SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended Commission File Number
December 31, 1994 1-7284
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B A L D O R E L E C T R I C C O M P A N Y
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(Exact name of registrant as specified in its charter)
Missouri 43-0168840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 R. S. Boreham, Jr St, Fort Smith, Arkansas 72902 501-646-4711
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(Address of principal executive offices) (Zip Code) (Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of Each Class which registered
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Common Stock, $0.10 Par Value New York Stock Exchange
Common Stock Purchase Rights 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 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 aggregate market value of voting stock held by non-affiliates of the
registrant based on the closing price on February 24, 1995, was
$339,131,000.
At February 24, 1995, there were 18,335,535 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
December 31, 1994, ("the Annual Report to Shareholders for 1994") are
incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders to
be held May 6, 1995, ("the 1995 Proxy Statement") are incorporated by
reference into Parts I and III.
<PAGE>
PART I
Item 1. Business
------------------
Baldor Electric Company ("the Company") was incorporated in Missouri in
1920. The Company operates primarily in one industry segment which
includes the design, manufacture, and sale of electric motors and drives.
In addition to electric motors and drives, products include speed
reducers, industrial grinders, buffers, polishing lathes, stampings,
castings, and repair parts. Baldor has made several small acquisitions;
however, the majority of its growth has come internally through broadening
its markets and product lines.
Products
Sales of electric motors represented approximately 84% of the Company's
business in 1994, 85% in 1993, and 85% in 1992. The AC motor product line
presently ranges in size from 1/50 through 600 horsepower. The DC motor
product line presently ranges from 1/50 through 700 horsepower.
Industrial control products, which include servo products, brushless DC
and SCR controls, and inverter and vector drives, accounted for
approximately 13% of the Company's total sales in 1994, 11% in 1993, and
10% in 1992. The Company's line of adjustable speed controls ranges from
1/50 to 250 horsepower. With these products, the Company provides its
customers the ability to purchase industrial motors and electronic
controls (which constitute drives) from one manufacturer. Sales of drives
were estimated to be about 20% of total 1994 sales.
Baldor's motors and drives are designed, manufactured, and marketed for
general purpose uses ("stock products") and for individual customer
requirements and specifications ("custom products"). Stock product sales
represent approximately 63% of the Company's business, with most sales to
customers who place orders for immediate shipment. Custom products
generally are shipped within four weeks from the date of order. Because
of these and other factors, the Company does not believe that its backlog
represents an accurate indication of future shipments.
Sales and Marketing
The products of the Company are marketed throughout the United States and
in more than 55 foreign countries. The Company's field sales organization
consists of more than 50 independent manufacturer's representatives
including 25 in the United States and the remainder in various parts of
the world including Canada, Europe, Latin America, Australia, and the Far
East.
Custom products and stock products are sold to original equipment manufac-
turers ("OEMs"). Stock products are also sold to independent distributors
for resale, often as replacement components in industrial machinery which
is being modernized or upgraded for improved performance.
<PAGE> - 2 -
The Company conducts business with a large number of customers and it does
not believe that the loss of any single customer would have a material
effect on its total business.
Competition
The Company faces substantial competition in the sales of its products in
all markets served. Some of the Company's competitors are larger in size
or are divisions of large diversified companies and have substantially
greater financial resources. The Company competes by providing its
customers better value through product quality and efficiency and better
services including availability, shorter lead-times, on-time delivery,
product literature, and training.
The Company is not aware of any industry-wide statistics from which it can
precisely determine its relative portion of the industrial electric motor
industry. In the United States, certain industry statistics are available
from the U.S. Department of Commerce and the National Electric
Manufacturers Association. However, these sources do not include all
competitors or all sizes of motors. The Company believes, however, that
it is a significant factor in the markets it serves and that its share of
the market has increased over the past several years.
Manufacturing
The Company manufactures many of the components used in its products in-
cluding laminations, motor hardware, and aluminum die castings.
Manufacturing many of its own components permits the Company to better
manage cost, quality, and availability. In addition to the manufacture of
components, the Company's motor manufacturing operations include
machining, stamping, welding, winding, assembling, and finishing
operations.
The raw materials necessary for the Company's manufacturing operations are
available from several sources. These materials include steel, copper
wire, gray iron castings, aluminum, and insulating materials, many of
which are purchased from more than one supplier. Although some materials
are purchased from a single supplier, the Company believes that alternate
sources are available for such materials.
Research and Development
The Company's design and development of electric motors and drives
includes both the development of products which extend the product lines
and the modification of existing products to meet new application
requirements. Additional development work is done to improve production
methods. Costs associated with research, new product development, and
product and cost improvements are treated as expenses when incurred and
amounted to approximately $14,800,000 in 1994, $12,900,000 in 1993, and
$11,300,000 in 1992.
<PAGE> - 3 -
Environment
Compliance with laws relating to the discharge of materials into the envi-
ronment or otherwise relating to the protection of the environment has not
had a material effect on capital expenditures, earnings, or the
competitive position of the Company and is not expected to have such an
effect.
Employees
At December 31, 1994, the Company had 3,404 employees.
Executive Officers of the Registrant
Information regarding executive officers is contained in Part III, Item
10, and incorporated herein by reference.
International Operations
For each of the three fiscal years in the period ended December 31, 1994,
export and international sales revenues have increased and represented
13.1% of consolidated sales in 1994, 13.4% in 1993, and 13.3% in 1992.
See also Note G on page 28 of the Annual Report to Shareholders for 1994.
The Company's products are distributed in more than 55 foreign countries,
principally in Canada, Europe, Australia, the Far East, and Latin America.
The Company's international operations include the Baldor ASR group of
companies which was acquired in 1983. Baldor ASR has a sales office
located in Switzerland, a sales office located in Germany, and three sales
offices located in the United Kingdom. Baldor ASR also has research and
manufacturing operations in Germany. The Company has a majority interest
in Baldor Electric (Far East) Pte. Ltd., located in Singapore, a majority
interest in Baldor Electric (Thailand) Ltd., located in Bangkok, Thailand,
a majority interest in Baldor Electric (Indonesia) Ltd., located in
Jakarta, Indonesia, and a majority interest in Australian Baldor Pty.
Limited, with two locations in Australia. Finally, the Company owns
Baldor de Mexico, S.A. de C.V., located in Mexico City. All of the
affiliate locations except Baldor ASR Germany are sales operations only.
The Company believes that it is in a position to act on global
opportunities as they become available. The Company also believes that
there are additional risks attendant to international operations including
currency fluctuations and possible restrictions on the movement of funds.
However, these risks have not had a material adverse effect on the
Company's business.
Item 2. Properties
-------------------
The Company believes that its facilities, including equipment and
machinery, are in good condition, suitable for current operations,
adequately maintained and insured, and capable of sufficient additional
<PAGE> - 4 -
production levels. The following table sets forth certain information
with respect to the Company's properties.
AREA
LOCATION PRIMARY USE (SQ. FT.)
-------- ----------- ---------
Fort Smith, AR AC motor production 293,350
Distribution and service center 159,500
Administration and engineering offices 69,800
Aluminum die casting 76,400
St. Louis County, MO Metal stamping and engineering toolroom 121,700
DC and miscellaneous motor production 55,600
Columbus, MS AC motor production 140,300
Westville, OK AC and DC motor production 155,000
Fort Mill, SC DC motors, AC motors 110,000
and tachometer production
Knoxville, AR Worm-gear speed reducers 100,000
Clarksville, AR Subfractional motor and 86,750
gear motor production
Ozark, AR AC motor production 77,300
Five other Metal stamping and motor, drives, and 123,200
domestic locations servomotor production
Eight foreign Sales and distribution centers 37,900
locations and servodrive production ___________
1,606,800
Certain properties listed above (528,750 sq. ft. in the aggregate) are
leased, principally pursuant to Industrial Revenue Bond agreements, and
where material, are accounted for as capitalized lease obligations. Certain
lease agreements contain purchase options at varying prices and/or renewal
options at reduced rentals for extended additional periods.
Item 3. Legal Proceedings
--------------------------
The Company is party to a number of legal proceedings incidental to its
business, none of which is deemed to be material to its operations or
business.
<PAGE> - 5 -
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable.
PART II
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Item 5. Market for the Registrant's Common Equity and Related Shareholder
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Matters
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Information under the captions "Dividends Paid", "Common Stock Price
Range", and "Shareholders" on page 31 of the Annual Report to Shareholders
for 1994 is incorporated herein by reference.
Item 6. Selected Financial Data
--------------------------------
Information under the caption "Eleven Year Summary of Financial Data" for
years 1990 through 1994 only for net sales, net earnings, net earnings per
share, dividends per share, long-term obligations, and total assets on
page 14 of the Annual Report to Shareholders for 1994 is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
------------------------------------------------------------------------
Results of Operations
---------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 20 and 21 of the Annual Report to Shareholders for
1994 is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
----------------------------------------------------
The consolidated financial statements of the Company on pages 22 through
28, the report thereon of Ernst & Young LLP, Independent Auditors, on page
29, and the "Summary of Quarterly Results of Operations (Unaudited)" on
page 23 of the Annual Report to Shareholders for 1994 are incorporated
herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
<PAGE> - 6 -
PART III
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Item 10. Directors and Executive Officers of the Registrant
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The current executive officers of the Company, each of whom is elected for
a term of one year or until his successor is elected and qualified, are:
Served as
Officer
Name Age Position Since
------------------ --- ------------------------------------- --------
R. S. Boreham, Jr. 70 Chairman of the Board 1961
R. L. Qualls 61 President and Chief Executive Officer 1986
George A. Schock 87 Assistant Secretary 1944
Theodore W. Atkins 56 Vice President - Industry 1986
Relations and Governmental Affairs
Charles H. Cramer 50 Vice President - Personnel 1984
Lloyd G. Davis 47 Chief Financial Officer, 1992
Vice President - Finance,
Secretary, and Treasurer
Gene J. Hagedorn 47 Vice President - Materials 1994
James R. Kimzey 56 Vice President - Research 1984
and Engineering
John A. McFarland 43 Vice President - Sales 1990
Robert L. Null, Jr. 52 Vice President - Manufacturing 1990
Jerry D. Peerbolte 38 Vice President - Marketing 1990
Each of the executive officers has served as an officer or in a management
capacity with Baldor Electric Company for the last five years. There are no
family relationships among the directors or executive officers. The information
under the caption "Election of Directors" and "Compliance With Section 16
Filings" of the 1995 Proxy Statement is incorporated herein by reference.
Item 11. Executive Compensation
--------------------------------
Information contained in the 1995 Proxy Statement under the caption
"Executive Compensation", except for the information contained in the sub-
captions "Report of the Executive and Stock Option Committees" and
"Performance Graph", and information under the caption "Information About
the Board of Directors and Committees of the Board" is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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The security ownership by officers and directors included under the caption
"Security Ownership of Certain Beneficial Owners and Management" of the
1995 Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
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Not applicable.
<PAGE> - 7 -
PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(a) (1) and (2) - The response to this portion of Item 14 is
submitted as a separate section of this Report at page 13
hereof. For a listing of all management contracts and
compensatory plans or arrangements required to be filed as
exhibits to this Form 10-K, see the first five exhibits listed
below under Exhibit 10.
(3) Listing of Exhibits
Exhibit 3(i) - The Restated Articles of Incorporation of Baldor
Electric Company, effective March 14, 1995, filed herewith.
Exhibit 3(ii) - Bylaws of Baldor Electric Company (as amended)
dated February 6, 1995, filed herewith.
Exhibit 4(i) - Rights Agreement dated May 6, 1988, between Baldor
Electric Company and Wachovia Bank of North Carolina, N.A.
(formerly Wachovia Bank & Trust Company, N.A.), as Rights Agent
originally filed as Exhibit 1 to Registrant's Form 8-K Current
Report, dated May 13, 1988, and refiled herewith.
Exhibit 4(iii) - The Registrant agrees to furnish to the
Securities and Exchange Commission upon request pursuant to Item
601(b)(4)(iii) of Regulation S-K copies of instruments defining
the rights of the holders of long-term debt of the Registrant and
its consolidated subsidiaries.
Exhibit (10) - Exhibits 10(iii)(A)(1) through 10(iii)(A)(5) were
previously submitted as exhibits and are incorporated herein by
reference:
- 10(iii)(A)(1) 1982 Incentive Stock Option Plan (originally
filed as Exhibit 10.8 to Form 10-K for year ended December 31,
1981, refiled as Exhibit 10.1 to Form 10-K for the year ended
December 28, 1991.)
- 10(iii)(A)(2) Officers Compensation Plan (originally filed
as Exhibit 10.6 to Form 10-K for year ended December 31, 1988, and
refiled herewith).
- 10(iii)(A)(3) 1987 Incentive Stock Plan (originally filed
as Appendix A to Registrant's Proxy Statement dated April 3, 1987,
and refiled herewith).
- 10(iii)(A)(4) 1989 Stock Option Plan for Non-Employee
Directors (filed as Exhibit 10 to Form 10-Q for quarter ended
September 29, 1990).
- 10(iii)(A)(5) 1994 Incentive Stock Plan (filed as Exhibit
A to Registrant's Proxy Statement dated April 4, 1994).
<PAGE> - 8 -
<PAGE>
Exhibit (11) - Computation of earnings per common share filed
herewith.
Exhibit (13) - Portions of the Annual Report to Shareholders for
1994. The Annual Report is being filed as an exhibit solely for
the purpose of incorporating certain provisions thereof by
reference. Portions of the Annual Report not specifically
incorporated are not deemed "filed" for the purposes of the
Securities Exchange Act of 1934, as amended.
Exhibit (21) - Affiliates of the Registrant filed herewith.
Exhibit (23) - Consent of Independent Auditors filed herewith.
Exhibit (24) - Powers of Attorney. Included on signature pages 10
and 11.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of
the period covered by this Report.
(c) Exhibits
The response to this portion of Item 14 is submitted as a separate
section of this Report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a separate
section of this Report.
<PAGE> - 9 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BALDOR ELECTRIC COMPANY
(Registrant)
By /s/ R. L. Qualls
------------------------
President and Chief Executive Officer
(Chief Executive Officer)
Date: March 20, 1995
----------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints R. S. Boreham, Jr., R. L. Qualls, and George A. Schock
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign this Report and any and all amend-
ments to this Report, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and neces-
sary to be done in and about the premises, as fully to all intents and purposes
as they might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
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.
<PAGE> - 10 -
<PAGE>
Signature Title Date
/s/ R. S. Boreham, Jr. Chairman of the Board of )
--------------------- Directors and Chairman of )
R. S. Boreham, Jr. the Executive Committee )
)
)
/s/ R. L. Qualls President, Chief Executive )
----------------- Officer, and Director )
R. L. Qualls (Principal Executive Officer) )
)
)
/s/ Lloyd G. Davis Chief Financial Officer, )
------------------ Vice President - Finance, )
Lloyd G. Davis Secretary, and Treasurer )
(Principal Financial )
and Accounting Officer) )
)
/s/ George A. Schock Assistant Secretary and ) March 20, 1995
-------------------- Director ) --------------
George A. Schock )
)
/s/ Jefferson W. Asher, Jr. Director )
--------------------------- )
Jefferson W. Asher, Jr. )
)
/s/ Fred C. Ballman Director )
------------------- )
Fred C. Ballman )
)
/s/ O. A. Baumann Director )
----------------- )
O. A. Baumann )
)
/s/ Robert J. Messey Director )
-------------------- )
Robert J. Messey )
)
/s/ Robert L. Proost Director )
-------------------- )
Robert L. Proost )
)
/s/ Willis J. Wheat Director )
------------------- )
Willis J. Wheat )
<PAGE> - 11 -
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED DECEMBER 31, 1994
BALDOR ELECTRIC COMPANY
FORT SMITH, ARKANSAS
<PAGE> - 12 -
<PAGE>
FORM 10-K, ITEM 14(a)(1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
BALDOR ELECTRIC COMPANY AND AFFILIATES
The following consolidated financial statements of Baldor Electric Company and
Affiliates, included in the Annual Report to Shareholders for 1994, are
incorporated by reference in Item 8:
Consolidated Balance Sheets
- December 31, 1994, and January 1, 1994
Consolidated Statements of Earnings
- for the three years in the period ended December 31, 1994
Consolidated Statements of Cash Flows
- for the three years in the period ended December 31, 1994
Consolidated Statements of Shareholders' Equity
- for the three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of Baldor Electric
Company and Affiliates are included in Item 14(d):
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
<PAGE> - 13 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Additions
----------------------
Charged to Charged to
Balance at Costs Other Balance
Beginning and Accounts Deductions at End of
Description of Period Expenses Describe Describe Period
(In thousands)
Deducted from current assets:
Allowance for doubtful accounts
1994 $1,800 $ 623 $ 173(F1) $2,250
1993 1,200 1,197 597(F1) 1,800
1992 935 1,354 1,089(F1) 1,200
Included in current liabilities:
Anticipated warranty costs
1994 $2,750 $ 950(F2) $3,700
1993 2,500 250(F2) 2,750
1992 2,405 95(F2) 2,500
[FN]
-----------------
(F1) Net uncollectible accounts written off during year.
(F2) Additions/(reductions) to reserve for anticipated warranty costs, net
of expenses incurred.
<PAGE> - 14 -
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
INDEX OF EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
2 Omitted - Inapplicable
3(i) Restated Articles of Incorporation - filed herewith
3(ii) Bylaws of Baldor Electric Company - filed herewith
4(i) Shareholders' Rights Agreement - refiled herewith
9 Omitted - Inapplicable
10(iii)(A)(2) Officers Compensation Plan - refiled herewith
10(iii)(A)(3) 1987 Incentive Stock Plan - refiled herewith
11 Computation of Earnings Per Common Share - filed herewith
12 Omitted - Inapplicable
13 Annual Report to Shareholders for 1994 - filed herewith
16 Omitted - Inapplicable
18 Omitted - Inapplicable
21 Affiliates of the Registrant - filed herewith
22 Omitted - Inapplicable
23 Consent of Independent Auditors - filed herewith
24 Powers of Attorney. Included on signature pages 10 and 11
27 Financial Data Schedules - filed herewith
28 Omitted - Inapplicable
<PAGE> - 15 -
RESTATED
ARTICLES OF INCORPORATION
OF
BALDOR ELECTRIC COMPANY
ARTICLE ONE
The name of the corporation is Baldor Electric Company.
ARTICLE TWO
The address of its registered office in the State of Missouri is 906 Olive
Street, St. Louis, Missouri 63101, and the name of its registered agent at
such address is CT Corporation System.
ARTICLE THREE
The maximum number of shares of capital stock which this corporation is
authorized to issue or to have outstanding at any time shall be Fifty-Five
Million (55,000,000) shares of which Fifty Million (50,000,000) shares
shall be Common Stock of $.10 par value, and Five Million (5,000,000)
shares shall be Preferred Stock of $.10 par value.
No holder of shares of any class of stock of this corporation shall have
any preemptive or preferential right to subscribe for, purchase, or
otherwise acquire or receive any shares of any class of stock hereafter
issued by this corporation, whether now or hereafter authorized, or any
shares of any class of stock of this corporation now or hereafter acquired
and held by this corporation as treasury stock and subsequently reissued
and sold or otherwise disposed of, or any bonds, certificates of
indebtedness, notes, or any other securities convertible into or
exchangeable for, or any warrants or rights to purchase or otherwise
acquire, any shares of any class of stock of this corporation, whether now
or hereafter authorized.
The Preferred Stock may be issued from time to time in one or more series,
upon resolution or resolutions providing for such series adopted by the
Board of Directors, with such distinctive designations as shall be stated
in such resolution or resolutions. The resolution or resolutions
providing for the issue of shares of a particular series shall fix,
subject to applicable laws and provisions of this Article Three, the
designation, rights, preferences and limitations of the shares of each
such series. The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of the
following:
(a) the number of shares constituting such series, including the
authority to increase or decrease such number, and the
distinctive designation of such series;
(b) the dividend rate of the shares of such series, whether the
dividend shall be cumulative and, if so, the date from which
they shall be cumulative, and the relative rights of priority,
if any, of payment of dividends on shares of such series;
(c) the right, if any, of the corporation to redeem shares of such
series and the terms and conditions of such redemption
including the redemption price;
(d) the rights of the shares in case of a voluntary or involuntary
liquidation, dissolution or winding up of the corporation, and
the relative rights of priority, if any, of payment of shares
of such series;
(e) the voting rights, if any, for such series and the terms and
conditions under which such voting rights may be exercised;
(f) the obligation, if any, of the corporation to retire shares of
such series pursuant to a retirement or sinking fund or fund
of a similar nature and the terms and conditions of such
obligation;
(g) the terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares of
stock of any other class or classes or of any other series of
preferred stock, including the price or prices or the rate or
rates of conversion or exchange and the terms of adjustment,
if any; and
(h) any other rights, preferences or limitations of the shares of
such series as may be permitted by law.
