UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
-------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7284
-----------------------------
BALDOR ELECTRIC COMPANY
-----------------------
(Exact name of registrant as specified in its charter)
Missouri 43-0168840
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5711 R.S. Boreham, Jr Street, Fort Smith, Arkansas 72908
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(501) 646-4711
--------------
(Registrant's Telephone Number, including Area Code)
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 [ ]
At July 4, 1998, there were 37,214,776 shares of the registrant's common stock
outstanding.
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- ------------------------
JULY 4 JUNE 28 JULY 4 JUNE 28
(In thousands, except share data) 1998 1997 1998 1997
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ......................................... $ 152,083 $ 141,929 $ 306,292 $ 271,842
Other income (net) ................................ 323 408 827 983
----------- ----------- ----------- ----------
152,406 142,337 307,119 272,825
Cost and expenses: Cost of goods sold ........... 105,961 99,088 213,588 189,925
Selling and administrative ... 25,225 23,745 50,750 45,447
Profit sharing ............... 2,225 2,261 4,732 4,347
Interest ..................... 375 567 750 1,155
----------- ----------- ----------- -----------
133,786 125,661 269,820 240,874
----------- ----------- ----------- -----------
Earnings before income taxes ...................... 18,620 16,676 37,299 31,951
Income taxes ...................................... 7,076 6,418 14,174 12,301
----------- ----------- ----------- -----------
NET EARNINGS ................. $ 11,544 $ 10,258 $ 23,125 $ 19,650
=========== =========== =========== ===========
Net earnings per share-diluted .................... $ 0.30 $ 0.28 $ 0.61 $ 0.54
=========== =========== =========== ===========
Net earnings per share-basic ...................... $ 0.31 $ 0.29 $ 0.63 $ 0.56
=========== =========== =========== ===========
Weighted average shares outstanding-diluted ....... 38,582,552 37,166,195 38,166,175 36,733,172
=========== =========== =========== ===========
Weighted average shares outstanding-basic ......... 37,187,291 35,747,415 36,807,415 35,373,238
=========== =========== =========== ===========
Dividends paid per common share ................... $ 0.10 $ 0.09 $ 0.20 $ 0.17
=========== =========== =========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
JULY 4 JANUARY 3
1998 1998
--------- --------
<S> <C> <C>
ASSETS (in thousands)
CURRENT ASSETS
Cash and cash equivalents ......................... $ 2,209 $ 9,575
Marketable securities ............................. 12,515 11,900
Receivables, less allowances
of $4,100 and $3,300, respectively .............. 98,061 88,740
Inventories: Finished products ................... 78,903 71,616
Work in process ..................... 9,680 10,675
Raw materials ....................... 43,957 41,793
--------- ---------
132,540 124,084
LIFO valuation adjustment (deduction) (27,522) (27,543)
--------- ---------
105,018 96,541
Other current and deferred tax assets ............. 16,774 12,684
--------- ---------
TOTAL CURRENT ASSETS .............................. 234,577 219,440
OTHER ASSETS ......................................... 31,569 32,352
NET PROPERTY, PLANT AND EQUIPMENT .................... 112,653 104,097
========= =========
$ 378,799 $ 355,889
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable .................................. $ 24,850 $ 19,935
Employee compensation ............................. 5,065 5,684
Profit sharing .................................... 4,703 8,858
Anticipated warranty costs ........................ 5,500 5,200
Accrued insurance obligations ..................... 15,957 13,836
Other accrued expenses ............................ 19,416 22,003
Income Taxes ...................................... 202 1,586
Current portion of long-term obligations .......... 1,100 1,070
--------- ---------
TOTAL CURRENT LIABILITIES ......................... 76,793 78,172
LONG-TERM OBLIGATIONS ................................ 33,104 27,929
DEFERRED INCOME TAXES ................................ 6,465 6,354
SHAREHOLDERS' EQUITY
Common stock ...................................... 3,825 3,795
Additional capital ................................ 29,716 44,606
Retained earnings ................................. 251,800 233,637
Cumulative translation adjustment ................. (2,084) (617)
Treasury stock , at cost .......................... (20,820) (37,987)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY ........................ 262,437 243,434
--------- ---------
$ 378,799 $ 355,889
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
--------------------
JULY 4 JUNE 28
1998 1997
-------- --------
(In thousands)
<S> <C> <C>
Operating activities:
Net earnings ............................... $ 23,125 $ 19,650
Depreciation and amortization .............. 10,367 9,295
Deferred income taxes ...................... 1,014 (2,110)
Changes in operating assets and liabilities:
Receivables ........................... (8,697) (8,651)
Inventories ........................... (7,825) 1,801
Other current assets .................. (3,867) 2,397
Accounts payable ...................... 4,670 536
Accrued expenses and other liabilities (6,527) 2,039
Income taxes .......................... (1,054) 2,108
Other , net ........................... (995) (1,908)
-------- --------
Net cash provided from operating activities 10,211 25,157
Investing activities:
