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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ___________.
COMMISSION FILE NUMBER: 1-12930
AGCO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-1960019
(State or orther jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
4205 RIVER GREEN PARKWAY, DULUTH, GEORGIA 30096
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 813-9200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, ($0.01 PAR VALUE) NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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The aggregate market value of common stock held by non-affiliates of the
Registrant as of the close of business on March 10, 1998 was $1,787,722,000. As
of such date, there were 62,991,311 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the AGCO Corporation Annual Report to Stockholders for the year
ended December 31, 1997 are incorporated by reference in Part II.
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on April 29, 1998 are incorporated by reference in Part
III.
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Item 1. BUSINESS
AGCO Corporation ("AGCO" or the "Company") was incorporated in Delaware
in April 1991. The Company's executive offices are located at 4205 River Green
Parkway, Duluth, Georgia 30096, and its telephone number is 770-813-9200. Unless
otherwise indicated, all references in this Form 10-K to the Company include the
Company's subsidiaries.
THE COMPANY
AGCO is a leading manufacturer and distributor of agricultural
equipment throughout the world. The Company sells a full range of agricultural
equipment and related replacement parts, including tractors, combines, hay
tools and forage equipment and implements. The Company's products are widely
recognized in the agricultural equipment industry and are marketed under the
following brand names: Massey Ferguson(R), Fendt, AGCO(R) Allis, GLEANER(R),
Hesston(R), White, Landini, White-New(R) Idea, Black Machine, AGCOSTAR(R),
Glencoe(R), Tye(R), Farmhand(R), IDEAL, and Deutz (South America). The Company
distributes its products through a combination of over 8,500 independent
dealers, wholly-owned distribution companies, associates and licensees. In
addition, the Company provides retail financing in North America, the United
Kingdom, France and Germany through its finance joint ventures with Cooperative
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank").
AGCO was organized in June 1990 by an investment group formed by
management to acquire the successor to the agricultural equipment business of
Allis-Chalmers, a company which began manufacturing and distributing
agricultural equipment in the early 1900s. Since its formation in June 1990,
AGCO has grown substantially through a series of 15 acquisitions for
consideration aggregating approximately $1.3 billion. These acquisitions have
allowed the Company to broaden its product line, expand its dealer network and
establish strong market positions in several new markets throughout North
America, South America, Western Europe and the rest of the world. The Company
has achieved significant cost savings and efficiencies from its acquisitions by
eliminating duplicative administrative, sales and marketing functions,
rationalizing its dealer network, increasing manufacturing capacity utilization
and expanding its ability to source certain products and components from third
party manufacturers. In addition to acquisitions, the Company has increased its
sales in North America by entering into a substantial number of crossover
contracts with its dealers whereby a dealer carrying one of the Company's brands
also contracts to sell additional AGCO brands or products. The Company has also
grown through successful expansion of its product offerings, particularly
related to the sale of complementary non-tractor products through its
international distribution channels, and new product introductions.
TRANSACTION HISTORY
Hesston Acquisition. In March 1991, the Company acquired Hesston
Corporation ("Hesston"), a leading manufacturer and distributor of hay tools,
forage equipment and related replacement parts, together with over 500 dealer
contracts (the "Hesston Acquisition"). The assets acquired also included
Hesston's 50% interest in a joint venture, Hay and Forage Industries ("HFI"),
between Hesston and Case Corporation ("Case") which manufactures hay and forage
equipment for both parties. Hesston's net sales in its full fiscal year
preceding the acquisition were approximately $91.0 million. The Hesston
Acquisition enabled the Company to provide its dealers with a more complete line
of farm equipment and to expand its dealer network into territories in which the
Company had not previously been represented.
White Tractor Acquisition. In May 1991, the Company acquired the White
Tractor Division ("White") of Allied Products Corporation ("Allied"), together
with over 600 dealer contracts (the "White Acquisition"). White's net sales in
its full fiscal year preceding the acquisition were approximately $58.3 million.
As a result of the White Acquisition, the Company added a new line of tractors
to its product offerings and expanded its North America dealer network.
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Massey Ferguson North American Acquisition. In January 1993, the
Company entered into an agreement with Varity Corporation ("Varity") to be the
exclusive distributor in the United States and Canada of the Massey Ferguson
line of farm equipment. Concurrently, the Company acquired the North American
distribution operation of Massey Ferguson Group Limited ("Massey") from Varity,
including approximately 1,100 dealer contracts (the "Massey North American
Acquisition"). Net sales attributable to Massey's North American distribution
operation in the full fiscal year preceding the acquisition were approximately
$215.0 million. The Massey North American Acquisition provided AGCO access to
another leading brand name in the agricultural equipment industry, and it
enabled the Company to expand its dealer network by entering into a substantial
number of crossover contracts.