ARTICLE FOUR
The name and place of residence of each incorporator was: E. Ballman, St.
Louis, Missouri; E. Doerr, St. Louis, Missouri; J.F. Gerleman, St. Louis,
Missouri; J.W. Shaw, St. Louis, Missouri; and O.A. Baumann, St. Louis,
Missouri.
ARTICLE FIVE
The corporation shall have nine (9) directors. The Board of Directors
shall be divided into three (3) classes, whose terms expire at different
times. At the annual shareholders' meeting to be held in 1977, three (3)
directors shall be elected for a term of one (1) year; three (3) directors
for a term of two (2) years; and three (3) directors for a term of three
(3) years. At each subsequent annual shareholders' meeting, successors to
the class of directors whose terms shall expire that year shall be elected
to hold office for a term of three (3) years.
The number of directors and size of the classes may be increased or
decreased from time to time as provided in the By-Laws, and any such
changes shall be reported to the Secretary of State within thirty calendar
days of such change. Whenever any vacancy on the Board of Directors shall
occur due to death, resignation, retirement, removal, increase in the
number of directors or otherwise, a majority of directors in office,
although less than a majority of the entire Board, may fill the vacancy or
vacancies for the balance of the unexpired term or terms, at which time a
successor or successors shall be duly elected by the shareholders and
shall qualify. This Article may not be amended or repealed without the
consent of the holders of two-thirds of the outstanding shares of the
corporation.
ARTICLE SIX
The duration of the corporation is perpetual.
ARTICLE SEVEN
The purposes for which the corporation is formed are:
(a) To manufacture, purchase, sell and otherwise deal in electric
motors, electric generators, electric motor generators and
other electrical machines, devices and apparatus, as well as
machines, devices and apparatus adapted for use in connection
therewith and for the manufacture thereof.
(b) To engage in any other lawful business for profit which is
authorized by the Board of Directors and which is lawful for
a corporation organized under The General and Business
Corporation Law of Missouri, whether of the same character as
or different character than the business activities above
described.
(c) To do any and every thing necessary or convenient for the
accomplishment of any of the purposes or the attainment of any
of the objects or the furtherance of any of the powers here-
inabove enumerated; to do any and every thing incidental to,
growing out of, or germane to any of the foregoing purposes or
objects, and to have and exercise all of the powers and rights
conferred by the laws of the State of Missouri upon
corporations formed under The General and Business Corporation
Law of Missouri, and all acts amendatory thereof and
supplemental thereto, it being expressly provided that the
foregoing clauses shall be construed both as objects, purposes
and powers and shall be in furtherance and not in limitation
of the powers conferred by the laws of the State of Missouri.
ARTICLE EIGHT
The corporation shall not consolidate with, or merge with or into, any
other corporation or convey to any corporation or other person or
otherwise dispose of all or substantially all of the assets or dispose of
by any means all or substantially all of the stock or assets of any major
subsidiary of the corporation unless such consolidation, merger,
conveyance or disposition is approved (a) by the affirmative vote of not
less than sixty-six and two-thirds per cent (66-2/3%) of the aggregate
voting power of the outstanding stock entitled to vote thereon, and (b) by
the affirmative vote of not less than 80% of the aggregate voting power of
the outstanding stock entitled to vote thereon, which shall include the
affirmative vote of at least 50% of the voting power of the outstanding
stock of shareholders entitled to vote thereon other than controlling
shareholders, (i) if any shareholder entitled to vote thereon is a person
who, including affiliates of such person, is the beneficial owner (as the
terms are defined in the Securities and Exchange Act of 1934 and in the
rules thereunder) of more than 20% of the voting power of the corporation
(a "controlling shareholder"), provided that shares held, voted or
otherwise controlled by a person as trustee, plan administrator, officer
of the corporation or otherwise pursuant to an employee benefit plan of
the corporation or of an affiliate of the corporation shall not be deemed
to be beneficially owned by any person for the purpose of determining
whether a person is a controlling shareholder, and (ii) if, prior to the
acquisition of 20% of the voting power of the corporation by a
shareholder, the Board of Directors of the corporation had not unanimously
approved such consolidation, merger, conveyance or disposition. If there
is a controlling shareholder, this Article Eight can be amended only by
the affirmative vote of the voting power of the corporation then required
to approve a consolidation, merger, conveyance or disposition under this
Article Eight.
ARTICLE NINE
The Board of Directors shall have power to make, and from time to time
repeal, amend and alter the By-Laws of the corporation; provided, however,
that the paramount power to repeal, amend and alter the By-Laws or to
adopt new By-Laws, shall always be vested in the shareholders, which power
may be exercised by a vote of a majority thereof present at any annual or
special meeting of the shareholders, and the directors thereafter shall
have no power to suspend, repeal, amend or otherwise alter any By-Laws or
portion thereof so enacted by the shareholders, unless the shareholders in
enacting such By-Laws or portion thereof shall otherwise provide.
ARTICLE TEN
(a) The corporation, except as provided in paragraph (b), shall
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, including without limitation
any action by or in the right of the corporation, by reason of
the fact that he is or was a director or officer of the
corporation or is or was a director or officer of the
corporation who is or was serving at the request of the
corporation as a director, officer, agent, employee, partner
or trustee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including
attorneys' fees, judgments, fines, taxes and amounts paid in
settlement, actually and reasonably incurred by him in
connection with such action, suit or proceeding if such
person's conduct is not finally adjudged to be knowingly
fraudulent, deliberately dishonest or willful misconduct. The
right to indemnification conferred in this paragraph shall be
a contract right and shall include the right to be paid by the
corporation expenses incurred in defending any actual or
threatened civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or
proceeding. Such right will be conditioned upon receipt of an
undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as
authorized in this Article. Such right shall survive any
amendment or repeal of this Article with respect to expenses
incurred in connection with claims arising out of acts or
omissions occurring prior to such amendment or repeal. 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.
(b) If a claim under paragraph (a) of this Article 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 an 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 standards
of conduct which make it permissible under the General
Business and Corporation Law of Missouri 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 General Business and
Corporation Law of Missouri, 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 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.
(c) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue
as to a person who has ceased to be a director, officer,
employee, partner, trustee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
(d) The corporation may purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee, partner,
trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity
or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such
liability under the provisions of this Article.
(e) For the purposes of this Article, references to the
"corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a
director, officer, employee or agent of such a constituent
corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee,
partner, trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the
same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would
if he had served the resulting or surviving corporation in the
same capacity.
(f) For purposes of this Article, the term "other enterprise"
shall include employee benefit plans; the term "fines" shall
include any excise taxes assessed on a person with respect to
any employee benefit plan, and the term "serving at the
request of the corporation" shall include any service as a
director, officer, employee, partner, trustee or agent of, or
at the request of, the corporation which imposes duties on, or
involves services by, such director, officer, employee,
partner, trustee or agent with respect to an employee benefit
plan, its participants, or beneficiaries.
(g) In the event any provision of this Article shall be held
invalid by any court of competent jurisdiction, such holding
shall not invalidate any other provision of this Article and
any other provisions of this Article shall be construed as if
such invalid provision had not been contained in this Article.
In any event, the corporation shall indemnify any person who
is or was a director or officer of the corporation, or who is
or was a director or officer of the corporation who is or was
serving at the request of the corporation as a director,
officer, agent, employee, partner or trustee of another
corporation, partnership, joint venture, trust or other
enterprise, to the full extent permitted under Missouri law,
as from time to time in effect.
AFFIDAVIT OF THE PRESIDENT
OF BALDOR ELECTRIC COMPANY
The undersigned, R. L. Qualls, the duly appointed President of Baldor
Electric Company (the "Company"), does hereby swear and affirm that the
Restated Articles of Incorporation of the Company as set forth above (the
"1995 Restatement"), were approved by the Board of Directors of the
Company at a duly called and noticed meeting held on February 6, 1995, at
which a quorum was present. The undersigned does further swear and affirm
that: (i) the 1995 Restatement correctly sets forth, without change, the
corresponding provisions of the Company's prior Restated Articles of
Incorporation adopted by the Company's shareholders on April 27, 1979, as
subsequently amended (the "1979 Restated Articles as Amended"); and (ii)
the 1995 Restatement supersedes the 1979 Restated Articles as Amended.
IN WITNESS WHEREOF, the undersigned President of this corporation has
executed this instrument and its Secretary has affixed its corporate seal
hereto and attested said seal this 6th day of February, 1995.
BALDOR ELECTRIC COMPANY
By /s/ R. L. Qualls
---------------------
R. L. Qualls
ATTEST:
/s/ Lloyd G. Davis
------------------
Lloyd G. Davis
STATE OF ARKANSAS )
) S.S.
COUNTY OF SEBASTIAN )
I, Gina L. Stafford, a Notary Public, do hereby certify that on the 6th
day of February, 1995, personally appeared before me R. L. Qualls, who,
being by me first duly sworn, declared that he is the President of Baldor
Electric Company, that he signed the foregoing document as President of
the corporation, and that the statements therein contained are true.
Notary Public
My Commission Expires: /s/ Gina L. Stafford
--------------------
Gina L. Stafford
June 12, 2001
As adopted by the Board of
Directors at the May 2, 1980
meeting, and including
amendments through
February 6, 1995.
BYLAWS
OF
BALDOR ELECTRIC COMPANY
ARTICLE I
OFFICES
1. Principal Office. The principal office of the corporation shall
be located at such place, either within or without the State of Missouri,
as the Board of Directors shall designate from time to time.
2. Registered Office and Agent. The corporation shall have and
continuously maintain a registered office and a registered agent within
the State of Missouri. The Board of Directors, from time to time by
resolution, may change the registered agent and the address of the
registered office.
3. Additional Offices. The corporation may also have offices and
branch offices at such other places as the Board of Directors from time to
time may designate or the business of the corporation may require.
ARTICLE II
SEAL
The seal of the corporation shall be a circular impression with the
name of the corporation around the rim thereof, the word "CORPORATE" in
the upper portion of the center thereof, the words "MO. 1920" in the lower
portion of the center thereof, and the word "SEAL" in the center. The
Board of Directors, by resolution, may change the form of the corporate
seal from time to time.
ARTICLE III
MEETINGS OF SHAREHOLDERS
1. Place. All meetings of the shareholders shall be held at such
place within our without the State of Missouri as may be designated by the
Board of Directors at a meeting held not less than fifteen days prior to
such meeting of shareholders. In the event the Board of Directors fail to
designate a place for the meeting to be held, then the meeting shall be
held at the principal office of the corporation. Anything to the contrary
in this Section 1 notwithstanding, any meeting of shareholders called
expressly for the purpose of removing one or more directors shall be held
at the registered office or principal business office of the corporation
in Missouri or in the city or county in Missouri in which the principal
business office of the corporation is located.
2. Annual Meeting. The annual meeting of shareholders shall be held
on the first Saturday in May or the second Saturday in May, as determined
from time to time by the Board of Directors, in each year at a time
designated by the Board of Directors for the purpose of electing Directors
and for the transaction of such other business as properly may come before
such meeting. If the day fixed for the annual meeting shall be a legal
holiday in the state of the location of such meeting, such meeting shall
be held on the next succeeding business date.
3. Special Meetings. Special meetings of the shareholders will be
called by the Secretary upon request of the President or a majority of the
members of the Board of Directors or upon the request of the holders of
not less than eighty percent (80%) of all the outstanding shares of the
corporation's stock entitled to vote at such meeting. Notwithstanding the
provisions of any Articles of the Restated Articles of Incorporation or
any other Article herein, this Section of the bylaws may not be amended or
repealed without the consent of the holders of eighty percent (80%) of the
outstanding shares of the corporation.
4. Notice. Notice, given as provided in Article X of these bylaws,
of each meeting of shareholders, stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, is required to be delivered or given as
provided in Article X of these bylaws not less than ten (10) nor more than
seventy (70) days prior to the date of said meeting.
5. Quorum. The holders of a majority of the shares of stock issued
and outstanding and entitled to vote at any meeting, present in person or
represented by proxy, constitutes a quorum at all meetings of the
shareholders for the transaction of business, except as otherwise provided
by law, by the Articles of Incorporation or by these bylaws; provided,
however, that in the absence of such quorum, the holders of a majority of
such shares present and voting at said meeting, either in person or by
proxy, have the right successively to adjourn the meeting to a specified
date not longer than ninety (90) days after such adjournment, and no
notice of such adjournment need be given to shareholders not present at
the meeting. Every decision which shall have received the favorable vote
of a majority of the votes cast in connection therewith at any meeting of
the shareholders at which a quorum was present shall be valid as a
corporate act unless a larger vote is required by law, by the Articles of
Incorporation or by these bylaws.
6. Informal Action by Shareholders. In all matters, every decision
of a majority of shares entitled to vote on the subject matter and
represented in person or by proxy at a meeting at which a quorum is
present shall be valid as an act of the shareholders, unless a larger vote
is required by law, by these bylaws, or the Articles of Incorporation.
Shares represented by a proxy which directs that the shares be voted to
abstain or to withhold a vote on a matter shall be deemed to be
represented at the meeting as to such matter.
ARTICLE IV
VOTING PROCEDURE
1. List of Voters. The officers having charge of the transfer book
for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting at least ten (10) days before
such meeting. Said list shall be arranged in alphabetical order with the
address and the number of shares held by each. Said list shall be kept on
file at the registered office of the corporation within the State of
Missouri, at least ten (10) days prior to such meeting and shall be open
to the inspection of any shareholder during said period and up to the
adjournment of the meeting. Such list also shall be produced and kept
open at the time and place of the meeting and shall be subject to
inspection by any shareholder prior to adjournment of the meeting. The
original share ledger or transfer book or a duplicate thereof kept in the
State of Missouri shall be prima facie evidence as to who are the
shareholders entitled to examine such list or share ledger or transfer
book or to vote at any meeting of shareholders. Failure to comply with
the requirements of this section shall not affect the validity of any
action taken at such meeting.
2. Inspectors. Every meeting of the shareholders shall be called to
order by the President, Secretary or persons calling said meeting. If the
object of said meeting be to elect directors or to take a vote of the
shareholders on any proposition, then, the person presiding at said
meeting may, and if requested to do so by any officer of the corporation
or the holders of a majority of shares present at such meeting, in person
or by proxy, shall, appoint not less than two persons who are not
directors as inspectors to receive and canvass the votes given at such
meeting and certify the results to the person presiding. In all cases
where the right to vote upon any share or shares shall be questioned, it
shall be the duty of the inspectors or the persons conducting the vote to
require the transfer books as evidence of shares held, and all shares that
may appear standing thereon in the name of any person or persons shall be
entitled to be voted upon by such person or persons directly to themselves
or by proxy.
3. Inspectors' Oath. Any inspector, before he shall enter upon the
duties of his office, shall take and subscribe the following oath before
any officer authorized by law to administer oaths: "I do solemnly swear,
that I will execute the duties of an inspector of the election now to be
held with strict impartiality, and according to the best of my ability."
4. Close of Transfer Books. At each meeting of the shareholders,
whether annual or special, the transfer books of the corporation shall be
produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder. The Board of Directors
shall have the power to close the transfer books, or fix in advance a date
not exceeding seventy (70) days preceding, or in advance of, the date of
any meeting of shareholders as a record date for the determination of the
shareholders entitled to notice of and to vote at any such meeting. If
the Board of Directors shall not have fixed a record date or closed the
transfer books of its stockholders entitled to notice of, and to vote at,
a meeting of shareholders, only the shareholders who are shareholders of
record at the close of business on the twentieth day preceding the date of
the meeting shall be entitled to notice of, and to vote at, the meeting,
and any adjournment of the meeting; except that, if prior to the meeting
written waivers of notice of the meeting are signed and delivered to the
corporation by all the shareholders of record at the time the meeting is
convened, only the shareholders who are shareholders of record at the time
of the meeting is convened shall be entitled to vote at the meeting, and
any adjournment of the meeting.
ARTICLE V
VOTERS
1. Eligible Voters. Any shareholder owning one or more shares of
stock on record in the stock books of the corporation on the record date
or on the date of closing of the transfer books of the corporation as
provided in paragraph 4 of Article IV of these bylaws, shall be eligible
to vote at any meeting of shareholders; provided, however, that no person
shall be admitted to vote on any shares belonging or hypothecated to the
corporation. On each matter submitted to a vote, each such shareholder
shall have as many votes as he has shares of stock in this corporation.
But in all elections for directors of this corporation, each such
shareholder shall have the right to cast as many votes in the aggregate as
shall equal the number of voting shares so held by him in the corporation,
multiplied by the number of directors to be elected at such election, and
each such shareholder may cast the whole number of votes, either in person
or by proxy, for one candidate, or distribute them among two or more
candidates; and such directors shall be elected in no other manner.
2. Proxies. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized attorney in
fact. No proxy shall be valid after eleven (11) months from the date of
execution unless otherwise provided in the proxy. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only
so long as, it is coupled with an interest sufficient in law to support an
irrevocable power of attorney. The interest with which it is coupled need
not be an interest in the shares themselves.
ARTICLE VI
BOARD OF DIRECTORS
1. Management and Number. The business of the corporation shall be
managed under the direction of its Board of Directors. The number of
Directors which shall constitute the whole Board shall be fixed, from time
to time, by resolutions adopted by the Board, but shall not be less than
three (3) persons. The Board shall be divided into three classes whose
terms expire at different times. At the annual shareholders' meeting to
be held in 1977, three (3) Directors shall be elected for a term of one
(1) year; three (3) Directors for a term of two (2) years; and three (3)
Directors for a term of three (3) years. At each subsequent annual
shareholders' meeting, successors to the class of Directors whose terms
expire that year shall be elected to hold office for a term of three (3)
years. Notwithstanding the provisions of any other Article herein, this
Section of the bylaws may not be amended or repealed without the consent
of the holders of two-thirds of the outstanding shares of the corporation.
2. Vacancies. Whenever any vacancy on the Board of Directors shall
occur due to death, resignation, retirement, removal, increase in the
number of Directors, or otherwise, a majority of Directors then in office,
although less than a majority of the entire Board, may fill the vacancy or
vacancies until the next election of Directors by the shareholders, at
which time a successor or successors shall be duly elected by the
shareholders to fill the vacancy or vacancies. The Board of Directors may
apportion any increase or decrease in directorships among the classes as
nearly equal in number as possible. Notwithstanding the provisions of any
other Article herein, only the remaining Directors of the corporation
shall have the authority, in accordance with the procedure stated above,
to fill any vacancy which exists on the Board of Directors.
3. Quorum. A majority of the full Board of Directors shall
constitute a quorum for the transaction of business by the Board of
Directors at any meeting, unless a greater number is required by the
Articles of Incorporation or these bylaws; provided, however, that in the
absence of such quorum, a majority of the directors present and voting at
such meeting shall have the right successively to adjourn the meeting to
a specified date, and no notice of such adjournment need be given to
directors not present at the meeting. Any act or decision of the majority
of the directors present at a meeting at which a quorum is present shall
be the act or decision of the Board of Directors, unless the act of a
greater number is required by the Articles of Incorporation or these
bylaws.
4. Place of Meetings. Meetings of directors shall be held at the
principal office of the corporation or such other place or places, either
within or without the State of Missouri, as may be agreed upon by the
Board of Directors. Members of the Board of Directors may also
participate in meetings of the board by means of conference telephone or
similar communications equipment whereby all persons participating in the
meeting can hear each other, and participation in a meeting in such manner
shall constitute presence in person at the meeting for all purposes.
5. Regular and Special Meetings. Regular meetings of the Board of
Directors shall be held as frequently and at such time and place as may be
determined by the Board of Directors from time to time. Special meetings
of the Board of Directors shall be called by the Secretary at any time on
request of the President or two members of the Board of Directors.
6. Notice. Regular meetings of the Board of Directors may be held
without notice. Special meetings of the Board of Directors may be held
upon three (3) days notice, given as provided in Article X of these bylaws
or by telephone.
7. Interest in Transactions. No contract or other transaction
between the corporation and any person, firm, association, corporation,
subsidiary or affiliated corporation, and no other act of the corporation,
shall in the absence of fraud, be invalidated or in any way affected by
the fact that any of the directors of the corporation are, directly or
indirectly, pecuniarily or otherwise interested (either as director,
shareholder, officer, employee, member or otherwise) in such person, firm,
association, corporation, subsidiary or affiliated corporation. Any
director of the corporation individually, or any firm or association of
which any director may be a member or shareholder, may be a party to, or
may be pecuniarily or otherwise interested in, any contract or transaction
of the corporation, provided that the fact that he individually or such
firm or association is so interested shall be disclosed or known to the
Board of Directors, or a majority of such members thereof as shall be
present at any meeting of the Board of Directors at which action upon any
such contract, transaction or other act is taken; and if such fact shall
be so disclosed or known, any director of this corporation so related or
otherwise interested may be counted in determining the presence of a
quorum at any meeting of the Board of Directors at which action upon any
such contract, transaction or act shall be taken, and may vote thereat
with respect to any such action to which he is so related or in which he
is interested.
