .............................. 6
Section 3. Issue of Right Certificates .............................. 6
Section 4. Form of Right Certificates ............................... 7
Section 5. Countersignature and Registration ........................ 8
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates ............................................. 8
Section 7. Exercise of Rights, Purchase Price; Expiration Date
Of Rights ................................................ 10
Section 8. Cancellation and Destruction of Right Certificates ....... 10
Section 9. Availability of Shares of Preferred Stock ................ 11
Section 10. Preferred Stock Record Date .............................. 12
Section 11. Adjustment of Purchase Price, Number of Shares and Number
of Rights ................................................ 12
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares ................................................ 20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power ........................................... 20
Section 14. Fractional Rights and Fractional Shares .................. 23
Section 15. Rights of Action ......................................... 25
Section 16. Agreement of Right Holders ............................... 25
Section 17. Right Certificate Holder Not Deemed a Stockholder ........ 25
Section 18. Concerning the Rights Agent .............................. 26
Section 19. Merger or Consolidation or Change of Name of
Rights Agent ............................................. 26
Section 20. Duties of Rights Agent ................................... 27
Section 21. Change of Rights Agent ................................... 29
Section 22. Issuance of New Right Certificates ....................... 29
Section 23. Redemption ............................................... 30
Section 24. Exchange ................................................. 30
Section 25. Notice of Certain Events ................................. 32
Section 26. Notices .................................................. 32
2
<PAGE>
Section 27. Supplements and Amendments ............................... 33
Section 28. Successors ............................................... 33
Section 29. Benefits of this Agreement ............................... 34
Section 30. Determinations and Actions by the Board of Directors ..... 34
Section 31. Severability ............................................. 34
Section 32. Governing Law ............................................ 34
Section 33. Counterparts ............................................. 34
Section 34. Descriptive Headings ..................................... 34
</TABLE>
3
<PAGE>
RIGHTS AGREEMENT
Rights Agreement, dated as of December 19, 1995 ("Agreement"), between
Valmont Industries, Inc., a Delaware corporation (the "Company"), and First
National Bank of Omaha, as Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the Close
of Business (as defined below) on January 8, 1996 (the "Record Date"), each
Right representing the right to purchase one one-thousandth (subject to
adjustment) of a share of Preferred Stock (as hereinafter defined), upon the
terms and subject to the conditions herein set forth, and has further authorized
and directed the issuance of one Right (subject to adjustment as provided
herein) with respect to each share of Common Stock that shall become outstanding
between the Record Date and the earlier of the Distribution Date and the
Expiration Date (as such terms are hereinafter defined); provided, however, that
Rights may be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and prior to the Expiration Date in
accordance with Section 22.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which shall be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the shares of Common Stock then outstanding, but
shall not include an Exempt Person (as such term is hereinafter defined);
provided, however, that (i) if the Board of Directors of the Company determines
in good faith that a Person who would otherwise be an "Acquiring Person" became
such inadvertently (including, without limitation, because (A) such Person was
unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (B) such Person was
aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and if such Person as promptly as practicable divested or divests
itself of Beneficial Ownership of a sufficient number of shares of Common Stock
so that such Person would no longer be an "Acquiring Person," then such Person
shall not be deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement; and (ii) if, as of the date hereof, any Person is
the Beneficial Owner of a number of shares of Common Stock that would otherwise
cause such Person to be an "Acquiring Person", such Person shall not be or
become an "Acquiring Person" unless and until such time as such Person shall
become the Beneficial Owner of additional shares of Common Stock (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Stock in shares of Common Stock or pursuant to a split or
subdivision of the outstanding Common Stock), unless, upon becoming the
Beneficial Owner of such additional shares of Common Stock, such Person is not
then the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding. No Person shall become an "Acquiring Person" as the result of an
acquisition of shares of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares of
Common Stock beneficially owned by such Person to 15% or more of the shares of
Common Stock then outstanding, provided, however, that if a Person shall become
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding by reason of such share acquisitions by the Company and shall
thereafter become the Beneficial Owner of
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any additional shares of Common Stock, then such Person shall be deemed to be an
"Acquiring Person" unless upon becoming the Beneficial Owner of such additional
shares of Common Stock such Person does not beneficially own 15% or more of the
shares of Common Stock then outstanding. For all purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as in effect on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings scribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be deemed to
have "Beneficial Ownership" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's Affiliates or is deemed to
beneficially own, directly or indirectly, within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act as in effect on the
date hereof;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, (x) securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person or
any of such Person's Affiliates or Associates until such tendered securities are
accepted for purchase, (y) securities which such Person has a right to acquire
upon the exercise of Rights at any time prior to the time that any Person
becomes an Acquiring Person or (z) securities issuable upon the exercise of
Rights from and after the time that any Person becomes an Acquiring Person if
such Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or Section
22 hereof ("Original Rights") or pursuant to Section 11(i) or Section 11(n) with
respect to an adjustment to Original Rights; or (B) the right to vote pursuant
to any agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security by reason of such agreement, arrangement or understanding if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other
Person and with respect to which such Person or any of such Person's Affiliates
or Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
Section 1(c)(ii)(B)) or disposing of such securities of the Company; provided,
however, that no Person who is an officer, director or employee of an Exempt
Person shall be deemed, solely by reason of such Person's status or authority as
such, to be the "Beneficial Owner" of, to have "Beneficial
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Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section l(c)), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of Nebraska or the city in which
the principal office of the Rights Agent is located are authorized or obligated
by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., Omaha,
Nebraska time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Omaha, Nebraska time, on the next
succeeding Business Day.
(f) "Common Stock" when used with reference to the Company shall mean the
Common Stock, presently par value $1.00 per share, of the Company.
"Common Stock" when used with reference to any Person that the
Company shall mean the common stock (or, in the case of an unincorporated
entity, the equivalent equity interest) with the greatest voting power of such
other Person or, if such other Person is a subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(g) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b) hereof.
(k) "Exempt Person" shall mean (i) the Company or any Subsidiary (as such
term is hereinafter defined) of the Company, in each case including, without
limitation, in its fiduciary capacity, or any employee benefit plan of the
Company or of any Subsidiary of the Company, or any entity or trustee holding
Common Stock for or pursuant to the terms of any such plan or for the purpose of
funding any such plan or funding other employee benefits for employees of the
Company or of any Subsidiary of the Company, and (ii) any Grandfathered Person.
A Grandfathered Person shall be:
(i) Robert B. Daugherty, his spouse and his children (such persons
collectively defined as the "Daugherty Family Members");
(ii) any trust previously established by a Daugherty Family Member, any
estate of, or the executor or administrator of any estate of, or any guardian or
custodian for, a Daugherty Family Member who dies after the date of this
Agreement (such trusts, estates, executors, administrators or guardians or
custodians collectively defined as the "Daugherty Family Entities"), or any
trust established after the date hereof by one or more Daugherty Family Members
or Daugherty Family Entities, provided that one or more Daugherty Family Members
or Daugherty Family Entities, collectively, are the beneficiaries of at least
80% of the actuarially-determined beneficial interests in such estate or trust;
(iii) any charitable organization which qualifies as an exempt
organization under Section 501(c) of the Internal Revenue Code of 1986, as
amended ("Charitable Organization") which is established by one or more
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Daugherty Family Members or Daugherty Family Entities (a "Daugherty Family
Charitable Organization"); and
(iv) any corporation, partnership or other entity of which at least 80%
of the voting power and at least 80% of the equity interest is held, directly or
indirectly, by or for the benefit of one or more Daugherty Family Members,
Daugherty Family Entities, or Daugherty Family Charitable Organizations;
provided, however, that a Grandfathered Person shall cease to be a
Grandfathered Person at the time that (i) all or any part of its interest in the
Common Stock becomes reportable on a Schedule 13D under the Securities Exchange
Act of 1934, as amended (or any comparable or successor report) as part of a
"group" (as such term is defined or used under Rule 13d-5(b) of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended)
which beneficially owns, directly or indirectly, 15% or more of the then
outstanding Common Shares and includes one or more persons (including any
Affiliate or Associate thereof) who (A) are not Grandfathered Persons and (B)
individually or in the aggregate beneficially own, directly or indirectly, in
excess of 1% of the then outstanding Common Stock or (ii) the Grandfathered
Persons in the aggregate beneficially own 35% or more of the then outstanding
Common Shares unless such ownership threshold is exceeded as a result of the
acquisition of shares of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares of
Common Stock beneficially owned by such Grandfathered Persons in the aggregate
to 35% or more of the shares of Common Stock then outstanding, provided,
however, that if the Grandfathered Persons in the aggregate shall become the
Beneficial Owners of 35% or more of the shares of Common Stock then outstanding
by reason of such share acquisitions by the Company and shall thereafter in the
aggregate become the Beneficial Owners of any additional shares of Common Stock,
then each such Grandfathered Person shall cease to be a Grandfathered Person,
unless upon becoming in the aggregate the Beneficial Owners of such additional
shares of Common Stock (other than pursuant to a dividend or distribution paid
or made by the Company on the outstanding Common Stock in shares of Common Stock
or pursuant to a split or subdivision of the outstanding Common Stock), the
Grandfathered Persons in the aggregate do not beneficially own 35% or more of
the shares of Common Stock then outstanding.
(l) "Exchange Ratio" shall have the meaning set forth in Section 24 hereof.
(m) "Expiration Date" shall have the meaning set forth in Section 7 hereof.
(n) "Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
(o) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(p) "NASDAQ" shall mean The NASDAQ Stock Market.
(q) "New York Stock Exchange" shall mean the New York Stock Exchange, Inc.
(r) "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust or other entity, and shall include any
successor (by merger or otherwise) to such entity.
(s) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, par value $1.00 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designation attached to this
Rights Agreement as Exhibit A.
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(t) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(u) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(v) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(w) "Right Certificate" shall have the meaning set forth in Section 3
hereof.
(x) "Securities Act" shall mean the Securities Act of 1933, as amended.
(y) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(z) "Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.
(aa) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such, or such
earlier date as a majority of the Board of Directors shall become aware of the
existence of an Acquiring Person.
(bb) "Subsidiary" of any Person shall mean any corporation or other entity
of which securities or other ownership interests having ordinary voting power
sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly, by
such Person, and any corporation or other entity that is otherwise controlled by
such Person.
(cc) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(dd) "Summary of Rights" shall have the meaning set forth in Section 3
hereof.
(ee) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date be the
holders of Common Stock) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the Close of Business on the earlier of (i) the tenth day after
the Stock Acquisition Date or (ii) the tenth Business Day (or such later date as
may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) after the date of the commencement by any
Person (other than an Exempt Person) of, or of the first public announcement of
the intention of such Person (other than an Exempt Person) to commence, a tender
or exchange offer the consummation of which would result in any Person (other
than an Exempt Person) becoming the Beneficial Owner of shares of Common Stock
aggregating 15% or more of the Common Stock then outstanding (including any such
date which is after the date of this Agreement
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and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Stock registered in the names of the holders thereof and not by separate
Right Certificates, and (y) the Rights will be transferable only in connection
with the transfer of Common Stock. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign
and the Company will send or cause to be sent (and the Rights Agent will, if
requested, send) by first-class, insured, postage-prepaid mail, to each record
holder of Common Stock as of the close of business on the Distribution Date
(other than any Acquiring Person or any Associate or Affiliate of an Acquiring
Person), at the address of such holder shown on the records of the Company, a
Right Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right (subject to adjustment as provided herein)
for each share of Common Stock so held. As of the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Shares of Preferred Stock,
in substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Record Date (other than any Acquiring Person or any
Associate or Affiliate of any Acquiring Person), at the address of such holder
shown on the records of the Company. With respect to certificates for Common
Stock outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such certificates registered in the names of the holders
thereof together with the Summary of Rights. Until the Distribution Date (or, if
earlier, the Expiration Date), the surrender for transfer of any certificate for
Common Stock outstanding on the Record Date, with or without a copy of the
Summary of Rights, shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby.
(c) Certificates issued for Common Stock (including, without limitation,
upon transfer of outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between Valmont Industries, Inc. and First National Bank of
Omaha, as Rights Agent, dated as of December 19, 1995 as the same
may be amended from time to time (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of
Valmont Industries, Inc. Under certain circumstances, as set
forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this
certificate. Valmont Industries, Inc. will mail to the holder of
this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights owned
by or transferred to any Person who is or becomes an Acquiring
Person (as defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no longer
be transferable.
With respect to such certificates containing the foregoing legend, until
the Distribution Date the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
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herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. In the event that the Company purchases or
otherwise acquires any Common Stock after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Stock which are no longer outstanding.
Notwithstanding this paragraph (c), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or interdealer quotation system on which the Rights may from time to
time be listed or quoted, or to conform to usage. Subject to the provisions of
Sections 11, 13 and 22 hereof, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price per one one-thousandth of a
share of Preferred Stock set forth therein (the "Purchase Price"), but the
number of such one one-thousandths of a share of Preferred Stock and the
Purchase Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
the Chief Executive Officer of the Company, either manually or by facsimile
signature, shall have affixed thereto the Company's seal or a facsimile thereof
and shall be attested by the Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e), 11(a)(ii) and 14 hereof, at
any time after the Distribution Date and prior to the Expiration Date, any Right
Certificate or Right Certificates may be transferred, split up, combined or
exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a
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share of Preferred Stock as the Right Certificate or Right Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Right Certificate or
Right Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office or agency of the
Rights Agent designated for such purpose. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, at any time
after the Distribution Date and prior to the Expiration Date, upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction or mutilation of a Right Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights.
(a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which the Rights are exercised, at any
time which is both after the Distribution Date and prior to the time (the
"Expiration Date") that is the earliest of (i) the Close of Business on December
19, 2005 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date") or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price shall be initially $100.00 for each one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-thousandths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Stock certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from the depositary agent
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<PAGE>
depositary receipts representing interests in such number of one one-thousandths
of a share of Preferred Stock as are to be purchased (in which case certificates
for the Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt, promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.
(d) Except as otherwise provided herein, in case the registered holder of
any Right Certificate shall exercise less than all of the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to the exercisable
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any purported
transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7
unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or form of election to purchase
set forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock or
any shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the time that
any Person becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or admitted to
trading on any national securities exchange, or quoted on NASDAQ, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on such exchange, or quoted on NASDAQ, upon official notice
of issuance upon such exercise.
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(c) From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance of shares
of Preferred Stock (and, following the time that any Person becomes an Acquiring
Person, shares of Common Stock and other securities) upon the exercise of
Rights, to register and qualify such shares of Preferred Stock (and, following
the time that any Person becomes an Acquiring Person, shares of Common Stock and
other securities) under the Securities Act and any applicable state securities
or "Blue Sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the date as of which the Rights are no longer
exercisable for such securities and the Expiration Date. The Company may
temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Preferred Stock (and, following
the time that any Person becomes an Acquiring Person, shares of Common Stock and
other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates therefor (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Preferred Stock (or shares of Common Stock or other securities)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Preferred Stock (or shares of Common
Stock or other securities) in a name other than that of, the registered holder
of the Right Certificate evidencing Rights surrendered for exercise or to issue
or deliver any certificates or depositary receipts for Preferred Stock (or
shares of Common Stock or other securities) upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by that
holder of such Right Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for Preferred Stock is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Stock for which the
Rights shall be exercisable, including, without limitation,
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the right to vote or to receive dividends or other distributions, and shall not
be entitled to receive any notice of any proceedings of the Company, except as
provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares and
Number of Rights. The Purchase Price, the number of shares of Preferred Stock or
other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares of Preferred Stock
or (D) issue any shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Company were
open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person (the first occurrence of such event being referred
to hereinafter as the "Flip-In Event"), then (A) the Purchase Price shall be
adjusted to be the Purchase Price in effect immediately prior to the Flip-In
Event multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such Flip-In Event,
whether or not such Right was then exercisable, and (B) each holder of a Right,
except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii)
hereof, shall thereafter have the right to receive, upon exercise thereof at a
price equal to the Purchase Price (as so adjusted), in accordance with the terms
of this Agreement and in lieu of shares of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by dividing the
Purchase Price (as so adjusted) by 50% of the current per share market price of
the Common Stock (determined pursuant to Section 11(d) hereof) on the date of
such Flip-In Event; provided, however, that the Purchase Price (as so adjusted)
and the number of shares of Common Stock so receivable upon exercise of a Right
shall, following the Flip-In Event, be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof.
Notwithstanding anything in this Agreement to the contrary, however, from and
after the Flip-In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Flip-In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip-In Event pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of
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this paragraph, and subsequent transferees of such Persons, shall be void
without any further action and any holder of such Rights shall thereafter have
no rights whatsoever with respect to such Rights under any provision of this
Agreement. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11(a)(ii) are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder. From and after the Flip-In
Event, no Right Certificate shall be issued pursuant to Section 3 or Section 6
hereof that represents Rights that are or have become void pursuant to the
provisions of this paragraph, and any Right Certificate delivered to the Rights
Agent that represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be canceled. From and after the occurrence of
an event specified in Section 13(a) hereof, any Rights that theretofore have not
been exercised pursuant to this Section 11(a)(ii) shall thereafter be
exercisable only in accordance with Section 13 and not pursuant to this Section
11(a)(ii).
(iii) The Company may at its option substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) a number of shares of Preferred Stock or fraction thereof such
that the current per share market price of one share of Preferred Stock
multiplied by such number or fraction is equal to the current per share market
price of one share of Common Stock. In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess (such excess, the "Spread") of
(1) the value of the shares of Common Stock issuable upon the exercise of a
Right in accordance with the foregoing subparagraph (ii) (the "Current Value")
over (2) the Purchase Price (as adjusted in accordance with the foregoing
subparagraph (ii)), and (B) with respect to each Right (other than Rights which
have become void pursuant to the foregoing subparagraph (ii)), make adequate
provision to substitute for the shares of Common Stock issuable in accordance
with the foregoing subparagraph (ii) upon exercise of the Right and payment of
the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a
reduction in such Purchase Price, (3) shares of Preferred Stock or other equity
securities of the Company (including, without limitation, shares or fractions of
shares of preferred stock which, by virtue of having dividend, voting and
liquidation rights substantially comparable to those of the shares of Common
Stock, are deemed in good faith by the Board of Directors to have substantially
the same value as the shares of Common Stock (such shares of Preferred Stock and
shares or fractions of shares of preferred stock are hereinafter referred to as
"Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock actually issued upon exercise
of such Right, shall have an aggregate value equal to the Current Value (less
the amount of any reduction in such Purchase Price), where such aggregate value
has been determined by the Board of Directors upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors; provided, however, that if the Company shall not make adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the Flip-In Event (the "Section 11(a) (ii) Trigger Date"), then the
Company shall be obligated to deliver, to the extent permitted by applicable law
and any material agreements then in effect to which the Company is a party, upon
the surrender for exercise of a Right and without requiring payment of such
Purchase Price, shares of Common Stock (to the extent available), and then, if
necessary, such number or fractions of shares of Preferred Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If, upon the occurrence of the Flip-In
Event, the Board of Directors shall determine in good faith that it is likely
that sufficient additional shares of Common Stock could
15
<PAGE>
be authorized for issuance upon exercise in full of the Rights, then, if the
Board of Directors so elects, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a) (ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, is herein called the "Substitution Period"). To
the extent that the Company determines that some action need be taken pursuant
to the second and/or third sentence of this Section 11(a)(iii), the Company (x)
shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this
Section 11(a)(iii) hereof, that such action shall apply uniformly to all
outstanding Rights and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to such second sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the shares of
Common Stock shall be the current per share market price (as determined pursuant
to Section 11(d)(i)) on the Section 11(a)(ii) Trigger Date and the per share or
fractional value of any "Common Stock equivalent" shall be deemed to equal the
current per share market price of the Common Stock. The Board of Directors of
the Company may, but shall not be required to, establish procedures to allocate
the right to receive shares of Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Stock (or shares having the same rights, privileges and
preferences as the Preferred Stock ("equivalent preferred shares")) or
securities convertible into Preferred Stock or equivalent preferred shares at a
price per share of Preferred Stock or equivalent preferred shares (or having a
conversion price per share, if a security convertible into shares of Preferred
Stock or equivalent preferred shares) less than the then current per share
market price of the Preferred Stock (determined pursuant to Section 11(d)
hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock and equivalent preferred shares
outstanding on such record date plus the number of shares of Preferred Stock and
equivalent preferred shares which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number of
additional shares of Preferred Stock and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Shares of Preferred Stock and equivalent preferred
shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the
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<PAGE>
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Preferred Stock (determined pursuant
to Section 11(d) hereof) on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to one share of Preferred
Stock, and the denominator of which shall be such current per share market price
(determined pursuant to Section 11(d) hereof) of the Preferred Stock; provided,
however, that in no event shall the consideration to be paid upon the exercise
of one Right be less than the aggregate par value of the shares of capital stock
of the Company to be issued upon exercise of one Right. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price which would then be in effect if such record date had not
been fixed.
(d)(i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price " of any security (a
"Security " for the purpose of this Section 11(d)(i)) on any date shall be
deemed to be the average of the daily closing prices per share of such Security
for the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security, and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported by the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day. (ii)
For the purpose of any computation hereunder,
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<PAGE>
if the Preferred Stock is publicly traded, the "current per share market price"
of the Preferred Stock shall be determined in accordance with the method set
forth in Section 11(d)(i). If the Preferred Stock is not publicly traded but the
Common Stock is publicly traded, the "current per share market price" of the
Preferred Stock shall be conclusively deemed to be the current per share market
price of the Common Stock as determined pursuant to Section 11(d)(i) multiplied
by the then applicable Adjustment Number (as defined in and determined in
accordance with the Certificate of Designation for the Preferred Stock). If
neither the Common Stock nor the Preferred Stock is publicly traded, "current
per share market price" shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one hundred-thousandth of a
share of Preferred Stock or share of Common Stock or other share or security as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than the Preferred Stock,
thereafter the Purchase Price and the number of such other shares so receivable
upon exercise of a Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e),
11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-thousandths of
a share of Preferred Stock (calculated to the nearest one hundred-thousandth of
a share of Preferred Stock) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to such
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price pursuant to Sections 11(a)(i), 11(b) or 11(c) hereof to adjust
the number of Rights, in substitution for any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number
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<PAGE>
of Rights shall become that number of Rights (calculated to the nearest
one-hundredth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company may, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
of a share of Preferred Stock which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the fraction of Preferred
Stock or other shares of capital stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Preferred Stock or other such shares at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such adjustments in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable for Preferred Stock, dividends on
Preferred Stock payable in shares of Preferred Stock or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
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(n) Anything in this Agreement to the contrary notwithstanding, in
the event that at any time after the date of this Rights Agreement and prior to
the Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Stock payable in Common Stock or (ii) effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or otherwise than by
payment of a dividend payable in Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(o) The Company agrees that, after the earlier of the Distribution Date or
the Stock Acquisition Date, it will not, except as permitted by Sections 23, 24
or 27 hereof, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Stock and the
Preferred Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25 hereof (if
so required under Section 25 hereof). The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of any such adjustment unless and until it
shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earnings
Power.
(a) In the event, directly or indirectly, at any time after the Flip-In
Event (i) the Company shall merge with and into any other Person, (ii) any
Person shall consolidate with the Company, or any Person shall merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or of the Company) or cash or any other
property, or (iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more wholly owned Subsidiaries of
the Company), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of a Right (other than Rights which have
become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price (as
theretofore
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<PAGE>
adjusted in accordance with Section 11(a)(ii) hereof), in accordance with the
terms of this Agreement and in lieu of shares of Preferred Stock or Common Stock
of the Company, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall equal the result
obtained by dividing the Purchase Price (as theretofore adjusted in accordance
with Section 11(a)(ii) hereof) by 50% of the current per share market price of
the Common Stock of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; provided, however, that the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) and the number of shares of Common
Stock of such Principal Party so receivable upon exercise of a Right shall be
subject to further adjustment as appropriate in accordance with Section 11(f)
hereof to reflect any events occurring in respect of the Common Stock of such
Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Rights Agreement; (C) the
term "Company" shall thereafter be deemed to refer to such Principal Party; and
(D) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of its shares of Common Stock in
accordance with Section 9 hereof) in connection with such consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights; provided that, upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Purchase Price as provided
in this Section 13(a), such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
(b) "Principal Party" shall mean (i) in the case of any transaction
described in (i) or (ii) of the first sentence of Section 13(a) hereof: (A) the
Person that is the issuer of the securities into which the shares of Common
Stock are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer the shares of Common Stock of which have the
greatest aggregate market value of shares outstanding, or (B) if no securities
are so issued, (x) the Person that is the other party to the merger, if such
Person survives said merger, or, if there is more than one such Person, the
Person the shares of Common Stock of which have the greatest aggregate market
value of shares outstanding or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger
(including the Company if it survives) or (z) the Person resulting from the
consolidation; and (ii) in the case of any transaction described in (iii) of the
first sentence in Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons as is
the issuer of Common Stock having the greatest aggregate market value of shares
outstanding; provided, however, that in any such case described in the foregoing
clause (b)(i) or (b)(ii), if the Common Stock of such Person is not at such time
or has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stock of all of which is and has been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Stock having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by
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a joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all of such joint
venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Agreement as the same shall have
been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof
and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities Act, if
necessary, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date and similarly comply with applicable
state securities laws;
(ii) use its best efforts, if the Common Stock of the Principal Party shall
be listed or admitted to trading on the New York Stock Exchange or on another
national securities exchange, to list or admit to trading (or continue the
listing of) the Rights and the securities purchasable upon exercise of the
Rights on the New York Stock Exchange or such securities exchange, or, if the
Common Stock of the Principal Party shall not be listed or admitted to trading
on the New York Stock Exchange or a national securities exchange, to cause the
Rights and the securities receivable upon exercise of the Rights to be
authorized for quotation on NASDAQ or on such other system then in use;
(iii) deliver to holders of the Rights historical financial statements for
the Principal Party which comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive rights in
respect of the Common Stock of the Principal Party subject to purchase upon
exercise of outstanding Rights.
(d) In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of Common
Stock of such Principal Party at less than the then current market price per
share thereof (determined pursuant to Section 11(d) hereof) or securities
exercisable for, or convertible into, Common Stock of such Principal Party at
less than such then current market price, or (ii) providing for any special
payment, tax or similar provision in connection with the issuance of the Common
Stock of such Principal Party pursuant to the provisions of Section 13, then, in
such event, the Company hereby agrees with each holder of Rights that it shall
not consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
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authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
the Flip-In Event, enter into any transaction of the type described in clauses
(i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately
after such consolidation, merger, sale, transfer or other transaction there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such consolidation, merger, sale,
transfer or other transaction, the stockholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights (except prior to
the Distribution Date in accordance with Section 11(n) hereof). In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
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not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current per share market price of one share of Preferred Stock
(as determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided therein and in
this Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
agency of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in whose
name the Right Certificate (or, prior to the Distribution Date, the Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the Common Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
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subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chief Executive Officer and the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights provided for in Sections 3, 11, 13, 23 and 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate furnished pursuant to Section 12,
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or other securities to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities will, when issued, be validly authorized
and issued fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the Chief Executive
Officer or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any
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action taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
any officer of the Company actually receives such application unless any such
officer shall have consented in writing to an earlier date) unless, prior to
taking any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed to certify the holder is not an
Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall
not take any further action with respect to such requested exercise of transfer
without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock or Preferred Stock by registered or certified mail, and, following
the Distribution Date, to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or the laws of any state of the
United States or the District of Columbia, in good standing, having an office in
the State of Nebraska, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights
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Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock or Preferred Stock, and, following the Distribution Date, mail
a notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such forms as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Stock following the Distribution Date and prior to the Expiration
Date, the Company may with respect to shares of Common Stock so issued or sold
pursuant to (i) the exercise of stock options, (ii) under any employee plan or
arrangement, (iii) upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company or (iv) a contractual obligation of
the Company, in each case existing prior to the Distribution Date, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale.
Section 23. Redemption.
(a) The Board of Directors of the Company may, at any time prior to the
Flip-In Event, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(the redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish. The Redemption Price shall be payable, at the option of the Company,
in cash, shares of Common Stock, or such other form of consideration as the
Board of Directors shall determine.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights (or such later time as the Board of
Directors may establish for the effectiveness of such redemption), the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption shall state the method by which the
payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option at any time
after the Flip-In Event, exchange all or part of the then outstanding and
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exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such amount per Right being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time after an Acquiring Person
shall have become the Beneficial Owner of shares of Common Stock aggregating 50%
or more of the shares of Common Stock then outstanding. From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The exchange of the Rights by the
Board of Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
shall promptly mail a notice of any such exchange to all of the holders of the
Rights so exchanged at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
shares of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in the event that there
shall not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit an exchange of Rights for Common Stock as
contemplated in accordance with this Section 24, the Company shall substitute to
the extent of such insufficiency, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, a number of shares of Preferred
Stock or fraction thereof (or equivalent preferred shares, as such term is
defined in Section 11(b)) such that the current per share market price
(determined pursuant to Section 11(d) hereof) of one share of Preferred Stock
(or equivalent preferred share) multiplied by such number or fraction is equal
to the current per share market price of one share of Common Stock (determined
pursuant to Section 11(d) hereof) as of the date of the Flip-In Event.
(d) The Company shall not, in connection with any exchange pursuant to this
Section 24, be required to issue fractions of shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of Common Stock, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable an amount in cash
equal to the same fraction of the current per share market price of a whole
share of Common Stock (as determined pursuant to Section 11(d) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
Section 25. Notice of Certain Events.
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<PAGE>
(a) In case the Company shall at any time after the earlier of the
Distribution Date or the Stock Acquisition Date propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Stock or to make
any other distribution to the holders of its Preferred Stock (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision or combination of
outstanding Preferred Stock), (iv) to effect the liquidation, dissolution or
winding up of the Company, or (v) to declare or pay any dividend on the Common
Stock payable in Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of the Common Stock
and/or Preferred Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or
Preferred Stock, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate (or if occurring prior to the Distribution Date,
the holders of the Common Stock) in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) and
Section 13 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Valmont Industries, Inc.
Valley, Nebraska 68064
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First National Bank of Omaha
First National Center
16 & Dodge Streets
Omaha, Nebraska 68102
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
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<PAGE>
Section 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights. At
any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order to (i) cure any
ambiguity, (ii) correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (iii) shorten or
lengthen any time period hereunder, or (iv) change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable;
provided that no such supplement or amendment shall adversely affect the
interests of the holders of Rights as such (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), and no such amendment may cause
the Rights again to become redeemable or cause the Agreement again to become
amendable other than in accordance with this sentence. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made which changes the Redemption Price. Upon the delivery of a certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Stock).
Section 30. Determinations and Actions by the Board of Directors. The Board
of Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or to amend this Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) that
are done or made by the Board of Directors of the Company in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights, as such, and all other parties, and (y) not subject the
Board of Directors to any liability to the holders of the Rights.
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the
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State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
VALMONT INDUSTRIES, INC.