White-New Idea Acquisition. In December 1993, the Company acquired the
White-New Idea Farm Equipment Division ("White-New Idea") of Allied, together
with approximately 900 dealer contracts (the "White-New Idea Acquisition"). The
White-New Idea Acquisition enabled the Company to offer a more complete line of
planters and spreaders and a broader line of tillage equipment. Of White-New
Idea's net sales of approximately $83.1 million in 1993, approximately 46%
represented sales of products in categories in which the Company previously did
not compete.
Agricredit-North America Acquisition. The Company acquired Agricredit
Acceptance Company ("Agricredit-North America"), a retail finance company, from
Varity in two separate transactions (together, the "Agricredit-North America
Acquisition"). The Company acquired a 50% joint venture interest in
Agricredit-North America in January 1993 and acquired the remaining 50% interest
in February 1994. The Agricredit-North America Acquisition has enabled the
Company to provide more competitive and flexible financing alternatives to end
users.
Massey Acquisition. In June 1994, the Company acquired Massey from
Varity, together with Massey's independent dealers and associate and licensee
companies outside the United States and Canada. Massey, with fiscal 1993 net
sales of approximately $898.4 million (including net sales to AGCO of
approximately $124.6 million) (the "Massey Acquisition"), was one of the largest
manufacturers and distributors of tractors in the world. The Massey Acquisition
significantly expanded AGCO's sales and distribution outside North America.
AgEquipment Acquisition. In March 1995, the Company further expanded
its product offerings through its acquisition of AgEquipment Group, a
manufacturer and distributor of farm implements and tillage equipment (the
"AgEquipment Acquisition"). The AgEquipment Acquisition added three brands of
agricultural implements to the Company"s product line, including no-till and
minimum tillage products, distributed under the Tye, Farmhand and Glencoe brand
names.
Maxion Acquisition. In June 1996, the Company acquired the agricultural
and industrial equipment business of Iochpe-Maxion S.A. (the "Maxion
Agricultural Equipment Business"), together with approximately 360 dealer
contracts (the "Maxion Acquisition"). The Maxion Agricultural Equipment
Business, with 1995 sales of approximately $265.0 million, was AGCO"s Massey
Ferguson licensee in Brazil, manufacturing and distributing agricultural
tractors under the Massey Ferguson brand name, combines under the Massey
Ferguson and IDEAL brand names and industrial loader-backhoes under the Massey
Ferguson and Maxion brand names. The Maxion Acquisition established AGCO with
market leadership in the significant Brazilian agricultural equipment market.
Western Combine Acquisition. In July 1996, the Company acquired certain
assets of Western Combine Corporation and Portage Manufacturing, Inc., the
Company"s suppliers of Massey Ferguson combines and other harvesting equipment
sold in North America (the "Western Combine Acquisition"). The Western Combine
Acquisition provided the Company with access to advanced technology and
increased the Company"s profit margin on certain combines and harvesting
equipment sold in North America.
Agricredit-North America Joint Venture. In November 1996, the Company
sold a 51% interest in Agricredit-North America to a wholly-owned subsidiary of
Rabobank. The Company received total consideration of approximately $44.3
million in the transaction. The Company retained a 49% interest in
Agricredit-North America and now operates Agricredit-North America with Rabobank
as a joint venture (the "Agricredit-North America Joint Venture"). The
Agricredit North-America Joint Venture has continued the business of
Agricredit-North America and seeks to build a broader asset-based finance
business through the addition of other lines of business. The Company has
similar joint venture arrangements with Rabobank with respect to its retail
finance companies located in the United Kingdom, France and Germany.
Deutz Argentina Acquisition. In December 1996, the Company acquired the
operations of Deutz Argentina S.A. ("Deutz Argentina"), together with
approximately 225 dealer contracts (the "Deutz Argentina Acquisition"). Deutz
Argentina, with 1995 sales of approximately $109.0 million, supplies
agricultural equipment, engines and light duty trucks in Argentina and other
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markets in South America. The Deutz Argentina Acquisition established AGCO as a
dominant supplier of agricultural equipment in Argentina.