8. Executive Committee. The Board of Directors may appoint two or
more directors to constitute an Executive Committee and may vest such
committee with all or any portion of the powers vested by law or in these
bylaws in the full Board of Directors and may provide for rules of
procedure to govern the operation of such committee; provided that in no
event shall the Executive Committee or any other committee have the power
to approve plans of liquidation, merger or reorganization, the sale of all
or substantially all of the assets of the corporation or amendments of
these bylaws or the Articles of Incorporation of the corporation.
9. Other Committees. The Board of Directors may appoint other
committees composed of members of the Board and may vest such committees
with any portion of the powers vested by law or in these bylaws in the
full Board of Directors and may provide for rules for procedure to govern
the operation of such committees.
10. Informal Action by Directors. Any action which is required to be
or may be taken at a meeting of the directors may be taken without a
meeting if consents in writing, setting forth the action so taken, are
signed by all the directors. The consents shall have the same force and
effect as a unanimous vote of the directors at a meeting duly held, and
may be stated as such in any certificate or document filed under the
provisions of the General and Business Corporation Law of Missouri. The
Secretary shall file the consents with the minutes of the meetings of the
Board of Directors.
11. Qualification of Directors. The Board of Directors shall be
composed of individuals who are at least 21 years of age, shareholders of
the Corporation and citizens of the United States. The Board of Directors,
by the affirmative vote of at least a majority of the directors then
serving on the Board, shall determine that an individual meets these
qualifications prior to his nomination as a director. If not nominated by
the Board but nominated by shareholders of the Corporation, then the Board
shall determine by the affirmative vote of at least a majority of the
directors then serving on the Board that such individual meets the
qualifications of this Section or such individual shall not stand for
election. The Board of Directors may, upon the affirmative vote of at
least a majority of the directors then serving on the Board, waive any or
all of the above qualification requirements as to any existing director or
any individual who has been or is to be nominated as a director.
12. Nomination of Directors. Nominations for election to the Board
of Directors may be made by the Board of Directors, or by any shareholder
of any outstanding class of capital stock of the Corporation entitled to
vote in the election of directors. Nominations, other than those made by
the existing Board of Directors, shall be made in writing and shall be
delivered or mailed to the President of the Corporation not less than 45
nor more than 90 days prior to the regularly scheduled date set in the
Bylaws of the Corporation as the date for the annual meeting of
shareholders at which directors shall be elected. Such nomination and
notification shall contain the following information to the extent known
to the notifying shareholder:
a. The names and addresses of the proposed nominee or nominees;
b. The principal occupation of each proposed nominee;
c. The total number of shares that, to the knowledge of the
notifying or nominating shareholders, will be noted for each
of the proposed nominees;
d. The name and residence address of each notifying or nominating
shareholder; and
e. The number of shares owned by the notifying or nominating
shareholder.
Nominations not made in accordance herewith may, in his discretion, be
disregarded by the chairman of the meeting, and upon his instructions, the
judges of election may disregard all votes cast for each such nomination.
ARTICLE VII
OFFICERS
1. Executive Officers. The Executive Officers of the corporation
shall be a Chairman of the Board of Directors, a President, a Vice
President, a Secretary and a Treasurer, and such other additional
officers, including an Executive Vice President, Vice Presidents by
whatever designation determined by the Board of Directors, Assistant
Secretaries and Assistant Treasurers, as the Board of Directors may from
time to time elect. Any two or more offices may be held by the same
individual.
2. Election and Term. The Chairman of the Board of Directors,
President, Vice President, Secretary, and Treasurer shall be elected by a
majority of the whole number of the Board of Directors, and shall hold
office at the pleasure of the Board of Directors. At any meeting the
Board of Directors may elect such other officers and agents as it shall
deem necessary, who shall hold office at the pleasure of the Board of
Directors, and who shall have such authority and shall perform such duties
as from time to time shall be prescribed by the Board of Directors.
3. Removal. Any officer elected by the Board of Directors may be
removed by the affirmative vote of a majority of the entire Board of
Directors whenever in its judgment the interests of the corporation will
be served thereby.
ARTICLE VIII
DUTIES OF OFFICERS
1. Chairman of the Board of Directors. The Chairman of the Board of
Directors shall be the Chairman of the Executive Committee and the Board
of Directors and shall perform such duties as shall be assigned to him and
shall exercise such powers as may be granted to him by the Board of
directors; he shall preside at all meetings of the shareholders and
directors. The Chairman of the Board of Directors shall have the
authority to sign or countersign certificates, contracts, and other
instruments of the corporation, including bonds, mortgages, conveyances
and other contracts requiring the seal of the corporation. In the absence
of direction by the Board of Directors to the contrary, the Chairman of
the Board of Directors shall have the power to vote all securities held by
the corporation and to issue proxies therefor.
2. President. The President shall be the Chief Executive Officer of
the corporation and perform such duties as shall be assigned to him and
shall exercise such powers as may be granted to him by the Board of
Directors or by the Chairman of the Board of Directors of the corporation.
He shall have general supervision and active management of the business
and finances of the corporation; he shall see that all orders and
resolutions of the Board of Directors are carried into effect; subject,
however, to the right of the directors to delegate any specific powers to
any other officer or officers of the corporation, except such as may be by
statute exclusively conferred upon the President. The President shall
have the authority to sign or countersign certificates, contracts, and
other instruments of the corporation, including bonds, mortgages,
conveyances and other contracts requiring the seal of the corporation. In
the absence or disability of the Chairman of the Board of Directors, the
President shall perform the duties and exercise the powers of the Chairman
of the Board of Directors with the same force and effect as if performed
by the Chairman of the Board of Directors, and shall be subject to all
restrictions imposed upon him.
3. Vice Presidents. The Executive Vice President, if any, and the
Vice Presidents shall perform such duties as shall be assigned to them and
shall exercise such powers as may be granted to them by the Board of
Directors or by the Chairman of the Board of the corporation.
4. The Secretary. The Secretary shall attend all meetings of the
shareholders and of the Board of Directors and act as clerk thereof, and
shall record all votes and the minutes of all proceedings in a minute book
to be kept for that purpose. He shall keep in safe custody the seal of
the corporation, and when authorized by the Chairman of the Board, the
President or a Vice President, he shall affix the seal to any instrument
requiring the seal, and, when so ordered, add his signature as an
attestation thereof. He shall give, or cause to be given, a notice as
required of all meetings of the shareholders and of the Board of
Directors. He shall keep or cause to be kept a stock certificate and
transfer book and a list of all the shareholders and their respective
addresses. He shall perform such other duties as may be prescribed from
time to time by the Board of Directors or the Chairman of the Board.
5. The Treasurer. The Treasurer shall have custody of the corporate
funds and securities and shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books of the corporation to be
maintained by him for such purpose; he shall deposit all moneys and other
valuable effects of the corporation in the name and to the credit of the
corporation in depositories designated by the Board of Directors; he shall
render to the Board of Directors and the Chairman of the Board, as they
may require, an account of all transactions and of the financial condition
of the corporation. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors and shall perform such other duties
as may be prescribed from time to time by the Board of Directors or the
Chairman of the Board.
6. Delegation of Power. In the absence of the Chairman of the Board,
or if the Chairman of the Board is unable to perform the duties of the
Chairman's position, the President shall perform the duties and exercise
the powers of the Chairman of the Board, with the same force and effect as
if performed by the Chairman of the Board, and shall be subject to all
restrictions imposed on the authority of the position. In the absence of
the President, or if the President is unable to perform the duties of the
President's position, the Chief Financial Officer (or the principal
financial officer) shall exercise the powers of the President with the
same force and effect as if performed by the President, and shall be
subject to all restrictions imposed on the authority of the position. In
the absence or disability of any officer of the corporation other than the
Chairman of the Board or the President, the Assistant of such officer
shall perform the duties and exercise the powers of such officer with the
same force and effect as if performed by such officer, and shall be
subject to all restrictions imposed upon such officer. In addition, and
without limiting the generality of the foregoing, in case of the absence
of any officer of the corporation or for any other reason that the Board
of Directors may deem sufficient, the Board, by resolution, may delegate
the powers or duties of such officer to any other officer or to any
director for the time being.
ARTICLE IX
CERTIFICATES OF STOCK AND TRANSFERS
1. Issuance. Certificates of stock of the corporation shall be
issued and signed by the Chairman of the Board of Directors, President or
a Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, and shall bear the corporate seal.
Such seal may be facsimile, engraved or printed, and if any such
certificate shall be signed by a transfer agent or by a registrar, the
signature of any such officer upon such certificate may be facsimile,
engraved or printed. Certificates shall be numbered consecutively and
registered as they are issued. They shall indicate, upon their face,
among other things, the owner's name, the number and class of shares of
stock represented by the certificate, the par value of shares of such
class, the date of its issuance and the manner in which the shares may be
transferred.
2. Transfers. Transfers of stock 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 a transfer agent of the corporation, and on surrender of the
certificates for such shares properly endorsed and the payment of all
taxes thereon.
3. Transfer Books. Proper books shall be kept under the direction
of the Secretary, showing the ownership and transfer of all certificates
of stock. The Board of Directors shall have power to close said transfer
books of the corporation for a period not exceeding seventy (70) days
preceding the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion of shares
shall go into effect. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date not exceeding
seventy (70) days preceding the date for the payment of any dividend, or
the date for the allotment of rights, or the date when any change or
conversion or exchange of shares shall go into effect, as a record date
for the determination of the shareholders entitled to receive payment of
any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any change, conversion or exchange of shares. In
such case, such shareholders and only such shareholders as shall have been
shareholders of record on the date of closing the transfer books or on the
record date so fixed shall be entitled to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after such date of closing of the transfer
books or such record date fixed as aforesaid.
4. Holders of Record. The corporation shall be entitled to treat the
holder of record of any shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of Missouri.
5. Lost, Stolen or Destroyed Certificates. The Board of Directors
may authorize a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors, in its discretion and
as a condition precedent to the issuance thereof, may require the owner of
such lost, stolen or destroyed certificate or certificates, or his legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against the corporation on account of
the alleged loss, theft or destruction of such certificate or the issuance
of such new certificate.
ARTICLE X
NOTICES
1. Notice Deemed Given. Whenever under the provisions of these
bylaws notice is required to be delivered to any director, officer or
shareholder, such notice shall be deemed to be delivered when deposited in
the United States mail with postage thereon prepaid, or dispatched by
prepaid telegram, addressed to such individual at his address as it
appears on the records of the corporation, or when delivered in person to
the individual.
2. Attendance as Waiver. Notice of any meeting required to be given
under the provisions of these bylaws or the laws of the State of Missouri
shall be deemed waived by the attendance at such meeting of the party or
parties entitled to notice thereof, except where a party or parties attend
a meeting for the express purpose of objecting to the transaction of any
business because the meeting was not lawfully called or convened.
3. Waiver of Notice. Any notice required to be given under the
provisions of these bylaws or the laws of the State of Missouri may be
waived by the persons entitled thereto signing a waiver of notice before
or after the time of said meeting, and such waiver shall be deemed
equivalent to the giving of such notice. Such waiver of notice may be
executed in person by the party entitled thereto or by his agent duly
authorized in writing so to do.
ARTICLE XI
INDEMNIFICATION OF OFFICERS AND DIRECTORS
AGAINST LIABILITIES AND EXPENSES IN ACTIONS
1. Indemnification With Respect to Third Party Actions. This
corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of this
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of this corporation, or is or was serving at the request
of this corporation as a director, officer, employee, partner, trustee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines, taxes and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of this corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of this
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
2. Indemnification With Respect to Actions By or in The Right of the
Corporation. This corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of this corporation to procure
a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of this corporation, or is or was
serving at the request of this corporation as a director, officer,
employee, partner, trustee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of this corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct
in the performance of his duty to this corporation unless and only to the
extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall
deem proper.
3. Determination of Standard of Conduct. Any indemnification under
Section 1 or Section 2 above (unless ordered by a court) shall be made by
this corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
partner, trustee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in Section 1 or Section
2. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties
to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders.
4. Payment of Expenses in Advance of Disposition of Action. Expenses
incurred in defending any actual or threatened civil or criminal action,
suit or proceeding may be paid by this corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee, partner, trustee or agent to
repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by this corporation as authorized in this
Article XI.
5. Indemnification Provided in This Article Non-Exclusive. The
indemnification provided by this Article XI shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity while
holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, partner, trustee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
6. Definition of "Corporation". For the purposes of this Article XI,
references to this "corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director,
officer, employee, partner, trustee or agent of such a constituent
corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee, partner, trustee or agent of
another corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article XI
with respect to the resulting or surviving corporation as he would if he
had served the resulting or surviving corporation in the same capacity.
7. Saving Clause. In the event any provision of this Article XI
shall be held invalid by any court of competent jurisdiction, such holding
shall not invalidate any other provision of this Article XI and any other
provisions of this Article XI shall be construed as if such invalid
provision had not been contained in this Article XI.
ARTICLE XII
AMENDMENTS
1. By Shareholders. The bylaws, or any of them, or any additional
or supplementary bylaws, may be altered, amended or repealed, and new
bylaws may be adopted at any annual meeting of the shareholders without
notice, or at any special meeting the notice of which shall set forth the
terms of the proposed bylaw or action to be taken on any bylaw, by a vote
of the majority of the shares represented in person or by proxy and
entitled to vote at such annual or special meeting, as the case may be.
2. By Directors. The Board of Directors also shall have the power
to adopt new bylaws, and to amend, alter and repeal these and any
additional and supplementary bylaws, at any regular or special meeting of
the Board of Directors unless otherwise provided in the Articles of
Incorporation. Notice of any such action to be taken on any bylaws need
not be included in the call of said meeting.
-------------------------------------------------------------------------------
BALDOR ELECTRIC COMPANY
and
WACHOVIA BANK AND TRUST COMPANY, N.A.
Rights Agent
--------------
Rights Agreement
Dated as of May 6, 1988
-------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Section
-------
1. Certain Definitions............................................ 1
2. Appointment of Rights Agent.................................... 7
3. Issue of Rights Certificates................................... 7
4. Form of Rights Certificates.................................... 8
5. Countersignature and Registration.............................. 9
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates................................................... 10
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.. 10
8. Cancellation and Destruction of Rights Certificates............ 12
9. Reservation and Availability of Common Stock................... 13
10. Common Stock Record Date....................................... 14
11. Subscription Right............................................. 14
12. Merger Right................................................... 16
13. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights............................................... 19
14. Fractional Rights and Fractional Shares........................ 24
15. Rights of Action............................................... 25
16. Agreement of Rights Holders.................................... 25
17. Rights Certificate Holder Not Deemed a Stockholder............. 26
18. Concerning the Rights Agent.................................... 26
19. Merger or Consolidation or Change of Name of Rights Agent...... 27
20. Duties of Rights Agent......................................... 28
21. Change of Rights Agent......................................... 30
22. Issuance of New Rights Certificates............................ 31
23. Redemption and Termination..................................... 31
24. Notice of Certain Events....................................... 33
25. Notices........................................................ 34
26. Supplements and Amendments..................................... 35
27. Successors..................................................... 35
28. Benefits of this Agreement..................................... 35
29. Severability................................................... 35
30. Governing Law................................................. 35
31. Counterparts................................................... 36
32. Descriptive Headings........................................... 36
Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
(i)
<PAGE>
RIGHTS AGREEMENT
----------------
Rights Agreement, dated as of May 6, 1988 (the "Agreement"), between
BALDOR ELECTRIC COMPANY, a Missouri corporation (the "Company"), and
WACHOVIA BANK AND TRUST COMPANY, N.A., a national banking association (the
"Rights Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on May 6, 1988, the Board of Directors of the Company authorized
and declared a dividend distribution of one Right (as hereinafter defined)
for each outstanding share of common stock, par value $.10 per share, of
the Company (the "Common Stock") outstanding on May 25, 1988 (the "Record
Date"), and contemplates the issuance of one Right (subject to adjustment
as provided herein) for each share of Common Stock of the Company issued
between the Record Date and the earlier of the Distribution Date and the
Expiration Date (as such terms are defined herein), each Right
representing the right to purchase one share of Common Stock of the
Company upon the terms and subject to the conditions hereinafter set forth
(the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions.
-------------------
For purposes of this Agreement, the following terms have the meanings
indicated.
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as
hereinafter defined) and Associates (as hereinafter defined) of such
Person, without the prior approval of a majority of the Continuing
Directors (as such term is hereinafter defined), shall be the Beneficial
Owner (as hereinafter defined) of 20% or more of the shares of Common
Stock then outstanding, provided, however, that Acquiring Person shall not
mean (i) the Company, (ii) any Subsidiary of the Company (as hereinafter
defined), (iii) any employee benefit plan of the Company or any Subsidiary
of the Company, (iv) any entity holding shares of Common Stock organized,
appointed, or established by the Company or any of its Subsidiaries for or
pursuant to the terms of any such plan, or (v) a Person who inadvertently
becomes the beneficial owner of 20% or more of the shares of Common Stock
then outstanding and who (A) represents to the Board of Directors of the
Company <PAGE>
that the acquisition of such shares was inadvertent without intent to make
a tender offer; (B) undertakes to sell, within five Business Days, to a
Person other than the Company, enough shares so that his total Beneficial
Ownership is less than 20% of the shares of Common Stock then outstanding;
and, (C) in fact does sell such shares within five Business Days.
(b) "Affiliate" shall mean, with respect to a specified Person,
a Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the Person
specified.
(c) "Associate" shall mean, with respect to a specified Person,
(i) any corporation or organization (other than the Company or a
Subsidiary of the Company) of which such Person is an officer or partner
or is, directly or indirectly, the beneficial owner of 10% or more of any
class of equity security as defined in Rule 3a-11 of the General Rules and
Regulations under the Exchange Act, (ii) any trust or other estate in
which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, and
(iii) any relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person, or is an officer or director
of any corporation controlling or controlled by such Person.
(d) "Beneficial Ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934 (or any successor rule or statutory provision) or, if Rule
13d-3 shall be rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to Rule 13d-3 as in effect on the date hereof;
provided, however, that a Person shall, in any event, also be deemed to be
the "Beneficial Owner" of any securities:
(i) which such Person or any Affiliate or Associate thereof
beneficially owns, directly or indirectly;
(ii) which such Person or any Affiliate or Associate
thereof, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether of not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A)
<PAGE>
securities tendered pursuant to a tender or exchange offer made
by such Person or any Affiliate or Associate thereof until the
tendered securities are accepted for purchase or exchange, or
(B) securities issuable upon exercise of Rights;
(iii) which such Person or any Affiliate or Associate
thereof, directly or indirectly, has sole or shared voting or
investment power with respect thereto pursuant to any agreement,
arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (iii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding (A) arises solely from
a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under
the Exchange Act, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act; or
(iv) which are beneficially owned, directly or indirectly,
by any other Person or any Affiliate or Associate thereof with
which such Person or any Affiliate or Associate thereof has any
agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in subparagraph (iii)
of this paragraph (d)) or disposing of any voting securities of
the Company.
(e) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of North Carolina are
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M.,
Winston-Salem, North Carolina time, on such date; provided, however, that
if such date is not a Business Day it shall mean 5:00 P.M., Winston-Salem,
North Carolina time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value $.10 per
share, of the Company, including shares of Common Stock without voting
rights pursuant to section 351.407 of the Missouri Revised Statutes, and
"common stock" when used
<PAGE>
with reference to any Person other than the Company shall mean the capital
stock with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) "Continuing Director" shall mean any director of the Company who
is not an Acquiring Person or a representative or nominee of an Acquiring
Person, and (i) who was elected by the stockholders or appointed by the
Board of Directors of the Company prior to the date as of which the
Acquiring Person in question became an Acquiring Person, or (ii) who was
designated (before his initial election or appointment as a director) as
a Continuing Director by a majority of the Whole Board (as hereinafter
defined), but only if a majority of the Whole Board shall then consist of
Continuing Directors, or, if a majority of the Whole Board shall not then
consist of Continuing Directors, by a majority of the then Continuing
Directors.
