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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9102
AMERON INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0100596
(State of Incorporation) (I.R.S. Employer Identification No.)
245 South Los Robles Avenue
Pasadena, CA 91101
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (818) 683-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
---------------------------- -----------------------
Common Stock $2.50 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.
The Registrant estimates that as of February 11, 1997 the aggregate
market value of the shares of its Common Stock, $2.50 par value, held by
non-affiliates of the Registrant (that is, shares beneficially owned by other
than executive officers and directors) was in excess of $179 million.
On February 11, 1997 there were 4,001,037 shares of Common Stock, $2.50 par
value outstanding. This is the only class of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
1. PORTIONS OF AMERON'S 1996 ANNUAL REPORT TO STOCKHOLDERS (PARTS I, II
AND IV).
2. PORTIONS OF AMERON'S PROXY STATEMENT FOR THE 1997 ANNUAL MEETING OF
STOCKHOLDERS (PART III).
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PART I
AMERON INTERNATIONAL CORPORATION
AMERON INTERNATIONAL CORPORATION, a Delaware corporation, and its consolidated
subsidiaries are collectively referred to herein as "Ameron", the "Company", the
"Registrant" or the "Corporation" unless the context clearly indicates
otherwise. The business of the Company has been divided into business segments
in Item 1(c)(1). Substantially all activities relate to the manufacture of
highly engineered products to the industrial, chemical, energy and construction
markets. All references to "the year" or "the fiscal year" pertain to the
twelve months ended November 30, 1996. All references to the "Annual Report"
pertain to the Company's 1996 Annual Report to Stockholders.
ITEM 1 - BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS.
Although the Company's antecedents date back to 1907, it evolved directly
from the merger of two separate firms in 1929, resulting in the
incorporation of American Concrete Pipe Co. on April 22, 1929. Various
name changes occurred between that time and 1942, at which time the
Company's name became American Pipe and Construction Co. By the late 1960s
the Company was almost exclusively engaged in manufacturing and had
expanded its product lines to include not only concrete and steel pipe but
also high-performance protective coatings, ready-mix concrete, aggregates
and reinforced thermosetting resin pipe and fittings.
At the beginning of 1970, the Company's name was changed to Ameron, Inc.
In the meantime, other manufactured products had been added to its product
lines. These included concrete and steel poles for street and area
lighting, and tapered steel vertical and cantilevered poles for traffic
signals.
In 1996, the Company's name was changed to Ameron International Corporation
in order to better reflect its expanded, global focus. Also in 1996, the
Company acquired assets of Centron, a leading manufacturer of fiberglass
pipe for the worldwide oil field market. In late 1996, the Company
acquired the worldwide Devoe marine coatings business of Imperial Chemical
Industries PLC.
Further details or commentary on the year's operations can be found in the
Annual Report, which is Exhibit 13 to this report on Form 10-K, and which
should be read in conjunction with this report.
(B) FINANCIAL INFORMATION AS TO INDUSTRY SEGMENTS.
The information contained in Notes (1), (6) and (18) of Notes to
Consolidated Financial Statements on pages 44, 45, 50, 52 and 53 of the
Annual Report is incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
(1) For geographical and operational convenience, the Company is
organized into divisions. These divisions are combined into the
following groups serving the following-described industry segments.
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a) The Protective Coatings Group develops, manufactures and
markets high-performance coatings and surfacer systems on a
world-wide basis. These products are utilized for the
preservation of major structures, such as metallic and
concrete facilities and equipment, to prevent their
degradation by corrosion, abrasion, marine fouling and other
forms of chemical and physical attack. The primary markets
served include marine, offshore, petrochemical, power
generation, petroleum, chemical, steel, pulp and paper,
railroad, bridges, mining, metal processing and original
equipment manufacturing. These products are marketed by
direct sales, as well as through manufacturers'
representatives, distributors and licensees. Competition is
based upon quality, price and service. Manufacture of these
products is carried out in the Company's plant in Arkansas, by
a wholly-owned subsidiary in The Netherlands, by jointly-owned
operations in Mexico and Saudi Arabia and by various third
party licensees. The Company licenses its patents,
trademarks, know-how and technical assistance to various of
its subsidiary and affiliated companies and to various third-
party licensees.
b) The Fiberglass Pipe Group develops, manufactures and markets
filament-wound and molded fiberglass pipe and fittings. These
products are used by a wide range of process industries,
including industrial, petroleum, chemical processing and
petrochemical industries, for service station replacement
piping systems, aboard marine vessels and on offshore oil
platforms, and are marketed as an alternative to metallic
piping systems which ultimately fail under corrosive operating
conditions. These products are marketed by direct sales, as
well as through manufacturers' representatives, distributors
and licensees. Competition is based upon quality, price and
service. Manufacture of these products is carried out in the
Company's plants in Texas and South Carolina, by its wholly-
owned domestic subsidiary, Centron International Inc., at its
plant in Texas, by wholly-owned subsidiaries in The
Netherlands and Singapore, and by a jointly-owned affiliate in
Saudi Arabia.
c) The Concrete & Steel Pipe Group supplies products and services
used in the construction of pipeline facilities for various
utilities. Six plants are located in three of the continental
western states. Also included within this group is American
Pipe & Construction International, a wholly-owned subsidiary,
with two plants in Colombia. These plants manufacture
concrete cylinder pipe, prestressed concrete cylinder pipe,
steel pipe and reinforced concrete pipe for water
transmission, storm and industrial waste water and sewage
collection. These products are marketed by direct selling
using the Company's own personnel and by competitive bidding.
Customers include local, state and federal agencies,
developers and general contractors. Normally no one customer
or group of customers will account for sales equal to or
greater than 10 percent of the Company's consolidated revenue.
However, occasionally, when more than one unusually large
project is in progress, combined sales to all U.S. government
agencies and/or general contractors for those agencies can
reach those proportions. Besides competing with several other
concrete pipe manufacturers located in the market area,
alternative products such as ductile iron, asbestos cement,
and clay pipe compete with the Company's concrete and steel
pipe products, but ordinarily these other materials do not
offer the full diameter range produced by the Company.
Principal methods of competition are price, delivery schedule
and service. The Company's technology is used in the Middle
East through affiliated companies whose activities are not
reflected in the amounts reported for this industry segment.
This segment also includes the manufacturing and marketing on
a world-wide basis through direct sales of polyvinyl chloride
and polyethylene sheet lining for the protection of concrete
pipe and cast-in-place concrete structures from the corrosive
effects of sewer gases, acids and industrial chemicals.
Competition is based on quality, price and service.
Manufacture of this product is carried out in the Company's
plant in California. This segment also includes engineered
design, fabrication and direct sale of specialized proprietary
equipment which is outside the regular business of the other
segments of the Company's businesses. Competition for such
work is based upon quality, price and service. Manufacture of
such equipment is carried out in the Company's plant in
California.
2
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d) The Construction & Allied Products Group includes the Hawaii
Division, which supplies ready-mix concrete, crushed and sized
basaltic aggregates, dune sand, concrete pipe and box
culverts, primarily to the construction industry in Hawaii.
These products are marketed through direct sales. Ample raw
materials are available locally in Hawaii and, as to rock
products, the Company has exclusive rights to a quarry
containing many years' reserves. Within the market area there
are competitors for each of the segment's products. No single
competitor offers the full range of products sold by the
Company in Hawaii. The principal methods of competition are
in price and service, since an appreciable portion of the
segment's business is obtained through competitive bidding.
This segment also includes the operations of the Pole Products
Division, which manufactures and markets concrete and steel
poles for highway, street and outdoor area lighting and for
traffic signals. Sales are nationwide, but with a stronger
concentration in the western states. Marketing is handled
by the Company's own sales force and by outside sales agents.
Competition for such products is mainly based on price, but
with some consideration for service and delivery. Manufacture
of these products is carried out in two plants in California,
as well as plants in Washington and Oklahoma.
e) Except as individually shown in the above descriptions of
industry segments, the following comments or situations apply
to all segments:
(i) Because of the number of manufacturing locations and the
variety of raw materials essential to the business, no
critical situations exist with respect to supply of
materials. The Company has multiple sources for raw
materials. The effects of increases in costs of energy are
being mitigated to the extent practical through conservation
and through addition or substitution of equipment to manage
the use and reduce consumption of energy.
(ii) The Company owns certain patents and trademarks, both U.S.
and foreign, related to its products. It licenses these
proprietary items to some extent in the U.S., and to a
greater degree abroad. These patents, trademarks, and
licenses do not constitute a material portion of the
Company's business. No franchises or concessions exist.
(iii) Many of the Company's products are used in connection
with capital goods, water and sewage transmission and
construction of capital facilities. Favorable or adverse
effects on general sales volume and earnings can result
from weather conditions. Normally, sales volume and
earnings will be lowest in the first fiscal quarter.
Seasonal effects simply accelerate or slow the business
volume and normally do not bring about severe changes in
full-year activity.
(iv) With respect to working capital items, the Company does not
encounter any requirements which are not common to other
companies engaged in the same industries. No unusual
amounts of inventory are required to meet seasonal delivery
requirements. All of the Company's industry segments turn
their inventory between three and nine times annually.
Average days' sales in accounts receivable range between
36 and 97 for all segments.
(v) The value of backlog orders at November 30, 1996 and 1995
by industry segment is shown below. A substantial portion
of the November 30, 1996 backlog is expected to be billed
and recorded as sales during the fiscal year 1997.
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Industry Segment 1996 1995
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(in thousands)
Protective Coatings Group $ 10,291 $ 6,139
Fiberglass Pipe Group 19,819 20,691
Concrete & Steel Pipe Group 59,718 96,864
Construction & Allied Products Group 14,978 15,581
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Total $104,806 $139,275
======== ========
(vi) There was no significant change in competitive conditions or
the competitive position of the Company in the industries and
localities in which it operates. There is no knowledge of any
single competitive situation which would be material to an
understanding of the business.
(vii) Sales contracts in all of the Company's business segments
normally consist of purchase orders, which in some cases are
issued pursuant to master purchase agreements. Longer term
contracts seldom involve commitments of more than one year by
the Company, and exceptions are not deemed material by
management. Payment is normally due from 30 to 60 days after
shipment, with progress payments prior to shipment in some
circumstances. It is the Company's practice to require
letters of credit prior to shipment of foreign orders, subject
to limited exceptions. The Company does not typically extend
long-term credit to purchasers of its products.
(2) a) Approximate expense during each of the last three fiscal years for
Research and Development costs is shown under the caption in Note
(1) of Notes to Consolidated Financial Statements on page 44 of the
Annual Report, which information is incorporated herein by
reference.
b) The Company's business is not dependent on any single customer or
few customers, the loss of any one or more of whom would have a
material adverse effect on its business.
c) For many years the Company has been consistently installing or
improving devices to control or eliminate the discharge of
pollutants into the environment. Accordingly, compliance with
federal, state, and locally enacted provisions relating to
protection of the environment is not having, and is not expected to
have, a material effect upon the Company's capital expenditures,
earnings, or competitive position.
d) At year-end the Company and its consolidated subsidiaries employed
approximately 2,611 persons. Of those, approximately 1,080 were
covered by labor union contracts, and there are six separate
bargaining agreements subject to renegotiation in 1997. Management
does not presently anticipate a strike or other labor disturbance
in connection with renegotiation of these agreements; however, the
possibility of such an occurrence exists.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The information contained in Notes (6) and (18) of Notes to Consolidated
Financial Statements on pages 45, 50, 52 and 53 of the Annual Report is
incorporated herein by reference.
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Export sales in the aggregate from domestic operations during the last
three fiscal years were:
In thousands
------------
1996 $30,980
1995 15,552
1994 13,648
ITEM 2 - DESCRIPTION OF PROPERTY
(a) The location and general character of principal plants and other materially
important physical properties used in the Company's operations is tabulated
below. Property is owned in fee except where otherwise indicated by
footnote. In addition to the property shown, the Company owns vacant land
adjacent to or in the proximity of some of its operating locations and
holds this property available for use when it may be needed to accommodate
expanded or new operations. Property listed does not include any temporary
project sites which are generally leased for the duration of the respective
projects. With the exception of the Kailua, Oahu property, shown under the
Construction & Allied Products industry segment, there are no material
leases with respect to which expiration or inability to renew would have
any material adverse effect on the Company's operations. The lease term on
the Kailua property extends to the year 2012. This is the principal source
of quarried rock and aggregates for the Company's operations on Oahu,
Hawaii and, in management's opinion, reserves are adequate for its
requirements during the term of the lease.
(b) The Company believes that its existing facilities are adequate for current
and presently foreseeable operations. Because of the cyclical nature of
certain of the Company's operations, and the substantial amounts involved
in some individual orders, the level of utilization of particular
facilities may vary significantly from time to time in the normal course of
operations.
INDUSTRY SEGMENT - GROUP
- ------------------------
Division - Location Description
------------------- -----------
PROTECTIVE COATINGS GROUP
Protective Coatings division - USA
Brea, CA Office, Laboratory
Little Rock, AR Office, Plant
Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
FIBERGLASS PIPE GROUP
Fiberglass Pipe division - USA
Houston, TX * Office
Burkburnett, TX Office, Plant
Spartanburg, SC Plant
Centron International, Inc. Office, Plant
Mineral Wells, TX
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Ameron B.V.
Geldermalsen, The Netherlands Office, Plant
Ameron (Pte) Ltd.
Singapore *Office, Plant
CONCRETE AND STEEL PIPE GROUP
Southern division
Rancho Cucamonga, CA *Office
Etiwanda, CA Plant
Fontana *Office, Plant
Lakeside, CA Plant
Phoenix, AZ Office, Plant
Northern division
Tracy, CA Office, Plant
Portland, OR Office, Plant
Protective Linings division
Brea, CA Office, Plant
Fabrication Plant
South Gate, CA Office, Plant
American Pipe & Construction International
Bogota, Colombia Office, Plant
Cali, Colombia Plant
CONSTRUCTION & ALLIED PRODUCTS GROUP
Hawaii division
Honolulu, Oahu, HI *Office, Plant
Kailua, Oahu, HI *Plant, Quarry
Barbers Point, Oahu, HI Plant
Puunene, Maui, HI *Office, Plant, Quarry
Pole Products division
Fillmore, CA Office, Plant
Oakland, CA *Plant
Everett, WA *Office, Plant
Tulsa, OK *Office, Plant
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CORPORATE
Corporate Headquarters
Pasadena, CA *Office
Corporate Research & Engineering
South Gate, CA Office, Laboratory
*Leased
ITEM 3 - LEGAL PROCEEDINGS
An action was filed in 1992 in the U.S. District for the District of Arizona by
the Central Arizona Water Conservation District ("CAWCD") seeking damages
against several parties, including the Company and the Company's customer, Peter
Kiewit Sons' Company ("Kiewit"), in connection with six prestressed concrete
pipe siphons furnished and installed in the 1970's as part of the Central
Arizona Project ("CAP"), a federal project to bring water from the Colorado
River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau
of Reclamation ("USBR") in the U.S. Court of Claims and with the Arizona
Projects Office of the USBR in connection with the CAP siphons. The CAWCD
alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. On
September 14, 1994 the U.S. District granted the Company's motion to dismiss the
CAWCD action and entered judgment against the CAWCD and in favor of the Company
and its co-defendants. CAWCD has filed a notice of appeal with the Ninth
Circuit Court of Appeals.
Separately, on September 28, 1995 the Contracting Officer for the USBR issued a
final decision claiming for the USBR approximately $40 million in damages
against Kiewit, based in part on the Contracting Officer's finding that the
siphons supplied by the Company were defective. That claim amount is considered
by the Company to be duplicative of the damages sought by the CAWCD for the
repair or replacement of the siphons in its aforementioned action in the U.S.
District for the District of Arizona. The Contracting Officer's final decision
has been appealed by Kiewit to the U.S. Department of the Interior Board of
Contract Appeals ("IBCA"). The Company is actively cooperating with, and
assisting, Kiewit in the administrative appeal of that final decision before the
IBCA.
The Company internally, as well as through independent third party consultants,
has conducted engineering analyses regarding the allegations that the CAP
siphons were defective and believes that the siphons were manufactured in
accordance with the project specifications and other contract requirements, and
therefore it is not liable for any claims relating to the siphons, whether by
the CAWCD or by the USBR. The Company has recorded provisions deemed adequate
by the Company to permit it to continue to vigorously defend its position in
this matter. The Company believes that it has meritorious defenses to these
actions and that resultant liability, if any, should not have a material adverse
effect on the financial position of the Company.
In July 1992 the Company was served with a complaint in an action brought by the
City & County of San Francisco in Superior Court of the State of California
against the Company and two co-defendants, in connection with a pipeline
referred to as San Andreas Pipeline No. 3, a water transmission pipeline which
was installed between 1980 and 1982. The Company furnished the pipe used in
that pipeline. Plaintiff alleged that the pipeline was defective. The amounts
claimed by plaintiff were substantial. In June of 1996 a settlement of this
litigation was reached by the Company. The terms of that settlement were
considered by management to be favorable to the Company, and did not have a
material effect on the Company's financial position or its results of
operations.
7
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In addition, certain other claims, suits and complaints, which arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have an adverse
material effect on the financial position of the Company and its results of
operations if disposed of unfavorably.
The Company is also subject to federal, state and local laws and regulations
concerning the environment and is currently participating in administrative
proceedings at several sites under these laws. It is difficult to estimate with
any certainty the total cost of remediation, the timing and extent of remedial
actions required by governmental authorities, and the amount of the Company's
liability, if any, in proportion to that of other potentially responsible
parties. While the Company finds it difficult to estimate with any certainty
the total cost of remediation at the several sites which are subject to
environmental regulatory proceedings, on the basis of currently available
information, the Company does not believe it likely that the outcome of such
environmental regulatory proceedings will have a material adverse effect on the
Company's financial position or its results of operations. This conclusion is
based on the location and type of contamination of each site, potential recovery
from insurance carriers and existing reserves. When it has been possible to
reasonably estimate the Company's liability with respect to these matters,
provisions have been made as appropriate.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(Not Applicable)
ITEM 4A - EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth information with respect to individuals who served as
executive officers as of November 30, 1996 and who are not directors of the
Company. All executive officers are appointed by the Board of Directors to
serve at the discretion of the Board of Directors.
NAME AGE TITLE AND YEAR ELECTED AS OFFICER
- ---------------------- --- ------------------------------------------------
George J. Fischer 62 Senior Vice President, Human Resources 1992
Raymond E. Foscante 54 Senior Vice President, Technology and
Business Development 1996
Javier Solis 50 Senior Vice President of Administration,
Secretary & General Counsel 1984
S. Daniel Stracner 50 Vice President, Communications &
Public Affairs 1993
Gary Wagner 45 Senior Vice President & Chief Financial
Officer, Treasurer 1990
All of the executive officers named above have held high level managerial or
executive positions with the Company for more than the past five years.
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PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $2.50 Par Value, of the Company, its only outstanding class of
common equity, is traded on the New York Stock Exchange, the only exchange on
which it is presently listed. On February 11, 1997, there were 1,723
stockholders of record of such stock.
Dividends have been paid each quarter during the prior two years and for many
years in the past. Information as to the amount of dividends paid during the
reporting period and the high and low sales prices of the Company's Common Stock
during that period are set out under the caption Per Share Data shown on page 50
of the Annual Report, which information is incorporated herein by reference.
Terms of lending agreements which place restrictions on cash dividends are
discussed in Note (12) of Notes to Consolidated Financial Statements on page 48
of the Annual Report, which is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information required by this item is contained in the Selected Consolidated
Financial Information shown on page 34 of the Annual Report, which information
is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item with respect to fiscal years 1996 and 1995
is shown under Ameron 1996 Financial Review on pages 35-38 of the Annual Report,
which information is incorporated herein by reference. The information required
for 1994 is as follows:
Results of Operations: 1994 Compared with 1993
GENERAL. Ameron earned $2.75 per share ($10.8 million after taxes) on sales of
$417.7 million for 1994, compared to a net loss of $6.28 per share (loss of
$24.3 million after taxes) in 1993 on sales of $453.4 million. During 1993,
Ameron recognized costs totaling $45.8 million ($31.5 million after taxes)
associated with a comprehensive restructuring of the Company. Excluding the
after-tax effect of restructuring charges, earnings per share for 1993 would
have been $1.87. During 1994, a non-strategic steel fabrication subsidiary in
Colombia was sold as part of the restructuring program; the sale resulted in a
net after-tax gain of $1.8 million or $.46 per share. Adjusting for the gain on
the sale of this subsidiary, earnings per share for 1994 were $2.29, a 22%
increase over equivalent 1993 earnings of $1.87 per share.
The earnings improvement was due principally to the positive impact of the
restructuring on Ameron's business segments, as well as continued growth of the
Protective Coatings business and the Construction & Allied Products segment. The
Concrete & Steel Pipe business had lower earnings as a result of project delays,
and the Fiberglass Pipe business declined because of completion of major
fiberglass pipe projects in North Africa during 1993.
9
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SALES. Compared to 1993, sales declined $35.7 million or 8% in 1994, primarily
because of completion of major fiberglass pipe projects in North Africa; lower
shipments of protective coatings from Ameron B.V., the Company's subsidiary in
The Netherlands; and project delays in California that reduced shipments of
concrete and steel pipe. The sales decline was offset partially by stronger
Protective Coatings sales in the United States and improved market penetration
by the Pole Products business within the Construction & Allied Products Group.
Total Protective Coatings sales were $134.2 million in 1994, compared to $137.8
million in 1993. The modest decline of $3.6 million reflects relatively flat
market conditions in Europe at the time and lower shipments to North Africa.
Sales of industrial coatings and product finishes in the United States reached
record high levels in 1994. The favorable sales performance resulted in part
from the successful introduction of PSX, Ameron's proprietary new polysiloxane
technology. Also contributing were market share gains in product finishes for
the original equipment manufacturer market and several large protective coatings
projects.
Total Fiberglass Pipe segment sales were $66.2 million in 1994, compared with
$92.9 million in 1993. The sales decrease ($26.7 million) was attributable to
the completion of several major crude oil projects in North Africa in 1993.
Sales in the United States were down in 1994, mostly due to the general softness
in oilfield markets and reduced demand for fuel-handling systems used for
service station rehabilitation.
Concrete & Steel Pipe segment sales totaled $101.6 million in 1994, compared to
$110.3 million in 1993. The sales decline ($8.7 million) occurred primarily
because of delivery delays on several major projects in California
Construction & Allied Products sales totaled $115.6 million in 1994, compared
with $112.4 million in 1993. The main reason for the $3.2 million increase was
sales growth achieved by the Pole Products business, which more than offset a
slight sales decline at the Company's Hawaiian operations. The growth in the
Pole Products business was due to market share gains in the steel pole product
line for traffic and street lighting applications, generally stronger market
demand and successful market expansion programs. Continued softness in the
private construction sector accounted for the modest sales decline in Hawaii.
GROSS PROFIT. Gross profit margin of $104.0 million or 24.9% of sales in 1994
was lower than the $119.9 million or 26.4% of sales reported in 1993. The
decline in gross profit ($15.9 million) in 1994 was due principally to the lower
sales volume in 1994, particularly in the European Fiberglass Pipe operations.
The lower gross profit margin rate resulted mainly from the completion of
Fiberglass Pipe projects in North Africa that had favorably affected 1993
operations. The gross profit of the Concrete & Steel Pipe segment was
unfavorably impacted by price competition, product mix and project delivery
delays in California. Protective Coatings had a slightly lower gross profit
margin due to product mix, while Construction & Allied Products had a higher
gross profit margin because of productivity gains and favorable pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses totaled $86.8 million in 1994, compared with $115.4
million in 1993. The $28.6 million decrease was attributable to the significant
reduction in the Company's overhead structure resulting from the comprehensive
restructuring in 1993. In addition, charges to income for environmental and
legal claims decreased $12.2 million in 1994 compared to 1993. In 1993 an
additional $9.0 million was reserved for environmental and legal matters as part
of the restructuring. The decrease in selling, general and administrative
expenses also reflects reduced selling expenses as a result of lower sales
volume.
RESTRUCTURING. During 1994, the Company disbursed approximately $3.5 million for
plant consolidation and employee severance costs in connection with its 1993
restructuring plan.
GAIN ON THE SALE OF ASSETS. The gains from the sale of assets in 1994 were
realized principally from the divestiture of a wholly-owned non-strategic steel
fabrication subsidiary in Colombia.
OTHER INCOME. Equity in earnings of affiliated companies recorded in 1994
totaled $1.7 million, a slight decline from the amount recorded in 1993. Two
affiliates, Gifford-Hill-American, Inc., a pressure pipe operation in
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Texas, and Tamco, a steel mini-mill in Southern California, reported sizable
improvements in sales and earnings in 1994. Sales and earnings of the
Company's Saudi Arabian affiliates, Oasis-Ameron, Ltd., Bondstrand, Ltd. and
Ameron Saudi Arabia, Ltd., were lower than in 1993.
Other income also includes royalties and fees received from affiliated companies
and licensees, as well as miscellaneous income earned from various sources.
INTEREST EXPENSE. Interest expense totaled $11.2 million in 1994, a decrease of
$1.5 million from 1993. Interest in 1993 was higher because of the recording of
accrued interest on income tax obligations related to prior years.
PROVISION FOR INCOME TAXES. Income tax expense aggregated $7.0 million in
1994, which represents an overall effective tax rate of 42.5% of pretax
income. This compares to the effective tax rate of 45.0% in 1993 after
adjusting for restructuring and related charges.
EQUITY IN EARNINGS OF AFFILIATED COMPANIES. Equity in earnings of affiliated
companies recorded in 1994 totaled $1.4 million, a slight decline from the
$1.8 million recorded in 1993. Two affiliates, Gifford-Hill-American, Inc.,
a pressure pipe operation in Texas, and Tamco, a steel mini-mill in Southern
California, reported sizable improvements in sales and earnings in 1994. Sales
and earnings of the Company's Saudi Arabian affiliates, Oasis-Ameron, Ltd.,
Bondstrand, Ltd. and Ameron Saudi Arabia, Ltd., were lower than in 1993.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements, the report thereon of Arthur Andersen LLP
dated January 13, 1997 and Notes to Consolidated Financial Statements comprising
pages 39 through 51 of the Annual Report, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(Not applicable)
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors is contained under the section
entitled, "Election of Directors" in the Company's Proxy Statement which was
filed on February 24, 1997 in connection with the Annual Meeting of Stockholders
to be held on March 26, 1997. Such information is incorporated herein by
reference.
Information with respect to the executive officers of the Company is located in
Part I, Item 4A of this report.
ITEM 11 - EXECUTIVE COMPENSATION*
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT*
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*
*The information required by Items 11, 12 and 13 is contained in the Company's
Proxy Statement which was filed on February 25, 1997 in connection with the 1997
Annual Meeting of Stockholders to be held on March 26, 1997. Such information
is incorporated herein by reference.
11
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS:
The financial statements to be filed hereunder are
cross-referenced, in the index immediately following, to the Annual
Report, as to sections incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
PAGE REFERENCE
STATEMENT TO ANNUAL REPORT
--------- -----------------
Consolidated Statements of Operations for the years
ended November 30, 1996, 1995 and 1994 39
Consolidated Balance Sheets at November 30, 1996
and 1995 40-41
Consolidated Statements of Cash Flows for the years
ended November 30, 1996, 1995 and 1994 42
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1996, 1995 and 1994 43
Notes to Consolidated Financial Statements 44-50
(i) Summarized information as to the financial condition and results of
operations for Gifford-Hill-American, Inc., Ameron Saudi Arabia, Ltd.,
Bondstrand, Ltd, Oasis-Ameron, Ltd. and Tamco are presented in
Note (6) of Notes to Consolidated Financial Statements on page 46
of the Annual Report, which information is incorporated herein by
reference.
(A) (2) FINANCIAL STATEMENT SCHEDULES:
The following additional financial data should be read in conjunction with
the consolidated financial statements in the 1996 Annual Report. Schedules
not included with this additional financial data have been omitted because
they are either not applicable, not required, not significant, or the
required information is provided in the consolidated financial statements
or notes thereto.