By: /s/ Mogens C. Bay
Name: Mogens C. Bay
Title: President
FIRST NATIONAL BANK OF OMAHA,
as Rights Agent
By: /s/ John E. Lenihan
Name: John E. Lenihan
Title: Corporate Trust Officer
32
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Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
VALMONT INDUSTRIES, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
Valmont Industries, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on December 19, 1995 adopted the
following resolution creating a series of 50,000 shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value $1.00 per
share, of the Corporation be and hereby is created, and that the designation and
number of shares thereof and the voting and other powers, preferences and
relative, participating, optional or other rights of the shares of such series
and the qualifications, limitations and restrictions thereof are as follows:
Series A Junior Participating Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock
that shall be designated as "Series A Junior Participating Preferred Stock," and
the number of shares constituting such series shall be 50,000. Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock, in
preference to the holders of shares of any class or series of stock of the
Corporation ranking junior to the Series A Junior Participating Preferred Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the first day of January, April, July and October in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) the Adjustment Number (as defined below) times the aggregate
per share amount of all cash dividends, and
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<PAGE>
the Adjustment Number times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $1.00 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. The
"Adjustment Number" shall initially be 1000. In the event the Corporation shall
at any time after December 19, 1995 (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the Adjustment Number in
effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock). (C) Dividends shall
begin to accrue and be cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights: (A) Each share of Series
A Junior Participating Preferred Stock shall entitle the holder thereof to a
number of votes equal to the Adjustment Number on all matters submitted to a
vote of the stockholders of the Corporation.
(B) Except as required by law and by Section 10 hereof, holders of
Series A Junior Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
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<PAGE>
Corporation shall not (i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock,
(ii) declare or pay dividends on or make any other distributions on any shares
of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, except dividends paid ratably on the Series A Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; or (iii) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of
Series A Junior Participating Preferred Stock, or to such holders and holders of
any such shares ranking on a parity therewith, upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received an amount per share (the "Series A
liquidation Preference") equal to the greater of (i) $100 plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, or (ii) the Adjustment Number times the
per share amount of all cash and other property to be distributed in respect of
the Common Stock upon such liquidation, dissolution or winding up of the
Corporation.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or
with another corporation nor the merger or consolidation of any other
corporation into or with the Corporation shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this Section
6.
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<PAGE>
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case each share of Series A
Junior Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number times
the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred Stock
shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise, and shall rank senior to the Common Stock
as to such matters.
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Certificate of Incorporation
of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 19th
day of December, 1995.
VALMONT INDUSTRIES, INC.
By: /s/ Mogens C. Bay
Name: Mogens C. Bay
Title: President
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<PAGE>
EXHIBIT B
Form of Right Certificate
Certificate No. R-______
NOT EXERCISABLE AFTER DECEMBER 19, 2005 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
Right Certificate
VALMONT INDUSTRIES, INC.
This certifies that ______________________ or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of December 19, 1995, as the same may be amended
from time to time (the "Rights Agreement"), between Valmont Industries, Inc., a
Delaware corporation (the "Company"), and First National Bank of Omaha, as
Rights Agent (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M., Omaha, Nebraska time, on December 19, 2005 at the office
or agency of the Rights Agent designated for such purpose, or of its successor
as Rights Agent, one one-thousandth of a fully paid non-assessable share of
Series A Junior Participating Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Company, at a purchase price of $100.00 per one
one-thousandth of a share of Preferred Stock (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-thousandths of a share of Preferred Stock
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of December 19,
1995, based on the Preferred Stock as constituted at such date. As provided in
the Rights Agreement, the Purchase Price, the number of one one-thousandths of a
share of Preferred Stock (or other securities or property) which may be
purchased upon the exercise of the Rights and the number of Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled
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<PAGE>
such holder to purchase. If this Right Certificate shall be exercised in part,
the holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of the Company's Common Stock, par value $1.00 per share, or shares of Preferred
Stock.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depository receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of the
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ______________________________, 199_.
VALMONT INDUSTRIES, INC.
ATTEST: By:
------------------------------------
[Title]
- ------------------------------------
[Title]
Countersigned:
FIRST NATIONAL BANK OF OMAHA, as Rights Agent
By
---------------------------------
[Title]
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<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED __________________________ hereby sells,
a s s i g n s a n d t r a n s f e r s u n t o
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
Rights represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
________________________________ Attorney, to transfer said Rights on the books
of the within-named Company, with full power of substitution.
Dated:
-----------------------------
- ----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
................................................................................
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being assigned to an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
- ----------------------------------
Signature
39
<PAGE>
Form of Reverse Side of Right Certificate - continued
FORM OF ELECTION TO PURCHASE
40
<PAGE>
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate)
To Valmont Industries, Inc.:
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of such Rights and
requests that certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to: Please insert social
security or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:
---------------------------
------------------------------------
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
41
<PAGE>
Form of Reverse Side of Right Certificate - continued
- --------------------------------------------------------------------------------
(To be completed)
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
------------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, such
Assignment or Election to Purchase will not be honored.
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<PAGE>
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON
WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF
WILL BECOME NULL AND VOID AND WILL NO LONGER BE
TRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF PREFERRED STOCK OF
VALMONT INDUSTRIES, INC.
On December 19, 1995, the Board of Directors of Valmont Industries,
Inc. (the "Company") declared a dividend of one preferred share purchase right
(a "Right") for each outstanding share of common stock, par value $1.00 per
share, of the Company (the "Common Stock"). The dividend is payable on January
8, 1996 (the "Record Date") to the stockholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share, (the "Preferred Stock") of the Company at a price of
$100.00 per one one-thousandth of a share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of December 19, 1995, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
First National Bank of Omaha, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock or (ii) 10 business days (or such later date
as may be determined by action of the Board of Directors prior to such time as
any person or group of affiliated persons becomes an Acquiring Person) following
the commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding shares of
Common Stock (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of the Record Date, by such Common Stock certificate
together with a copy of this Summary of Rights. An "Acquiring Person" shall not
include the Company, its employee benefit plans, or, subject to certain
conditions, Robert B. Daugherty and his related persons and entities.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Record Date upon transfer or new issuances of Common Stock will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights, will also constitute the transfer of the Rights associated
43
<PAGE>
with the shares of Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on December 19, 2005 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of the Rights is
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is subject to adjustment in the event
of a stock dividend on the Common Stock payable in shares of Common Stock or
subdivisions, consolidations or combinations of the Common Stock occurring, in
any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of $1.00 per
share but will be entitled to an aggregate dividend of 1000 times the dividend
declared per share of Common Stock. In the event of liquidation, the holders of
the Preferred Stock will be entitled to a minimum preferential liquidation
payment of $100 per share (plus any accrued but unpaid dividends) but will be
entitled to an aggregate payment of 1000 times the payment made per share of
Common Stock. Each share of Preferred Stock will have 1000 votes, voting
together with the Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Common Stock are converted
or exchanged, each share of Preferred Stock will be entitled to receive 1000
times the amount received per share of Common Stock. These rights are protected
by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation
and voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right at the
then-current exercise price of the Right, that number of shares of Common Stock
having a market value of two times the exercise price of the Right.
In the event that, after a person or group has become an Acquiring
Person, the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provisions will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
44
<PAGE>
of the person with whom the Company has engaged in the foregoing transaction (or
its parent) that at the time of such transaction has a market value of two times
the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the earlier of one of the events described in the previous paragraph or
the acquisition by such person or group of 50% or more of the outstanding shares
of Common Stock, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which will have become void),
in whole or in part, for shares of Common Stock or Preferred Stock (or a series
of the Company's preferred stock having equivalent rights, preferences and
privileges), at an exchange ratio of one share of Common Stock, or a fractional
share of Preferred Stock (or other preferred stock) equivalent in value thereto,
per Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), and in lieu thereof an adjustment in cash
will be made based on the market price of the Preferred Stock on the last
trading day prior to the date of exercise.
At any time prior to the time an Acquiring Person becomes such, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
For so long as the Rights are then redeemable, the Company may, except
with respect to the redemption price, amend the Rights in any manner. After the
Rights are no longer redeemable, the Company may, except with respect to the
redemption price, amend the Rights in any manner that does not adversely affect
the interests of holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
December __, 1995. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.
45
<PAGE>
CERTIFICATE OF ADJUSTMENT
This is to certify pursuant to Section 12 of the Rights Agreement, dated as
of December 19, 1995, as amended (the "Rights Agreement"), between Valmont
Industries, Inc., A Delaware corporation (the "Company") and First National Bank
of Omaha, as Rights Agent, that:
I. Statement of Facts.
At its April 28, 1997 meeting, the Company's Board of Directors declared a
two-for-one split of the shares of common stock of the Company (the "Common
Stock"), which was effected in the form of a stock dividend on May 30, 1997.
II. Adjustments Pursuant to the Rights Agreement.
Pursuant to the provisions of the Sections 11(n) of the Rights Agreement,
effective as of May 30, 1997, the Right associated with each share of Common
Stock is hereby adjusted so that one-half Right shall be associated with each
share of Common Stock outstanding immediately after the Distribution.
Effective the 30th day of May, 1997.
VALMONT INDUSTRIES, INC,
By: /s/ Terry J. McClain
-------------------------
Name: Terry J. McClain
Title: Senior Vice President and
Chief Financial Officer
46
<PAGE>
Exhibit 4(iii)
================================================================================
VALMONT INDUSTRIES, INC.
PRIVATE SHELF AGREEMENT
$100,000,000
Private Shelf Facility
Dated as of September 10, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
(not part of agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. AUTHORIZATION OF ISSUE OF NOTES....................................................1
1A. Intentionally Omitted..............................................1
1B. Authorization of Issue of Shelf Notes..............................1
2. PURCHASE AND SALE OF NOTES.........................................................2
2A. Intentionally Omitted..............................................2
2B. Purchase and Sale of Shelf Notes...................................2
2B(1). Facility...........................................................2
2B(2). Issuance Period....................................................2
2B(3). Request for Purchase...............................................2
2B(4). Rate Quotes........................................................3
2B(5). Acceptance.........................................................3
2B(6) Market Disruption .................................................4
2B(7). Facility Closings..................................................4
2B(8). Fees...............................................................4
2B(8)(i). Structuring Fee....................................................5
2B(8)(ii). Issuance Fee.......................................................5
2B(8)(iii). Delayed Delivery Fee...............................................5
2B(8)(iv). Cancellation Fee...................................................5
3. CONDITIONS OF CLOSING..............................................................6
3A. Certain Documents..................................................6
3B. Opinion of Purchaser's Special Counsel.............................7
3C. Representations and Warranties; No Default.........................7
3D. Purchase Permitted by Applicable Laws..............................7
3E. Payment of Fees....................................................8
4. PREPAYMENTS........................................................................8
4A. Intentionally Omitted..............................................8
4B. Required Prepayments of Shelf Notes................................8
4C. Optional Prepayment With Yield-Maintenance Amount..................8
4D. Notice of Optional Prepayment......................................8
4E. Application of Prepayments.........................................8
4F. No Acquisition of Notes............................................9
5. AFFIRMATIVE COVENANTS..............................................................9
5A. Financial Statements; Notice of Defaults...........................9
5B. Information Required by Rule 144A.................................10
5C. Inspection of Property............................................10
5D. Covenant to Secure Notes Equally..................................11
5E. Compliance with Laws..............................................11
5F. Maintenance of Insurance..........................................11
6. NEGATIVE COVENANTS................................................................11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6A(1). Coverage Ratio....................................................11
6A(2). Leverage Ratio....................................................11
6A(3). Total Debt Ratio..................................................11
6B. Minimum Consolidated Net Worth....................................11
6C. Lien, Debt and Other Restrictions.................................12
6C(1). Liens.............................................................12
6C(2). Debt..............................................................12
6C(3). Intentionally Omitted.............................................12
6C(4). Merger and Consolidation .........................................12
6C(5). Transfer of Assets................................................13
6C(6). Sale or Discount of Receivables...................................14
6C(7). Related Party Transactions........................................14
7. EVENTS OF DEFAULT.................................................................14
7A. Acceleration......................................................14
7B. Rescission of Acceleration........................................16
7C. Notice of Acceleration or Rescission..............................17
7D. Other Remedies....................................................17
8. REPRESENTATIONS, COVENANTS AND WARRANTIES.........................................17
8A. Organization; Subsidiary Preferred Stock..........................17
8B. Financial Statements..............................................17
8C. Actions Pending...................................................18
8D. Outstanding Debt..................................................18
8E. Title to Properties...............................................18
8F. Taxes.............................................................19
8G. Conflicting Agreements and Other Matters..........................19
8H. Offering of Notes.................................................19
8I. Use of Proceeds...................................................19
8J. ERISA.............................................................20
8K. Governmental Consent..............................................20
8L. Environmental Compliance..........................................20
8M. Regulatory Status.................................................20
8N. Section 144A......................................................21
8O. Absence of Financing Statements, etc..............................21
8P. Disclosure........................................................21
8Q. Year 2000.........................................................21
8R. Hostile Tender Offers.............................................21
9. REPRESENTATIONS OF THE PURCHASERS.................................................21
9A. Nature of Purchase................................................21
9B. Source of Funds...................................................22
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10. DEFINITIONS; ACCOUNTING MATTERS...................................................22
10A. Yield-Maintenance Terms...........................................22
10B. Other Terms.......................................................23
10C. Accounting Principles, Terms and Determinations...................31
11. MISCELLANEOUS.....................................................................32
11A. Note Payments.....................................................32
11B. Expenses..........................................................32
11C. Consent to Amendments.............................................32
11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes....33
11E. Persons Deemed Owners; Participations.............................34
11F. Survival of Representations and Warranties; Entire Agreement......34
11G. Successors and Assigns............................................34
11H. Independence of Covenants.........................................34
11I. Notices...........................................................35
11J. Payments Due on Non-Business Days.................................35
11K. Severability......................................................35
11L. Descriptive Headings..............................................35
11M. Satisfaction Requirement..........................................36
11N. Governing Law.....................................................36
11O. Severalty of Obligations..........................................36
11P. Counterparts......................................................36
11Q. Confidentiality Provisions........................................36
11R. Transfer Restrictions.............................................37
11S. Binding Agreement.................................................37
11T. Amendment of Existing Agreement...................................38
</TABLE>
EXHIBITS AND SCHEDULES
---------------------
<TABLE>
<CAPTION>
Purchaser Schedule
Information Schedule
<S> <C>
Exhibits A1-A2 --Forms of Shelf Notes
Exhibit B --Form of Request for Purchase
Exhibit C --Form of Confirmation of Acceptance
Exhibit D --Form of Opinion of Company Counsel
Schedule 6B(1) --List of Existing Liens
Schedule 8G --Agreements Restricting Debt
</TABLE>
4
<PAGE>
VALMONT INDUSTRIES, INC.
6000 VALMONT PLAZA
OMAHA, NEBRASKA 68154
As of September 10, 1999
The Prudential Insurance Company
of America ("PRUDENTIAL")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential, the "PURCHASERS")
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Ladies and Gentlemen:
The undersigned, Valmont Industries, Inc., a Delaware corporation
(herein called the "COMPANY"), hereby agrees with you as set forth below.
Reference is made to paragraph 10 hereof for definitions of capitalized terms
used herein and not otherwise defined herein.
1. AUTHORIZATION OF ISSUE OF NOTES.
1A. INTENTIONALLY OMITTED
1B. AUTHORIZATION OF ISSUE OF SHELF NOTES. The Company will
authorize the issue of its senior promissory notes (the "SHELF NOTES") in the
aggregate principal amount of $100,000,000, to be dated the date of issue
thereof, to mature, in the case of each Shelf Note so issued, no more than 15
years after the date of original issuance thereof, to have an average life, in
the case of each Shelf Note so issued, of no more than 12 years after the date
of original issuance thereof, to bear interest on the unpaid balance thereof
from the date thereof at the rate per annum, and to have such other particular
terms, as shall be set forth, in the case of each Shelf Note so issued, in the
Confirmation of Acceptance with respect to such Shelf Note delivered pursuant to
paragraph 2B(5), and to be substantially in the form of EXHIBIT A attached
hereto. The terms "SHELF NOTE" and "SHELF NOTES" as used herein shall include
each Shelf Note delivered pursuant to any
5
<PAGE>
provision of this Agreement and each Shelf Note delivered in substitution or
exchange for any such Shelf Note pursuant to any such provision. The terms
"NOTE" and "NOTES" as used herein shall include each Shelf Note delivered
pursuant to any provision of this Agreement and each Note delivered in
substitution or exchange for any such Note pursuant to any such provision. Notes
which have (i) the same final maturity, (ii) the same principal prepayment
dates, (iii) the same principal prepayment amounts (as a percentage of the
original principal amount of each Note), (iv) the same interest rate, (v) the
same interest payment periods and (vi) the same date of issuance (which, in the
case of a Note issued in exchange for another Note, shall be deemed for these
purposes the date on which such Note's ultimate predecessor Note was issued),
are herein called a "SERIES" of Notes.
2. PURCHASE AND SALE OF NOTES.
2A. INTENTIONALLY OMITTED.
2B. PURCHASE AND SALE OF SHELF NOTES.
2B(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
from time to time, the purchase of Shelf Notes pursuant to this Agreement. The
willingness of Prudential to consider such purchase of Shelf Notes is herein
called the "FACILITY". At any time, the aggregate principal amount of Shelf
Notes stated in paragraph 1B, MINUS the aggregate principal amount of Shelf
Notes purchased and sold pursuant to this Agreement prior to such time, MINUS
the aggregate principal amount of Accepted Notes (as hereinafter defined) which
have not yet been purchased and sold hereunder prior to such time, MINUS any
additional aggregate principal amount outstanding owing by the Company to
Prudential, is herein called the "AVAILABLE FACILITY AMOUNT" at such time.
NOTWITHSTANDING THE WILLINGNESS OF PRUDENTIAL TO CONSIDER PURCHASES OF SHELF
NOTES, THIS AGREEMENT IS ENTERED INTO ON THE EXPRESS UNDERSTANDING THAT NEITHER
PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT
OFFERS TO PURCHASE SHELF NOTES, OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH
RESPECT TO SPECIFIC PURCHASES OF SHELF NOTES, AND THE FACILITY SHALL IN NO WAY
BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.
2B(2). ISSUANCE PERIOD. Shelf Notes may be issued and sold pursuant
to this Agreement until the earlier of (i) the third anniversary of the date of
this Agreement (or if such anniversary date is not a Business Day, the Business
Day next preceding such anniversary) and (ii) the thirtieth day after Prudential
shall have given to the Company, or the Company shall have given to Prudential,
a written notice stating that it elects to terminate the issuance and sale of
Shelf Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day). The period
during which Shelf Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".
6
<PAGE>
2B(3). REQUEST FOR PURCHASE. The Company may from time to time
during the Issuance Period make requests for purchases of Shelf Notes (each such
request being herein called a "REQUEST FOR PURCHASE"). Each Request for Purchase
shall be made to Prudential by telecopier or overnight delivery service, and
shall (i) specify the aggregate principal amount of Shelf Notes covered thereby,
which shall not be less than $5,000,000 and not be greater than the Available
Facility Amount at the time such Request for Purchase is made, (ii) specify the
principal amounts, final maturities, principal prepayment dates and amounts and
interest payment periods (quarterly or semi-annual in arrears) of the Shelf
Notes covered thereby, (iii) certify that the proceeds of such Shelf Notes shall
be used for general corporate purposes permitted by this Agreement, (iv) specify
the proposed day for the closing of the purchase and sale of such Shelf Notes,
which shall be a Business Day during the Issuance Period not less than 10 days
and not more than 25 days after the making of such Request for Purchase, (v)
certify that the representations and warranties contained in paragraph 8 are
true on and as of the date of such Request for Purchase and that there exists on
the date of such Request for Purchase no Event of Default or Default, (vi)
specify whether the fee to be due pursuant to paragraph 2B(8)(ii) should be
included in the rate quotes Prudential may provide pursuant to paragraph 2B(4)
or will be paid separately by the Company on the Closing Day for such purchase
and sale, and (vii) be substantially in the form of EXHIBIT B attached hereto.
Each Request for Purchase shall be in writing and shall be deemed made when
received by Prudential.
2B(4). RATE QUOTES. Not later than five Business Days after the
Company shall have given Prudential a Request for Purchase pursuant to paragraph
2B(3), Prudential may, but shall be under no obligation to, provide to the
Company by telephone or telecopier, in each case between 9:30 A.M. and 1:30 P.M.
New York City local time (or such later time as Prudential may elect) interest
rate quotes for the several principal amounts, maturities, principal prepayment
schedules, and interest payment periods of Shelf Notes specified in such Request
for Purchase. Each quote shall represent the interest rate per annum payable on
the outstanding principal balance of such Shelf Notes at which Prudential or a
Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of
the principal amount thereof.
2B(5). ACCEPTANCE. Within the Acceptance Window, the Company may,
subject to paragraph 2B(6), elect to accept such interest rate quotes as to not
less than $5,000,000 aggregate principal amount of the Shelf Notes specified in
the related Request for Purchase. Such election shall be made by an Authorized
Officer of the Company notifying Prudential by telephone or telecopier within
the Acceptance Window that the Company elects to accept such interest rate
quotes, specifying the Shelf Notes (each such Shelf Note being herein called an
"ACCEPTED NOTE") as to which such acceptance (herein called an "ACCEPTANCE")
relates. The day the Company notifies Prudential of an Acceptance with respect
to any Accepted Notes is herein called the "ACCEPTANCE DAY" for such Accepted
Notes. Any interest rate quotes as to which Prudential does not receive an
Acceptance within the Acceptance Window shall expire, and no purchase or sale of
Shelf Notes hereunder shall be made based on such expired interest rate quotes.
Subject to paragraph 2B(6) and the other terms and conditions hereof, the
Company agrees to sell to Prudential or a Prudential Affiliate, and Prudential
agrees to purchase, or to cause the purchase by a Prudential
7
<PAGE>
Affiliate of, the Accepted Notes at 100% of the principal amount of such Notes.
As soon as practicable following the Acceptance Day, the Company, Prudential and
each Prudential Affiliate which is to purchase any such Accepted Notes will
execute a confirmation of such Acceptance substantially in the form of EXHIBIT C
attached hereto (herein called a "CONFIRMATION OF ACCEPTANCE"). If the Company
should fail to execute and return to Prudential within three Business Days
following receipt thereof a Confirmation of Acceptance with respect to any
Accepted Notes, Prudential may at its election at any time prior to its receipt
thereof cancel the closing with respect to such Accepted Notes by so notifying
the Company in writing.
2B(6). MARKET DISRUPTION. Notwithstanding the provisions of
paragraph 2B(5), if Prudential shall have provided interest rate quotes pursuant
to paragraph 2B(4) and thereafter prior to the time an Acceptance with respect
to such quotes shall have been notified to Prudential in accordance with
paragraph 2B(5) the domestic market for U.S. Treasury securities or derivatives
shall have closed or there shall have occurred a general suspension, material
limitation, or significant disruption of trading in securities generally on the
New York Stock Exchange or in the domestic market for U.S. Treasury securities
or derivatives, then such interest rate quotes shall expire, and no purchase or
sale of Shelf Notes hereunder shall be made based on such expired interest rate
quotes. If the Company thereafter notifies Prudential of the Acceptance of any
such interest rate quotes, such Acceptance shall be ineffective for all purposes
of this Agreement, and Prudential shall promptly notify the Company that the
provisions of this paragraph 2B(6) are applicable with respect to such
Acceptance.
2B(7). FACILITY CLOSINGS. Not later than 11:30 A.M. (New York City
local time) on the Closing Day for any Accepted Notes, the Company will deliver
to each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of the Prudential Capital Group, Two Prudential Plaza, Suite 5600,
Chicago, Illinois 60601, Attention: Law Department, the Accepted Notes to be
purchased by such Purchaser in the form of one or more Notes in authorized
denominations as such Purchaser may request for each Series of Accepted Notes to
be purchased on the Closing Day, dated the Closing Day and registered in such
Purchaser's name (or in the name of its nominee), against payment of the
purchase price thereof by transfer of immediately available funds for credit to
the Company's account specified in the Request for Purchase of such Notes. If
the Company fails to tender to any Purchaser the Accepted Notes to be purchased
by such Purchaser on the scheduled Closing Day for such Accepted Notes as
provided above in this paragraph 2B(7), or any of the conditions specified in
paragraph 3 shall not have been fulfilled by the time required on such scheduled
Closing Day, the Company shall, prior to 1:00 P.M., New York City local time, on
such scheduled Closing Day notify Prudential (which notification shall be deemed
received by each Purchaser) in writing whether (i) such closing is to be
rescheduled (such rescheduled date to be a Business Day during the Issuance
Period not less than one Business Day and not more than 10 Business Days after
such scheduled Closing Day (the "RESCHEDULED CLOSING DAY")) and certify to
Prudential (which certification shall be for the benefit of each Purchaser) that
the Company reasonably believes that it will be able to comply with the
conditions set forth in paragraph 3 on such Rescheduled Closing Day and that the
Company will pay the Delayed Delivery Fee in accordance with paragraph
2B(8)(iii) or (ii) such closing is to be canceled. In the event that the Company
shall fail to give such notice referred to in the preceding sentence, Prudential
(on behalf of each Purchaser) may at its election, at any time after 1:00 P.M.,
New York City local time, on such scheduled Closing Day, notify the Company in
writing that such closing is
8
<PAGE>
to be canceled. Notwithstanding anything to the contrary appearing in this
Agreement, the Company may not elect to reschedule a closing with respect to any
given Accepted Notes on more than one occasion, unless Prudential shall have
otherwise consented in writing
2B(8). FEES.
2B(8)(i). STRUCTURING FEE. At the time of the execution and delivery
of this Agreement by the Company and Prudential, the Company will pay to
Prudential in immediately available funds a fee (herein called the "STRUCTURING
FEE") in the amount of $50,000.
2B(8)(ii).ISSUANCE FEE. The Company will pay to Prudential in
immediately available funds a fee (herein called the "ISSUANCE FEE") on each
Closing Day in an amount equal to 0.10% of the aggregate principal amount of
Notes sold on such Closing Day, unless the Company shall have requested pursuant
to the applicable Request for Purchase that such fee be included in the rate
quotes Prudential may provide pursuant to paragraph 2B(4).
2B(8)(iii).DELAYED DELIVERY FEE. If the closing of the purchase and
sale of any Accepted Note is delayed for any reason beyond the original Closing
Day for such Accepted Note, the Company will pay to Prudential (a) on the
Cancellation Date or actual closing date of such purchase and sale and (b) if
earlier, the next Business Day following 90 days after the Acceptance Day for
such Accepted Note and on each Business Day following 90 days after the prior
payment hereunder, a fee (herein called the "DELAYED DELIVERY FEE") calculated
as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, I.E., the bond equivalent yield per
annum of such Accepted Note; "MMY" means Money Market Yield, I.E., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by Prudential each time such closing is delayed);
"DTS" means Days to Settlement, I.E., the number of actual days elapsed from and
including the original Closing Day with respect to such Accepted Note (in the
case of the first such payment with respect to such Accepted Note) or from and
including the date of the next preceding payment (in the case of any subsequent
delayed delivery fee payment with respect to such Accepted Note) to but
excluding the date of such payment; and "PA" means Principal Amount, I.E., the
principal amount of the Accepted Note for which such calculation is being made.
In no case shall the Delayed Delivery Fee be less than zero. Nothing contained
herein shall obligate any Purchaser to purchase any Accepted Note on any day
other than the Closing Day for such Accepted Note, as the same may be
rescheduled from time to time in compliance with paragraph 2B(7).
2B(8)(iv).CANCELLATION FEE. If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the purchase
and sale of any Accepted Note, or if Prudential notifies the Company in writing
under the circumstances set forth in the last sentence of
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paragraph 2B(5) or the penultimate sentence of paragraph 2B(7) that the closing
of the purchase and sale of such Accepted Note is to be canceled, or if the
closing of the purchase and sale of such Accepted Note is not consummated on or
prior to the last day of the Issuance Period (the date of any such notification,
or the last day of the Issuance Period, as the case may be, being herein called
the "CANCELLATION DATE"), the Company will pay to Prudential in immediately
available funds an amount (the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, I.E., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning ascribed to it in paragraph 2B(8)(iii). The foregoing bid and ask prices
shall be as reported by Telerate Systems, Inc. (or, if such data for any reason
ceases to be available through Telerate Systems, Inc., any publicly available
source of similar market data). Each price shall be based on a U.S. Treasury
security having a par value of $100.00 and shall be rounded to the second
decimal place. In no case shall the Cancellation Fee be less than zero.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to
purchase and pay for any Notes is subject to the satisfaction, on or before the
Closing Day for such Notes, of the following conditions:
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser;
(ii) A favorable opinion of McGrath, North, Mullin &
Kratz, special counsel to the Company (or such other counsel
designated by the Company and acceptable to the Purchaser(s))
satisfactory to such Purchaser and substantially in the form of
EXHIBIT D attached hereto and as to such other matters as such
Purchaser may reasonably request. The Company hereby directs each such
counsel to deliver such opinion, agrees that the issuance and sale of
any Notes will constitute a reconfirmation of such direction, and
understands and agrees that each Purchaser receiving such an opinion
will and is hereby authorized to rely on such opinion;
(iii) a Secretary's Certificate signed by the Secretary or
an Assistant Secretary and one other officer of the Company
certifying, among other things, (A) as to the names, titles and true
signatures of the officers of the Company authorized to sign this
Agreement, the Notes and the other documents to be delivered in
connection with this Agreement, (B) that attached as Exhibit A thereto
is a true, accurate and complete copy of the Certificate of
Incorporation of
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the Company, certified by the Secretary of State of Delaware as of a
date not more than ten Business Days from the Closing Day, (C) that
attached as Exhibit B thereto is a true, accurate and complete copy of
the Company's Bylaws which were duly adopted and are presently in
effect and have been in effect immediately prior to and at all times
since the adoption of the resolutions referred to in clause (D) below,
(D) that attached as Exhibit C thereto is a true, accurate and
complete copy of the resolutions of the Company's Board of Directors
(authorizing the issuance and sale of the Notes and the execution,
delivery and performance of this Agreement) duly adopted by written
action or at a meeting of the Company's Board of Directors, and such
resolutions have not been rescinded, amended or modified and (E) that
attached as Exhibit D thereto is a good standing certificate for the
Company from the Secretary of State of Delaware;
(iv) an Officer's Certificate pursuant to paragraph 3C
hereof;
(v) with respect to the first Closing Day only,
certified copies of Requests for Information or Copies (Form UCC-11)
or equivalent reports listing all effective financing statements which
name the Company or any Subsidiary (under its present name and
previous names used in the last seven years) as debtor and which are
filed in the office of the Secretary of State of Delaware together
with copies of such financing statements;
(vi) with respect to the first Closing Day only, a
duly completed response to the Year 2000 Due Diligence Questionnaire
supplied by the Securities Valuation Office of the National
Association of Insurance Commissioners; and
(vii) additional documents or certificates with
respect to legal matters or corporate or other proceedings related to
the transactions contemplated hereby as may be reasonably requested by
such Purchaser.
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Marianne Grabowski, Assistant General Counsel of Prudential or
such other counsel who is acting as special counsel for it in connection with
this transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties contained in paragraph 8 shall be true on and as
of such Closing Day, except to the extent of changes caused by the transactions
herein contemplated; there shall exist on such Closing Day no Event of Default
or Default; and the Company shall have delivered to such Purchaser an Officer's
Certificate, dated such Closing Day, to both such effects.
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3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Notes to be purchased by such Purchaser on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation U,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and such
Purchaser shall have received such certificates or other evidence as it may
request to establish compliance with this condition.