(i) "Current Market Price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however,
that in the event that the current per share market price of the Common
Stock is determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities
convertible into shares of such Common Stock, or (B) any subdivision,
combination, or reclassification of such Common Stock, and prior to the
expiration of 30 Trading Days after the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination, or
reclassification, then, and in each such case, the "current market price"
shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange
or, if the shares of Common Stock are not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading, or if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
National
<PAGE>
Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock selected by the Board of
Directors of the Company. If on any such date no market maker is making
a market in the Common Stock, the fair market value of such shares on such
date as determined reasonably and with good faith by the Board of
Directors of the Company shall be used and shall be binding on the Rights
Agent. If the Common Stock is not publicly held or not so listed or
traded, "current market price" per share shall mean the fair value per
share determined reasonably and with good faith to the holders of Rights
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent.
(j) "Distribution Date" shall mean the earlier of (i) the Stock
Acquisition Date (as hereinafter defined) or (ii) the tenth day after the
date of the commencement of, or first public announcement of the intent of
any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company or
any entity holding shares of Common Stock organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
to commence (which intention to commence remains in effect for five
Business Days after such announcement) a tender or exchange offer which
would result in such Person becoming an Acquiring Person, unless such date
is extended by a majority of the Continuing Directors (including any such
date which is after the date of this Agreement and prior to the issuance
of the Rights).
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended and in effect on the date of this Agreement, and all references
to any rule or regulation of the General Rules and Regulations under the
Exchange Act shall be, except as otherwise specifically provided herein,
to such rule or regulation as was in effect on the date of this Agreement.
(l) "Merger Right" shall mean the Rights described in Section 12(a)
hereof.
(m) "Offeror" shall mean any Person who both beneficially owns 1% or
less of the outstanding Common Stock as of the date such proposal is
delivered and who has not within one year prior to the delivery of such
written proposal beneficially owned in excess of 1% of the outstanding
Common Stock
<PAGE>
and disclosed, or caused the disclosure of, any intention which relates to
or would result in the acquisition, or influence or control, of the
Company.
(n) "Permitted Offer" shall mean a tender offer or an exchange offer
by an Offeror, and which offer is
(i) for all outstanding shares of Common Stock; and
(ii) at a price and on terms determined by at least a majority
of the members of the Board of Directors who are not officers of the
Company and who are not representatives, nominees, Affiliates or
Associates of the Offeror (after receiving advice from one or more
investment banking firms and taking into account all factors which such
members of the Board deem relevant including, without limitation, prices
which could reasonably be achieved if the Company or its assets were sold
on an orderly basis designed to realize maximum value, and other factors
as may be permitted under Missouri law) to be (A) at a price which is fair
to holders of Common Stock of the Company other than the Offeror and its
Affiliates or Associates, and (B) otherwise in the best interests of the
Company and the holders of its Common Stock other than the Offeror and its
Affiliates or Associates.
(o) "Person" shall mean any individual, firm, corporation,
partnership, or other entity.
(p) "Stock Acquisition Date" shall mean the first date of a public
announcement by the Company or an Acquiring Person that an Acquiring
Person has become such.
(q) "Subscription Right" shall mean the Rights described in Section
11(a) hereof.
(r) "Subsidiary" shall mean, with reference to any Person, and
corporation of which a majority of any class of equity security is
Beneficially Owned, directly or indirectly, by such person.
(s) "Trading Day," with respect to any security shall mean a day on
which the principal national securities exchange on which the security is
listed or admitted to trading is open for the transaction of business or,
if the security is not listed or admitted to trading on any national
securities exchange, a Business Day.
<PAGE>
(t) "Triggering Event" shall mean an event giving rise to the
Subscription Rights or Merger Rights.
(u) "Whole Board" shall mean the total number of directors which the
Company would have if there were no vacancies.
Any determination required by the definitions contained in this Section 1
shall be made by the Board of Directors of the Company in its good faith
judgment, which determination shall be final and binding.
Section 2. Appointment of Rights Agent.
---------------------------
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3
hereof, shall prior to the Distribution Date also be the holders of the
Common Stock) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the Distribution Date, (x) the Rights will be evidenced by
the certificates for the Common Stock registered in the names of the
holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock (including a
transfer to the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock as of the Close of
Business on the Distribution Date, at the address of such holder shown on
the records of the Company, a Rights certificate, in substantially the
form of Exhibit A hereto (the "Rights Certificates"), evidencing one Right
for each share of Common Stock so held. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit B (the "Summary of Rights"), by first-class,
postage prepaid mail to each record holder of the Common Stock as of the
Close of Business on the Record Date, at the address of such holder shown
on the records of the Company.
(c) Certificates for the Common Stock issued after the Record Date,
but prior to the earlier of the Distribution Date or the Expiration Date
(as hereinafter defined), shall be <PAGE>
deemed also to be certificates for Rights, and shall bear the following
legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Baldor
Electric Company (the "Company") and Wachovia Bank and Trust
Company, N.A., dated as of May 6, 1988 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to
the holder of this certificate a copy of the Rights Agreement
without charge promptly after receipt of a written request therefor.
Under certain circumstances, Rights beneficially owned by
Acquiring Persons (as defined in the Rights Agreement) and any
subsequent holder of such Rights may become null and void.
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Stock
represented by such certificates alone, and the surrender for transfer of
any of such certificates, shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may
from time to time be listed or to conform to usage. Subject to the
provisions of Section 11, Section 12, and Section 22 hereof, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date
and on their face shall entitle the holders thereof to purchase such
number of shares of Common Stock as shall be set forth therein at the
price per share set forth therein (the "Purchase Price"), but the number
of such shares and the Purchase Price shall be subject to adjustment as
provided herein.
<PAGE>
(b) Any Rights Certificate issued pursuant to Section 3(a) hereof
that represents Rights beneficially owned by an Acquiring Person or that
represents any Rights owned on or after the Distribution Date by any
person who subsequently becomes an Acquiring Person and any Rights
Certificate issued at any time upon the transfer of any Rights to an
Acquiring Person thereof or to any nominee of such Acquiring Person and
any Rights Certificate issued pursuant to Section 6 or Section 13 upon
transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, may contain the following
legend:
The Rights represented by this Rights Certificate were issued to a
Person who was or became an Acquiring Person. This Rights
Certificate and the Rights represented hereby may become void in the
circumstances specified in Section 7(e) of the Rights Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights
Certificate.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice-President,
either manually or by facsimile signature and shall have affixed thereto
the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may
be countersigned by the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company
and any Rights Certificates may be signed on behalf of the Company by any
person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices in Winston-Salem, North Carolina
books for registration and
<PAGE>
transfer of the Rights Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
--------------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
--------------------------------------------------------------
Certificates.
--------------
(a) Subject to the provisions of Section 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Certificates, entitling the registered
holder to purchase a like number of shares of Common Stock as the Rights
Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent designed for such purpose.
Thereupon, the Rights Agent shall countersign and deliver to the Person
entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of
the Rights Certificate so lost, stolen, destroyed, or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Sections 7(e) and 23(a) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby in
whole or in part at any time after the Distribution Date upon surrender of
the Rights Certificate, with the form of election to purchase on
<PAGE>
the reverse side thereof including the certificate contained therein duly
executed, to the Rights Agent at the principal corporate trust office of
the Rights Agent, together with payment of the Purchase Price for each
share of Common Stock as to which the Rights are exercised prior to the
earlier of (i) the Close of Business on May 25, 1998, subject to extension
as provided in Section 12(c) hereof (the "Final Expiration Date"), (ii)
the time at which the Rights are redeemed as provided in Section 23
hereof, or (iii) consummation of a transaction contemplated by Section
12(d) (such earlier time being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each share of Common Stock pursuant to
the exercise of a Right shall initially be $75.00 and shall be subject to
adjustment from time to time as provided in Section 13 hereof and shall be
payable in lawful money of the United States of America in accordance with
Paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase including the certificate
contained therein duly executed, accompanied by payment of the Purchase
Price for the shares to be purchased and an amount equal to any applicable
transfer tax in cash, or by certified check or bank draft payable to the
order of the Company, the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Common Stock
certificates for the number of shares of Common Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Company, at its sole discretion
shall have elected to deposit the shares of Common Stock issuable upon
exercise of the Rights hereunder into a depository, requisition from the
depositary agent depositary receipts representing such number of shares of
Common Stock as are to be purchased (in which case certificates for the
shares of Common Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct
the depositary agent to comply with such requests, (ii) when appropriate
requisition from the Company the amount of cash, if any, to be paid in
lieu of fractional shares in accordance with Section 14, (iii) after
receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt deliver such cash, if any, to or upon the
order of the registered holder of such Rights Certificate. In the case of
an exercise of the Rights by a holder pursuant to Section 11(a), the
Rights Agent shall return such Rights Certificate to the registered holder
thereof
<PAGE>
after imprinting, stamping, or otherwise indicating thereon that the
rights represented by such Rights Certificate no longer include the rights
provided by Section 11(a) of the Rights Agreement and if less than all the
Rights represented by such Rights Certificate were so exercised, the
Rights Agent shall indicate on the Rights Certificate the number of Rights
represented thereby which continue to include the rights provided by
Section 11(a).
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Rights Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, if
there occurs one or more of the transactions set forth in Section 11(a) or
Section 12(a) on or after the time an Acquiring Person became such, then
any Rights that are or were on or after the earlier of the Distribution
Date or the Stock Acquisition Date beneficially owned by an Acquiring
Person or any Associate or Affiliate shall become void with respect to the
Subscription Right and Merger Right and any holder of such Rights shall
thereafter have no right to exercise such Rights under the provisions of
Section 11(a) and Section 12(a).
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder of any Rights Certificate
upon the occurrence of any purported exercise thereof unless such
registered holder shall have (i) completed and signed the certificate
contained in the form of election to purchase set forth on the reverse
side of the Rights Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or
any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled
by it, and no Rights Certificates shall be issued in lieu thereof except
as expressly permitted by any of the provisions of this Rights Agreement.
The Company shall deliver
<PAGE>
to the Rights Agent for cancellation and retirement, and the Rights Agent
shall so cancel and retire, any other Rights Certificates purchased or
acquired by the Company otherwise than upon the exercise thereof. The
Rights Agent shall deliver all canceled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such
canceled Rights Certificates, and in such case shall deliver a certificate
of destruction thereof to the Company.
Section 9. Reservation and Availability of Common Stock.
--------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Common Stock, or any authorized and issued shares of Common Stock held in
its treasury, the number of shares of Common Stock that will be sufficient
to permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Common Stock issuable upon the exercise
of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the Stock Acquisition Date, or, if required under
the Securities Act of 1933 (the "Act") following the Distribution Date, a
registration statement under the Act, with respect to the Common Stock
purchasable upon exercise of the Rights, (ii) cause such registration
statement to become effective as soon as practicable after the filing, and
(iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act and the rules
and regulations thereunder) until the expiration of the Subscription
Rights and thereafter if required under the Act until the Expiration Date.
The Company will also take all action necessary to ensure compliance with
the securities laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability
of the Rights in order to prepare and file such registration statements.
Upon any suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is no longer
in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless
the requisite qualification in that jurisdiction shall have been obtained.
<PAGE>
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price),
be duly and validly authorized and issued and fully paid and nonassessable
shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Common Stock upon the
exercise of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a person other than, or the issuance or
delivery of the shares of Common Stock in respect of a name other than
that of the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for
shares of Common Stock in a name other than that of, the registered holder
upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Common Stock Record Date.
------------------------
Each person in whose name any certificate for shares of Common Stock is
issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the shares of Common Stock represented
thereby on, and such certificate shall be dated, the date upon which the
Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a
date upon which the Common Stock transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Common Stock transfer books of the Company are
open.
Section 11. Subscription Right.
------------------
(a) In the event that any Person (other than the Company, any
subsidiary of the Company, and employee benefit plan of the Company or any
of its subsidiaries or any entity holding securities of the Company
organized, appointed, or established by the Company or any of its
subsidiaries for or pursuant to the terms of any such plan), alone or
together with its Affiliates and Associates, shall become an Acquiring
Person (except pursuant to a Permitted Offer), then proper provision shall
be made so that each
<PAGE>
holder of a Right, except as provided in Section 7(e) hereof, shall, for
a period of 60 days (or such other shorter or longer period as may be
established by action of a majority of the Continuing Directors) after the
later of the Stock Acquisition Date and the effective date of an
appropriate registration statement pursuant to Section 9, have a right to
receive ("Subscription Right"), upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number
of shares of Common Stock of the Company as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the then
number of shares of Common Stock for which a Right is then exercisable and
dividing that product by (y) 50% of the Current Market Price per one share
of Common Stock on the date of the occurrence of the event set forth in
this paragraph (such number of shares being referred to as the "number of
Adjustment Shares"); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 12 hereof, then only the provisions of Section 12
hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a).
(b) In the event that there shall not be sufficient authorized but
unissued Common Stock to permit the exercise in full of the Subscription
Rights, the Company shall take all such action as may be necessary to
authorize additional shares of Common Stock for issuance upon exercise of
the Subscription Rights, including the calling of a meeting of
shareholders; provided, however, that if the Company is unable to cause
the authorization of a sufficient number of additional shares of Common
Stock, then, in the event the Rights become so exercisable, the Board of
Directors may, but shall not be required to, with respect to each Right,
(A) pay cash in an amount equal to the Purchase Price, in lieu of issuing
shares of Common Stock and requiring payment therefore, or (B) issue debt
or equity securities or a combination thereof, having a value equal to the
Current Value of the Common Stock (as defined hereinafter), where the
value of such securities shall be determined by an investment banking firm
selected by the Board of Directors of the Company, and require the payment
of the Purchase Price, or (C) deliver any combination of cash, property,
Common Stock and/or other securities having a value equal to the Current
Value, and require payment of all or any requisite portions of the
Purchase Price. The Current Value shall be the product of the Current
Market Price per share of Common Stock on the date of the occurrence of
the event giving rise to the Subscription Right, multiplied by the number
of shares of Common Stock for which the Subscription Right otherwise would
be exercisable if there were sufficient shares available. To the extent
that the Company determines that some
<PAGE>
action need be taken pursuant to clauses (A), (B), or (C) of the provision
of this Section 11(b), the Board of Directors may temporarily suspend the
exercisability of the Subscription Rights for a period of up to 45 days
following the date on which the event described in Section 11(a) shall
have occurred, in order to seek any authorization of additional shares of
Common Stock and/or to decide the appropriate form of distribution to be
made pursuant to the above proviso and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended.
Section 12. Merger Right.
------------
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person, (y) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person (or
the Company) or cash or any other property, or (z) the Company shall sell,
lease, mortgage, or otherwise transfer (or one or more of its Subsidiaries
shall sell, mortgage, or otherwise transfer), in one or more transactions,
assets or earning power aggregating more than 50% of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any other
Person or Persons, then, and in each such case proper provision shall be
made so that (i) following the Distribution Date, each holder of a Right,
except as provided in Section 7(e), shall have the right ("Merger Right")
to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of shares of
freely tradeable common stock of the Principal Party (as hereinafter
defined), free and clear of any liens, encumbrances, or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the
then current Purchase Price by the number of shares of Common Stock for
which a Right is then exercisable (without taking into account any
adjustment previously made pursuant to a Subscription Right) and dividing
that product by (2) 50% of the Current Market Price per share of the
common stock of such Principal Party on the date of consummation of such
consolidation, merger, sale, or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale, or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 13 hereof shall apply
to such Principal Party; (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Common
<PAGE>
Stock) in connection with such consummation as may be necessary to assure
that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of common stock thereafter
deliverable upon the exercise of the Merger Right.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (x) or (y) of
the first sentence of this Section 12, the Person that is the issuer
of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities
are so issued, the Person that is the other party to the merger or
consolidation (including, if applicable, the Company, if it is the
surviving corporation); and
(ii) in the case of any transaction described in (z) of the first
sentence in this Section 12, the Person that is the party receiving
the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the
preceding 12-month period registered under Section 12 of the Securities
Exchange Act of 1934, as then in effect, and such Person is a direct or
indirect Subsidiary or Affiliate of another Person the common stock of
which is and has been so registered, "Principal Party" shall refer to such
other Person; (2) in case such Person is a subsidiary, directly or
indirectly, of more than one Person, the shares of Common Stock of two or
more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock
having the greatest aggregate market value; and (3) in case such Person is
owned, directly or indirectly, by a joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in (1) and (2) above shall apply to each of the chains
of ownership having an interest in such joint venture as if such party
were a "subsidiary" of both or all of such joint venturers and the
Principal Parties in each such chain shall bear the obligations set forth
in this Section 12 in the same ratio as their direct or indirect interests
in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale, or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock that have not been issued
or reserved for issuance to permit the exercise in full of the Merger
Rights
<PAGE>
and unless prior thereto the Company and each Principal Party and each
other Person who may become a Principal Party, as a result of such
consolidation, merger, sale, or transfer, shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 12 and further
providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer, the Principal Party at its own
expense will:
(i) prepare and file a registration statement under the Act
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, will use its best
efforts to cause such registration statement to become effective as
soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until
the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the
blue sky laws of such jurisdiction as may be necessary or
appropriate; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 12 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under
this Section 12 shall be in addition to the rights under Section 11 and
shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 12 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 12(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (or a wholly-owned subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per Common Shares paid to all
holders of Common Stock whose shares were purchased pursuant to such
Permitted Offer, and (iii) the form of consideration being offered to the
remaining holders of Common Stock
<PAGE>
pursuant to such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such
transaction contemplated by this subsection (d), all Rights hereunder
shall expire.
Section 13. Adjustment of Purchase Price, Number and Kind of Shares or
-----------------------------------------------------------
Number of Rights.
----------------
The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 13 or as otherwise provided in this
Agreement.
(a) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock, (C)
combine the outstanding Common Stock into a smaller number of shares, or
(D) issue any shares of its capital stock in a reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 13(a)
and Section 7(e), the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Rights exercised after such time shall be entitled
to receive the aggregate number and kind of shares of capital stock which,
if such Rights had been exercised immediately prior to such date and at a
time when the Common Stock transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by virtue
of such dividend, subdivision, combination or reclassification. If an
event occurs which would require an adjustment under both Section 11(a)
hereof and this Section 13(a), the adjustment provided for in this Section
13(a) shall be in addition to, and shall be made prior to any adjustment
required pursuant to Section 11(a).
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase (for a period expiring within 45 calendar
days after such record date) Common Stock or securities convertible into
Common Stock at a price per share of Common Stock (or having a conversion
price per share, if a security convertible into Common Stock) less than
the Current Market Price per share of Common Stock on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the
number of shares
<PAGE>
of Common Stock outstanding on such record date, plus the number of shares
of Common Stock which the aggregate offering price of the total number of
shares of Common Stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price and the denominator of which shall
be the number of shares of Common Stock outstanding on such record date,
plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible securities so to
be offered are initially convertible). In case such subscription price
may be paid in a consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent. Shares of Common Stock owned by or held for
the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed; and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not
been fixed.
(c) If the Company shall fix a record date for a distribution to all
holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
regular quarterly cash dividend out of earnings or retained earnings of
the Company), assets (other than a dividend payable in Common Stock), or
subscription rights or warrants (excluding those referred to in Section
13(b)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior
to such record date by a fraction, the numerator of which shall be the
Current Market Price per share of the Common Stock on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets
or evidences of indebtedness so to be distributed or of such subscription
rights or warrants in respect of one share of Common Stock and the
denominator of which shall be such current market price per share of
Common Stock. Such adjustments shall be made successively whenever such
a record date if fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price
which would be in effect if such record date had not been fixed.
<PAGE>
(d) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
13(d) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
13 shall be made to the nearest cent or to the nearest ten-thousandth of
a share of Common Stock. Notwithstanding the first sentence of this
Section 13(d), any adjustment required by this Section 13 shall be made no
later than the earlier or (i) three years from the date of the transaction
which mandates such adjustment or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11 or
12(a), the holder of any Rights thereafter exercised shall become entitled
to receive any shares of capital stock of the Company other than Common
Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the shares contained in
Sections 11 and 13(a), (b), (c), (d), (f), (g), (h), (i), (j), and (l) and
the provisions of Section 7, 9, 10, 12, and 14 hereof with respect to the
Common Stock shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of shares of
Common Stock purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided
in Section 13(h), upon each adjustment of the Purchase Price as a result
of the calculations made in Sections 13(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of shares of Common Stock (calculated to the nearest one-ten
thousandth) obtained by (i) multiplying (x) the number of shares covered
by a Right immediately prior to this adjustment by (y) the Purchase Price
in effect immediately prior to such adjustment of the Purchase Price and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
<PAGE>
(h) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment
in the number of Rights shall be exercisable for the number of shares of
Common Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one-ten thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 13(h), the
Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Common Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the number of shares
which were expressed in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value of
<PAGE>
the shares of Common Stock issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Purchase Price.