Additions to property, plant and equipment . (17,491) (7,907)
Sales of available-for-sale securities ..... 10,822 9,486
Purchases of available-for-sale securities . (11,437) (7,512)
Acquisitions ............................... 732 (7,597)
-------- --------
Net cash used in investing activities ...... (17,374) (13,530)
Financing activities:
Additional long-term borrowings ............ 5,750
Reduction of long-term obligations ......... (545) (8,544)
Unexpended debt proceeds ................... (150) (184)
Dividends paid ............................. (7,428) (6,109)
Stock option plans ......................... 2,170 1,006
-------- --------
Net cash used in financing activities ..... (203) (13,831)
-------- --------
Net decrease in cash & cash equivalents ....... (7,366) (2,204)
Beginning cash and cash equivalents ........... 9,575 7,950
-------- --------
Ending cash and cash equivalents .............. $ 2,209 $ 5,746
======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
BALDOR ELECTRIC COMPANY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 4, 1998
Note A Significant Accounting Policies
Basis of Presentation: The unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements, and therefore should be read in conjunction
with the Company's Annual Report on Form 10-K for the year ended January 3,
1998. In the opinion of management, all adjustments (consisting only of normal
recurring items) considered necessary for a fair presentation have been
included. The results of operations for the six months ended July 4, 1998, may
not be indicative of the results that may be expected for the fiscal year ending
January 2, 1999.
Comprehensive Income: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. This statement requires companies to classify components
of other comprehensive income by their nature in a financial statement and
disclose the accumulated balance of other comprehensive income separately in the
equity section of the balance sheet. The Company's only "other comprehensive
income" item is the cumulative translation adjustment. Net comprehensive income
was approximately $13,314,000 and $10,301,000 for the second quarter of 1998 and
1997, and was approximately $21,833,000 and $19,275,000 for the six months
ending July 4, 1998 and June 28, 1997, respectively.
Segment Reporting: In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, Disclosures about Segments
of an Enterprise and Related Information. The statement requires public
companies to report financial and descriptive information about their reportable
operating segments. The Company has only one reportable segment; therefore,
management expects the adoption of this statement to have no material effect.
Computer Software Costs: In March 1998, the AICPA issued Statement of Position
(SOP) 98-1, Accounting For the Costs of Computer Software Developed For or
Obtained For Internal-Use. The SOP is effective for fiscal years beginning after
December 15, 1998, with early adoption encouraged. The Company adopted the SOP
during the second quarter of 1998. The SOP requires the capitalization of
certain costs incurred with developing or obtaining software for internal-use.
The adoption of SOP 98-1 did not have a material effect on the Company's results
of operations.
Acquisition: In March 1998, the Company acquired Northern Magnetics, Inc.
(Normag) of Santa Clarita, California in a transaction accounted for as a
pooling. Because the financial results of operations for Normag for prior years
are not material, the Company's financial statements for prior years have not
been restated.
Reclassifications: The Company has reclassified the presentation of certain
prior year information to be consistent with the presentation in the current
year.
<PAGE>
Note B Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (EPS):
<TABLE>
<CAPTION>
July 4, 1998 June 28, 1997
------------ -----------
<S> <C> <C>
Numerator Reconciliation:
The numerator is the same for basic and diluted EPS:
Net earnings (in thousands) .......... $ 23,125 $ 19,650
=========== ===========
Denominator Reconciliation:
The denominator for basic EPS:
Weighted average shares .............. 36,807,415 35,373,238
Effect of dilutive securities:
Stock options .................. 1,358,760 1,359,934
----------- -----------
The denominator for diluted EPS-adjusted
weighted average shares .............. 38,166,175 36,733,172
=========== ===========
Basic earnings per share ...................... $ 0.63 $ 0.56
=========== ===========
Diluted earnings per share .................... $ 0.61 $ 0.54
=========== ===========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Baldor posted record sales and earnings for the 26th consecutive quarter,
resulting in net earnings for the quarter totaling $11,544,000 or $0.30 per
share. A quarterly increase of 7% in sales was leveraged into an increase in net
earnings of 13% through productivity gains in eight of the twelve production
facilities. Operating margins improved to record levels of 13.7% for the six
month period in 1998 compared to 13.4% for the same period in 1997. Sales for
the second quarter of 1998, which had two less selling days than 1997, were
$152,083,000 and year-to-date sales were $306,292,000. Sales from international
operations (foreign affiliates and exports), which comprised approximately 15%
of consolidated sales for both the second quarter and six month period,
increased 9% over the second quarter of 1997 and 24% over the same six month
period in 1997. The increase from international operations included growth in
Mexico and Europe, while sales in Australia were weaker.