3E. PAYMENT OF FEES. The Company shall have paid to Prudential
any fees due it pursuant to or in connection with this Agreement, including any
Structuring Fee due pursuant to paragraph 2B(8)(i), any Issuance Fee due
pursuant to paragraph 2B(8)(ii) and any Delayed Delivery Fee due pursuant to
paragraph 2B(8)(iii).
4. PREPAYMENTS. Any Shelf Notes shall be subject to required
prepayment as and to the extent provided in paragraphs 4A and 4B, respectively.
Any Shelf Notes shall also be subject to prepayment under the circumstances set
forth in paragraph 4C. Any prepayment made by the Company pursuant to any other
provision of this paragraph 4 shall not reduce or otherwise affect its
obligation to make any required prepayment as specified in paragraph 4A or 4B.
4A. INTENTIONALLY OMITTED.
4B. REQUIRED PREPAYMENTS OF SHELF NOTES. Each Series of Shelf
Notes shall be subject to required prepayments, if any, set forth in the Notes
of such Series.
4C. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes
of each Series shall be subject to prepayment, in whole at any time or from time
to time in part (in integral multiples of $500,000 and in a minimum amount of
$1,000,000), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each such Note. Any partial prepayment of a
Series of the Notes pursuant to this paragraph 4C shall be applied in
satisfaction of required payments of principal in inverse order of their
scheduled due dates.
4D. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the
holder of each Note of a Series to be prepaid pursuant to paragraph 4C
irrevocable written notice of such prepayment not less than 10 Business Days
prior to the prepayment date, specifying such prepayment date, the aggregate
principal amount of the Notes of such Series to be prepaid on such date, the
principal amount of the Notes of such Series held by such holder to be prepaid
on that date and that such prepayment is to be made pursuant to paragraph 4C.
Notice of prepayment having been given as aforesaid, the principal amount of the
Notes specified in such notice, together with interest thereon to the prepayment
date and together with the Yield-Maintenance Amount, if any, herein provided,
shall become due and payable on such prepayment date. The Company shall, on
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or before the day on which it gives written notice of any prepayment pursuant to
paragraph 4C, give telephonic notice of the principal amount of the Notes to be
prepaid and the prepayment date to each Significant Holder which shall have
designated a recipient for such notices in the Purchaser Schedule attached
hereto or the applicable Confirmation of Acceptance or by notice in writing to
the Company.
4E. APPLICATION OF PREPAYMENTS. In the case of each prepayment
of less than the entire unpaid principal amount of all outstanding Notes of any
Series pursuant to paragraphs 4A, 4B or 4C, the amount to be prepaid shall be
applied pro rata to all outstanding Notes of such Series (including, for the
purpose of this paragraph 4E only, all Notes prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its Subsidiaries or
Affiliates other than by prepayment pursuant to paragraph 4A, 4B or 4C)
according to the respective unpaid principal amounts thereof.
4F. NO ACQUISITION OF NOTES. The Company shall not, and shall
not permit any of its Subsidiaries or Affiliates to, prepay or otherwise retire
in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to paragraphs 4A, 4B or 4C, or upon acceleration of such
final maturity pursuant to paragraph 7A), or purchase or otherwise acquire,
directly or indirectly, Notes held by any holder. Any notes so prepaid or
otherwise retired or purchased or otherwise acquired by the Company or any of
its Subsidiaries or Affiliates shall not be deemed to be outstanding for any
purpose under this Agreement, except as provided in paragraph 4E.
5. AFFIRMATIVE COVENANTS. During the Issuance Period and so
long thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company
covenants that it will deliver to each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year consolidated statements of
income, and cash flows and a consolidated statement of shareholders'
equity of the Company and its Subsidiaries for the period from the
beginning of the current fiscal year to the end of such quarterly
period, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in
each case in comparative form figures for the corresponding period in
the preceding fiscal year, all in reasonable detail and certified by
an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments; PROVIDED, HOWEVER, that delivery
pursuant to clause (iii) below of copies of the Quarterly Report on
Form 10-Q of the Company for such quarterly period filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (i);
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(ii) as soon as practicable and in any event within
90 days after the end of each fiscal year, consolidated statements of
income and cash flows and a consolidated statement of shareholders'
equity of the Company and its Subsidiaries for such year, and a
consolidated balance sheet of the Company and its Subsidiaries as at
the end of such year, setting forth in each case in comparative form
corresponding consolidated figures from the preceding annual audit,
all in reasonable detail and satisfactory in form to the Required
Holder(s) and, reported on by independent public accountants of
recognized national standing selected by the Company whose report
shall be without limitation as to scope of the audit and satisfactory
in substance to the Required Holder(s) PROVIDED, HOWEVER, that
delivery pursuant to clause (iii) below of copies of the Annual Report
on Form 10-K of the Company for such fiscal year filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii);
(iii) promptly upon transmission thereof, copies of
all such financial statements, proxy statements, notices and reports
as it shall send to its public stockholders and copies of all
registration statements (without exhibits) and all reports which it
files with the Securities and Exchange Commission (or any governmental
body or agency succeeding to the functions of the Securities and
Exchange Commission); and
(iv) with reasonable promptness, such other information as
such holder (which is not a Competitor) may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company and its Subsidiaries with the provisions of paragraph 6 and stating
that there exists no Event of Default or Default, or, if any Event of Default or
Default exists, specifying the nature and period of existence thereof and what
action the Company proposes to take with respect thereto.
The Company also covenants that immediately after any
Responsible Officer obtains knowledge of an Event of Default or Default, it will
deliver to each Significant Holder an Officer's Certificate specifying the
nature and period of existence thereof and what action the Company proposes to
take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants
that it will, upon the request of the holder of any Note, provide such holder,
and any qualified institutional buyer designated by such holder, such financial
and other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to and in compliance with the reporting requirements
of section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph
5B,
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the term "QUALIFIED INSTITUTIONAL BUYER" shall have the meaning specified in
Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person (which is not a Competitor) designated by any Significant
Holder in writing, at such Significant Holder's expense, if no Default or Event
of Default then exists (and at the Company's expense, if a Default or Event of
Default then exists) to visit and inspect any of the properties of the Company
and its Subsidiaries, to examine the corporate books and financial records of
the Company and its Subsidiaries and make copies thereof or extracts therefrom
and to discuss the affairs, finances and accounts of any of such corporations
with the principal officers of the Company and, during the continuance of an
Event of Default, its independent public accountants, all at such reasonable
times and as often as such Significant Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants
that, if it or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other than Liens
permitted by the provisions of paragraph 6C(1) (unless prior written consent to
the creation or assumption thereof shall have been obtained pursuant to
paragraph 11C), it will make or cause to be made effective provision whereby the
Notes will be secured by such Lien equally and ratably with any and all other
Debt thereby secured so long as any such other Debt shall be so secured.
5E. COMPLIANCE WITH LAWS. The Company covenants that it shall,
and shall cause each Subsidiary to, comply with all applicable laws, rules,
regulations, decrees and orders of all federal, state, local or foreign courts
or governmental agencies, authorities, instrumentalities or regulatory bodies
the noncompliance with which could be reasonably expected to result in a
material adverse effect on the business, assets, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole.
5F. MAINTENANCE OF INSURANCE. The Company covenants that it and
each Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as
customarily is maintained by the other companies operating similar businesses.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and unpaid,
the Company covenants as follows:
6A(1). COVERAGE RATIO. The Company will not permit the ratio
(expressed as a percentage) of EBITDA to Fixed Charges for any rolling four
consecutive fiscal quarter period to be less than (x) 185% at any time on or
prior to June 30, 2000; and (y) 200% at any time thereafter.
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6A(2). LEVERAGE RATIO. The Company will not permit the ratio
(expressed as a percentage) of Consolidated Funded Debt to Consolidated Gross
Worth to exceed 50% at any time.
6A(3). TOTAL DEBT RATIO. The Company will not permit the ratio
(expressed as a percentage) of Total Debt to EBITDA to exceed 225% at any time.
For purposes of this paragraph EBITDA shall be determined as of the end of the
most recently ended fiscal quarter for the four consecutive fiscal quarter
period then ended.
6B. MINIMUM CONSOLIDATED NET WORTH. The Company will not permit
at any time Consolidated Net Worth to fall below $150,000,000 plus fifty percent
(50%) of annual Consolidated Net Income (less 0% in the event of a loss) applied
at the end of each fiscal year commencing with the fiscal year ending on
December 31, 1999.
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company will
not and will not permit any Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any
of its properties or assets, whether now owned or hereafter acquired (whether or
not provision is made for the equal and ratable securing of the Notes in
accordance with the provisions of paragraph 5D), EXCEPT:
(i) Liens for taxes, assessments or other governmental
charges not yet due or which are being actively contested in good
faith by appropriate proceedings,
(ii) Liens incidental to the conduct of its business
or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of an advance
or credit, and which do not in the aggregate materially detract from
the value of its property or assets or materially impair the use
thereof in the operation of its business,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or to a Wholly-Owned
Subsidiary,
(iv) Liens in existence on the date hereof and identified
on Schedule 6C(1) hereto, and
(v) other Liens provided however that Priority Debt at no
time exceeds 25% of Consolidated Net Worth;
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt,
EXCEPT:
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(i) Debt of any Subsidiary owing to the Company or a
Wholly-Owned Subsidiary, and
(ii) other Debt of the Company or Subsidiaries, so long as
Priority Debt at no time exceeds 25% of Consolidated Net Worth;
6C(3). INTENTIONALLY OMITTED.
6C(4). MERGER AND CONSOLIDATION. Merge or consolidate with or
into any other Person, EXCEPT that:
(i) any Subsidiary may merge or consolidate with or into
the Company, PROVIDED that the Company is the continuing or surviving
corporation,
(ii) any Subsidiary may merge or consolidate with or into
any other Subsidiary (so long as any dilution of the Company's
ownership interest in such Subsidiary resulting from such merger if
treated as a sale of assets would be permitted by clause (iii) or (iv)
of paragraph 6(5)) or Person which will constitute a Subsidiary after
giving effect to such merger,
(iii) to the extent permitted by paragraph 6C(5), any
Subsidiary may merge with any other Person (other than the Company)
with such other Person being the continuing or surviving corporation,
and
(iv) the Company may merge with any other solvent
corporation, so long as the Company shall be the continuing or
surviving corporation,
PROVIDED that no Default or Event of Default exists or would exist
immediately after giving effect to any such merger;
6C(5). TRANSFER OF ASSETS. Transfer any of its assets EXCEPT
that:
(i) the Company and Subsidiaries may sell inventory
and equipment in the ordinary course of business,
(ii) any Subsidiary may Transfer assets to the
Company or (so long as permitted by clause (iii) or (iv) of this
paragraph to the extent dilution of the Company's ownership interest
in such Transferred assets will result from such Transfer) any other
Subsidiary,
(iii) the Company or any Subsidiary may otherwise
Transfer assets, PROVIDED that after giving effect thereto the assets
so transferred pursuant to this clause (iii) for the prior four fiscal
quarter period (x) shall not have
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contributed more than 10% of Consolidated Net Income (before
extraordinary gains or losses) and (y) shall not have
constituted more than 10% of Consolidated total assets, and
(iv) the Company or any Subsidiary may Transfer
assets other than as set forth in the preceding clauses (i) through
(iii) of this paragraph 6C(5), if the net proceeds from such Transfer
are either (x) reinvested in productive assets utilized in existing
business operations within 120 days of the Transfer and/or (y)
dedicated to make an offer to make an optional prepayment of the Notes
in accordance with paragraph 4C and the Company provides each holder of
the Notes with an Officer's Certificate at least seven Business Days
prior to such asset Transfer showing the intended means of compliance
with this paragraph in reasonable detail.
6C(6). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount or otherwise sell for less than the face value thereof, or subject to
a Lien, any of its notes or accounts receivable other than receivables which
are doubtful in accordance with generally accepted accounting principles;
6C(7). RELATED PARTY TRANSACTIONS. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, in the ordinary course of business or
otherwise, any Related Party; PROVIDED that the foregoing shall not prohibit
transactions which are engaged in the ordinary course of business and are on
terms demonstrably no less favorable to the Company or a Subsidiary (as the
case may be) than would be available in an "arm's-length" transaction.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such occurrence shall
be voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) the Company defaults in the payment of any
principal of, or Yield- Maintenance Amount payable with respect to, any
Note when the same shall become due, either by the terms thereof or
otherwise as herein provided; or
(ii) the Company defaults in the payment of any
interest on any Note for more than 10 days after the date due; or
(iii) the Company or any Subsidiary defaults (whether
as primary obligor or as guarantor or other surety) in any payment of
principal of or interest on any other obligation for money borrowed
(or any Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention
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agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money
mortgage or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace
provided with respect thereto, or the Company or any Subsidiary
fails to perform or observe any other agreement, term or condition
contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement
shall occur and be continuing) and the effect of such failure or
other event is to cause, or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to
cause, such obligation to become due (or to be repurchased by the
Company or any Subsidiary) prior to any stated maturity, PROVIDED
that the aggregate amount of all obligations as to which such a
payment default shall occur and be continuing or such a failure or
other event causing or permitting acceleration (or resale to the
Company or any Subsidiary) shall occur and be continuing exceeds
$5,000,000; or
(iv) any representation or warranty made by the
Company herein or by the Company or any of its officers in any
writing furnished in connection with or pursuant to this Agreement
shall be false in any material respect on the date as of which made;
or
(v) the Company fails to perform or observe any
agreement contained in paragraph 6; or
(vi) the Company fails to perform or observe any
other agreement, term or condition contained herein and such failure
shall not be remedied within 30 days after any Responsible Officer
obtains actual knowledge thereof; or
(vii) the Company or any Material Subsidiary makes an
assignment for the benefit of creditors; or
(viii) any decree or order for relief in respect of
the Company or any Material Subsidiary is entered under any
bankruptcy, reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law,
whether now or hereafter in effect (herein called the "BANKRUPTCY
LAW"), of any jurisdiction; or
(ix) the Company or any Material Subsidiary petitions
or applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any Material Subsidiary, or of any
substantial part of the assets of the Company or any Material
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than
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proceedings for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Material Subsidiary under
the Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any
such proceedings are commenced, against the Company or any Material
Subsidiary and the Company or such Material Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 30
days; or
(xi) any order, judgment or decree is entered in any
proceedings against the Company decreeing the dissolution of the
Company and such order, judgment or decree remains unstayed and in
effect for more than 60 days: or
(xii) any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up
of the Company or such Subsidiary which requires the divestiture of
assets representing a substantial part, or the divestiture of the
stock of a Subsidiary whose assets represent a substantial part, of
the consolidated assets of the Company and its Subsidiaries
(determined in accordance with generally accepted accounting
principles) or which requires the divestiture of assets, or stock
of a Subsidiary, which shall have contributed a substantial part of
the consolidated net income of the Company and its Subsidiaries
(determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently
ended, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(xiii) one or more final judgments in an aggregate
amount in excess of $5,000,000 is rendered against the Company or any
Subsidiary and, within 60 days after entry thereof, any such judgment
is not discharged or execution thereof stayed pending appeal, or
within 60 days after the expiration of any such stay, such judgment is
not discharged; or
(xiv) the Company or any ERISA Affiliate, in its
capacity as an employer under a Multiemployer Plan, makes a complete
or partial withdrawal from such Multiemployer Plan resulting in the
incurrence by such withdrawing employer of a withdrawal liability in
an amount exceeding $5,000,000;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes held by such holder to be, and all of
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the Notes held by such holder shall thereupon be and become, immediately due
and payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are hereby
waived by the Company, (b) if such event is an Event of Default specified in
clause (viii), (ix) or (x) of this paragraph 7A with respect to the Company,
all of the Notes at the time outstanding shall automatically become
immediately due and payable together with interest accrued thereon and
together with the Yield-Maintenance Amount, if any, with respect to each
Note, without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Company, and (c) with respect to any event
constituting an Event of Default, the Required Holder(s) of the Notes of any
Series may at its or their option during the continuance of such Event of
Default, by notice in writing to the Company, declare all of the Notes of
such Series to be, and all of the Notes of such Series shall thereupon be and
become, immediately due and payable together with interest accrued thereon
and together with the Yield-Maintenance Amount, if any, with respect to each
Note of such Series, without presentment, demand, protest or notice of any
kind, all of which are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all
of the Notes of any Series shall have been declared immediately due and
payable pursuant to paragraph 7A, the Required Holder(s) of the Notes of such
Series may, by notice in writing to the Company, rescind and annul such
declaration and its consequences if (i) the Company shall have paid all
overdue interest on the Notes of such Series, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes of such
Series which have become due otherwise than by reason of such declaration,
and interest on such overdue interest and overdue principal and
Yield-Maintenance Amount at the rate specified in the Notes of such Series,
(ii) the Company shall not have paid any amounts which have become due solely
by reason of such declaration, (iii) all Events of Default and Defaults,
other than non-payment of amounts which have become due solely by reason of
such declaration, shall have been cured or waived pursuant to paragraph 11C,
and (iv) no judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes of such Series or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note
shall be declared immediately due and payable pursuant to paragraph 7A or any
such declaration shall be rescinded and annulled pursuant to paragraph 7B,
the Company shall forthwith give written notice thereof to the holder of each
Note of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or other agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement.
No remedy conferred in this Agreement upon the holder of any Note is intended
to be exclusive of any other remedy, and each and every
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such remedy shall be cumulative and shall be in addition to every other
remedy conferred herein or now or hereafter existing at law or in equity or
by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows (all references to "Subsidiary"
and "Subsidiaries" in this paragraph 8 shall be deemed omitted if the Company
has no Subsidiaries at the time the representations herein are made or
repeated):
8A. ORGANIZATION; SUBSIDIARY PREFERRED STOCK. The Company is a
corporation duly organized and existing in good standing under the laws of
the State of Delaware, each Subsidiary is duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated, and
the Company has and each Subsidiary has the corporate power to own its
respective property and to carry on its respective business as now being
conducted. No subsidiary has outstanding any shares of stock of a class which
has priority over any other class as to dividends or in liquidation.
8B. FINANCIAL STATEMENTS. The Company has furnished each
Purchaser of any Note with the following financial statements, identified by
a principal financial officer of the Company: (i) a consolidated balance
sheet of the Company and its Subsidiaries as at December 31 in each of the
three fiscal years of the Company most recently completed prior to the date
as of which this representation is made or repeated to such Purchaser (other
than fiscal years completed within 90 days prior to such date for which
audited financial statements have not been released) and consolidated
statements of income and cash flows and a consolidated statement of
shareholders' equity of the Company and its Subsidiaries for each such year,
all reported on by Deloitte and Touche L.L.P. and (ii) consolidated balance
sheet of the Company and its Subsidiaries as at the end of the quarterly
period (if any) most recently completed prior to such date and after the end
of such fiscal year (other than quarterly periods completed within 60 days
prior to such date for which financial statements have not been released) and
the comparable quarterly period in the preceding fiscal year and consolidated
statements of income and cash flows and a consolidated statement of
shareholders' equity for the periods from the beginning of the fiscal years
in which such quarterly periods are included to the end of such quarterly
periods, prepared by the Company. Such financial statements (including any
related schedules and/or notes) (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been prepared
in all material respects in accordance with generally accepted accounting
principles consistently followed throughout the periods involved. The balance
sheets fairly present in all material respects the consolidated condition of
the Company and its Subsidiaries as at the dates thereof, and the statements
of income, stockholders' equity and cash flows fairly present in all material
respects the consolidated results of the operations of the Company and its
Subsidiaries and their cash flows for the periods indicated in accordance
with generally accepted accounting principles. There has been no material
adverse change in the business, property or assets, condition (financial or
otherwise), operations of the Company and its Subsidiaries taken as a whole
since the end of the most recent fiscal year for which such audited financial
statements have been furnished.
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8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which could be reasonably expected to result in any
material adverse change in the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole.
8D. OUTSTANDING DEBT. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted by paragraph 6C(2).
There exists no default under the provisions of any instrument evidencing
such Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to all of
its other respective properties and assets, including the properties and
assets reflected in the most recent audited balance sheet referred to in
paragraph 8B (other than properties and assets disposed of in the ordinary
course of business), subject to no Lien of any kind except Liens permitted by
paragraph 6C(1). All leases necessary in any material respect for the conduct
of the respective businesses of the Company and its Subsidiaries are valid
and subsisting and are in full force and effect.
8F. TAXES. The Company has and each of its Subsidiaries has
filed all federal, state and other income tax returns which, to the best
knowledge of the officers of the Company and its Subsidiaries, are required
to be filed, and each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have become due,
except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance
with generally accepted accounting principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially and
adversely affects the consolidated business, property or assets, condition
(financial or otherwise) or operations of the Company and its Subsidiaries
taken as a whole. Neither the execution nor delivery of this Agreement or the
Notes, nor the offering, issuance and sale of the Notes, nor fulfillment of
nor compliance with the terms and provisions hereof and of the Notes will
conflict with, or result in a breach of the terms, conditions or provisions
of, or constitute a default under, or result in any violation of, or result
in the creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Subsidiaries, any award of any arbitrator or any
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or
any of its Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained
in, any instrument evidencing Indebtedness of the Company or such Subsidiary,
any agreement relating thereto or any other contract or agreement (including
its charter) which limits the amount of, or otherwise imposes restrictions
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on the incurring of, Debt of the Company of the type to be evidenced by the
Notes except as set forth in the agreements listed in SCHEDULE 8G attached
hereto (as such Schedule 8G may have been modified from time to time by
written supplements thereto delivered by the Company and accepted in writing
by Prudential).
8H. OFFERING OF NOTES. Neither the Company nor any agent
acting on its behalf has, directly or indirectly, offered the Notes or any
similar security of the Company for sale to, or solicited any offers to buy
the Notes or any similar security of the Company from, or otherwise
approached or negotiated with respect thereto with, any Person other than
institutional investors, and neither the Company nor any agent acting on its
behalf has taken or will take any action which would subject the issuance or
sale of the Notes to the provisions of Section 5 of the Securities Act or to
the provisions of any securities or Blue Sky law of any applicable
jurisdiction.
8I. USE OF PROCEEDS. The Company is not engaged principally,
or as one of its important activities, in the business of extending credit
for the purpose of purchasing or carrying "margin stock" (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System), and
the aggregate market value of all "margin stock" owned by the Company and its
Subsidiaries does not exceed 25% of the aggregate value of the assets
thereof, as determined by any reasonable method. Neither the Company nor any
agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation U, Regulation T or
any other regulation of the Board of Governors of the Federal Reserve System
or to violate the Exchange Act, in each case as in effect now or as the same
may hereafter be in effect.
8J. ERISA. No material accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the PBGC has been or is expected by the Company or any ERISA
Affiliate to be incurred with respect to any Plan (other than a Multiemployer
Plan) by the Company, any Subsidiary or any ERISA Affiliate which is or would
be materially adverse to the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Subsidiaries
taken as a whole. Neither the Company, any Subsidiary nor any ERISA Affiliate
has incurred or presently expects to incur any withdrawal liability under
Title IV of ERISA with respect to any Multiemployer Plan which is or would be
materially adverse to the business, property or assets, condition (financial
or otherwise) or operations of the Company and its Subsidiaries taken as a
whole. The execution and delivery of this Agreement and the issuance and sale
of the Notes will be exempt from or will not involve any transaction which is
subject to the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the
Code. The representation by the Company in the next preceding sentence is
made in reliance upon and subject to the accuracy of the representation of
each Purchaser in paragraph 9B as to the source of funds to be used by it to
purchase any Notes.
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8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or properties, nor
any relationship between the Company or any Subsidiary and any other Person,
nor any circumstance in connection with the offering, issuance, sale or
delivery of the Notes is such as to require any authorization, consent,
approval, exemption or any action by or notice to or filing with any court or
administrative or governmental body (other than routine filings after the
Closing Day for any Notes with the Securities and Exchange Commission and/or
state Blue Sky authorities) in connection with the execution and delivery of
this Agreement, the offering, issuance, sale or delivery of the Notes or
fulfillment of or compliance with the terms and provisions hereof or of the
Notes.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries
and all of their respective properties and facilities have complied at all
times and in all respects with all foreign, federal, state, local and
regional statutes, laws, ordinances and judicial or administrative orders,
judgments, rulings and regulations relating to protection of the environment
EXCEPT, in any such case, where failure to comply would not result in a
material adverse effect on the business, condition (financial or otherwise)
or operations of the Company and its Subsidiaries taken as a whole.
8M. REGULATORY STATUS. Neither the Company nor any Subsidiary
is (i) an "Investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, (ii) a "holding company" or a "subsidiary company" or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Act of 1935, as amended, or (iii) a
"public utility" within the meaning of the Federal Power Act, as amended.
8N. SECTION 144A. The Notes are not of the same class as
securities, if any, of the Company listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system.
8O. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect
to Liens permitted by paragraph 6C(1) hereof, there is no financing
statement, security agreement, chattel mortgage, real estate mortgage or
other document filed or recorded with any filing records, registry or other
public office, that purports to cover, affect or give notice of any present
or possible future Lien on, or security interest in, any assets or property
of the Company or any of its Subsidiaries or any rights relating thereto.
8P. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading in light of the circumstances in
which made. There is no fact peculiar to the Company or any of its Subsidiaries
which materially adversely affects or in the future could be reasonably expected
to (so far as the Company can now reasonably foresee) materially adversely
affect the business,
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property or assets, condition (financial or otherwise) or operations of the
Company and its Subsidiaries taken as a whole which has not been set forth in
this Agreement.
8Q. YEAR 2000. The Company has reviewed the areas within its
business and operations which could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications, as well as embedded
microchips in non-computing devices, used by the Company may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any after December 31, 1999). The Company has developed or
is developing programs to address its "Year 2000 Problem" on a timely basis.
Based on such review and program, the Company reasonably believes based on
current information that its "Year 2000 Problem" will not result in a
material adverse effect on the business, property, assets, prospects,
financial condition or operations of the Company and its Subsidiaries taken
as a whole.
8R. HOSTILE TENDER OFFERS. None of the proceeds of the
sale of any Notes will be used to finance a Hostile Tender Offer.
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control.
9B. SOURCE OF FUNDS. The source of the funds being used by such
Purchaser to pay the purchase price of the Notes being purchased by such
Purchaser hereunder constitutes assets allocated to: (i) the "insurance company
general account" of such Purchaser (as such term is defined under Section V of
the United States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60, (ii) a separate account maintained by such Purchaser in which no
employee benefit plan, other than employee benefit plans identified on a list
which has been furnished by such Purchaser to the Company, participates to the
extent of 10% or more or (iii) an investment fund, the assets of which do not
include any assets of any employee benefit plan. For the purpose of this
paragraph 9B, the terms "SEPARATE ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall
have the respective meanings specified in section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraphs 10A and 10B (or within the text of
any other paragraph) shall have the respective meanings specified therein and
all accounting matters shall be subject to determination as provided in
paragraph 10C.
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10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any
Note, the principal of such Note that is to be prepaid pursuant to paragraph
4C or is declared to be immediately due and payable pursuant to paragraph 7A,
as the context requires.
"DISCOUNTED VALUE" shall mean, with respect to the
Called Principal of any Note, the amount obtained by discounting all
Remaining Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to such
Called Principal, in accordance with accepted financial practice and at a
discount factor (as converted to reflect the periodic basis on which interest
on such Note is payable, if payable other than on a semi-annual basis) equal
to the Reinvestment Yield with respect to such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the
Called Principal of any Note, the yield to maturity implied by (i) 0.50%
over the yields reported, as of 10:00 A.M. (New York City local time) on the
Business Day next preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page 678" on the Telerate Service
(or such other display as may replace page 678 on the Telerate Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date,
or if such yields shall not be reported as of such time or the yields
reported as of such time shall not be ascertainable, (ii) the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported as of the Business Day next preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement
Date. Such implied yield shall be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (b) interpolating linearly between yields
reported for various maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii)
the sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which will
elapse between the Settlement Date with respect to such Called Principal and
the scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect
to the Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with respect
to such Called Principal if no payment of such Called Principal were made prior
to its scheduled due date.
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"SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be
prepaid pursuant to paragraph 4C or is declared to be immediately due and
payable pursuant to paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to
any Note, an amount equal to the excess, if any, of the Discounted Value of
the Called Principal of such Note over the sum of (i) such Called Principal
plus (ii) interest accrued thereon as of (including interest due on) the
Settlement Date with respect to such Called Principal. The Yield-Maintenance
Amount shall in no event be less than zero.
10B. OTHER TERMS.
"ACCEPTANCE" shall have the meaning specified in paragraph
2B(5).
"ACCEPTANCE DAY" shall have the meaning specified in
paragraph 2B(5).
"ACCEPTANCE WINDOW" shall mean, with respect to any
interest rate quote made by Prudential pursuant to paragraph 2B(4), the time
period designated by Prudential during which the Company may elect to accept
such interest rate quote as to not less than $5,000,000 in aggregate
principal amount of Shelf Notes specified in the related Request for Purchase.
"ACCEPTED NOTE" shall have the meaning specified in
paragraph 2B(5).
"AFFILIATE" shall mean (i) any Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with such Person (except, with respect to the Company, a Subsidiary)
and (ii) in the case of Prudential or any "Affiliate" of Prudential, any
investment fund or vehicle for which Prudential or any Affiliate acts as
investment advisor or portfolio manager. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AUTHORIZED OFFICER" shall mean (i) in the case of the
Company, its chief executive officer, its chief financial officer, any
vice president of the Company designated as an "Authorized Officer" of the
Company in the Information Schedule attached hereto or any vice president of
the Company designated as an "Authorized Officer" of the Company for the
purpose of this Agreement in an Officer's Certificate executed by the
Company's chief executive officer or chief financial officer and delivered to
Prudential, and (ii) in the case of Prudential, any officer of Prudential
designated as its "Authorized Officer" in the Information Schedule or any
officer of Prudential designated as its "Authorized Officer" for the purpose
of this Agreement in a certificate executed by one of its Authorized
Officers. Any action taken under this Agreement on behalf of the Company by
any individual who on or after the date of this
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Agreement shall have been an Authorized Officer of the Company and whom
Prudential in good faith believes to be an Authorized Officer of the Company
at the time of such action shall be binding on the Company even though such
individual shall have ceased to be an Authorized Officer of the Company, and
any action taken under this Agreement on behalf of Prudential by any
individual who on or after the date of this Agreement shall have been an
Authorized Officer of Prudential and whom the Company in good faith believes
to be an Authorized Officer of Prudential at the time of such action shall be
binding on Prudential even though such individual shall have ceased to be an
Authorized Officer of Prudential.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified
in paragraph 2B(1).
"BANKRUPTCY LAW" shall have the meaning specified in
clause (viii) of paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a
Saturday or a Sunday, (ii) a day on which commercial banks in New York City
are required or authorized to be closed and (iii) for purposes of paragraph
2B(3) hereof only, a day on which The Prudential Insurance Company of America
is not open for business.
"CANCELLATION DATE" shall have the meaning specified in
paragraph 2B(8)(iv).
"CANCELLATION FEE" shall have the meaning specified in
paragraph 2B(8)(iv).
"CAPITAL STOCK" shall mean as to any Person, all shares,
interests, partnership interests, limited liability company interests,
participations and other rights in, or other equivalents of, such Person's
equity, and any rights, warrants, or options exchangeable for, or convertible
into, such shares, interests, participations, rights or other equivalents.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under generally accepted accounting principles, is or
will be required to be capitalized on the books of the Company or any
Subsidiary, taken at the amount thereof accounted for as indebtedness (net of
interest expenses) in accordance with such principles.