(k) In any case in which this Section 13 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Rights exercised after such
record date the shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the
Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 13 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 13, as
and to the extent that in its sole discretion the Company shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Common Stock, (ii) issuance wholly for cash of any shares of Common Stock
at less than the Current Market Price, (iii) issuance wholly for cash of
shares of Common Stock or securities which by their terms are convertible
into or exchangeable for shares of Common Stock, (iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in this Section
13, hereafter made by the Company to holders of its Common Stock shall, if
practicable, not be taxable to such stockholders.
(m) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the date of this
Agreement and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the outstanding
Common Stock into a smaller number of shares, or (iv) issue any shares of
its capital stock in a reclassification of the outstanding Common Stock,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
<PAGE>
Rights thereafter associated with each share of Common Stock following any
such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to
such event by a fraction the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately following the occurrence of
such event.
(n) The exercise of Rights under Section 11(a) shall only result in
the loss of rights under Section 11(a) to the extent so exercised and
shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights represented by Section 12.
(o) The Company covenants and agrees that it shall not (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer to,
in one or more transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries
taken as a whole, any other Person if at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
accorded by the Rights. The Company shall not consummate any such
consolidation, merger, or sale unless prior thereto the Company and such
person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this subsection.
(p) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Section 23 or
Section 26 hereof, take any action the purpose or effect of which is to
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
Section 14. Fractional Rights and Fractional Shares.
--------------------------------------
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the Current Market Price of a whole Right as of the date on
which such fractional Rights would have been otherwise issuable.
<PAGE>
(b) The Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the Current
Market Price of a share of Common Stock as of the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right.
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates and only such
holders (and, prior to the Distribution Date, the registered holders of
the Common Stock and only such holders); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common
Stock) without the consent of the Rights Agent or of the holder of any
other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to execute
the Rights evidenced by such Rights Certificate in the manner provided in
such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and shall be
entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
---------------------------
Every holder of a Right by accepting the same consents and agrees with the
company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the principal corporate trust office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer;
<PAGE>
(c) the Company and the Rights Agent may deem and treat the person
in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company
or the Rights Agent) for all purposes whatsoever, and neither the Company
nor the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary
or permanent injunction or other order, decree or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority
prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such
order, decree or ruling listed or otherwise overturned.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
Except as otherwise expressly provided in this Agreement, no holder, as
such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Common
Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the
rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting Stockholders,
or to receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder as agreed and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
<PAGE>
execution of this Agreement and the execution and performance of its
duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense,
incurred without negligence, bad faith or willful misconduct on the part
of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of
liability in the premises. The indemnification provided for hereunder
shall survive the expiration of the Rights and the termination of this
Agreement.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to
be signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or
any successor Rights Agent shall be a party, or any corporation succeeding
to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of
the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of
predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
or in the name of the successor Rights Agent; and in all such cases such
Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but
not delivered, the
<PAGE>
Rights Agent may adopt the countersignature under its prior name and
deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or
in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this
Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with
such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring
Person) be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice-President, the Treasurer,
any Assistant Treasurer, the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent, for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of facts or recitals contained in this Agreement of in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or
<PAGE>
the execution and delivery hereof (except the due execution hereof by the
Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Sections
11 or 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
shares of Common Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock will, when
so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice-President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the
Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or
<PAGE>
accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct provided reasonable care was exercised
in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability
is not reasonably assured to it.
(k) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event, or determination under the
Rights Agreement unless and until the Rights Agent shall be specifically
notified in writing by the Company of such fact, event, or determination.
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days notice in
writing mailed to the Company, and to each transfer agent of the Common
Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days notice in writing, mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights
Agent. If the Company shall fail to make such appointment within a period
of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who
shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may
apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the States of Arkansas,
North Carolina, or New York (or of any other state of the United States so
long as such corporation is authorized to do business as a banking
institution in the States of Arkansas, North Carolina, or New York), in
good standing, having a principal office in the state
<PAGE>
of North Carolina, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $100,000,000.
After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute
and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment
the Company shall file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Stock, and mail a
notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
-----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Purchase
Price per share and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provision of this Agreement.
Section 23. Redemption and Termination.
--------------------------
(a) (i) The Board of Directors of the Company may, at its option, at
any time prior to 5:00 P.M., Winston-Salem, North Carolina time, on
the earlier of (x) the Stock Acquisition Date, or (y) the Final
Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $.05 per Right,
approximately adjusted to reflect any stock split, stock dividend,
or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption
Price").
(ii) In addition, the Board of Directors of the Company may
redeem all but not less than all of the then outstanding Rights at
the Redemption Price following the occurrence of a Stock Acquisition
Date but prior to any event described in Section 12(a) either (x)
prior to commencement of the period under
<PAGE>
Section 11(a) during which the Subscription Right may be
exercised (the "Subscription Period") if each of the following
shall have occurred and remain in effect: (1) a Person who is
an Acquiring Person shall have transferred or otherwise
disposed of a number of shares of Common Stock in a
transaction, or series of transactions, such that such Person
is thereafter a Beneficial Owner of 5% or less of the
outstanding shares of Common Stock, (2) there are no other
Persons, immediately following the transfer or other
disposition described in clause (1), who are Acquiring
Persons, and (3) the transfer or other disposition described
in clause (1) was other than pursuant to a transaction, or
series of transactions, which directly or indirectly involved
the Company or any of its Subsidiaries; (y) in connection with
any event specified in Section 12(a) in which all holders of
Common Stock are treated alike and not involving an Acquiring
Person or an Affiliate or Associate of an Acquiring Person or
any other Person in which such Acquiring Person, Affiliate or
Associate has any interest, or any other Person acting
directly or indirectly on behalf of or in association with any
such Acquiring Person, Affiliate, or Associate; or (z)
following the expiration of the Subscription Period if and for
as long as the Acquiring Person is not thereafter the
Beneficial Owner of securities representing 20% or more of the
Voting Power of the Company, and at the time of redemption
there are no other Persons who are Acquiring Persons.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption
Price. In the case of a redemption permitted only under Section
23(a)(ii), evidence of which shall have been filed with the Rights Agent,
the right to exercise the Rights will terminate and represent only the
right to receive the Redemption Price: (i) prior to commencement of the
Subscription Period, only after ten Business Days following the giving of
notice of such redemption to the holders of such Rights; and (ii) after
commencement of the Subscription Period, upon the later of ten Business
Days following the giving of such notice or the expiration of the
Subscription Period. Within ten days after the action of the Board of
Directors ordering any such
<PAGE>
Redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to the Rights Agent and to all such holders at their
last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the Transfer
Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made.
The Company may, at its option, discharge all of its obligations with
respect to the Rights by (i) issuing a press release announcing the manner
of redemption of the Rights and (ii) mailing payment of the Redemption
Price to the registered holders of the Rights at their last addresses as
they appear on the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent of the
Common Stock, and upon such action, all outstanding Rights Certificates
shall be null and void without any further action by the Company.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of Common Stock or to make
any other distribution to the holders of Common Stock (other than a
regular quarterly cash dividend), or (ii) to offer to the holders of
Common Stock rights or warrants to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any
other securities, rights, or options, or (iii) to effect any
reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or
(iv) to effect any consolidation or merger into or with, or to effect any
sale or other transfer (or to permit one or more of its subsidiaries to
effect any sale or transfer), in one or more transactions, of more than
50% of the assets or earning power of the Company and its subsidiaries
(taken as a whole to, any other Person, or (v) to effect the liquidation,
dissolution, or winding up of the Company, then, in each such case, the
Company shall give to each holder of a Rights Certificate, in accordance
with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Common Stock, if any such date is
to be fixed, and such notice shall be so given in the case of any action
<PAGE>
covered by clause (i) or (ii) above at least 20 days prior to the record
date for determining holders of the shares of Common Stock for purposes of
such action, and in the case of any such other action, at least 30 days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Common Stock
whichever shall be the earlier.
(b) Upon the occurrence of an event giving rise to the Subscription
Rights, the Company or Principal Party, as the case may be, shall as soon
as practicable thereafter give to each holder of a Rights Certificate, to
the extent feasible and in accordance with Section 25 hereof, a notice of
the occurrence of such event and the consequences thereof to holders of
Rights under Sections 11(a) or 12(a) hereof, as the case may be.
Section 25. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Baldor Electric Company
5711 South Seventh Street
Fort Smith, Arkansas 72901
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of
any Rights Certificate to or on the Rights Agent shall be sufficiently
given or made if delivered by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:
Wachovia Bank and Trust Company, N.A.
P.O. Box 3001
Winston-Salem, North Carolina 27102
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall
be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company. The Company shall deliver a copy of
any notice or demand it delivers to the holder of any Rights Certificate
to the Rights Agent and the Rights Agent shall deliver a copy of any
notice or demand it deliver to the holder of any Rights Certificate to the
Company.
<PAGE>
Section 26. Supplements and Amendments.
--------------------------
The Company and the Rights Agent may from time to time supplement or amend
this Agreement without the approval of any holders of Rights Certificates
in order (i) to cure any ambiguity, (ii) to correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) prior to the Distribution Date, to change
or supplement the provisions hereunder in any manner which the Company may
deem necessary or desirable, or (iv) following the Distribution Date, to
change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates. Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 26, the Rights Agent shall execute such supplement
or amendment unless the Rights Agent shall have determined in good faith
that such supplement or amendment would adversely affect its interests
under this Agreement. Prior to this Distribution Date, the interests of
holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.
Section 27. Successors.
----------
All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure to the benefit of
their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent, and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, the Common
Stock) any legal or equitable right, remedy, or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent, and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Stock).
Section 29. Severability.
------------
If any term, provision, covenant, or restriction of this Agreement is held
by a court of competent jurisdiction of other authority to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants,
and restrictions of this Agreement shall remain in full force and effect
and shall in no way be affected, impaired, or invalidated.
Section 30. Governing Law.
-------------
This Agreement, each Right and each Rights Certificate issued hereunder
shall be deemed to be a contract made under the laws of the State of
Missouri and for all purposes shall be governed by and
<PAGE>
construed in accordance with the laws of such State applicable to
contracts made and to be performed entirely within such State.
Section 31. Counterparts.
------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute but one and the same
instrument.
Section 32. Descriptive Headings.
--------------------
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto
affixed and attested, all as of the day and year first above written.
Attest: BALDOR ELECTRIC COMPANY
By: /s/ G. C. Kowert By: /s/ R. S. Boreham, Jr.
----------------- ----------------------
Name: G. C. Kowert Name: R. S. Boreham, Jr.
Title: Vice-President, Finance, Title: Chairman and Chief
Secretary and Treasurer Executive Officer
Attest: WACHOVIA BANK AND TRUST COMPANY, N.A.
By: /s/ Robert W. Seifert By: /s/ Harry W. Rolison
---------------------- --------------------
Name: Robert W. Seifert Name: Harry W. Rolison
Title: Vice-President Title: Senior Vice-President
<PAGE>
Exhibit A
---------
(Form of Rights Certificate)
Certificate No. R-
______________ Rights
NOT EXERCISABLE AFTER MAY 25, 1998 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OF THE COMPANY, AT $.05 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
BALDOR ELECTRIC COMPANY
This certifies that ______________________________________ ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the
terms, provisions and conditions of the Rights Agreement dated as of May
6, 1988 (the "Rights Agreement") between Baldor Electric Company, a
Missouri corporation (the "Company"), and Wachovia Bank and Trust Company,
N.A., a national banking association (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M. (Winston-Salem,
North Carolina time) on May 25, 1998 at the principal corporate trust
office of the Rights Agent, or its successor as Rights Agent, one fully
paid, nonassessable share of Common Stock (the "Common Stock") of the
Company, at a purchase price of $75.00 per share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form
of Election to Purchase duly executed.
The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth
above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of May 25, 1988. As provided in the Rights
Agreement, the Purchase Price, the type of security, and the number of
shares of Common Stock which may be purchased upon the exercise of the
Rights evidenced by this Rights Certificate are subject to modification
and adjustment upon the happening of certain events.
A-1
<PAGE>
This Rights Certificate is subject to all of the terms, provisions,
and conditions of the Rights Agreement, which terms, provisions, and
conditions are hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties, and
immunities hereunder of the Rights Agent, the Company and the holders of
the Rights Certificates. Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal corporate trust office of the Rights
Agent, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder
to purchase a like aggregate number of shares of Common Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised (other than pursuant to Section 11(a) of
the Rights Agreement) in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised. If this Rights Certificate
shall be exercised in whole or in part pursuant to Section 11(a) of the
Rights Agreement, the holder shall be entitled to receive this Rights
Certificate duly marked to indicate that such exercise has occurred as set
forth in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this certificate may be redeemed by the Company at its option
at a redemption price of $.05 per Right. Subject to the provisions of the
Rights Agreement, the Company, at its option, may elect to mail payment of
the redemption price to the registered holder of the Right at the time of
redemption, in which event this certificate may become void without any
further action by the Company.
No fractional shares of Common Stock will be issued upon the
exercise of any Right or Rights evidenced hereby, but in lieu thereof of
a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of
Common Stock or of any other securities of the Company which may at any
time be issuable on the exercise hereof, nor shall anything contained in
the Rights Agreement or herein be construed to confer upon the holder
hereof, as such, any of the rights or a stockholder of the
A-2
<PAGE>
Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of May 25, 1988
ATTEST: BALDOR ELECTRIC COMPANY
By:
--------------------------- --------------------------
Secretary President
Countersigned:
WACHOVIA BANK AND TRUST COMPANY, N.A.
Rights Agent
By:
-----------------------------
Authorized Signature
A-3
<PAGE>
(Form of Reverse Side of Rights Certificate)
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
-------------------------------------------------------
hereby sells, assigns, and transfer unto
--------------------------------
-------------------------------------------------------------------------
(Please print name and address of transferee)
--------------------------------------------------------------------------
this Rights Certificate, together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint
--------------
as attorney to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: , 19
---------------- ----
-------------------------------
Signature
-------------------------------
Signature
Signature Guaranteed:
--------------------------------
A-4
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights Certificate pursuant to
Section 11(a) of the Rights Agreement.)
TO: BALDOR ELECTRIC COMPANY
The undersigned hereby irrevocably elects to exercise
-------------
Rights represented by this Rights Certificate to purchase the shares of
Common Stock issuable upon the exercise of the Rights and requests that
certificates for such shares be issued in the name of:
--------------------------------------------------------------------------
(Please insert social security or other identifying number.)
--------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
The Rights Certificate indicating the balance, if any, of such
Rights which may still be exercised pursuant to Section 11(a) of the
Rights Agreement shall be returned to the undersigned unless such person
requests that the Rights Certificate be registered in the name of and
delivered to:
--------------------------------------------------------------------------
Please insert social security or other identifying number
(complete only if Rights Certificate is to be
registered in a name other than the undersigned.)
--------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------
Dated: ,19
------------ ----
-------------------------------
Signature
Signature Guaranteed:
---------------------------------- -------------------------------
Signature
A-5
<PAGE>
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as each
such terms are defined in the Rights Agreement); and
(2) After due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was, or subsequently became, an
Acquiring Person or Affiliate or Associate of any such Acquiring Person.
Dated: , 19
-------------- ---- -------------------------------
Signature
-------------------------------
Signature
NOTICE
------
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
A-6
<PAGE>
Exhibit B
---------
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On May 6, 1988, the Board of Directors of Baldor Electric Company (the
"Company") declared a dividend distribution of one Right for each
outstanding share of common stock, $.10 par value (the "Common Stock"), of
the Company to shareholders of record at the close of business on May 25,
1988 (the "Record Date"). Except as set forth below, each Right, when
exercisable, entitles the registered holder to purchase from the Company
one share of Common Stock, at a price of $75.00 per share (the "Exercise
Price"), subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement (the "Rights Agreement") between the
Company and Wachovia Bank and Trust Company, N.A., as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Right certificates
will be distributed. Until the earlier to occur of (i) a public
announcement that, without the prior consent of the Company, a person or
group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire beneficial ownership of 20% or
more of the outstanding Common Stock of the Company or (ii) ten days
(unless such date is extended by the Board of Directors) following the
commencement of (or a public announcement of an intention to make) a
tender offer or exchange offer which would result in any person or group
and related persons becoming an Acquiring Person, without the prior
consent of the Company (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of
the Common Stock certificates outstanding as of the Record Date, by such
Common Stock certificate together with this Summary of Rights. A person
shall not be deemed to be an Acquiring Person, and therefore the Right
Certificates will not be distributed, if the person represents to the
Company that: (i) the person did not intend to beneficially own 20% or
more of the Company's Common Stock; (ii) the person intends to sell,
within five (5) business days, enough shares so he will beneficially own
less than 20% of the Company's Common Stock; and (iii) such person in fact
sells such shares to an unaffiliated party or parties and someone other
than the Company. The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only with
Common Stock certificates. From as soon as practicable after the Record
Date and until the Distribution Date (or earlier redemption or expiration
of the
B-1
<PAGE>
Rights), new Common Stock certificates issued after the Record Date upon
transfer or new issuance of the Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender
for transfer of any certificates for Common Stock outstanding as of the
Record Date (with or without this Summary of Rights attached) will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date, and the separate Rights
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on the earliest of (i) May 25, 1998, (ii) upon consummation of
a merger transaction with a person or group who acquired Common Stock
pursuant to a Permitted Offer (as defined below), and is offering in the
merger the same price per share and form of consideration paid in the
Permitted Offer, and (iii) upon redemption by the Company as described
below.
The Exercise Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the
event of a stock dividend on, or a subdivision, combination, or
reclassification of the Common Stock, (ii) upon the grant to holders of
the Common Stock of certain rights or warrants to subscribe for Common
Stock, certain convertible securities or securities having the same or
more favorable rights, privileges, and preferences as the Common Stock at
less than the current market price of the Common Stock, or (iii) upon the
distribution to holders of the Common Stock of evidences of indebtedness
or assets (excluding regular quarterly cash dividends out of earnings or
retained earnings) or of subscription rights or warrants (other than those
referred to above).
In the event that, after the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such,
the Company is involved in a merger or other business combination
transaction in which the Common Stock is exchanged or changed, or 50% or
more of the Company's assets or earning power are sold (in one transaction
or a series of transactions), proper provision shall be made so that each
holder of a Right shall thereafter have the right to receive, upon the
exercise thereof at the then current Exercise Price of the Right, that
number of shares of common stock of
B-2
<PAGE>
the acquiring company (or, in the event there is more than one acquiring
company, the acquiring company receiving the greatest portion of the
assets or earning power transferred) which at the time of such transaction
would have a market value of two times the Exercise Price of the Right
(such right being called the "Merger Right").
In the event that a person becomes the beneficial owner of 20% or more of
the then outstanding shares of Common Stock of the Company (unless
pursuant to a tender or exchange offer for all outstanding shares of
Common Stock at a price and on terms, which in the opinion of a majority
of the independent directors is fair to and in the best interests of the
Company and its shareholders (a "Permitted Offer")), proper provision
shall be made so that each holder of a Right will for a 60 day period
thereafter have the right to receive upon exercise that number of shares
of Common Stock having a market value of two times the Exercise Price of
the Right, subject to the availability of a sufficient number of
authorized but unissued shares (such right being called the "Subscription
Right"). The 60 day subscription period may be increased or decreased by
the Board of Directors. The holder of a Right will continue to have the
Merger Right whether or not such holder exercises the Subscription Right.
Upon the occurrence of any of the events giving rise to the exercisability
of the Subscription Right or the Merger Right, any Rights that are or were
at any time owned by an Acquiring Person engaging in any of such
transactions or receiving the benefits thereof on or after the time the
Acquiring Person becomes such shall become void insofar as they relate to
the Subscription Right or the Merger Right.
With certain exceptions, no adjustments in the Exercise Price will be
required until cumulative adjustments require an adjustment of at least 1%
in such Exercise Price. No fractions of shares will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price
of the Common Stock on the last trading date prior to the date of
exercise.
At any time prior to the earlier to occur of (i) a public announcement of
a person becoming an Acquiring Person (the "Stock Acquisition Date") or
(ii) the expiration of the Rights, the Company may redeem the Rights in
whole, but not in part, at a price of $.05 per Right (the "Redemption
Price"), which redemption shall be effective upon the action of the Board
of Directors. Additionally, after the Stock Acquisition Date, the Company
may redeem the then outstanding Rights in whole, but not in part, at the
Redemption Price provided that:
B-3
<PAGE>
(i) such redemption is incidental to a merger or other business
combination transaction or series of transactions involving the Company
but not involving an Acquiring Person or any person who was an Acquiring
Person, (ii) such redemption is prior to commencement of the period during
which the Subscription Right may be exercised (the "Subscription Period")
and the Acquiring Person reduces his ownership to less than 5% in
transactions not involving the Company and there is no other Acquiring
Person, or (iii) such redemption is following expiration of the
Subscription Period and for as long as an Acquiring Person beneficially
owns securities representing less than 20% of the Company's Common Stock.