Sales growth was broad-based with growth across several product lines,
industries, and geographic regions. North American sales increased 7% for the
quarter. Sales of motor products were up 7% and 10% compared to 1997 for the
second quarter and six month period, respectively. Distributor and OEM sales
experienced moderate growth and the mix remained stable. Drive sales increased
15% for the second quarter compared to 1997, while year-to-date drive sales
increased 31% over 1997. In order to maximize the potential in the drives
business, management will begin an initiative to evaluate the drives production
to determine possible opportunities for increased productivity, profitability
and greater value for our shareholders.
Selling and administrative expense for the first six months of 1998, as a
percent of sales, was 16.6% down slightly from the same period in 1997. Profit
margin increased to 7.6% in 1998 compared to 7.2% in 1997, coupled with a
decrease in the effective tax rate of 38.0% from 38.5% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position continues to remain strong. The current ratio
increased to 3.1 at July 4, 1998, compared to 2.8 at January 4, 1998. Working
capital increased to $157.8 million at end of the second quarter, from $141.3
million at year end 1997. Cash and marketable securities were $14.7 million at
the end of the second quarter compared to $21.5 million at January 4, 1998. The
ratio of debt to total capitalization was 11.2% at July 4, 1998, compared to
10.3% at January 4, 1998.
YEAR 2000
The Company continues its previously announced implementation of a new, fully
integrated company-wide information system that has been certified by the vendor
to be Year 2000 compliant. The Company also has initiated discussions with its
customers, suppliers and financial institutions to ensure that they have
appropriate plans. Contingency plans will be developed as needed.
<PAGE>
The Company's comprehensive Year 2000 initiative is being managed internally.
The Company's activities are designed to attempt to ensure that there is no
material adverse effect on operations and that transactions with customers,
suppliers and financial institutions will not be interrupted. The Company is
well under way with these efforts, which are scheduled to be completed in early
1999. While the Company believes its planning efforts are adequate to address
its Year 2000 concerns, there can be no guarantee that the systems of other
companies on which the Company's systems and operations rely will be converted
on a timely basis and will not have a material effect on the Company. The cost
of the Year 2000 initiatives is not expected to be material adverse to the
Company's results of operation or financial position.
This Form 10-Q may contain statements which may constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, and
Section 21 of the Securities Act of 1934, as amended. Prospective investors are
cautioned that any such forward-looking statements are not guarantees for future
performance and involve risks and uncertainties, and that actual results may
differ from those contemplated by such forward-looking statements.
<PAGE>
PART II. OTHER INFORMATION
Item 2. Recent Sales of Unregistered Securities
During the second quarter of 1998, certain District Managers exercised
non-qualified stock options previously granted to them under the Baldor Electric
Company 1990 Stock Option Plan for District Managers (the DM Plan). The exercise
price paid by the District Manager equaled the fair market value on the date of
grant. The total amount of shares granted under the DM Plan is less than 1% of
the outstanding shares of Baldor common stock.
None of the transactions were registered under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption from registration afforded
by Section 4(2) of the Act. The Company deems this exemption to be appropriate
given that there are a limited number of participants in the DM Plan and all
parties are knowledgeable about the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting on May 2, 1998 at which three proposals were
voted on by the shareholders. Proposal I was the election of three Directors to
the Company's Board of Directors for terms expiring in 2001. Proposal II was to
amend the Company's Restated Articles of Incorporation, as Amended, as described
in the Company's Proxy Statement dated March 27, 1998. Proposal III was to amend
the Baldor Electric Company 1994 Incentive Stock Plan as contained in the
Company's Proxy Statement dated March 27, 1998. The following is a list of the
Board's slate of nominees (who were only nominees) each of whom were elected,
and the results of shareholder voting on each proposal:
Votes Votes Votes
Proposal For Against Withheld
- - -------- --- ------- --------
Proposal I
Fred C. Ballman 24,836,076 N/A 1,182,171
R.S. Boreham, Jr. 24,836,235 N/A 1,182,012
R.L. Qualls 24,835,962 N/A 1,182,285
Proposal II 22,008,534 3,960,021 49,692
Proposal III 21,540,714 3,964,171 513,362
Messers Jefferson W. Asher, Jr., O. A. Baumann, John A. McFarland, Robert J.