"CLOSING DAY" shall mean, with respect to any Accepted
Note, the Business Day specified for the closing of the purchase and sale of
such Accepted Note in the Request for Purchase of such Accepted Note,
PROVIDED that (i) if the Company and the Purchaser which is obligated to
purchase such Accepted Note agree on an earlier Business Day for such
closing, the "CLOSING DAY" for such Accepted Note shall be such earlier
Business Day, and (ii) if the closing of the purchase and sale of such
Accepted Note is rescheduled pursuant to paragraph 2B(7), the Closing Day for
such Accepted Note, for all purposes of this Agreement except references to
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"original Closing Day" in paragraph 2B(8)(iii), shall mean the Rescheduled
Closing Day with respect to such Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPETITOR" shall mean and include any Person (other
than Prudential or any Prudential Affiliate) engaged in any material
respect in the fabricated structural metal, coating (galvanizing, painting or
other commercially applied metal finishes) or irrigation industries in which
the Company is engaged. Each holder and each Transferee may in good faith
conclusively rely on a certificate of a proposed purchaser of the Note(s)
addressed and delivered to the Company and such holder or Transferee to the
effect that such proposed purchaser of the Note(s) is not a Competitor,
provided that the Company has not, by written notice to such holder or
Transferee delivered within five Business Days after the Company's receipt of
such certificate, objected to such reliance on the grounds that the Company
in good faith reasonably believes such proposed purchaser of the Note(s) is a
Competitor.
"CONFIDENTIAL INFORMATION" shall mean any non-public or
proprietary information delivered or made available by or on behalf of the
Company or any Subsidiary to a Purchaser or a Transferee (as the case may
be), including without limitation any non-public information obtained
pursuant to paragraph 5A or 5C, in connection with or pursuant to this
Agreement which is proprietary in nature, but in no event shall include
information (i) which was publicly known or otherwise known to such Purchaser
or Transferee (as the case may be) at the time of disclosure (except pursuant
to disclosure in connection with this Agreement), (ii) which subsequently
becomes publicly known through no act or omission by such Purchaser or
Transferee (as the case may be), or (iii) which otherwise becomes known to
such Purchaser or Transferee, other than through disclosure by the Company or
from a Person obligated not to disclose under this Agreement.
"CONFIRMATION OF ACCEPTANCE" shall have the meaning
specified in paragraph 2B(5).
"CONSOLIDATED" shall mean the consolidation of the
accounts of the Company and its Subsidiaries in accordance with generally
accepted accounting principles including principles of consolidation.
"CONSOLIDATED FUNDED DEBT" shall mean, as of any time of
determination thereof, the Funded Debt of the Company and its Subsidiaries
determined on a Consolidated basis in accordance with generally accepted
accounting principles.
"CONSOLIDATED NET INCOME" shall mean, with respect to
any period, the net income of the Company and its Subsidiaries determined on
a consolidated basis in accordance with generally accepted accounting
principles.
"CONSOLIDATED NET WORTH" shall mean, as of any time of
determination thereof, the sum of (i) the par value (or value stated on the
books of the Company) of the capital
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stock of all classes of the Company including paid-in-capital, plus (or minus
in the case of a surplus deficit) (ii) the amount of the consolidated
surplus, whether capital or earned, of the Company and its Subsidiaries after
subtracting therefrom the aggregate of treasury stock and any other
contra-equity accounts including, without limitation, minority interests; all
determined in accordance with generally accepted accounting principles.
"CONSOLIDATED GROSS WORTH" shall mean, as of any time of
determination thereof, the sum of Consolidated Net Worth and Consolidated
Funded Debt.
"CURRENT DEBT" shall mean, with respect to any Person,
all Indebtedness of such Person for borrowed money which by its terms or by
the terms of any instrument or agreement relating thereto matures on demand
or within one year from the date of the creation thereof and is not directly
or indirectly renewable or extendible at the option of the debtor to a date
more than one year from the date of the creation thereof, provided that
Indebtedness for borrowed money outstanding under a revolving credit or
similar agreement which obligates the lender or lenders to extend credit over
a period of more than one year shall constitute Funded Debt and not Current
Debt, even though such Indebtedness by its terms matures on demand or within
one year from the date of the creation thereof.
"DEBT" shall mean Current Debt and Funded Debt.
"DELAYED DELIVERY FEE" shall have the meaning specified in
paragraph 2B(8)(iii).
"EBITDA" for any period shall mean Consolidated Net
Income plus, to the extent deducted in determining Consolidated Net Income
for such period, without duplication, (i) interest expense, (ii) depreciation
expense, (iii) amortization expense, and (iv) income tax expense.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is
a member of the same controlled group of corporations as the Company within
the meaning of section 414(b) of the Code, or any trade or business which is
under common control with the Company within the meaning of section 414(c) of
the Code.
"EVENT OF DEFAULT" shall mean any of the events specified
in paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall
mean any of such events, whether or not any such requirement has been
satisfied.
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"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"FACILITY" shall have the meaning specified in paragraph
2B(1).
"FIXED CHARGES" shall mean the sum, for the relevant
period, of (a) consolidated interest expense of the Company and the
Subsidiaries (including, without limitation, imputed interest expense on
Capitalized Leases), PLUS (b) mandatory payment of the principal (or
principal component, in the instance of Capitalized Leases) of the Company's
and the Subsidiaries' consolidated interest-bearing debt (which term shall
INCLUDE, without limitation, the Notes, any seller note, any discount note,
and the principal component of Capitalized Leases, but shall EXCLUDE trade
payables incurred in the ordinary course of business), PLUS (c) any
Restricted Payments distributed in the form of cash or debt.
"FUNDED DEBT" shall mean with respect to any Person, all
Indebtedness of such Person which by it terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise
payable or unpaid, more than one year from, or is directly or indirectly
renewable or extendible at the option of the debtor to a date more than one
year (including an option of the debtor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year) from, the date of the creation thereof, including all
Indebtedness to any Person, to the extent such Indebtedness has not been
reduced to zero for a period of sixty consecutive days (such period to be
selected by the Company) for the four consecutive fiscal quarter period ended
as of the date on which Funded Debt is to be determined.
"GUARANTEE" shall mean, with respect to any Person,
any direct or indirect liability, contingent or otherwise, of such Person
with respect to any indebtedness, lease, dividend or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business) or discounted or sold with recourse by such
Person, or in respect of which such Person is otherwise directly or
indirectly liable, including, without limitation, any such obligation in
effect guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such obligation or
any security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain the solvency or any
balance sheet or other financial condition of the obligor of such obligation,
or to make payment for any products, materials or supplies or for any
transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected against loss in respect thereof. The amount
of any Guarantee shall be equal to the outstanding principal amount of the
obligation guaranteed or such lesser amount to which the maximum exposure of
the guarantor shall have been specifically limited.
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"HEDGE TREASURY NOTE(S)" shall mean, with respect to any
Accepted Note, the United States Treasury Note or Notes whose duration (as
determined by Prudential) most closely matches the duration of such Accepted
Note.
"HOSTILE TENDER OFFER" shall mean, with respect to the use
of proceeds of any Note, any offer to purchase, or any purchase of, shares of
capital stock of any corporation or equity interests in any other entity, or
securities convertible into or representing the beneficial ownership of, or
rights to acquire, any such shares or equity interests, if such shares,
equity interests, securities or rights are of a class which is publicly
traded on any securities exchange or in any over-the-counter market, other
than purchases of such shares, equity interests, securities or rights
representing less than 5% of the equity interests or beneficial ownership of
such corporation or other entity for portfolio investment purposes, and such
offer or purchase has not been duly approved by the board of directors of
such corporation or the equivalent governing body of such other entity prior
to the date on which the Company makes the Request for Purchase of such Note.
"INCLUDING" shall mean, unless the context clearly
requires otherwise, "including without limitation".
"INDEBTEDNESS" shall mean, with respect to any Person,
without duplication, (i) all items (excluding trade payables and accrued
expenses incurred in the ordinary course of business, contingency reserves,
reserves for deferred income taxes, employee retirement-related benefits,
insurance and claims, and other non-borrowing long-term reserves, and other
reserves to the extent that such reserves do not constitute an obligation)
which in accordance with generally accepted accounting principles would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is to be
determined (including Capitalized Lease Obligations), (ii) all indebtedness
secured by any Lien on any property or asset owned or held by such Person
subject thereto, whether or not the indebtedness secured thereby shall have
been assumed, and (iii) all indebtedness of others with respect to which such
Person has become liable by way of Guarantee.
"INSTITUTIONAL INVESTOR" shall mean Prudential,
Prudential Affiliates, any insurance company, bank, finance company,
mutual fund, registered money or asset manager, savings and loan association,
credit union, registered investment advisor, pension fund, investment
company, licensed broker or dealer, "qualified institutional buyer" (as such
term is defined under Rule 144A promulgated under the Securities Act, or any
successor law, rule or regulation).
"ISSUANCE PERIOD" shall have the meaning specified in
paragraph 2B(2).
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including
any agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any lease in the nature thereof,
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and the filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of protecting
a creditor against loss or securing the payment or performance of an
obligation.
"MATERIAL SUBSIDIARY" shall mean any Subsidiary or group
of Subsidiaries (i) whose assets constitute ten percent (10%) or more of the
consolidated net assets the Company and its Subsidiaries or (ii) which has
contributed more than ten percent (10%) of Consolidated Net Income for the
most recently ended fiscal year.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA.
"NOTES" shall have the meaning specified in paragraph 1B.
"OFFICER'S CERTIFICATE" shall mean a certificate signed
in the name of the Company by an Authorized Officer of the Company.
"PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a limited liability company, and a government or any department
or agency thereof.
"PLAN" shall mean any employee pension benefit plan (as
such term is defined in section 3 of ERISA) which is or has been established
or maintained, or to which contributions are or have been made, by the
Company or any ERISA Affiliate.
"PRIORITY DEBT" shall mean the sum of (i) Debt of the
Company which is secured by a Lien and (ii) Debt of any Subsidiary
(including, but not limited to, any Debt of a Subsidiary which consists of a
Guarantee of Debt of the Company), excluding however Debt of Subsidiaries
owing to the Company or any Wholly-Owned Subsidiary.
"PRUDENTIAL" shall mean The Prudential Insurance Company
of America.
"PRUDENTIAL AFFILIATE" shall mean any Affiliate of
Prudential.
"PURCHASERS" shall mean Prudential and/or the Prudential
Affiliate(s), which are purchasing such Accepted Notes.
"RELATED PARTY" shall mean (i) any Significant
Stockholder, (ii) all persons to whom any Significant Stockholder is related
by blood, adoption or marriage and (iii) all Affiliates of the foregoing
Persons.
"REQUEST FOR PURCHASE" shall have the meaning specified in
paragraph 2B(3).
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"REQUIRED HOLDER(S)" shall mean the holder or holders of
at least 51% of the aggregate principal amount of the Notes or of a Series of
Notes, as the context may require, from time to time outstanding.
"RESCHEDULED CLOSING DAY" shall have the meaning specified
in paragraph 2B(7).
"RESPONSIBLE OFFICER" shall mean the chief executive
officer, chief operating officer, chief financial officer or chief accounting
officer of the Company, general counsel of the Company or any other officer
of the Company involved principally in its financial administration or its
controllership function.
"RESTRICTED PAYMENTS" shall mean (i) any dividend on
any shares of the capital stock of the Company or any Subsidiary (other than
dividends payable solely in shares of capital stock) or any other
distribution, direct or indirect, on account of shares of capital stock of
the Company or any Subsidiary (other than distributions of capital stock of
the Company), (ii) any redemption, purchase, retirement, sinking fund, or
similar payment, or other acquisition, direct or indirect, of any shares of
the capital stock of the Company or any Subsidiary, and (iii) in the event
that the stock of the Company ceases to be publicly held, any loans, advances
or any other payments of any character made by the Company or any Subsidiary
to any holder of any shares of capital stock of the Company or any Subsidiary.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SERIES" shall have the meaning specified in paragraph 1B.
"SHELF NOTES" shall have the meaning specified in paragraph
1B.
"SIGNIFICANT HOLDER" shall mean (i) Prudential, so long
as Prudential or any Prudential Affiliate shall hold (or be committed under
this Agreement to purchase) any Note, and (ii) any other holder of at least
10% of the aggregate principal amount of the Notes from time to time
outstanding.
"SIGNIFICANT STOCKHOLDER" shall mean and include any
Person who owns, beneficially or of record, directly or indirectly, at any
time during any year with respect to which a computation is being made,
either individually or together with all persons to whom such Person is
related by blood, adoption or marriage, 5% or more of the Voting Stock of the
Company.
"STRUCTURING FEE" shall have the meaning specified in
paragraph 2B(8)(i).
"SUBSIDIARY" shall mean, as to any Person, any
corporation, association or other business entity in which such Person or one
or more of its Subsidiaries or such Person and
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one or more of its Subsidiaries owns sufficient equity or voting interests to
enable it or them (as a group) ordinarily, in the absence of contingencies,
to elect a majority of the directors (or Persons performing similar
functions) of such entity, and any partnership or joint venture if more than
a 50% interest in the profits or capital thereof is owned by such Person or
one or more if its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"TOTAL DEBT" shall mean, as of any time of determination
thereof, all Debt of the Company and its Subsidiaries, determined on a
Consolidated basis in accordance with generally accepted accounting principles.
"TRANSFER" shall mean, with respect to any item, the sale,
exchange, conveyance, lease, transfer or other disposition of such item.
"TRANSFEREE" shall mean any direct or indirect transferee
of all or any part of any Note purchased by any Purchaser under this Agreement.
"VOTING STOCK" shall mean, with respect to any
corporation, any shares of stock of such corporation whose holders are
entitled under ordinary circumstances to vote for the election of directors
of such corporation (irrespective of whether at the time stock of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency).
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary all
of the stock of every class of which is, at the time as of which any
determination is being made, owned by the Company either directly or through
a wholly-owned Subsidiary.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All
references in this Agreement to "generally accepted accounting principles"
shall be deemed to refer to generally accepted accounting principles in
effect in the United States at the time of application thereof. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all unaudited financial statements and certificates and
reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with generally accepted accounting principles applied
on a basis consistent with the most recent audited financial statements
delivered pursuant to clause (ii) of paragraph 5A or, if no such statements
have been so delivered, the most recent audited financial statements referred
to in clause (i) of paragraph 8B. Any reference herein to any specific law,
statute, rule or regulation shall refer to such law, statute, rule or
regulation as the same may be may be modified, amended or replaced from time
to time.
11. MISCELLANEOUS.
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11A. NOTE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of,
interest on, and any Yield-Maintenance Amount payable with respect to, such
Note, which comply with the terms of this Agreement, by wire transfer of
immediately available funds for credit (not later than 12:00 noon, New York
City local time, on the date due) to (i) the account or accounts of such
Purchaser specified in the Purchaser Schedule attached hereto in the case of
any Series A Note, (ii) the account or accounts of such Purchaser specified
in the Confirmation of Acceptance with respect to such Note in the case of
any Shelf Note or (iii) such other account or accounts in the United States
as such Purchaser may from time to time designate in writing, notwithstanding
any contrary provision herein or in any Note with respect to the place of
payment. Each Purchaser agrees that, before disposing of any Note, it will
make a notation thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which interest thereon
has been paid. The Company agrees to afford the benefits of this paragraph
11A to any Transferee which shall have made the same agreement as the
Purchasers have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the
transactions contemplated hereby shall be consummated, to pay, and save
Prudential, each Purchaser and any Transferee harmless against liability for
the payment of, all out-of-pocket expenses arising in connection with such
transactions, including (i) all document production and duplication charges
and the fees and expenses of any special counsel engaged by the Purchasers or
any Transferee in connection with this Agreement, the transactions
contemplated hereby and any subsequent proposed modification of, or proposed
consent under, this Agreement, whether or not such proposed modification
shall be effected or proposed consent granted, excluding, however, for
purposes of this clause (i) expenses incurred by Prudential, any Purchaser or
any Transferee in connection with a transfer of the Notes, and (ii) the costs
and expenses, including attorneys' fees, incurred by any Purchaser or any
Transferee in enforcing (or determining whether or how to enforce) any rights
under this Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the transactions contemplated hereby or by reason of any
Purchaser's or any Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. The
obligations of the Company under this paragraph 11B shall survive the
transfer of any Note or portion thereof or interest therein by any Purchaser
or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) of the
Notes of each Series except that, (i) with the written consent of the holders of
all Notes of a particular Series, and if an Event of Default shall have occurred
and be continuing, of the holders of all Notes of all Series, at the time
outstanding (and such written consents), the Notes of such Series may be amended
or the provisions thereof waived to change the maturity thereof, to change or
affect the principal thereof, or to change or affect the rate or time of payment
of interest on or any Yield-Maintenance Amount payable with respect to the Notes
of such Series, (ii) without the written consent of the holder or holders of all
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Notes at the time outstanding, no amendment to or waiver of the provisions of
this Agreement shall change or affect the provisions of paragraph 7A or this
paragraph 11C insofar as such provisions relate to proportions of the principal
amount of the Notes of any Series, or the rights of any individual holder of
Notes, required with respect to any declaration of Notes to be due and payable
or with respect to any consent, amendment, waiver or declaration, (iii) with the
written consent of Prudential (and without the consent of any other holder of
the Notes) the provisions of paragraph 2B may be amended or waived (except
insofar as any such amendment or waiver would affect any rights or obligations
with respect to the purchase and sale of Notes which shall have become Accepted
Notes prior to such amendment or waiver), and (iv) with the written consent of
all of the Purchasers which shall have become obligated to purchase Accepted
Notes of any Series (and not without the written consent of all such
Purchasers), any of the provisions of paragraphs 2B and 3 may be amended or
waived insofar as such amendment or waiver would affect only rights or
obligations with respect to the purchase and sale of the Accepted Notes of such
Series or the terms and provisions of such Accepted Notes. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein and in the Notes, the term "THIS AGREEMENT" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $1,000,000, except as may be necessary to reflect
any principal amount not evenly divisible by $1,000,000. The Company shall
keep at its principal office a register in which the Company shall provide
for the registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company,
the Company shall, at its expense, execute and deliver one or more new Notes
of like tenor and of a like aggregate principal amount, registered in the
name of such transferee or transferees. At the option of the holder of any
Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall, at its
expense, execute and deliver the Notes which the holder making the exchange
is entitled to receive. Each prepayment of principal payable on each
prepayment date upon each new Note issued upon any such transfer or exchange
shall be in the same proportion to the unpaid principal amount of such new
Note as the prepayment of principal payable on such date on the Note
surrendered for registration of transfer or exchange bore to the unpaid
principal amount of such Note. No reference need be made in any such new Note
to any prepayment or prepayments of principal previously due and paid upon
the Note surrendered for registration of transfer or exchange. Every Note
surrendered for registration of transfer or exchange shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
holder of such Note or such holder's attorney duly authorized in writing. Any
Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and
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interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of
any Note of the loss, theft, destruction or mutilation of such Note and, in
the case of any such loss, theft or destruction, upon receipt of such
holder's unsecured indemnity agreement, or in the case of any such mutilation
upon surrender and cancellation of such Note, the Company will make and
deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the Person in
whose name any Note is registered as the owner and holder of such Note for
the purpose of receiving payment of principal of and interest on, and any
Yield-Maintenance Amount payable with respect to, such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and the
Company shall not be affected by notice to the contrary. Subject to the
preceding sentence, the holder of any Note may from time to time grant
participations in all or any part of such Note to any Person on such terms
and conditions as may be determined by such holder in its sole and absolute
discretion; provided that holders of participations shall not be deemed
holders of the Notes.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection herewith shall survive
the execution and delivery of this Agreement and the Notes, the transfer by
any Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any Transferee, regardless of
any investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties hereto
shall bind and inure to the benefit of the respective successors and assigns
of the parties hereto (including, without limitation, any Transferee) whether
so expressed or not.
11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall
be given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted
by an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not avoid (i) the occurrence of a Default or Event of
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holder of any Note to prohibit through equitable
action or otherwise the taking of any action by the Company or any Subsidiary
which would result in a Default or Event of Default.
11I. NOTICES. All written communications provided for hereunder
(other than communications provided for under paragraph 2) shall be sent by
first class mail or nationwide
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overnight delivery service (with charges prepaid) and (i) if to any
Purchaser, addressed as specified for such communications in the Purchaser
Schedule attached to the applicable Confirmation of Acceptance or at such
other address as any such Purchaser shall have specified to the Company in
writing, (ii) if to any other holder of any Note, addressed to it at such
address as it shall have specified in writing to the Company or, if any such
holder shall not have so specified an address, then addressed to such holder
in care of the last holder of such Note which shall have so specified an
address to the Company and (iii) if to the Company, addressed to it at 6000
Valmont Plaza, Omaha, Nebraska 68154, Attention: Chief Financial Officer,
PROVIDED, HOWEVER, that any such communication to the Company may also, at
the option of the Person sending such communication, be delivered by any
other means either to the Company at its address specified above or to any
Authorized Officer of the Company. Any communication pursuant to paragraph 2
shall be made by the method specified for such communication in paragraph 2,
and shall be effective to create any rights or obligations under this
Agreement only if, in the case of a telephone communication, an Authorized
Officer of the party conveying the information and of the party receiving the
information are parties to the telephone call, and in the case of a
telecopier communication, the communication is signed by an Authorized
Officer of the party conveying the information, addressed to the attention of
an Authorized Officer of the party receiving the information, and in fact
received at the telecopier terminal the number of which is listed for the
party receiving the communication in the Information Schedule or at such
other telecopier terminal as the party receiving the information shall have
specified in writing to the party sending such information.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or interest on, or Yield-Maintenance Amount payable with respect
to, any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day. If the date for any payment is extended to
the next succeeding Business Day by reason of the preceding sentence, the
period of such extension shall not be included in the computation of the
interest payable on such Business Day.
11K. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser, to any holder of
Notes or to the Required Holder(s), the determination of such satisfaction
shall be made by such Purchaser, such holder or the Required Holder(s), as
the case
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may be, in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE INTERNAL LAW OF THE STATE OF ILLINOIS.
11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the
Purchasers are to be several sales, and the obligations of Prudential and the
Purchasers under this Agreement are several obligations. No failure by
Prudential or any Purchaser to perform its obligations under this Agreement
shall relieve any other Purchaser or the Company of any of its obligations
hereunder, and neither Prudential nor any Purchaser shall be responsible for
the obligations of, or any action taken or omitted by, any other such Person
hereunder.
11P. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
11Q. CONFIDENTIALITY PROVISIONS. Each Purchaser (and each
Transferee by its acceptance of an interest in any Note) agrees, so long as
no Event of Default has occurred and continued for a period of one hundred
eighty days under paragraphs 7A(i), (ii), (viii), (ix) or (x), that it will
use its best efforts to hold in confidence and not disclose any Confidential
Information without the prior written consent of the Company which consent
shall not be unreasonably denied; provided, however, that nothing contained
herein shall prevent the holder of any Note from delivering copies of any
financial statements and other documents delivered to such holder, and
disclosing any other information disclosed to such holder, by the Company or
any Subsidiary in connection with or pursuant to this Agreement to (i) such
holder's directors, officers, employees, agents and professional consultants,
(ii) any other holder of any Note, (iii) any Institutional Investor to which
such holder offers to sell such Note or any part thereof, (iv) any
Institutional Investor to which such holder sells or offers to sell a
participation in all or any part of such Note, (v) any Institutional Investor
from which such holder offers to purchase any security of the Company, (vi)
any federal or state regulatory authority having jurisdiction over such
holder, (vii) the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency or (viii) any
other Person which is not a Competitor to which such delivery or disclosure
may be reasonably necessary or appropriate (a) in compliance with any law,
rule, regulation or order applicable to such holder, (b) in response to any
subpoena or other legal process or investigative demand, (c) in connection
with any litigation in connection with this Agreement to which such holder is
a party or (d) in order to protect such holder's investment and enforce the
rights of such holder under this Agreement; and provided further that after
notice to the Company the holders of the Notes shall be free to correct any
false or misleading information which may become public concerning their
relationship to the Company or any of its Subsidiaries. For purposes of this
Agreement, each Purchaser and each Transferee may in good faith conclusively
rely on a certificate of a proposed purchaser of the Note(s) addressed and
delivered to the Company and such Purchaser or Transferee to the
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effect that such proposed purchaser of the Note(s) is not a Competitor,
provided that the Company has not, by written notice to such Purchaser or
Transferee delivered within five Business Days after the Company's receipt of
such certificate, objected to such reliance on the grounds that the Company
in good faith reasonably believes such proposed purchaser of the Note(s) is a
Competitor.
11R. TRANSFER RESTRICTIONS. Notwithstanding anything to the
contrary contained herein, so long as no Event of Default under paragraphs
7A(i), (ii), (viii), (ix) or (x) has occurred and continued for a period of
one hundred eighty days each Purchaser and Transferee hereby agrees that it
will not transfer or sell any participation in any Note to a Competitor or
any other Person which is not an Institutional Investor.
11S. BINDING AGREEMENT. When this Agreement is executed and
delivered by the Company and Prudential, it shall become a binding agreement
between the Company and Prudential. This Agreement shall also inure to and
each such Purchaser shall be bound by this Agreement to the extent provided
in such Confirmation of Acceptance.
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11T. AMENDMENT OF EXISTING AGREEMENT. The covenants set forth in
paragraphs 5 and 6 of the agreement dated as of February 1, 1994 (the "Existing
Agreement") between the Company and Prudential shall be deemed amended in their
entirety so as to read as set forth in paragraphs 5 and 6 of this Agreement, and
defined terms and cross references used in paragraphs 5 and 6 of the Existing
Agreement, as amended hereby, shall be deemed to have the meanings ascribed
thereto in, and to refer to paragraphs in, this Agreement. Notwithstanding the
above amendment, any reference to a "Note" or "Notes" in the Existing Agreement,
as amended hereby, shall mean a "Note" or the "Notes" issued under the Existing
Agreement. No termination of this Agreement in whole or in part or any
modification hereof, shall affect the continued applicability of such paragraph
as incorporated into the Existing Agreement.
Very truly yours,
VALMONT INDUSTRIES, INC.
By: /s/ Terry McClain
--------------------------
Name: Terry McClain
Title: Sr. VP & CFO
The foregoing Agreement is hereby accepted as of the date first above written.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ P. Scott Von Fischer
------------------------
Vice President
43
<PAGE>
Exhibit 10(ii)
VALMONT 1996 STOCK PLAN
SECTION 1
NAME AND PURPOSE
1.1 Name. The name of the plan shall be the Valmont 1996 Stock Plan (the
"Plan").
1.2. Purpose of Plan. The purpose of the Plan is to foster and promote the
long-term financial success of the Company and increase stockholder value by (a)
motivating superior performance by means of stock incentives, (b) encouraging
and providing for the acquisition of an ownership interest in the Company by
Employees and (c) enabling the Company to attract and retain the services of a
management team responsible for the long-term financial success of the Company.
SECTION 2
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have
the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Stock Bonus, or any combination thereof, including Awards
combining two or more types of Awards in a single grant.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Compensation Committee of the Board, which
shall consist of two or more members, each of whom shall be
"disinterested persons" within the meaning of Rule 16b-3 as
promulgated under the Act.
(f) "Company" means Valmont Industries, Inc., a Delaware corporation
(and any successor thereto) and its Subsidiaries.
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<PAGE>
(g) "Director Award" means an award of Stock and an annual Award of a
Nonstatutory Stock Option granted to each Eligible Director
pursuant to Section 7.1 without any action by the Board or the
Committee.
(h) "Eligible Director" means a person who is serving as a member of
the Board and who is not an Employee.
(i) "Employee" means any employee of the Company or any of its
Subsidiaries.
(j) "Fair Market Value" means, on any date, the average of the high and
low sales prices of the Stock as reported on the National
Association of Securities Dealers Automated Quotation system (or on
such other recognized market or quotation system on which the
trading prices of the Stock are traded or quoted at the relevant
time) on such date. In the event that there are no Stock
transactions reported on such system (or such other system) on such
date, Fair Market Value shall mean the average of the high and low
sale prices on the immediately preceding date on which Stock
transactions were so reported.
(k) "Option" means the right to purchase Stock at a stated price for a
specified period of time. For purposes of the Plan, an Option may
be either (i) an Incentive Stock Option within the meaning of
Section 422 of the Code or (ii) a Nonstatutory Stock Option.
(l) "Participant" means any Employee designated by the Committee to
participate in the Plan.
(m) "Plan" means the Valmont 1996 Stock Plan, as in effect from time
to time.
(n) "Restricted Stock" shall mean a share of Stock granted to a
Participant subject to such restrictions as the Committee may
determine.
(o) "Stock" means the Common Stock of the Company, par value $1.00
per share.
(p) "Stock Appreciation Right" means the right, subject to such terms
and conditions as the Committee may determine, to receive an amount
in cash or Stock, as determined by the Committee, equal to the
excess of (i) the Fair Market Value, as of the date such Stock
Appreciation Right is exercised, of the number shares of Stock
covered by the Stock Appreciation Right being exercised over (ii)
the aggregate exercise price of such Stock Appreciation Right.
2
<PAGE>
(q) "Stock Bonus" means the grant of Stock as compensation from the
Company, which may be in lieu of cash salary or bonuses otherwise
payable to the Participant or in addition to such cash
compensation.
(r) "Subsidiary" means any corporation or partnership in which the
Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock of such corporation
or of the capital interest or profits interest of such partnership.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural, and the plural shall include
the singular.
SECTION 3
ELIGIBILITY AND PARTICIPATION
Except as otherwise provided in Section 7.1, the only persons eligible
to participate in the Plan shall be those Employees selected by the Committee as
Participants.
SECTION 4
POWERS OF THE COMMITTEE
4.1 Power to Grant. The Committee shall determine the Participants to
whom Awards shall be granted, the type or types of Awards to be granted, and the
terms and conditions of any and all such Awards. The Committee may establish
different terms and conditions for different types of Awards, for different
Participants receiving the same type of Awards, and for the same Participant for
each Award such Participant may receive, whether or not granted at different
times.
3
<PAGE>
4.2 Administration. The Committee shall be responsible for the
administration of the Plan. The Committee, by majority action thereof, is
authorized to prescribe, amend, and rescind rules and regulations relating to
the Plan, to provide for conditions deemed necessary or advisable to protect the
interests of the Company, and to make all other determinations necessary or
advisable for the administration and interpretation of the Plan in order to
carry out its provisions and purposes. Determinations, interpretations, or 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.
Notwithstanding anything else contained in the Plan to the contrary, neither the
Committee nor the Board shall have any discretion regarding whether an Eligible
Director receives a Director Award pursuant to Section 7.1 or regarding the
terms of any such Director Award, including, without limitation, the number of
shares subject to any such Director Award.
SECTION 5
STOCK SUBJECT TO PLAN
5.1 Number. Subject to the provisions of Section 5.3, the number of
shares of Stock subject to Awards (including Director Awards) under the Plan may
not exceed 800,000 shares of Stock. The shares to be delivered under the Plan
may consist, in whole or in part, of treasury Stock or authorized but unissued
Stock, not reserved for any other purpose. The maximum number of shares of Stock
with respect to which Awards may be granted to any one Employee under the Plan
is 40% of the aggregate number of shares of Stock available for Awards under
Section 5.1.