PAGES OF
SCHEDULE SCHEDULES OF AMERON INTERNATIONAL AND SUBSIDIARIES THIS REPORT
-------- -------------------------------------------------- -----------
Report of Independent Public Accountants 13
II Valuation and Qualifying Accounts and Reserves 14-16
12
<PAGE>
(A) (3) EXHIBITS THIS REPORT
-----------
3(i) Certificate of Incorporation 18
3(ii) Bylaws 19
4 Instrument Defining the Rights of Security Holders,
Including Indentures 20
10 Material Contracts 21
13 Annual Report 22
21 Subsidiaries of the Registrant 23
23 Consent of Independent Public Accountants 24
(B) REPORTS ON FORM 8-K
A report on Form 8-K was filed by the Corporation on September 26, 1996
reporting under Item 5 the financial results for the Company's third
quarter ended August 31, 1996.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and the Board of Directors, Ameron International
Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Ameron's Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 13, 1997. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
the index above is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 13, 1997
13
<PAGE>
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1996
(In thousands)
<TABLE>
<CAPTION>
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- -------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for doubtful accounts $ 4,800 $ 2,583 $ (1,325) $ (119) $ 5,939
Reserve for realization of investments
in affiliates $ 9,359 $ 1,408 $ (1,172) $ -- $ 9,595
Reserve for write-down of assets related to
certain foreign affiliates $ 3,219 $ 694 $ (60) $ -- $ 3,853
Included in current liabilities
Reserve for pending claims and litigation $ 3,086 $ 3,864 $ (1,718) $ (44) $ 5,188
Restructuring reserve $ 539 $ (94) $ (99) $ -- $ 346
Other reserves $ 764 $ 616 $ (761) $ 60 $ 679
Reserve for self-insured programs $ 5,874 $ 6,564 $ (6,121) $ -- $ 6,317
Included in long-term liabilities
Reserve for pending claims and litigation $ 13,788 $ 2,175 $ (1,034) $ -- $ 14,929
Restructuring reserve $ 1,261 $ (430) $ (831) $ -- $ --
Reserve for self-insured programs $ 6,771 $ -- $ -- $ -- $ 6,771
</TABLE>
14
<PAGE>
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- -------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for doubtful accounts $ 4,135 $ 1,710 $ (1,138) $ 93 $ 4,800
Reserve for realization of investments
in affiliates $ 9,748 $ -- $ -- $ (389)(1) $ 9,359
Reserve for write-down of assets related to
certain foreign affiliates $ 3,216 $ 3 $ -- $ -- $ 3,219
Included in current liabilities
Reserve for pending claims and litigation $ 6,218 $ 1,109 $ (1,894) $(2,347) $ 3,086
Restructuring reserve $ 3,646 $ -- $ (1,846) $(1,261) $ 539
Other reserves $ 1,336 $ 62 $ (633) $ (1) $ 764
Reserve for self-insured programs $ 4,392 $ 5,413 $ (3,931) $ -- $ 5,874
Included in long-term liabilities
Reserve for pending claims and litigation $ 10,429 $ 1,330 $ (387) $ 2,416 $ 13,788
Restructuring reserve $ -- $ -- $ -- $ 1,261 $ 1,261
Reserve for self-insured programs $ 6,771 $ -- $ -- $ -- $ 6,771
</TABLE>
(1) Included as equity in earnings of affiliated companies in Consolidated
Statement of Operations
15
<PAGE>
AMERON INTERNATIONAL AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED NOVEMBER 30, 1994
(In thousands)
<TABLE>
<CAPTION>
Addi-
tions Deduc-
Balance Charged tions, Reclas-
at to Payments sifica- Balance
Begin- Costs and tions at
ning and Write- and End
Classification of Year Expense offs Others of Year
- -------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts
Allowance for doubtful accounts $ 4,315 $ 1,314 $ (1,793) $ 299 $ 4,135
Reserve for realization of investments
in affiliates $ 7,323 $ 2,425 $ -- $ -- $ 9,748
Reserve for write-down of assets related to
certain foreign affiliates $ 11,990 $ 236 $ (9,259) $ 249 $ 3,216
Included in current liabilities
Reserve for pending claims and litigation $ 7,188 $ 2,232 $ (2,844) $ (358) $ 6,218
Restructuring reserve $ 7,643 $ -- $ (3,997) $ -- $ 3,646
Other reserves $ 1,797 $ 732 $ (493) $ (700) $ 1,336
Reserve for self-insured programs $ 7,541 $ 5,997 $ (8,782) $ (364) $ 4,392
Included in long-term liabilities
Reserve for pending claims and litigation $ 9,484 $ 120 $ (963) $ 1,788 $ 10,429
Other reserves $ 1,722 $ -- $ (771) $ (951) $ --
Reserve for self-insured programs $ 4,867 $ -- $ -- $ 1,904 $ 6,771
</TABLE>
16
<PAGE>
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.
AMERON INTERNATIONAL CORPORATION
By:
-----------------------------------------------
Javier Solis, Senior Vice President & Secretary
Date: February 21, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Date: 2-27-97 Director, Chairman of the Board,
----------------------------- President and Chief Executive Officer
James S. Marlen (Principal Executive Officer)
Date: 2-27-97 Senior Vice President & Chief Financial
----------------------------- Officer, Treasurer (Principal Financial
Gary Wagner & Accounting Officer)
Date: 2-24-97 Director
-----------------------------
Stephen W. Foss
Date: 2-21-97 Director
-----------------------------
A. Frederick Gerstell
Date: 2-24-97 Director
-----------------------------
J. Michael Hagan
Date: 2-21-97 Director
-----------------------------
Terry L. Haines
Date: 2-22-97 Director
-----------------------------
John F. King
Date: 2-21-97 Director
-----------------------------
Alan L. Ockene
Date: Director
-----------------------------
Richard J. Pearson
Date: 2-24-97 Director
-----------------------------
David L. Sliney
Date: 2-24-97 Director
-----------------------------
F. H. Fentener van Vlissingen
17
<PAGE>
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION OF
AMERON INTERNATIONAL CORPORATION
(As amended through April 16, 1996)
FIRST: The name of this corporation is:
AMERON INTERNATIONAL CORPORATION
SECOND: The name and address of the registered agent of the
corporation in the State of Delaware is:
Corporation Trust Company
Wilmington, Delaware 19801
County of New Castle
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: 1. The total number of shares of stock which the
Corporation shall have authority to issue is Thirteen Million (13,000,000),
consisting of Twelve Million (12,000,000) shares of Common Stock, par value Two
Dollars and 50/100 ($2.50) per share (the "Common Stock"), and One Million
(1,000,000) shares of Preferred Stock, par value One Dollar ($1.00) per share
(the "Preferred Stock").
2. Shares of Preferred Stock may be issued from time to
time in one or more classes or series, each of which class or series shall have
such distinctive designation or title as shall be fixed by resolution of the
Board of Directors of the Corporation (the "Board of Directors") prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated in
such resolution providing for the issuance of such class or series of Preferred
Stock as may be adopted from time to time by the Board of Directors prior to the
issuance of any shares thereof pursuant to the authority hereby expressly vested
in it, all in accordance with the laws of the State of Delaware. The Board of
Directors is further authorized to increase or decrease (but not below the
number of shares of such class or series then outstanding) the number of shares
of any class or series subsequent to the issuance of shares of that class or
series.
FIFTH: The name and mailing address of the incorporator of the
corporation is as follows:
<PAGE>
Name Mailing Address
---- ---------------
R. H. Jenner 4700 Ramona Boulevard
Monterey Park, California 91754
SIXTH: New bylaws may be adopted or the bylaws may be amended or
repealed by a vote of eighty percent (80%) of the outstanding stock of the
corporation entitled to vote thereon. Bylaws may also be adopted, amended or
repealed by the Board of Directors as provided or permitted by law; however, any
bylaw amendment adopted by the Board of Directors increasing or reducing the
authorized number of directors shall require a resolution adopted by the
affirmative vote of not less than two-thirds of the directors.
SEVENTH: The number of directors which shall constitute the whole
Board of Directors of the corporation shall be specified in the bylaws of the
corporation, subject to the provisions of Article SIXTH hereof and this Article
SEVENTH. The board is divided into three classes, Class I, Class II and
Class III. Such classes shall be as nearly equal in number of directors as
possible. Each director shall serve for a term ending on the third annual
meeting following the annual meeting at which such director was elected;
provided, however, that the directors first elected to Class I shall serve for a
term ending at the annual meeting to be held in 1987, the directors first
elected to Class II shall serve for a term ending at the annual meeting to be
held in 1988, and the directors first elected to Class III shall serve for a
term ending at the annual meeting to be held in 1989. The foregoing
notwithstanding, each director shall serve until his successor shall have been
duly elected and qualified, unless he shall resign, become disqualified,
disabled or shall otherwise be removed.
At each annual election, the directors chosen to succeed those whose
terms then expire shall be of the same class as the directors they succeed,
unless, by reason of any intervening changes in the authorized number of
directors the Board shall designate one or more directorships whose term then
expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors each director then continuing to serve as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term, or his prior death, resignation or
removal.
In any election of directors of the Corporation, a holder of any class
or series of stock then entitled to vote in such election shall be entitled to
as many votes as shall equal (i) the number of votes which (except for this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by (ii) the number
of directors to be elected in the election in which his class or series of
shares is entitled to vote, and each stockholder may cast all of such votes for
a single director or for any two or more of them as he may see fit.
-2-
<PAGE>
EIGHTH: Notwithstanding any other vote which may be required under
applicable law, and in addition thereto, the affirmative vote of holders of not
less than eighty percent (80%) of the total voting power of all outstanding
shares of voting stock of this corporation shall be required to approve:
(a) any merger (other than a merger with a 90% stockholder of this Corporation
effected in accordance with Section 253 of the Delaware General Corporation
Law), consolidation, combination or reorganization of this corporation or any of
its subsidiaries with any other corporation if such other corporation is a
Substantial Stockholder (as defined below) or an Associate (as defined below) of
a Substantial Stockholder, or (b) the sale, lease or exchange by this
corporation or any of its subsidiaries of all or a Substantial Part (as defined
below) of its assets to or with a Substantial Stockholder or an Associate
thereof, or (c) the issuance or delivery of any stock or other securities of
this corporation or any of its subsidiaries in exchange or payment for any cash
or other properties or assets of such Substantial Stockholder or Associate
thereof or securities of such Substantial Stockholder or Associate thereof, or
(d) any reverse stock split of, or exchange of securities, cash or other
properties or assets for, any outstanding securities of this corporation or any
of its subsidiaries or liquidation or dissolution of this Corporation or any of
its subsidiaries, in any such case in which a Substantial Stockholder or an
Associate thereof receives or retains any securities, cash or other properties
or assets whether or not different from those received or retained by any holder
of securities of the same class as held by such Substantial Stockholder or
Associate thereof; provided, however, that the foregoing shall not apply to any
such merger, consolidation, combination, reorganization, sale, lease or
exchange, or for issuance or delivery of stock or other securities, or reverse
stock split, exchange, liquidation or dissolution which is approved by
resolution adopted by a majority of the Continuing Directors (as defined below)
of this corporation, nor shall it apply to any such transaction solely between
this corporation and another corporation controlled by this corporation and none
of the securities of which is owned before or after such transaction directly or
indirectly by a Substantial Stockholder or Associate thereof.
As used in this Certificate of Incorporation, the following terms
shall have the respective meanings set forth below.
(i) "Substantial Stockholder" shall mean any person or group of two
or more persons who have agreed to act together for the purpose of
acquiring, holding, voting or disposing of securities who singly or
together with its or their Associates own or owns beneficially, in the
aggregate, directly or indirectly, securities representing ten percent
(10%) or more of the voting power of all shares of voting stock of this
corporation; provided, however, that the term "Substantial Stockholder"
shall not include any benefit plan or trust established by this corporation
or any of its subsidiaries for the benefit of the employees of this
corporation and/or any of its subsidiaries or any trustee, agent or other
representative of any such plan or trust;
(ii) An "Affiliate" of any specified person is any person (other than
this corporation and any corporation controlled by this corporation and
none of the
-3-
<PAGE>
voting securities of which is owned directly or indirectly by a Substantial
Stockholder or any Associate thereof) who directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, the person specified;
(iii) The term "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise;
(iv) "Substantial Part" of the assets shall mean assets of this
corporation or any of its subsidiaries comprising more than ten percent
(10%) of the book value or fair market value of the total assets of this
corporation and its subsidiaries taken as a whole;
(v) An "Associate" of a Substantial Stockholder is any person who is,
or was within a period of five years prior to the time of determination, an
officer, director, employee, partner, trustee, agent, member of the
immediate family or Affiliate of the Substantial Stockholder or of an
Affiliate thereof.
(vi) The term "person" shall include a corporation, partnership,
trust or government or political subdivision thereof, an individual, an
estate, an association or any unincorporated organization;
(vii) The term "member of the immediate family" shall mean any of a
person's spouse, parents, children, siblings, mothers- and fathers-in-law,
sons- and daughters-in-law, and brothers- and sisters-in-law.
(viii) The term "Continuing Director" shall mean, as to any
Substantial Stockholder, any member of the Board of Directors of this
corporation who (a) is unaffiliated with and is not the Substantial
Stockholder and (b) was a member of the Board of Directors of this
corporation prior to April 1, 1986 or thereafter became a member of the
Board of Directors of this corporation prior to the time the Substantial
Stockholder became a Substantial Stockholder, and any successor of a
Continuing Director who is recommended to succeed a Continuing Director by
a majority of the Continuing Directors then on the Board.
In the context of any transaction described in this Article EIGHTH,
the Board of Directors acting by majority vote shall have the exclusive power
and duty to determine, on the basis of information known to them after
reasonable inquiry, (i) whether a person is a Substantial Stockholder,
(ii) whether a person is an Affiliate or Associate of a Substantial Stockholder
and (iii) whether a portion of the assets of this corporation constitutes a
Substantial Part of such assets. Any such determination of the Directors shall
be final and binding in the absence of bad faith, fraud or gross negligence by
such Directors.
-4-
<PAGE>
NINTH: No action shall be taken by the stockholders except at an
annual or special meeting of stockholders. No action shall be taken by
stockholders by written consent.
TENTH: Special meetings of the stockholders of the corporation for
any purpose or purposes may be called at any time by the Board of Directors, or
by a majority of the members of the Board of Directors, or by a committee of the
Board of Directors which has been duly designated by the Board of Directors and
whose powers and authority, as provided in a resolution of the Board of
Directors or in the by-laws of the corporation, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons; provided, however, that, if and to the extent that any special meeting
of stockholders may be called by any other person or persons specified in any
provisions of this Certificate of Incorporation or any amendment thereto, then
such special meeting may also be called by the person or persons, in the manner,
at the times and for the purposes so specified.
ELEVENTH: 1. No director shall be personally liable to the
Corporation or any stockholder for monetary damages for breach of fiduciary duty
as a director, except for any matter in respect of which such director shall be
liable under Section 174 of the Delaware General Corporation Law or any
amendment thereto or successor provision thereof or shall be liable by reason
that, in addition to any and all other requirements for such liability, such
person (i) shall have breached such person's duty of loyalty to the Corporation
or its stockholders, (ii) in acting or in failing to act, shall not have acted
in good faith or shall have acted in a manner involving intentional misconduct
or a knowing violation of law or (iii) shall have derived an improper personal
benefit from the transaction in respect of which such breach of fiduciary duty
occurred. Neither the amendment nor repeal of Section 1 of this Article
ELEVENTH shall eliminate or reduce the effect of Section 1 of this Article
ELEVENTH in respect of any matter occurring, or any cause of action, suit or
claim that, but for Section 1 of this Article ELEVENTH would accrue or arise,
prior to such amendment or repeal. If the Delaware Corporation Law is amended
after approval by the stockholders of this Article ELEVENTH to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of the director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended from time to time.
2. (i) Each person who was or is a party, or is threatened
to be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request
of the Corporation as a director or officer of another corporation or in
any capacity with respect to an employee benefit plan maintained or
sponsored by the Corporation, shall be indemnified and held harmless by the
Corporation to the fullest extent permissible under the Delaware General
Corporation Law, as the same
-5-
<PAGE>
exists or may hereafter be amended, against all expenses, liabilities and
losses (including attorneys' fees, judgments, fines, excise taxes pursuant
to the Employee Retirement Income Security Act of 1974 or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of his or her heirs, executors and
administrators; PROVIDED, HOWEVER, that, except as provided in paragraph
(ii) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated
by such person only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to indemnification
conferred in this Section shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any
such proceeding in advance of its final disposition; PROVIDED HOWEVER,
that, if the Delaware General Corporation Law so requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any any other capacity in which service was
or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the
final disposition of a proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that
such director or officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
(ii) If a claim under paragraph (i) of this Section is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and,
if successful in whole or in part, the claimant shall be entitled to be
paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition
where the required undertaking, if any is required, has been tendered to
the Corporation) that the claimant has not met the standard of conduct
required under Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving
such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not
met such
-6-
<PAGE>
applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of
conduct.
(iii) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation, by-law, agreement, vote of stockholders
or disinterested directors or otherwise.
(iv) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation Law.
TWELFTH: This corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation. Notwithstanding
the foregoing, the provisions set forth in Articles SIXTH, SEVENTH, EIGHTH,
NINTH, TENTH and this Article TWELFTH may not be repealed or amended in any
respect unless such repeal or amendment is approved by the affirmative vote of
the holders of not less than eighty percent (80%) of the total voting power of
all outstanding shares of voting stock of this corporation and no provision may
be added to this Certificate of Incorporation permitting the removal of
directors of this corporation otherwise than for cause, unless such provision is
so approved.
Date of Incorporation: February 10, 1986
-7-
<PAGE>
EXHIBIT 3(ii)
AMERON INTERNATIONAL CORPORATION
(a Delaware corporation)
BYLAWS
(Restated with amendments
through February 1, 1997 )
ARTICLE I
Offices
SECTION 1.01. Registered Office. The registered office of AMERON
INTERNATIONAL CORPORATION (hereinafter called the Corporation) in the State of
Delaware shall be at 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of the registered agent in charge thereof shall be The
Corporation Trust Company.
SECTION 1.02. Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 2.01. Annual Meetings. Annual Meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02. Special Meetings. Special meetings of the stockholders of
the Corporation for any purpose may only be called in accordance with the
provisions of the Certificate of Incorporation.
SECTION 2.03. Place of Meetings. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may be
designated by the Board.
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SECTION 2.04. Notice of Meetings. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post office address last
known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state
the place, date and hour of the meeting, and, in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder to whom notice may be omitted pursuant to applicable Delaware law or
who shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
SECTION 2.05. Quorum. Except as otherwise required by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 2.06. Voting.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
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(i) on the date fixed pursuant to Section 6.05 of these Bylaws as the
record date for the determination of stockholders entitled to notice of and
to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledges to vote thereon, in
which case only the pledges, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants in
common, tenants by entirety or otherwise, or with respect to which two or more
persons have the same fiduciary relationship, shall be voted in accordance with
the provisions of the General Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07. List of Stockholders. The Secretary of the Corporation
shall prepare and make, at least ten (10) days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
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address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
SECTION 2.08. Judges. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualifications of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
SECTION 2.09. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders. No action
shall be taken by stockholders by written consent.
SECTION 2.10 Notice of Stockholder Business. At any annual stockholders'
meeting, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual
stockholders' meeting, business must be (i) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors; (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (iii) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be received at the principal office of the Corporation
not less than sixty (60) days nor more than one hundred and twenty (120) days
prior to the meeting; provided, however, that in the event that the first public
disclosure (whether by mailing of a notice to shareholders, press release or
otherwise) of the date of the meeting is made less than sixty-five (65) days
prior to the date of the meeting, notice by the stockholder will be timely if
received not later than the close of business on the tenth day following the day
on which such first public
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disclosure was made. A stockholder's notice to the Secretary shall set forth,
as to each matter the stockholder proposes to bring before the annual meeting,
(i) the reasons for conducting such business at the annual meeting; (ii) the
name and address as they appear on the Corporation's stock register, of the
stockholder proposing such business; (iii) the number of shares of capital stock
of the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding any
other provision of these Bylaws, no business shall be conducted at an annual
stockholders' meeting except in accordance with the procedures set forth in this
Section 2.10. If the presiding officer of an annual stockholders' meeting
determines and declares that business was not properly brought before the
meeting in accordance with this Section 2.10, any such business shall not be
transacted.
ARTICLE III
Board of Directors
SECTION 3.01. General Powers. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02. Number and Term of Office. The number of directors shall
not be less than six (6) nor more than eleven (10), the exact number of which
shall be fixed by Bylaw duly adopted by the Board. The number of directors of
the Corporation shall be ten (10). The Board shall be divided into three
classes, Class I, Class II and Class III. Such classes shall be as nearly equal
in number of directors as possible. Each director shall serve for a term ending
on the third annual meeting following the annual meeting at which such director
was elected; provided, however, that the directors first elected to Class I
shall serve for a term ending at the annual meeting to be held in 1987, the
directors first elected to Class II shall serve for a term ending at the annual
meeting to be held in 1988 and the directors first elected to Class III shall
serve for a term ending at the annual meeting to be held in 1989. Directors
need not be stockholders. Each of the directors of the Corporation shall hold
office until his successor shall have been duly elected and shall qualify or
until he shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 3.03. Election of Directors. In any election of directors of the
Corporation, a holder of any class or series of stock then entitled to vote in
such election shall be entitled to as many votes as shall equal (i) the number
of votes which (except for this Section as to cumulative voting) he would be
entitled to cast for the election of directors with respect to his shares of
stock multiplied by (ii) the number of directors to be elected in the election
in which his class or series
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of shares is entitled to vote, and each stockholder may cast all of such votes
for a single director or for any two or more of them as he may see fit.
SECTION 3.04. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05. Vacancies. Except as otherwise provided in the Certificate
of Incorporation, any vacancy in the Board, whether because of death,
resignation, disqualification, an increase in the number of directors, or any
other cause, may be filled by vote of the majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a vacancy shall
hold office for the unexpired term of his predecessor or until his successor
shall have been elected and shall qualify or until he shall resign or shall have
been removed in the manner hereinafter provided.
SECTION 3.06. Place of Meeting, Etc. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special
meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07. First Meeting. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08. Regular Meetings. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at the same hour and
place on the next succeeding business day not a legal holiday. Except as
provided by law, notice of regular meetings need not be given.
SECTION 3.09. Special Meetings. Special meetings of the Board shall be
held whenever called by the Chairman of the Board, the President or a majority
of the authorized number of directors. Except as otherwise provided by law or
by these Bylaws, notice of
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the time and place of each such special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, at least
five (5) days before the day on which the meeting is to be held, or shall be
sent to him at such place by telegraph or cable or be delivered personally not
less than twenty-four (24) hours before the time at which the meeting is to be
held. Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10. Quorum and Manner of Acting. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the number of directors
then currently specified as the size of the Board pursuant to Section 3.02 of
these Bylaws shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
SECTION 3.12. Removal of Directors. Subject to the provisions of the
Certificate of Incorporation, a director may be removed at any time, for cause
only.
SECTION 3.13. Compensation. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
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SECTION 3.14. Committees. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of such
absent or disqualified member.
SECTION 3.15. Notice of Director Nominations. Only persons who are
nominated in accordance with the procedures set forth in this Section 3.15 shall
be eligible for election as Director at annual meeting of the stockholders.
Nominations of candidates for election to the Board of Directors of the
Corporation at any annual meeting may be made only by or at the direction of the
Board of Directors or by a stockholder entitled to vote at such annual meeting.
All such nominations, except those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation of the stockholder's intention to make such nomination. To
be timely, any such notice must be received at the principal office of the
Corporation not less than sixty (60) no more than one hundred twenty (120) days
prior to the date of such annual meeting; provided, however, that in the event
that the first public disclosure (whether by mailing of a notice to
stockholders, press release or otherwise) of the date of such annual meeting is
made less than sixty-five (65) days prior to the date of such annual meeting,
notice by the stockholder will be timely if received not later than the close of
business on the tenth day following the day on which such first public
disclosure was made. Such stockholder's notice with respect to a proposed
nomination shall set forth (i) the name, age, business and residence address and
principal occupation or employment of each nominee proposed in such notice;
(ii) the name and address of the stockholder giving the notice as the same
appears in the Corporation's stock register; (iii) the number of shares of
capital stock of the Corporation which are beneficially owned by each such
nominee and by such stockholder; and (iv) such other information concerning each
such nominee as would be required, under the rules of the Securities and
Exchange Commission, in a proxy statement soliciting proxies for the election of
such nominee. Such notice must also include a signed consent of each such
nominee to serve as a director of the Corporation, if elected.
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In the event that a person is validly designated as a nominee in accordance
with the procedures specified above and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the stockholder who proposed such nominee, as the case may be, may
designate a substitute nominee; provided, however, that in the case of persons
not nominated by the Board of Directors, such a substitution may only be made if
notice as provided above in this Section 3.15 is received at the principal
office of the Corporation not later than the later of (i) thirty (30) days prior
to the date of the annual meeting or (ii) five (5) days after the stockholder
proposing the original nominee first learned that such original nominee has
become unable or unwilling to stand for election.
ARTICLE IV
Officers
SECTION 4.01. Officers, Election and Removal. The officers of the
Corporation shall be a President, a Vice President, a Secretary, and a
Treasurer. The Corporation may also have at the discretion of the Board of
Directors an Executive Vice President, one or more additional Vice Presidents,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other officers as may be elected by the Board of Directors. Any two or more
offices may be held by the same person except that the office of President and
the office of Secretary may not be held by the same person.
The officers of the Corporation shall be elected annually by the Board of
Directors at their first meeting after the annual meeting of the stockholders
and, unless they shall sooner resign, be removed or become disqualified, shall
hold office until their respective successors shall be elected and qualify.
The Chairman of the Board and the President shall be elected from among the
Directors but the other officers need not be Directors.
Any officer may be removed either with or without cause by a majority of
the Directors at the time in office at any regular or special meeting of the
Board of Directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if there
shall be one, shall preside at all meetings of the stockholders and of the Board
of Directors. He shall, ex officio, be a member of all committees appointed or
constituted by the Board of Directors, including the Executive Committee.
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SECTION 4.03. President, Executive Vice President and Vice President. The
President shall be responsible to the Board of Directors for all actions and
activities of the Corporation.
The Executive Vice President, if there shall be one, shall act for the
President in the President's absence. He shall have such other powers and be
required to perform such other duties as the President and the Board of
Directors shall prescribe.
The Vice President, or if there shall be more than one such officer
elected, shall have such powers and perform such duties as may be delegated to
him or them by the President or the Board of Directors.
SECTION 4.04. Secretary. The Secretary shall issue notices for all
meetings, shall keep their minutes, shall have charge of the seal and the
Corporate books, and shall make such reports and perform such other duties as
are incident to his office, or are properly required of him by the Board of
Directors. He shall also keep at the principal office of the corporation or
cause to be kept at the office of the Corporation's transfer agent, a stock
transfer book, and he shall keep or cause to be kept by the Corporation's
registrar, a share registry book. The Secretary may be required to perform such
duties of the Treasurer as may be assigned to him from time to time.
SECTION 4.05. Treasurer. The Treasurer shall have the custody of all
moneys and securities of the Corporation and shall keep regular books of
account. He shall disburse the funds of the Corporation in payment of the just
demands against the Corporation or as may be ordered by the Board of Directors,
taking proper vouchers for such disbursements, and shall render to the President
and to the Board of Directors from time to time as may be required of him, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. He shall perform all other duties incident to his office or
that are properly required of him by the Board. He shall give the Corporation a
bond, if required by the Board of Directors, in a sum, and with one or more
sureties, satisfactory to the Board of Directors, for the faithful performance
of the duties of his office, and for the restoration to the Corporation, in case
of his death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession or
under his control belonging to the Corporation.
SECTION 4.06. Incapacity. In case of the absence or inability of any
officer of the Corporation to act and of any person herein authorized to act in
his place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or any Director or other person whom
they may select.
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SECTION 4.07. Vacancies. Vacancies in any office arising from any cause
may be filled by the Directors at any regular or special meeting.
SECTION 4.08. Other officers. The Board of Directors may appoint such
other officers and agents as it shall deem necessary or expedient, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
SECTION 4.09. Salaries. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving proper compensation therefor.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01. Execution of Contracts. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02. Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board and shall be drawn out only by check signed by
persons designated, from time to time, by resolution of the Board of Directors.
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SECTION 5.04. General and Special Bank Accounts. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
SECTION 6.01. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02. Transfers of Stock. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall
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be deemed the owner thereof for all purposes as regards the Corporation.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, such fact shall be so expressed in the entry of transfer if, when
the certificate or certificates shall be presented to the Corporation for
transfer, both the transferor and the transferee request the Corporation to do
so.
SECTION 6.03. Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04. Lost, Stolen, Destroyed, and Mutilated Certificates. In any
case of loss, theft, destruction, or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction,
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting, nor
more than sixty (60) days prior to any other action. If in any case involving
the determination of stockholders for any purpose other than notice of or voting
at a meeting of stockholders, the Board shall not fix such a record date, the
record date for determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
-13-
<PAGE>
ARTICLE VII
Indemnification
SECTION 7.01. (DELETED MARCH 30, 1987)
ARTICLE VIII
Executive Committee
SECTION 8.01. Members and Powers. The Board, by resolution adopted by
majority of its total number, may annually elect three or more of its number to
constitute an Executive Committee of the Board to have authority to exercise to
the extent permitted by law, in the intervals between meetings of the Board, all
powers of the Board, except to amend or repeal these Bylaws, or to fill
vacancies in its own membership or in the Board, or to declare dividends. The
actions of the Executive Committee shall be ratified at the next succeeding
meeting of the Board.
SECTION 8.02. Meetings. The Executive Committee may adopt rules governing
the method of the notice of the time and place of its meetings and the conduct
of the proceedings thereat; but, in the absence of such rules, meetings of the
Executive Committee may be called by any member of the Committee. Notice to
each member, regarding the time and place of holding the proposed meeting, shall
be given to each member verbally or by mail at least twenty-four (24) hours
before the time of the meeting. No notice of a meeting will be required if all
members of the Committee are in attendance, or if notice is waived. The
Executive Committee shall keep a record of its acts and proceedings.
SECTION 8.03. Quorum. To constitute a quorum of the Executive Committee
for the transaction of business at any meeting, a majority shall be present and
the act of a majority of the whole Committee shall be necessary to constitute
the act of the Committee.
SECTION 8.04. Removal of Members. Any member of the Executive Committee
may be removed with or without cause by resolution of the Board, adopted by a
majority of its total number then in office.
SECTION 8.05. Vacancies. Vacancies in the Executive Committee shall be
filled in the same manner as for the original appointment to membership.
-14-
<PAGE>
ARTICLE IX
Miscellaneous
SECTION 9.01. Seal. The Corporate seal of the Corporation shall consist
of two concentric circles, between which is the name of the Corporation, and in
the center shall be inscribed the year of its incorporation and the words,
"Corporate Seal, Delaware."
SECTION 9.02. Waiver of Notices. Whenever notice is required to be given
by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 9.03. Amendments. Except as otherwise provided herein or in the
Certificate of Incorporation, these Bylaws or any of them, may be altered,
amended, repealed or rescinded and new Bylaws may be adopted, (i) by the Board,
or (ii) by the stockholders, at any annual meeting of stockholders, or at any
special meeting of stockholders, provided that notice of such proposed
alteration, amendment, repeal, rescission or adoption is given in the notice of
meeting.