Messey, Robert L. Proost and Willis J. Wheat, are the remaining board members,
each of whom is expected to serve out his respective term.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit Number Description
3i Articles of Incorporation as
amended at the Company's Annual
Meeting on May 2, 1998-filed
herewith.
10 (iii)A.1 1994 Incentive Stock Plan as amended at
the Company's Annual Meeting on May
2, 1998.-filed herewith.
10 (iii)A.2 1989 Stock Option Plan for Non-Employee
Directors as amended at the Board of
Directors Meeting August 10, 1998-
filed herewith.
10 (iii)A.3 1996 Stock Option Plan for Non-Employee
Directors as amended at the Baord of
Directors Meeting August 10, 1998-
filed herewith.
11 Computation of Earning per Common Share-
Incorporated by reference to Note B
of the Form 10-Q for July 4, 1998.
27 Financial Data Schedules-filed herewith
in electronic filing of Form 10-Q.
b. The registrant did not file any reports on Form 8-K during the most
recently completed fiscal quarter.
S I G N A T U R E S
---------------------------
Pursuant to the requirements 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)
Date: August 17, 1998 By: /s/ Lloyd G. Davis
---------------- ----------------------
Lloyd G. Davis - Executive Vice President-
Finance, Chief Financial Officer, Secretary
and Treasurer(on behalf of the Registrant
and as principal financial officer)
<PAGE>
Amended as of
May 2, 1998
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 One Hundred
Fifty-Five Million (155,000,000) shares of which One Hundred Fifty Million
(150,000,000) 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:
<PAGE>
5
(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 hereinabove
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.
BALDOR ELECTRIC COMPANY
1994 INCENTIVE STOCK PLAN
Restated for Amendments
through August 10, 1998
1. Purpose.
The purpose of the 1994 Incentive Stock Plan (the "1994 Plan") is to aid
in maintaining and developing strong management capable of assuring the
future success of Baldor Electric Company (the "Company"). The 1994 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 1994 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(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.
(e) "Eligible Employee" means any employee of the Company or a
Subsidiary, including a director of the Company or a Subsidiary
who is an employee of the Company or a Subsidiary.
(f) "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 422 of
the Code.
(g) "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.
(h) "Option" means an Incentive Stock Option or Nonqualified Stock
Option.
(i) "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 any entity or arrangement that first becomes
described in this subparagraph after the effective date of this
1994 Plan.
(j) "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. Administration.
(a) General. The 1994 Plan shall be administered by the Board of
Directors or by a committee or committees appointed by the Board
of Directors as Administrator of the 1994 Plan.
(b) Reporting Persons. Anything in subparagraph (a) of this Paragraph
3 to the contrary notwithstanding, selection of Reporting Persons
for participation in the 1994 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 1994 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 1994 Plan
and decisions concerning the timing, pricing, and amount of a
grant to Reporting Persons; and (ii) the Board of Directors or the
committee or committees described in subparagraph (a) of this
Paragraph 3, with respect to all other administrative functions.
Subject to the provisions of this 1994 Plan, the Administrator
shall have exclusive authority to interpret and administer the
1994 Plan, to establish appropriate rules relating to the 1994
Plan, to grant Incentive Stock Options and Non-qualified Stock
Options in accordance with the 1994 Plan, to delegate its
authority and duties under the 1994 Plan and to take all such
steps and make all such determinations in connection with the 1994
Plan and the Incentive Stock Options and Nonqualified Stock
Options as it may deem necessary or advisable.
4. Eligibility.
The Administrator shall from time to time determine and designate
Eligible Employees who shall receive awards under the 1994 Plan and the
number of Incentive Stock Options and Nonqualified Stock Options 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 1994 Plan include (a) Incentive
Stock Options and (b) Nonqualified Stock Options as described in this
1994 Plan ("Benefits").
6. Award of Benefits.
(a) General. The Administrator may from time to time award Incentive
Stock Options or Non-qualified Stock Options or any combination
thereof, to Eligible Employees. Each Eligible Employee receiving
an award under the 1994 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 1994 Plan as the Administrator in its sole
discretion shall determine.