5.2 Cancelled, Terminated or Forfeited Awards. Any shares of Stock
subject to an Award which for any reason are cancelled, terminated or otherwise
settled without the issuance of any Stock shall again be available for Awards
under the Plan.
4
<PAGE>
5.3 Adjustment in Capitalization. In the event of any Stock dividend or
Stock split, recapitalization (including, without limitation, the payment of an
extraordinary dividend), merger, consolidation, combination, spin-off,
distribution of assets to stockholders, exchange of shares, or other similar
corporate change, (i) the aggregate number of shares of Stock available for
Awards under Section 5.1 and (ii) the number of shares and exercise price with
respect to Options and the number, prices and dollar value of other Awards, may
be appropriately adjusted by the Committee, whose determination shall be
conclusive. If, pursuant to the preceding sentence, an adjustment is made to the
number of shares of Stock authorized for issuance under the Plan, a
corresponding adjustment shall be made with respect to Director Awards granted
pursuant to Section 7.1.
SECTION 6
STOCK OPTIONS
6.1 Grant of Options. Options may be granted to Participants at such
time or times as shall be determined by the Committee. Options granted under the
Plan may be of two types: (i) Incentive Stock Options and (ii) Nonstatutory
Stock Options. The Committee shall have complete discretion in determining the
number of Options, if any, to be granted to a Participant. Each Option shall be
evidenced by an Option agreement that shall specify the type of Option granted,
the exercise price, the duration of the Option, the number of shares of Stock to
which the Option pertains, the exercisability (if any) of the Option in the
event of death, retirement, disability or termination of employment, and such
other terms and conditions not inconsistent with the Plan as the Committee shall
determine.
6.2 Option Price. Nonstatutory Stock Options and Incentive Stock
Options granted pursuant to the Plan shall have an exercise price which is not
less than the Fair Market Value on the date the Option is granted.
6.3 Exercise of Options. Options awarded to a Participant under the
Plan shall be exercisable at such times and shall be subject to such
restrictions and conditions as the Committee may impose, subject to the
Committee's right to accelerate the exercisability of such Option in its
discretion. Notwithstanding the foregoing, no Option shall be exercisable for
more than ten years after the date on which it is granted.
5
<PAGE>
6.4 Payment. The Committee shall establish procedures governing the
exercise of Options, which shall require that written notice of exercise be
given and that the Option price be paid in full in cash or cash equivalents,
including by personal check, at the time of exercise or pursuant to any
arrangement that the Committee shall approve. The Committee may, in its
discretion, permit a Participant to make payment (i) in Stock already owned by
the Participant valued at its Fair Market Value on the date of exercise (if such
Stock has been owned by the Participant for at least six months) or (ii) by
electing to have the Company retain Stock which would otherwise be issued on
exercise of the Option, valued at its Fair Market Value on the date of exercise.
As soon as practicable after receipt of a written exercise notice and full
payment of the exercise price, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Stock.
6.5 Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, no term of this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or authority granted
under the Plan be so exercised, so as to disqualify the Plan under Section 422
of the Code, or, without the consent of any Participant affected thereby, to
cause any Incentive Stock Option previously granted to fail to qualify for the
Federal income tax treatment afforded under Section 421 of the Code. In
furtherance of the foregoing, (i) the aggregate Fair Market Value of shares of
Stock (determined at the time of grant of each Option) with respect to which
Incentive Stock Options are exercisable for the first time by an Employee during
any calendar year shall not exceed $100,000 or such other amount as may be
required by the Code, (ii) an Incentive Stock Option may not be exercised more
than three months following termination of employment (except as the Committee
may otherwise determine in the event of death or disability), and (iii) if the
Employee receiving an Incentive Stock Option owns Stock possessing more than 10%
of the total combined voting power of all classes of Stock of the Company, the
exercise price of the Option shall be at least 110% of Fair Market Value and the
Option shall not be exercisable after the expiration of five years from the date
of grant.
6
<PAGE>
6.6 Replacement Options. The Committee may grant a replacement option
(a "Replacement Option") to any Employee who exercises all or part of an option
granted under this Plan using Qualifying Stock (as herein defined) as payment
for the purchase price. A Replacement Option shall grant to the Employee the
right to purchase, at the Fair Market Value as of the date of said exercise and
grant, the number of shares of stock equal to the sum of the number of whole
shares (i) used by the Employee in payment of the purchase price for the option
which was exercised and (ii) used by the Employee in connection with applicable
withholding taxes on such transaction. A Replacement Option may not be exercised
for six months following the date of grant, and shall expire on the same date as
the option which it replaces. Qualifying Stock is stock which has been owned by
the Employee for at least six months prior to the date of exercise and has not
been used in a stock-for-stock swap transaction within the preceding six months.
SECTION 7
DIRECTOR AWARDS
7.1 Amount of Award. Each Eligible Director shall receive a
non-discretionary Award of 1,000 shares of stock each year; such Award shall be
made annually on the date of and following completion of the Company's annual
stockholders' meeting (commencing with the 1996 annual stockholders' meeting).
Each Eligible Director shall be issued a common stock certificate for such
number of shares. Termination of the director's services for any reason other
than (i) death, (ii) retirement from the Board at mandatory retirement age, or
(iii) resignation or failure to stand for re-election, in any such case with the
prior approval of the Board, will result in forfeiture of the Stock. If the
Stock is forfeited, the director shall return the number of forfeited shares of
Stock, or equivalent value, to the Company. The number of shares of Stock
awarded to an Eligible Director annually shall be appropriately adjusted in the
event of any stock changes as described in Section 5.3. In addition, each
Eligible Director shall receive a non-discretionary Award of a Nonqualified
Stock Option for 2,000 shares of Stock exercisable at the Fair Market Value of
the Company's common stock on the date of grant; such Award shall be made
annually on the date of and
7
<PAGE>
following completion of the Company's annual stockholders' meeting (commencing
with the 1996 annual stockholders' meeting). The number of nonqualified options
awarded to a director shall be appropriately adjusted in the event of any stock
changes as described in Section 5.3.
7.2 No Other Awards. An Eligible Director shall not receive any
other Award under the Plan.
SECTION 8
STOCK APPRECIATION RIGHTS
8.1 SAR's In Tandem with Options. Stock Appreciation Rights may be
granted to Participants in tandem with any Option granted under the Plan,
either at or after the time of the grant of such Option, subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine. Each Stock Appreciation Right shall only be
exercisable to the extent that the corresponding Option is exercisable, and
shall terminate upon termination or exercise of the corresponding Option.
Upon the exercise of any Stock Appreciation Right, the corresponding Option
shall terminate.
8.2 Other Stock Appreciation Rights. Stock Appreciation Rights may also
be granted to Participants separately from any Option, subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine.
SECTION 9
RESTRICTED STOCK
9.1 Grant of Restricted Stock. The Committee may grant Restricted Stock
to Participants at such times and in such amounts, and subject to such other
terms and conditions not inconsistent with the Plan as it shall determine. Each
grant of Restricted Stock shall be subject to such restrictions, which may
relate to continued employment with the Company, performance of the Company, or
other restrictions, as the Committee may determine. Each grant of Restricted
Stock shall be evidenced by a written agreement setting forth the terms of such
Award.
9.2 Removal of Restrictions. The Committee may accelerate or waive such
restrictions in whole or in part at any time in its discretion.
8
<PAGE>
SECTION 10
STOCK BONUSES
10.1 Grant of Stock Bonuses. The Committee may grant a Stock Bonus to a
Participant at such times and in such amounts, and subject to such other terms
and conditions not inconsistent with the Plan, as it shall determine.
SECTION 11
AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
11.1 General. The Board may from time to time amend, modify or
terminate any or all of the provisions of the Plan, subject to the provisions
of this Section 11.1. The Board may not change the Plan in a manner which would
prevent outstanding Incentive Stock Options granted under the Plan from being
Incentive Stock Options without the consent of the optionees concerned.
Furthermore, the Board may not make any amendment which would (i) materially
modify the requirements for participation in the Plan, (ii) increase the number
of shares of Stock subject to Awards under the Plan pursuant to Section 5.1,
(iii) materially increase the benefits accruing to Participants under the Plan,
or (iv) make any other amendments which would cause the Plan not to comply with
Rule 16b-3 under the Act, in each case without the approval of the Company's
stockholders. No amendment or modification shall affect the rights of any
Employee with respect to a previously granted Award, nor shall any amendment or
modification affect the rights of any Eligible Director pursuant to a previously
granted Director Award.
11.2 Termination of Plan. No further Options shall be granted under the
Plan subsequent to December 31, 2005, or such earlier date as may be determined
by the Board.
SECTION 12
MISCELLANEOUS PROVISIONS
12.1 Nontransferability of Awards. No Awards granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. All rights with
respect to Awards granted to a Participant under the Plan shall be
9
<PAGE>
exercisable during the Participant's lifetime only by such Participant and all
rights with respect to any Director Awards granted to an Eligible Director shall
be exercisable during the Director's lifetime only by such Eligible Director.
12.2 Beneficiary Designation. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named contingent
or successively) to whom any benefit under the Plan is to be paid or by whom any
right under the Plan is to be exercised in case of his death. Each designation
will revoke all prior designations by the same Participant shall be in a form
prescribed by the Committee, and will be effective only when filed in writing
with the Company. In the absence of any such designation, Awards outstanding at
death may be exercised by the Participant's surviving spouse, if any, or
otherwise by his estate.
12.3 No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employ of the Company or any
Subsidiary. No Employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future Awards.
12.4 Tax Withholding. The Company shall have the power to withhold, or
require a Participant or Eligible Director to remit to the Company, an amount
sufficient to satisfy federal, state, and local withholding tax requirements on
any Award under the Plan, and the Company may defer issuance of Stock until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have shares of Stock otherwise issuable under the Plan withheld by the
Company or (ii) to deliver to the Company previously acquired shares of Stock,
in each case having a Fair Market Value sufficient to satisfy all or part of the
Participant's estimated total federal, state and local tax obligation associated
with the transaction.
12.5 Change of Control. On the date of a Change of Control, all
outstanding options and stock appreciation rights shall become immediately
exercisable and all restrictions with respect to Restricted Stock shall lapse.
"Change of Control" shall mean:
10
<PAGE>
(i) The acquisition (other than from the Company) by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Act
(excluding any acquisition or holding by (i) the Company or its subsidiaries,
(ii) any employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company and (iii) Robert B.
Daugherty, his successors and assigns and any tax-exempt entity established by
him) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Act) of 50% or more of either the then outstanding shares of common stock or
the combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or (ii) Individuals
who, as of the date hereof, constitute the Board (as of the date hereof the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for the election by the Company's
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be, for purposes of this Plan,
considered as though such person were a member of the Incumbent Board; or (iii)
Approval by the stockholders of the Company of a reorganization, merger or
consolidation, in each case, with respect to which persons who were the
stockholders of the Company immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50% of the combined
voting power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, or a liquidation or dissolution of the Company or of the sale of all
or substantially all of the assets of the Company.
12.6 Company Intent. The Company intends that the Plan comply in all
respects with Rule 16b-3 under the Act, and any ambiguities or inconsistencies
in the construction of the Plan shall be interpreted to give effect to such
intention.
12.7 Requirements of Law. The granting of Awards and the issuance of
shares of Stock shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or securities exchanges as
may be required.
11
<PAGE>
12.8 Effective Date. The Plan shall be effective upon its adoption by
the Board subject to approval by the Company's stockholders at the 1996 annual
stockholders' meeting.
12.9 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware.
12
<PAGE>
Exhibit 10(iv)
VALMONT EXECUTIVE INCENTIVE PLAN
1. Purpose. The principal purpose of the Valmont Industries, Inc.
Executive Incentive Plan (the "Plan") is to provide incentives to executive
officers of Valmont ("Valmont") who have significant responsibility for
the success and growth of Valmont and to assist Valmont in attracting,
motivating and retaining executive officers on a competitive basis.
2. Administration of the Plan. The Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee shall have the sole discretion to interpret the Plan; approve a
pre-established objective performance measure or measures annually; certify the
level to which each performance measure was attained prior to any payment under
the Plan; approve the amount of awards made under the Plan; and determine who
shall receive any payment under the Plan.
The Committee shall have full power and authority to administer and
interpret the Plan and to adopt such rules, regulations and guidelines for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable. The Committee's interpretations of the Plan, and
all actions taken and determinations made by the Committee pursuant to the
powers vested in it hereunder, shall be conclusive and binding on all parties
concerned, including Valmont, its stockholders and any person receiving an award
under the Plan.
3. Eligibility. Executive officers and other key management personnel of
Valmont shall be eligible to receive awards under the Plan. The Committee shall
designate the executive officers and other key management personnel who will
participate in the Plan each year.
4. Awards. The Committee shall establish annual and/or long-term incentive
award targets for participants. If an individual becomes an executive officer
during the year, such individual may be granted eligibility for an incentive
award for that year upon such individual becoming an executive officer.
The Committee shall also establish annual and/or long-term performance
targets which must be achieved in order for an award to be earned under the
Plan. Such targets shall be based on earnings, earnings per share, growth in
earnings per share, achievement of annual operating profit plans, return on
equity performance, or similar financial performance measures as may be
<PAGE>
determined by the Committee. The specific performance targets for
each participant shall be established in writing by the Committee within
ninety days after the commencement of the fiscal year (or within such other
time period as may be required by Section 162(m) of the Internal Revenue
Code) to which the performance target relates. The performance target
shall be established in such a manner than a third party having
knowledge of the relevant facts could determine whether the performance goal
has been met.
Awards shall be payable following the completion of the applicable
fiscal year upon certification by the Committee that Valmont achieved the
specified performance target established for the participant.
Notwithstanding the attainment by Valmont of the specified performance
targets, the Committee has the discretion, for each participant, to reduce
some or all of an award that would otherwise be paid. However, in no event
may a participant receive an award of more than 400% of such participant's
base salary under the Plan in any fiscal year; for this purpose, a
participant's base salary shall be the base salary in effect at the time the
Committee establishes the performance targets for a fiscal year or period.
5. Miscellaneous Provisions. Valmont shall have the right to deduct from
all awards hereunder paid in cash any federal, state, local or foreign taxes
required by law to be withheld with respect to such awards. Neither the Plan
nor any action taken hereunder shall be construed as giving any employee any
right to be retained in the employ of Valmont. The costs and expenses of
administering the Plan shall be borne by Valmont and shall not be charged to
any award or to any participant receiving an award.
6. Effective Date, Amendments and Termination. The Plan shall become
effective on December 19, 1995 subject to approval by the stockholders of
Valmont at the 1996 Annual Meeting of Stockholders. The Committee may at any
time terminate or from time to time amend the Plan in whole or in part, but
no such action shall adversely affect any rights or obligations with respect
to any awards theretofore made under the Plan. However, unless the
stockholders of Valmont shall have first approved thereof, no amendment of
the Plan shall be effective which would increase the maximum amount which can
be paid to any one executive officer under the Plan in any fiscal year, which
would change the specified performance goals for payment of awards, or which
would modify the requirement as to eligibility for participation in the Plan.
<PAGE>
1999 annual report
valmont [LOGO]
INFRASTRUCTURE
IRRIGATION
The lights that brighten your way at night, the electricity you use, the
phone call you make, the water that nourishes the food you eat - there's a
good chance that Valmont products help produce it, transport it, support it
or protect it.
<PAGE>
1999 FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
[DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS]
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS 1999 1998 1997
Net sales $ 614.2 $ 606.3 $ 622.5
Net earnings 26.4 27.6 37.5
Diluted earnings per share 1.08 1.02 1.33
Dividends per share 0.26000 0.25125 0.21875
FINANCIAL POSITION
Shareholders' equity $ 170.5 $ 175.9 $ 207.1
Shareholders' equity per share 7.30 7.12 7.49
Long-term debt as a % of invested capital 33.8% 30.3% 10.4%
OPERATING RATIOS
Gross profit as a % of net sales 28.1% 25.2% 27.2%
Operating income as a % of net sales 8.2% 7.9% 10.0%
Net earnings as a % of net sales 4.3% 4.6% 6.0%
Return on beginning equity 15.0% 13.3% 21.4%
Return on invested capital 9.8% 10.3% 15.4%
YEAR-END DATA
Shares outstanding (000) 23,354 24,721 27,641
Approximate number of shareholders 5,500 5,500 5,400
Number of employees 3,948 3,869 3,751
</TABLE>
<TABLE>
<CAPTION>
NET SALES OPERATING INCOME DILUTED EARNINGS PER SHARE RETURN ON INVESTED CAPITAL
<S> <C> <C> <C>
1994 $502 1994 $31.7 1994 $.69 1994 10.7%
1995 $545 1995 $41.8 1995 $.90 1995 13.0%
1996 $645 1996* $52.4 1996* $1.12 1996* 14.7%
1997 $623 1997 $62.0 1997 $1.33 1997 15.4%
1998 $606 1998 $47.8 1998 $1.02 1998 10.3%
1999 $614 1999 $50.2 1999 $1.08 1999 9.8%
</TABLE>
* Before asset valuation charge
Contents
<TABLE>
<S> <C>
1 Letter to Shareholders 16 Irrigation
4 At a Glance 26 Investment Value
6 Where We Are 30 Total Value Impact
8 Infrastructure 32 Financial Objectives and Results
</TABLE>
<PAGE>
1999 LETTER TO FELLOW SHAREHOLDERS THE YEAR IN REVIEW
What a difference a year makes. When I wrote to you in last year's annual
report, we had just finished a soft 1998 with weak momentum in two of our
major businesses. The agricultural economy in the U.S. had deteriorated
sharply and wireless carriers had temporarily curtailed the build-out of
their infrastructure.
The year 1999 started slowly and then steadily gained momentum. The year 2000
looks like it is going to be a strong year for your company.
We are particularly pleased with the growing earnings power of our
infrastructure businesses. In this segment, we expect to see continued growth
as we exploit our strong position in poles, towers and coatings. The world's
infrastructure is in constant need of expansion and upgrading, and because
our plant network spans the globe, we have the flexibility to serve our
customers around the world in a superior fashion.
In the U.S., our lighting and traffic businesses continue to benefit from the
federal highway bill funding and strong commercial construction activity. Our
wireless communication business, however,
VALMONT INDUSTRIES, INC.
Valmont is recognized throughout the world as an industry leader in providing
infrastructure support structures and water management equipment for
agriculture.
We create shareholder value by managing our businesses well, while leveraging
our products, markets and processes in order to drive growth. Essential to
our success is a company-wide commitment to customer service and innovation,
and the ability to be the best-cost producer for all products and services we
provide.
Recognizing that our employees are the cornerstone of our accomplishments, we
pride ourselves on being people of passion and integrity who excel and
deliver results.
1
<PAGE>
continued to be weak in the U.S. as our customer base went through a
significant shift. Once predominately a carrier-based market, customers now
include vertical real estate companies and build-to-suit companies. But we
are happy to report that activity in this business accelerated rapidly toward
the end of the year and we are expecting this trend to continue.
COMPOUND ANNUAL GROWTH RATE
DILUTED EARNINGS PER SHARE
- TARGET - 15%
- ACTUAL - 13%
<TABLE>
<CAPTION>
Target Actual
<S> <C> <C> <C>
1993 $0.53 1993 $0.53
1994 $0.61 1994 $0.69
1995 $0.70 1995 $0.90
1996 $0.81 1996 $1.12
1997 $0.93 1997 $1.33
1998 $1.07 1998 $1.02
1999 $1.23 1999 $1.08
</TABLE>
Our coatings business, too, has continued its rapid growth and performs very
well financially. During the first quarter of 2000, we acquired another three
businesses for this division, which now comprises ten facilities in North
America. In addition to galvanizing services, we also added anodizing and
expanded our powder coating capability.
The deregulation of the utility industry is now having a dramatic impact on
our utility business as utilities are expanding their transmission grids to
more efficiently move power across company and geographic boundaries. We
expect this growth to continue.
Internationally, our Shanghai, China, plant is making great strides in both
volume and profitability. We have experienced significant growth in the
wireless communication business there by developing solid relationships with
China's wireless carriers.
The U.S. agricultural economy is still weak but has not deteriorated further
due, in part, to strong governmental support, which we expect will continue
until commodity prices improve. Our international irrigation business had
another year of growth in both sales and earnings, partially offsetting the
weakness in our
2
<PAGE>
"The underlying drivers
for our two business
segments are compelling,
enduring and global."
home market. We are pleased with our investment in Brazil, which saw another
strong year despite a severe devaluation of the Brazilian currency. In South
Africa, we started a majority-owned joint venture manufacturing facility with
our local distributor of 25 years, and I am happy to report solid results.
Africa offers good growth potential in the irrigation market, and we are well
positioned to serve development in this region.
A notable milestone for our irrigation business: In January of 2000, we began
production in our highly efficient manufacturing facility in McCook,
Nebraska. This positions the irrigation business for the inevitable upturn in
the agricultural markets.
When we set our financial objectives in 1993, we set the bar high by striving
for 15 percent compounded annual growth in earnings per share. At the end of
1999, with our irrigation and wireless businesses in down cycles, we have
achieved 13 percent. This supports our confidence that we will meet our goal
of 15 percent growth over time.
Thank you! In 1999 we bid farewell to three directors who had a tremendous
impact on Valmont's successes: Allen Jacobson, a director for 23 years; Bob
Wallace, a director for 15 years; and Lloyd Johnson who served on our Board
for 8 years. We will always be grateful for your advice and counsel and wish
you well. We welcomed to our board two new directors: Bruce Rohde, Chairman
and CEO of ConAgra, Inc. and Charles D. Peebler, Jr., Chairman Emeritus of
True North Communications. Thank you for joining us, Bruce and Chuck, we look
forward to your guidance.
On another note, I have never been more impressed with the Valmont team--a
global family of associates with great passion for our businesses. Our future
is in their hands and I thank each and every one of them for what they do for
Valmont every day.
Last year, I assured you that I was confident that we are focused on the
right businesses: engineered structures and services for infrastructure
development and water management for agriculture. One year later, I am
further convinced. The underlying drivers for our two business segments are
compelling, enduring and global. Thank you for your continued support.
/s/ Mogens C. Bay
Mogens C. Bay
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
<PAGE>
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
UTILITY STRUCTURES Poles and substation structures for electrical
transmission and distribution for the utility industry [Picture to right]
COMMERCIAL & DECORATIVE LIGHTING Steel, aluminum and composite poles for
commercial, street, highway and decorative lighting [Picture to right]
TRAFFIC Steel and aluminum traffic signage and control structures
[Picture to right]
COMMUNICATION POLES Wireless communication pole structures and components
[Picture to right]
COMMUNICATION TOWERS Self-supporting and guyed towers and accessories for
all types of communication structure applications [Picture to right]
COATINGS High-quality galvanized, anodized and powder coatings
[Picture to right]
<PAGE>
CENTER PIVOT & LINEAR MOVE IRRIGATION EQUIPMENT Efficient and uniform
application of water, fertilizer and chemicals, and tubing for agriculture
and industry
[Picture to left]
WATER RE-USE Environmental consulting for soil and water management and land
application of treated wastewater
[Picture to left]
At Valmont, we manufacture mechanized irrigation equipment and provide water
management services to
HELP INCREASE
FOOD PRODUCTION
AND CONSERVE WATER.
We provide products to support the signs, signals, lights,
communication equipment and other infrastructure components that
IMPROVE SAFETY AND
QUALITY OF LIFE the world over.
We provide the coating and treatment services that make those products
longer lasting and more attractive.
AT A GLANCE
<PAGE>
[MAP ILLUSTRATION]
OMAHA, NEBRASKA, USA
CORPORATE HEADQUARTERS
<TABLE>
<S> <C>
MCCOOK, NEBRASKA, USA
irrigation equipment ST. JULIE, QUEBEC, CANADA
steel and aluminum poles
LINDON, UTAH, USA
galvanizing, powder coating
TUALATIN, OREGON, USA
galvanizing
SALEM, OREGON, USA MINNEAPOLIS, MINNESOTA, USA
wireless communication aluminum poles
structures, passive repeaters,
wave guide and antenna MINNEAPOLIS, MINNESOTA, USA
supporting systems, fasteners anodizing, powder coating and e-coating
ALBANY, OREGON, USA CHICAGO, ILLINOIS, USA
headquarters, cascade earth galvanizing
sciences, environmental
engineering, earth sciences,
water and soil management
LOS ANGELES, CALIFORNIA, USA
anodizing and powder coating
LONG BEACH, CALIFORNIA, USA ELKHART, INDIANA, USA
galvanizing steel and aluminum poles
GUNNISON, UTAH, USA
composite poles
WEST POINT, NEBRASKA, USA
galvanizing
VALLEY, NEBRASKA, USA
irrigation equipment, steel poles,
tubing, galvanizing
BRENHAM, TEXAS, USA
steel poles
UBERABA, BRAZIL
TULSA, OKLAHOMA, USA irrigation equipment,
steel poles, rolled and communication towers
welded steel cylinders
TULSA, OKLAHOMA, USA
galvanizing
</TABLE>
WHERE WE ARE
Valmont is an INTERNATIONAL MANUFACTURING COMPANY with operations around the
world. VALMONT operates 27 manufacturing plants, located on five continents,
and SELLS ITS PRODUCTS IN MORE THAN 100 COUNTRIES.
6
<PAGE>
1999 ANNUAL REPORT
[MAP ILLUSTRATION]
<TABLE>
<S> <C>
MADRID, SPAIN
irrigation equipment
CREUZIER-LE-NEUF, FRANCE
industrial covers and conveyers
CHARMEIL, FRANCE
steel poles
SIEDLCE, POLAND
steel poles
GELSENKIRCHEN, GERMANY
steel poles
MAARHEEZE, THE NETHERLANDS
steel poles
SHANGHAI, CHINA
steel poles
RIVE-DE-GIER, FRANCE
aluminum poles
JOHANNESBURG, SOUTH AFRICA
irrigation equipment
</TABLE>
VALMONT DESIGNS AND MANUFACTURES MECHANIZED IRRIGATION EQUIPMENT TO ENHANCE
FOOD PRODUCTION THROUGH EFFICIENT WATER MANAGEMENT, AS WELL AS POLES, TOWERS
AND STRUCTURES FOR LIGHTING, UTILITY AND COMMUNICATION APPLICATIONS, AND
CUSTOM COATINGS AND OTHER PRODUCTS FOR VARIOUS INDUSTRIAL USES.
7
<PAGE>
INFRASTRUCTURE
[DIAGRAM]
Around the World:
Solutions for Growth
VALMONT PROVIDES STREET LIGHTING AND TRAFFIC CONTROL POLES; SUBSTATIONS AND
POLES FOR TRANSMITTING AND DISTRIBUTING ELECTRICITY; POLES, TOWERS AND
ACCESSORIES TO SUPPORT WIRELESS COMMUNICATION ANTENNAS; AND CUSTOM COATING
SERVICES.
[PICTURE OF STREET LIGHTING]
8
<PAGE>
AROUND THE WORLD,
PEOPLE SHARE
ONE BASIC NEED-
a safe place to live.
AT VALMONT, WE
MANUFACTURE PRODUCTS
and provide services to support the signs,
signals, lights, communication equipment
and other vital infrastructure components
that HELP IMPROVE
SAFETY AND THE
QUALITY OF LIFE
in your hometown
and around the world.
9
<PAGE>
Hot Dip Galvanizing Makes Steel Products Last Longer
ENVIRONMENT
Light Industrial
High Salt
High Humidity
Heavy Industrial
Service Life in Years ranges from 0 to 80.
Service Life is defined as the time to 5% rusting of the steel surface.
Thickness of Zinc Coating ranges from 0.4 to 5.1 (in mils).
MODERN MANUFACTURING, HIGH-QUALITY MATERIALS AND PROTECTIVE COATINGS GIVE
EXTRA VALUE TO VALMONT INFRASTRUCTURE PRODUCTS.
[PICTURE BELOW]
<PAGE>
STAND AT A CROSSROADS OR INTERSECTION IN ANY MODERN METROPOLITAN AREA ON
EARTH. NOW LOOK BEYOND THE CROWDS, THE TRAFFIC AND THE OTHER THINGS THAT
USUALLY ATTRACT YOUR ATTENTION. YOU'LL BEGIN TO SEE THE PHYSICAL UNDERPINNING
OF THE CITY ITSELF. POLES FOR TRANSMITTING AND DISTRIBUTING ELECTRICITY,
POLES THAT PROVIDE STREET LIGHTING AND TRAFFIC CONTROL, POLES AND TOWERS TO
SUPPORT WIRELESS COMMUNICATION ANTENNAS-IN SHORT, THE ESSENTIAL
INFRASTRUCTURE COMPONENTS OF ANY MODERN CITY. ELECTRICITY, PAVED ROADS AND
TELEPHONES-THESE ARE CRUCIAL COMPONENTS OF A BETTER LIFE FOR A GROWING WORLD
POPULATION.VALMONT'S INFRASTRUCTURE BUSINESS TOUCHES EACH OF THESE CRITICAL
AREAS EITHER BY MANUFACTURING THEM IN WHOLE OR IN PART, OR BY PROVIDING
PROTECTIVE COATINGS TO THESE AND OTHER PRODUCTS THAT PROLONG THEIR SERVICE
LIFE AND VALUE.
SUPPORTING POWER LINES
Worldwide population growth translates into increased infrastructure
development and an increased demand for additional electric power,
distribution systems and substations. Valmont manufactures high-quality
transmission and distribution poles and structures as well as substations
that are required by utilities in the U.S. and abroad to meet this growing
demand for electricity.
As worldwide deregulation of electric utilities proceeds and power grids
become further interconnected, the demand for Valmont's utility products
should continue to increase. This wave of deregulation and the increased
competition it brings should translate into lower electricity prices and
increased services for consumers. In order to maintain a competitive edge,
utilities and energy providers will need to implement cost-saving measures
and more cost-effective business practices.
One way for electric utilities to lower costs is to replace wooden poles with
lighter, easier-to-install steel poles that are impervious to termites and
wood rot. Steel poles last many years longer than wood poles and result in
lower lifetime installed costs. Valmont is currently working with several
utilities to replace a full range of wood poles with steel poles-from large
transmission structures to smaller distribution poles. In time, as the
endurance, ease of installation and other benefits of steel poles are fully
realized, we believe this market will continue to grow for Valmont.
LIGHTING THE WAY
Another aspect of a growing population worldwide is the need for additional
transportation infrastructure. In the U.S., upgrading the nation's
transportation infrastructure has become a higher priority. Government
funding for roadway and mass transit enhancements, such as the U.S. highway
bill, leads to increased demand for the lighting and traffic signal poles
manufactured by Valmont.
11
<PAGE>
SPENDING FOR HIGHWAY CONSTRUCTION IS INCREASING
<TABLE>
<S> <C>
1995 $37,308
1996 $39,492
1997 $44,031
1998 $44,440
1999 $51,145
</TABLE>
Billions of Dollars
SOURCE: U.S. DEPARTMENT OF COMMERCE. CONSTRUCTION PUT-IN-PLACE. SEASONALLY
ADJUSTED ANNUAL RATE IN CURRENT DOLLARS.
VALMONT'S INFRASTRUCTURE PRODUCTS HELP PROVIDE SAFE, WELL-LIT OUTDOOR
ENVIRONMENTS AROUND THE WORLD.