-15-
<PAGE>
EXHIBIT 4
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES
-------------------------------------------------------------------------
1. Note Agreement dated September 1, 1990 re: Senior Notes due September 15,
2000, which document is incorporated by reference to Annual Report on Form
10-K filed with the Commission for Registrant's fiscal year ended November
30, 1990.
2. Note Agreement dated November 15, 1991 re: Senior Notes due November 15,
1998, which document is incorporated by reference to Annual Report on Form
10-K filed with the Commission for Registrant's fiscal year ended November
30, 1991.
3. Note Purchase Agreement dated August 28, 1996 re: Senior Notes due
September 1, 2006, with form of Note attached.
The Company agrees to provide to the Securities and Exchange Commission, on
request, copies of instruments defining the rights of security holders of
long-term debt of the Company.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMERON INTERNATIONAL CORPORATION
$50,000,000 7.92% Senior Notes due September 1, 2006
------------
NOTE PURCHASE AGREEMENT
------------
Dated August 28, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . 1
2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . 1
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
4. CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 2
4.1. Representations and Warranties . . . . . . . . . . . . . . . . . 2
4.2. Performance; No Default. . . . . . . . . . . . . . . . . . . . . 2
4.3. Compliance Certificates. . . . . . . . . . . . . . . . . . . . . 2
4.4. Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . 3
4.5. Purchase Permitted By Applicable Law, etc. . . . . . . . . . . . 3
4.6. Sale of Other Notes. . . . . . . . . . . . . . . . . . . . . . . 3
4.7. Payment of Special Counsel Fees. . . . . . . . . . . . . . . . . 4
4.8. Private Placement Number . . . . . . . . . . . . . . . . . . . . 4
4.9. Changes in Corporate Structure . . . . . . . . . . . . . . . . . 4
4.10. Company Documents . . . . . . . . . . . . . . . . . . . . . . . 4
4.11. Proceedings and Documents . . . . . . . . . . . . . . . . . . . 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . 5
5.1. Organization; Power and Authority. . . . . . . . . . . . . . . . 5
5.2. Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . 5
5.3. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4. Organization and Ownership of Shares of
Subsidiaries; Affiliates . . . . . . . . . . . . . . . . . . . . 6
5.5. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
5.6. Compliance with Laws, Other Instruments, etc. . . . . . . . . . 7
5.7. Governmental Authorizations, etc. . . . . . . . . . . . . . . . 7
5.8. Litigation; Observance of Agreements, Statutes and Orders. . . . 7
5.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.10. Title to Property; Leases. . . . . . . . . . . . . . . . . . . . 8
5.11. Licenses, Permits, etc . . . . . . . . . . . . . . . . . . . . . 8
5.12. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 8
5.13. Private Offering by the Company . . . . . . . . . . . . . . . . 9
5.14. Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 10
5.15. Existing Debt; Future Liens . . . . . . . . . . . . . . . . . . 10
5.16. Foreign Assets Control Regulations, etc. . . . . . . . . . . . . 10
5.17. Status under Certain Statutes . . . . . . . . . . . . . . . . . 11
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5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . 11
6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . 11
6.1. Purchase for Investment. . . . . . . . . . . . . . . . . . . . . 11
6.2. Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . . 12
7. INFORMATION AS TO COMPANY . . . . . . . . . . . . . . . . . . . . . . 13
7.1. Financial and Business Information . . . . . . . . . . . . . . . 13
7.2. Officer's Certificate. . . . . . . . . . . . . . . . . . . . . . 16
7.3. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8. PREPAYMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . 17
8.1. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . 17
8.2. Optional Prepayments with Make-Whole Amount. . . . . . . . . . . 18
8.3. Allocation of Partial Prepayments. . . . . . . . . . . . . . . . 18
8.4. Maturity; Surrender, etc. . . . . . . . . . . . . . . . . . . . 18
8.5. Purchase of Notes. . . . . . . . . . . . . . . . . . . . . . . . 18
8.6. Make-Whole Amount. . . . . . . . . . . . . . . . . . . . . . . . 19
9. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 20
9.1. Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 20
9.2. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.3. Maintenance of Properties. . . . . . . . . . . . . . . . . . . . 21
9.4. Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . 21
9.5. Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . 21
9.6. Environmental and Safety Laws. . . . . . . . . . . . . . . . . . 22
9.7. Information Required by Rule 144A. . . . . . . . . . . . . . . . 22
10. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1. Related Party Transactions . . . . . . . . . . . . . . . . . . . 22
10.2. Merger and Sale of Assets . . . . . . . . . . . . . . . . . . . 23
10.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.4. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . 26
10.5. Limitation on Certain Investments . . . . . . . . . . . . . . . 27
10.6. Sale and Lease-back . . . . . . . . . . . . . . . . . . . . . . 28
10.7. Sale or Discount of Receivables . . . . . . . . . . . . . . . . 28
10.8. Subsidiary Restrictions . . . . . . . . . . . . . . . . . . . . 28
10.9. Restricted Leases . . . . . . . . . . . . . . . . . . . . . . . 29
11. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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<PAGE>
12. REMEDIES ON DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . . 31
12.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . 31
12.2. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.3. Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
12.4. No Waivers or Election of Remedies, Expenses, etc. . . . . . . . 32
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES . . . . . . . . . . . . 33
13.1. Registration of Notes . . . . . . . . . . . . . . . . . . . . . 33
13.2. Transfer and Exchange of Notes . . . . . . . . . . . . . . . . . 33
13.3. Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . 34
14. PAYMENTS ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.1. Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . 34
14.2. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . 34
15. EXPENSES, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.1. Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . 35
15.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . 35
17. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 36
17.1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 36
17.2. Solicitation of Holders of Notes . . . . . . . . . . . . . . . . 36
17.3. Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . 37
17.4. Notes held by Company, etc. . . . . . . . . . . . . . . . . . . 37
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
19. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . 38
20. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 38
21. SUBSTITUTION OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . 39
22. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
22.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 39
22.2. Payments Due on Non-Business Days . . . . . . . . . . . . . . . 40
22.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 40
iii
<PAGE>
22.4. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 40
22.6. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 40
SCHEDULE A -- INFORMATION RELATING TO PURCHASERS
SCHEDULE B -- DEFINED TERMS
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Subsidiaries of the Company and
Ownership of Subsidiary Stock
SCHEDULE 5.14 -- Use of Proceeds
SCHEDULE 5.15 -- Existing Indebtedness
SCHEDULE 10.3 -- Existing Liens
EXHIBIT 1 -- Form of 7.92% Senior Note due September 1, 2006
EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
EXHIBIT 5 -- Form of Subordination Agreement
iv
<PAGE>
AMERON INTERNATIONAL CORPORATION
245 SOUTH LOS ROBLES AVENUE
PASADENA, CALIFORNIA 91101-2894
$50,000,000 7.92% Senior Notes due September 1, 2006
August 28, 1996
TO EACH OF THE PURCHASERS LISTED ON
THE ATTACHED SIGNATURE PAGES:
Ladies and Gentlemen:
Ameron International Corporation, a Delaware corporation (the
"COMPANY"), agrees with you as follows:
1. AUTHORIZATION OF NOTES.
The Company will authorize the issue and sale of $50,000,000 aggregate
principal amount of its 7.92% Senior Notes due September 1, 2006 (the "NOTES",
such term to include any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement or the Other Agreements (as hereinafter defined)).
The Notes shall be substantially in the form set out in Exhibit 1, with such
changes therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B; references
to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule
or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company
will issue and sell to you and you will purchase from the Company, at the
Closing provided for in Section 3, Notes in the principal amount specified
opposite your name in Schedule A at the purchase price of 100% of the principal
amount thereof. Contemporaneously with entering into this Agreement, the
Company is entering into separate Note Purchase Agreements (the "OTHER
AGREEMENTS") identical with this Agreement with each of the other purchasers
named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such
Closing to each of the Other Purchasers of Notes in the principal amount
specified opposite its name in Schedule A. Your obligation hereunder and the
obligations of the Other Purchasers under the Other Agreements are several and
not joint obligations and you shall have no obligation under any Other Agreement
and no liability to any Person for the performance or non-performance by any
Other Purchaser thereunder.
1
<PAGE>
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the
Other Purchasers shall occur at the offices of O'Melveny & Myers LLP, 400 South
Hope Street, Los Angeles, California 90071-2899, at 9:00 a.m., Los Angeles time,
at a closing (the "CLOSING") on August 28, 1996 or on such other Business Day
thereafter on or prior to August 29, 1996 as may be agreed upon by the Company
and you and the Other Purchasers. At the Closing the Company will deliver to you
the Notes to be purchased by you in the form of a single Note (or such greater
number of Notes in denominations of at least $500,000 as you may request) dated
the date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately available funds for the account of the Company to Bank of America,
1850 Gateway Blvd., Concord, California 94520, ABA No. 121000358, Account Name:
Ameron, Account Number: 1233650166. If at the Closing the Company shall fail to
tender such Notes to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to your
satisfaction, you shall, at your election, be relieved of all further
obligations under this Agreement, without thereby waiving any rights you may
have by reason of such failure or such nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
4.1. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. PERFORMANCE; NO DEFAULT.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Schedule 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since May 31, 1996 that would have been prohibited by Section 10
hereof had such Section applied since such date.
2
<PAGE>
4.3. COMPLIANCE CERTIFICATES.
(a) OFFICER'S CERTIFICATE. The Company shall have delivered to you
an Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) SECRETARY'S CERTIFICATE. The Company shall have delivered to you
a certificate of the Secretary of the Company certifying as to (i) the
resolutions of the Board of Directors of the Company approving the transactions
contemplated by this Agreement and the Notes and the execution, delivery and
performance thereof, and authorizing the officers of the Company to execute and
deliver this Agreement and the Notes in such form as they deem necessary and
appropriate, and (ii) the signatures and incumbency of the officers of the
Company executing this Agreement and the Notes.
4.4. OPINIONS OF COUNSEL.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Javier Solis, General Counsel for
the Company, covering the matters set forth in Exhibit 4.4(a) and covering such
other matters incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company hereby instructs its counsel to
deliver such opinion to you) and (b) from O'Melveny & Myers LLP, your special
counsel in connection with such transactions, substantially in the form set
forth in Exhibit 4.4(b) and covering such other matters incident to such
transactions as you may reasonably request.
4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.6. SALE OF OTHER NOTES.
Contemporaneously with the Closing the Company shall sell to the Other
Purchasers and the Other Purchasers shall purchase the Notes to be purchased by
them at the Closing as specified in Schedule A.
3
<PAGE>
4.7. PAYMENT OF SPECIAL COUNSEL FEES.
Without limiting the provisions of Section 15.1, the Company shall
have paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. PRIVATE PLACEMENT NUMBER.
A Private Placement number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes.
4.9. CHANGES IN CORPORATE STRUCTURE.
Except as specified in Schedule 4.9, the Company shall not have
changed its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any substantial part of the
liabilities of any other entity, at any time following the date of the most
recent financial statements referred to in Section 5.5.
4.10. COMPANY DOCUMENTS.
The Company shall have delivered to you the following, each dated the
date of the Closing unless otherwise indicated:
(a) copies of its Certificate of Incorporation, certified by the
Secretary of State of the State of Delaware;
(b) copies of the Bylaws of the Company, certified by the Secretary
of the Company;
(c) a good standing certificate from the Secretary of State of
Delaware and each other state in which the Company has major operations or
manufacturing facilities and, to the extent generally available, a certificate
or other evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such states, each
dated a recent date prior to the date of the Closing; and
(d) such other documents or certificates as you may reasonably
request.
4.11. PROCEEDINGS AND DOCUMENTS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special
4
<PAGE>
counsel shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. ORGANIZATION; POWER AND AUTHORITY.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority
to own or hold under lease the properties it purports to own or hold under
lease, to transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Other Agreements and the Notes and
to perform the provisions hereof and thereof.
5.2. AUTHORIZATION, ETC.
This Agreement and the Other Agreements and the Notes have been
duly authorized by all necessary corporate action on the part of the Company,
and this Agreement constitutes, and upon execution and delivery thereof each
Note will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
5.3. DISCLOSURE.
Except as disclosed in Schedule 5.3, this Agreement, the documents,
certificates or other writings delivered to you by or on behalf of the
Company in connection with the transactions contemplated hereby and the
financial statements listed in Section 5.5, taken as a whole, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as expressly described in
Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Section 5.5,
since November 30, 1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. There is no fact
known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not
5
<PAGE>
been set forth herein or in the other documents, certificates and other
writings delivered to you by or on behalf of the Company specifically for use
in connection with the transactions contemplated hereby.
5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
and the percentage of shares of each class of its capital stock or similar
equity interests outstanding owned by the Company and each other Subsidiary,
(ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the
Company's directors and senior officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being owned by
the Company and its Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or another Subsidiary free and
clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as
a foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other
power and authority to own or hold under lease the properties it purports to
own or hold under lease and to transact the business it transacts and
proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or
any of its Subsidiaries that owns outstanding shares of capital stock or
similar equity interests of such Subsidiary.
5.5. FINANCIAL STATEMENTS.
The Company has delivered to each Purchaser copies of (i) audited
financial statements of the Company and its Subsidiaries for the fiscal years
ended in 1993, 1994 and 1995 and (ii) unaudited financial statements of the
Company and its Subsidiaries for the fiscal quarter ended May 31, 1996 with
figures in comparative form for the corresponding period in the preceding
fiscal year. All such financial statements (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
respective dates specified in such
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Schedule and the consolidated results of their operations and cash flows for
the respective periods so specified and have been prepared in accordance with
GAAP consistently applied throughout the periods involved except as set forth
in the notes thereto (subject, in the case of any interim financial
statements, to normal year-end adjustments).
5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect
of any property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which the Company
or any Subsidiary is bound or by which the Company or any Subsidiary or any
of their respective properties may be bound or affected, (ii) conflict with
or result in a breach of any of the terms, conditions or provisions of any
order, judgment, decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any Governmental
Authority applicable to the Company or any Subsidiary.
5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.
No consent, approval or authorization of, or registration, filing
or declaration with, any Governmental Authority is required in connection
with the execution, delivery or performance by the Company of this Agreement
or the Notes.
5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.
(a) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance,
rule or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. TAXES.
The Company and its Subsidiaries have filed all tax returns that
are required to have been filed in any jurisdiction, and have paid all taxes
shown to be due and payable
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on such returns and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is
not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Company knows of no basis for any other tax or
assessment that could reasonably be expected to have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of Federal, state or other taxes for all fiscal
periods are adequate. The Federal income tax liabilities of the Company and
its Subsidiaries have been determined by the Internal Revenue Service and
paid for all fiscal years up to and including the fiscal year ended November
30, 1986.
5.10. TITLE TO PROPERTY; LEASES.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are
Material, including all such properties reflected in the most recent audited
balance sheet referred to in Section 5.5 or purported to have been acquired
by the Company or any Subsidiary after said date (except as sold or otherwise
disposed of in the ordinary course of business), in each case free and clear
of Liens prohibited by this Agreement. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11. LICENSES, PERMITS, ETC.
(a) The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are Material, without known conflict with the rights of others.
(b) To the best knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person.
(c) To the best knowledge of the Company, there is no Material
violation by any Person of any right of the Company or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Company or any
of its Subsidiaries.
5.12. COMPLIANCE WITH ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of
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noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax provisions of the Code relating to employee benefit
plans (as defined in Section 3 of ERISA), and no event, transaction or condition
has occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by the Company or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "BENEFIT LIABILITIES" has the
meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and
"PRESENT VALUE" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company and its Subsidiaries is not Material.
(e) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that is
subject to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the
Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to (i) the accuracy of
your representation in Section 6.2 as to the sources of the funds used to pay
the purchase price of the Notes to be purchased by you and (ii) the
assumption, made solely for the purpose of making such representation, that
Department of Labor Interpretive Bulletin 75-2 with respect to prohibited
transactions remains valid in the circumstances of the transactions
contemplated herein.
5.13. PRIVATE OFFERING BY THE COMPANY.
Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities for sale to, or solicited any offer to buy any
of the same from, or
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otherwise approached or negotiated in respect thereof with, any person other
than you and the Other Purchasers, each of which has been offered the Notes
at a private sale for investment. Neither the Company nor anyone acting on
its behalf has taken, or will take, any action that would subject the
issuance or sale of the Notes to the registration requirements of Section 5
of the Securities Act.
5.14. USE OF PROCEEDS; MARGIN REGULATIONS.
The Company will apply the proceeds of the sale of the Notes as set
forth in Schedule 5.14. No part of the proceeds from the sale of the Notes
hereunder will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 CFR 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 CFR 224) or
to involve any broker or dealer in a violation of Regulation T of said Board
(12 CFR 220). The Company and its Subsidiaries do not own any margin stock and
the Company does not have any present intention of acquiring margin stock. As
used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR
CARRYING" shall have the meanings assigned to them in said Regulation G.
5.15. EXISTING DEBT; FUTURE LIENS.
(a) Schedule 5.15 sets forth a complete and correct list of all
outstanding Debt of the Company and its Subsidiaries as of the date of this
Agreement. Neither the Company nor any Subsidiary is in default and no waiver
of default is currently in effect, in the payment of any principal or interest
on any Debt of the Company or such Subsidiary and no event or condition exists
with respect to any Debt of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one or more
Persons to cause such Debt to become due and payable before its stated maturity
or before its regularly scheduled dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Subsidiary has agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien.
5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
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5.17. STATUS UNDER CERTAIN STATUTES.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. ENVIRONMENTAL MATTERS.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any notice of any claim, and no proceeding has been instituted
raising any claim against the Company or any of its Subsidiaries or any of their
respective real properties now or formerly owned, leased or operated by any of
them or other assets, alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect. Except as otherwise disclosed
to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating
from, occurring on or in any way related to real properties now or
formerly owned, leased or operated by any of them or to other assets
or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored,
transported or disposed of any Hazardous Materials on or from any real
properties now or formerly owned, leased or operated by any of them in
a manner contrary to any Environmental Laws in each case in any manner
that could reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in compliance
with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse
Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. PURCHASE FOR INVESTMENT.
You represent that you are purchasing the Notes for your own account
or for one or more separate accounts maintained by you or for the account of one
or more pension or trust funds and not with a view to the distribution thereof,
PROVIDED that the disposition of your or their property shall at all times be
within your or their control. You understand
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that the Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or
if an exemption from registration is available, except under circumstances
where neither such registration nor such an exemption is required by law, and
that the Company is not required to register the Notes.
6.2. SOURCE OF FUNDS.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) if you are an insurance company, the Source does not include
assets allocated to any separate account maintained by you in which any
employee benefit plan (or its related trust) has any interest, other than a
separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to
such plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of
the separate account; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of Prohibited Transaction Exemption ("PTE") 90-1
(issued January 29, 1990), or (ii) a bank collective investment fund,
within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as
you have disclosed to the Company in writing pursuant to this paragraph (b),
no employee benefit plan or group of plans maintained by the same employer
or employee organization beneficially owns more than 10% of all assets
allocated to such pooled separate account or collective investment fund; or
(c) the Source is an insurance company general account in respect of
which the reserves and liabilities for the general account contract(s) held
by or on behalf of any Benefit Plan (as defined by the annual statement for
life insurance companies approved by the National Association of Insurance
Commissioners (the "NAIC Annual Statement")) together with the amount of the
reserves and liabilities for the general account contract(s) held by or on
behalf of any other Benefit Plans maintained by the same employer (or
affiliate thereof as defined in Prohibited Transaction Class
Exemption 95-60) or by the same employee organization (as defined by the
NAIC Annual Statement) in the general account do not exceed 10% of the
total reserves and liabilities of the general account (exclusive of
separate account liabilities) plus surplus as set forth in the NAIC
Annual Statement filed with the state of domicile of the insurance
company; or
(d) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when
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combined with the assets of all other employee benefit plans established
or maintained by the same employer or by an affiliate (within the
meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by
the same employee organization and managed by such QPAM, exceed 20% of
the total client assets managed by such QPAM, the conditions of Part
I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition of
"control" in Section V(e) of the QPAM Exemption) owns a 5% or more
interest in the Company and (i) the identity of such QPAM and (ii) the
names of all employee benefit plans whose assets are included in such
investment fund have been disclosed to the Company in writing pursuant
to this paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans,
each of which has been identified to the Company in writing pursuant to
this paragraph (f); or
(g) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) QUARTERLY STATEMENTS -- 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, cash flows and stockholders' equity of the Company and its
Restricted 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 Restricted 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, prepared in accordance with GAAP, satisfactory
in form to the Required Holders and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results
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of operations and cash flows, subject to changes resulting from year-end
adjustments; PROVIDED, HOWEVER, that delivery pursuant to Section 7.1(d)
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 Section 7.1(a) if
such Quarterly Report contains consolidated financial statements only
with regard to the Company and its Restricted Subsidiaries;
(b) ANNUAL STATEMENTS -- as soon as practicable and in any event
within 90 days after the end of each fiscal year, consolidated statements
of income, cash flows and stockholders' equity of the Company and its
Restricted Subsidiaries for such year, and a consolidated balance sheet
of the Company and its Restricted 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, prepared in accordance with GAAP, satisfactory in form to the
Required Holders, and accompanied
(i) by an opinion thereon of independent certified public
accountants of recognized international standing, which opinion shall
state that such financial statements present fairly, in all material
respects, the financial position of the companies being reported upon
and their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such accountants
in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, and
(ii) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making their
audit, they have become aware of any condition or event that then
constitutes a Default or an Event of Default, and, if they are aware
that any such condition or event then exists, specifying the nature
and period of the existence thereof (it being understood that such
accountants shall not be liable, directly or indirectly, for any
failure to obtain knowledge of any Default or Event of Default unless
such accountants should have obtained knowledge thereof in making an
audit in accordance with generally accepted auditing standards or did
not make such an audit)
; PROVIDED, HOWEVER, that delivery pursuant to Section 7.1(d) 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 and Annual Report to
Stockholders shall be deemed to satisfy the requirements of this Section
7.1(b) if such Annual Reports contain consolidated financial statements
only with regard to the Company and its Restricted Subsidiaries;
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(c) RESTRICTED SUBSIDIARY FINANCIAL STATEMENTS -- promptly upon
their becoming available, notice that the Company has, at its election,
arranged for the preparation of any independently audited consolidated
balance sheet and consolidated statements of income, cash flows and
stockholders' equity of a Restricted Subsidiary for any fiscal year, and
promptly following the Company's receipt from any holder of any Note of a
written request for copies of any such financial statements, copies
thereof together with any report thereon by the independent public
accountants auditing such financial statements;
(d) SEC AND OTHER REPORTS -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Restricted Subsidiary to
public securities holders generally, (ii) each regular or periodic
report, each registration statement (without exhibits except as expressly
requested by such holder), and each prospectus and all amendments thereto
filed by the Company or any Restricted Subsidiary with the Securities and
Exchange Commission and of all press releases and other statements made
available generally by the Company or any Restricted Subsidiary to the
public concerning developments that are Material, and (iii) each other
report submitted to the Company or any Restricted Subsidiary that is a
Significant Subsidiary by independent accountants in connection with any
material special audit made by them of the books of the Company or any
such Significant Subsidiary;
(e) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default
hereunder or that any Person has given any notice or taken any action
with respect to a claimed default of the type referred to in Section
11(f), a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto;
(f) ERISA MATTERS -- promptly, and in any event within five days
after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any,
that the Company or an ERISA Affiliate proposes to take with respect
thereto:
(i) with respect to any Plan, any reportable event, as defined
in section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from
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a Multiemployer Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii)any event, transaction or condition that could result
in the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, or in
the imposition of any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or
Lien, taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material Adverse
Effect;
(g) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any
event within 30 days of receipt thereof, copies of any notice to the
Company or any Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse
Effect; and
(h) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be
reasonably requested by any such holder of Notes.
7.2. OFFICER'S CERTIFICATE.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) COVENANT COMPLIANCE -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.2(a)(i), 10.2(a)(ii),
10.3(i), 10.4, 10.5, 10.7 and 10.9 hereof during the quarterly or annual
period covered by the statements then being furnished (including with
respect to each such Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the
amount, ratio or percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that such officer has reviewed
the relevant terms hereof and has made, or caused to be made, under his
or her supervision, a review of the transactions and conditions of the
Company and its Restricted Subsidiaries from the beginning of the
quarterly or annual period covered by the statements then being furnished
to the date of the certificate and that such review shall not have
disclosed the existence during such period of any condition or
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event that constitutes a Default or an Event of Default or, if any such
condition or event existed or exists (including, without limitation,
any such event or condition resulting from the failure of the Company
or any Restricted Subsidiary to comply with the provisions of any
Environmental Laws where such non-compliance could reasonably be
expected to result in a Material Adverse Effect), specifying the nature
and period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
7.3. INSPECTION.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor:
(a) NO DEFAULT -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to
discuss the affairs, finances and accounts of the Company and its
Restricted Subsidiaries with the Company's officers, and (with the
consent of the Company, which consent will not be unreasonably withheld)
its independent public accountants, and (with the consent of the Company,
which consent will not be unreasonably withheld) to visit the other
offices and properties of the Company and each Restricted Subsidiary, all
at such reasonable times and as often as may be reasonably requested in
writing; and
(b) DEFAULT -- if a Default or Event of Default then exists, at the
expense of the Company to visit and inspect any of the offices or
properties of the Company or any Restricted Subsidiary, to examine all
their respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company and its Restricted Subsidiaries), all at such times and as
often as may be requested.
8. PREPAYMENT OF THE NOTES.
8.1. REQUIRED PREPAYMENTS.
On September 1, 2001 and on each September 1 thereafter to and
including September 1, 2005 the Company will prepay $8,333,333 principal
amount (or such lesser principal amount as shall then be outstanding) of the
Notes at par and without payment of the Make-Whole Amount or any premium,
PROVIDED, that upon any partial prepayment of the Notes pursuant to Section 8.2,
the principal amount of each required prepayment of the Notes becoming due
under this Section 8.1 on and after the date of any such partial prepayment
shall be reduced in the same proportion as the aggregate unpaid principal
amount of the Notes is reduced as a result of such prepayment or purchase.
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8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than $1,000,000 of the aggregate principal amount of the
Notes then outstanding in the case of a partial prepayment, at 100% of the
principal amount so prepaid, PLUS the Make-Whole Amount determined for the
prepayment date with respect to such principal amount. The Company will give
each holder of Notes written notice of each optional prepayment under this
Section 8.2 not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of each Note held by such holder to be prepaid (determined
in accordance with Section 8.3), and the interest to be paid on the
prepayment date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to
such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
8.3. ALLOCATION OF PARTIAL PREPAYMENTS.
In the case of each partial prepayment of the Notes, the principal
amount of the Notes to be prepaid shall be allocated among all of the Notes
at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called for
prepayment.
8.4. MATURITY; SURRENDER, ETC.
In the case of each prepayment of Notes pursuant to this Section 8,
the principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount,
if any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount
shall cease to accrue. Any Note paid or prepaid in full shall be surrendered
to the Company and cancelled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
8.5. PURCHASE OF NOTES.
The Company will not and will not permit any Affiliate controlled
directly or indirectly by the Company or any of its Subsidiaries to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and
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the Notes. The Company will promptly cancel all Notes acquired by it or any
Affiliate controlled directly or indirectly by the Company or any of its
Subsidiaries pursuant to any payment, prepayment or purchase of Notes
pursuant to any provision of this Agreement and no Notes may be issued in
substitution or exchange for any such Notes.
8.6. MAKE-WHOLE AMOUNT.
The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Remaining
Scheduled Payments with respect to the Called Principal of such Note over the
amount of such Called Principal, PROVIDED that the Make-Whole Amount may in
no event be less than zero. For the purposes of determining the Make-Whole
Amount, the following terms have the following meanings:
"CALLED PRINCIPAL" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or
is declared to be immediately due and payable pursuant to Section 12.1,
as the context requires.
"DISCOUNTED VALUE" means, 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 (applied on the same periodic basis as that on which
interest on the Notes is payable) equal to the Reinvestment Yield with
respect to such Called Principal.
"REINVESTMENT YIELD" means, with respect to the Called Principal of
any Note, 0.25% PLUS the yield to maturity implied by (i) the yields
reported, as of 10:00 A.M. (New York City time) on the second Business
Day preceding the Settlement Date with respect to such Called Principal,
on the display designated as "Page 678" on the Telerate Access Service
(or such other display as may replace Page 678 on Telerate Access
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 (ii) if such yields are not reported as of such time
or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day for
which such yields have been so reported as of the second Business Day
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 will
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 (1) the
actively traded U.S. Treasury security with the duration closest to and
greater than the Remaining
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Average Life and (2) the actively traded U.S. Treasury security with
the duration closest to and less than the Remaining Average Life.
"REMAINING AVERAGE LIFE" means, with respect to any Called
Principal, 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) the principal component of
each Remaining Scheduled Payment with respect to such Called Principal
by (b) the number of years (calculated to the nearest one-twelfth year)
that 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" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and
interest thereon that would be due 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, PROVIDED that if such
Settlement Date is not a date on which interest payments are due to be
made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of
interest accrued to such Settlement Date and required to be paid on
such Settlement Date pursuant to Section 8.2 or 12.1.
"SETTLEMENT DATE" means, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
9.1. COMPLIANCE WITH LAW.
The Company will and will cause each of its Subsidiaries to comply
with all laws, ordinances or governmental rules or regulations to which each
of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership
of their respective properties or to the conduct of their respective businesses,
in each case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain
or maintain in effect such licenses, certificates, permits, franchises and
other governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
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9.2. INSURANCE.
The Company will and will cause each of its Subsidiaries to maintain,
with financially sound and reputable insurers, insurance with respect to their
respective properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated and
upon request of any holder of Notes, the Company will deliver an Officer's
Certificate specifying the details of such insurance in effect at that time.