(b) Administrator's Discretion. The award of any Benefit under the
1994 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
1994 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, and (vi) provisions for
awarding Benefits in any combination or combinations. (c)
Individual Limit. Notwithstanding anything to the contrary in
this 1994 Incentive Stock Plan, the maximum number of shares that
may be awarded in any calendar year to a "covered employee" for
such year, as defined in Section 162(m) of the Code, shall not
exceed 100,000 shares.
(d) 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.
(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 1994 Plan or any plan of a
parent corporation or Subsidiary which become 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 1994 Plan.
No person entitled to exercise any option granted under
the 1994 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.
7. Shares Subject to 1994 Plan.
Subject to the provisions of Paragraph 8 (relating to adjustment for
changes in capital stock), there is hereby reserved Three Million
(3,000,000) shares of Common Stock. 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 1994 Plan; provided that in no event may
the number of shares of Common Stock issued under this 1994 Plan exceed
Three Million (3,000,000).
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 1994 Plan and the kind and number of shares and
price per share of stock subject to each outstanding Benefit. The
additional shares of Common Stock which become issuable upon exercise of
an outstanding Option due to an adjustment made in accordance with the
events enumerated in the proceeding sentence, shall be subject to the
same restrictions applicable to the shares of Common Stock originally
underlying the outstanding Option prior to the adjustment. No fractional
shares of stock shall be issued under the 1994 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 1994 Plan.
The Board of Directors may at any time amend the 1994 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 that may be issued under the
1994 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 1994 Plan without the consent of the person to whom the
Benefit was granted.
10. Termination of the 1994 Plan.
The Board of Directors may terminate or suspend the 1994 Plan at any
time. No Benefit shall be awarded after termination of the 1994 Plan.
Rights and obligations under a Benefit awarded while the 1994 Plan is in
effect shall not be altered or impaired by termination or suspension of
the 1994 Plan except by consent of the person to whom the Benefit was
awarded.
11. Definitions and Rules of Construction.
The terms of the 1994 Plan shall be construed in accordance with the
laws of the state of Missouri provided that the terms of the 1994 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 1994 Plan satisfying the requirements of the provisions of the Code
governing Incentive Stock Options.
12. Nontransferability.
Each Benefit granted under this 1994 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.
13. Effective Date.
The 1994 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 1994
Plan by the Board of Directors.
<PAGE>
BALDOR ELECTRIC COMPANY
1989 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Restated for Amendments
through August 10, 1998
1. Purpose
The purpose of this Stock Option Plan for Non-Employee Directors (the
"Plan") of Baldor Electric Company (the "Company") is to increase the
ownership interest in the Company of non-employee directors whose
services are considered essential to the Company's continued progress
and to provide a further incentive to serve as a director of the
Company.
2. Administration
The Plan shall be administered by a committee consisting of directors
who are not eligible to participate in the Plan (the "Committee").
Subject to the provisions of the Plan, the Committee shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan; provided,
however, that the Committee shall have no discretion with respect to the
eligibility or selection of directors to receive options under the Plan,
the number of shares of stock subject to any such options under the
Plan, or the purchase price thereunder, and provided further that the
Committee shall not have the authority to take any action or make any
determination that would materially increase the benefits accruing to
participants under the Plan. The determination of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive and binding upon all persons including, without limitation,
the Company, its shareholders, and persons granted options under the
Plan. The Secretary of the Company shall be authorized to implement the
Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and
purposes thereof. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Missouri.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
affiliate of the Company shall be eligible to participate in the Plan
("Eligible Directors").
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 7, an aggregate of 150,000
shares of Company common stock ("Stock") shall be available for issuance
upon the exercise of options granted under the Plan. The shares of Stock
deliverable upon the exercise of options may be made available from
authorized but unissued shares or shares reacquired by the Company,
including shares purchased in the open market or in private
transactions. If any option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the
shares subject to, but not delivered under, such option may again become
available for the grant of other options under the Plan.
5. Non-Statutory Stock Options
All options granted under the Plan shall be non-statutory options not
intended to qualify under Section 422A of the Internal Revenue Code of
1986, as amended.