[PICTURE OF HIGHWAY LIGHTING]
<PAGE>
In Europe, spending on infrastructure is also increasing. Valmont-designed
fluted and decorative poles are particularly popularin Europe where both
old-world aesthetics and modern designs are important. Additionally,
throughout both Europe and North America, sports stadiums and event
facilities are being constructed that require specialized, highly engineered
lighting structures.
In all geographic regions, safety is a paramount concern. Citizens require
well-lit public areas, parking lots, streets and highways that provide for
safe and smooth traffic flow. In the area of safety, Valmont continues its
research to improve "breakaway" lighting and power pole designs for use near
roadways. These poles, which may be designed out of aluminum, steel or
fiberglass composite materials, are designed to break upon accidental impact
with vehicles, reducing damage and injury.
To meet this growing demand for lighting structures worldwide, Valmont has
located pole manufacturing facilities in China, and throughout Europe and
North America.
ANSWERING THE CALL
Once a novelty, wireless telephones and pagers have become commonplace. Many
experts predict that in the near future, the wireless phone will replace the
traditional home phone. This trend will be especially evident in developing
nations that choose to meet telecommunication demands with more efficient
wireless communication systems, bypassing the installation of overland wires.
Evidence of this trend is seen in some emerging markets where the ratio of
wireless to hard-wired telephone use is much higher than in many developed
economies.
As a provider of communication towers, poles and related accessories, Valmont
is poised to benefit from growth in the communication industry. Valmont has
invested in manufacturing capacity and improved design and customer service
processes to provide communication towers and poles quickly and cost
effectively. To complement these products, we also manufacture a
comprehensive offering of components such as waveguide support systems,
antenna supports and rooftop mounting systems. These product offerings, along
with Valmont's global manufacturing capabilities, enable our Communication
Division to continue its leadership position within the global
telecommunication market.
13
<PAGE>
MAKING IT LAST
Valmont products are known for being among the most reliable in their
industries. Part of that reliability is supplied by our Coatings Division,
which specializes in hot-dip galvanizing, anodizing and powder coating.
Galvanizing is one of the most efficient and cost-effective ways to protect
steel from the elements. The galvanizing process provides a zinc coating that
bonds with steel at the molecular level, significantly extending the service
life of the treated product - in some cases for more than 70 years. Anodizing
is a versatile process that protects aluminum with a durable, attractive
finish. Powder coating is an alternative, high-performance painting
application, which results in a durable and colorful coating that resists
abrasion and corrosion and prolongs product life.
Valmont has been using the hot-dip galvanizing process since the mid 1960s.
By leveraging this core strength, the galvanizing business has grown to the
point where Valmont is now the leading custom galvanizer in North America,
providing custom-finish coatings for products and components manufactured by
other companies. The Valley, Nebraska, plant has one of the largest
galvanizing tanks in the world. Today, the Coatings Division is one of
Valmont's fastest growing business units.
PROVIDING VALUE - THE SHAREHOLDERS' PERSPECTIVE
The demand for Valmont infrastructure products and services is driven in the
short term by a number of powerful factors. Among these are an increase in
U.S. highway and mass transit funding; a significant increase in urban
renovation; a need to improve traffic safety; an explosive global increase in
wireless communication; a need to improve the electric power grid brought on
by deregulation; and an overall cost-saving effort to limit rust and
corrosion and extend the service life of basic infrastructure elements.
In the long term, the global demand for Valmont products and services will be
driven by the increasing world population, economic development and the
significant new construction required to cope with traffic congestion and
urban sprawl. The drivers of wireless communications growth - energy
deregulation and increased infrastructure funding - should also extend
themselves far into the future and provide additional value for our
investors.
14
<PAGE>
[PICTURE OF TRANSMISSION POLE]
THIS IS WHAT PARTNERSHIP IS ALL ABOUT...
At about six p.m. on May 3rd, 1999, a huge tornado started moving from the
west toward Oklahoma City. By the time it reached the city, the winds were
clocked at a staggering 318 miles per hour. When it was all over, 6,000 homes
had been destroyed and 43 people were dead.
Power lines were down all over. We needed to get the power back up as quickly
as possible to help with recovery efforts, not to mention that three of the
lines we lost transport more than 55 percent of the power to our customers in
Oklahoma City.
I called Valmont project engineer David Clarke and asked him how fast
replacement poles could be manufactured and delivered. David took it from
there and within five days, Valmont had 10 poles on site, and the rest
arrived soon thereafter. All told, Valmont provided 77 structures, and they
also sent personnel to assist us with on-site engineering. We were back up
with full service in 37 days - an amazing feat.
Was I surprised at the way Valmont came though for us? Not really, although I
was mighty impressed. You see, we have a strategic alliance with Valmont and
we've worked with them for many years. They've never missed a delivery for us
yet, so I know when they say they will do something, it will be done.
I also know Valmont made some sacrifices to get this job done for us so
quickly. True, this is what partnership is all about, but if there ever was a
time we needed to count on something, this was it. Valmont came through for
us and we appreciate that.
<PAGE>
VALMONT INDUSTRIES, INC. AND SUBSIDIARIES
Supporting a Growing Population
MECHANIZED IRRIGATION EQUIPMENT BRINGS
WATER TO DRY FIELDS AND CAN BE USED FOR
APPLYING FERTILIZER, CHEMICALS, FRESH
WATER AND RECYCLED WASTEWATER.1999 ANNUAL REPORT
<PAGE>
The world's
LIMITED AVAILABILITY OF FRESH WATER
presents a dilemma for a
growing population. How can we
MANAGE THIS PRECIOUS RESOURCE yet increase food production at the same time?
AT VALMONT
WE HAVE ANSWERS:
through the greater use of efficient irrigation equipment and
recycling of wastewater.
17
<PAGE>
WE HAVE ONLY BEGUN TO TAP THE VERY LARGE IRRIGATION MARKET.
[PIE CHART] mechanized irrigation = 4.0%
THE VALLEY C:A:M:S-TM- SYSTEM ALLOWS REMOTE, PROGRAMMABLE CONTROL OF WATER AND
CHEMICAL APPLICATION TIMING, RATES AND DEPTHS.
[PICTURE BELOW]
<PAGE>
COMBINE A GROWING WORLD POPULATION WITH LIMITED WATER RESOURCES AND YOU HAVE
ONE OF TODAY'S MOST PRESSING GLOBAL CHALLENGES - MANAGING FRESH WATER
RESOURCES. VALMONT IS HELPING TO MEET THIS CHALLENGE WITH TECHNOLOGIES THAT
MAKE FARMLAND MORE PRODUCTIVE, CONSERVE FRESH WATER AND REUSE WASTEWATER.
MECHANIZED IRRIGATION IS A VITAL PART OF A TOTAL SOLUTION THAT WILL HELP
ENSURE THE WATER NEEDS OF A GROWING POPULATION ARE MET TODAY AND IN THE
FUTURE.
DAY OF SIX BILLION
On October 12, 1999, the world's population reached six billion people. One
of the most important resources each one of us needs, along with air and
sunlight, is fresh water-not just to drink and use, but to help produce
life-sustaining food.
In many parts of the world, however, water is exactly the resource that is
most at risk. During the past 50 years, demands on fresh water from rivers,
lakes, reservoirs, underground aquifers and other sources have more than
quadrupled. At the same time, pollution has seriously degraded the water
quality in many of these water sources-effectively decreasing the supply of
fresh water.
A recent World Bank report underlines the critical importance of improving
global water management. The report stresses that with respect to conserving
water, "AFTER DECADES OF WASTE, POLLUTION, AND INABILITY TO PROVIDE BASIC
WATER SERVICES TO THE POOR, WE MUST FUNDAMENTALLY CHANGE THE WAY WE THINK
ABOUT AND MANAGE WATER...AT STAKE ARE OUR HEALTH, OUR ECONOMIES, AND THE LIFE
OF THE PLANET ITSELF."
As the leading manufacturer of efficient mechanized irrigation equipment,
Valmont is uniquely positioned as a key player in helping to conserve
precious water resources and improve food production for the world's growing
population.
GROWING POPULATION MEANS GROWING POTENTIAL
Over the next 50 years, experts predict that the current level of food
production must double to meet the demands of a growing population and to
improve diets. Today, agriculture is responsible for using nearly two-thirds
of global fresh water. Since the world's fresh water supply is finite, we
must start today to manage water resources more efficiently in order to meet
the food demands of tomorrow and help ensure that adequate supplies of water
are available for industry as well as personal consumption.
19
<PAGE>
[PIE CHART] USABLE WATER SUPPLY IS LIMITED
total worldwide water supply
3% freshwater
[PIE CHART] of this 3% two thirds is trapped in polar ice caps and only
one-third is usable freshwater
[PIE CHART] today of this one third of usable freshwater, 65% is used by
agriculture
VALMONT'S ADVANCED IRRIGATION AND WATER MANAGEMENT EQUIPMENT IS DESIGNED TO
CONSERVE WATER AND INCREASE FOOD PRODUCTION.
[PICTURE BELOW]
<PAGE>
The majority of the needed future gains in crop production are expected to
come from irrigated land. Because irrigated land can be more than twice as
productive as non-irrigated land, the benefits of efficient irrigation
equipment are enormous. Valmont's advanced irrigation and water management
equipment is designed to both conserve water and increase food production.
TOMORROW'S WATER MANAGEMENT TECHNOLOGIES-TODAY
Compared to competing flood irrigation methods, Valmont's mechanized
irrigation equipment provides significant savings in water, energy,
chemicals, tillage and labor for most producers. Specially designed
low-pressure sprays, low-energy irrigation nozzles and better electronic
timing and volume controls for water application allow producers to use up to
50 percent less water than traditional flood irrigation methods. Other
benefits of mechanized irrigation include higher yields, the elimination of
water and chemical runoff, the reduction of soil salinity, and labor savings
of up to 75 percent. Replacing flood irrigation equipment is, and will
continue to be, a critical solution to water management strategies around the
globe and an ongoing sales growth opportunity for Valmont.
LEADING BRAND NAME-KNOWN FOR QUALITY
The Valley-Registered Trademark- brand has always been known for reliable
products-a reputation proven by the fact that 50 percent of the installed
base of mechanized irrigation systems in the world today are Valleys. Valmont
is a best-cost producer, providing value at a fair price without sacrificing
quality or features. This value-the `best brand at the best cost'-will cause
producers to increasingly choose Valley when they invest in mechanized
irrigation.
Further recognition of Valmont's emphasis on quality and reliability came
this year when Valmont's Irrigation Division was presented the Edgerton Award
of Excellence. The Edgerton Award is modeled after the prestigious Malcolm
Baldridge National Quality Award. Companies seeking this honor undergo a
comprehensive audit examining their leadership systems, strategic planning
processes, systems for assuring and maintaining customer satisfaction, and
the company's processes for obtaining and analyzing information. Valmont is
the only irrigation equipment manufacturer to earn the award.
MORE THAN PIPES AND WATER
Information is becoming an increasingly important asset to growers in this
age of precision farming. In this arena, Valmont
21
<PAGE>
ENSURING THAT SUPPLY KEEPS PACE WITH DEMAND
Valmont recently completed construction of a new, highly automated
manufacturing facility in McCook, Nebraska, that will allow build-to-order
irrigation equipment to be manufactured and shipped quickly and efficiently.
The McCook plant features an advanced galvanizing facility and automated,
laser-guided material-handling equipment to move components through the
facility as they are manufactured.
Valley irrigation equipment will also continue to be manufactured in Valley,
Nebraska. With these two manufacturing facilities in the U.S. and our
facilities in Brazil, South Africa and Spain, Valmont will be able to
manufacture and ship irrigation equipment expediently to customers anywhere
in the world.
SUPPLY AND DEMAND
AT ITS NEW IRRIGATION MANUFACTURING FACILITY IN McCOOK, NEBRASKA, VALMONT
MEETS DEMAND WITH AUTOMATED MANUFACTURING AND SHIPPING.
[PICTURE BELOW]
<PAGE>
has developed electronic irrigation equipment controls to transform Valley
mechanized irrigation equipment into technologically advanced farming tools.
The Valley Computer Aided Management System (C:A:M:S-TM-), allows producers
to program, manage and control irrigation equipment. Processes such as water
and chemical application timing, rates and depths can be monitored and
adjusted through C:A:M:S-TM- panels at the site, or remotely from a base
station in the home or office.
To complement precision farming practices, customized irrigation equipment is
specifically designed for certain crops, terrain and soil types. As a leader
in innovative technologies for mechanized irrigation equipment, Valmont helps
producers to utilize resources more efficiently and move from uniform water
and chemical application to precise application-only watering or treating
those places in the field that need it, and only when needed. During 1999,
Valmont moved closer to that goal with the successful test of Global
Positioning Satellite (GPS) technology. GPS allows continual adjustment of
speed and alignment to control and position Valley pivots with improved
accuracy. In the future, this technology will help producers apply even more
precise amounts of water and chemicals to their fields.
Valmont is using information technology to improve customer service as well.
A new electronic commerce system allows Valley irrigation dealers to assist
customers in the online custom design and ordering of irrigation equipment
tailored to each customer's crop needs and field conditions. Called V(2)0-for
Valley Virtual Office-this service provides secure intranet access for Valley
dealers to order parts, refer to technical and service manuals, and check
order status. Eventually, orders placed through V(2)0 will interface directly
with Valmont's manufacturing processes, shortening the delivery time to the
customer.
WASTEWATER MANAGEMENT - A CRITICAL FUTURE ISSUE
Wastewater management is a key component of water conservation worldwide.
Research is providing a wealth of information on the use of treated
wastewater for irrigation. Valmont is at the forefront of this research and
is a leading provider of this technology today.
One example of this leadership is Cascade Earth Sciences (CES), a subsidiary
of Valmont. CES is one of the nation's leading wastewater management
consulting and design firms. Acquired by
23
<PAGE>
Valmont in 1998, CES brings the experience base for Valmont to provide
agricultural, industrial and municipal generators of wastewater with turnkey
solutions to wastewater management challenges.
Through CES, Valmont conducts thorough analyses of soil fertility, wastewater
nutrient value and crop agronomic characteristics to determine the best
solutions for the land application of wastewater on crops. This expertise
allowed CES to recently sign a multi-year contract with a large food
processor to use partially treated industrial wastewater to irrigate and
fertilize nearby farm crops. By using Valley center pivot or linear move
irrigation equipment, recycled wastewater can be productively applied with
precision and uniformity to cropland, benefiting industry and agriculture.
SHORT AND LONG-TERM VALUE - THE SHAREHOLDERS' PERSPECTIVE
The global demand for Valmont irrigation technologies and products is
immediate and growing. The ability to meet the world's increasing food needs
is constrained by limited amounts of available cropland and fresh water. To
meet these needs, it is crucial for farmers to adopt efficient growing and
irrigation strategies now and in the future, furthering the market demand for
Valmont products.
Of the world's total irrigated acreage, only 4 percent is under mechanized
irrigation equipment. For much of the other 96 percent of irrigated acreage,
the critical need to conserve and recycle water will drive the replacement of
less-efficient flood irrigation methods with precision farming techniques
like Valley mechanized irrigation equipment. As a global manufacturer of
mechanized irrigation equipment with manufacturing facilities located in the
U.S., Brazil, South Africa and Spain, Valmont is uniquely positioned to
benefit from this worldwide opportunity.
In the long term, world population growth, improving diets and fresh water
shortages will put even more pressure on producers to meet increasing
feedgrain demands. Today, Valmont technologies and products are positioned to
meet these long-term needs. Tomorrow, Valmont will continue to invest in
research to deliver the technological advances that will help provide the
solutions to make these scarce natural resources more productive. The
convergence of the world's long-term needs to conserve water and land with
Valmont's practical water management solutions means value for Valmont
shareholders today, tomorrow, and well into the future.
24
<PAGE>
[BROTHERS PICTURED WITH EQUIPMENT]
PIONEERING A NEW WAY OF FARMING
Our family has always been pioneers of a sort-this farm has been in our
family since the Homestead Act of 1860. The land here in Hancock, Wisconsin,
has never been easy to farm-the soil is sandy and doesn't hold a lot of
moisture. Through the 1940s and early 1950s, we used flood irrigation,
getting water out of ponds, and our grandfather would hire kids to come in
and help move the pipe. Some of that pipe was cast iron and moving it around
was a backbreaking, tedious chore.
Grandpa was always ahead of his time, though. In 1957, he drilled one of the
first irrigation wells in the county. In 1964, he installed the first
mechanized irrigation system in this area. It was a Valley water
drive-pioneering technology if we ever saw it, a remarkable piece of
equipment. With the pivots, we started concentrating on growing potatoes. A
few years later, when we installed electric-drive systems, they were Valleys,
too.
Today, we have 1,000 acres of potatoes, 28 irrigation wells, and 42 of our
irrigation systems have Valley C:A:M:S-TM- panels on them that we can control
with a base station in our office. The canning companies we sell to give us a
better price for our crops because we irrigate. They know our product will be
more consistent and uniform in size. We have to say that mechanized
irrigation has transformed farming in this area of Wisconsin and is
responsible for our success. Without it, we wouldn't be here.
<PAGE>
INVESTMENT VALUE
WHY INVEST IN VALMONT?
THE WORLD BANK HAS IDENTIFIED FOUR AREAS AS CRITICAL TO MEETING THE NEEDS OF
A GROWING WORLD POPULATION: SAFE WATER, ELECTRICITY, PAVED ROADS AND
TELEPHONES. VALMONT SUPPLIES PRODUCTS AND SERVICES IN EACH OF THESE AREAS,
AND WE TAKE PRIDE IN HELPING TO MEET THE WORLD'S NEEDS FOR INFRASTRUCTURE
PRODUCTS AND WATER CONSERVATION.
<PAGE>
SHORT-TERM INFRASTRUCTURE DRIVERS
1 RISE IN U.S. GOVERNMENT HIGHWAY FUNDING
2 DEMAND FOR COMPLETE WIRELESS COVERAGE
3 NEED FOR IMPROVEMENTS IN THE POWER TRANSMISSION GRID
4 COST-SAVING BENEFITS OF CORROSION PREVENTION
5 INCREASING URBAN RENOVATION PROJECTS
AND WIDER USE OF DECORATIVE POLES IN
LANDSCAPE ARCHITECTURE
LONG-TERM INFRASTRUCTURE DRIVERS
1 GLOBAL POPULATION GROWTH AND ECONOMIC EXPANSION
2 GROWING INFRASTRUCTURE NEEDS OF EMERGING ECONOMIES
3 INCREASED GOVERNMENT FUNDING FOR INFRASTRUCTURE
4 GROWTH IN WIRELESS COMMUNICATION
5 RISE IN ELECTRIC GRID CONSTRUCTION DUE TO INCREASED ENERGY CONSUMPTION,
DEREGULATION AND COMPETITION
6 INCREASED CONSTRUCTION OF TRAFFIC CONTROL SYSTEMS DUE TO URBAN SPRAWL AND
EMPHASIS ON HIGHWAY SAFETY
7 INCREASED LIGHTING NEEDS OF A GLOBAL 24-HOUR SHOPPING/BUSINESS ENVIRONMENT
8 COST EFFECTIVENESS OF STEEL VERSUS WOOD POLES SHORT-TERM IRRIGATION DRIVERS
SHORT-TERM IRRIGATION DRIVERS
1 REDUCED QUALITY AND AVAILABILITY OF WATER RESOURCES AND GROWING NEED FOR
CONSERVATION AND REUSE STRATEGIES
2 GRAIN SUPPLY, DEMAND AND PRICES
3 MECHANIZED IRRIGATION EQUIPMENT BEING USED ON MORE CROPS
4 GROWTH OF PRECISION FARMING PRACTICES
5 INCREASED USE OF INFORMATION TECHNOLOGY ON FARM EQUIPMENT
6 INCREASED FARM SIZE
LONG-TERM IRRIGATION DRIVERS
1 HUMAN AND INDUSTRIAL IMPACT ON WATER RESOURCES
2 GLOBAL POPULATION GROWTH
3 IMPROVED DIETS
4 RISING GLOBAL GRAIN DEMAND
5 WORLD PEACE AND ECONOMIC EXPANSION
6 LOSS OF ARABLE LAND TO URBAN AND INDUSTRIAL SPRAWL
27
<PAGE>
WHY INVEST IN VALMONT? VALMONT OFFERS EXCEPTIONAL SHAREHOLDER VALUE FOR AT
LEAST TWO REASONS - GLOBAL GROWTH OPPORTUNITIES AND VALUE-DRIVEN MANAGEMENT
PRACTICES.
GLOBAL GROWTH OPPORTUNITIES
Currently, 27 percent of Valmont's revenues are derived internationally.
Economic opportunities tied to increasing world population drive the
global demand for our products, and we see that demand increasing. In
addition, our focus on international business opportunities makes sense
for Valmont shareholders for the following reasons:
- Several of Valmont's markets have higher growth rates overseas than
domestically.
- Many global communities prefer one supplier for all of their
locations.
- Many of our competitors are local and based outside the U.S. Our
presence in their markets allows us to be more competitive.
- An international presence allows us to allocate global capacity for
better utilization of resources.
- An international presence allows Valmont to leverage global
procurement, further enhancing cost savings.
ACTING ON OPPORTUNITY
Over the last several years, the market for irrigation equipment has grown
throughout Southern Africa. During 1999, Valmont formed a company to
manufacture irrigation equipment in South Africa in order to meet this
growing need. By manufacturing and distributing Valmont products from a local
base, we will be able to compete more efficiently, effectively and profitably.
28
<PAGE>
[PICTURE OF FRANCOIS JOUSSE]
SAFETY IS A BEAUTIFUL THING IN THE CITY OF LIGHT
Every year, millions of tourists visit our city. For them, and for our own
citizens, we want to provide an enjoyable, safe experience - and one way we
can ensure safety is with ample lighting and traffic controls in our streets.
Paris is one of the safest cities in the world - also one of the most
beautiful. So, as I see it, my job is to keep the city safe and beautiful at
the same time. That is not a small task when you consider that we replace
approximately 2,000 poles in our city every year.
We want to make sure the poles maintain the Parisian aesthetic and that, too,
has been something of a challenge. You see, in 1937, the famous architect,
Robert Mallet Stevens, designed beautiful cast iron fluted poles that were
installed at the Palais de Chaillot as part of the International Exhibition.
Soon, the fluted poles were placed at the Place de la Concorde, on the Champs
Elysees and elsewhere throughout the city.
Valmont Sermeto (the Valmont subsidiary in France) provides us with
"Cityquartz," a modern version of the original fluted poles. They are
attractive and built with quality - consistent in strength, resistant to
corrosion, and of ample diameter to contain and conceal from view the
electrical accoutrements that must fit inside them. And because of the
company's reputation for reliability, we know we have a source for poles well
into the future.
The Cityquartz poles help us meet both of our objectives. Quality of life and
beauty - it's what you expect in Paris, the "City of Light."
<PAGE>
VALUE DRIVEN MANAGEMENT
Total Value Impact (TVI) is Valmont's unique formulation of the business
philosophy of value-added metrics. It is a powerful tool that aligns
shareholder and management interests because it measures our performance, not
only by revenues and earnings, but also by achieving solid returns on our
investments. Simply put, our business units are "charged" for the capital
they employ. We subtract the cost of that capital-the return our shareholders
and lenders expect on their investment-from net operating profit after taxes.
The remainder is TVI, and the increase in that value from year to year
measures how much value we have created for our shareholders.
TVI has put the focus on capital management squarely in the limelight for
Valmont managers, encouraging them to enhance long-term TVI growth, thus
leading to increased shareholder value. TVI encourages business managers to
invest in projects that generate returns in excess of the cost of capital and
increase operating income through revenue growth, reducing operating costs
and efficiently using the capital invested in their businesses.
The result is a constant, corporation-wide focus on shareholder value. TVI is
Valmont's commitment to long-term performance for our shareholders-the people
who invest in us.
30
<PAGE>
[PICTURE OF TERRY WINKLER OVER BLUEPRINT]
SEEING THE WRITING ON THE WALL - OR THE FLOOR
In 1967, I left college to work for Valmont temporarily - or so I thought. More
than 30 years later, I'm still here. Over the years, Valmont helped me
continue my education, which has been instrumental in my career growth.
I've seen a lot of changes at Valmont over the years. Like me, most of the
employees in the early days were local guys - very good at their jobs. There
was one engineer we called the `Blacksmith of Valmont.' He carried a
soapstone in his pocket and as he walked through the plant, if someone had an
idea or an idea came to him, he would take out that soapstone and draw with
it on the floor.
One of the ideas he came up with changed the direction of the company. They
knew back then that we could be a better company if we made our own tubing.
And so a tubing mill was built from his design. It was - and still is - one of
the best mills in the industry.
We then started manufacturing pipe for farm and auto equipment, handrails and
other structural items. Progress came quickly and today we don't just make
tubing, we successfully manufacture many great products.
I think our success has really come from two things: from listening and from
recognizing or creating opportunities. I know Valmont has created many
opportunities for me throughout the years, and I think our customers can say
the same.
<PAGE>
FINANCIAL
OBJECTIVES AND RESULTS
33 MANAGEMENT'S DISCUSSION & ANALYSIS
38 SELECTED 11-YEAR FINANCIAL DATA
40 CONSOLIDATED STATEMENTS OF OPERATIONS
41 CONSOLIDATED BALANCE SHEETS
42 CONSOLIDATED STATEMENTS OF CASH FLOWS
43 CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
49 BUSINESS SEGMENT INFORMATION
50 QUARTERLY FINANCIAL DATA
51 INDEPENDENT AUDITORS' REPORT
51 REPORT OF MANAGEMENT
52 OFFICERS AND MANAGEMENT
52 SHAREHOLDER INFORMATION
53 BOARD OF DIRECTORS
WE MEASURE OUR PERFORMANCE AGAINST MANY STANDARDS. FINANCIALLY, WE HAVE
SELECTED THREE PRINCIPAL FACTORS THAT TELL JUST HOW WELL WE ARE MANAGING THE
COMPANY AND THE MONEY INVESTED IN IT. THE GOALS WE HAVE ESTABLISHED FOR
EARNINGS GROWTH, RETURN ON INVESTED CAPITAL AND LONG TERM DEBT LEVERAGE ARE
APPROPRIATE FOR THE INDUSTRIES IN WHICH WE PARTICIPATE, YET CHALLENGING
ENOUGH TO DEMAND THE VERY BEST TALENTS AND PERFORMANCE OF OUR MANAGEMENT
TEAM.
OBJECTIVE OBJECTIVE OBJECTIVE
Increase trendline Achieve a minimum Maintain Long-Term
earnings per share 10% after tax Return Debt as a percent of
15% per year on Invested Capital Invested Capital at
less than 40%
<TABLE>
<CAPTION>
DILUTED EARNINGS RETURN ON LONG TERM DEBT AS A
PER SHARE INVESTED CAPITAL PRECENT OF INVESTED CAPITAL
<S> <C> <C> <C> <C> <C>
1994 $ .69 1994 10.7% 1994 21.9%
1995 $ .90 1995 13.0% 1995 17.1%
1996* $1.12 1996* 14.7% 1996 12.7%
1997 $1.33 1997 15.4% 1997 10.4%
1998 $1.02 1998 10.3% 1998 30.3%
1999 $1.08 1999 9.8% 1999 33.8%
</TABLE>
* Before asset valuation charge
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial position. During the first
quarter of 1999, the Company reorganized its businesses on a worldwide
product-line basis. Accordingly, the 1997 and 1998 segment information has
been reclassified to conform to the 1999 presentation. This discussion should
be read in conjunction with the Consolidated Financial Statements and related
Notes.
RESULTS OF OPERATIONS
The net sales and operating income of the Company's business segments for the
past three years are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
[IN MILLIONS] 1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
NET SALES
Irrigation $ 249.2 $ 252.7 $ 271.5
Infrastructure 339.6 318.2 310.2
Other 25.4 35.4 40.8
------- ------- -------
Net Sales $ 614.2 $ 606.3 $ 622.5
======= ======= =======
OPERATING INCOME
Irrigation $ 28.7 $ 31.6 $ 34.2
Infrastructure 20.6 14.3 25.5
Other .9 1.9 2.3
------- ------- -------
Operating Income $ 50.2 $ 47.8 $ 62.0
======= ======= =======
</TABLE>
FISCAL 1999 COMPARED WITH FISCAL 1998 CONSOLIDATED
Net sales of $614.2 million in 1999 were 1.3% higher than 1998 net sales of
$606.3 million. Sales decreased in the Irrigation segment 1.4% from $252.7
million to $249.2 million in 1999. In the Infrastructure segment, 1999 sales
were $339.6 million, up 6.7% from 1998 sales of $318.2 million. Other sales
decreased 28.2% from $35.4 million to $25.4 million in 1999, primarily due to
the exit from the gratings business in 1999.
[GRAPH]
Gross profit was 28.1% of net sales in 1999, compared with 25.2% in 1998. The
increase in 1999 was primarily attributable to higher margins in the
Infrastructure segment and to a lesser extent in the Irrigation segment.
Selling, general and administrative expenses increased from $105.1 million
(17.3% of sales) in 1998 to $122.6 million (20.0% of sales) in 1999, as a
result of year 2000 computer conversion spending and higher sales
commissions, acquisitions and compensation incentive payments related to
increased sales and operating income. Operating income increased 5.0% to
$50.2 million. As a percentage of sales, operating income increased from 7.9%
in 1998 to 8.2% in 1999.
Net interest expense was $7.1 million in 1999, compared with $4.8 million
in 1998. The higher interest expense was attributable to higher average
borrowings resulting primarily from the stock repurchase program.
The effective tax rate was 37.5% in 1999, compared with 36.5% in 1998. The
higher tax rate in 1999 resulted primarily from increased state and local
taxes as well as decreased tax benefits related to the Company's export
activity.
33
<PAGE>
Net earnings decreased 4.6% to $26.4 million and diluted earnings per share
increased 5.9% with $1.08. The percentage differences in earnings per share
compared to net earnings were attributable to the Company's repurchase of
shares during 1999.
IRRIGATION SEGMENT
Net sales and operating income in the Irrigation segment
decreased in 1999 by 1.4% and 9.2%, respectively. The slightly lower sales
level in 1999 was due to a continuation of low agricultural commodity prices
and a weak farm economy leading to reduced sales of irrigation equipment.
General weakness in agricultural markets lowered the Company's tubing sales
to farm machinery manufacturers; however, tubing sales to grain-handling
equipment manufacturers were at the Company's historical levels in
anticipation of a large grain crop. Startup expenses for the Company's new
facility in McCook, Nebraska, competitive market conditions and a shift in
the sales mix led to a reduction in operating income. During 1998 and 1999,
the Company made acquisitions of an engineering consulting business and two
retail irrigation outlets. While these acquisitions added sales in 1999,
their operating income margin percentages are lower than those of the
Company's manufacturing operations. Internationally, the Irrigation segment
sales and operating income improved. In Brazil, sales and operating income
were higher in U.S. dollars
<TABLE>
<CAPTION>
SG&A EXPENSE
AS A PERCENT
WORKING CAPITAL OF NET SALES
[$ in millions]
<S> <C> <C> <C>
1997 $94.4 1997 17.2%
1998 $99.5 1998 17.3%
1999 $98.6 1999 20.0%
</TABLE>
despite a significant currency devaluation early in 1999. Increased investment
in manufacturing and distribution operations in southern Africa resulted in an
increase in sales and profits. Included in this year's year-to-date operating
income is a $2.8 million gain from the sale of an investment.