9.3. MAINTENANCE OF PROPERTIES.
The Company will and will cause each of its Restricted Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, PROVIDED that this Section shall not prevent
the Company or any Restricted Subsidiary from discontinuing the operation and
the maintenance of any of its properties if such discontinuance is desirable in
the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
9.4. PAYMENT OF TAXES AND CLAIMS.
The Company will and will cause each of its Subsidiaries to file all
tax returns required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Subsidiary, PROVIDED
that neither the Company nor any Subsidiary need pay any such tax or assessment
or claims if (i) the amount, applicability or validity thereof is contested by
the Company or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
9.5. CORPORATE EXISTENCE, ETC.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Section 10.2, the Company will at
all times preserve and keep in full force and effect the corporate existence of
each of its Restricted Subsidiaries
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(unless merged into the Company or a Restricted Subsidiary) and all rights
and franchises of the Company and its Restricted Subsidiaries unless, in the
good faith judgment of the Company, the termination of or failure to
preserve and keep in full force and effect such corporate existence, right
or franchise could not, individually or in the aggregate, have a Material
Adverse Effect.
9.6. ENVIRONMENTAL AND SAFETY LAWS.
The Company will, and will cause each Subsidiary to, deliver promptly
to each holder of Notes any notice of (a) any material enforcement, cleanup,
removal or other material governmental, regulatory or other actions instituted,
completed or, to the Company's or such Subsidiary's best knowledge, threatened
pursuant to any Environmental Laws; (b) all material Environmental Liabilities
and Costs against or in respect of any Property, the Company or any Subsidiary;
and (c) the Company's or any Subsidiary's discovery of any occurrence or
condition on any real property adjoining or in the vicinity of any Property that
such Company or Subsidiary has reason to believe could cause any Property or any
material part thereof to be subject to any material restrictions on its
ownership, occupancy, transferability or use under any Environmental Laws.
9.7. INFORMATION REQUIRED BY RULE 144A.
The Company 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 the reporting requirements of
section 13 or 15(d) of the Exchange Act. For the purpose of this Section 9.7,
the term "qualified institutional buyer" shall have the meaning specified in
Rule 144A under the Securities Act, but shall not include any Person who is
engaged in businesses of the type then being engaged in by the Company or any of
its Subsidiaries.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are
outstanding:
10.1. RELATED PARTY TRANSACTIONS.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly engage in any transaction, including the purchase,
sale, exchange or other transfer of property or other assets or the rendering of
any services, or otherwise deal with, any Shareholder or any other Affiliate of
the Company (including Unrestricted Subsidiaries), except in the ordinary course
of business and upon terms that are materially no less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those that might be
obtained in an arm's-length transaction with an unrelated third party.
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10.2. MERGER AND SALE OF ASSETS.
(a) The Company will not, and will not permit any Restricted
Subsidiary to, merge with or into or consolidate with any other Person or sell,
lease or transfer to any Person or otherwise dispose of assets, which together
with all other assets sold, leased, transferred or otherwise disposed of
(including deemed dispositions of assets as described in clause (b)(iii) of the
definition of "Unrestricted Subsidiary" set forth in Schedule B) during (i) the
immediately preceding 12 months, have an aggregate net book value exceeding 15%
of Consolidated Tangible Assets (measured as at the fiscal quarter end
immediately preceding such sale or disposition) or (ii) the period beginning on
the date hereof and ending on the date of any such proposed sale or disposition,
have an aggregate net book value exceeding 40% of Consolidated Tangible Assets
(measured as at the fiscal quarter end immediately preceding such sale or
disposition) and in each case, no Default or Event of Default would occur after
giving effect thereto, except that:
(A) any Restricted Subsidiary may merge with the Company (PROVIDED
that the Company shall be the continuing or surviving corporation) or with
any one or more wholly owned Restricted Subsidiaries organized in the
United States;
(B) any Restricted Subsidiary organized in the United States may
sell, lease, transfer or otherwise dispose of any of its assets to the
Company or to any wholly owned Restricted Subsidiary organized in the
United States;
(C) any Restricted Subsidiary organized outside the United States may
sell, lease, transfer or otherwise dispose of any of its assets on
arm's-length terms to the Company or to any wholly owned Restricted
Subsidiary;
(D) the Company may merge or consolidate with another Person so long
as (1) the Company will be the surviving corporation and (2) immediately
after such merger or consolidation and after giving effect thereto, no
Event of Default or Default shall have occurred; and
(E) the Company and any Restricted Subsidiary may engage in normal
sales or other dispositions of (1) inventory and (2) vehicles or equipment
with little or no remaining useful life in each case on arm's-length terms
and otherwise in the ordinary course of business.
(b) If the net amount of consideration received by the Company or any
Restricted Subsidiary pursuant to any sale or other disposition of assets
described in clauses (i) or (ii) of Section 10.2(a) is applied to the
acquisition by the Company or such Restricted Subsidiary, within 180 days after
such sale or disposition, of similar assets of the Company or such Restricted
Subsidiary to be used in the ordinary course of business of the Company or such
Restricted Subsidiary, then such sale or disposition shall not be deemed to be a
sale or disposition of assets for the purpose of determining compliance with
clauses (i) or (ii) of Section 10.2(a). Within 30 days of such acquisition of
similar assets (or, if earlier, at the
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time an officer's compliance certificate is delivered pursuant to Sections
7.1(a) or (b)), the Company shall deliver to each holder of Notes an
Officer's Certificate certifying in reasonable detail as to such acquisition
of similar assets.
(c) For purposes of determining compliance by the Company with the
provisions of Section 10.2(a), sales or other dispositions of assets described
in clauses (B), (C) and (E) of Section 10.2(a) are not included in making the
calculations required for clauses (i) and (ii) of Section 10.2(a).
10.3. LIENS.
The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, create, assume or permit to exist at any time any
Lien of any kind (unless prior written consent to the creation or assumption
thereof shall have been obtained pursuant to Section 17) on or with respect to
any of its property or assets, whether now owned or hereafter acquired, except
(a) Liens for taxes not yet due or which are being actively contested
in good faith by appropriate proceedings;
(b) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
sums not yet due or being actively contested in good faith by appropriate
proceedings;
(c) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business (i) in connection with workers'
compensation, unemployment insurance and other types of social security or
(ii) to secure (or to obtain letters of credit that secure) the performance
of tenders, statutory obligations, surety and appeal bonds, bids, leases,
performance bonds, purchase, construction or sales contracts and other
similar obligations; PROVIDED, that in each case such Liens are not
incurred or made in connection with the borrowing of money, the obtaining
of advances or credit or the payment of the deferred purchase price of
property, and such Liens do not in the aggregate materially detract from
the value of the Company's or any Restricted Subsidiary's property or
assets or materially impair the use thereof in the operation of its
business;
(d) Liens on property or assets of a Restricted Subsidiary to secure
obligations of such Restricted Subsidiary to the Company or a wholly-owned
Restricted Subsidiary;
(e) Liens now or hereafter required by this Agreement;
(f) Liens existing on the date hereof as specified by the Company on
Schedule 10.3 attached hereto; PROVIDED, HOWEVER, that all Debt secured by
such Liens permitted by this Section 10.3(f) shall be permitted under
Section 10.4(c);
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(g) any Lien created to secure all or any part of the purchase price,
or to secure Debt incurred or assumed to pay all or any part of the
purchase price, of property acquired by the Company or a Restricted
Subsidiary after the date hereof; PROVIDED, HOWEVER, that (i) any such Lien
shall be confined solely to the item or items of property so acquired and,
if expressly required by the terms of the instrument originally creating
such Lien, other property which is an improvement to or is acquired for
specific use in connection with such acquired property or which is real
property being improved by such acquired property, (ii) the principal
amount of the Debt secured by any such Lien shall (exclusive of capitalized
interest that is treated as Debt for purposes of Sections 10.4(b) or (c))
at no time exceed an amount equal to 100% of the lesser of (a) the cost to
the Company or such Restricted Subsidiary of the property so acquired and
(b) the fair market value of such property (as determined in good faith by
the Board of Directors of the Company) at the time of such acquisition,
(iii) any such Lien shall be created within six months after, in the case
of property, its acquisition, or, in the case of improvements, their
completion and (iv) all Debt secured by Liens created or existing pursuant
to this Section 10.3(g) shall be permitted under Section 10.4(c);
(h) any Lien existing on property of a Person immediately prior to
its being consolidated with or merged into the Company or a Restricted
Subsidiary or its becoming a Restricted Subsidiary, or any Lien existing on
any property acquired by the Company or any Restricted Subsidiary at the
time of such acquisition (whether or not the Debt secured thereby shall
have been assumed), PROVIDED, HOWEVER, that (i) no such Lien shall have
been created or assumed in contemplation of such consolidation or merger or
such Person's becoming a Restricted Subsidiary or such acquisition of
property, (ii) each such Lien shall at all times be confined solely to the
item or items of property so acquired and, if required by the terms of the
instrument originally creating such Lien, other property which is an
improvement to or is acquired for specific use in connection with such
acquired property and (iii) all Debt secured by Liens created or existing
pursuant to this Section 10.3(h) shall be permitted under Section 10.4(c);
(i) any other Liens securing Debt; PROVIDED, that all Debt secured by
Liens created or existing pursuant to this Section 10.3(i) shall be
permitted under Section 10.4(c); and
(j) any Lien renewing, extending or refunding any Lien permitted by
clauses (d), (e), (f), (g), (h) and (i) of this Section 10.3; PROVIDED,
HOWEVER, that (i) the principal amount of Debt secured by such Lien
immediately prior thereto is not increased, the maturity thereof is not
shortened and such Lien is not extended to any other assets or property and
(ii) all Debt secured by Liens created or existing pursuant to this Section
10.3(j) shall be permitted under Section 10.4(c).
If, notwithstanding the prohibition contained herein, the Company
shall create, incur, or suffer to be incurred or to exist any Lien upon any of
its property or assets, or the
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property or assets of any of its Restricted Subsidiaries, whether now owned
or hereafter acquired, or transfer any property for the purpose of subjecting
the same to the payment of obligations in priority to the payment of its or
their general creditors, or acquire or permit any Restricted Subsidiary to
acquire, any property or assets upon conditional sales agreements or other
title retention devices, other than as permitted by the provisions of clauses
(a) through (j) of this Section 10.3, then at the request of the Required
Holders, the Company shall make or cause to be made effective provision
whereby the Notes will be secured equally and ratably with any and all other
obligations thereby secured, such security to be pursuant to agreements
reasonably satisfactory to the Required Holders and, in any such case, the
Notes shall have the benefit, to the fullest extent that, and with such
priority as, the holders of the Notes may be entitled under applicable law,
of an equitable Lien on such property, and the holders of the Notes shall
receive an opinion of nationally recognized independent counsel selected by
the Company reasonably satisfactory to the Required Holders that the holders
of the Notes are so secured. Such violation of this Section 10.3 will
constitute an Event of Default, whether or not provision is made for an equal
and ratable Lien pursuant to this Section 10.3.
10.4. FINANCIAL COVENANTS.
(a) CONSOLIDATED TANGIBLE NET WORTH REQUIREMENT. The Company will
not, at any time, permit Consolidated Tangible Net Worth to be less than the sum
of (i) $110,000,000, PLUS (ii) an aggregate amount equal to 25% of its
Consolidated Net Earnings (but, in each case, only if a positive number) for
each completed fiscal year beginning with the fiscal year ended November 30,
1996.
(b) LIMITATION ON RATIO OF TOTAL DEBT TO TANGIBLE GROSS WORTH. The
Company will not, at any time, permit the ratio of Total Debt to Tangible Gross
Worth to exceed .60:1.00; PROVIDED, that (i) during the fiscal year beginning on
December 1, 1997 and ending on November 30, 1998, there shall have been a period
of at least 45 consecutive days during which the ratio of Total Debt to Tangible
Gross Worth does not exceed .575:1.00, and (ii) during each subsequent fiscal
year of the Company, there shall have been a period of at least 45 consecutive
days during which the ratio of Total Debt to Tangible Gross Worth does not
exceed .55:1.00.
(c) LIMITATION ON CERTAIN DEBT. The Company will not, at any time,
permit the sum (without duplication) of (i) Debt of Restricted Subsidiaries
(including, without limitation, Debt resulting from any Guaranty by a Restricted
Subsidiary of the obligations of the Company) PLUS (ii) Debt secured by Liens of
the type described in Sections 10.3(f), (g), (h), (i) and (j), to exceed the
greater of (a) $40,000,000 or (b) 20% of Consolidated Tangible Net Worth at such
time.
If any Restricted Subsidiary provides a Guaranty with respect to any
Debt of the Company other than the Notes, the Company will cause such Restricted
Subsidiary to provide a Guaranty with respect to the Notes equally and ratably
with such other Guaranty
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for so long as such other Guaranty continues in effect; PROVIDED, that
compliance with the foregoing sentence will not cure a breach of Section
10.4(c).
10.5. LIMITATION ON CERTAIN INVESTMENTS.
The Company will not, and will not permit any Restricted Subsidiary
to, at any time, make or permit to remain outstanding any loan or advance to, or
own, purchase or acquire stock, obligations or securities of, or any other
interest in, or make or commit to make any capital contribution to, any Person,
except that the Company and its Restricted Subsidiaries may:
(a) permit to remain outstanding loans, investments and advances to
or in the Affiliated Companies as shown on the Company's consolidated
balance sheet at August 31, 1991;
(b) make loans, investments and advances in and to Restricted
Subsidiaries, including any investment in a corporation which, after giving
effect to such investment, will become a Restricted Subsidiary;
(c) make investments in any money market fund the aggregate asset
value of which is at least $200,000,000, which is managed by a fund manager
of recognized national standing, and the investment in which, in accordance
with GAAP, is classified as a current asset on the balance sheet of the
Company or a Restricted Subsidiary, as the case may be;
(d) own, purchase or acquire direct obligations of the United States
or any of its agencies or obligations fully guaranteed by the United
States, PROVIDED THAT such obligations mature within two years from the
date acquired;
(e) own, purchase or acquire certificates of deposit which mature
within one year from the date of purchase and are issued by any commercial
bank or trust company (i) organized under the laws of the United States or
any of its states, (ii) having consolidated capital, surplus and undivided
profits aggregating at least $500,000,000 and (iii) whose senior debt
securities are rated A or better by S&P or an equivalent rating from
another nationally recognized credit rating agency;
(f) own, purchase or acquire commercial paper given an "A-1" rating
or better by S&P or an equivalent rating by another nationally recognized
credit rating agency and maturing not more than 270 days from the date
acquired;
(g) make or permit to remain outstanding any other loans, advances or
investments, including additional investments in Affiliated Companies or
similar joint ventures or Unrestricted Subsidiaries, so long as the
aggregate original cost of or expenditures for all such additional loans,
advances or investments does not exceed at any time 15% of Consolidated
Tangible Net Worth; PROVIDED, HOWEVER, that
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increases or decreases in the Company's or a Restricted Subsidiary's equity
in an Affiliated Company resulting from such company's earnings or losses
shall not be included in computing compliance with this clause (g); and
(h) make investments in life insurance policies maintained for the
benefit of members of its executive management.
10.6. SALE AND LEASE-BACK.
The Company will not, and will not permit any Restricted Subsidiary
to, enter into any arrangement providing for the leasing by the Company or
any Restricted Subsidiary of real or personal property which has been or is
to be sold or transferred by the Company or any Restricted Subsidiary to a
lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or
rental obligations of the Company or any Restricted Subsidiary; PROVIDED,
HOWEVER that the Company or any Restricted Subsidiary may enter into such
sale/lease-back transactions (other than in respect of assets sold to the
lessor by an Unrestricted Subsidiary) only if (a) the assets to be so sold
may be sold in compliance with Section 10.2 (PROVIDED, HOWEVER, that
compliance with Section 10.2 shall not be required with regard to assets
(other than any assets acquired upon the application of any consideration
received by the Company or any Restricted Subsidiary pursuant to a
disposition of assets as described in Section 10.2(b)) if the sale-leaseback
transaction occurs within 24 months of the date the property that is the
subject of such sale/lease-back transaction is acquired, or in the case of
improvements thereto, of the date completed, whichever event occurs later);
and (b) the rental obligations payable pursuant to such leaseback are
permitted under Section 10.8 (whether or not such lease is characterized as a
"true lease" in accordance with GAAP).
10.7. SALE OR DISCOUNT OF RECEIVABLES.
The Company will not, and will not permit any Restricted Subsidiary
to, sell with recourse, or discount or otherwise sell for less than the face
value thereof, more than $5,000,000 original principal amount of its notes
receivable or accounts receivable in any fiscal year; PROVIDED, HOWEVER, that
the Company's foreign Restricted Subsidiaries may sell their accounts or notes
receivable, so long as the discount applied does not exceed the net present
value of the receivables sold for the period of time equal to the estimated
collection period and using a discount factor no greater than prevailing market
rates.
10.8. SUBSIDIARY RESTRICTIONS.
The Company will not, and will not permit any Restricted Subsidiary
to, incur or permit to exist at any time any restriction on such Restricted
Subsidiary's ability to make (a) any dividend payments or other distributions of
cash, assets, properties, obligations or securities on account of any shares of
any class of such Restricted Subsidiary's capital stock (other than restrictions
on payments or distributions in connection with minority interests); or (b) any
repurchases, redemptions, retirement or other acquisitions of such Restricted
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Subsidiary's capital stock or the establishment of any sinking fund or other
fund for any such purpose, to repay loans or advances, or to otherwise transfer
property or other assets, to the Company or any Restricted Subsidiary that is a
parent of such Restricted Subsidiary.
10.9. RESTRICTED LEASES.
The Company will not, and will not permit any Restricted Subsidiary
to, incur or permit to exist at any time any obligation, direct or indirect,
for rental payments under a Restricted Lease if, after giving effect thereto,
the aggregate amount of all minimum noncancellable rental payments under
Restricted Leases to which the Company and its Restricted Subsidiaries are
parties or otherwise obligated exceeds for any fiscal year 6% of Consolidated
Tangible Net Worth as at the end of the immediately preceding fiscal quarter.
11. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" shall exist if any of the following conditions
or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable;
or
(c) the Company defaults in the performance of or compliance with
any term contained in Section 10; or
(d) the Company defaults in the performance of or compliance with
any term contained herein (other than those referred to in paragraphs
(a), (b) and (c) of this Section 11) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note (any such written notice
to be identified as a "notice of default" and to refer specifically to
this paragraph (d) of Section 11); or
(e) any representation or warranty made in writing by or on behalf
of the Company or by any officer of the Company in this Agreement or in
any writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect on
the date as of which made; or
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Debt beyond any
period of grace provided
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with respect thereto, or (ii) the Company or any Restricted Subsidiary is
in default in the performance of or compliance with any term of any
evidence of any Debt or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of
such default or condition such Debt has become, or has been declared (or
one or more Persons are entitled to declare such Debt to be), due and
payable before its stated maturity or before its regularly scheduled
dates of payment, or (iii) as a consequence of the occurrence or
continuation of any event or condition (other than the passage of time or
the right of the holder of Debt to convert such Debt into equity
interests), (X) the Company or any Restricted Subsidiary has become
obligated to purchase or repay Debt before its regular maturity or before
its regularly scheduled dates of payment, or (Y) one or more Persons have
the right to require the Company or any Restricted Subsidiary so to
purchase or repay such Debt; provided that the aggregate outstanding
principal amount of all Debt referred to in clauses (i) through (iii),
inclusive, is at least $5,000,000; or
(g) the Company or any Restricted Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or
any other petition in bankruptcy, for liquidation or to take advantage of
any bankruptcy, insolvency, reorganization, moratorium or other similar
law of any jurisdiction, (iii) makes an assignment for the benefit of its
creditors, (iv) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or with
respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(h) a court or governmental authority of competent jurisdiction
enters an order appointing, without consent by the Company or any of its
Restricted Subsidiaries, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy
or for liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Restricted Subsidiaries, or any
such petition shall be filed against the Company or any of its Restricted
Subsidiaries and such petition shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of money
aggregating in excess of $5,000,000 are rendered against one or more of
the Company and its Restricted Subsidiaries and which judgments are not,
within 60 days after entry thereof, bonded, discharged or stayed pending
appeal, or are not discharged within 60 days after the expiration of such
stay; or
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(j) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a
Plan may become a subject of any such proceedings, (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of
section 4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any
ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, (v) the Company
or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the
Company or any Subsidiary establishes or amends any employee welfare
benefit plan that provides post-employment welfare benefits in a manner
that would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i) through
(vi) above, either individually or together with any other such event or
events, could reasonably be expected to have a Material Adverse Effect.
As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms
in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. ACCELERATION.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g))
has occurred, all the Notes then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of more than 51% in principal amount of the Notes at the time
outstanding may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at
the time outstanding affected by such Event of Default may at any time, at its
or their option, by notice or notices to the Company, declare all the Notes
held by it or them to be immediately due and payable.
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Upon any Notes becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, PLUS (X) all accrued and
unpaid interest thereon and (Y) the Make-Whole Amount determined in respect of
such principal amount (to the full extent permitted by applicable law), shall
all be immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the
Company (except as herein specifically provided for) and that the provision for
payment of a Make-Whole Amount by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.
12.2. OTHER REMEDIES.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law or
otherwise.
12.3. RESCISSION.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 51%
in principal amount of the Notes then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if (a)
the Company has paid all overdue interest on the Notes, all principal of and
Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid
other than by reason of such declaration, and all interest on such overdue
principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than non-payment of amounts
that have become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or decree has been
entered for the payment of any monies due pursuant hereto or to the Notes. No
rescission and annulment under this Section 12.3 will extend to or affect any
subsequent Event of Default or Default or impair any right consequent thereon.
12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.
No course of dealing and no delay on the part of any holder of any
Note in exercising any right, power or remedy shall operate as a waiver thereof
or otherwise
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prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Note on demand such further amount
as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. REGISTRATION OF NOTES.
The Company shall keep at its principal executive office a register
for the registration and registration of transfers of Notes. The name and
address of each holder of one or more Notes, each transfer thereof and the
name and address of each transferee of one or more Notes shall be registered
in such register. Prior to due presentment for registration of transfer, the
Person in whose name any Note shall be registered shall be deemed and treated
as the owner and holder thereof for all purposes hereof, and the Company
shall not be affected by any notice or knowledge to the contrary. The
Company shall give to any holder of a Note that is an Institutional Investor
promptly upon request therefor, a complete and correct copy of the names and
addresses of all registered holders of Notes.
13.2. TRANSFER AND EXCHANGE OF NOTES.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense (except as
provided below), one or more new Notes (as requested by the holder thereof)
in exchange therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be payable
to such Person as such holder may request and shall be substantially in the
form of Exhibit 1. Each such new Note shall be dated and bear interest from
the date to which interest shall have been paid on the surrendered Note or
dated the date of the surrendered Note if no interest shall have been paid
thereon. The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such transfer of
Notes. Notes shall not be transferred in denominations of less than
$500,000, PROVIDED that if necessary to enable the registration of transfer
by a holder of its entire holding of Notes, one Note may be in a denomination
of less than $500,000. Any transferee, by its acceptance of a Note
registered in its name (or
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the name of its nominee), shall be deemed to have made the representation set
forth in Section 6.2.
13.3. REPLACEMENT OF NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to the
Company of the ownership of and the loss, theft, destruction or mutilation of
any Note (which evidence shall be, in the case of an Institutional Investor,
notice from such Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED that if the holder of such Note is,
or is a nominee for, an original Purchaser or another holder of a Note with
a minimum net worth of at least $100,000,000, such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note, dated and bearing interest from the date to which interest shall
have been paid on such lost, stolen, destroyed or mutilated Note or dated the
date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
14. PAYMENTS ON NOTES.
14.1. PLACE OF PAYMENT.
Subject to Section 14.2, payments of principal, Make-Whole Amount,
if any, and interest becoming due and payable on the Notes shall be made in
the State of California at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each holder of a
Note, change the place of payment of the Notes so long as such place of
payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
14.2. HOME OFFICE PAYMENT.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after
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payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at
its principal executive office or at the place of payment most recently
designated by the Company pursuant to Section 14.1. Prior to any sale or
other disposition of any Note held by you or your nominee you will, at your
election, either endorse thereon the amount of principal paid thereon and the
last date to which interest has been paid thereon or surrender such Note to
the Company in exchange for a new Note or Notes pursuant to Section 13.2.
The Company will afford the benefits of this Section 14.2 to any
Institutional Investor that is the direct or indirect transferee of any Note
purchased by you under this Agreement and that has made the same agreement
relating to such Note as you have made in this Section 14.2.
15. EXPENSES, ETC.
15.1. TRANSACTION EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of a special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments,
waivers or consents under or in respect of this Agreement or the Notes
(whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend)
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 Notes, or by reason of being a holder of any Note,
and (b) the costs and expenses, including financial advisors' fees, incurred
in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save you and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses if any, of brokers and finders (other
than those retained by you).
15.2. SURVIVAL.
The obligations of the Company under this Section 15 will survive
the payment or transfer of any Note, the enforcement, amendment or waiver of
any provision of this Agreement or the Notes, and the termination of this
Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note
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or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed representations and warranties of the Company under this Agreement.
Subject to the preceding sentence, this Agreement and the Notes embody the
entire agreement and understanding between you and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. REQUIREMENTS.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it
is used therein), will be effective as to you unless consented to by you in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, (i) subject to
the provisions of Section 12 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the rate
or change the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the principal
amount of the Notes the holders of which are required to consent to any such
amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or
20.
17.2. SOLICITATION OF HOLDERS OF NOTES.
(a) SOLICITATION. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) PAYMENT. The Company will not directly or indirectly pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to the entering into by any holder of
Notes or any waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security
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d<PAGE>
is concurrently granted, on the same terms, ratably to each holder of Notes
then outstanding even if such holder did not consent to such waiver or
amendment.
17.3. BINDING EFFECT, ETC.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any right consequent
thereon. 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, the term
"THIS AGREEMENT" and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented.
17.4. NOTES HELD BY COMPANY, ETC.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Restricted Subsidiaries and Affiliates shall be deemed not to be
outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such
address as such other holder shall have specified to the Company in
writing, or
(iii) if to the Company, to the Company at its address set forth
at the beginning hereof to the attention of Chief Financial Officer, or at
such other address as the Company shall have specified to the holder of
each Note in writing.
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Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing (except
the Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not
such reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "CONFIDENTIAL INFORMATION"
means information delivered to you by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by you as
being confidential information of the Company or such Subsidiary, PROVIDED
that such term does not include information that (a) was publicly known or
otherwise known to you prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by you or any person acting
on your behalf, (c) otherwise becomes known to you other than through
disclosure by the Company or any Subsidiary or (d) constitutes financial
statements delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, PROVIDED
that you may deliver or disclose Confidential Information to (i) your
directors, officers, employees, agents, attorneys and affiliates (to the
extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note, (iv) any Institutional Investor to which
you sell or offer to sell such Note or any part thereof or any participation
therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(v) any
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Person from which you offer to purchase any security of the Company (if such
Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (vi) any
federal or state regulatory authority having jurisdiction over you, (vii) the
National Association of Insurance Commissioners or any similar organization,
or any nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other Person to
which such delivery or disclosure may be necessary or appropriate (w) to
effect compliance with any law, rule, regulation or order applicable to you,
(X) in response to any subpoena or other legal process, (y) in connection
with any litigation to which you are a party or (z) if an Event of Default
has occurred and is continuing, to the extent you may reasonably determine
such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On reasonable
request by the Company in connection with the delivery to any holder of a
Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and
such Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon
receipt of such notice, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall be deemed to refer to such
Affiliate in lieu of you. In the event that such Affiliate is so substituted
as a purchaser hereunder and such Affiliate thereafter transfers to you all
of the Notes then held by such Affiliate, upon receipt by the Company of
notice of such transfer, wherever the word "you" is used in this Agreement
(other than in this Section 21), such word shall no longer be deemed to refer
to such Affiliate, but shall refer to you, and you shall have all the rights
of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS.
22.1. SUCCESSORS AND ASSIGNS.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective
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successors and assigns (including, without limitation, any subsequent holder
of a Note) whether so expressed or not.
22.2. PAYMENTS DUE ON NON-BUSINESS DAYS.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest
on any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
22.3. SEVERABILITY.
Any provision of this Agreement that 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 (to the full extent permitted by law) not invalidate
or render unenforceable such provision in any other jurisdiction.
22.4. CONSTRUCTION.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by
any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by
such Person.
22.5. 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. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of
California excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
* * * * *
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If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
you and the Company.
Very truly yours,
AMERON INTERNATIONAL CORPORATION
By: _________________________________
Title: ______________________________
By: _________________________________
Title: ______________________________
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The foregoing is hereby
agreed to as of the
date thereof.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: _________________________________
Title: ______________________________
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The foregoing is hereby
agreed to as of the
date thereof.
SUNAMERICA LIFE INSURANCE COMPANY
By: _________________________________
Title: ______________________________
42
<PAGE>
The foregoing is hereby
agreed to as of the
date thereof.
ANCHOR NATIONAL LIFE INSURANCE COMPANY
By: _________________________________
Title: ______________________________
42
<PAGE>
The foregoing is hereby
agreed to as of the
date thereof.
FORD LIFE INSURANCE COMPANY
By: _________________________________
Title: ______________________________
42
<PAGE>
The foregoing is hereby
agreed to as of the
date thereof.