Fendt Acquisition. In January 1997, the Company acquired the operations
of Xaver Fendt GmbH & Co. KG ("Fendt") (the "Fendt Acquisition"). Fendt, which
had 1996 sales of approximately $650.0 million, manufactures and sells tractors
ranging from 50 to 260 horsepower through a network of independent agricultural
cooperatives and dealers in Germany and a network of dealers and distributors
throughout Europe and Australia. With this acquisition, AGCO has leading market
share in Germany and France, two of Europe"s largest agricultural equipment
markets. In December 1997, the Company sold Fendt's caravan and motor home
business in order to focus on its core agricultural equipment business.
Dronningborg Acquisition. In December 1997, the Company acquired the
remaining 68% of Dronningborg Industries a/s (the "Dronningborg Acquisition"),
the Company's supplier of combine harvesters sold under the Massey Ferguson
brand name in Europe. The Company previously owned 32% of this combine
manufacturer which developed and manufactured combine harvesters exclusively for
AGCO. The Dronningborg Acquisition is expected to enable the Company to achieve
certain synergies within its worldwide combine manufacturing and will give AGCO
the opportunity to generate margin improvement on combines sold primarily in
Europe.
Argentina Engine Joint Venture. In December 1997, the Company sold 50%
of Deutz Argentina's engine production and distribution business to Deutz AG, a
global supplier of diesel engines in Cologne, Germany. The Company retained a
50% interest in the engine business and now operates it with Deutz AG as a joint
venture (the "Argentina Engine Joint Venture"). The Argentina Engine Joint
Venture will allow the Company to share in research and development costs and
gain access to advanced technology.
PRODUCTS
Tractors
Tractors are vehicles used to pull farm implements, hay tools, forage
equipment and other farm equipment. The Company participates in three segments
of the tractor market: the compact segment, which includes tractors in the less
than 40 horsepower range; the mid-range segment, which includes tractors in the
40 to 100 horsepower range; and the high horsepower segment, which includes
tractors in excess of 100 horsepower.
All compact tractors are sold under the Massey Ferguson brand name and
are typically used on small farms and in specialty agricultural industries such
as dairies, orchards and vineyards. The Company offers a full range of tractors
in the 40 to 100 horsepower category, including both two-wheel and all-wheel
drive versions. The Company sells mid-range tractors in this category under the
Massey Ferguson, Fendt, AGCO Allis, White, Landini, and Deutz brand names. The
mid-range tractors are typically used on small and medium-sized farms and in
specialty agricultural industries. The Company also offers a full range of
tractors in the over-100 horsepower segment ranging primarily from 100 to 425
horsepower. High horsepower tractors are typically used on larger farms and on
cattle ranches for hay production. The Company sells high horsepower tractors
under the Massey Ferguson, Fendt, AGCO Allis, White, Landini, AGCOSTAR and Deutz
brand names. Tractors accounted for approximately 62%, 60% and 61% of the
Company's net sales in 1997, 1996 and 1995, respectively.
Combines
Combines are large, self-propelled machines used for the harvesting of
crops, such as corn, wheat, soybeans and barley. The Company sells combines
under the GLEANER, Massey Ferguson and IDEAL brand names. Depending on the
market, Gleaner and Massey Ferguson combines are sold with conventional or
rotary technology while the IDEAL combines sold in South America utilize
conventional technology. All combines are complemented by a variety of
crop-harvesting heads, available in different sizes, which are designed to
maximize harvesting speed and efficiency while minimizing crop loss. Combines
accounted for 10%, 11% and 10% of the Company's net sales in 1997, 1996 and
1995, respectively.
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Hay Tools and Forage Equipment, Implements and Other Products
Hay tools are used to harvest and process hay crops for livestock feed.
Hay tools perform a variety of functions, including mowing and conditioning,
raking, tedding, baling and harvesting. Hay tools include self-propelled
windrowers and tractor-powered mowers, which cut and condition hay crops for
faster drying before forage harvesting or baling; hay tedders and rakes, which
are designed to reduce drying time and place hay crops in windrows; round
balers, which harvest and roll windrowed hay into circular bales; square balers,
which harvest and compress the windrowed hay into solid bales; and forage
harvesters, which are used to cut standing corn crops or windrowed hay crops to
uniform length. The Company sells hay and forage equipment primarily under the
Hesston brand name and, to a lesser extent, the White-New Idea and Massey
Ferguson brand names.