6. Terms, Conditions, and Form of Options
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve,
which agreements shall comply with and be subject to the following terms
and conditions:
a. Option Grant Dates. Options to purchase 1,500 shares of Stock (as
adjusted pursuant to Section 7) shall be granted automatically to
each Eligible Director on the last trading day of Stock on the
New York Stock Exchange in each January, 1990 through 1996
("Annual Grants"). In addition, an initial grant of options to
purchase 6,000 shares of stock shall be made on August 3, 1989 to
each Eligible Director (the "1989 Grant"), and options to
purchase 6,000 shares of stock shall be granted to each new
Eligible Director ("New Director Grant") on the first trading day
of July of the year in which such New Eligible Director is first
elected or appointed as a director of the Company, provided,
that, if the effective date of such election or appointment is
after July 1 of any given year, the New Director Grant shall be
made as of the first trading day of the month following such
effective date. Options which are granted prior to the 1990
Annual Meeting of shareholders ("1990 Annual Meeting") are
subject to approval of the Plan by the shareholders at the 1990
Annual Meeting.
b. Purchase Price. The purchase price per share of Stock for which
each option is exercisable shall be the fair market value per
share of Stock on the date the option is granted, which shall be
the closing per share price of the Stock based upon its
consolidated trading as generally reported for New York Stock
Exchange listed stocks, except that the purchase price per share
for 25% of each 1989 Grant, 25% of each New Director Grant, and
40% of each Annual Grant, which becomes exercisable each year as
provided in Section 6(c) below, shall be 50% of the fair market
value per share on the date any such option is granted. For
example, the purchase price per share for 300 of the 1,200 Shares
of the 1989 Grant which becomes exercisable on May 31, 1990,
shall be 50% of the fair market value on the date of the grant.
c. Exercisability and Term of Options. Each option granted under the
Plan will become exercisable and mature in five equal
installments, commencing on the first anniversary of the date of
grant and annually thereafter, except that for the 1989 Grant and
New Director Grants, the first installment shall mature and
become exercisable on May 31, 1990, and May 31 of the year
following the grant of any New Director Grant, respectively, and
each subsequent installment of such grant shall mature and become
exercisable on the last day of each subsequent January. Each
option granted under the Plan shall expire ten years from the
date of the grant, and shall be subject to earlier termination as
hereinafter provided.
d. Death or Termination of Service. In the event of termination of
service on the Board by a holder of an option, each of the then
outstanding options of such holder will continue to mature and
become exercisable in accordance with paragraph c. above and the
holder may exercise the matured installments at any time within
five years after such termination of service but in no event
after the expiration date of the term of the option. In the event
of death of the holder of any option, each of the then
outstanding options of such holder will immediately mature in
full and become exercisable by the holder's legal representative
at any time within a period of five years after death, but in no
event after the expiration date of the term of the option.
However, if the holder dies within five years following
termination of service on the Board, such option shall only be
exercisable for two years after the holder's death or five years
after termination of service, whichever is longer, or until the
expiration date of the term of the option, if earlier.
e. Payment. Options may be exercised only upon payment to the
Company in full of the purchase price of the shares to be
delivered. Such payment shall be made in cash or, if permitted in
the agreement, in Stock or in a combination of cash and Stock.
The sum of the cash and the fair market of such Stock shall be at
least equal to the aggregate price of the shares to be delivered.
7. Adjustment upon Changes in Stock
If there shall be any change in the Stock subject to the Plan or to any
option granted thereunder through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, exchange of stock or
other change in the corporate structure, appropriate adjustments shall
be made in the aggregate number and kind of shares or other securities
or property subject to the Plan, and the number and kind of shares or
other securities or property subject to outstanding and to subsequent
option grants and in the purchase price of outstanding options to
reflect such changes.
8. Tax Obligations
The Optionee may direct that the Company pay on his or her behalf any
and all tax obligations incurred by the Optionee due to the exercise of
the Options (the "Tax Obligation"). To pay for the Tax Obligation, the
Optionee may remit cash, surrender shares previously owned by the
Optionee, or the Optionee may direct the Company to withhold shares of
stock issuable from the exercise. If the Optionee so directs, then the
Optionee shall reimburse the Company with that number of shares of the
Company's common stock which are necessary to reimburse the Company for
the amount of the Tax Obligation. The number of shares necessary will be
based on the fair market value on the day immediately preceding the date
of exercise.
9. Options Non-Assignable and Non-Transferable
Each option and all rights thereunder shall be non-assignable and
non-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.
10. Limitation of Rights
a. No Right to Continue as a Director. Neither the Plan, nor the
granting of an option, nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the director has a right
to continue as a director for any period of time, or at any
particular rate of compensation.
b. No Shareholders' Right for Options. An Optionee shall have no
rights as a shareholder with respect to the shares covered by
options granted hereunder until the date of the issuance of a
stock certificate therefor, and no adjustment will be made for
dividends or other rights for which the record date is prior to
the date such certificate is issued.