FIRST SUNAMERICA LIFE INSURANCE COMPANY
By: _________________________________
Title: ______________________________
42
<PAGE>
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Aggregate Principal Amount Note
Name and Address of Purchaser of Notes to be Purchased Denomination(s)
- ----------------------------- -------------------------- ---------------
THE PRUDENTIAL INSURANCE $35,000,000 $35,000,000
COMPANY OF AMERICA
(1) All payments on account of Notes held by such purchaser shall be made by
wire transfer of immediately available funds for credit to:
Account No. 050-54-526
Morgan Guaranty Trust Company of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of the Company, a
reference to "7.92% Senior Notes due September 1, 2006, Security No.
!INV5447!", and the due date and application (as among principal,
interest and Yield-Maintenance Amount) of the payment being made.
(2) Address for notices relating to payments:
The Prudential Insurance Company of America
c/o Prudential Capital Group
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: Manager, Investment
Operations Group
Telephone: (201) 802-5260
Telecopy: (201) 802-8055
1
Schedule A
<PAGE>
(3) Address for all other communications and notices:
The Prudential Insurance Company of America
c/o Prudential Capital Group-Corporate
Four Embarcadero Center
Suite 2700
San Francisco, CA 94111
Attention: Managing Director
Telecopy: (415) 296-7237
(4) Recipient of telephonic prepayment notices:
Manager, Investment Structure and Pricing
Telephone: (201) 802-6660
Telecopy: (201) 802-9425
(5) Tax Identification No.: 22-1211670
SUNAMERICA LIFE INSURANCE $4,000,000 $4,000,000
COMPANY
(1) All payments on or in respect of the Notes shall be by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
ABA# 021-001-033
Account #99-911-145
For further credit to acct. #099530
Ref: Ameron International Corporation
PPN# ,P$ ,I$
2
Schedule A
<PAGE>
(2) Address for all notices in respect of payment:
SunAmerica Investments
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th floor
Telephone: 310-772-6342
Fax: 310-772-6596
(3) Address for all other communications:
SunAmerica Corporate Finance
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: John Lapham
Telephone: 310-772-6822
Fax: 310-772-6078
(4) Please issue notes in the nominee name
"OKGBD & CO."
Tax ID# 13-3020293
Tax ID# for SunAmerica Life Insurance
Company: 52-0502540
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th floor, Window 44
Account #099530
(6) DTC PARTICIPATION
Participation #0903
Agent I.D. # 20903
Institution ID # 26540
Ref: SunAmerica Life Insurance
Company
Account # 099530
3
Schedule A
<PAGE>
ANCHOR NATIONAL LIFE INSURANCE $4,000,000 $4,000,000
COMPANY
(1) All payments on or in respect of the Notes shall be by wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
ABA# 021-001-033
Account# 99-911-145
For further credit to acct. #099527
Ref: Ameron International Corporation
PPN# ,P$ ,I$
(2) Address for all notices in respect of payment:
SunAmerica Investments
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th floor
Telephone: 310-772-6342
Fax: 310-772-6576
(3) Address for all other communications:
SunAmerica Corporate Finance
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: John Lapham
Telephone: 310-772-6822
Fax: 310-772-6078
(4) Please issue notes in the nominee name
"OKGBD & CO."
Tax ID# 13-3020293
Tax ID# for Anchor National Life
Insurance Company: 86-0198983
4
Schedule A
<PAGE>
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th floor, Window 44
Account #099527
(6) DTC Participant #0903
Agent Bank ID # 20903
Institution ID# 26540
Ref: Anchor National/MAIN
Account # 099527
FORD LIFE INSURANCE COMPANY $5,000,000 $5,000,000
(1) All payments on or in respect of the
Notes shall be by wire transfer of Federal
or other immediately available funds to:
Bankers Trust Company
ABA# 021-001-033
Account# 99-911-145
For further credit to acct. #099546
Ref: Ameron International Corporation
PPN# ,P$ ,I$
(2) Address for all notices in respect of
payment:
SunAmerica Investments
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th floor
Telephone: 310-772-6342
Fax: 310-772-6596
5
Schedule A
<PAGE>
(3) Address for all other communications:
SunAmerica Corporate Finance
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: John Lapham
Telephone: 310-772-6822
Fax: 310-772-6078
(4) Please issue notes in the nominee name
"OKGBD & CO."
Tax ID# 13-3020293
Tax ID# for Ford Life Insurance
Company: 38-1803868
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th Floor, Window 44
Account #099546
FIRST SUNAMERICA LIFE INSURANCE COMPANY $2,000,000 $2,000,000
(1) All payments on or in respect of the
Notes shall be by wire transfer of Federal
or other immediately available funds to:
Bankers Trust Company
ABA# 021-001-033
Account# 99-911-145
For further credit to acct. #099537
Ref: Ameron International Corporation
PPN# ,P$ ,I$
6
Schedule A
<PAGE>
(2) Address for all notices in respect of
payment:
SunAmerica Investments
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: Investment Accounting, 36th floor
Telephone: 310-772-6342
Fax: 310-772-6596
(3) Address for all other communications:
SunAmerica Corporate Finance
1 SunAmerica Center
Los Angeles, CA 90067-6022
Attn: John Lapham
Telephone: 310-772-6822
Fax: 310-772-6078
(4) Please issue notes in the nominee name
"OKGBD & CO."
Tax ID# 13-3020293
Tax ID# for First SunAmerica Life
Insurance Company: 06-0992729
(5) Physical Delivery Instructions:
Bankers Trust Company
14 Wall Street
New York, NY 10005
4th Floor, Window 44
Account #099537
7
Schedule A
<PAGE>
SCHEDULE B
DEFINED TERMS
Unless otherwise specified herein or in the Note Purchase Agreement to
which this Schedule B is attached, all accounting terms used herein and in the
Note Purchase Agreement shall be interpreted, and all accounting determinations
hereunder shall be made, in accordance with GAAP. As used in the Note Purchase
Agreement, the following terms have the respective meanings set forth below or
set forth in the Section of the Note Purchase Agreement following such term:
"AFFILIATE" means, at any time, and with respect to any Person, (a)
any other Person (other than a Restricted Subsidiary) that at such time directly
or indirectly through one or more intermediaries Controls, or is Controlled by,
or is under common Control with, such first Person, and (b) any Person
beneficially owning or holding, directly or indirectly, 10% or more of any class
of voting or equity interests of the Company or any Subsidiary or any
corporation of which the Company and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of voting or
equity interests. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"AFFILIATED COMPANIES" shall mean those Persons listed as "Affiliated
Companies" on Schedule 5.4 to the Note Purchase Agreement.
"BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed, and (b) for the purposes of any
other provision of this Agreement, any day other than a Saturday, a Sunday or a
day on which commercial banks in Los Angeles, California or New York, New York
are required or authorized to be closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" shall mean any rental obligation
which, under GAAP, is or will be required to be capitalized on the books of the
Company or any Restricted Subsidiary, taken at the amount thereof accounted for
as indebtedness (net of interest expense) in accordance with such principles.
"CLOSING" is defined in Section 3.
1
Schedule B
<PAGE>
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and the rules and regulations promulgated thereunder from time to time.
"COMPANY" means Ameron International Corporation, a Delaware
corporation.
"CONFIDENTIAL INFORMATION" is defined in Section 20.
"CONSOLIDATED CURRENT DEBT" means, without duplication, (a) any
obligation for borrowed money and any notes payable and drafts accepted
representing extensions of credit (other than trade and taxes payables) payable
on demand or within a period of one year from the date of the creation thereof
(including seasonal lines of credit, but excluding revolving lines of credit
with maturities in excess of one year or with options to renew final maturities
more than one year beyond the date of creation, which debt shall be treated as
Funded Debt) of the Company and its Restricted Subsidiaries, (b) Off-Balance
Sheet Current Debt, (c) any Guaranty of the Company or any Restricted Subsidiary
with respect to liabilities of a type described in clauses (a) or (b) above and
(d) all modifications, renewals and extensions of the foregoing that do not
extend the final, non-renewable maturity of such indebtedness beyond one year
from the date of creation, all on a consolidated basis.
"CONSOLIDATED FUNDED DEBT" means, without duplication, (a) any
obligation of the Company or any Restricted Subsidiary (including the Notes and
other obligations evidenced by notes, bonds, debentures or similar written
instruments) payable more than one year from the date of creation thereof (or
which is renewable or extendable at the option of the obligor for a period of
more than one year from the date of creation), (b) all indebtedness of the
Company or any Restricted Subsidiary having a maturity of less than one year,
PROVIDED that such indebtedness is incurred pursuant to revolving credit
arrangements or other financing commitments with a final, non-extendable
maturity more than one year from the date of creation thereof, (c) Capitalized
Lease Obligations of the Company or any Restricted Subsidiary, (d) Off-Balance
Sheet Funded Debt, (e) obligations secured by a Lien on, or payable out of the
proceeds of production from, property of the Company or any Restricted
Subsidiary whether or not such obligation shall be assumed by the Company or
such Restricted Subsidiary, (f) any Guaranty of the Company or any Restricted
Subsidiary with respect to liabilities of a type described in clauses (a), (b),
(c), (d) or (e) above, and (g) all renewals and extensions of any of the
foregoing, all on a consolidated basis.
"CONSOLIDATED NET EARNINGS" shall mean consolidated gross revenues of
the Company and its Restricted Subsidiaries less all costs, rebates, returns,
allowances, adjustments, discounts, expenses and other proper charges (including
current and deferred taxes on income, provisions for taxes on unremitted foreign
earnings that are included in gross revenues and current additions to reserves),
determined in accordance with GAAP. Consolidated Net Earnings shall not include
(a) extraordinary gains or losses, (b) gains or losses resulting from the sale
or other disposition of capital assets (other than vehicles and office equipment
and other equipment sold in the normal course of businesses); (c)
2
Schedule B
<PAGE>
undistributed earnings of any Person (including any Affiliated Company) which
is not a Restricted Subsidiary; (d) gains or losses arising from changes in
accounting principles; (e) gains or loses arising from the write-up or
write-down of assets; (f) any undistributed earnings of any Restricted
Subsidiary, to the extent that the declaration or payment of dividends or
other share distributions, share repurchases or redemptions or repayment of
intracompany loans or advances by such Restricted Subsidiary is restricted by
charter document, agreement, law or otherwise; (g) any gain from the
collection of proceeds from insurance policies; (h) any gain from the
acquisition of securities or the retirement or extinguishment of Debt and (i)
any gains, losses or undistributed earnings of any Unrestricted Subsidiary.
"CONSOLIDATED TANGIBLE ASSETS" shall mean the net book value of all
assets of the Company and its Restricted Subsidiaries on a consolidated basis,
net of (a) the net book value of all Intangibles; (b) all reserves relating to
such assets; and (c) any write-up in the carrying values of such assets, all
determined in accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean all items that in
accordance with GAAP would be included in the stockholders' or shareholders'
equity portion of the consolidated balance sheet of the Company and its
Restricted Subsidiaries, including capital stock of any class (net of treasury
stock), capital surplus and retained earnings, less (a) the net book value of
all Intangibles and (b) minority interests.
"CURRENT DEBT", as to any Person, has the same meaning as Consolidated
Current Debt (treating such Person as the Company).
"DEBT" means Consolidated Current Debt and Consolidated Funded Debt.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest that is the greater of
(i) 2% per annum above the rate of interest stated in clause (a) of the first
paragraph of the Notes or (ii) 2% over the rate of interest publicly announced
by Morgan Guaranty Trust Company of New York, as its "base" or "prime" rate.
"ENVIRONMENTAL LAWS" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ENVIRONMENTAL LIABILITIES AND COSTS" means, as to any Person, all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, contribution, cost
recovery, costs and expenses
3
Schedule B
<PAGE>
(including all fees, disbursements and expenses of counsel, expert and
consulting fees, and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, permit, order or
agreement with any Federal, state or local governmental authority or other
Person, arising from environmental, health or safety conditions, or the
release or threatened release of any contaminant, pollutant or Hazardous
Materials into the environment, resulting from the operations of such person
or its subsidiaries, or breach of any Environmental Laws or for which such
Person or its subsidiaries is otherwise liable or responsible.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FUNDED DEBT", as to any Person, has the same meaning as "Consolidated
Funded Debt" (treating such Person as the Company).
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any such
government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend
4
Schedule B
<PAGE>
or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of
such indebtedness or obligation, or (ii) to maintain any working capital or
other balanc e sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or obligation
against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.
"HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INCLUDING" means, unless the context clearly requires otherwise,
"including, without limitation."
"INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note or
any Affiliate thereof, (b) any holder of a Note holding more than 5% of the
aggregate principal amount of the Notes then outstanding, and (c) any bank,
trust company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.
5
Schedule B
<PAGE>
"INTANGIBLES" means any Intellectual Properties (including any
amounts, however designated, representing the cost of acquisition of business
and investments in excess of the book value thereof), unamortized debt discount
and expense, deferred research and development costs, any write-up of asset
value after November 30, 1995 and any other assets treated as intangible assets
under GAAP.
"INTELLECTUAL PROPERTIES" means any material patents, patent
applications, copyrights, copyright applications, trade secrets, trade names and
trademarks, technologies, methods, processes or other proprietary properties or
information.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"MAKE-WHOLE AMOUNT" is defined in Section 8.6.
"MATERIAL" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Company
and its Restricted Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of
the Company to perform its obligations under this Agreement and the Notes, or
(c) the validity or enforceability of this Agreement or the Notes.
"MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"NOTES" is defined in Section 1.
"OFF-BALANCE SHEET CURRENT DEBT" means all Current Debt of any
partnership or joint venture of which the Company or any Subsidiary is a general
partner or joint venturer, recourse with respect to which may be had against the
Company or any Restricted Subsidiary or any of their respective assets.
"OFF-BALANCE SHEET FUNDED DEBT" means all Funded Debt of any
partnership or joint venture of which the Company or any Subsidiary is a general
partner or joint venturer, recourse with respect to which may be had against the
Company or any Restricted Subsidiary or any of their respective assets.
6
Schedule B
<PAGE>
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" is defined in Section 2.
"OTHER PURCHASERS" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"PLAN" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"PROPERTY" or "PROPERTIES" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, choate
or inchoate.
"PROPERTY" means all real property owned or leased by the Company or
any of its Restricted Subsidiaries and all personal property located thereon.
"QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14
issued by the United States Department of Labor.
"REQUIRED HOLDERS" means, at any time, the holders of at least 51% in
principal amount of the Notes at the time outstanding (exclusive of Notes then
owned by the Company, any Restricted Subsidiary or any of their Affiliates).
"RESPONSIBLE OFFICER" means any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this agreement.
"RESTRICTED LEASE" means any lease for real property other than a
Capitalized Lease Obligation with an initial lease term (as defined under GAAP)
(or a term that is extendable or renewable at either party's option for a total
lease term) of three years or more from the date of creation thereof.
7
Schedule B
<PAGE>
"RESTRICTED SUBSIDIARY" means, at any time, any Subsidiary of the
Company which is not then designated an Unrestricted Subsidiary by the Board of
Directors of the Company.
"S&P" means Standard & Poors Ratings Group, a division of McGraw Hill,
Inc. and any successor thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SHAREHOLDER" shall mean any record or beneficial holder of 5% or more
of any class of the Company's capital stock. For purposes of making this
computation, all warrants, rights, options, convertible securities and other
rights to purchase or acquire a class of Company capital stock shall be deemed
to be exercised.
"SIGNIFICANT SUBSIDIARY" shall mean any Subsidiary with total assets
(a) with a net book value in excess of 20% of Consolidated Tangible Assets as at
the end of the immediately preceding fiscal quarter or (b) that generated in
excess of 20% of Consolidated Net Earnings before interest and income taxes for
any of the three most recently ended fiscal years.
"SUBSIDIARY" means, as to any Person, any corporation more than 50% of
the total combined voting power of all classes of Voting Stock of which is, at
the time as of which any determination is being made, owned by such Person
either directly or through such Person's Subsidiaries. Unless the context
otherwise clearly requires, any reference to a "Subsidiary" is a reference to a
Subsidiary of the Company.
"TANGIBLE GROSS WORTH" means, as of any date of determination, (a) the
total amount of shareholders' equity of the Company PLUS (b) Total Debt MINUS
(c) the net book value of any Intangibles that are booked subsequent to the date
of the Closing other than in connection with the acquisition by the Company of
the assets of Devoe Coatings from Grow Group Incorporated and Gliden Company
pursuant to a Master Purchase Agreement dated as of August 7, 1996.
"TOTAL DEBT" means the total of all Debt of the Company and its
Restricted Subsidiaries; PROVIDED, that any Debt owing by the Company to a
Restricted Subsidiary shall be included in Total Debt unless such Debt is
subordinated to the Notes pursuant to a Subordination Agreement in the form of
Exhibit 5 attached hereto.
"UNRESTRICTED SUBSIDIARY" shall mean each Subsidiary of the Company
which is so designated by the Board of Directors of the Company; PROVIDED,
HOWEVER, that no such designation shall be effective unless (a) at the time of
such designation, such Subsidiary does
8
Schedule B
<PAGE>
not own any shares of capital stock or Debt of the Company or any other
Restricted Subsidiary which is not simultaneously being designated an
Unrestricted Subsidiary, (b) immediately after giving effect to such
designation, and after deducting from all covenant calculations made in
respect of the immediately preceding four fiscal quarters the assets,
liabilities, revenues and costs attributable to such Subsidiary (i) no
Default or Event of Default would either occur and be continuing or would
have occurred at any time during the immediately preceding four fiscal
quarters; (ii) the Company would be permitted to make the investment in such
Subsidiary resulting from such designation in compliance with Section
10.5(g); and (iii) such designation is treated at the time of designation and
at all times thereafter as a sale of assets for purposes of Section 10.2 and
the Company would be permitted to make such asset sale in compliance with
such Section. Any Subsidiary which has been designated as an Unrestricted
Subsidiary pursuant to the preceding sentence may, at any time thereafter, be
redesignated as a Restricted Subsidiary by resolution of the Board of
Directors of the Company (a certified copy of which shall promptly be
delivered to each holder of the Notes) if, immediately after giving effect to
such redesignation and all other simultaneous designations and
redesignations, if any, of other Subsidiaries pursuant to this definition, no
Default or Event of Default shall exist. Any Subsidiary which has been
redesignated as a Restricted Subsidiary as provided in the preceding sentence
of this definition may not thereafter be designated or redesignated as an
Unrestricted Subsidiary.
"VOTING STOCK" means, 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).
9
Schedule B
<PAGE>
EXHIBIT 1
[FORM OF 7.92% SENIOR NOTE DUE 2006]
AMERON INTERNATIONAL CORPORATION
7.92% SENIOR NOTE DUE SEPTEMBER 1, 2006
No. [_____] [Date]
$[_______] PPN[_______
_______]
FOR VALUE RECEIVED, the undersigned, AMERON INTERNATIONAL CORPORATION
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, hereby promises to pay to [_______________],
or registered assigns, the principal sum of [_______________] DOLLARS on
September 1, 2006, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.92%
per annum from the date hereof, payable semiannually, on the 1st day of
September and March in each year, commencing with March 1, 1997, until the
principal hereof shall have become due and payable, and (b) to the extent
permitted by law on any overdue payment (including any overdue prepayment) of
principal, any overdue payment of interest and any overdue payment of any
Make-Whole Amount (as defined in the Note Purchase Agreements referred to
below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 9.92% or (ii) 2% over the rate of interest
publicly announced by Morgan Guaranty Trust Company of New York from time to
time in New York, New York as its "base" or "prime" rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America in the State of California at the principal office of the Company in
such jurisdiction or at such other place as the Company shall have designated by
written notice to the holder of this Note as provided in the Note Purchase
Agreements referred to below.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to separate Note Purchase Agreements, dated as of
August 28, 1996 (as from time to time amended, the "Note Purchase Agreements"),
between the Company and the respective Purchasers named therein and is entitled
to the benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (i) to have agreed to the confidentiality provisions set
forth in Section 20 of the Note Purchase Agreements and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of
transfer, duly endorsed, or
1
Exhibit 1
<PAGE>
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment
and for all other purposes, and the Company will not be affected by any
notice to the contrary.
The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreements. This
Note is also subject to optional prepayment, in whole or from time to time in
part, at the times and on the terms specified in the Note Purchase
Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable Make-Whole Amount) and with the effect provided in the Note
Purchase Agreements.
This Note shall be construed and enforced in accordance with the
law of the State of California excluding choice-of-law principles of the law
of such State that would require the application of the laws of a
jurisdiction other than such State.
AMERON INTERNATIONAL CORPORATION
By: _________________________
Title: _____________________
By: _________________________
Title: _____________________
2
Exhibit 1
<PAGE>
EXHIBIT 4.4(a)
FORM OF OPINION OF COUNSEL
TO THE COMPANY
1. The Company has been duly incorporated and is validly existing in
good standing under the laws of the State of Delaware and is duly licensed or
qualified and is in good standing as a foreign corporation in each jurisdiction
in which the character of the properties owned or leased by it or the nature of
the business transacted by it makes such licensing or qualification necessary.
2. Each Restricted Subsidiary has been duly incorporated and is
validly existing in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business transacted by it makes such licensing or
qualification necessary.
3. The Company has the corporate power to execute and deliver the
Note Purchase Agreements, to issue and sell the Notes and to perform its
obligations set forth in each of the Note Purchase Agreements and the Notes.
4. The execution, delivery and performance of each of the Note
Purchase Agreements and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and each of the Note Purchase
Agreements and the Notes has been duly executed and delivered by the Company.
5. The Note Purchase Agreements and the Notes constitute the legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally (including, without limitation, fraudulent
conveyance laws) and by general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
6. The Company's execution and delivery of, and performance of its
obligations under the Note Purchase Agreements and the Notes do not and will not
(i) violate the Company's Certificate of Incorporation or Bylaws, (ii) violate,
breach or result in a default under any existing obligation of or restriction on
the Company under any other agreement, instrument or indenture, (iii) breach or
otherwise violate any existing obligation of or restriction on the Company under
any order, judgment or decree of any California or federal court or governmental
authority binding on the Company, or (iv) violate any California or federal
statute or any provision of the Delaware General Corporation Law.
1
Exhibit 4.4(a)
<PAGE>
7. No order, consent, permit or approval of any California or
federal governmental authority is required on the part of the Company to issue
and sell the Notes or for the execution and delivery of, and performance of its
obligations under, the Note Purchase Agreements.
8. There is no action, suit or proceeding pending against or
threatened against or affecting the Company or any Restricted Subsidiary before
any court, governmental or regulatory authority or arbitrator, which if
adversely determined would question, either individually or collectively, the
validity of the Note Purchase Agreements or the Notes, or any of the
transactions contemplated thereby.
9. Assuming the accuracy of (i) the Company's representations in the
first sentence of Section 5.13 of the Note Purchase Agreements and (ii) your
representations in Section 6.1 of the Note Purchase Agreements, it is not
necessary in connection with the execution and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreements to register the Notes
under the Securities Act of 1933, as amended, or to qualify an indenture in
respect thereof under the Trust Indenture Act of 1939, as amended.
10. Neither the extension of credit nor the use of proceeds provided
in the Note Purchase Agreements will violate Regulations G, T or X of the Board
of Governors of the Federal Reserve System.
11. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
2
Exhibit 4.4(a)
<PAGE>
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
1. The Company has been duly incorporated and is validly existing in
good standing under the laws of the State of Delaware.
2. The Company has the corporate power to execute and deliver the
Note Purchase Agreements, to issue and sell the Notes and to perform its
obligations set forth in each of the Note Purchase Agreements and the Notes.
3. The execution, delivery and performance of each of the Note
Purchase Agreements and the Notes have been duly authorized by all necessary
corporate action on the part of the Company, and each of the Note Purchase
Agreements and the Notes has been duly executed and delivered by the Company.
4. The Note Purchase Agreements and the Notes constitute the legally
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally (including, without limitation, fraudulent
conveyance laws) and by general principles of equity including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
and the possible unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
5. Assuming the accuracy of (i) the Company's representations in the
first sentence of Section 5.13 of the Note Purchase Agreements and (ii) your
representations in Section 6.1 of the Note Purchase Agreements, it is not
necessary in connection with the execution and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreements to register the Notes
under the Securities Act of 1933, as amended, or to qualify an indenture in
respect thereof under the Trust Indenture Act of 1939, as amended.
6. Neither the extension of credit nor the use of proceeds provided
in the Note Purchase Agreements will violate Regulations G, T or X of the Board
of Governors of the Federal Reserve System.
7. The opinion of [ ], counsel for the Company, is
satisfactory in scope and form to us, and we believe you are justified in
relying on such opinion.
1
<PAGE>
EXHIBIT 5
FORM OF SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT ("AGREEMENT") dated , made by AMERON
INTERNATIONAL CORPORATION, a Delaware corporation (the "COMPANY"), AND [NAME OF
RESTRICTED SUBSIDIARY OF COMPANY], a corporation (the
"SUBORDINATED CREDITOR"), in favor of each of the Holders, as defined below.
RECITALS
A. Certain financial institutions (the "PURCHASERS") have entered
into separate Note Purchase Agreements dated August 28, 1996 with the Company
(as they may from time to time hereafter be amended or modified, collectively,
the "NOTE PURCHASE AGREEMENTS"). The Purchasers, together with their assigns,
transferees and successors, are collectively referred to herein as the
"HOLDERS". Capitalized terms not otherwise defined herein shall have the
meaning ascribed to them in the Note Purchase Agreements.
B. The Company may from time to time become indebted to the
Subordinated Creditor in the ordinary course of its business. All indebtedness
and other obligations of the Company to the Subordinated Creditor now or
hereafter existing, interest thereon and any fees, expenses and other amounts
payable are hereinafter referred to as the "SUBORDINATED DEBT".
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. AGREEMENT TO SUBORDINATE.
The Subordinated Creditor, for itself and its successors and assigns,
hereby agrees and covenants that, to the extent set forth herein and on the
terms and conditions set forth herein, the Subordinated Debt is and shall be
subordinate in right of payment to the prior indefeasible payment in full in
cash of all obligations of the Company now or hereafter existing under the Note
Purchase Agreements and the Notes, whether for principal, interest, Make-Whole
Amount, fees, expenses or otherwise (including amounts that would become due but
for the operation of the automatic stay under Section 362(a) of
1
Exhibit 5
<PAGE>
the Bankruptcy Code, 11 U.S.C. Section 362(a)) (all such obligations being,
collectively, the "OBLIGATIONS").
Section 2. INSOLVENCY.
(a) Upon any payment or distribution of assets of the Company or the
estate created by the commencement of any Insolvency Proceeding (defined below),
of any kind or character, whether in cash, securities or other property, the
Holders shall first be entitled to receive payment in full of all Obligations in
cash before the Subordinated Creditor shall be entitled to receive any payment
or distribution on account of the Subordinated Debt. "INSOLVENCY PROCEEDING"
means any dissolution, winding up, liquidation, arrangement, reorganization,
adjustment, protection, relief or composition of the Company or its debts,
whether voluntary or involuntary, in any bankruptcy, insolvency, arrangement,
reorganization, receivership, relief or other similar case or proceeding under
any federal or state bankruptcy or similar law or upon an assignment for the
benefit of creditors, any other marshaling of the assets and liabilities of the
Company or otherwise.
(b) Upon the occurrence of any Insolvency Proceeding, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities to which the Subordinated Creditor would
be entitled, shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, directly to the Holders for application to the payment in full in
cash of all Obligations after giving effect to any concurrent payment or
distribution to the Holders.
Section 3. PAYMENT OF SUBORDINATED DEBT.
Nothing in this Agreement is intended to or shall impair, as between
the Company and the Subordinated Creditor, the obligation of the Company, which
is absolute and unconditional, to pay all principal, interest and other amounts
payable with respect to the Subordinated Debt.
Section 4. PROHIBITED PAYMENTS.
The Company agrees that it will not make any payment of any of the
Subordinated Debt, or take any other action, in contravention of the provisions
of this Agreement. All payments or distributions upon or with respect to the
Subordinated Debt which are received by the Subordinated Creditor contrary to
the provisions of this Agreement shall be received in trust for the benefit of
the Holders, shall be segregated from other funds and property held by the
Subordinated Creditor and shall be forthwith paid over to the Holders in the
same form as so received (with any necessary endorsement) to be applied (in the
case of cash) to, or held as collateral (in the case of non-cash property or
2
Exhibit 5
<PAGE>
securities) for, the payment or prepayment of the Obligations in accordance with
the terms of the Note Purchase Agreements.
Section 5. AMENDMENTS, ETC.
No amendment or waiver of any provision of this Agreement, and no
consent to any departure by the Subordinated Creditor or the Company herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Required Holders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 6. EXPENSES.
The Subordinated Creditor and the Company jointly and severally agree
upon demand to pay to the Holders the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts or
agents, which any Holder may incur in connection with the exercise or
enforcement of any of the rights of the Holders hereunder or the failure by the
Subordinated Creditor or the Company to perform or observe any of the provisions
hereof.
Section 7. ADDRESSES FOR NOTICES.
All notices and other communications provided for hereunder shall be
in writing (including telecopier) and mailed, telecopied or delivered, (i) if to
the Subordinated Creditor, to such Subordinated Creditor c/o the Company at its
address specified in the Note Purchase Agreements; and (ii) if to the Company or
any Holder, at their respective addresses specified in the Note Purchase
Agreements, or as to each party, at such other address as shall be designated by
such party in a written notice to each other party. All such notices and other
communications shall, when mailed, be effective when deposited in the mails,
when telecopied, be effective when sent and electronic confirmation of receipt
received, or when delivered, respectively.
Section 8. NO WAIVER; REMEDIES.
No failure on the part of any Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof. No single or
partial exercise of any right hereunder shall preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9. CONTINUING AGREEMENT; ASSIGNMENTS UNDER THE NOTE PURCHASE
AGREEMENT.