INFRASTRUCTURE SEGMENT
Net sales and operating income in the Infrastructure segment increased 6.7%
and 44.1%, respectively. Increased unit sales, cost reductions and operating
leverage all combined to improve the operating income for the segment. All
product lines except communication had higher sales levels for 1999. After a
slow start, sales grew stronger during the year due to improving market
conditions for lighting and traffic structures, which were stimulated by
higher levels of government spending. Electric utility companies continued to
increase investment in transmission and distribution capacity to compete in
a deregulating industry. This resulted in higher sales of utility poles and
structures. In Europe, lighting sales were slightly higher in local
currency. In China, lighting and utility sales were up as the market for
quality poles expanded. Sales and profit margins grew in the coatings
division due to volume growth at existing facilities and a full year of
revenues from acquisitions completed in 1998.
Sales and profit margins for the communication division remained low early in
the year. The fourth quarter saw a marked increase in orders. In order to
remain responsive in the communication market, selling, general and
administrative spending levels were maintained early in the year anticipating
the market turnaround, which did occur later in the year. In China,
communication poles sales and profitability were much improved for 1999.
FISCAL 1998 COMPARED WITH FISCAL 1997 CONSOLIDATED
Net sales of $606.3 million in 1998 were 2.6% lower than 1997 net sales of
$622.5 million. Sales in the Irrigation segment declined 6.9% from $271.5
million in 1997 to $252.7 million in 1998. In the Infrastructure segment, 1998
sales were $318.2 million, up 2.6% from 1997 sales of $310.2 million. Other
sales decreased 13.2% from $40.8 million to $35.4 million in 1998.
The gross profit margin was 25.2% in 1998, compared with 27.2% in 1997. The
reduction in 1998 was primarily attributable to lower margins in the
Infrastructure segment offset in part by improved margins in the Irrigation
segment. Selling, general and administrative expenses declined from $107.2
million (17.2% of sales) in 1997 to $105.1 million (17.3% of sales) in
1998, as a result of cost reduction programs, less
34
<PAGE>
sales volume and lower incentive payments. Operating income decreased 23.0%.
As a percentage of sales, operating income decreased from 10.0% in 1997 to
7.9% in 1998.
Net interest expense was $4.8 million in 1998, compared with $2.8 million
in 1997. The higher interest expense was attributable to higher average
borrowings.
The effective tax rate was 36.5% in 1998, compared with 36.3% in 1997. The
higher tax rate in 1998 resulted primarily from decreased tax benefits on
export sales.
Net earnings decreased 26.4% to $27.6 million and diluted earnings per
share decreased 23.3% to $1.02. The lower percentage decrease in earnings
per share compared with net earnings was primarily attributable to the
Company's repurchase of shares during 1998.
IRRIGATION SEGMENT
Net sales and operating income in the Irrigation segment decreased in 1998 by
6.9% and 7.6%, respectively. Agricultural commodity prices declined in the
second half of 1998 due to large supplies of grain, which were a result of a
favorable growing season and a short-term declining demand. Consequently,
farmers became very conservative in their spending for equipment and
postponed their investments. To encourage sales, industry-wide pricing became
more competitive.
INFRASTRUCTURE SEGMENT
Net sales in the Infrastructure segment increased 2.6% while operating income
decreased 43.9%. With respect to the Company's lighting and traffic pole
products, wet weather delayed the start of the construction season in many
parts of the United States. Also, a delay in the passage of the federal
highway bill kept many product purchasers sidelined and thereby reduced
sales. As a result, the shipments of lighting and traffic products were lower
than the 1997 levels. The eventual passage of the highway bill in June 1998
resulted in an increase of orders for lighting and traffic products
throughout the second half of the year. To fill this demand, the Company
incurred increased overtime costs. In Europe, sales of lighting products were
above 1997 levels due to the improvement of certain European economies.
Lighting sales from the Company's China facility were higher in 1998 as
compared with 1997.
Orders from electric utility companies in 1998 were above 1997 levels for
transmission structures, substations, and distribution poles. This was due
to an overall strengthening in demand from utility companies seeking
to increase service reliability and expand capacity. Utility product sales
also benefited from increased sales of steel transmission and distribution
poles to utility customers who replaced wood poles with steel.
Sales of communication poles, towers and components to the wireless
communication market declined in 1998. An overall slowdown in the build-out
of the U.S. wireless communication network continued throughout 1998. This
led to a very competitive market environment, which reduced sales and
pressured pricing levels. Sales of communication poles and towers in Europe
also declined. Sales of communication poles in China increased in 1998.
However, the effects of currency devaluation and economic uncertainty led to
a reduced level of sales of communication products in the rest of Southeast
Asia.
During 1998, the Company acquired four galvanizing operations in Utah,
Oregon, Oklahoma and California. These acquisitions helped to increase sales
and operating income in the coatings division from 1997 levels.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at December 25, 1999 was $98.6 million compared with
$99.5 million at December 26, 1998. The ratio of current assets with current
liabilities was 1.8:1 at both year-ends.
Available short-term credit facilities through bank lines of credit were $50
million at the end of 1999 compared with $44 million at the end of 1998. On
December 25, 1999, $37 million of these credit facilities were unused.
The Company's growth has been financed through a combination of cash provided
from operations and debt financing. The Company's objective is to maintain
long-term debt as a percent of invested capital below 40%. At the end of
1999, long-term debt as a percent of invested capital was 33.8% as compared
with 30.3% at the end of 1998. The increased debt level was the result of
share repurchases, capital expenditures and acquisitions. Cash provided from
operating activities was $63.9 million in 1999 and $42.0 million in 1998.
Under the terms of a 1997 revolving credit agreement with a group of banks,
the Company may borrow up to the equiv-alent of $100 million in multiple
currencies. This facility is unsecured and any outstanding principal balance
is due on June 30, 2002. The outstanding principal balance may be paid down
at any time without penalty, or additional funds may be borrowed up to the
maximum limit. On December 25, 1999, the outstanding principal balance was
$47 million compared with a balance of $79 million at December 26, 1998.
35
<PAGE>
Under the terms of a 1999 unsecured facility with an insurance company, the
Company may borrow up to $100 million during the first three years. Each
borrowing matures no more than 15 years from the date of issuance with an
average life of no more than 12 years from the date of issuance. The
outstanding principal may be prepaid at anytime subject to applicable yield
maintenance provisions. On December 25, 1999, the outstanding principal
balance under the facility was $50 million.
In 1998, the Board of Directors authorized the repurchase of up to 5.4
million shares of the Company's common stock. Repurchased shares are recorded
as "Treasury Stock" and result in a reduction of "Shareholder's Equity". When
treasury shares are reissued, the Company uses the last-in, first-out method,
and the difference between the repurchase cost and reissuance price is
charged or credited to "Additional Paid-In Capital." As of December 25, 1999,
and December 26, 1998, cumulative totals of 4,528,360 and 3,122,160 shares
had been purchased respectively for $75.5 million and $53.3 million
respectively.
The Company believes cash flows from operations, available credit facilities
and the capital structure now in place will be adequate for 2000 planned
capital expenditures, dividends, additional share repurchases and other
financial commitments, as well as to take advantage of opportunities to
expand its markets and businesses.
YEAR 2000 ISSUE
The Year 2000 (Y2K) issue arose because many existing computer programs use
only the last two digits to refer to a year. Therefore, these computer
programs do not properly recognize a year that begins with "20" instead of
the familiar "19". If not corrected, many computer applications could
fail or create erroneous results.
The Company's Y2K plan included remediation of its mainframe systems,
upgrades to packaged systems, implementation of new enterprise resource
planning (ERP) systems in certain business units, examination and resolution
of administrative and production equipment that contain embedded chips,
evaluation of network equipment and personal computers, and evaluation of the
Year 2000 readiness of key suppliers.
The Company has no knowledge of significant exposure to contingencies
related to the Year 2000 issue for the products it has sold. Throughout all
global locations, the Company experienced no significant Year 2000 problems.
The total cost for the Company's Year 2000 Project to date has been
approximately $10 million.
CAPITAL EXPENDITURES
In 1999, the Company expended $37.8 million in property, plant and equipment,
an $8.1 million increase from the $29.7 million invested in 1998. The major
expenditures were a new irrigation manufacturing facility in McCook,
Nebraska, and a new coatings facility in Tulsa, Oklahoma. An additional $2.9
million was spent for the acquisition of two retail irrigation stores.
RISK MANAGEMENT
MARKET RISK - The principal market risks affecting the Company are exposure
to interest rates and foreign currency exchange rates. The Company does not
have in place any derivative financial instruments to hedge these exposures,
nor does it have derivatives for trading purposes.
INTEREST RATES - The Company manages interest expense using a mix of fixed,
floating and variable-rate debt. Assuming average interest rates and
borrowings on variable-rate debt, a hypothetical 10% change in interest rates
would have an impact on interest expense of $563 in 1999 and $366 in 1998.
FOREIGN EXCHANGE - Exposure to transactions denominated in a currency other
than the entity's functional currency are minimal, and therefore the
potential exchange losses in future earnings, fair value and cash flows from
these transactions are immaterial.
The Company manages its investment risk in foreign operations by borrowing in
the functional currencies of the foreign entities. The following table
indicates the change in the recorded value of the Company's investment at
year-end assuming a hypothetical 10% change in the value of the U.S. Dollar.
<TABLE>
<CAPTION>
[IN THOUSANDS] 1999 1998
-------------------
<S> <C> <C>
Europe $ 2,489 $ 2,686
South America 728 1,110
Asia 295 295
-------------------
</TABLE>
36
<PAGE>
OUTLOOK FOR 2000
Looking at the year 2000, many areas across the U.S. are currently
experiencing dry growing conditions. Absent continuation of such conditions,
the Company anticipates Irrigation segment sales and profits to remain at
1998-99 levels. The Company expects this segment to experience higher steel
prices, lower manufacturing volume and changes in the sales mix due to
continued lower equipment sales levels, increased depreciation and startup
expenses related to the new McCook, Nebraska, plant. The impact of these
factors should be offset by continued cost reductions and productivity
programs. Longer term, the Company expects increased food production due to a
growing world population and improving diets. To meet this increase in food
production, greater farm efficiency and investments in water conservation and
water re-use must take place. The Company's mechanized irrigation equipment
conserves water and enhances farming efficiency, helping to meet these needs.
In the Infrastructure segment, backlogs for domestic lighting, traffic,
utility and communication products are at high levels. The activity for
communication poles, tower and component products has continued at the
improved level of late 1999. Despite expected increases in steel prices
throughout 2000, profitability for the Infrastructure segment is expected to
increase due to planned cost reductions and increased sales volumes. The
recent acquisitions of Lexington Standard, an aluminum pole manufacturing
facility, and three coating facilities in early 2000 are expected to add to
the Company's sales and profitability. Beyond 2000, more lighting and traffic
structures will be required to enhance street and highway safety.
Distribution of electricity worldwide will require more transmission and
distribution poles and structures.
The demand for wireless communication should result in increased sales of
towers, poles and components. Demand to extend the life of infrastructure
products will drive application of galvanizing, powder coatings and anodizing
applications. Because of these trends, the Company remains positive on the
outlook for its businesses.
<TABLE>
<CAPTION>
TOTAL ASSETS CAPITAL EXPENDITURES
$ in millions $ in millions
<S> <C> <C> <C>
1997 $368 1997 $39.1
1998 $407 1998 $29.7
1999 $419 1999 $37.8
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAINS FORWARD LOOKING STATEMENTS THAT
REFLECT MANAGEMENT'S CURRENT VIEW AND ESTIMATES OF FUTURE ECONOMIC AND MARKET
CIRCUMSTANCES, INDUSTRY CONDITIONS, COMPANY PERFORMANCE AND FINANCIAL
RESULTS. THE STATEMENTS ARE BASED ON MANY ASSUMPTIONS AND FACTORS INCLUDING
OPERATING EFFICIENCIES, AVAILABILITY AND PRICE OF RAW MATERIALS, AVAILABILITY
AND MARKET ACCEPTANCE OF NEW PRODUCTS, PRODUCT PRICING, DOMESTIC AND
INTERNATIONAL COMPETITIVE ENVIRONMENTS, ACTIONS AND POLICY CHANGES OF
DOMESTIC AND INTERNATIONAL GOVERNMENTS, AND OTHER RISKS DESCRIBED FROM TIME
TO TIME IN VALMONT'S REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION. ANY
CHANGES IN SUCH ASSUMPTIONS OR FACTORS COULD PRODUCE SIGNIFICANTLY DIFFERENT
RESULTS.
37
<PAGE>
SELECTED 11-YEAR FINANCIAL DATA [LOGO]
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS] 1999 1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING DATA
Net sales $ 614,191 $ 606,307 $ 622,506 $ 644,531
Earnings (loss) from continuing operations 26,367 27,636 37,544 21,248
Earnings from discontinued operations -- -- -- --
Cumulative effect of accounting change -- -- -- --
-------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 26,367 $ 27,636 $ 37,544 $ 21,248
=============================================================================================================
Depreciation and amortization $ 21,949 $ 19,843 $ 16,437 $ 14,832
Capital expenditures 37,783 29,667 39,115 35,559
PER SHARE DATA
Earnings (loss):
Basic $ 1.09 $ 1.04 $ 1.36 $ 0.78
Diluted 1.08 1.02 1.33 0.76
Cash dividends 0.26 0.25 0.22 0.19
Shareholders' equity 7.30 7.12 7.49 6.41
FINANCIAL POSITION
Working capital $ 98,588 $ 99,466 $ 94,416 $ 81,403
Property, plant and equipment, net 173,920 157,447 140,834 120,579
Total assets 419,335 406,957 368,052 341,648
Long-term debt, including current installments 108,622 96,218 28,060 29,573
Shareholders' equity 170,488 175,913 207,102 175,231
Invested capital 321,096 317,708 270,400 243,905
KEY FINANCIAL MEASURES
Return on beginning shareholders' equity 15.0% 13.3% 21.4% 13.3%
Return on invested capital 9.8% 10.3% 15.4% 10.3%
Long-term debt as a percent of invested capital 33.8% 30.3% 10.4% 12.1%
YEAR-END DATA
Shares outstanding (000) 23,354 24,721 27,641 27,330
Approximate number of shareholders 5,500 5,500 5,400 4,400
Number of employees 3,948 3,869 3,751 4,868
</TABLE>
PER SHARE AMOUNTS AND NUMBER OF SHARES REFLECT THE TWO-FOR-ONE STOCK SPLITS IN
1989 AND 1997.
38
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 544,642 $ 501,740 $ 464,274 $ 445,481 $ 446,543 $ 461,789 $ 443,444
24,759 18,887 7,551 11,671 (8,822) 11,373 16,818
-- -- 4,637 3,564 2,134 5,474 4,602
-- -- (4,910) -- -- -- --
- ---------------------------------------------------------------------------------------------------
$ 24,759 $ 18,887 $ 7,278 $ 15,235 $ (6,688) $ 16,847 $ 21,420
===================================================================================================
$ 12,361 $ 11,018 $ 10,907 $ 12,585 $ 11,285 $ 9,887 $ 7,608
34,772 23,535 17,089 8,353 11,539 20,607 17,470
$ 0.92 $ 0.70 $ 0.27 $ 0.57 $ (0.25) $ 0.63 $ 0.81
0.90 0.69 0.27 0.56 (0.25) 0.63 0.81
0.15 0.15 0.15 0.13 0.13 0.13 0.11
5.87 5.10 4.52 4.43 4.06 4.42 3.94
$ 80,993 $ 88,278 $ 87,793 $ 68,551 $ 69,143 $ 66,302 $ 72,811
113,532 89,201 75,501 78,150 84,144 81,675 71,872
308,710 283,443 261,275 286,076 291,041 291,163 268,216
36,687 43,242 44,076 69,735 81,698 63,003 66,774
159,256 137,582 121,841 118,428 108,142 117,200 104,069
215,318 197,591 180,961 200,501 205,618 191,255 180,464
18.0% 15.5% 6.1% 14.1% (5.7%) 16.2% 25.5%
13.0% 10.7% 5.6% 7.4% (1.9%) 9.5% 12.4%
17.0% 21.9% 24.4% 34.8% 39.7% 32.9% 37.0%
27,120 26,990 26,972 26,750 26,620 26,494 26,412
3,900 3,800 3,800 3,500 3,500 2,800 1,600
4,166 3,946 4,152 4,532 4,478 4,524 4,255
</TABLE>
39
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
three-year period ended December 25, 1999
<TABLE>
<CAPTION>
--------------------------------------------
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS] 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 614,191 $ 606,307 $ 622,506
Cost of sales 441,445 453,459 453,326
--------------------------------------------
Gross profit 172,746 152,848 169,180
Selling, general and administrative expenses 122,570 105,096 107,190
--------------------------------------------
Operating income 50,176 47,752 61,990
--------------------------------------------
Other income (deductions):
Interest expense (8,052) (5,858) (3,731)
Interest income 913 1,012 900
Miscellaneous (870) 630 (215)
--------------------------------------------
(8,009) (4,216) (3,046)
--------------------------------------------
Earnings before income taxes 42,167 43,536 58,944
--------------------------------------------
Income tax expense (benefit):
Current 16,700 12,500 14,400
Deferred (900) 3,400 7,000
--------------------------------------------
15,800 15,900 21,400
--------------------------------------------
Net earnings $ 26,367 $ 27,636 $ 37,544
--------------------------------------------
Earnings per share:
Basic $ 1.09 $ 1.04 $ 1.36
============================================
Diluted $ 1.08 $ 1.02 $ 1.33
============================================
Cash dividends per share $ 0.26 $ 0.25125 $ 0.21875
============================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
40
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 25, 1999 and December 26, 1998
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS] 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 14,936 $ 7,580
Receivables, less allowance for doubtful
receivables of $3,203 in 1999 and $3,421 in 1998 106,844 115,843
Inventories 85,383 77,694
Prepaid expenses 4,784 5,297
Refundable and deferred income taxes 8,086 13,532
-------------------------
Total current assets 220,033 219,946
-------------------------
Property, plant and equipment, at cost 326,451 292,944
Less accumulated depreciation and amortization 152,531 135,497
-------------------------
Net property, plant and equipment 173,920 157,447
-------------------------
Goodwill and other assets 25,382 29,564
-------------------------
Total assets $ 419,335 $ 406,957
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 4,372 $ 5,737
Notes payable to banks 18,834 25,494
Accounts payable 46,753 45,996
Accrued expenses 49,962 41,646
Dividends payable 1,524 1,607
-------------------------
Total current liabilities 121,445 120,480
-------------------------
Deferred income taxes 11,109 11,984
Long-term debt, excluding current installments 104,250 90,481
Minority interest in consolidated subsidiaries 7,302 3,862
Other noncurrent liabilities 4,741 4,237
Shareholders' equity:
Preferred stock of $1 par value.
Authorized 500,000 shares; none issued -- --
Common stock of $1 par value.
Authorized 75,000,000 shares; issued 27,900,000 shares 27,900 27,900
Additional paid-in capital 1,043 1,280
Retained earnings 220,506 200,393
Accumulated other comprehensive income (5,113) (1,423)
-------------------------
244,336 228,150
Less:
Cost of common shares in treasury-
4,545,503 shares in 1999 (3,178,627 shares in 1998) 73,808 52,235
Unearned restricted stock 40 2
-------------------------
Total shareholders' equity 170,488 175,913
-------------------------
Total liabilities and shareholders' equity $ 419,335 $ 406,957
=========================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
41
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
three-year period ended December 25, 1999
<TABLE>
<CAPTION>
------------------------------------------
[DOLLARS IN THOUSANDS] 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net earnings $ 26,367 $ 27,636 $ 37,544
Adjustments to reconcile net earnings to net cash
provided by operations:
Depreciation and amortization 21,949 19,843 16,437
Other adjustments (1,634) (302) 1,385
Changes in assets and liabilities:
Receivables 5,567 1,379 (32,040)
Inventories (8,473) 4,057 (7,671)
Prepaid expenses (48) (1,704) (1,081)
Accounts payable 4,340 (4,645) 7,154
Accrued expenses 9,007 (7,986) (4,297)
Other noncurrent liabilities 1,225 253 769
Income taxes 5,635 3,517 5,147
------------------------------------------
Net cash provided by operations 63,935 42,048 23,347
------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (37,783) (29,667) (39,115)
Acquisitions (2,854) (29,447) --
Proceeds from sale of property and equipment 114 4,768 289
Proceeds from sale of assets held for sale -- -- 26,903
Proceeds from sale of investment 8,294 -- --
Proceeds from investments by minority shareholders 1,374 -- 1,959
Changes in other assets (1,667) (1,875) 924
Other, net 382 (581) (1,007)
------------------------------------------
Net cash used by investing activities (32,140) (56,802) (10,047)
------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under short-term agreements (9,312) 6,612 (4,550)
Proceeds from long-term borrowings 75,060 73,443 7,172
Principal payments on long-term obligations (60,863) (9,742) (7,856)
Dividends paid (6,337) (6,551) (5,838)
Proceeds from exercises under stock plans 637 3,347 3,067
Purchase of common treasury shares:
Stock repurchase program (22,210) (53,255) --
Stock plan exercises (588) (3,025) (3,273)
------------------------------------------
Net cash provided (used) by financing activities (23,613) 10,829 (11,278)
------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (826) -- --
------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,356 (3,925) 2,022
Cash and cash equivalents - beginning of year 7,580 11,505 9,483
------------------------------------------
Cash and cash equivalents - end of year $ 14,936 $ 7,580 $ 11,505
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
42
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
three-year period ended December 25, 1999
<TABLE>
<CAPTION>
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS]
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional other Unearned Total
Common paid-in Retained comprehensive Treasury restricted shareholders'
stock capital earnings income stock stock equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28, 1996 $ 13,950 $ 6,458 $ 153,146 $ 1,737 $ (18) $ (42) $ 175,231
---------
Comprehensive income:
Net earnings -- -- 37,544 -- -- -- 37,544
Currency translation adjustment -- -- -- (2,703) -- -- (2,703)
---------
Total comprehensive income -- -- -- -- -- -- 34,841
Cash dividends ($0.21875 per share) -- -- (6,027) -- -- -- (6,027)
Purchase of 154,039 common shares -
stock plan exercises -- -- -- -- (3,273) -- (3,273)
Sale of 43,914 common shares -- 905 -- -- -- -- 905
Stock options exercised;
393,164 shares issued -- (216) -- -- 3,283 -- 3,067
Tax benefit from exercise of stock options -- 1,796 -- -- -- -- 1,796
Stock awards; 27,146 shares issued -- 542 -- -- -- 20 562
Two-for-one stock split 13,950 (8,647) (5,303) -- -- -- --
-----------------------------------------------------------------------------------
BALANCE AT DECEMBER 27, 1997 27,900 838 179,360 (966) (8) (22) 207,102
Comprehensive income:
Net earnings -- -- 27,636 -- -- -- 27,636
Currency translation adjustment -- -- -- (457) -- -- (457)
---------
Total comprehensive income -- -- -- -- -- -- 27,179
Cash dividends ($0.25125 per share) -- -- (6,603) -- -- -- (6,603)
Purchase of treasury shares:
Stock repurchase program, 3,122,160 shares -- -- -- -- (53,255) -- (53,255)
Stock plan exercises, 163,590 shares -- -- -- -- (3,025) -- (3,025)
Stock options exercised;
339,241 shares issued -- (1,331) -- -- 4,052 -- 2,721
Tax benefit from exercise of stock options -- 1,169 -- -- -- -- 1,169
Stock awards; 26,913 shares issued -- 604 -- -- 1 20 625
-----------------------------------------------------------------------------------
BALANCE AT DECEMBER 26, 1998 27,900 1,280 200,393 (1,423) (52,235) (2) 175,913
Comprehensive income:
Net earnings -- -- 26,367 -- -- -- 26,367
Currency translation adjustment -- -- -- (3,690) -- -- (3,690)
---------
Total comprehensive income -- -- -- -- -- -- 22,677
Cash dividends ($0.26 per share) -- -- (6,254) -- -- -- (6,254)
Purchase of treasury shares:
Stock repurchase program, 1,406,200 shares -- -- -- -- (22,210) -- (22,210)
Stock plan exercises, 35,982 shares -- -- -- -- (588) -- (588)
Stock options exercised;
56,181 shares issued -- (404) -- -- 951 -- 547
Tax benefit from exercise of stock options -- 111 -- -- -- -- 111
Stock awards; 19,125 shares issued -- 56 -- -- 274 (38) 292
-----------------------------------------------------------------------------------
BALANCE AT DECEMBER 25, 1999 $ 27,900 $ 1,043 $ 220,506 $ (5,113) $ (73,808) $ (40) $170,48843
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
43
+<PAGE>
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
three-year period ended December 25, 1999
[DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS]
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Valmont
Industries, Inc. and its wholly and majority-owned subsidiaries (the
Company). Investments in 20% to 50% owned affiliates are accounted for by
the equity method and investments in less than 20% owned affiliates are
accounted for by the cost method. All significant intercompany items have
been eliminated.
OPERATIONS
During the first quarter of 1999, the Company reorganized its businesses on
a worldwide product line basis. Accordingly, the 1997 and 1998 segment
information has been reclassified to conform to the 1999 presentation. The
Company has two reportable segments:
IRRIGATION: This segment consists of the manufacture and distribution
of agricultural irrigation equipment, tubular products and related
parts and services; and
INFRASTRUCTURE: This segment includes the manufacture and distribution
of engineered metal structures and coating services for the lighting,
utility and wireless communications industries.
FISCAL YEAR
The Company operates on 52/53 week fiscal years with each year ending on the
last Saturday in December. Accordingly, the Company's fiscal years 1999, 1998
and 1997 ended on December 25, December 26 and December 27, respectively, and
each of these fiscal years consisted of 52 weeks. The fiscal year ending
December 30, 2000 will consist of 53 weeks.
INVENTORIES
At December 25, 1999, approximately 67% of inventory is valued at the lower
of cost, determined on the last-in, first-out (LIFO) method, or market. All
other inventory is valued at the lower of cost, determined on the first-in,
first-out (FIFO) method or market.
The excess of replacement cost of inventories over the LIFO value is
approximately $9,100 and $10,000 at December 25, 1999, and December 26, 1998,
respectively.
LONG-LIVED ASSETS
The Company follows Statement of Financial Accounting Standards No. 121,
(SFAS No. 121), Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to Be Disposed Of, which prescribes that an
impairment loss be recognized if the carrying amount of an asset may not be
recoverable and exceeds estimated future undiscounted cash flows of the
asset. A recognized impairment loss reduces the carrying amount of the asset
to its fair value.
Included in Selling, General and Administrative Expenses in 1999 is a charge
of $1,915 to write-down assets of a French communication tower facility to
value and to provide for other related costs including employee severance.
Management determined that this charge was appropriate after reviewing the
decline in the European communication tower market and the operating
performance of this facility.
Property, plant and equipment are recorded at historical cost. The Company
uses the straight-line method in computing depreciation and amortization for
financial reporting purposes and generally uses accelerated methods for
income tax purposes. The annual provisions for depreciation and
amortization have been computed principally in accordance with the
following ranges of asset lives: buildings 15 to 40 years, machinery and
equipment 3 to 12 years, and intangible assets 3 to 40 years.
INCOME TAXES
The Company uses the asset and liability method to calculate
deferred income taxes. Deferred tax assets and liabilities are recognized on
temporary differences between financial statement and tax basis of assets
and liabilities using enacted tax rates. The effect of tax rate changes
on deferred tax assets and liabilities is recognized in income during
the period that includes the enactment date.
FOREIGN CURRENCY TRANSLATIONS
Results of operations for foreign subsidiaries are translated using the
average exchange rates during the period. Assets and liabilities are
translated at the exchange rates in effect on the balance sheet dates.
Cumulative translation adjustments are included as a separate component of
accumulated other comprehensive income. These translation adjustments are the
Company's only component of other comprehensive income.
44
<PAGE>
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabili-ties and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
Statement establishes accounting and reporting standards for derivative
financial instruments. The Statement requires recognition of derivatives in
the statement of financial position, to be measured at fair value. Gains or
losses resulting from changes in the value of derivatives are accounted for
depending on the intended use of the derivative and whether it qualifies for
hedge accounting. This Statement becomes effective for the Company's
financial statements beginning in 2001. Due to the Company's limited use
of derivative financial instruments, adoption of Statement No. 133 is not
expected to have a significant effect on the Company's consolidated results
of operations, financial position, or cash flows.
(2) CASH FLOW SUPPLEMENTARY INFORMATION
The Company considers all highly liquid temporary cash investments purchased
with a maturity of three months or less at the time of purchase to be cash
equivalents. Cash payments for interest and income taxes (net of refunds)
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Interest $7,596 $ 5,747 $ 4,035
Income taxes 9,718 11,223 16,373
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consists of the following:
<TABLE>
<CAPTION>
1999 1998
----------------------
<S> <C> <C>
Land and improvements $ 13,410 $ 12,696
Buildings and improvements 72,215 69,690
Machinery and equipment 168,750 152,229
Transportation equipment 5,090 5,131
Office furniture and equipment 33,597 25,786
Construction in progress 33,389 27,412
----------------------
$326,451 $292,944
======================
</TABLE>
The Company leases certain facilities, machinery, computer equipment and
transportation equipment under operating leases with unexpired terms ranging
from one to twelve years. Rental expense for operating leases amounted to
$8,855, $5,807 and $4,920 for fiscal 1999, 1998 and 1997, respectively.
Minimum lease payments under operating leases expiring subsequent to
December 25, 1999 are:
<TABLE>
<CAPTION>
<S> <C>
Fiscal year ending
2000 $ 6,462
2001 5,691
2002 4,398
2003 4,024
2004 1,485
Subsequent 9,747
-------
Total minimum lease payments $31,807
=======
</TABLE>
(4) BANK CREDIT ARRANGEMENTS
The Company maintains various lines of credit for short-term borrowings
totaling $50,000. The interest rates charged on these lines of credit vary
in relation to the banks' costs of funds. The unused borrowings under
the lines of credit were $37,000 at December 25, 1999. The lines of credit
can be modified at any time at the option of the banks. The Company pays
facility fees of 1/8 of 1% in connection with $10,000 of its lines of
credit, and pays no fees in connection with the remaining lines of credit.
The weighted average interest rate on short-term borrowings was 5.5% at
December 25, 1999 and 5.3% at December 26, 1998.
(5) INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Current:
Federal $11,847 $ 9,501 $11,423
State 1,069 912 940
Foreign 3,784 2,087 2,037
-----------------------------------
16,700 12,500 14,400
-----------------------------------
Deferred:
Federal (168) 2,224 5,963
State (29) 176 529
Foreign (703) 1,000 508
-----------------------------------
(900) 3,400 7,000
-----------------------------------
$15,800 $15,900 $21,400
===================================
</TABLE>
The reconciliations of the statutory Federal income tax rate and the
effective tax rates follow:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------
<S> <C> <C> <C>
Statutory Federal
income tax rate 35.0% 35.0% 35.0%
State income taxes, net
of Federal benefit 2.2% 1.8% 1.9%
Other 0.3% (0.3)% (0.6)%
------------------------------
37.5% 36.5% 36.3%
==============================
</TABLE>
45
<PAGE>
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at December 25, 1999 and December 26, 1998, are:
<TABLE>
<CAPTION>
1999 1998
-------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses and
allowances $13,825 $10,977
Inventory capitalization 1,226 1,199
-------------------
Total deferred tax assets 15,051 12,176
-------------------
Deferred tax liabilities:
Plant and equipment 9,999 11,062
Lease transactions 2,646 1,507
Other 5,428 4,564
-------------------
Total deferred tax liabilities 18,073 17,133
-------------------
Net deferred tax liabilities $(3,022) $(4,957)
===================
</TABLE>
No valuation allowance for deferred tax assets has been provided since all
tax benefits are more likely than not to be realized. The currency
translation adjustments in accumulated other comprehensive income are not
adjusted for income taxes as they relate to indefinite investments in
non-U.S. subsidiaries.