The redemption of Rights described in the preceding sentence shall be
effective only as of such time when the Subscription Right is not
exercisable, and in any event, only after 10 business days prior notice.
Upon the effective date of the redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement of Form 8-A.
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
B-4
EXHIBIT 10.6
BALDOR ELECTRIC COMPANY
OFFICER COMPENSATION PLAN
UPDATE NOVEMBER, 1988
The Officer Compensation Plan of Baldor Electric Company has the goal of
rewarding company officers with competitive pay for competitive
performance, including sales and earnings performance. It is the Board's
intention that the officers' and companies' attention remain long-term
while being attentive to yearly operations at the same time.
Under the Officer Compensation Plan, pay is determined by reference to
management compensation of certain other similar manufacturing companies
plotted on a curve relating management compensation to sales, and is
divided into sales and earnings components. Pay attributable to the sales
component increases or decreases in relation to sales by reference to the
curve. Pay attributable to the earnings component increases if earnings
exceed a set return on stockholders' equity as determined by the Board of
Directors (currently 10% on year-end equity) and decreases if earnings are
less than such amount. The Board of Directors determines the relative
participation of the officers in the plan.
CRITICAL RATIOS AND GENERAL FORMULAE
The critical ratios are the key performance measures set by Baldor's Board
of Directors. They are part of the updated general formulae developed for
Baldor's Officer Compensation Plan by Fred Ballman and approved by the
Board of Directors in years past. We owe a debt of gratitude to Mr.
Ballman for the considerable efforts required to develop this plan which
continues to be current and appropriate.
Critical Ratios Set by Board of Directors
M = .05 (5%) - Return on year-end equity for zero performance
N = .10 (10%) - Return on year-end equity considered to be average
performance
R = .25 (25%) - Ratio of earnings weight Cp to sales Cs
4 Sales to 1 Earnings
General Formulae
S = Annual sales dollars (consolidated)
P = Annual net profit (as a fraction of year-end net worth)
T = Total officers remuneration dollars
F = Total fixed portion of " T "
C = Total contingent portion of " T "
Cs = Part of " C " earned by sales
Cp = Part of " C " earned by profit
T81 = Officer pool for average performance (1981 survey data)
Tn = Total officer compensation for average performance (contemporary
data)
Cn = Contingent pool for average performance
Cpn = Profit pool for average performance
R = Ratio of " Cpn " to " Cs " (weight of sales and earnings components)
N = Profit fraction (Return on Year-End Equity) expected for average
performance
M = Profit fraction expected for zero performance
Compensation Formula for Average Performance
The compensation formula for average performance is the basis for
determining contingent compensation.
X = Total of competitive pay for each Baldor officer position based on
survey data (at average performance for the specified sales level
surveyed)
Y = Compensation of the officer group for average performance according
to the 1981 survey and formula derived from the 1981 survey data at
the sales level specified for "X"
T81 = 1981 formula
T81 = Antilog (Log T81)
Log T81 = .47568 Log S + 2.15025
X
A = Ratio of current competitive pay to 1981 competitive pay = ---
Y
Tn = (A)(T81)
The log chart illustrating the 1981 formula derivation is attached as
Exhibit A. Complete data regarding the 1981 update is maintained with the
permanent officer compensation files.
Formula for Contingent Compensation
T = F + C = F + Cs + Cp
C = Cs + Cp
C = Cs + (r)Cs
C (P - M)
C = ----- + r ------- (C)
1 + r N - M
See appendix A, page 3 for derivation of this formula.
<PAGE>
MAINTAINING THE PLAN/OBTAINING COMPETITIVE DATA
Total officer compensation for average performance is based on the ratio
of current competitive data for the total of competitive pay for each
officer position to the 1981 competitive pay formula at a given point in sales.
Tn = (A) * (T81).
The slope of the curve determined for T81 appears workable for a number of
years. Current competitive pay should be resurveyed at least every couple
of years and each time there is a change in officer positions. In this
way, the Officer Compensation Plan can remain relevant and be maintained
up-to-date.
Survey data should be for equivalent officer positions at similar
manufacturing companies. 1988 survey data was obtained with the
assistance of the Wyatt Company from their extensive compensation data
base. The Wyatt Company compared Baldor officer compensation levels to a
national electrical equipment group. The comparisons were made by job and
according to company revenue size--with $280MM used for Baldor. Survey
data from ECS was provided through the 1988/89 Top Management Regression
Report and updated 5.5% annually from the effective date of the survey to
January 1, 1989. This analysis of base salary and annual incentive levels
provides the basis for determining how competitive Baldor is when compared
to similar size electrical equipment manufacturers.
<PAGE>
EXHIBIT A -- Page 1
Average Officer & Director Total Renumeration
1981 Update & Procedures
The original filing contained a log chart illustrating the 1981 formula
derivation.
The vertical axis represented sales revenue and was marked off from 10
million to 1,000 million.
The horizontal axis represented 100 Tn/S = (%S) and was marked off from .1
through .8.
The graph depicted a line running from upper left to lower right through
the folling two points:
P' (0.27,1000) and P"(3.02,10).
The graph also contained the following formulas:
1981
Log S = Log a + b Log 100Tn
-----
S
P'(0.270,10^9) P"(3.02,10^7)
Log S - Log 10^9 Log 10^9 - Log 10^7
-------------------- = --------------------
Log 100Tn - Log .270 Log .270 - Log 3.02
-----
S
Log S-9 2
--------------------------- = ------------------
2 + Log Tn - Log S + .56864 .56864 - .48000
Log Tn = 0.47568 Log S + 2.15025
<PAGE>
EXHIBIT A -- Page 2
This page contained a continuation of the Log Chart from the previous
page.
The vertical axis represented sales revenues and was marked off from 1,000
million to 100,000 million.
The horizontal axis represented 100 Tn/S + (% S) and was marked off from .01
to .9
The graph depicted a line running from the upper left to the lower right
through the following two points:
P'(0.025,100000) and P"(.275,1000)
<PAGE>
EXHIBIT A -- Page 3
GENERAL FORMULAE
Let: -
S = Annual sales dollars (consolidated)
P = Annual net profit (as a fraction of year-end Net Worth)
T = Total officers remuneration dollars
F = Total fixed portion of " T "
C = Total contingent portion of " T "
Cs = Part of " C " earned by sales
Cp = Part of " C " earned by profit
F0 = Fixed salary of chief officer
f1,f2,... = Individual share ratios to chief officer
Tn = Officer pool for average performance (contemporary data)
Cn = Contingent pool for average performance
Cpn = Profit pool for average performance
r = Ratio of " Cpn " to " Cs "
n = Profit fraction expected for average performance
m = Profit fraction expected for zero performance
T = F+C = F+Cs+Cp
F1 = f1F0, F2 = f2F0,....
F = F0+f1F0+f2F0.... = (1+f1+f2....)F0
Cn = Tn-F = Cs+Cpn
Cpn = rCs
Cn = Cs+rCs = (1+r)Cs
Cn
Cs = -----
1+r
Assume straight-line profit relationship - express in two point form.
Cp-Cp' Cp'-Cp" Cp-0 0-Cpn
------ = ------- ---- = -----
p-p' p'-p" p-m m-n
(p-m)(-rCs) r(p-m)
Cp = ----------- = ------ Cs
m-n n-m
Cn r(p-m) Cn
C = Cs+Cp = ----- + ------ * ------
1+r n-m 1+r
Cn r(p-m)
C = ----- [ 1 + ------ ]
1+r n-m
Individual shares of contingent pool (C) are:
C f1C
Co = ----------- C1 = ---------- etc.
1+f1+f2... 1+f1+f2...
Exhibit A
BALDOR ELECTRIC COMPANY
1987 INCENTIVE STOCK PLAN
1. Purpose.
The purpose of the 1987 Incentive Stock Plan (the "Plan") is to aid in
maintaining and developing strong management capable of assuring the
future success of Baldor Electric Company (the "Company"). The Plan is
designed to secure for the Company and its shareholders the benefits
inherent in common stock ownership by the employees of the Company and its
subsidiaries, who are largely responsible for the Company's future growth
and continued financial success; and to afford such persons the
opportunity to obtain or increase a proprietary interest in the Company on
a favorable basis and, thereby, to have an opportunity to share in its
success.
2. Definitions.
As used in this Plan, the following words shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the
Company;
(b) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to a section of the Code shall include that section and any
comparable section or sections of any future legislation that amends,
supplements or supersedes that section.
(c) "Common Stock" means common stock of the Company.
(d) "Disinterested Person" shall have the meaning set forth in Rule
16b-3(d)(3) of the Securities Exchange Act and shall include (1) the Board
of Directors if a majority of the Board of Directors and a majority of the
directors acting in a matter are Disinterested Persons; and (2) a
committee of three or more people if (a) all the members of the committee
are Disinterested Persons or (b) all the members of the committee are
directors of the Company and the committee does not have the authority to
award Benefits to any director of the Company.
(e) "Eligible Employee" means a salaried employee of the Company or
a Subsidiary, including a director of the Company or a Subsidiary who is
a salaried employee of the Company or a Subsidiary;
(f) "Formula Price Share" means a share of Common Stock subject to
the Company's first right of refusal upon such terms and conditions
determined by the Administrator in accordance with Paragraph 6;
(g) "Incentive Stock Option" means an option to purchase shares of
Common Stock at the times and at the price determined by the Administrator
in accordance with Paragraph 6 which is intended to qualify as an
incentive stock option as defined in Section 422A of the Code;
A-1
<PAGE>
(h)"Nonqualified Stock Option" means an option to purchase shares
of Common Stock at the times and at the price determined by the
Administrator in accordance with Paragraph 6 which is not intended to
qualify as an Incentive Stock Option;
(i) "Option" means an Incentive Stock Option or Nonqualified Stock
Option;
(j) "Restricted Share" means a share of Common Stock that is subject
to certain restrictions on the disposition of the share and rights of the
Company to reacquire the share upon the occurrence of certain events
during a specified period as determined by the Administrator in accordance
with Paragraph 6;
(k) "Stock Appreciation Right" means a right the holder of which is
entitled to receive upon surrender of the right to an amount of cash or
Common Stock, measured in whole or in part by the Common Stock's
appreciation in value during a specified period and as determined by the
Administrator in accordance with Paragraph 6;
(l) "Subsidiary" means any corporation, partnership, joint venture
or business trust, fifty percent (50%) or more of the control of which is
owned, directly or indirectly, by the Company; provided that for the
purpose of Incentive Stock Options "Subsidiary" shall have the same
meaning as the term "subsidiary corporation" as defined in Section 425 of
the Code; provided further that "Subsidiary" includes an entity or
arrangement that first becomes described in this subparagraph after the
effective date of this Plan.
3. Administration.
(a) General. The Plan shall be administered by the Board of
Directors or by a committee appointed by the Board of Directors as
Administrator of the Plan. The Board of Directors, or such a committee,
whichever is serving as Administrator of the Plan, is hereinafter referred
to as the "Administrator." Subject to the provisions of the Plan, to
establish appropriate rules relating to the Plan, to select persons to
receive awards under the Plan, to select persons to receive awards under
the Plan, to grant Incentive Stock Options, Nonqualified Stock Options,
Stock Appreciation Rights, Restricted Shares and Formula Price Shares in
accordance with the Plan, to delegate its authority and duties under the
Plan and to take all such steps and make all such determinations in
connection with the Plan and the Incentive Stock Options, Nonqualified
Stock Options, Stock Appreciation Rights, Restricted Shares and Formula
Price Shares as it may deem necessary or advisable.
(b) Reporting Persons. If any person is selected to participate in
the Plan who, at the time of such selection, is subject to Section 16(a)
or 16(b) of the Securities Exchange Act of 1934 (a "Reporting Person") or
if a determination is made with respect to the number or maximum number of
shares of Restricted Shares, Formula Price Shares, Incentive Stock
Options, Nonqualified Stock Options or Stock Appreciation Rights that may
be awarded to any Eligible Employee who is a Reporting Person at the time
of such determination and the selection or determination is not made by a
Disinterested Person, then the restrictions and limitations set forth in
Paragraph 11 below shall be applicable.
A-2
<PAGE>
4.Eligibility.
The Administration shall from time to time determine and designate
Eligible Employees who shall receive awards under the Plan and the number
of Incentive Stock Options, Nonqualified Stock Options, Restricted Shares,
Formula Price Shares and Stock Appreciation Rights to be awarded to each
such Eligible Employee. In making any such award, the Administrator may
take into account the nature of services rendered by an Eligible Employee,
the capacity of the Eligible Employee to contribute to the success of the
Company, and other factors that the Administrator may consider relevant.
5. Types of Benefits.
Benefits that may be awarded under the Plan include only (a) Incentive
Stock Options; (b) Nonqualified Stock Options; (c) Restricted Shares; (d)
Formula Price Shares; and (e) Stock Appreciation Rights, as described in
this Plan ("Benefits").
6. Award of Benefits.
(a) General. The Administrator may from time to time award Options,
Restricted Shares, Formula Price Shares or Stock Appreciation Rights, or
any combination thereof, to Eligible Employees. Each Eligible Employee
receiving an award under the Plan shall enter into an agreement with the
Company in the form specified by the Administrator agreeing to the terms
and conditions of the award and such other matters consistent with the
Plan as the Administrator in its sole discretion shall determine.
(b) Administrator's Discretion. The award of any Benefit under the
Plan may be subject to any provisions (whether or not applicable to the
Benefit awarded to any other similarly situated Eligible Employee) as the
Administrator determines appropriate consistent with the provisions
specifically provided for in the Plan, including, without limitation, (i)
provisions for the purchase of common shares under Options in
installments, (ii) provisions for the payment of the purchase price of
shares under Options by delivery of Common Stock, (iii) restrictions on
resale or other disposition, (iv) such provisions as may be appropriate to
comply with federal or state securities laws and stock exchange
requirements, (v) understandings or conditions regarding the Eligible
Employee's employment, (vi) provisions for making the grant of Benefits
conditional upon an election by an Eligible Employee to defer payment of
a portion of his salary, (vii) provisions for giving an Eligible Employee
a choice between two Benefits or combination of Benefits, and (viii)
provisions for awarding Benefits in any combination or combinations. Any
election by a Reporting Person pursuant to a provision described in
subsection (vi) of this subparagraph 6(b) or any choice given to a
Reporting Person described in subsection (vii) of this subparagraph 6(b)
shall be made by the Reporting Person prior to the award of Benefits by
the Administrator.
(c) Stock Options. Each agreement evidencing an Option by
appropriate language shall include the substance of all of the provisions
as set forth in subparagraphs (i) through (iii) below, and shall further
contain the provisions of subparagraphs (iv) through (vi) if the Option is
an Incentive Stock Option.
A-3
<PAGE>
(i)The purchase price of the shares of stock covered by each
Option shall be determined by the Administrator, but in the case of
Incentive Stock Options shall not be less than one hundred percent (100%)
of the fair market value of such stock, as determined by the Administrator
in its sole discretion, on the date the Incentive Stock Option is granted
and, in the case of Nonqualified Stock Options, shall not be less than
fifty percent (50%) of the fair market value of such stock, as determined
by the Administrator in its sole discretion, on the date the Nonqualified
Stock Option is granted.
(ii) The purchase price shall be payable in full upon exercise of
the Option.
(iii) An Option shall not be transferable by the individual to
whom granted except by will or by the laws of descent and distribution and
such an Option may be exercised during the lifetime of such individual
only by such individual.
(iv) The aggregate fair market value (determined by the
Administrator in its sole discretion as of the time an Incentive Stock
Option is granted) of the shares of Common Stock covered by an Incentive
Stock Option granted to an Eligible Employee under the Plan or any plan of
a parent corporation or Subsidiary which becomes exercisable for the first
time during any calendar year shall not exceed one hundred thousand
dollars ($100,000) or such other maximum applicable to Incentive Stock
Options as may be in effect from time to time under the Code.
(v) The maximum term of an Incentive Stock Option shall be ten
(10) years from the date it was granted.
(vi) No Incentive Stock Option shall be awarded after the day
preceding the tenth anniversary of the effective date of the Plan.
No person entitled to exercise any Option granted under the Plan shall
have any of the rights or privileges of a shareholder of the Company with
respect to shares issuable upon exercise of such Option until certificates
representing such shares shall have been issued and delivered to such
person.
(d) Stock Appreciation Rights. A Stock Appreciation Right may be
satisfied in cash or in shares of Common Stock, as determined by the
Administrator. The agreement evidencing a Stock Appreciation Right may
limit the maximum amount of appreciation in the value of Common Stock to
be taken into account under a Stock Appreciation Right.
(e) Restricted Shares. The consideration to be paid by an Eligible
Employee for a Restricted Share shall be determined by the Administrator
in its sole discretion and may be solely the prior services of the
Eligible Employee. Restricted Shares awarded to Eligible Employees may
not be sold, transferred, pledged or otherwise encumbered during a period
(the "Restricted Period") designated by the Administrator at the time of
the award. The Eligible Employee shall have most of the rights and
privileges of a shareholder with respect to Restricted Shares awarded to
him, including the right to receive dividends and the right to vote such
Restricted Shares.
A-4
<PAGE>
An Eligible Employee shall not be entitled to delivery of the certificate
until the expiration of the Restricted Period applicable to such
Restricted Shares.
(f) Formula Price Shares. Formula Price Shares shall be subject to
the Company's first right of refusal to purchase the Formula Price Shares.
The Company's first right of refusal shall be on the terms and conditions
determined by the Administrator in its sole discretion. Each Eligible
Employee receiving an award of a Formula Price Share shall pay as
consideration therefor an amount not less than fifty percent (50%) of the
fair market value of a share of Common Stock as determined by the
Administrator in its sole discretion as of the date the Formula Price
Share is awarded.
7. Shares Subject to Plan.
Subject to the provisions of Paragraph 8 (relating to adjustment for
changes in capital stock), there is hereby reserved Five Hundred Thousand
(500,000) shares of Common Stock. The shares hereby reserved are in
addition to the shares previously reserved under the Company's Incentive
Stock Option Plan. If there is a lapse, expiration, termination or
cancellation of any Benefit without the issuance of shares, or if shares
are issued under any Benefit and later are reacquired by the Company
pursuant to rights reserved on issuance, the shares subject to or reserved
for such Benefit may again be used for Benefits authorized under this
Plan; provided that in no event may the number of shares of Common Stock
issued under this Plan exceed Five Hundred Thousand (500,000).
8. Adjustment Upon Changes in Stock.
If any change is made in the shares of common stock of the Company by
reason of any merger, consolidation, reorganization, recapitalization,
stock dividend, split up, combination of shares, exchange of shares,
change in corporate structure, or otherwise, appropriate adjustments shall
be made by the Administrator to the kind and maximum number of shares
subject to the Plan and the kind and number of shares and price per share
of stock subject to each outstanding Benefit. Any shares received by an
Eligible Employee with respect to any Benefit shall be subject to the same
restrictions applicable to such Restricted Shares, Formula Price Shares or
shares obtained upon the exercise of an Option or a Stock Appreciation
Right, whichever are applicable. No fractional shares of stock shall be
issued under the Plan on account of any such adjustment, and rights to
shares always shall be limited after such an adjustment to the lower full
share.
9. Amendment of the Plan.
The Board of Directors may at any time amend the Plan, provided that the
Board may not, without the approval (within twelve months before or after
the date of such change) of the holders of a majority of the outstanding
shares entitled to vote of the Company: (a) increase the maximum number of
shares of Common Stock in the aggregate which may be issued under the
Plan, except as may be permitted under the adjustment provisions of
Paragraph 8, or (b) adopt any other amendment for which shareholder
approval is required by federal income tax or securities laws. The Board
of Directors may not alter or impair any Benefit previously granted under
the Plan without the consent of the person to whom the Benefit was
granted.
A-5
<PAGE>
10.Termination of the Plan.
The Board of Directors may terminate or suspend the Plan at any time. No
Benefit shall be awarded after termination of the Plan.
Rights and obligations under a Benefit awarded while the Plan is in effect
shall not be altered or impaired by termination or suspension of the Plan
except by consent of the person to whom the Benefit was awarded.