11. Effective Date and Duration of Plan
The Plan shall become effective immediately following approval by the
shareholders at the 1990 Annual Meeting of Shareholders. Options granted
prior to the 1990 Annual Meeting of Shareholders are contingent upon
approval of the Plan at such Annual Meeting. The period during which
option grants shall be made under the Plan shall terminate on the day
following the 1996 Annual Meeting of Shareholders (unless the Plan is
extended or terminated at an earlier date by shareholders) but such
termination shall not affect the terms of any then outstanding options.
12. Amendment, Suspension, or Termination of the Plan
The Board of Directors may suspend or terminate the Plan or revise or
amend it in any respect whatsoever; provided, however, that without
approval of the Shareholders, no revision or amendment shall change the
selection or eligibility of directors to receive options under the Plan,
the number of shares of Stock subject to any such options or the Plan,
the purchase price thereunder, or materially increase the benefits
accruing to participants under the Plan.
13. Notice
Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall
become effective when it is received.
14. Use of Proceeds
Proceeds from the sale of Stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
15. Fractional Shares
No fractional shares of Stock shall be issued pursuant to options
granted hereunder, but in lieu thereof, the cash value of such fraction
shall be paid.
BALDOR ELECTRIC COMPANY
1996 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Restated for Amendments
through August 10, 1998
1. Purpose
The purpose of this Stock Option Plan for Non-Employee Directors (the
"Plan") of Baldor Electric Company (the "Company") is to increase the
ownership interest in the Company of non-employee directors whose
services are considered essential to the Company's continued progress
and to provide a further incentive to serve as a director of the
Company.
2. Administration
The Plan shall be administered by a committee consisting of directors
who are not eligible to participate in the Plan (the "Committee").
Subject to the provisions of the Plan, the Committee shall be authorized
to interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan; provided,
however, that the Committee shall have no discretion with respect to the
eligibility or selection of directors to receive options under the Plan,
the number of shares of stock subject to any such options under the
Plan, or the purchase price thereunder, and provided further that the
Committee shall not have the authority to take any action or make any
determination that would materially increase the benefits accruing to
participants under the Plan. The determination of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive and binding upon all persons including, without limitation,
the Company, its shareholders, and persons granted options under the
Plan. The Secretary of the Company shall be authorized to implement the
Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and
purposes thereof. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Missouri.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
affiliate of the Company on an Option Grant Date shall be eligible to
participate in the Plan ("Eligible Directors") on that Option Grant
Date.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 7, an aggregate of 150,000
shares of Company common stock ("Stock") shall be available for issuance
upon the exercise of options granted under the Plan. The shares of Stock
deliverable upon the exercise of options may be made available from
authorized but unissued shares or shares reacquired by the Company,
including shares purchased in the open market or in private
transactions. If any option granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the
shares subject to, but not delivered under, such option may again become
available for the grant of other options under the Plan.
5. Non-Statutory Stock Options
All options granted under the Plan shall be non-statutory options not
intended to qualify under Section 422A of the Internal Revenue Code of
1986, as amended.
6. Terms, Conditions, and Form of Options
Each option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve,
which agreements shall comply with and be subject to the following terms
and conditions:
a. Option Grant Dates. Options to purchase 4,050 shares of Stock (as
adjusted pursuant to Section 7) shall be granted automatically to
each Eligible Director on the last trading day of Stock on the
New York Stock Exchange in the five-year period beginning January
1, 1997, and ending 2001.
b. Purchase Price. The purchase price per share of Stock for which
each option is exercisable shall be the fair market value per
share of Stock (except that for 40% of each Annual Grant, the
purchase price per share of Stock shall be 50% of the fair market
value) on the date the option is granted, which shall be the
closing per share price of the Stock based upon its consolidated
trading as generally reported for New York Stock Exchange listed
stocks.
c. Exercisability and Term of Options. Each option granted under the
Plan will become exercisable and mature in five equal
installments, commencing on the first anniversary of the date of
grant and annually thereafter. Each option granted under the Plan
shall expire ten years from the date of the grant, and shall be
subject to earlier termination as hereinafter provided.
d. Death or Termination of Service. In the event of death of the
holder of any option, each of the then outstanding options of
such holder will immediately mature in full and become
exercisable by the holder's legal representative at any time
within a period of five years after death, but in no event after
the expiration date of the term of the option. However, if the
holder dies within five years following termination of service on
the Board, such option shall only be exercisable for two years
after the holder's death or five years after termination of
service, whichever is longer, or until the expiration date of the
term of the option, if earlier. In the event of termination of
service on the Board by a holder of an option, each of the then
outstanding options of such holder will continue to mature and
become exercisable in accordance with paragraph c. above and the
holder may exercise the matured installments at any time within
five years after such termination of service but in no event
after the expiration date of the term of the option.
e. Payment. Options may be exercised only upon payment to the
Company in full of the purchase price of the shares to be
delivered. Such payment shall be made in cash or, if permitted in
the agreement, in Stock or in a combination of cash and Stock.