This Agreement is a continuing agreement and shall (i) remain in full
force and effect until the payment in full of the Obligations, (ii) be binding
upon the Subordinated
3
Exhibit 5
<PAGE>
Creditor, the Company and their respective successors and assigns, and (iii)
inure to the benefit of, and be enforceable by the Holders and their
respective successors, transferees and assigns. Without limiting the
generality of the foregoing clause (iii), any Holder may assign or otherwise
transfer all or any portion of its rights and obligations under the
applicable Note Purchase Agreement (including, without limitation, all or any
portion of any Note held by it) to any other person or entity, and such other
person or entity shall thereupon become vested with all rights in respect
thereof granted to such Holder herein or otherwise, subject.
Section 10. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California excluding choice-of-law principles of the
law of such State that would require the application of the laws of a
jurisdiction other than such State.
Section 11. WAIVER OF JURY TRIAL.
Each party hereto, and each of the Holders by their acceptance of the
benefits hereof, irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement or the transactions contemplated
hereby.
[remainder of page is intentionally blank]
4
Exhibit 5
<PAGE>
IN WITNESS WHEREOF, the Subordinated Creditor and the Company each has
caused this Agreement to be duly executed and delivered by its officer thereunto
duly authorized as of the date first above written.
[NAME OF RESTRICTED SUBSIDIARY]
By:
--------------------------
Name:
------------------------
Title:
-----------------------
AMERON INTERNATIONAL CORPORATION
By:
--------------------------
Name:
------------------------
Title:
-----------------------
By:
--------------------------
Name:
------------------------
Title:
-----------------------
5
Exhibit 5
<PAGE>
EMPLOYMENT AGREEMENT
This agreement ("Agreement") is made effective as of June 11, 1996, by and
between Ameron International Corporation, a Delaware corporation, (the
"Company") and James S. Marlen ("Employee").
In consideration of the mutual promises and agreements set forth herein,
the Company and Employee agree as follows:
1. TERM.
1.1 The term of this agreement shall be from June 11, 1996 through June 10,
1999, (the "Term") subject to earlier termination in accordance with the
provisions of section 10 hereinbelow. The Term is subject to extension
upon the mutual agreement of both parties hereto.
2. POSITION AND TITLE.
2.1 The Company hereby employs Employee as its Chairman of the Board, President
and Chief Executive Officer, and Employee hereby accepts such employment.
2.2 Employee shall devote substantially all of his efforts on a full time basis
to the business and affairs of the Company and to its subsidiaries and
affiliates. Employee shall not engage in any business or perform any
services in any capacity whatsoever adverse to the interests of the
Company.
2.3 Employee shall at all times faithfully, industriously, and to the best of
his ability, experience and talents, perform all of the duties of the
office of Chairman of the Board, President and Chief Executive Officer of
the Company.
2.4 As President and Chief Executive Officer, Employee shall be responsible to
the Board of Directors for all actions and activities of the Company.
3. (deleted)
4. BASE SALARY.
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<PAGE>
4.1 As of June 11, 1996, Employee's base salary is $515,000 per year.
Employee's base salary and performance shall be reviewed annually during
the Term, by the Board of Directors of the Company and may be increased
from time to time at the discretion of, and by, such board based on merit
or such other considerations as such Board shall deem appropriate.
5. SHORT-TERM INCENTIVE BONUS.
5.1 The Company has adopted a management incentive bonus plan for its
executives, which plan is currently known as the "Management Incentive
Compensation Plan" (herein the "MIC Plan"), and a Key Executive Long-Term
Cash Incentive Plan (herein the "LTIP").
5.2 Employee shall be deemed to be a participant under the MIC Plan and the
LTIP, as well as any successor management incentive bonus plans adopted by
the Company for its executives. Individual goals and guidelines for bonus
payable to Employee under the MIC Plan and the LTIP, and any successor
plans, shall be subject to review and approval by the Board of Directors of
the Company.
5.3 Employee's participation in the MIC Plan and the LTIP shall be in
accordance with the terms and conditions of those plans and other
compensation arrangements as agreed to herein. In the event of Employee's
termination of employment other than for cause (as defined in paragraph
10.1 hereinbelow) Employee shall be entitled to a pro-rata portion of the
award he would have been entitled to receive under the MIC Plan in respect
of the fiscal year in which Employee's termination date occurs had he
continued in employment until the end of such fiscal year.
5.4 The Company shall consider in good faith any recommendations of Employee
with respect to any management incentive bonus plans subsequent to the MIC
Plan and the LTIP.
6. STOCK GRANTS & OPTIONS.
6.1 (deleted)
6.2 As promptly as possible, with due consideration to the limitations on
shares of the Company's stock available for award under the Company's 1992
Incentive Stock Compensation Plan, the Company shall cause Employee to be
granted stock options of 100,000 shares of the Company's common stock in
the form of non-qualified stock options with terms of 10 years from the
dates of actual grant, with vesting in four installments, each of which
shall equal twenty-five percent of the shares subject to the
2
<PAGE>
option during each of the succeeding four annual periods. The option price
for such 100,000 shares shall be $39.50, that being the New York Stock
Exchange closing market price of the Company's common stock (par value
$2.50) as of June 24, 1996, as agreed to by the Company's Board of
Directors at its meeting held on June 24, 1996.
6.3 Except as noted in paragraph 6.2 hereinabove, Employee hereby waives any
rights to claim any additional stock option grants during calendar years
1996, 1997 and 1998. Notwithstanding the foregoing additional stock grants
may be granted from time to time at the sole discretion of, and by, the
Board of Directors of the Company. The Board of Directors of the Company
shall consider in good faith any recommendations of Employee with respect
to any alternative formulas or plans for stock options.
7. (deleted)
8. PENSION.
8.1 During the Term, the Company shall provide pension benefits to Employee in
accordance with the terms and conditions of Company's Pension Plan for
Salaried Employees and its Supplemental Executive Retirement Plan as in
effect as of June 11, 1993.
8.2 In addition to the pension benefits described in paragraph 8.1 hereinabove,
the Company shall provide the following additional pension benefits to
Employee. Those additional benefits shall be calculated by crediting two
years of service for each actual year of service during the first 9-1/2
years of his employment by the Company under the Supplemental Executive
Retirement Plan described in paragraph 8.1 hereinabove, provided however
that in no event shall Employee's vested pension benefits from the Company
at age 65 be less than $114,302 in the event of Employee's voluntary or
involuntary termination before age 65.
8.3 Vesting of the pension benefits described in paragraphs 8.1 and 8.2
hereinabove began as of June 11, 1993.
8.4 In the event that Employee's employment is terminated by the Company
without cause (as defined in paragraph 10.2 hereinbelow) and/or a Change of
Control (as defined in paragraph 10.5 hereinbelow) during the Term,
Employee shall be entitled to the vested pension benefits described in
paragraph 8.1, and those described in paragraphs 8.2 and 8.3 hereinabove
plus three (3) additional years of credited service. However, in the event
that Employee should obtain new employment within three (3) years of the
date of such termination of employment with the Company, then Employee
shall be entitled only to the vested pension benefits described in
paragraphs 8.1, 8.2 and 8.3 hereinabove from the date of such termination
of employment with the Company and until the effective date of his new
employment.
3
<PAGE>
9. ADDITIONAL EMPLOYEE BENEFITS.
9.1 The Company shall provide Employee the right to participate in its
Executive Life Insurance plan, together with all other fringe benefit
programs in which executive officers of the Company generally participate
so long as such programs are continued by the Company, and all other fringe
benefit programs which may hereafter be adopted by the Company for its
executive officers.
9.2 The Company shall provide Employee the right to participate in its medical
and dental insurance plans.
9.3 In the event that Employee should voluntarily resign or is terminated
without cause (as defined in paragraph 10.2 hereinbelow) by the Company
during the Term, the Company shall provide Employee with substantially the
same level of health and medical benefits in effect for Employee as of the
date of such resignation or termination, with Employee remaining obligated
to continuing to pay employee contributions towards such coverage at the
same level as in effect as of such date, until the earlier of (1) the
second anniversary of such date of resignation or termination, or (2) the
date Employee becomes employed by another party.
9.4 The Company shall provide Employee the right to participate in its long-
term disability insurance plan, which as of this date generally provides
that in the event of total disability, the plan will provide a benefit
equal to 60% of base monthly salary less any income received by Employee
from other sources, such as by way of example and not limitation, Social
Security and worker's compensation.
9.5 The Company shall provide Employee the right to participate in its 401(k)
Savings Plan.
9.6 The Company shall reimburse Employee for dues and assessments for
membership at the Annandale Country Club and the California Club.
9.7 The Company shall provide Employee with the use of a company car
substantially equivalent to a Cadillac STS, together with normal
maintenance, insurance and operating expenses.
9.8 Employee shall be entitled to vacation in accordance with the customary
practice of the company with regard to its executives, which is currently
four (4) weeks annually.
9.9 Employee shall be reimbursed for financial/tax consulting services actually
incurred, not-to-exceed $5,000 annually.
9.10 The Company shall reimburse Employee for fees actually paid by Employee to
his
4
<PAGE>
legal counsel in connection with legal review of this employment agreement,
provided that such reimbursement shall not exceed $5000.00.
10. TERMINATION; EXTENSION.
10.1 During the Term of this Agreement, the Company's Board of Directors may
terminate Employee's employment herein at any time for cause as
contemplated by Section 2924 of the California Labor Code (copy of which in
effect as of the date hereof is attached hereto as Exhibit "E" and made a
part hereof), or as a result of a material breach by Employee of his
obligations under this Agreement, provided however that Company shall
provide Employee with not less than sixty (60) days prior written notice
describing the behavior or conduct which is alleged by the Company to
constitute cause for termination, and Employee shall be provided with
reasonable opportunity to correct such behavior or conduct within that
notice period.
10.2 In the event that the Company terminates Employee's employment for any
cause other than the causes set forth in paragraph 10.1 hereinabove, such
shall be considered to be termination "without cause." Removal from
Employee of the title of "President, Chief Executive Officer and Chairman
of the Board" during the Term, without Employee's consent, shall be deemed
to be termination without cause.
10.3 In the event that the Company terminates this Agreement or Employee's
employment hereunder without cause at any time between June 11, 1996 and
June 10, 1999, except for termination without cause under a Change of
Control (as that term is defined in paragraph 10.5 hereinabove), then:
(1) the Company shall pay Employee a lump-sum severance amount equal
to 3.5 times the sum of (i) Employee's annual base salary in
effect as of the date of termination, and (ii) the highest
management incentive bonus paid to Employee during that period of
time (but not less than sixty percent (60%) times Employee's
annual base salary determined as of the date of termination; and
(2) all unvested restricted stock grants and stock options granted to
Employee shall automatically vest in full.
10.4 On or before January 10, 1999 the Company shall review terms for the future
extension of the Term beyond June 10, 1999. In the event that following
their good faith efforts, the Company and Employee are unable to agree on
reasonable terms for such extension by March 10, 1999, which reasonable
terms shall be consistent with general competitive practices based on the
Company's peer group of companies, then, at Employee's option, Employee's
employment shall terminate on June 10, 1999 and Employee shall be entitled
to those termination benefits described in paragraphs 8.3,
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<PAGE>
8.4, 9.3, 10.3 (1) and 10.3 (2) hereinabove. In the event however that the
Company and Employee continue their good faith negotiations for such an
extension of the Term through June 10, 1999, but have been unable to reach
agreement as of that date, this Agreement shall nevertheless be deemed to
remain in effect until the earlier of the following shall have occurred:
(1) mutual agreement for an extension is reached, (2) Employee's employment
is terminated by the Company, or (3) Employee exercises his option to
consider his employment terminated, in which case Employee shall be
entitled to those termination benefits described in paragraphs 8.3, 8.4,
9.3, 10.3(1) and 10.3(2) hereinabove.
10.5 In the event of Change of Control at any time between June 11, 1996 and
June 10, 1999:
(1) all unvested restricted stock grants and stock options granted to
Employee shall automatically vest in full; and
(2) in the event that the Company terminates Employee's employment
without cause at any time within the period of twelve (12) months
following the date of Change of Control, then Employee shall be
entitled to the following termination benefits:
(i) the Company shall pay Employee a lump-sum severance
amount equal to 2.99 times the sum of (a) Employee's
annual base salary in effect as of the date of
termination, and (b) the highest management incentive
bonus paid to Employee during that period of time (but
not less than sixty percent (60%) times Employee's
annual base salary determined as of the date of
termination;
(ii) all unvested restricted stock grants and stock options
granted to Employee shall automatically vest in full;
and
(iii) Employee shall be entitled to the benefits described in
paragraphs 8.3, 8.4 and 9.3 hereinabove.
The provisions of paragraph 10.5(2) above shall not be deemed to
be additional to those described in paragraph 10.3(1)
hereinabove.
Notwithstanding any other provisions in this Agreement or any other
agreement, plan or arrangement (except as provided in paragraph I of
Exhibit "T" herein, the provisions of which Exhibit are hereby fully
incorporated by reference), if any payment or benefit received or to be
received by Employee, whether under the terms of this Agreement, or any
other agreement, plan or arrangement with the Company, or any other plan,
arrangement or agreement with any person whose actions result in a Change
of
6
<PAGE>
Control or any person affiliated with the Company, (all such payments and
benefits being hereinafter referred to as "Total Payments") would be
subject, in whole or in part, to taxes imposed by Internal Revenue Code
("IRC") Section 4999, then the portion of the Total Payments payable under
this Agreement shall be reduced as provided in accordance with the
provisions of Exhibit "T".
As used herein, the term "Change of Control" means either: (1) the
dissolution or liquidation of the Company; (ii) a reorganization, merger
or consolidation of the Company with one or more corporations as a result
of which the Company is not the surviving corporation; (iii) approval by
the stockholders of the Company of any sale, lease, exchange or other
transfer (in one or a series of transactions) of all or substantially all
of the assets of the Company; (iv) approval by the stockholders of the
Company of any merger or consolidation of the Company in which the holders
of voting stock of the Company immediately before the merger or
consolidation will not own fifty percent (50%) or more of the outstanding
voting shares of the continuing or surviving corporation immediately after
such merger or consolidation; or (v) a change of 25% (rounded to the next
whole person) in the membership of the Board of Directors of the Company
within a 12-month period, unless the election or nomination for election by
stockholders of each new director within such period was approved by the
vote of 85% (rounded to the next whole person) of the directors then still
in office who were in office at the beginning of the 12-month period.
10.6 In the event that Employee should voluntarily resign or is terminated for
cause by the Company during the Term, Employee shall not be entitled to any
of the termination benefits described in this section 10, other than any
payment which may be due pursuant to section 10.5 hereinabove.
10.7 In the event that Employee should die or become disabled or incapacitated
for an uninterrupted period in excess of six (6) months during the Term,
then (1) all unvested restricted stock grants and stock options granted to
Employee shall automatically vest in full, and (2) Employee shall remain
eligible (or entitled as the case may be) for a pro-rated management
incentive or bonus award for the period prior to Employee's death or
disability.
11. COVENANTS.
11.1 Employee agrees that any and all confidential knowledge or information,
including but not limited to customer lists, books, records, data,
formulae, specifications, inventions, processes and methods, developments
and improvements, which has or have been or may be obtained or learned by
him in the course of his employment with the Company, will be held
confidential by him and that he will not disclose the same to any person
outside of the Company either during his employment or after his employment
by the Company has terminated.
7
<PAGE>
11.2 Employee agrees that upon termination of his employment with the Company he
will immediately surrender and turn over to the Company all books, records,
forms, specifications, formulae, data and all papers and writings relating
to the business of the Company and all other property belonging to the
Company, it being understood and agreed that the same are the sole property
of the Company and that Employee will not make or retain any copies
thereof.
11.3 Employee agrees that all inventions, developments or improvements which he
may make, conceive, invent, discover or otherwise acquire during his
employment by the Company in the scope of his responsibilities or otherwise
shall become the sole property of the Company.
12. MISCELLANEOUS.
12.1 All terms and conditions of this Agreement are set forth herein, and there
are no warranties, agreements or understandings, express or implied, except
those expressly set forth herein.
12.2 Any modification of this Agreement shall be binding only if evidenced in
writing signed by both parties hereto.
12.3 Any notice or other communication required or permitted to be given
hereunder shall be deemed properly given if personally delivered or
deposited in the United States mail, registered or certified and postage
prepaid, address to the Company at 245 S. Los Robles Ave., Pasadena, CA
91101, or to Employee at 437 South Orange Grove Boulevard #5, Pasadena, CA
91105, or at such other addresses as may from time to time be designated by
the respective parties in writing.
12.4 The laws of the State of California shall govern the validity of this
Agreement, the construction of its terms and the interpretation of the
rights an duties of the parties.
12.5 In the event that any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable, the same shall not affect any other provisions of this
Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provisions had never been contained herein.
12.6 This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of the Company and the personal representatives,
heirs and legatees of Employee.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first
8
<PAGE>
above written.
AMERON INTERNATIONAL CORPORATION
By:
-------------------------------
A. Frederick Gerstell
Chairman, Compensation & Stock Option Committee
Board of Directors
EMPLOYEE
- ------------------------------------
James S. Marlen
9
<PAGE>
Exhibit "T"
(Page 1 of 2)
I. The Total Payments payable under this Agreement shall be reduced to the
extent necessary so that no portion of the Total Payments shall be subject
to the parachute excise tax (the "Excise Tax") imposed by IRC Section 4999
(after taking into account any reduction in the Total Payments provided by
reason of IRC Section 280G in any other plan, arrangement or agreement) but
only if the amount determined under the following subparagraph I.(1) is
greater than the amount determined under the following subparagraph I.(2):
(1) The amount determined hereunder shall be the net amount of such Total
Payments, as so reduced (and after deduction of the net amount of
Federal, state and local income taxes on such reduced Total Payments
computed at Employee's highest marginal tax rate).
(2) The amount determined hereunder shall be the excess of:
(i) the net amount of such Total Payments, without reduction (but
after deduction of the net amount of Federal, state and local
income taxes on such Total Payments computed at Employee's
highest marginal tax rate), over
(ii) the amount of Excise Tax to which Employee would be subject in
respect of such Total Payments.
Any reduction of the Total Payments shall be made under one of the two
alternative methods described in the following section II. For purposes of
this Exhibit "T" and the calculations hereunder, Total Payments shall not
include any amounts considered a "parachute payment" under IRC Section 280G
in the opinion of Arthur Andersen LLP (or suitable experts selected by the
Company's Board of Directors).
II. If the Total Payments all become payable at approximately the same time:
(1) the payments under section 10.5(2)(i)(b) of the Agreement shall first
be reduced (if necessary, to zero);
(2) the payments under section 10.5(2)(i)(a) of the Agreement shall next
be reduced (if necessary, to zero);
(3) the other portions of the Total Payments shall next be reduced (if
necessary, to zero); and
Exhibit "T"
(Page 2 of 2)
<PAGE>
(4) the acceleration of vesting of awards under stock options shall be
reduced as necessary.
If the Total Payments do not become due and payable at approximately the
same time, the respective Total Payments shall be paid in full in the order
in which they become payable until any portion thereof would not be
deductible, and such portion (and any subsequent portions) of the Total
Payments shall be reduced to zero. In such case, the Company shall make
every reasonable effort to make such payments in the order that results in
the most favorable tax treatment and financial results for Employee.
III. For purposes of determining whether and the extent to which the Total
Payments would be subject to the Excise Tax:
(1) no portion of the Total Payments the receipt or enjoyment of which
Employee shall have effectively waived in writing prior to the date of
termination shall be taken into account;
(2) no portion of the Total Payments shall be taken into account which in
the opinion of Arthur Andersen LLP (or suitable experts selected by
the Company's Board of Directors) does not constitute a "parachute
payment" within the meaning of IRC Section 280G(b)(2), including by
reason of IRC Section 280G(b)(4)(A);
(3) in calculating the Excise Tax, the payments shall be reduced only to
the extent necessary so that the Total Payments in their entirety
constitute reasonable compensation for services actually rendered
within the meaning of IRC Section 280G(b)(4) or are otherwise not
subject to disallowance as deductions because of IRC Section 280G, in
the opinion of Arthur Andersen LLP (or suitable experts selected by
the Company's Board of Directors); and
(4) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by Arthur Andersen
LLP (or suitable experts selected by the Company's Board of Directors)
in accordance with the principles of IRC Section 280G(d)(3) and (4).
The Company shall provide Employee with the calculation of the foregoing
amounts and any supporting materials as are reasonably necessary for
Employee to evaluate the calculations. All calculations hereunder shall be
performed by Arthur Andersen LLP (or suitable experts selected by the
Company's Board of Directors).
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
----------- Year ended November 30
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER COMMON SHARE DATA
Net income (loss) $ 3.87 $ 3.15 $ 2.75 (1) $ (6.28)(2) $ 1.53
Net income excluding restructuring and
related charges, and unusual items 3.87 3.15 2.29 1.87 1.53
Dividends 1.28 1.28 1.28 1.28 1.28
Average shares (3) 3,982,006 3,954,544 3,924,456 3,861,872 3,827,540
Stock price - high 50 37 7/8 43 1/8 38 3/4 36 1/2
Stock price - low 34 1/8 29 31 7/8 31 29
Price/earnings ratio (range) 13-9 12-9 16-12 NA 24-19
- -------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Sales $ 496,940 $ 481,405 $ 417,682 $ 453,357 $ 446,477
Gross profit 129,263 116,731 103,975 119,869 118,528
Interest expense 11,134 11,715 11,191 12,689 10,990
Provision (benefit) for income taxes 8,297 5,190 7,297 (7,674) 2,766
Net income (loss) 15,410 12,452 10,790 (1) (24,255) (2) 5,859
Net income/sales 3.1% 2.6% 2.6% -5.4% 1.3%
Return on equity 11.0% 9.6% 9.0% -18.6% 4.1%
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AT YEAR END
Working capital $ 121,858 $ 114,458 $ 103,904 $ 85,990 $ 107,086
Property, plant and equipment, net 125,687 114,116 112,953 113,199 128,130
Investments, advances and
equity in affiliated companies 33,722 36,197 37,315 39,984 47,882
Total assets 411,666 371,381 350,856 337,842 379,480
Long-term debt, less current portion 112,598 91,565 92,847 89,590 105,874
- -------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Expenditures $ 25,227 $ 16,154 $ 14,934 $ 14,697 $ 21,027
Depreciation 16,078 16,065 15,855 16,444 15,649
-----------
</TABLE>
(1) INCLUDES $1.8 MILLION GAIN, NET OF INCOME TAXES, OR $.46 PER SHARE, ON THE
SALE OF A COLOMBIAN SUBSIDIARY.
(2) INCLUDES $31.5 MILLION, NET OF INCOME TAXES, OR $8.15 PER SHARE, FOR
RESTRUCTURING AND OTHER RELATED CHARGES.
(3) INCLUDES COMMON STOCK EQUIVALENTS IN THE PERIODS IN WHICH THEY HAVE A
DILUTIVE EFFECT.
34
<PAGE>
AMERON 1996 FINANCIAL OVERVIEW
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company generated $44.6 million of cash from operations,
compared to $20.2 million in 1995. These funds, along with additional net
borrowings of $21.3 million, were used for capital expenditures of $25.2
million, business acquisitions of $29.0 million and payment of common dividends
of $5.1 million. Cash and cash equivalents at November 30, 1996 totaled $18.4
million, an increase of $5.5 million from the prior year.
Cash provided by operating activities increased over the previous year due to
improved earnings and reduced working capital requirements of existing
businesses. Inventories as shown on the consolidated balance sheet increased
from last year, however this occurred mainly as a result of business
acquisitions made during the year. Inventories purchased through acquisitions
totaled $8.7 million.
Cash used in investing activities consisted principally of business acquisitions
and capital expenditures. During the year the Company purchased substantially
all the assets of Centron Corporation, a fiberglass pipe manufacturer, and the
worldwide Devoe marine coatings business from Imperial Chemical Industries, PLC
(ICI). The sum of both transactions was $29.0 million. Capital expenditures of
$25.2 million included the purchase of previously leased property in Hawaii for
$11.2 million and normal replacements, upgrades, and expansion of manufacturing
facilities worldwide. During the fiscal year ending November 30, 1997, the
Company anticipates spending approximately $15 to $30 million for capital
expenditures, which will be funded from existing cash balances and lines of
credit, as well as funds generated from operations.
Late in the third quarter of fiscal 1996 the Company completed a $50 million
private placement of unsecured, senior debt with two insurance companies. The
final maturity of the debt is ten years with a fixed interest rate of 7.92%.
Proceeds from the private placement were used to acquire the Devoe business,
purchase property in Hawaii and repay other debt. During the third quarter, the
Company obtained financing from the Industrial Development Corporation of
Mineral Wells, Texas to fund the purchase, construction and equipping of
facilities related to the Company's acquisition of Centron. A total of $7.2
million was borrowed at a variable interest rate with final maturity in the year
2016. Also, the Company maintains a $75 million revolving credit facility with
five banks. During the year, the term of this facility was extended one year to
June 1999. At November 30, 1996, the Company had $114 million in unused credit
available to fund operating and investing activities worldwide. Management
believes that cash flows from operations and current cash balances, together
with currently available lines of credit, will be sufficient to meet future
operating requirements.
RESULTS OF OPERATIONS: 1996 COMPARED WITH 1995
GENERAL
Earnings per share for the fiscal year ended November 30, 1996 were $3.87 on
sales of $496.9 million compared to $3.15 per share on sales of $481.4 million
in 1995. Earnings per share in 1996 improved 23% over the prior year, while
sales in 1996 were the highest in the Company's history. Return on stockholder's
equity increased to 11.0% in 1996 from 9.6% in the prior year.
The significant increase in earnings over the prior year reflects mainly the
improved profitability of Ameron's concrete and steel pipe operations in the
western United States, and higher sales and earnings from the Company's
worldwide protective coatings and fiberglass pipe businesses.
SALES
Sales increased by $15.5 million to $496.9 million in 1996 due partly to
increased shipments of fiberglass pipe to oilfield and offshore platform markets
in the United States and Latin America. Sales of protective coatings worldwide
also improved over the prior year. Partially offsetting these increases were
lower sales of construction products in Hawaii due to the continued slowdown in
construction spending in the Islands. Sales of concrete and steel pipe were down
slightly from the record level in 1995.
35
<PAGE>
Protective Coatings sales improved to $142.6 million in 1996, versus $130.5
million in the prior year. Sales in domestic markets were up as deliveries of
protective coatings improved over last year. European operations benefited from
the introduction of Ameron's unique PSX siloxane-based coatings. Sales in Asian
markets also improved over the previous year. In October 1996, the Company
completed the acquisition of the worldwide Devoe marine coatings business from
ICI. The acquisition made Ameron the largest supplier of high-performance marine
and offshore coatings in the United States and greatly expanded the Company's
sales and service network and global presence in these markets. Ameron is now
manufacturing and marketing a number of well-known marine and offshore product
lines under Devoe trade names. In addition, the operation in The Netherlands
manufactures and sells Devoe coatings to industrial maintenance markets in
Europe, the Middle East and parts of Africa. The Devoe business acquired by
Ameron generated sales of approximately $50 million in 1995 when part of ICI.
While the acquisition had a minor impact on Ameron's sales in 1996, the Company
expects to begin realizing substantial benefits in 1997.
Fiberglass Pipe sales increased to $104.1 million in 1996 compared to $82.8
million in 1995. The increase was attributed to higher sales of oilfield and
offshore platform products in the United States and Latin America. European
sales were down because of sluggish markets and major order delays. Asian
operations reported higher sales than the prior year. In January 1996, the
Company acquired the assets of Centron Corporation, a privately-held,
Texas-based manufacturer of fiberglass pipe for oilfield applications. Looking
forward, the Company expects exports from the United States will continue to
increase, and sales in Europe will improve.
Concrete & Steel Pipe sales were $148.5 million in 1996, down slightly from the
$153.2 million posted in 1995. During 1996, the Company completed work on
several major water transmission pipelines in California, including the Coastal
Aqueduct, the Eastside pipeline and the Los Vaqueros pipeline.Ameron continued
to benefit from the strong demand for water-transmission piping throughout the
western United States as water agencies expanded water storage and distribution
systems. Total order backlog for this segment at November 30, 1996, was $60
million, compared to backlog of $97 million a year ago. Backlog subsequently
increased significantly because of orders received during the first quarter of
1997. Considering these additional orders, the Company anticipates sales will
improve for the coming year.
Construction & Allied Products sales totaled $101.8 million in 1996, versus
$115.0 million in the prior year. The Company's construction products business
in Hawaii reported substantially lower sales in 1996 compared to 1995.
Construction spending in 1996 for large public and private building projects
continued to decline in the Islands. Spending for residential construction
declined as well. The Company anticipates that construction spending in the
Islands will remain weak in the near term. Sales of the Company's Pole Products
Division improved slightly over last year. The division further penetrated new
markets in the Midwest and South with its prestressed concrete lighting and
traffic poles. The Company expects continued sales growth in the Pole Products
Division.
GROSS PROFIT
Gross profit in 1996 was $129.3 million or 26.0% of sales, an improvement over
1995 performance of $116.7 million or 24.2% of sales. The improved gross profit
dollars and margin can be attributed mainly to the Company's Concrete & Steel
Pipe operations. Strong demand for water transmission piping coupled with
manufacturing cost reductions and improved productivity resulted in higher
margins in this segment. In addition, margins in Protective Coatings increased
as a result of lower raw material costs, improved manufacturing productivity and
a favorable product mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $103.3 million in 1996 or
20.8% of sales, compared to $95.8 million or 19.9% of sales in 1995. The $7.5
million increase was attributable partly to the Centron and Devoe acquisitions
and partly to increased provisions for doubtful accounts and pending claims.
Selling, general and administrative expenses as a percent of sales increased
because despite slightly lower sales from the concrete and steel pipe segment,
expenses rose somewhat to maintain marketing and engineering support for
expected future business activity.