11. Reporting Person Restrictions and Limitations.
If Benefits are awarded to Reporting Persons and the benefits are not
awarded by a Disinterested Person, then such Benefits (and only such
Benefits) shall be, in addition to such other restrictions and limitations
established by the Administrator, subject to the following restrictions:
(a) The total number of shares for which Incentive Stock Options,
Nonqualified Stock Plans, Stock Appreciation Rights, Restricted Stock and
Formula Price Shares may be awarded to any one Reporting Person with
respect to any fiscal year of the Company by persons who are not
Disinterested Persons shall not exceed that number of shares equal to the
amount of compensation received by such an Eligible Employee for such year
divided by the fair market value of a share of Common Stock of the Company
on the last day of such fiscal year.
(b) An Option or Stock Appreciation Right awarded to any Reporting
Person shall not be exercisable until at least the first anniversary date
of the award of such Option; the Restricted Period for any Restricted
Shares that may be awarded to any Reporting Person may not be less than
one year; and the Formula Price Shares may not be transferable for at
least one year following their award.
12. Definitions and Rules of Construction.
The terms of the Plan shall be construed in accordance with the laws of
the state of Missouri provided that the terms of the Plan as they relate
to Incentive Stock Options shall be construed first in accordance with the
meaning under and in a manner that will result in the Plan satisfying the
requirements of, the provisions of the Code governing Incentive Stock
Options.
13. Nontransferability.
Each Benefit other than Formula Price Shares (including Restricted Stock
only during the Restricted Period) granted under this Plan shall not be
transferable other than by will or the laws of descent and distribution,
and shall be exercisable, during the holder's lifetime, only by the holder
or the holder's guardian or legal representative.
14. Effective Date.
The Plan shall become effective as of the date it is adopted by the Board
of Directors subject only to approval by the Company's shareholders within
twelve (12) months after the adoption of the Plan by the Board of
Directors.
A-6
<PAGE>
FIRST AMENDMENT TO THE BALDOR ELECTRIC COMPANY
1987 INCENTIVE STOCK PLAN
Approved at the regular meeting of the Board of Directors of Baldor
Electric Company held in Westville, Oklahoma on November 11, 1991.
This first amendment to the Baldor Electric Company 1987 Incentive Stock
Plan (the "Plan) is hereby adopted by Baldor Electric Company.
1. Subparagraph (d) of paragraph 2 of the Plan is hereby deleted and
the following subparagraph (d) is inserted in lieu thereof:
(d) "Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) of the Securities Exchange Act of 1934, as amended, and
shall include (1) the board of directors if each member is a Disinterested
Person; and (2) a committee of two or more directors if all the members of
the committee are Disinterested Persons;
2. Subparagraph (m) of paragraph 2 of the Plan is hereby added and
shall read as follows:
(m) "Reporting Person" means any person who is the beneficial owner,
directly or indirectly, of more than ten percent (10%) of any class of
equity securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended; any director or officer of the issuer of
such securities; and any person specified in Section 17(a) of the Public
Utility Holding Company Act of 1935 or Section 30(f) of the Investment
Company Act of 1940;
3. Paragraph 3 of the Plan is hereby deleted and the following
paragraph 3 is inserted in lieu thereof:
3. Administration.
(a) General. The Plan shall be administered by the Board of
Directors or by a committee appointed by the Board of Directors as
Administrator of the Plan.
(b) Reporting Persons. Anything in subparagraph (a) of this
paragraph 3 to the contrary notwithstanding, selection of Reporting
Persons for participation in the Plan and decisions concerning the timing,
pricing, and amount of a grant or award to Reporting Persons must be made
solely by a committee of two or more directors, each of whom is a
Disinterested Person.
(c) Administrator. References throughout this Plan to "the
Administrator" shall refer to (i) the administrative committee described
in subparagraph (b) of this paragraph 3, with respect to selection of
Reporting Persons for participation in the Plan and decisions concerning
the timing, pricing, and amount of grant or award to Reporting Persons;
and (ii) the Board of Directors of the committee described in subparagraph
(a) of this paragraph 3, with respect to all other administrative
functions. Subject to the provisions of this Plan, the Administrator
shall have exclusive authority to interpret and administer the Plan, to
establish appropriate rules relating to the Plan, to select persons to
receive
A-7
<PAGE>
awards under the Plan, to grant Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights, Restricted Shares and Formula
Price Shares in accordance with the Plan, to delegate its authority and
duties under the Plan and to take all such steps and make all such
determinations in connection with the Plan and the Incentive Stock
Options, Non-qualified Stock Options, Stock Appreciation Rights,
Restricted Shares and Formula Price Shares as it may deem necessary or
advisable.
4. Paragraph 11 of the Plan is deleted in its entirety.
5. In all other respects, the Plan as herein above amended is hereby
ratified and confirmed.
BALDOR ELECTRIC COMPANY
BY
-----------------------------------
Date
-----------------------------------
A-8
EXHIBIT 11
BALDOR ELECTRIC COMPANY AND AFFILIATES
COMPUTATION OF EARNINGS PER COMMON SHARE
FISCAL YEAR
------------------------------------
1994 1993 1992
(In thousands, except per share amounts)
Primary
Weighted average shares
outstanding 18,177 17,865 17,668
Dilutive stock options based
on the treasury stock
method using the average
market price 825 846 652
------ ------ ------
Total 19,002 18,711 18,320
====== ====== ======
Net Earnings $26,359 $19,426 $15,264
======= ======= =======
Per Share Earnings $1.39 $1.04 $.83
===== ===== ====
Fully Diluted
Weighted average shares
outstanding 18,177 17,865 17,668
Dilutive stock options
based on the treasury
stock method using the
year-end market price,
if higher than average
market price 897 993 862
------ ------ ------
Total 19,074 18,858 18,530
====== ====== ======
Net Earnings $26,359 $19,426 $15,264
======= ======= =======
Per Share Earnings $1.38 $1.03 $.82
===== ===== ====
_______________
Note: Amounts for 1993-92 have been restated for a six-for-five stock
split effected in the form of a 20% stock dividend which was
declared during the fourth quarter 1993. See Note E to Annual
Report to Shareholders for 1994.
ELEVEN-YEAR SUMMARY OF FINANCIAL DATA
(In thousands, except percentages and per-share data)
PER SHARE DATA
------------------- LONG-
NET NET NET TOTAL TERM
SALES EARNINGS EARNINGS DIVIDENDS ASSETS OBLIGATIONS
1994 $418,152 $26,359 $1.39 $0.42 $283,155 $26,303
1993 356,595 19,426 1.04 0.35 237,950 22,474
1992 318,930 15,264 0.83 0.29 211,941 23,209
1991 286,495 11,922 0.67 0.27 203,277 24,376
1990 294,030 14,137 0.80 0.27 200,694 25,299
<PAGE>
Management's Discussion and Analysis Results of Operations
Summary
In 1994, Baldor posted its third consecutive yearly record sales
and earnings performance. A 17.3% sales increase was leveraged into a
35.7% earnings increase. Baldor continually strives to provide better
value to its customers and shareholders through productivity and cost
improvements, short lead times, inventory availability, new product
introductions, and a continuing emphasis on education and training.
Net Sales
Baldor sells to a broad base of distributors and OEMs
domestically, and in more than 55 countries through a network of foreign
affiliates and distributors. No single customer accounts for more than
3.0% of 1994 sales. Sales of $418.2 million in 1994 were up 17.3% over
1993 sales of $356.6 million. Sales in fiscal 1992, which contained 53
weeks, were $318.9 million.
The 1994 sales increase was broad-based with good growth
across many product lines, industries, and geographic regions. Sales of
drives and Super-E(r) premium-efficient motors continued strong,
approximately doubling the overall sales growth rate. In 1994,
distributor sales increased 12.7% over 1993 levels and OEM sales increased
22.5% over 1993 levels.
The 1993 sales increase of 11.8% over 1992 sales was due in part to the
sales of new products, including drives products and Super-E(r) premium-
efficient motors, both of which grew significantly faster than the overall
sales growth rate.
Net Earnings
Net earnings of $26.4 million in 1994 exceeded 1993 net
earnings of $19.4 million by 35.7%. Net earnings in 1992 were $15.3
million. Price improvement averaged just over 2% in both 1994 and 1993.
The gross margin percentage increased to 28.9% in 1994 from 28.3% in
1993 and 28.0% in 1992. The gross margin percentages in 1994 and 1993 improved
due to continued productivity improvements in both years. Increases in
raw material prices were offset by small, but effective, increases in
selling prices in both years.
Selling and administrative costs as a percentage of sales
decreased to 17.3% in 1994, from 18.2% in 1993, and 19.0% in 1992. This
improvement was the result of a continued emphasis on productivity
improvements.
Due to the increased volumes, improved pricing, and productivity
and cost improvements, 1994 pre-tax margins continued to improve. The 1994
pre-tax margin of 10.3% compares favorably with the 1993 pre-tax margin of
9.1% and the 1992 pre-tax margin of 7.8%.
<PAGE>
International Operations
Sales from international operations (foreign affiliates and exports)
were $54.6 million in 1994, up 14.6% from 1993 sales of $47.6 million. Sales
in 1992 from international operations were $42.4 million. International
sales in 1994 were particularly strong in Europe. Foreign pre-tax
earnings for 1994 increased to $1.7 million, a 4.9% increase over the
previous year and a 73.3% increase over 1992 levels.
Impact of Inflation
Inflation had a nominal impact on operations during the
last three years. Pressure on our margins due to increases in raw
material prices was offset through modest increases in selling prices over
the last 3 years. Other increases in operating costs were consistent with
the general inflation rate, and were more than offset by productivity
improvements.
We are beginning to see pricing pressures on some of our raw materials,
namely aluminum and steel; however, at this time, future increases appear to
be manageable. Also, while higher interest rates will probably have little
direct impact on us, we have many entrepreneurial customers who could be
affected.
Baldor principally values its inventory on the LIFO basis,
which more closely matches current costs with current revenues and which
has resulted in a more conservative valuation of inventory over time.
Approximately 40% of our machinery and equipment has been acquired during
the last 5 years; thus depreciation expense approximates the effect of
current costs.
Environmental Remediation
We believe, based on our internal reviews and other factors, that
the future costs relating to environmental remediation and compliance will
not have a material effect on the capital expenditures, earnings, or
competitive position of the Company.
Financial Position
Summary
Baldor improved its already strong financial condition in
1994. Stable liquidity and low debt ratios position us well to finance
future growth opportunities and to deal with future economic conditions.
During 1994, we continued to invest in our future by expanding research
and development of new products and improvements of old ones, continuing
capital investments for capacity, productivity and cost improvements, and
making additional investments in our employees and customers through
education and training. We also used our financial condition to increase
the dividend rate.
<PAGE>
Investments
In 1994, we invested $22.1 million in property, plant and
equipment, not including the assets purchased from Grant Gear. Capital
investments have been made to improve product quality, increase
productivity, lower manufacturing costs, increase capacity, and support
new products. Examples of new products include the commercial motor line,
line-regen drives, and expanded servo lines. The Ozark Plant will expand
capacity for the 15hp to 75hp steel band motors. Construction began in
1994 and motor production began in February of 1995. There were also
expansions at our Nupar (Claremore, OK) and Southwestern Die Casting (Fort
Smith, AR) facilities.
Investments in property, plant and equipment for 1995 are anticipated
to be in the low $20 millions. Baldor's cash flow and financial strength
are expected to be adequate to fund these anticipated future investments in
new product development, productivity and cost improvement, and expanded
capacity.
In 1994, we also increased our investments in research and
development to $14.8 million from $12.9 million in 1993 and $11.3 million
in 1992. During the last three years we have introduced many new products
and our commitment to research and development continues to help Baldor
maintain a leadership position in the marketplace and to satisfy our
customers' needs.
Current Liquidity
Cash flow from operations continues to provide the principal
source of the Company's liquidity. In 1994, cash flow from operating
activities increased to $31.9 million from $27.8 million in 1993.
Working capital was $118.6 million at the end of 1994 compared to
$108.6 million at the end of 1993. The current ratio, while still very
strong, decreased to 2.9 compared to 3.5 at the end of 1993. This
decrease was due primarily to the increased volume of business. Baldor
has available lines of credit of $30 million to support operations. There
were no borrowings under these lines at the end of 1994 or 1993.
Long-Term Debt and Shareholders' Equity
Long-term obligations were 12.5% of capitalization at the end of
1994 compared to 12.3% at the end of 1993. The weighted average interest
rate on our long-term debt is 6.5%. Shareholders' equity continues to
increase and at December 31, 1994 was at a record level for Baldor. This
strong capital base gives us an excellent opportunity to finance expansion
opportunities as they arise. Return on average shareholders' equity for
1994 increased to 15.3% from 12.7% in 1993. The cash dividend was increased
20.0% during 1994. This is in addition to the 20.7% increase during 1993.
In the fourth quarter of 1993, there was a six-for-five stock split effected
in the form of a stock dividend.
<PAGE>
CONSOLIDATED BALANCE SHEETS
BALDOR ELECTRIC COMPANY AND AFFILIATES
DECEMBER 31 JANUARY 1
1994 1994
------------ ----------
ASSETS (in thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 8,848 $ 7,310
Marketable securities 25,996 22,914
Receivables, less allowances of 71,003 59,566
$2,250 and $1,800, respectively
Inventories:
Finished products 48,516 44,544
Work-in-process 11,933 9,351
Raw material 29,408 24,448
---------- ----------
89,857 78,343
LIFO valuation adjustment (deduction) (25,759) (24,724)
---------- ----------
64,098 53,619
Deferred tax assets 4,801 2,219
Other current assets 6,426 6,374
---------- ----------
TOTAL CURRENT ASSETS 181,172 152,002
OTHER ASSETS 20,481 13,552
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 3,303 3,117
Buildings and improvements 27,745 24,792
Machinery and equipment 131,991 118,311
Allowances for depreciation and
amortization (deduction) (81,537) (73,824)
---------- ----------
NET PROPERTY, PLANT, 81,502 72,396
AND EQUIPMENT
---------- ----------
$ 283,155 $ 237,950
========== ==========
See notes to consolidated financial statements.
<PAGE>
DECEMBER 31 JANUARY 1
1994 1994
------------ ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands, except share data)
CURRENT LIABILITIES:
Accounts payable $ 18,802 $ 12,690
Employee compensation 5,776 4,740
Profit sharing 5,789 4,284
Anticipated warranty costs 3,700 2,750
Accrued insurance obligations 9,156 6,616
Other accrued expenses 15,697 9,710
Income taxes 2,777 2,121
Current maturities of long-term obligations 925 490
--------- ---------
TOTAL CURRENT LIABILITIES 62,622 43,401
LONG-TERM OBLIGATIONS 26,303 22,474
DEFERRED INCOME TAXES 9,968 11,536
SHAREHOLDERS' EQUITY:
Preferred stock, $0.10 par value
Authorized shares: 5,000,000
Issued and outstanding shares: None
Common stock, $0.10 par value
Authorized shares: 50,000,000
Issued and outstanding shares:
1994--18,310,429; 1993--17,968,383
(excluding 158,015 shares held in
treasury in 1994 and 120,387
shares held in treasury in 1993) 1,831 1,797
Additional capital 21,958 17,848
Retained earnings 160,024 141,729
Cumulative translation adjustments 449 (835)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 184,262 160,539
---------- ----------
$ 283,155 $ 237,950
========== ==========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF EARNINGS
BALDOR ELECTRIC COMPANY AND AFFILIATES
YEARS ENDED
----------------------------------------------
DECEMBER 31 JANUARY 1 JANUARY 2
1994 1994 1993
(In thousands, except share data)
Net sales $ 418,152 $ 356,595 $ 318,930
Other income, net 1,668 1,398 705
--------- --------- ---------
419,820 357,993 319,635
Costs and expenses
Cost of goods sold $ 297,212 255,557 229,686
Selling and administrative 72,329 64,807 60,697
Profit sharing 5,788 4,284 3,371
Interest 1,279 975 908
--------- --------- ---------
376,608 325,623 294,662
Earnings Before Income Taxes 43,212 32,370 24,973
Income taxes 16,853 12,944 9,709
--------- --------- ---------
NET EARNINGS $ 26,359 $ 19,426 $ 15,264
NET EARNINGS PER COMMON SHARE $ 1.39 $ 1.04 $ .83
Weighted average common shares
outstanding 19,002,182 18,710,860 18,319,835
========== ========== ==========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (Unaudited)
BALDOR ELECTRIC COMPANY AND AFFILIATES
<CAPTION>
QUARTER (In thousands, except share data)
FIRST SECOND THIRD FOURTH TOTAL
<S> <C> <C> <C> <C> <C>
1994
Net sales $ 97,476 $104,812 $105,432 $110,432 $418,152
Gross profit 27,905 30,145 30,646 32,244 120,940
Net earnings 5,678 6,602 6,818 7,261 26,359
Net earnings per
common share 0.30 0.35 0.36 0.38 1.39
1993
Net sales $ 86,547 $ 90,673 $ 90,703 $ 88,672 $356,595
Gross profit 24,602 25,874 25,591 24,971 101,038
Net earnings 4,593 5,145 4,853 4,835 19,426
Net earnings per
common share 0.25 0.27 0.26 0.26 1.04
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BALDOR ELECTRIC COMPANY AND AFFILIATES
<CAPTION>
YEARS ENDED
--------------------------------------------------
DECEMBER 31 JANUARY 1 JANUARY 2
1994 1994 1993
<S> <C> <C> <C>
(In thousands)
Operating activities:
Net earnings $ 26,359 $ 19,426 $ 15,264
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 13,121 12,220 12,148
Deferred income taxes (3,882) (2,192) (1,846)
Changes in operating assets
and liabilities:
Receivables (11,887) (8,765) (2,274)
Inventories (10,480) (3,944) (268)
Other current assets (52) (843) 794
Accounts payable 6,113 3,350 (330)
Accrued expenses 12,017 6,662 1,957
Income taxes 656 1,588 (179)
Other, net (70) 258 (232)
-------- -------- -------
Net cash from operating activities 31,895 27,760 25,034
Investing activities:
Additions to property,
plant, and equipment (22,131) (14,983) (11,632)
Marketable securities purchased (45,153) (22,914) (16,812)
Marketable securities sold 41,388 16,812 5,271
Information systems development (252)
--------- -------- ---------
Net cash used in investing activities (25,896) (21,085) (23,425)
Financing activities:
Short-term borrowings (repayments) (1,085)
Additional long-term borrowings 6,000
Reduction of long-term obligations (1,737) (931) (1,416)
Unexpended debt proceeds (5,220) 472 3,661
Dividends paid (7,648) (6,190) (5,139)
Stock option plans 4,144 1,363 1,516
-------- -------- -------
Net cash used in financing activities (4,461) (5,286) (2,463)
-------- -------- -------
Net increase (decrease) in
cash and cash equivalents 1,538 1,389 (854)
Beginning cash and cash equivalents 7,310 5,921 6,775
-------- -------- --------
Ending cash and cash equivalents $ 8,848 $ 7,310 $ 5,921
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BALDOR ELECTRIC COMPANY AND AFFILIATES
<CAPTION>
Cumulative
Common Stock Additional Retained Translation
Shares Amount Capital Earnings Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
BALANCE AT DECEMBER 28, 1991 9,780 $ 978 $ 13,389 $ 119,160 $ 136 $ 133,663
Stock option plans,
net of shares exchanged 99 10 1,506 1,516
Translation adjustments (625) (625)
Net earnings 15,264 15,264
Purchase of Sweo Controls, Inc. 22 2 545 547
Three-for-two common stock split
effected in the form of a 50%
stock dividend 4,924 493 (493)
Cash dividends at $.29
per common share (5,139) (5,139)
------- ------ ------ ------- ----- --------
BALANCE AT JANUARY 2, 1993 14,825 1,483 15,440 128,792 (489) 145,226
Stock option plans,
net of shares exchanged 102 10 1,353 1,363
Translation adjustments (346) (346)
Net earnings 19,426 19,426
Purchase of Sweo Controls, Inc. 47 5 1,055 1,060
Six-for-five common stock split
effected in the form of a 20%
stock dividend 2,994 299 (299)
Cash dividends at $.35
per common share (6,190) (6,190)
------ ----- ------ ------- ----- --------
BALANCE AT JANUARY 1, 1994 17,968 1,797 17,848 141,729 (835) 160,539
Stock option plans,
net of shares exchanged 342 34 4,110 4,144
Translation adjustments 1,284 1,284
Net earnings 26,359 26,359
Securities valuation adjustment,
net of deferred taxes of $267 (416) (416)
Cash dividends at $.42
per common share (7,648) (7,648)
------- ------ ------- -------- ----- --------
BALANCE AT DECEMBER 31, 1994 18,310 $1,831 $21,958 $160,024 $ 449 $184,262
======= ====== ======= ======== ===== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BALDOR ELECTRIC COMPANY AND AFFILIATES
December 31, 1994
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Line of Business: The Company operates primarily in one industry segment
which includes the design, manufacture, and sale of electric motors and
drives.