The sum of the cash and the fair market of such Stock shall be at
least equal to the aggregate price of the shares to be delivered.
7. Adjustment upon Changes in Stock
If there shall be any change in the Stock subject to the Plan or to any
option granted thereunder through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, exchange of stock or
other change in the corporate structure, appropriate adjustments shall
be made in the aggregate number and kind of shares or other securities
or property subject to the Plan, and the number and kind of shares or
other securities or property subject to outstanding and to subsequent
option grants and in the purchase price of outstanding options to
reflect such changes.
8. Options Non-Assignable and Non-Transferable
Each option and all rights thereunder shall be non-assignable and
non-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 (the
"Optionee").
9. Tax Obligations
The Optionee may direct that the Company pay on his or her behalf any
and all tax obligations incurred by the Optionee due to the exercise of
the Options (the "Tax Obligation"). To pay for the Tax Obligation, the
Optionee may remit cash, surrender shares previously owned by the
Optionee, or the Optionee may direct the Company to withhold shares of
stock issuable from the exercise. If the Optionee so directs, then the
Optionee shall reimburse the Company with that number of shares of the
Company's common stock which are necessary to reimburse the Company for
the amount of the Tax Obligation. The number of shares necessary will be
based on the fair market value on the day immediately preceding the date
of exercise.
10. Limitation of Rights
a. No Right to Continue as a Director. Neither the Plan, nor the
granting of an option, nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Eligible Director has
a right to continue as a director for any period of time, or at
any particular rate of compensation.
b. No Shareholders' Right for Options. An Optionee shall have no
rights as a shareholder with respect to the shares covered by
options granted hereunder until the date of the issuance of a
stock certificate therefor, and no adjustment will be made for
dividends or other rights for which the record date is prior to
the date such certificate is issued.
11. Effective Date and Duration of Plan
The Plan shall become effective immediately following approval by the
shareholders at the 1996 Annual Meeting of Shareholders. The period
during which option grants shall be made under the Plan shall terminate
on the day following the 2001 Annual Meeting of Shareholders (unless the
Plan is extended or terminated at an earlier date by shareholders) but
such termination shall not affect the terms of any then outstanding
options.
12. Amendment, Suspension, or Termination of the Plan
The Board of Directors may suspend or terminate the Plan or revise or
amend it in any respect whatsoever; provided, however, that without
approval of the Shareholders, no revision or amendment shall change the
selection or eligibility of directors to receive options under the Plan,
the number of shares of Stock subject to any such options or the Plan,
the purchase price thereunder, or materially increase the benefits
accruing to participants under the Plan.
13. Notice
Any written notice to the Company required by any of the provisions of
this Plan shall be addressed to the Secretary of the Company and shall
become effective when it is received.
14. Use of Proceeds
Proceeds from the sale of Stock pursuant to options granted under the
Plan shall constitute general funds of the Company.
15. Fractional Shares
No fractional shares of Stock shall be issued pursuant to options
granted hereunder, but in lieu thereof, the cash value of such fraction
shall be paid.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
In accordance with SFAS 128, earnings per share amounts have been restated for
the second quarter of 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JAN-02-1999 JAN-03-1998
<PERIOD-END> JUL-04-1998 JUN-28-1997
<CASH> 2209 5746
<SECURITIES> 12515 15918
<RECEIVABLES> 102161 93622
<ALLOWANCES> 4100 3525
<INVENTORY> 105018 91560
<CURRENT-ASSETS> 234577 217854
<PP&E> 245071 210064
<DEPRECIATION> 132418 115335
<TOTAL-ASSETS> 378799 344917
<CURRENT-LIABILITIES> 76793 75998
<BONDS> 0 0
0 0
0 0
<COMMON> 3825 2874
<OTHER-SE> 258612 225582
<TOTAL-LIABILITY-AND-EQUITY> 378799 344914
<SALES> 306292 271842
<TOTAL-REVENUES> 307119 272825
<CGS> 213588 189925
<TOTAL-COSTS> 269070 239719
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 750 1155
<INCOME-PRETAX> 37299 31951
<INCOME-TAX> 14174 12301
<INCOME-CONTINUING> 23125 19650
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23125 19650
<EPS-PRIMARY> .63 .56
<EPS-DILUTED> .61 .54
</TABLE>