Selling, general and administrative expenses include charges for environmental
and legal claims. For a discussion on pending environmental and legal claims,
refer to Note Fifteen, "Commitments and Contingencies." Given recorded reserves,
the Company does not expect these matters to have a material adverse effect on
the Company's present or future financial position or its results of operations.
36
<PAGE>
In the early 1970s, the Company disposed of certain quantities of waste at the
Stringfellow Hazardous Waste Site in Riverside County, California, which is one
of several priority sites on the Superfund list established by the U.S.
Environmental Protection Agency. Ameron waste accounted for less than one
percent of the total waste deposited at the site. In 1993, the State of
California was found to be 75% to 85% liable for the remediation costs of this
Superfund site. However, the State of California has appealed this finding.
Ameron maintains reserves that it believes to be adequate to cover expected
future costs associated with this matter.
The Company is subject to federal, state and local laws and regulations
concerning the environment and, in addition to the Stringfellow site, is
currently participating in administrative proceedings at several sites under
these laws. While the Company finds it difficult to estimate with any certainty
the total cost of remediation at the several sites, on the basis of currently
available information and reserves provided, the Company believes it unlikely
that the outcome of such environmental regulatory proceedings will have a
material adverse effect on the Company's financial position or its results of
operations.
OTHER INCOME
Other income includes equity in earnings of affiliated companies (see Note Two,
"Other Income"). Equity in earnings of affiliated companies totaled $2.3
million, declining $1.5 million from the previous year. Tamco's sales improved
in 1996, but net income was down slightly. Gifford-Hill-American, Inc.,
Bondstrand, Ltd. and Oasis-Ameron, Ltd. all reported improved earnings over the
prior year. Ameron Saudi Arabia, Ltd. reported its second year of losses.
Other income also includes royalties and fees from affiliated companies and
licensees, currency gains and losses, and other miscellaneous income. Royalty
and fee income rose $1.3 million in 1996 over 1995 due to new protective
coatings licensing agreements and improved results from existing fiberglass pipe
and protective coatings licensees. Foreign currency losses of $.9 million were
incurred by the Company's Colombian and European operations in 1995 as compared
to gains of $.6 million realized in 1996. Miscellaneous income includes sublease
and property rental income, which was lower than last year.
INTEREST
Interest expense was $11.1 million in 1996 compared to $11.7 million in 1995.
The decrease was the result of lower borrowing levels during the second and
third fiscal quarters of 1996.
PROVISION FOR INCOME TAXES
The Company's effective tax rate increased from 29.4% in 1995 to 35.0% in 1996.
The higher effective rate was attributable to taxes accrued for unremitted
earnings of certain affiliated companies.
RESULTS OF OPERATIONS: 1995 COMPARED WITH 1994
GENERAL
Net income in 1995 was $12.5 million or $3.15 per share on sales of $481.4
million, compared to net income of $10.8 million or $2.75 per share on sales of
$417.7 million in 1994. Results in 1994 included a gain on the sale of a
non-strategic steel fabrication subsidiary in Colombia, which resulted in a net
after-tax gain of $1.8 million or $.46 per share. After adjusting for the gain
on the sale of this subsidiary, earnings per share for 1994 were $2.29. The
increase in 1995 earnings over equivalent 1994 earnings was 38%.
The sales and earnings improvement over 1994 reflects a significant increase in
concrete and steel pipe deliveries in California, as well as improved
performance by the Fiberglass Pipe business segment. Net income in 1995 also
benefited from improved performance at certain affiliated companies.
SALES
Compared to 1994, sales increased $63.7 million or 15% in 1995, primarily
because of significantly improved deliveries of concrete and steel pipe in
California and increased shipments of fiberglass pipe to Central Africa, the
Middle East, Europe and the Pacific Rim. These sales increases were partially
offset by lower Protective Coatings shipments to North Africa from the Company's
subsidiary in The Netherlands.
Protective Coatings sales were $130.5 million in 1995 compared to $134.2 million
in 1994. Sales of protective coatings and product finishes in the U.S. increased
over 1994 record sales. Ameron's product line based on proprietary
PSX-Registered Trademark- technology continued to grow as an important component
of its high-performance product sales. The primary product in that series, PSX
700, tripled sales in 1995 compared
37
<PAGE>
to 1994 and was among the segment's top five products in sales volume. Modest
gains were made in key U.S. market segments, notably rail, marine and offshore.
Sales in Europe, while adversely affected by the reduction in shipments to North
Africa, showed improvements in core industrial segments in Western and Eastern
Europe and in the Middle East.
Fiberglass Pipe sales improved to $82.8 million in 1995 versus $66.2 million in
1994. The increase in sales was attributed to strong oilfield, industrial,
offshore and marine markets in Europe, Central Africa, the Middle East and the
Pacific Rim. Sales in the U.S. declined during 1995.
Concrete & Steel Pipe sales totaled $153.2 million in 1995, compared to $101.6
million in 1994. The primary reason for the $51.6 million increase was the
commencement of several major water transmission pipelines in California,
including the Coastal Aqueduct, the Eastside pipeline and the Los Vaqueros
pipeline, the largest concrete pipe contract in Ameron's history.
Construction & Allied Products sales totaled $115.0 million in 1995 compared to
$115.6 million in 1994. The Pole Products business achieved significant growth
in traffic signal, highway lighting and street lighting applications due to
broader geographic coverage. The Company's Hawaiian operation, which is the
largest supplier of ready-mix concrete on the Islands continued to experience a
downturn in sales due to reduced construction spending in Hawaii.
GROSS PROFIT
Gross profit in 1995 totaled $116.7 million compared to $104.0 million in 1994.
The improvement in gross profit was due mainly to the increase in sales volume
in 1995, as discussed above. Gross profit as a percent of sales declined from
24.9% in 1994 to 24.2% in 1995. The decrease in margin resulted principally from
a change in the product mix caused by higher sales of lower margin concrete and
steel pipe, coupled with decreased margins due to higher raw material costs and
competitive pricing in the Protective Coatings segment. This decline was offset
partially by improved gross profit margins in the Company's other business
segments as a result of improved pricing and higher capacity utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses totaled $95.8 million in 1995 or
19.9% of sales, compared to $86.8 million or 20.8% of sales in 1994. The $9.0
million increase was attributable primarily to the substantial increase in
business activity over 1994.
GAIN ON THE SALE OF ASSETS
The gain from the sale of assets in 1994 was realized principally from the
divestiture of a wholly-owned non-strategic steel fabrication subsidiary in
Colombia.
OTHER INCOME
Equity in earnings of affiliated companies recorded in 1995 totaled $3.8
million, an increase of $2.2 million from 1994. Two affiliates, Tamco, which
operates a steel mini-mill in Southern California, and Bondstrand, Ltd., a
fiberglass pipe manufacturer in Saudi Arabia, reported higher sales and earnings
in 1995. Sales and earnings of the Company's concrete pipe producing affiliates,
Gifford-Hill-American, Inc. in Texas and Ameron Saudi Arabia, Ltd. were lower in
1995 than in the previous year.
Royalty and fee income from affiliated companies and licensees declined in 1995
from the prior year as a result of lower sales by affiliated companies. Foreign
currency losses were incurred by the Company's Colombian and European
operations. Miscellaneous income included sublease and property rental income as
well as other income from various sources.
INTEREST
Interest expense totaled $11.7 million in 1995, an increase of $.5 million from
1994 due to higher borrowing levels maintained throughout the year.
PROVISION FOR INCOME TAXES
The Company's effective tax rate declined from 40.3% in 1994 to 29.4% in 1995.
The lower effective rate was attributable to a reduction of deemed dividends
from foreign subsidiaries and improved availability of foreign tax credits on
the Federal tax return.
38
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
--------- Year ended November 30
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 496,940 $ 481,405 $ 417,682
Cost of sales 367,677 364,674 313,707
--------- --------- ---------
Gross profit 129,263 116,731 103,975
Selling, general and administrative expenses 103,320 95,786 86,767
--------- --------- ---------
Operating profit 25,943 20,945 17,208
Gain from sale of assets 576 730 4,188
Other income 7,940 7,338 7,198
--------- --------- ---------
Income before interest and income taxes 34,459 29,013 28,594
Interest income 382 344 684
Interest expense 11,134 11,715 11,191
--------- --------- ---------
Income before income taxes 23,707 17,642 18,087
Provision for income taxes 8,297 5,190 7,297
--------- --------- ---------
Net income $ 15,410 $ 12,452 $ 10,790
--------- --------- ---------
--------- --------- ---------
Net income per share $ 3.87 $ 3.15 $ 2.75
--------- --------- ---------
--------- --------- ---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
39
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of November 30
----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 18,381 $ 12,923
Receivables, less allowance of $5,939 in
1996 and $4,800 in 1995 105,534 105,019
Inventories 84,971 76,426
Deferred income tax benefits 9,741 7,315
Prepaid expenses and other 4,996 5,155
---------------------------
Total current assets 223,623 206,838
Investments, advances and equity in undistributed
earnings of affiliated companies 33,722 36,197
Property, plant and equipment
Land 33,780 22,068
Buildings 50,450 50,256
Machinery and equipment 211,652 203,282
Construction in progress 7,958 8,980
---------------------------
Total property, plant and equipment at cost 303,840 284,586
Less accumulated depreciation (178,153) (170,470)
---------------------------
Total property, plant and equipment, net 125,687 114,116
Intangible assets, net of accumulated amortization
of $3,269 in 1996 and $2,902 in 1995 12,061 637
Other assets 16,573 13,593
---------------------------
Total assets $ 411,666 $ 371,381
---------------------------
---------------------------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
40
<PAGE>
<TABLE>
<CAPTION>
As of November 30
----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) 1996 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 1,242 $ 1,718
Current portion of long-term debt 17,753 17,803
Trade payables 36,715 32,219
Accrued liabilities 41,102 37,427
Income taxes 4,953 3,213
---------------------------
Total current liabilities 101,765 92,380
Deferred income taxes 2,727 4,040
Long-term debt, less current portion 112,598 91,565
Other long-term liabilities 49,778 48,824
---------------------------
Total liabilities 266,868 236,809
Commitments and contingencies
Stockholders' equity
Common stock, par value $2.50 a share,
authorized 12,000,000 shares,
outstanding 3,985,112 shares in 1996 and
3,956,497 shares in 1995, net of treasury shares 12,895 12,823
Additional paid-in capital 16,212 15,322
Retained earnings 157,321 146,987
Cumulative foreign currency translation adjustments 1,149 2,219
Less treasury stock (1,172,900 shares in 1996 and 1995),
at cost (42,779) (42,779)
---------------------------
Total stockholders' equity 144,798 134,572
---------------------------
Total liabilities and stockholders' equity $ 411,666 $ 371,381
---------------------------
---------------------------
----------
</TABLE>
41
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended November 30
----------
(DOLLARS IN THOUSANDS) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,410 $ 12,452 $ 10,790
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 16,078 16,065 15,855
Amortization 367 161 140
Provision (benefit) for deferred income taxes (3,460) (822) 9,740
Equity in earnings of affiliated companies (2,298) (3,844) (1,685)
Dividends from affiliated companies 4,152 6,186 1,755
Gain from sale of assets (576) (730) (4,188)
Stock contributed to employee benefit plan 186 681 967
Other, net 698 (537) (479)
Other changes in operating assets and liabilities,
excluding business acquisitions:
(Increase) decrease in receivables 2,405 (8,483) (17,109)
Increase in inventories (667) (4,182) (9,383)
(Increase) decrease in other current assets (2,211) (3,274) 3,374
Increase in long-term assets (536) (440) (2,530)
Increase (decrease) in trade payables,
accrued liabilities and income taxes 10,415 (2,511) (9,899)
Increase in long-term liabilities 4,616 9,445 6,184
----------------------------------------
Net cash provided by operating activities 44,579 20,167 3,532
----------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of assets 1,371 1,126 4,688
Additions to property, plant and equipment (25,227) (16,154) (14,934)
Business acquisitions (29,032) -- --
Investment in life insurance policies (2,995) (1,452) (2,872)
Other -- -- (420)
----------------------------------------
Net cash used in investing activities (55,883) (16,480) (13,538)
----------------------------------------
FINANCING ACTIVITIES
Net change in debt with maturities of
three months or less (471) (1,061) 395
Issuance of debt 65,022 15,897 13,041
Repayment of debt (43,277) (9,849) (5,953)
Dividends on common stock (5,076) (5,051) (5,016)
Issuance of common stock 776 34 401
----------------------------------------
Net cash provided by (used in) financing activities 16,974 (30) 2,868
----------------------------------------
Effect of exchange rate changes on cash
and cash equivalents (212) 236 430
----------------------------------------
Net change in cash and cash equivalents 5,458 3,893 (6,708)
Cash and cash equivalents at beginning of year 12,923 9,030 15,738
----------------------------------------
Cash and cash equivalents at end of year $ 18,381 $ 12,923 $ 9,030
----------------------------------------
----------------------------------------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
42
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
------------------------
Shares Additional Retained
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) Outstanding Amount Paid-in Capital Earnings Other
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1993 3,886,465 $ 12,648 $ 13,414 $ 133,812 $(1,581)
Net income -- 1994 10,790
Exercise of stock options and issuance of stock
to employee savings plan 49,246 124 1,244
Dividends on common stock of $1.28 a share (5,016)
Foreign currency translation adjustments 1,431
Minimum pension liability adjustment 720
-----------------------------------------------------------------------
Balance, November 30, 1994 3,935,711 12,772 14,658 139,586 570
Net income -- 1995 12,452
Exercise of stock options and issuance of stock
to employee savings plan 20,786 51 664
Dividends on common stock of $1.28 a share (5,051)
Foreign currency translation adjustments 1,649
-----------------------------------------------------------------------
Balance, November 30, 1995 3,956,497 12,823 15,322 146,987 2,219
Net income -- 1996 15,410
Exercise of stock options and issuance of stock
to employee savings plan 28,615 72 890
Dividends on common stock of $1.28 a share (5,076)
Foreign currency translation adjustments (1,070)
-----------------------------------------------------------------------
Balance, November 30, 1996 3,985,112 $ 12,895 $ 16,212 $ 157,321 $ 1,149
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE ONE: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Ameron
International Corporation and all wholly-owned subsidiaries (the Company). All
material intercompany accounts and transactions have been eliminated.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with the current
year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REVENUE RECOGNITION
Revenue from sales of protective coatings, fiberglass pipe, construction
products and certain other products is recorded at the time the goods are
shipped or when title passes. Revenue from sales of concrete and steel pipe is
recorded at the time the pipe is inspected and accepted by the customer.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Such costs
were approximately $4,400,000 in 1996, $4,300,000 in 1995 and $4,700,000
in 1994.
ENVIRONMENTAL CLEAN-UP COSTS
The Company expenses environmental clean-up costs related to existing conditions
resulting from past or current operations and from which no current or future
benefit is discernible. Expenditures that extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The Company determines its liability on a site by site basis and
records a liability at the time when it is probable and can be reasonably
estimated. The estimated liability of the Company is not discounted or reduced
for possible recoveries from insurance carriers.
INCOME TAXES
In December 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes."
The adoption of this Statement changes the Company's method of accounting for
income taxes from the deferred method (Accounting Principles Board Opinion
(APBO) No. 11) to an asset and liability approach. Previously the Company
deferred the past tax effects of timing differences between financial reporting
and taxable income. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets
and liabilities.
NET INCOME PER SHARE
Net income per share is computed on the basis of the weighted average number of
common shares outstanding each year, plus common stock equivalents related to
dilutive stock options. The number of shares used in the computation of per
share data was 3,982,006 in 1996, 3,954,544 in 1995 and 3,924,456 in 1994.
CASH AND CASH EQUIVALENTS
Cash equivalents include time deposits with maturities of three months or less
when purchased.
INVENTORY VALUATION
Inventories are valued at the lower of cost or market. Cost is principally
determined by either the first-in, first-out or average cost methods. Such cost
includes raw materials, direct labor and manufacturing overhead. Certain steel
inventories are valued using the last-in, first-out cost method.
EQUITY METHOD OF ACCOUNTING
Investments in significant 30- to 50-percent-owned affiliates are accounted for
by the equity method of accounting, whereby the investment is carried at cost of
acquisition, plus the Company's equity in undistributed earnings or losses since
acquisition. Reserves are provided where management determines that the
investment or equity in earnings is not realizable.
PROPERTY, PLANT AND EQUIPMENT
Items capitalized as property, plant and equipment, including improvements to
existing facilities, are recorded at cost. Upon sale or retirement, the cost and
related accumulated depreciation are removed from the respective accounts, and
any gain or loss is included in income. Maintenance and repair costs are
expensed as incurred. Interest costs applicable to the construction of major
plant and expansion projects were immaterial for the periods presented.
DEPRECIATION METHOD
Depreciation is computed principally using the straight-line method based on
estimated useful lives of the assets. Annual rates of depreciation are as
follows:
Percentage of Cost
- --------------------------------------------------------
Buildings 2.50 - 10.00
Machinery and equipment
Autos, trucks and trailers 6.67 - 50.00
Cranes and tractors 10.00 - 15.00
Manufacturing equipment 6.67 - 33.33
Other 5.00 - 66.67
AMORTIZATION OF INTANGIBLES
Goodwill and other intangible assets are amortized on a straight-line basis over
periods ranging up to 40 years.
SELF INSURANCE
The Company utilizes third-party insurance subject to varying retention levels
or self insurance. Such self insurance relates to losses and liabilities
primarily associated with workers' compensation claims and general, product and
vehicle liability. Losses are accrued based upon the Company's estimates of the
aggregate liability for claims incurred using certain actuarial assumptions
followed in the insurance industry and based on Company experience.
FOREIGN CURRENCY TRANSLATION
The functional currency for the majority of the Company's foreign operations is
the applicable local currency. The translation from the applicable foreign
currencies to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for revenue and expense
accounts using a weighted average exchange rate during the period. The resulting
translation adjustments are recorded as a component of shareholders' equity.
Gains or losses resulting from foreign currency transactions are included in
other income.
PENDING ACCOUNTING CHANGES
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that
44
<PAGE>
the carrying amount of an asset may not be recoverable. The Statement must be
adopted by the Company no later than the fiscal year ending November 30, 1997.
The Company does not expect implementation of this statement to have a material
effect on its financial position or its results of operations.
In November 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock-Based Compensation." This new standard encourages, but
does not require, companies to recognize compensation expense for grants of
stock, stock options, and other equity instruments based on a fair-value method
of accounting.
Companies that do not choose to adopt the new expense recognition rules of SFAS
No. 123 will continue to apply the existing accounting rules contained in APBO
No. 25, but will be required to provide pro forma disclosures of the
compensation expense determined under the fair-value provisions of SFAS No. 123,
if material. APBO No. 25 requires no recognition of compensation expense for
most of the stock-based compensation arrangements provided by the Company,
namely, option grants where the exercise price is equal to the market price at
the date of grant.
The Company is required to adopt either the recognition or the disclosure
provisions of SFAS No. 123 no later than the fiscal year ending November 30,
1997. The Company expects to continue to follow the accounting provisions of
APBO No. 25 for stock-based compensation and to furnish the pro forma
disclosures required under SFAS No. 123, if material.
CASH FLOW INFORMATION
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Interest paid $ 9,545 $ 9,849 $ 10,365
Income taxes paid, net $ 9,010 $ 2,448 $ 1,581
NOTE TWO: OTHER INCOME
Other income for the years ended November 30 included the following:
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Royalties and fees from affiliated
companies and licensees $ 4,557 $ 3,297 $ 4,018
Equity in earnings of
affiliated companies 2,298 3,844 1,685
Foreign currency gain (loss) 558 (928) (205)
Miscellaneous 527 1,125 1,700
------------------------------------
$ 7,940 $ 7,338 $ 7,198
------------------------------------
------------------------------------
The Company provides technical services and receives fees, royalties and other
income from several of its affiliates and licensees, which are included above.
NOTE THREE: CASH AND CASH EQUIVALENTS
At November 30, 1996, the Company had approximately $3,978,000 invested in time
deposits. The Company had no cash equivalents at November 30, 1995. The carrying
value of cash and cash equivalents approximates their fair value.
NOTE FOUR: RECEIVABLES
Receivables at November 30, were as follows:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Trade $ 102,683 $ 101,732
Affiliated companies 2,205 1,533
Dividends from affiliated companies 1,138 550
Other 5,447 6,004
Reserve (5,939) (4,800)
---------------------------
$ 105,534 $ 105,019
---------------------------
---------------------------
NOTE FIVE: INVENTORIES
Inventories at November 30 were as follows:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Finished products $ 44,577 $ 32,210
Products in process 17,467 26,128
Materials and supplies 22,927 18,088
---------------------------
$ 84,971 $ 76,426
---------------------------
---------------------------
Certain steel inventories are valued using the last-in, first-out cost method.
These items comprised 10.1% and 8.7% of consolidated inventories at November 30,
1996 and 1995, respectively. If such inventories had been valued using the
first-in, first-out cost method, total inventories would have increased by
$1,597,000 and $2,469,000 at November 30, 1996 and 1995, respectively.
NOTE SIX: AFFILIATED COMPANIES
The Company's principal investments, which have been accounted for by the equity
method, are summarized as follows:
Ownership
Products Affiliate Interest
- --------------------------------------------------------------------------------
Concrete pipe products Gifford-Hill-American, Inc. 50%
Ameron Saudi Arabia, Ltd. 30%
Steel products Tamco 50%
Other Bondstrand, Ltd. 40%
Oasis-Ameron, Ltd. 40%
Investments in affiliated companies and the amount of undistributed retained
earnings included in the Company's consolidated retained earnings at November 30
were as follows:
Concrete
pipe Steel
(IN THOUSANDS) products products Other Total
- --------------------------------------------------------------------------------
INVESTMENT, NOVEMBER 30, 1996
COST $ 6,194 $ 8,482 $ 3,706 $ 18,382
ACCUMULATED EQUITY IN
UNDISTRIBUTED EARNINGS 13,175 9,918 1,842 24,935
RESERVES (7,145) (2,450) -- (9,595)
----------------------------------------------
$ 12,224 $ 15,950 $ 5,548 $ 33,722
----------------------------------------------
----------------------------------------------
Investment, November 30, 1995
Cost $ 6,194 $ 8,482 $ 3,706 $ 18,382
Accumulated equity in
undistributed earnings 15,258 9,335 2,581 27,174
Reserves (8,116) (1,042) (201) (9,359)
----------------------------------------------
$ 13,336 $ 16,775 $ 6,086 $ 36,197
----------------------------------------------
----------------------------------------------
The Company has provided income taxes on the undistributed earnings of its
affiliated companies.
45
<PAGE>
Summarized and combined financial information for affiliates in the concrete
pipe products business follows:
Financial Condition
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Current assets $ 61,483 $ 63,360
Noncurrent assets 37,178 39,604
--------------------------
$ 98,661 $ 102,964
--------------------------
--------------------------
Current liabilities $ 38,993 $ 35,554
Noncurrent liabilities 3,191 7,303
Stockholders' equity 56,477 60,107
--------------------------
$ 98,661 $ 102,964
--------------------------
--------------------------
Results of Operations
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Net sales $ 38,753 $ 41,861 $ 80,230
----------------------------------------
----------------------------------------
Gross profit $ 8,987 $ 8,087 $ 23,715
----------------------------------------
----------------------------------------
Net income (loss) $ (2,397) $ (1,924) $ 5,688
----------------------------------------
----------------------------------------
The Company's investment in Gifford-Hill-American, Inc., which manufactures
concrete pressure pipe, was recorded based on audited financial statements as of
June 30, 1996 and unaudited financial statements as of October 31, 1996.
The Company's investments in Ameron Saudi Arabia, Ltd., Bondstrand, Ltd. and
Oasis-Ameron, Ltd. were recorded based on audited financial statements as of
December 31, 1995 and unaudited financial statements as of September 30, 1996.
The investment in Tamco was based on audited financial statements as of November
30, 1996.
Summarized and combined financial information for Tamco, Bondstrand, Ltd. and
Oasis-Ameron, Ltd. follows:
Financial Condition
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Current assets $ 65,877 $ 65,392
Noncurrent assets 30,525 27,787
--------------------------
$ 96,402 $ 93,179
--------------------------
--------------------------
Current liabilities $ 38,700 $ 36,718
Noncurrent liabilities 3,607 3,588
Stockholders' equity 54,095 52,873
--------------------------
$ 96,402 $ 93,179
--------------------------
--------------------------
Results of Operations
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Net sales $ 150,116 $ 140,568 $ 136,790
----------------------------------------
----------------------------------------
Gross profit $ 26,711 $ 26,387 $ 17,637
----------------------------------------
----------------------------------------
Net income $ 8,432 $ 7,870 $ 3,886
----------------------------------------
----------------------------------------
The amount of investments and accumulated equity in the undistributed earnings
in the Middle Eastern affiliates was approximately $17,000,000 and $18,000,000
at November 30, 1996 and 1995, respectively.
Sales and technical services provided by the Company to affiliates in the Middle
East totaled approximately $1,200,000 in 1996, $1,700,000 in 1995 and $3,500,000
in 1994, and related receivables aggregated approximately $900,000 at November
30, 1996 and $1,300,000 at November 30, 1995.
NOTE SEVEN: SALES OF ASSETS
During 1994, the Company completed the sale of a non-strategic steel fabrication
subsidiary in Colombia. This sale resulted in an after tax gain of $1.8 million
or $.46 per share, for the year.
NOTE EIGHT: BUSINESS ACQUISITIONS
On January 8, 1996, the Company acquired for cash substantially all the assets
of Centron Corporation (Centron). Centron, located in Mineral Wells, Texas is a
manufacturer of fiberglass pipe for the worldwide oilfield market. The
acquisition was accounted for as a purchase and Centron's results of operations
have been included in the Company's consolidated financial statements since
January 1996.
During the fourth quarter of fiscal 1996, the Company acquired for cash the
worldwide Devoe marine coatings business of Imperial Chemical Industries, PLC
(ICI). The acquisition was accounted for as a purchase and its results of
operations were included in the Company's consolidated financial statements
beginning in the fourth quarter of fiscal 1996. The Company will manufacture and
sell Devoe coatings in various marine, offshore and industrial maintenance
markets.
The above acquisitions were completed for a total of $29,032,000. The excess of
the purchase price over the fair values of the assets acquired was $7,613,000
and was recorded as goodwill, which is being amortized on a straight-line basis
over a period not to exceed 40 years.
SUBSEQUENT EVENT (UNAUDITED)
On February 7, 1997, the Company signed an agreement to acquire the maintenance
coatings business of The Valspar Corporation; Valspar agreed, in turn, to
acquire Ameron's product finishes business. The Valspar maintenance coatings
business had sales of approximately $18 million in 1996, and the Ameron product
finishes business had sales of $16 million.
NOTE NINE: ACCRUED LIABILITIES
Accrued liabilities at November 30, were as follows:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Compensation and benefits $ 12,653 $ 12,998
Self-insurance reserves 6,317 5,874
Reserves for pending claims and litigation 5,188 3,086
Interest 3,753 1,426
Commissions and royalties 2,927 2,947
Taxes (other than income taxes) 2,816 3,705
Other 7,448 7,391
--------------------------
$ 41,102 $ 37,427
--------------------------
--------------------------
NOTE TEN: EMPLOYEE BENEFIT PLANS
The Company has a qualified, defined benefit, noncontributory pension plan for
employees not covered by union pension plans, which is accounted for in
accordance with SFAS No. 87. Benefits paid to retirees are based upon age at
retirement, years of credited service and average compensation or negotiated
benefit rates. The Company's funding policy is to make contributions to the plan
sufficient to meet the minimum funding requirements of applicable laws and
regulations, plus such additional amounts, if any, as the Company deems
appropriate based on actuarial consultants' recommendations.
Assets of the defined benefit plan are invested in a directed trust. Assets in
the trust are invested in equity securities of corporations (including
$4,781,000 of the Company's common stock at November 30, 1996), U.S. government
obligations, derivative securities, corporate bonds and money market funds.
46
<PAGE>
The Company has a supplemental non-qualified, non-funded retirement plan, for
which the Company has purchased cost recovery life insurance on the lives of the
participants. The Company is the sole owner and beneficiary of such policies.
The amount of the coverage is designed to provide sufficient revenues to cover
all costs of the plan if assumptions made as to mortality experience, policy
earnings and other factors are realized. On November 30, 1996 and 1995, the cash
surrender value of these policies was $4,871,000 and $3,775,000, respectively.
Net periodic pension cost for the years ended November 30 consists of the
following:
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Service cost:
Defined benefit plan $ 1,953 $ 1,822 $ 2,111
Supplemental plan 217 26 25
Interest cost:
Defined benefit plan 8,292 8,333 7,663
Supplemental plan 250 213 186
Return on plan assets (14,996) (17,466) 508
Net (amortization) deferral:
Defined benefit plan 4,560 7,860 (9,701)
Supplemental plan 346 273 268
----------------------------------------
Net periodic pension cost $ 622 $ 1,061 $ 1,060
----------------------------------------
----------------------------------------
The following table sets forth the funding status of the qualified, defined
benefit plan and the amount recognized in the Company's balance sheet at
November 30:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $ 103,724 $ 104,666
Non-vested benefits 522 738
---------------------------
Accumulated benefit obligation 104,246 105,404
Effect of salary increases 7,722 8,669
---------------------------
Actuarial present value of
projected benefit obligation 111,968 114,073
Less plan assets at market value 122,571 115,204
---------------------------
Plan assets in excess of
projected benefit obligation (10,603) (1,131)
Unrecognized asset 15,477 6,196
---------------------------
Accrued pension cost in
consolidated balance sheets $ 4,874 $ 5,065
---------------------------
---------------------------
The following table sets forth the status of the supplemental plan as of
November 30:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $ 3,007 $ 2,618
Non-vested benefits 3 3
---------------------------
Accumulated benefit obligation 3,010 2,621
Effect of salary increases 548 259
---------------------------
Actuarial present value of projected
benefit obligation 3,558 2,880
Unrecognized obligation (841) (729)
Unrecognized net loss (73) (135)
---------------------------
Accrued pension cost in consolidated
balance sheets $ 2,644 $ 2,016
---------------------------
---------------------------
The 1996 actuarial computations for both the qualified, defined benefit plan and
the supplemental plan assumed a discount rate of 8.0% and annual salary
increases of 5.5%. The qualified, defined benefit plan assumed an expected
long-term rate of return of 9.75%.