Consolidation: The consolidated financial statements include the accounts
of the Company and all its affiliates. Intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year: The Company's fiscal year ends on the Saturday nearest to
December 31, which results in a 52 or 53 week year. Fiscal year 1994
contained 52 weeks, fiscal year 1993 contained 52 weeks, and fiscal year
1992 contained 53 weeks.
Cash Equivalents: Cash equivalents consist of highly liquid investments
having original maturities of three months or less and are valued at cost
which approximates market.
Marketable Securities: Effective January 2, 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." No Adjustment was
necessary at January 2, 1994 to reflect this accounting change.
Marketable securities are available for sale to support current operations
or take advantage of other investment opportunities. These securities are
stated at estimated fair value based upon market quotes with unrealized
gains and losses, net of tax, computed on the basis of specific
identification, and included in retained earnings. Prior to the adoption
of SFAS No. 115, marketable securities were valued at cost which
approximated market.
Inventories: The Company values inventories at the lower of cost or
market, cost being determined principally by the last-in, first-out method
(LIFO), except for $9,513,000 in 1994 and $9,085,000 in 1993 at foreign
locations, valued by the first-in, first-out method (FIFO).
Property, Plant and Equipment: Property, plant and equipment, including
assets under capital leases, are stated at cost. Depreciation and
amortization are computed principally using the straight-line method over
the estimated useful lives of the assets and the remaining term of capital
leases, respectively.
Information Systems: Costs incurred in developing management information
systems are capitalized and included in property, plant, and equipment.
These costs are amortized using the straight-line method over their
estimated useful lives from the date the systems become operational.
Amortization was $1,108,000 in 1994, $1,108,000 in 1993, and $1,037,000 in
1992.
Benefit Plans: The Company has a profit sharing plan covering most
employees with over two years service. The plan currently provides,
subject to certain adjustments, for Company contributions equal to 12% of
earnings before income taxes of participating companies. The Company has
no expenses related to postretirement health benefits for retired
employees. Accordingly, it is not affected by Financial Accounting
Standard 106, Employer's Accounting for Postretirement Benefits Other Than
Pensions.
<PAGE>
Income Taxes: Income taxes are provided based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes". Deferred income taxes are
provided for the expected future tax consequences of temporary differences
between the basis of assets and liabilities reported for financial and tax
purposes.
Net Earnings Per Common Share: Net earnings per common share are computed
by dividing net earnings by the weighted average number of shares of
common stock and common stock equivalents (dilutive stock options)
outstanding during the year. Since the dilutive effect of common stock
options is similar in both calculations, net earnings per common share
reflects both primary and fully diluted earnings per share.
Research and Development: Costs associated with research, new product
development and product cost improvements are treated as expenses when
incurred and amounted to approximately $14,800,000 in 1994, $12,900,000 in
1993, and $11,300,000 in 1992.
<PAGE>
NOTE B -- LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
1994 1993
(in thousands)
Industrial Development Bonds
due through 2004 at 6.0% fixed rate $ 431 $ 629
due through 2004 at 8.25% fixed rate 4,685 4,985
due through 2004 at 5.95% variable rate 2,300 3,500
due through 2004 at 5.29% fixed rate 6,000 0
due through 2009 at 7.75% fixed rate 3,000 3,000
due through 2009 at 7.875% fixed rate 7,200 7,200
due through 2010 at 5.70% variable rate 3,440 3,440
Notes payable to banks
due November 1, 2003 at 11.8% 172 210
-------- --------
27,228 22,964
Less current maturities 925 490
-------- --------
$ 26,303 $ 22,474
======== ========
At December 31, 1994, Industrial Development Bond proceeds of $12,384,000
are included in Other Assets. Certain long-term obligations are
collateralized by property, plant and equipment with a net book value of
$15,475,000 at December 31, 1994.
Maturities of long-term obligations during each of the five fiscal years
ending 1999 are: 1995--$925,000; 1996--$980,000; 1997--$1,492,000; 1998--
$1,475,000; and 1999--$1,585,000. Industrial Development Bonds include
capital lease obligations of $8,115,000 at December 31, 1994. Aggregate
future minimum capital lease payments at December 31, 1994, are
$12,231,000 including interest of $4,116,000.
Certain long-term obligations require, among other things, that the
Company maintain certain financial ratios and restrict cumulative cash
dividends and other distributions. Retained earnings of $32,427,000 at
December 31, 1994, were unrestricted. At December 31, 1994, the Company
had outstanding letters of credit totaling $9,099,000.
Interest paid was $1,565,000 in 1994, $1,420,000 in 1993, and $1,481,000
in 1992.
The Company had lines of credit aggregating $30,000,000 available at
December 31, 1994. These arrangements do not have termination dates but
are reviewed annually. Interest on these lines of credit is at rates
mutually agreed upon at the time of borrowing. There were no outstanding
borrowings under these lines at December 31, 1994.
<PAGE>
NOTE C -- INCOME TAXES
The Company made income tax payments of $18,830,000 in 1994, $13,219,000
in 1993, and $10,539,000 in 1992. Income tax expense consists of the
following:
(In thousands) 1994 1993 1992
Current: Federal $18,679 $12,906 $10,126
State 1,757 1,429 1,123
Foreign 566 448 212
Deferred (4,149) (1,839) (1,752)
------- ------ -------
$16,853 $12,944 $ 9,709
======= ======= =======
Deferred income taxes arise from recognizing revenues and expenses in
different years for tax and financial statement purposes. The sources of
these differences relate primarily to depreciation, certain liabilities,
and bad debt expense.
The following table reconciles the difference between the Company's
effective income tax rate and the federal corporate statutory rate:
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
State taxes, net of federal benefit 3.4 3.4 3.4
Other 0.6 1.6 1.5
---- ---- ----
Effective income tax rate 39.0% 40.0% 38.9%
==== ==== ====
<PAGE>
NOTE D -- STOCK PLANS
The Company has four plans under which various types of stock options may
be granted. Additionally, the Company has one plan that expired November
9, 1991 except as to options then outstanding. Under two plans the
Company has granted non-compensatory stock options to employees and
district managers, as approved by the shareholders and the Board of
Directors, respectively, at prices equal to the market value at the date
of grant. Outstanding options expire either five or ten years from the
date of grant. There are no charges to income in connection with these
plans.
The shareholders of the Company approved three additional plans which are
administered by the Option Committee of the Board of Directors. These
plans can grant shares to employees and non-employee directors. Under
these plans, grants can include incentive stock options, non-qualified
stock options, restricted shares, formula price shares, and stock
appreciation rights. The Committee has granted incentive options to
purchase shares at prices not less than market value at the date of grant
and non-qualified options to purchase shares of restricted stock at 50% of
the stock's market value at the date of grant. Restrictions lapse on
these shares after five years or if the Company is acquired. Related
compensation expense is amortized over the restriction period.
A summary of information regarding the stock plans follows:
NUMBER OF SHARES
Non-
Compensatory Compensatory
Total Plans Plans
Shares available for grant 4,895,800 2,275,800 2,620,000
Options outstanding:
Balance at January 1, 1994,
at $4.05 - $18.85 per share 1,684,986 810,634 874,352
Granted at $12.19 -
$25.38 per share 218,300 54,000 164,300
Exercised at $4.17 -
$15.00 per share (379,674) (281,240) (98,434)
Canceled at $9.03 -
$25.38 per share (18,200) (5,400) (12,800)
--------- ---------- --------
Balance at December 31, 1994,
at $4.05 - $25.38 per share 1,505,412 577,994 927,418
========= ========== ========
Shares exercisable
at December 31, 1994 1,258,013 550,995 707,018
Shares reserved for
future grants:
January 1, 1994 371,692 3,600 368,092
December 31, 1994 1,332,392 99,600 1,108,592
<PAGE>
NOTE E -- SHAREHOLDERS' EQUITY
On November 8, 1993, the Company's Board of Directors authorized a six-
for-five stock split effected in the form of a 20% stock dividend payable
January 7, 1994 to shareholders of record on December 10, 1993. This
resulted in the issuance of 2,993,997 additional shares of common stock.
All per share and weighted average share amounts have been restated to
reflect this stock split.
In May 1988, the Company declared a dividend distribution of one Common
Stock Purchase Right on each outstanding share of common stock. If a
person acquires or announces an intent to acquire 20% or more of the
Company's common stock, without the Board of Director's consent, then each
Right would entitle its holder to purchase for $28 the number of shares of
Baldor stock (or in the event of a merger, a number of shares of the
acquiring company's stock) that has a market value of $56. The Rights,
which expire in May 1998, may be redeemed by the Company at a price of
$.018 per Right prior to a person's acquiring 20% or more of the Company's
common stock and in certain events thereafter.
NOTE F -- OPERATING LEASES
The Company leases certain computers, buildings, and other equipment under
operating lease agreements. Related rental expense was $3,900,000 in
1994, $3,500,000 in 1993, and $3,600,000 in 1992. Future minimum payments
for operating leases having noncancelable lease terms in excess of one
year are: 1995-$2,044,000, 1996-$1,499,000, 1997-$1,151,000, 1998-$82,000,
1999-$82,000; and decline substantially thereafter.
<PAGE>
NOTE G -- FOREIGN OPERATIONS
The Company's foreign operations include both export sales and the results
of its foreign affiliates in Europe, Australia, Singapore, and Mexico.
Consolidated sales, earnings before income taxes and identifiable assets
consist of the following:
(In thousands) 1994 1993 1992
Net Sales:
United States Companies:
Domestic customers $ 363,548 $ 308,949 $ 276,536
Export customers 21,232 19,262 16,997
--------- --------- ---------
384,780 328,211 293,533
Foreign Affiliates 33,372 28,384 25,397
--------- --------- ---------
$ 418,152 $ 356,595 $ 318,930
========= ========= =========
Earnings Before Income Taxes:
United States Companies $ 41,508 $ 30,746 $ 23,990
Foreign Affiliates 1,704 1,624 983
--------- --------- ---------
$ 43,212 $ 32,370 $ 24,973
========= ========= =========
Assets:
United States Companies $ 261,984 $ 218,509 $ 193,822
Foreign Affiliates 21,171 19,441 18,119
--------- --------- ---------
$ 283,155 $ 237,950 $ 211,941
========= ========= =========
Assets and liabilities of foreign affiliates are translated into U. S.
dollars at year-end exchange rates. Income statement items are generally
translated at average exchange rates prevailing during the period.
Translation adjustments are recorded in the Cumulative Translation
Adjustment account in shareholders' equity.
<PAGE>
NOTE I -- FINANCIAL DERIVATIVES
Hedging of Foreign Exchange Risks
As a result of having various foreign operations, the Company engages in
a limited amount of hedging to minimize the effects of fluctuating foreign
currencies on its intercompany pricing. The Company's investment in
foreign currency derivatives is included in Other Current Assets at cost,
less realized gains deferred, and is amortized to Other Income over the
period in which intercompany sales to foreign affiliates occur; generally
within the following twelve months.
At December 31, 1994 and January 1, 1994 the investments in foreign
currency derivatives were not significant.
Hedging of Copper and Aluminum Requirements
The Company purchases significant amounts of copper and aluminum, key
ingredients in its motor production, under short-term firm price contracts
which are renegotiated annually. In order to hedge itself from exposure
to price fluctuations on these two metals, the Company purchases various
options, the cost of which is carried in Other Current Assets, net of
realized gains deferred, and is amortized to material costs in Cost of
Goods Sold over the period that the metal is used.
The net unamortized costs with respect to the Company's metal hedging
programs were not material at December 31, 1994 and January 1, 1994.
<PAGE>
<TABLE>
NOTE H -- MARKETABLE SECURITIES
Marketable securities available for sale include the following:
<CAPTION>
Amortized Unrealized Unrealized Estimated
(In thousands) Cost Gains Losses Fair Value
<S> <C> <C> <C> <C>
1994:
U.S. Treasury and Agency Securities $ 5,977 $ $330 $ 5,647
U.S. Corporate Debt Securities 17,477 306 17,171
Municipal Debt Securities 4,202 7 45 4,164
Other Debt Securities 1,986 10 1,976
------- ---- ---- -------
29,642 7 691 28,958
Less Cash Equivale 2,963 1 2,962
------- ---- ---- ------
Marketable Securities $26,679 $ 7 $690 $25,996
======= ==== ==== =======
</TABLE>
The contractual maturities of marketable securities are as follows:
Estimated
Amortized Fair
(In thousands) Cost Value
1994:
Due in one year or less $15,476 $15,440
Due between 8,203 7,882
Due after three years 3,000 2,674
------- -------
$26,679 $25,996
======= =======
<PAGE>
SHAREHOLDERS AND BOARD OF DIRECTORS
BALDOR ELECTRIC COMPANY AND AFFILIATES
We have audited the accompanying consolidated balance sheets of Baldor
Electric Company and affiliates as of December 31, 1994, and January 1,
1994, and the related consolidated statements of earnings, cash flows, and
shareholders' equity for each of the three years in the period ended
December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Baldor
Electric Company and affiliates at December 31, 1994, and January 1, 1994,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------
St. Louis, Missouri
February 3, 1995
<PAGE>
REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Baldor management is responsible for the integrity and objectivity of the
financial information contained in this Annual Report. The accompanying
financial statements have been prepared in conformity with generally
accepted accounting principles, applying informed judgements and estimates
where appropriate.
Baldor maintains a system of internal accounting control that provides
reasonable assurance that assets are safeguarded and transactions are
executed in accordance with management's authorization and recorded
properly to permit the preparation of financial statements in accordance
with generally accepted accounting principles.
The Audit Committee of the Board of Directors is composed solely of
outside directors and is responsible for recommending to the Board the
independent accounting firm to be retained for the coming year. The Audit
Committee meets regularly with the independent auditors, with the Director
of Audit Services, as well as with Baldor management, to review
accounting, auditing, internal accounting controls, and financial
reporting matters. The independent auditors, Ernst & Young LLP, and the
Director of Audit Services have direct access to the Audit Committee
without the presence of management to discuss the results of their audits.
Ernst & Young LLP, independent certified public accountants, have audited
Baldor's financial statements. Management has made available to Ernst &
Young LLP all the corporation's financial records and related data, as
well as the minutes of shareholders' and directors' meetings.
/s/ R. S. Boreham, Jr.
----------------------
R. S. Boreham, Jr.
Chairman of the Board and
Chairman of the Executive Committee
/s/ R. L. Qualls
-----------------
R. L. Qualls
President and Chief Executive Officer
/s/ Lloyd G. Davis
-------------------
Lloyd G. Davis
Chief Financial Officer,
Vice President - Finance,
Secretary, and Treasurer
DIRECTORS & OFFICERS
(Photo)
Roland S. Boreham, Jr. Chairman of the Board
Director since 1961
(Photo)
R. L. Qualls President and Chief Executive Officer
Director since 1987
(Photo)
George A. Schock Assistant Secretary
Director since 1944
(Photo)
Jefferson W. Asher, Jr. Independent Management Consultant
Director since 1973
(Photo)
Fred C. Ballman Former Chairman and
Chief Executive Officer (retired)
Director from 1944 to 1982 and since 1992
(Photo)
O. A. Baumann Former Manufacturer's Representative
for the Company (retired)
Director since 1961
(Photo)
Robert J. Messey Senior Vice President, Chief Financial Officer,
and Director of Sverdrup Corporation
Director since 1993
(Photo)
Robert L. Proost Corporate Vice President and Director of
Administration of A.G.Edwards & Sons,Inc.
Director since 1988
(Photo)
Willis J. Wheat Professor of Management and Marketing
at Oklahoma City University
Director since 1991
(Photo)
Theodore W. Atkins Vice President - Industry Relations &
Governmental Affairs
(Photo)
Charles H. Cramer Vice President - Personnel
(Photo)
Lloyd G. Davis Vice President - Finance,
Chief Financial Officer,
Secretary, and Treasurer
(Photo)
Gene J. Hagedorn Vice President - Materials
(Photo)
James R. Kimzey Vice President - Research & Engineering
(Photo)
John A. McFarland Vice President - Sales
(Photo)
Robert L. Null, Jr. Vice President - Manufacturing
(Photo)
Jerry D. Peerbolte Vice President - Marketing
<PAGE>
SHAREHOLDER INFORMATION
FORM 10-K REPORT
Shareholders may obtain additional financial information about Baldor from
the Company's Form 10-K report filed with the Securities and Exchange
Commission. Copies are available on request, without charge.
INVESTOR INFORMATION INQUIRIES
Requests for additional copies of the Annual Report, or other materials and
information you may wish regarding the condition and prospects of the
Company, should be directed to: Investor Relations, Baldor Electric Company,
P.O. Box 2400, Fort Smith, Arkansas 72902.
SHAREHOLDERS' ANNUAL MEETING
The Annual Meeting of the Shareholders of Baldor Electric Company will be
held at 10:30 a.m., Saturday, May 6, 1995, at the Holiday Inn, 700 Rogers
Avenue, Fort Smith, Arkansas 72901.
DIVIDENDS PAID 1992 1993 1994
1st quarter $ .07 $ .08 $ .10
2nd quarter .07 .08 .10
3rd quarter .07 .09 .10
4th quarter .08 .10 .12
---- ---- ----
Year $ .29 $ .35 $ .42
COMMON STOCK PRICE RANGE
NYSE SYMBOL-BEZ 1993 1994
High Low High Low
1st quarter 19-1/8 16-1/4 27-1/2 22-3/4
2nd quarter 21-1/4 18-3/8 24-7/8 21-1/4
3rd quarter 21-1/2 18-3/8 24-7/8 22
4th quarter 24-1/2 20-3/8 27 24-1/4
SHAREHOLDERS
3,681 at December 31, 1994 including shareholders of record and employees
through benefit plans.
EXHIBIT 21
BALDOR ELECTRIC COMPANY AND AFFILIATES
AFFILIATES OF THE REGISTRANT
PLACE OF ORGANIZATION NATURE OF
NAME OF AFFILIATE OR INCORPORATION OWNERSHIP
----------------- --------------------- ---------
Baldor of Arkansas, Inc. Arkansas 100%
Baldor of Nevada, Inc. Nevada 100%
BEC Business Trust Massachusetts 100% (1)
Baldor of Texas, L.P. Texas 100% (2)
Baldor International, Inc. U.S. Virgin Islands 100%
Carolina Capacitors, Inc. South Carolina 100%
Southwestern Die Casting Co., Inc. Arkansas 100%
Sweo Controls, Inc. Washington 100%
Baldor Holdings, Inc. Delaware 100%
Baldor de Mexico, S.A. de C.V. Mexico 100% (3)
Baldor ASR, AG Switzerland 100% (3)
Baldor ASR GmbH fuer Antriebstechnik Germany 100% (3)
Baldor ASR U.K. Limited United Kingdom 100% (3)
Australian Baldor Pty. Limited Australia 60%
Baldor Electric (Far East) PTE. Ltd. Singapore 60%
Baldor Electric (Thailand) Ltd. Thailand 100% (4)
Baldor Industrial Automation PTE. Ltd. Singapore 100% (4)
Baldor Electric (Indonesia) Ltd. Indonesia 100% (4)
(1) 100% owned by Baldor of Nevada
(2) 99% owned by Baldor Business Trust (LP) and 1% owned by Baldor of
Arkansas (GP)
(3) 100% owned by Baldor Holdings, Inc.
(4) 100% owned by Baldor Electric (Far East) PTE. Ltd.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Baldor Electric Company and affiliates of our report dated
February 3, 1995, included in the 1994 Annual Report to Shareholders of
Baldor Electric Company and affiliates.
Our audits also included the financial statement schedules of Baldor
Electric Company and affiliates listed in Item 14(a). These schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial
statement schedules referred to above, when considered in relation to the
basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8, No. 2-77046) pertaining to the Baldor Electric
Company 1982 Incentive Stock Option Plan, (Form S-8, No. 33-16766)
pertaining to the Baldor Electric Company 1987 Incentive Stock Plan, (Form
S-8, No. 33-28239) pertaining to the Baldor Electric Company Employee
Savings Plan, and (Form S-8, No. 33-36421) pertaining to the Baldor
Electric Company 1989 Stock Option Plan for Non-Employee Directors of our
report dated February 3, 1995, with respect to the consolidated financial
statements incorporated herein by reference, and our report included in
the preceding paragraph with respect to the financial statement schedules
included in this Annual Report (Form 10-K) of Baldor Electric Company and
affiliates.
/s/ Ernst & Young LLP
---------------------
St. Louis, Missouri
March 27, 1995
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Audited amounts from fiscal years ended December 31, 1994 and January 1, 1994.
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<NAME> BALDOR ELECTRIC COMPANY
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