(6) LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
---------------------
<S> <C> <C>
9.40% to 12.77% promissory
notes, unsecured (a) $ 5,750 $10,250
7.49% to 7.63% promissory
notes, unsecured (b) 50,000 --
Revolving credit agreement (c) 47,448 78,833
3.0% to 9.25% notes 5,424 7,135
---------------------
Total long-term debt 108,622 96,218
Less current installments
of long-term debt 4,372 5,737
---------------------
Long-term debt, excluding
current installments $104,250 $90,481
=====================
</TABLE>
(a) The unsecured promissory notes payable are due in varying annual
principal installments through 2001. The notes are subject to prepayment
in whole or in part with or without premium as specified in the agreement.
(b) The unsecured promissory notes are advances under a facility of $100,000.
These notes payable are due in varying annual principal installments
through 2006. The notes are subject to prepayment in whole or in part
with or without premium as specified in the agreement.
(c) The revolving credit agreement is an unsecured facility with a group of
banks for a maximum of $100,000. The facility has a termination date of
June 30, 2002. The funds borrowed may be repaid at any time without
penalty, or additional funds may be borrowed up to the facility limit.
The Company may choose from the following three interest rate
alternatives: the higher of prime rate or Federal Funds Rate plus 0.5%,
the applicable Eurodollar rate plus a leverage ratio-based spread
(which at December 25, 1999 was 0.275%) or up to $50,000 at a rate
determined through a competitive bid process. The effective interest
rate at December 25, 1999 was 5.98% and at December 26, 1998 was 5.36%.
The lending agreements place certain restrictions on working capital, capital
expenditures, payment of dividends, purchase of Company stock and additional
borrowings. Under the most restrictive covenants of the agreements, the
Company may purchase the remainder of the 5.4 million shares of Company stock
authorized by the Board of Directors in 1998 and in addition make payments of
cash dividends and purchases of the Company's capital stock of $12,000 in any
fiscal year.
The minimum aggregate maturities of long-term debt for each of the four
years following 2000 are: $2,907, $58,121, $10,487 and $10,317.
(7) STOCK PLANS
The Company maintains stock-based compensation plans approved by the
shareholders, which provide that the Compensation Committee of the Board of
Directors may grant incentive stock options, nonqualified stock options,
stock appreciation rights, restricted stock awards and bonuses of common
stock. At December 25, 1999, 1,315,000 shares of common stock remained
available for issuance under the plans. Shares and options issued and
available are subject to changes in capitalization.
Under the plans, the exercise price of each option equals the market price
at the time of the grant. Options vest beginning on the first anniversary
of the grant in equal amounts over three to six years or on the fifth
anniversary of the grant. Expiration of grants is from six to ten years
from the date of grant.
The Company applies APB Opinion 25 in accounting for its fixed stock
compensation plans. Accordingly, no compensation cost has been recognized for
the fixed plans in 1999, 1998 or 1997. Had compensation cost been determined
on the basis of fair value pursuant to Statement of Financial Accounting
Standards No. 123, net earnings and earnings per share would have been
reduced as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-----------------------------------
<S> <C> <C> <C>
Net earnings
As reported $26,367 $27,636 $37,544
-----------------------------------
Pro forma $24,441 $25,969 $36,584
-----------------------------------
Earnings per share
As reported: Basic $ 1.09 $ 1.04 $ 1.36
-----------------------------------
Diluted $ 1.08 $ 1.02 $ 1.33
-----------------------------------
Pro forma: Basic $ 1.01 $ 0.98 $ 1.33
-----------------------------------
Diluted $ 1.00 $ 0.96 $ 1.30
-----------------------------------
</TABLE>
46
<PAGE>
The fair value of each option grant commencing with grants made in 1996 was
estimated as of the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions used for grants in
1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------
<S> <C> <C> <C>
Expected volatility 41% 35% 29%
Risk-free interest rate 6.43% 4.71% 5.75%
Expected life from vesting date 2.6 yrs. 2.6 yrs. 2.7 yrs.
Dividend yield 1.36% 1.15% 1.03%
</TABLE>
Following is a summary of the activity of the stock plans during 1997, 1998
and 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
-----------------------
<S> <C> <C>
Outstanding at December 28, 1996 1,866,974 $ 11.11
Granted 443,414 21.48
Exercised (308,876) (7.43)
Forfeited (76,850) (14.34)
-----------------------
Outstanding at December 27, 1997 1,924,662 $ 13.96
-----------------------
Options exercisable at December 27, 1997 919,801 $ 10.22
-----------------------
Weighted average fair value of
options granted during 1997 $ 6.56
-------
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
-----------------------
<S> <C> <C>
Outstanding at December 27, 1997 1,924,662 $ 13.96
Granted 712,687 17.09
Exercised (339,241) (8.57)
Forfeited (118,012) (19.27)
-----------------------
Outstanding at December 26, 1998 2,180,096 $ 15.52
-----------------------
Options exercisable at December 26, 1998 1,034,491 $ 13.35
-----------------------
Weighted average fair value of
options granted during 1998 $ 5.58
-------
</TABLE>
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
------------------------
<S> <C> <C>
Outstanding at December 26, 1998 2,180,096 $ 15.52
Granted 870,047 16.37
Exercised (96,181) (9.89)
Forfeited (22,046) (19.09)
------------------------
Outstanding at December 25, 1999 2,931,916 $ 15.93
------------------------
Options exercisable at December 25, 1999 1,348,234 $ 14.91
------------------------
Weighted average fair value of
options granted during 1999 $ 6.48
=======
</TABLE>
Following is a summary of the status of stock options outstanding at
December 25, 1999:
OUTSTANDING AND EXERCISABLE BY PRICE RANGE
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Range Number Life Price Number Price
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6.00-12.94 768,503 5.26 years $10.29 631,837 $ 9.96
13.22-16.88 1,340,708 9.07 years 16.37 230,329 15.90
17.41-21.78 741,866 7.39 years 20.25 415,229 20.59
22.13-23.00 80,839 6.51 years 22.52 70,839 22.51
- ----------------------------------------------------------------------------------------------------
2,931,916 1,348,234
====================================================================================================
</TABLE>
(8) EARNINGS PER SHARE
The following table provides a reconciliation between Basic and Diluted
earnings per share (EPS).
<TABLE>
<CAPTION>
Dilutive
Effect
of Stock Diluted
Basic EPS Options EPS
----------------------------------
<S> <C> <C> <C>
1997:
Net earnings $37,544 -- $37,544
Shares outstanding 27,521 686 28,207
Per share amount $ 1.36 -- $ 1.33
1998:
Net earnings $27,636 -- $27,636
Shares outstanding 26,605 498 27,103
Per share amount $ 1.04 -- $ 1.02
1999:
Net earnings $26,367 -- $26,367
Shares outstanding 24,158 255 24,413
Per share amount $ 1.09 -- $ 1.08
</TABLE>
47
<PAGE>
(9) TREASURY STOCK
During 1998, the Board of Directors authorized management to repurchase up to
5.4 million shares of the Company's common stock. Repurchased shares are
recorded as "Treasury Stock" and result in a reduction of "Shareholders'
Equity." When treasury shares are reissued, the Company uses the last-in,
first-out method, and the difference between the repurchase cost and
reissuance price is charged or credited to "Additional Paid-In Capital."
As of December 25, 1999, a total of 4.5 million shares had been purchased
for $75,465 including 1.4 million shares purchased during 1999 at a cost of
$22,210.
(10) EMPLOYEE RETIREMENT SAVINGS PLANS
Established under Internal Revenue Code Section 401(k), the Valmont Employee
Retirement Savings Plan is available to all eligible employees. Participants
can elect to contribute up to 15% of annual pay, on a pretax and/or after-tax
basis. The Company may also make basic, matching and/or supplemental
contributions to the Plan. In addition, the Company has a defined
contribution plan covering the employees of Microflect; contributions under
this plan are based primarily on the performance of the business unit and
employee compensation. The 1999, 1998 and 1997 Company contributions to these
plans amounted to approximately $5,100, $3,900 and $5,400, respectively.
(11) RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the year
incurred. Research and development expenses were approximately $2,500 in
1999, $3,300 in 1998, and $3,700 in 1997.
(12) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents, receivables, accounts
payable, notes payable to banks and accrued expenses approximate fair value
because of the short maturity of these instruments. The fair values of each
of the Company's long-term debt instruments are based on the amount of future
cash flows associated with each instrument discounted using the Company's
current borrowing rate for similar debt instruments of comparable maturity.
The fair value estimates are made at a specific point in time and the
underlying assumptions are subject to change based on market conditions. At
December 25, 1999, the carrying amount of the Company's long-term debt was
$108,622 with an estimated fair value of approximately $107,600. At
December 26, 1998, the carrying amount of the Company's long-term debt was
$96,218 with an estimated fair value of approximately the same. At December 25,
1999, the Company had no derivative financial instruments.
(13) STOCKHOLDERS' RIGHT PLAN
Each share of common stock carries with it one half preferred stock purchase
right ("Right"). The Right becomes exercisable ten days after a person (other
than Robert B. Daugherty and his related persons and entities) acquires or
commences a tender offer for 15% or more of the Company's common stock. Each
Right entitles the holder to purchase one one-thousandth of a share of a new
series of preferred stock at an exercise price of $100, subject to
adjustment. The Right expires on December 19, 2005 and may be redeemed at the
option of the Company at $.01 per Right, subject to adjustment. Under certain
circumstances, if (i) any person becomes an Acquiring Person or (ii) the
Company is acquired in a merger or other business combination, each holder of
a Right (other than the Acquiring Person) will have the right to receive,
upon exercise of the Right, shares of common stock (of the Company under
(i) and of the acquiring company under (ii)) having a value of twice the
exercise price of the Right.
(14) ACQUISITIONS AND DIVESTITURE
During 1999, the Company's Irrigation segment invested $2.9 million cash in
two irrigation retail outlets. The excess of purchase price over fair value
of the net assets acquired has been recorded as goodwill and is being
amortized over the estimated useful life. During March of 1999, the Company
sold an investment in an irrigation-related business for proceeds of
$8.3 million and realized a gain of $2.8 million.
During 1998, the Company's Coating division acquired the operating assets of
four separate galvanizing facilities in Oklahoma, California, Oregon and
Utah. The excess of purchase price over the estimated fair values of the net
assets acquired has been recorded as goodwill and is being amortized over
estimated useful lives. In November 1998, the Company acquired the
outstanding shares of Cascade Earth Sciences, Ltd., a firm providing
consulting services for environmental and wastewater management projects with
headquarters in Oregon.
All acquisitions have been accounted for under the purchase method. The
results of operations of the acquired businesses are included in the
consolidated financial statements from the dates of acquisition.
(15) BUSINESS SEGMENTS
During the first quarter of 1999, the Company reorganized its businesses on
a worldwide product line basis. Accordingly the 1997 and 1998 segment
information has been reclassified to conform to the 1999 presentation. The
Company has two reportable segments:
IRRIGATION: This segment consists of the manufacture and distribution of
agricultural irrigation equipment, tubular products and related parts and
services; and
INFRASTRUCTURE: This segment includes the manufacture and distribution of
engineered metal structures and coating services for the lighting, utility
and wireless communications industries.
48
<PAGE>
In addition to these two reportable segments, the Company has other
businesses that individually are not more than 10% of consolidated sales.
The accounting policies of the reportable segments are the same as those
described in Note 1. The Company evaluates the performance of its business
segments based upon operating income and invested capital. The Company does
not allocate interest expense, non-operating income and deductions or income
taxes to its business segments. All Corporate expenses and assets are
allocated to the business segments. Intersegment sales prices are both cost
and market based.
BUSINESS SEGMENT INFORMATION
[DOLLARS IN THOUSANDS]
<TABLE>
<CAPTION>
SUMMARY OF BUSINESS SEGMENT 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES: Irrigation $252,606 $252,745 $271,512
Infrastructure 347,226 327,393 320,052
Other 28,003 36,826 42,302
----------------------------------------
Total 627,835 616,964 633,866
- -------------------------------------------------------------------------------------------------------------------------
INTERSEGMENT SALES: Irrigation 3,432 -- --
Infrastructure 7,588 9,243 9,905
Other 2,624 1,414 1,455
----------------------------------------
Total 13,644 10,657 11,360
- -------------------------------------------------------------------------------------------------------------------------
NET SALES: Irrigation 249,174 252,745 271,512
Infrastructure 339,638 318,150 310,147
Other 25,379 35,412 40,847
----------------------------------------
Total $614,191 $606,307 $622,506
- -------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME: Irrigation $ 25,906 $ 31,579 $ 34,239
Gain on sale of investment 2,823 -- --
----------------------------------------
Total Irrigation 28,729 31,579 34,239
----------------------------------------
Infrastructure 22,423 14,256 25,495
Impairment charge (1,915) -- --
----------------------------------------
Total Infrastructure 20,508 14,256 25,495
----------------------------------------
Other 939 1,917 2,256
----------------------------------------
Total 50,176 47,752 61,990
- -------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE, NET (7,139) (4,846) (2,831)
MISCELLANEOUS (870) 630 (215)
----------------------------------------
Earnings before income taxes $ 42,167 $ 43,536 $ 58,944
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS: Irrigation $150,300 $132,654 $122,456
Infrastructure 254,606 255,122 227,689
Other 14,429 19,181 17,907
----------------------------------------
Total $419,335 $406,957 $368,052
- -------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES: Irrigation $ 23,897 $ 16,652 $ 12,181
Infrastructure 13,192 10,344 24,743
Other 694 2,671 2,191
----------------------------------------
Total $ 37,783 $ 29,667 $ 39,115
- -------------------------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION: Irrigation $ 6,876 $ 5,295 $ 4,355
Infrastructure 14,375 13,791 11,363
Other 698 757 719
----------------------------------------
Total $ 21,949 $ 19,843 $ 16,437
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY BY GEOGRAPHICAL AREA BY LOCATION OF VALMONT FACILITIES: 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET SALES: United States $482,378 $483,130 $517,006
France 54,309 59,887 52,226
Other 77,504 63,290 53,274
----------------------------------------
Total $614,191 $606,307 $622,506
- -------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME: United States $ 41,630 $ 42,398 $ 56,594
France 1,066 505 1,976
Other 7,480 4,849 3,420
----------------------------------------
Total $ 50,176 $ 47,752 $ 61,990
- -------------------------------------------------------------------------------------------------------------------------
LONG-LIVED ASSETS: United States $167,081 $152,275 $114,663
France 14,724 17,729 18,597
Other 17,497 17,007 16,862
----------------------------------------
Total $199,302 $187,011 $150,122
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NO SINGLE CUSTOMER ACCOUNTED FOR MORE THAN 10% OF NET SALES IN 1999, 1998 OR
1997. NET SALES BY GEOGRAPHICAL AREA ARE BASED ON THE LOCATION OF THE
FACILITY PRODUCING THE SALES.
OPERATING INCOME BY BUSINESS SEGMENT AND GEOGRAPHICAL AREAS ARE BASED ON NET
SALES LESS IDENTIFIABLE OPERATING EXPENSES AND ALLOCATIONS.
LONG-LIVED ASSETS CONSIST OF PROPERTY, PLANT AND EQUIPMENT, NET OF DEPRECIATION,
GOODWILL AND OTHER ASSETS, LONG-LIVED ASSETS BY GEOGRAPHICAL AREA ARE BASED ON
LOCATION OF FACILITIES.
49
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
[DOLLARS IN THOUSANDS]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Net Earnings
-----------------------------
Net Gross Per Share Stock Price Dividends
Sales Profit Amount Basic Diluted High Low Declared
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
First $ 154,403 $ 40,398 $ 5,761 $ 0.23 $ 0.23 $ 14.75 $ 11.25 $ 0.06500
Second 162,759 43,594 6,902 0.28 0.28 18.25 13.31 0.06500
Third 138,848 40,003 5,692 0.24 0.23 17.25 14.75 0.06500
Fourth 158,181 48,751 8,012 0.34 0.33 17.88 13.13 0.06500
-------------------------------------------------------------------------------------
Year $ 614,191 $ 172,746 $ 26,367 $ 1.09 $ 1.08 $ 18.25 $ 11.25 $ 0.26000
1998
First $ 160,587 $ 43,069 $ 9,645 $ 0.35 $ 0.34 $ 24.63 $ 17.63 $ 0.05625
Second 154,340 38,239 7,450 0.27 0.26 25.00 15.75 0.06500
Third 140,105 34,906 4,678 0.18 0.18 20.50 13.25 0.06500
Fourth 151,275 36,634 5,863 0.23 0.23 16.19 12.25 0.06500
-------------------------------------------------------------------------------------
Year $ 606,307 $ 152,848 $ 27,636 $ 1.04 $ 1.02 $ 25.00 $ 12.25 $ 0.25125
1997
First $ 165,418 $ 44,616 $ 8,954 $ 0.33 $ 0.32 $ 22.63 $ 18.63 $ 0.05000
Second 159,100 44,144 9,893 0.36 0.35 22.38 18.50 0.05625
Third 136,015 37,746 7,857 0.28 0.28 21.88 19.00 0.05625
Fourth 161,973 42,674 10,840 0.39 0.38 23.88 19.00 0.05625
-------------------------------------------------------------------------------------
Year $ 622,506 $ 169,180 $ 37,544 $ 1.36 $ 1.33 $ 23.88 $ 18.50 $ 0.21875
</TABLE>
EARNINGS PER SHARE ARE COMPUTED INDEPENDENTLY FOR EACH OF THE QUARTERS.
THEREFORE, THE SUM OF THE QUARTERLY EARNINGS PER SHARE MAY NOT EQUAL THE
TOTAL FOR THE YEAR.
50
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF VALMONT INDUSTRIES, INC.
VALLEY, NEBRASKA
We have audited the accompanying consolidated balance sheets of Valmont
Industries, Inc. and subsidiaries as of December 25, 1999 and December 26,
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended
December 25, 1999. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Valmont Industries, Inc. and
subsidiaries as of December 25, 1999 and December 26, 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 25, 1999 in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 4, 2000
REPORT OF MANAGEMENT
The consolidated financial statements of Valmont Industries, Inc. and
subsidiaries and the other information contained in the Annual Report were
prepared by and are the responsibility of management. The statements have
been prepared in accordance with generally accepted accounting principles and
necessarily include amounts based on management's best estimates and
judgements.
In fulfilling its responsibilities, management relies on a system of internal
controls which provide reasonable assurance that the financial records are
reliable for preparing financial statements and maintaining accountability of
assets. Internal controls are designed to reduce the risk that material
errors or irregularities in the financial statements may occur and not be
timely detected. These systems are augmented by written policies,
careful selection and training of qualified personnel, an
organizational structure providing for the division of responsibilities
and a program of financial, operational and systems audits. The Company also
has a business ethics policy which requires employees to maintain high
ethical standards in the conduct of Company business.
The Audit Committee, composed of non-employee directors, is responsible for
recommending to the Board of Directors, subject to ratification of
shareholders, the independent accounting firm to be retained each year. The
Audit Committee meets regularly, and when appropriate separately, with the
independent certified public accountants, management and the internal
auditors to review company performance. The independent certified public
accountants, internal auditors, and the Audit Committee have unrestricted
access to each other in the discharge of their responsibilities.
/s/ Mogens C. Bay /s/ Terry J. McClain
MOGENS C. BAY TERRY J. MCCLAIN
Chairman and Chief Executive Officer Senior Vice President and Chief
Financial Officer
51
<PAGE>
OFFICERS AND MANAGEMENT
<TABLE>
<CAPTION>
Corporate Divisions
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE AND STAFF OFFICERS POLES DIVISION IRRIGATION DIVISION CORPORATE HEADQUARTERS
MOGENS C. BAY* MARK R. RICHARDS THOMAS D. SPEARS Valmont Industries, Inc.
CHAIRMAN AND PRESIDENT PRESIDENT One Valmont Plaza
CHIEF EXECUTIVE OFFICER Omaha, Nebraska 68154-5215 USA
KEITH A. HUFFMAN DUANE BIER 402.963.1000
VINCENT T. CORSO * VICE PRESIDENT VICE PRESIDENT
SENIOR VICE PRESIDENT AND GLOBAL OPERATIONS OPERATIONS
CHIEF FINANCIAL OFFICER INDEPENDENT PUBLIC ACCOUNTANTS
RICHARD M. SAMPSON HECTOR A. HAGET Deloitte & Touche LLP
TERRY J. MCCLAIN* VICE PRESIDENT VICE PRESIDENT Omaha, Nebraska USA
SENIOR VICE PRESIDENT AND SALES MARKETING AND ENGINEERING
CHIEF FINANCIAL OFFICER
THOMAS F. SANDERSON TERRY RAHE LEGAL COUNSEL
E. ROBERT MEANEY* VICE PRESIDENT PRESIDENT McGrath, North, Mullin &
SENIOR VICE PRESIDENT GLOBAL MARKETING AND CASCADE EARTH SCIENCES Kratz, P.C.
INTERNATIONAL PRODUCTION DEVELOPMENT Omaha, Nebraska USA
DENNIS E. SCHWIEGER
ANN F. ASHFORD THOMAS J. SUTKO VICE PRESIDENT
VICE PRESIDENT VICE PRESIDENT GLOBAL SALES STOCK TRANSFER AGENT AND
HUMAN RESOURCES MARKETING ADMINISTRATION REGISTRAR
First National Bank of Omaha
JILL A. DAILY KLAVS GULDAGER COATINGS DIVISION Trust Department
VICE PRESIDENT GENERAL MANAGER One First National Center
PROCUREMENT CHINA JEFFREY BRIGGS Omaha, Nebraska 68102-1596 USA
PRESIDENT 402.341.0500
THOMAS P. EGAN, JR. PAUL VAN ISEGHEM
VICE PRESIDENT VICE PRESIDENT RICHARD S. CORNISH
CORPORATE COUNSEL EUROPEAN OPERATIONS VICE PRESIDENT Notices regarding changes of
AND SECRETARY OPERATIONS address and inquiries
regarding lost or stolen
MARK C. JAKSICH INDUSTRIAL PRODUCTS DIVISION certificates and transfers of
VICE PRESIDENT COMMUNICATION DIVISION stock should be directed to
CORPORATE CONTROLLER LEONARD M. ADAMS the transfer agent.
VICE PRESIDENT JAMES R. CALLAWAY
MARK E. TREINEN AND GENERAL MANAGER PRESIDENT
VICE PRESIDENT ANNUAL MEETING
BUSINESS DEVELOPMENT SEAN GALLAGHER The annual meeting of Valmont's
VICE PRESIDENT shareholders will be held
* MEMBER, OFFICE OF THE PRESIDENT SALES at 2:00 p.m. on Wednesday,
April 26, 2000, at the Joslyn
J. MARSHALL HAINES Art Museum in Omaha, Nebraska
VICE PRESIDENT USA.
OPERATIONS
SHAREHOLDER AND INVESTOR
RELATIONS
Valmont's common stock trades
on the Nasdaq National Market
under the symbol VALM.
Valmont's most recent Quarterly
News Releases are available on
the internet at www.valmont.com
under the heading "The Company."
Valmont maintains an active
investor relations program and
mailing list to keep
shareholders and potential
investors informed about the
Company. Comments and inquiries
are welcomed and should be
directed to Investor Relations.
A copy of Valmont's 1999 Annual
Report on form 10-K may be
obtained by calling or writing
Investor Relations:
Jeffrey S. Laudin
Investor Relations Department
Valmont Industries, Inc.
One Valmont Plaza
Omaha, Nebraska 68154-5215 USA
Phone: 402.963.1000
Fax: 402.963.1199
</TABLE>
MARKET MAKERS
THE FOLLOWING MAKE A MARKET IN VALMONT INDUSTRIES, INC. COMMON STOCK AS OF
FEBRUARY 2000: GEORGE K. BAUM & COMPANY, DAIN RAUSCHER INC., HERZOG, HEINE,
GEDULD, INC., KIRKPATRICK PETTIS INC, KNIGHT SECURITIES, L.P., SPEAR, LEEDS &
KELLOGG, SHERWOOD SECURITIES, MAYER AND SCHWEITZER, SECURITY INVESTMENT
COMPANY OF KANSAS CITY.
VISIST VALMONT'S WEB SITE: WWW.VALMONT.COM
52
<PAGE>
BOARD OF DIRECTORS
PICTURED FROM LEFT TO RIGHT
CHARLES D. PEEBLER, JR.
WALTER SCOTT, JR.
CHARLES M. HARPER
BRUCE C. ROHDE
MOGENS C. BAY
ROBERT B. DAUGHERTY
JOHN E. JONES
THOMAS C. MADISON
KENNETH E. STINSON
MOGENS C. BAY
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
VALMONT INDUSTRIES, INC.
DIRECTOR SINCE 1993
ROBERT B. DAUGHERTY
FOUNDER AND
CHAIRMAN EMERITUS
VALMONT INDUSTRIES, INC.
DIRECTOR SINCE 1947
CHARLES M. HARPER
FORMER CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
RJR NABISCO HOLDINGS CORP.
AND CONAGRA, INC.
DIRECTOR SINCE 1979
JOHN E. JONES
RETIRED CHAIRMAN,
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
CBI INDUSTRIES, INC.
DIRECTOR SINCE 1993
THOMAS F. MADISON
PRESIDENT, MLM PARTNERS
CHAIRMAN OF THE BOARD
COMMUNICATIONS HOLDINGS, INC.
DIRECTOR SINCE 1987
CHARLES D. PEEBLER, JR.
CHAIRMAN EMERITUS
TRUE NORTH COMMUNICATIONS, INC.
DIRECTOR SINCE 1999
BRUCE C. ROHDE
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
CONAGRA, INC.
DIRECTOR SINCE 1999
WALTER SCOTT, JR.
CHAIRMAN
LEVEL 3 COMMUNICATIONS, INC.
DIRECTOR SINCE 1981
KENNETH E. STINSON
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
PETER KIEWIT SONS', INC.
DIRECTOR SINCE 1996
- ------------------------------
AUDIT COMMITTEE
WALTER SCOTT, JR., CHAIRMAN
JOHN E. JONES
KENNETH E. STINSON
COMPENSATION COMMITTEE
CHARLES M. HARPER, CHAIRMAN
THOMAS F. MADISON
CHARLES D. PEEBLER, JR.
<PAGE>
VALMONT [LOGO]
ONE VALMONT PLAZA
OMAHA NEBRASKA
68154-5215 USA
PHONE 402.963.1000
FAX 402.963.1199
www.valmont.com
<PAGE>
Exhibit 21
SUBSIDIARIES OF VALMONT INDUSTRIES, INC.
State or Country
Name of Subsidiary of Incorporation
------------------ ----------------
Best-All Electric, Inc. Nebraska
Cascade Earth Sciences, Ltd. Oregon
Cleanwater International, Inc. Oregon
Gate City Steel Corporation Delaware
Golden State Irrigation, Inc. California
KUO Testing Labs, Inc. Washington
Lampadaires Feralux, Inc. Canada
Masstock Ltd. Zambia
Microflect Company, Inc. Oregon
NeuValco S.A. France
NeuValco GmbH Germany
Oregon Pacific Group, LLC. Oregon
Sermeto S.A. France
Sermeto Iberica S.A. Spain
Shanghai Valmont Special Steel Tube Co., Ltd. China
TelecCentre, S.A. France
Tubalco S.A. France
Valley Irrigation South Africa, PTY. South Africa
Valmont California Irrigation, Inc. California
Valmont Coatings, Inc. Delaware
Valmont Composites, LLC Utah
Valmont de Espana, S.A. Spain
Valmont Mastbau, KG Germany
Valmont S.A. Spain
Valmont Industria e Comercio, Ltda. Brazil
Valmont Industries (Asia-Pacific) Ltd. Hong Kong
Valmont Industries de Argentina S.A. Argentina
Valmont Industries Holland B.V. The Netherlands
Valmont International, L.L.C. Delaware
Valmont International Corp. Texas
Valmont International Inc. U. S. Virgin Islands
Valmont Nederlands B.V. The Netherlands
Valmont Northwest, Inc. Nebraska
Valmont Polska Sp. zoo. Poland
Valmont Service Centers, Inc. Nebraska
Valmont Services Irrigacao, Ltda. Brazil
Valmont World Trade, N.V. Netherlands Antilles
<PAGE>
Exhibit 23
DELOITTE & TOUCHE LLP (letterhead)
2000 First National Center Telephone 402-346-7788
Omaha, NE 68102-1578 Facsimile 402-346-0711
402-344-0372
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to incorporation by reference in Registration Statements No.
2-88663, 33-21680, 33-57117, 333-02785, 333-78017, and 333-83251 of Valmont
Industries, Inc. on Form S-8 of our reports dated February 4, 2000, appearing
in or incorporated by reference in the Annual Report on Form 10-K of Valmont
Industries, Inc. for the year ended December 25, 1999.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
March 20, 2000
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned Directors of Valmont Industries, Inc., a Delaware
corporation, hereby constitute and appoint Mogens C. Bay as
attorney-in-fact in their name, place and stead to execute Valmont's
Annual Report on Form 10-K for the fiscal year ended December 25, 1999,
together with any and all subsequent amendments thereof in their
capacity as Chairman of the Board and hereby ratify all that said
attorney-in-fact may do by virtue thereof.
DATED this 23rd day of February, 2000.
/s/Robert B.Daugherty /s/Charles D. Peebler, Jr.
- ------------------------------ ------------------------------
Robert B. Daugherty, Director Charles D. Peebler, Jr.
/s/Charles M. Harper /s/Bruce Rohde
- ------------------------------ ------------------------------
Charles M. Harper, Director Bruce Rohde
/s/John E. Jones /s/Walter Scott, Jr.
- ------------------------------ ------------------------------
John E. Jones, Director Walter Scott, Jr., Director
/s/Thomas F. Madison /s/Kenneth E. Stinson
- ------------------------------ ------------------------------
Thomas F. Madison, Director Kenneth E. Stinson, Director
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<EXCHANGE-RATE> 1
<CASH> 14,936
<SECURITIES> 0
<RECEIVABLES> 106,844
<ALLOWANCES> 0
<INVENTORY> 85,383
<CURRENT-ASSETS> 220,033
<PP&E> 326,451
<DEPRECIATION> 152,531
<TOTAL-ASSETS> 419,335
<CURRENT-LIABILITIES> 121,445
<BONDS> 0
0
0
<COMMON> 27,900
<OTHER-SE> 142,588
<TOTAL-LIABILITY-AND-EQUITY> 419,335
<SALES> 614,191
<TOTAL-REVENUES> 614,191
<CGS> 441,445
<TOTAL-COSTS> 441,445
<OTHER-EXPENSES> 122,570
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,009
<INCOME-PRETAX> 42,167
<INCOME-TAX> 15,800
<INCOME-CONTINUING> 26,367
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,367
<EPS-BASIC> 1.09
<EPS-DILUTED> 1.08
</TABLE>