Approximately 19% of the Company's employees are covered by union sponsored,
collectively bargained, multi-employer pension plans. The Company contributed
and charged to expense $2,600,000, $2,700,000 and $2,400,000 in 1996, 1995 and
1994, respectively. These contributions are determined in accordance with the
provisions of negotiated labor contracts and generally are based on the number
of hours worked. Information from the plans' administrators is not available to
permit the Company to determine its share of unfunded vested benefits, if any.
The Company has no intention of withdrawing from any of these plans, nor is
there any intention to terminate such plans.
The Company has a deferred compensation plan providing key executives with the
opportunity to participate in an unfunded, deferred compensation program. Under
the program, participants may defer base compensation and bonuses and earn
interest on their deferred amounts. The program is not qualified under Section
401 of the Internal Revenue Code. The total of participant deferrals, which is
reflected in long-term liabilities was $4,668,000 at November 30, 1996 and
$3,911,000 at November 30, 1995. The expense for this plan was $5,000 in 1996,
$346,000 in 1995 and $136,000 in 1994.
The Company has a life insurance plan wherein eligible executives are provided
with life insurance protection based upon three times base salary. Upon
retirement, the executive is provided with life insurance protection based upon
final base salary. Benefits may be paid as a lump sum or as an annual income to
the identified survivor over ten years. The (income) expense for this plan was
$(88,000) in 1996, $46,000 in 1995 and $60,000 in 1994.
In connection with the above two plans, whole life insurance contracts were
purchased on the related participants. At November 30, 1996 and 1995, the cash
surrender value of these policies was $7,581,000 and $5,682,000, respectively,
net of loans of $2,043,000.
The Company provides to certain employees a savings plan under Section 401(k) of
the Internal Revenue Code. The savings plan allows for deferral of income up to
a certain percentage through contributions to the plan, and, within certain
restrictions, Company matching contributions are in the form of cash. In 1996,
contributions were in the form of the Company's common stock and cash. In 1995
and 1994, matching contributions were solely in the form of the Company's common
stock. In 1996, 1995 and 1994, the Company recorded expenses for matching
contributions of $433,000, $681,000 and $967,000, respectively, while 4,840 and
19,761 and 25,996 shares of common stock were issued by the Company to the
savings plan.
In December 1994, the Company adopted SFAS No. 112 "Employers' Accounting for
Postemployment Benefits -- An Amendment of FASB Statements No. 5 and 43." This
statement requires employers to recognize obligations to provide postemployment
benefits if certain criteria are met. Implementation of this statement did not
have a material effect on the Company's financial position or its results of
operations.
NOTE ELEVEN: INCOME TAXES
The provision for income taxes for the years ended November 30 included
the following:
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Current
Federal $ 8,366 $ 2,833 $ (3,730)
Foreign 1,730 2,516 1,287
State 1,661 663 --
--------------------------------------
11,757 6,012 (2,443)
Deferred
Federal (2,801) (993) 8,892
Foreign (46) 396 (157)
State (613) (225) 1,005
--------------------------------------
(3,460) (822) 9,740
--------------------------------------
$ 8,297 $ 5,190 $ 7,297
--------------------------------------
--------------------------------------
47
<PAGE>
The principal types of timing differences and the tax effect of each, which give
rise to the deferred tax provision (benefit), for the years ended November 30
follow:
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Accelerated depreciation $ (6) $ (377) $ (150)
Change in nondeductable reserves (3,801) (2,310) 8,799
Write down of fixed assets (410) -- --
Federal alternative minimum tax
and State loss carryforwards 32 1,379 (314)
Unremitted earnings of certain
affiliated companies 954 -- --
Equity in earnings of
affiliated companies (343) 250 326
Other, net 114 236 1,079
--------------------------------------
$ (3,460) $ (822) $ 9,740
--------------------------------------
--------------------------------------
Deferred tax assets (liabilities) are comprised of the following as of November
30:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Non-current deferred taxes
Self insurance/claims reserves $ 7,993 $ 8,242
Investments (2,234) (2,675)
Employee benefits 9,352 8,399
Fixed assets (20,437) (20,577)
Federal and State tax credit and
loss carryforwards 2,347 2,347
Other 252 224
-------------------------
Net non-current deferred liability (2,727) (4,040)
Current deferred taxes
Self-insurance/claims reserves 1,442 1,309
Employee benefits 2,497 1,685
Accounts receivable 2,937 1,481
Inventory 2,935 2,728
Other (70) 112
-------------------------
Net current deferred asset 9,741 7,315
-------------------------
Net deferred taxes $ 7,014 $ 3,275
-------------------------
-------------------------
The tax provision represents effective tax rates of 35.0%, 29.4% and 40.3% of
pretax income for the years ended November 30, 1996, 1995 and 1994,
respectively. A reconciliation of income taxes provided at the effective income
tax rate and the amount computed at the federal statutory income tax rate of 35%
for the years ended November 30, 1996, 1995 and 1994 follows:
(IN THOUSANDS) 1996 1995 1994
- --------------------------------------------------------------------------------
Domestic pretax income $ 17,534 $ 12,771 $ 15,475
Foreign pretax income 6,173 4,871 2,612
--------------------------------------
$ 23,707 $ 17,642 $ 18,087
--------------------------------------
--------------------------------------
Taxes at federal statutory rate $ 8,297 $ 6,175 $ 6,330
State taxes (net of federal tax benefit) 681 285 653
Foreign losses with no federal benefit 11 630 199
Percentage depletion (484) (512) (457)
Foreign branch/withholding taxes (20) 226 481
Unremitted earnings of certain
affiliated companies 954 -- --
Equity in earnings of
affiliated companies (948) (1,096) (246)
Other, net (194) (518) 337
--------------------------------------
$ 8,297 $ 5,190 $ 7,297
--------------------------------------
--------------------------------------
The Internal Revenue Service completed the examination of the Company's 1990
through 1992 Federal income tax returns, and issued an assessment. The Company
agreed and paid the tax on a portion of the assessment, and filed an appeal with
respect to the portion that is in dispute. The Company also has an appeal
pending with respect to a portion of the Internal Revenue Service audit
assessment relating to the Company's 1987 through 1989 Federal income tax
returns. The resolution of these matters are not expected to have a material
effect on the Company's financial position or its results of operations.
NOTE TWELVE: DEBT
Short-term borrowings consist of loans payable to banks by foreign subsidiaries
totaling $1,242,000 and $1,718,000 as of November 30, 1996, and 1995,
respectively. The average interest rate on these loans was approximately 9.1 %
in 1996 and 16.9% in 1995. The high interest rate in 1995 was related to
borrowings by the Company's Colombian subsidiary.
Domestically, the Company has uncommitted, short-term, bank credit lines
totaling $18,000,000 with interest at various money market rates.
Long-term debt as of November 30, consisted of the following:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Fixed-rate unsecured notes payable:
8.63%, payable in annual principal
installments of $5,000 $ 10,000 $ 15,000
9.79%, payable in annual principal
installments of $12,000 48,000 60,000
7.92%, payable in annual principal
installments of $8,333,
commencing in 2001 50,000 --
Variable-rate industrial development bonds,
payable in 2016 (3.65% at November 30, 1996) 7,200 --
Variable-rate unsecured bank
revolving credit facilities
(3.78% at November 30, 1996) 11,009 29,148
Variable-rate unsecured bank loan,
with annual principal
installments of approximately $753
(3.51% at November 30, 1996) 4,142 5,220
-------------------------
130,351 109,368
Less current portion 17,753 17,803
-------------------------
$112,598 $ 91,565
-------------------------
-------------------------
The Company maintains a $75,000,000 revolving credit facility with five banks.
The Company may at its option borrow at interest rates based on specified
margins over money market rates, at any time until June 1999 when all borrowings
under the facility must be repaid. At November 30, 1996 no amount was borrowed
under this facility.
Additionally, a consolidated subsidiary maintains revolving credit facilities
with three banks. The subsidiary may at its option borrow in various currencies,
at interest rates based on specified margins over money market rates. The
subsidiary is able to borrow up to the equivalent of $8,000,000 at any time
through October 2001 under one facility, and $4,000,000 through August 1998
under a second facility. A third arrangement permits borrowings up to
$7,000,000; this availability declines by $695,000 semi-annually. At November
30, 1996, $11,009,000 was borrowed under these bank facilities.
Future payments due on long-term debt total $17,753,000 in 1997, $19,375,000 in
1998, $14,143,000 in 1999, $14,143,000 in 2000, and $15,693,000 in 2001.
The lending agreements contain various restrictive covenants including the
requirement to maintain specified amounts of working capital and net worth, and
restrictions on cash dividends, borrowings, liens, investments
48
<PAGE>
and guarantees. Under the most restrictive provisions of the Company's lending
agreements, approximately $8,300,000 of retained earnings was not restricted at
November 30, 1996, as to the declaration of cash dividends and the repurchase of
Company stock. At November 30, 1996, the Company was in compliance with all
covenants.
Certain note agreements contain provisions regarding the Company's ability to
grant security interests or liens in association with other debt instruments. If
the Company grants such a security interest or lien, then such notes will be
secured equally and ratably as long as such other debt shall be secured.
The following disclosure of the estimated fair value of the Company's debt is
made in accordance with the requirements of SFAS No. 107 "Disclosures about Fair
Value of Financial Instruments." The estimated fair value amounts have been
determined by the Company using available market information and appropriate
valuation methodologies. Considerable judgment is required to develop the
estimates of fair value, thus the estimates provided herein are not necessarily
indicative of the amounts that could be realized in a current market exchange.
November 30, 1996
----------------------
Carrying Fair
(IN THOUSANDS) Amount Value
- ---------------------------------------------------------
Short-term borrowings $ 1,242 $ 1,242
Fixed-rate long-term debt 108,000 113,336
Variable-rate long-term debt 22,351 22,351
The carrying values of short-term and variable-rate long-term debt are a
reasonable estimate of their fair value. The estimated fair value of the
Company's fixed-rate long-term debt is based on U.S. government notes plus an
estimated spread at November 30, 1996 for similar securities with similar
remaining maturities.
NOTE THIRTEEN: LEASE COMMITMENTS
Rental expense under long-term operating leases of property, vehicles and other
equipment was $7,201,000 in 1996, $7,225,000 in 1995 and $6,532,000 in 1994. At
November 30, 1996, future rental commitments under these leases totaled
$49,311,000. Future rental commitments are payable as follows:
Year ending
(IN THOUSANDS) November 30 Amount
- ----------------------------------------------------
1997 $ 6,940
1998 4,908
1999 4,694
2000 3,987
2001 3,391
2002 - Beyond 25,391
----------
$ 49,311
----------
----------
Minimum payments for leases have not been reduced by minimum noncancelable
sublease rentals aggregating $4,421,000 for operating leases.
NOTE FOURTEEN: OTHER LONG-TERM LIABILITIES
Other long-term liabilities at November 30 were as follows:
(IN THOUSANDS) 1996 1995
- --------------------------------------------------------------------------------
Reserves for pending claims and litigation $ 14,927 $ 13,788
Compensation and benefits 14,693 12,275
Interest and self-insurance reserves 10,289 9,814
Other 9,869 12,947
------------------------
$ 49,778 $ 48,824
------------------------
------------------------
NOTE FIFTEEN: COMMITMENTS AND CONTINGENCIES
An action was filed in 1992 in the U.S. District for the District of Arizona by
the Central Arizona Water Conservation District ("CAWCD") seeking damages
against several parties, including the Company and the Company's customer, Peter
Kiewit Sons' Company ("Kiewit"), in connection with six prestressed concrete
pipe siphons furnished and installed in the 1970's as part of the Central
Arizona Project ("CAP"), a federal project to bring water from the Colorado
River to Arizona. The CAWCD also filed separate actions against the U.S. Bureau
of Reclamation ("USBR") in the U.S. Court of Claims and with the Arizona
Projects Office of the USBR in connection with the CAP siphons. The CAWCD
alleged that the six CAP siphons were defective and that the USBR and the
defendants in the U.S. District Court action were liable for the repair or
replacement of those siphons at a claimed estimated cost of $146.7 million. On
September 14, 1994, the U.S. District Court granted the Company's motion to
dismiss the CAWCD action and entered judgment against the CAWCD and in favor of
the Company and its co-defendants. CAWCD has filed a notice of appeal with the
Ninth Circuit Court of Appeals.
Separately, on September 28, 1995, the Contracting Officer for the USBR issued a
final decision claiming for the USBR approximately $40 million in damages
against Kiewit, based in part on the Contracting Officer's finding that the
siphons supplied by the Company were defective. That claim amount is considered
by the Company to be duplicative of the damages sought by the CAWCD for the
repair or replacement of the siphons in its aforementioned action in the U.S.
District for the District of Arizona. The Contracting Officer's final decision
has been appealed by Kiewit to the U.S. Department of the Interior Board of
Contract Appeals ("IBCA"). The Company is actively cooperating with, and
assisting Kiewit in the administrative appeal of that final decision before the
IBCA.
The Company internally, as well as through independent third party consultants,
has conducted engineering analysis regarding the allegations that the CAP
siphons were defective and believes that the siphons were manufactured in
accordance with the project specifications and other contract requirements, and
therefore it is not liable for any claims relating to the siphons, whether by
the CAWCD or by the USBR. The Company has recorded provisions deemed adequate by
the Company to permit it to continue to vigorously defend its position in this
matter. The Company believes that it has meritorious defenses to these actions
and that resultant liability, if any, should not have a material adverse effect
on the financial position of the Company or its results of operations.
In July 1992, the Company was served with a complaint in an action brought by
the City and County of San Francisco in Superior Court of the State of
California against the Company and two co-defendants, in connection with a
pipeline referred to as San Andreas Pipeline No. 3, a water transmission
pipeline, which was installed between 1980 and 1982. The Company furnished the
pipe used in that pipeline. The amounts claimed by plaintiff were substantial.
In June of 1996, a settlement of this litigation was reached by the Company. The
terms of this settlement were considered by management to be favorable to the
Company, and did not have a material effect on the Company's financial position
or its results of operations.
In addition, certain other claims, suits and complaints that arise in the
ordinary course of business, have been filed or are pending against the Company.
Management believes that these matters, and the matters discussed above, are
either adequately reserved, covered by insurance, or would not have a material
adverse effect on the financial position of the Company or its results of
operations if disposed of unfavorably. The Company is also subject to federal,
state and local laws and regulations concerning the environment and is currently
participating in administrative proceedings at several sites under these laws.
While the Company finds it difficult to estimate with any certainty the total
cost of remediation at the several sites, on the basis of currently available
information and reserves provided, the Company believes that the outcome of such
environmental regulatory proceedings will not have a material adverse effect on
the Company's financial position or its results of operations.
49
<PAGE>
At November 30, 1996, the Company had reserves of $10,535,000 for potential
environmental liabilities and $9,580,000 associated with product liability and
other legal claims.
NOTE SIXTEEN: CAPITAL STOCK
The certificate of incorporation in Delaware authorizes 12,000,000 shares of
$2.50 par value common stock, 1,000,000 shares of $1.00 par value preferred
stock and 100,000 shares of $1.00 par value series A junior participating
cumulative preferred stock. The preferred stock may be issued in series, with
the rights and preferences of each series to be established by the Board of
Directors. As of November 30, 1996, the Company had no shares of preferred stock
or series A junior participating cumulative preferred stock outstanding.
The Company has a Stockholders' Rights Agreement, which entitles stockholders to
purchase common stock if a party acquires 15% or more of the Company's common
shares or announces a tender offer for at least 15% of its common shares
outstanding.
NOTE SEVENTEEN: STOCK COMPENSATION PLANS
On January 27, 1992, the Board of Directors of the Company adopted the Incentive
Stock Compensation Plan (the "1992 Incentive Plan"). Under the terms of the 1992
Incentive Plan, 1.5% of the total number of shares of common stock outstanding
on the preceding December 31 are available for grant of awards in the following
calendar year to key employees.
The Company has reserved 269,559 shares of common stock for sale to employees
under the 1992 Incentive Plan at November 30, 1996. The plan provides for the
issuance of additional options to purchase not more than 250,000 shares of
common stock in the form of incentive options under the provisions of Section
422 of the Internal Revenue Code. Options can be incentive stock options or
nonqualified options and may be granted for up to ten years. Awards under the
1992 Incentive Plan may include but are not limited to stock bonuses, stock
options, convertible securities and restricted stock grants. Restrictions may
limit the sale, transfer, voting rights and dividends on these shares. At
November 30, 1996, 3,750 restricted shares were outstanding, and 1,401 shares
were available for future grants.
Also at November 30, 1996, the Company reserved 8,700 shares of common stock for
sale to employees under the 1982 Stock Option Plan. The 1982 Stock Option Plan
expired in January 1992 and no further options will be granted under that plan.
On June 27, 1994 the Board of Directors of the Company adopted the 1994
Nonemployee Director Stock Option Plan (Nonemployee Director Plan). On March 27,
1995, the Nonemployee Director Plan was approved by the stockholders at the
Annual Stockholders' Meeting. Under the terms of the Nonemployee Director Plan,
each Nonemployee Director shall automatically be granted 1,000 options on the
first business day following the date of the annual meeting of stockholders of
the Company at which the directors of the Company are elected. The aggregate
number of common shares issued and issuable shall not exceed 120,000. As of
November 30, 1996, the Company had reserved 14,000 shares of common stock for
sale under the Nonemployee Director Plan.
A summary of all stock option transactions for 1996, 1995 and 1994
is as follows:
Number of Option Price
Shares per Share
- --------------------------------------------------------------------------------
Outstanding at November 30, 1993 146,850 $14.63 to $43.75
Granted 121,184 37.00 to 42.00
Exercised (23,250) 14.63 to 34.75
Expired (34,450) 31.00 to 43.75
-------
Outstanding at November 30, 1994 210,334 31.00 to 43.75
Granted 36,575 31.63 to 33.75
Exercised (1,025) 31.00 to 34.75
Expired (17,550) 31.00 to 43.75
-------
Outstanding at November 30, 1995 228,334 31.00 to 42.00
Granted 107,000 37.50 to 39.50
Exercised (23,775) 31.00 to 42.00
Expired (19,300) 31.00 to 37.38
-------
Outstanding at November 30, 1996 292,259 31.00 to 42.00
-------
-------
Options for 49,975 shares were exercisable at November 30, 1996. The remaining
outstanding options become exercisable in varying amounts through 2006.
NOTE EIGHTEEN: BUSINESS SEGMENTS
AND GEOGRAPHIC AREAS
Financial information for 1996, 1995 and 1994, with respect to the various
business segments of the Company, appears on pages 52 and 53.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the years ended November 30, 1996 and
1995 follow:
1996
--------------------------------------------------------
(IN THOUSANDS First Second Third Fourth
EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
Sales $ 111,752 $ 120,632 $ 133,622 $ 130,934
Gross Profit 25,363 30,852 36,220 36,828
Net Income 475 4,350 5,972 4,613
Net Income per Share .12 1.09 1.50 1.16
1995
--------------------------------------------------------
(IN THOUSANDS First Second Third Fourth
EXCEPT PER SHARE DATA) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
Sales $ 98,031 $ 118,526 $ 137,421 $ 127,427
Gross Profit 24,011 29,563 33,431 29,726
Net Income 116 4,002 4,577 3,757
Net Income per Share .03 1.01 1.16 .95
The Company traditionally experiences lower sales during the first fiscal
quarter because of seasonal patterns associated with weather and contractor
schedules.
PER SHARE DATA
Stock Price Dividends
--------------------------------------------------
Quarter Ended 1996 1995 1996 1995
- -------------------------------------------------------------------------------
February 29 & 28 -High $ 39 1/8 $ 34 $ .32 $ .32
-Low 36 29
May 31 -High 41 3/4 37 7/8 .32 .32
-Low 37 3/8 33 5/8
August 31 -High 41 5/8 36 5/8 .32 .32
-Low 34 1/8 33 3/4
November 30 -High 50 36 7/8 .32 .32
-Low 36 1/8 33 7/8
50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS, AMERON INTERNATIONAL
CORPORATION:
We have audited the accompanying consolidated balance sheets of Ameron
International Corporation (a Delaware corporation) and subsidiaries as of
November 30, 1996 and 1995, and the related consolidated statements of income,
cash flows and stockholders' equity for each of the three years in the period
ended November 30, 1996. 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, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Ameron International Corporation and subsidiaries as of November 30,
1996 and 1995, and the results of their operations and their cash flows for each
of the three years in the period ended November 30, 1996, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
January 13, 1997
REPORT OF MANAGEMENT
We have prepared the accompanying consolidated financial statements and related
financial information of Ameron International Corporation and subsidiaries in
conformity with generally accepted accounting principles appropriate in the
circumstances. Management is primarily responsible for the integrity of the
financial information included in this Annual Report. In preparing the financial
statements, management makes estimates as necessary based upon currently
available information and judgments of current conditions and circumstances.
Ameron maintains a system of internal accounting controls supported by
documentation to provide reasonable assurance that assets are safeguarded and
the accounting records reflect the authorized transactions of the Company. We
believe the Company's system provides this appropriate balance in accordance
with established policies and procedures as implemented by qualified personnel.
The independent auditors, Arthur Andersen LLP, appointed by the Board of
Directors, are responsible for expressing their opinion as to whether the
consolidated financial statements present fairly in all material respects the
financial position, operating results and cash flows of the Company. In this
process, they evaluate the system of internal accounting controls to establish
the audit procedures. Their opinion appears on this page.
The Audit Committee of the Board of Directors is composed of three directors who
are not officers or employees of the Company. They meet periodically with
management, Arthur Andersen LLP and the internal auditors to review the audit
scope and results, discuss internal control and financial reporting subjects,
and review management actions on these matters. Arthur Andersen LLP and the
internal auditors have full and free access to the members of the Audit
Committee.
/s/ James S. Marlen /s/ Gary Wagner
JAMES S. MARLEN GARY WAGNER
Chairman of the Board, Senior Vice President
President & Chief Executive Officer & Chief Financial Officer, Treasurer
51
<PAGE>
BUSINESS SEGMENTS
Ameron classifies its business operations into four segments.
The Protective Coatings Group manufactures and markets high-performance
industrial and marine coatings as well as product finishes. The Fiberglass Pipe
Group manufactures and markets filament-wound and molded fiberglass pipe, tubing
and fittings. The Concrete & Steel Pipe Group manufactures and supplies concrete
and steel pressure pipe, concrete non-pressure pipe, protective linings for
pipe, and fabricated products. The Construction & Allied Products Group
manufactures and sells ready-mix concrete, sand and aggregates, concrete pipe,
and concrete and steel lighting and traffic poles.
Intersegment sales were not significant. Income from reportable segments is
exclusive of certain unallocated income and expense. Identifiable assets by
segment are those assets that are used exclusively by such segment. Unallocated
assets are principally cash, corporate property and equipment, and investments.
Capital expenditures do not include plant and equipment for business
acquisitions. A summary of sales, income (loss), assets, depreciation and
capital expenditures by segment follows:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
--------------------------------------------------------------------------------------------
Protective Fiberglass Concrete & Construction &
(DOLLARS IN THOUSANDS) Coatings Pipe Steel Pipe Allied Products Unallocated Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Sales $ 142,562 $ 104,056 $ 148,528 $ 101,794 $ -- $ 496,940
Income (loss) before interest
and income taxes 10,073 10,052 17,936 10,680 (14,282) 34,459
Identifiable assets 106,917 76,610 82,811 60,906 84,422 411,666
Capital expenditures 4,475 2,876 2,411 14,490 975 25,227
Depreciation 2,435 3,804 4,072 4,487 1,280 16,078
- ------------------------------------------------------------------------------------------------------------------------------------
1995
Sales $ 130,543 $ 82,752 $ 153,155 $ 114,955 $ -- $ 481,405
Income (loss) before interest
and income taxes 3,248 8,777 10,496 15,178 (8,686) 29,013
Identifiable assets 71,432 63,892 107,092 54,228 74,737 371,381
Capital expenditures 3,894 2,534 5,375 2,856 1,495 16,154
Depreciation 2,359 4,027 4,091 4,928 660 16,065
- ------------------------------------------------------------------------------------------------------------------------------------
1994
Sales $ 134,201 $ 66,228 $ 101,644 $ 115,609 $ -- $ 417,682
Income (loss) before interest
and income taxes 13,338 2,987 3,271 (1) 16,687 (7,689) 28,594 (1)
Identifiable assets 64,493 60,731 94,393 56,062 75,177 350,856
Capital expenditures 3,605 2,127 5,161 2,701 1,340 14,934
Depreciation 2,208 3,943 4,159 4,913 632 15,855
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) INCLUDES $3.2 MILLION GAIN, BEFORE INCOME TAXES, ON THE SALE OF A COLOMBIAN
SUBSIDIARY.
52
<PAGE>
GEOGRAPHIC AREAS
The markets served by the Protective Coatings Group and the Fiberglass Pipe
Group are worldwide in scope. The Concrete & Steel Pipe Group serves primarily
the western United States. Ameron Hawaii operates exclusively in the State of
Hawaii, and the Pole Products Division sells mainly in the continental United
States. Ameron Hawaii and the Pole Products Division together comprise the
Construction & Allied Products Group. Sales for export or to any individual
customer did not exceed 10% of consolidated sales. Information with respect to
the Company's geographic areas is as follows:
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS
------------------------------------------------------------------------------
United Investments &
(DOLLARS IN THOUSANDS) States Europe Other Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $ 396,904 $ 64,634 $ 35,402 $ -- $ 496,940
Intercompany sales between geographic areas 4,705 932 5,637 (11,274) --
------------------------------------------------------------------------------
Total sales $ 401,609 $ 65,566 $ 41,039 $ (11,274) $ 496,940
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Income before interest
and income taxes $ 22,556 $ 1,579 $ 8,026 $ 2,298 $ 34,459
Identifiable assets 288,017 61,951 27,976 33,722 411,666
- -----------------------------------------------------------------------------------------------------------------------------------
1995
Sales to unaffiliated customers $ 372,589 $ 73,528 $ 35,288 $ -- $ 481,405
Intercompany sales between geographic areas 4,180 1,411 6,448 (12,039) --
------------------------------------------------------------------------------
Total sales $ 376,769 $ 74,939 $ 41,736 $ (12,039) $ 481,405
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Income before interest
and income taxes $ 15,915 $ 1,006 $ 8,248 $ 3,844 $ 29,013
Identifiable assets 253,734 56,315 25,135 36,197 371,381
- -----------------------------------------------------------------------------------------------------------------------------------
1994
Sales to unaffiliated customers $ 334,688 $ 55,286 $ 27,708 $ -- $ 417,682
Intercompany sales between geographic areas 2,519 1,716 5,507 (9,742) --
------------------------------------------------------------------------------
Total sales $ 337,207 $ 57,002 $ 33,215 $ (9,742) $ 417,682
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Income before interest
and income taxes $ 19,112 (1) $ 1,489 $ 6,308 $ 1,685 $ 28,594 (1)
Identifiable assets 239,652 49,053 24,836 37,315 350,856
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1) INCLUDES $3.2 MILLION GAIN, BEFORE INCOME TAXES, ON THE SALE OF A COLOMBIAN
SUBSIDIARY.
53
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
PARENTS
- -------
None
JURISDICTION OF PERCENT OF
SUBSIDIARIES CONSOLIDATED INCORPORATION STOCK OWNED
- ------------------------- --------------- -----------
American Pipe & Construction International California 100
Ameron B.V. The Netherlands 100
Ameron FSC Guam 100
Ameron (Hong Kong) Ltd. Hong Kong 100
Ameron (Pte) Ltd. Singapore 100
Centron International, Inc. Delaware 100
SUBSIDIARIES NOT CONSOLIDATED AND
FIFTY-PERCENT OR LESS OWNED COMPANIES
- -------------------------------------
Gifford-Hill-American, Inc. Texas 50
Tamco California 50
Bondstrand, Ltd. Saudi Arabia 40
Oasis-Ameron, Ltd. Saudi Arabia 40
Ameron Saudi Arabia, Ltd. Saudi Arabia 30
Names of other subsidiaries not consolidated and fifty-percent or less owned
companies are omitted because when considered in the aggregate as a single
subsidiary they do not constitute a significant subsidiary.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our reports included and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements (File No. 33-3400,
33-57308 and 33-59697).
ARTHUR ANDERSEN LLP
Los Angeles, California
February 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1996
<CASH> 18,381
<SECURITIES> 0
<RECEIVABLES> 111,473
<ALLOWANCES> (5,939)
<INVENTORY> 84,971
<CURRENT-ASSETS> 223,623
<PP&E> 303,840
<DEPRECIATION> (178,153)
<TOTAL-ASSETS> 411,666
<CURRENT-LIABILITIES> 101,765
<BONDS> 112,598
0
0
<COMMON> 12,895
<OTHER-SE> 131,903
<TOTAL-LIABILITY-AND-EQUITY> 411,666
<SALES> 496,940
<TOTAL-REVENUES> 496,940
<CGS> 367,677
<TOTAL-COSTS> 367,677
<OTHER-EXPENSES> 103,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,134
<INCOME-PRETAX> 23,707
<INCOME-TAX> 8,297
<INCOME-CONTINUING> 15,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,410
<EPS-PRIMARY> 3.87
<EPS-DILUTED> 3.87
</TABLE>