The Company also distributes a wide range of implements, planters and
other equipment for its product lines. Tractor-pulled implements are used in
field preparation and crop management. Implements include disk harrows, which
improve field performance by cutting through crop residue, leveling seed beds
and mixing chemicals with the soil; min-tils, which break up soil and mix crop
residue into topsoil, with or without prior disking; and field cultivators,
which prepare a smooth seed bed and destroy weeds. Tractor-pulled planters apply
fertilizer and place seeds in the field. Other equipment primarily includes
tractor-pulled manure spreaders, which fertilize fields with the controlled
application of sludge or solid manure, and loaders, which are used for a variety
of tasks including lifting and transporting hay crops. The Company sells
implements, planters and other products under the Hesston, White-New Idea, Black
Machine, Massey Ferguson, Tye, Farmhand, Glencoe, Deutz and Fendt brand names.
Hay tools and forage equipment, implements and other products accounted for 12%,
12% and 11% of the Company's net sales in 1997, 1996 and 1995, respectively.
Replacement Parts
In addition to sales of new equipment, the replacement parts business
is an important source of revenue and profitability for both the Company and its
dealers. The Company sells replacement parts for products sold under all of its
brand names, many of which are proprietary. These parts help keep farm equipment
in use, including products no longer in production. Since most of the Company's
products can be economically maintained with parts and service for a period of
10 to 20 years, each product which enters the marketplace provides the Company
with a potential long-term revenue stream. In addition, sales of replacement
parts typically generate higher gross margins and historically have been less
cyclical than new product sales. Replacement parts accounted for approximately
16%, 17% and 18% of the Company's net sales in 1997, 1996 and 1995,
respectively.
MARKETING AND DISTRIBUTION
The Company distributes its products primarily through a network of
independent dealers and distributors. The Company"s dealers are responsible for
retail sales to the equipment"s end user in addition to after-sales service and
support of the equipment. The Company"s distributors may sell the Company
products through a network of dealers supported by the distributor. Through the
Company's acquisitions and dealer development activities, the Company has
broadened its product line, expanded its dealer network and strengthened its
geographic presence in Western Europe, North America, South America and the rest
of the world. The Company's sales are not dependent on any specific dealer,
distributor or group of dealers.
Western Europe
Fully assembled tractors and other equipment are marketed by
wholly-owned distribution companies in most major Western European markets.
These distribution companies support a combined network of approximately 2,500
independent Massey Ferguson and Fendt dealers and agricultural cooperatives in
Western Europe. In addition, the Company sells through independent distributors
and associates in certain markets in Western Europe, which distribute through
approximately 750 Massey Ferguson and Fendt dealers. In most cases, dealers
carry competing or complementary products from other manufacturers. Sales in
Western Europe accounted for 47%, 43% and 45% of the Company"s net sales in
1997, 1996 and 1995, respectively.
North America
The Company markets and distributes its farm machinery, equipment and
replacement parts to farmers in North America through a network of dealers
supporting approximately 6,700 dealer contracts. Each of the Company's
approximately 2,575 independent dealers represents one or more of the Company's
distribution lines or brand names. Dealers may also handle competitive and
dissimilar lines of products. The Company intends to maintain the separate
strengths and identities of its brand
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names and product lines. The Company has been able to increase sales, as well
as dealer focus on its products, by establishing crossover contracts. Sales in
North America accounted for 30%, 36% and 38% of the Company"s net sales in 1997,
1996 and 1995, respectively.
South America
The Company markets and distributes its farm machinery, equipment and
replacement parts to farmers in South America through several different
networks. In Brazil and Argentina, the Company distributes products directly to
approximately 420 independent dealers primarily supporting either the Massey
Ferguson, IDEAL, or Deutz brand names. Outside of Brazil and Argentina, the
Company sells its products in South America through independent distributors. In
Brazil, federal laws are extremely protective of the dealers and prohibit a
manufacturer from selling any of its products in Brazil except through its
dealer network. Additionally, each dealer has the exclusive right to sell its
manufacturer"s product in its designated territory and as a result, no dealer
may represent more than one manufacturer. Sales in South America accounted for
10%, 4% and 1% of the Company"s net sales in 1997, 1996 and 1995, respectively.
Rest of the World
Outside Western Europe, North America and South America, the Company
operates primarily through a network of approximately 2,330 independent Massey
Ferguson and Fendt distributors and dealers, as well as associates and
licensees, marketing the Company"s products and providing customer service
support in approximately 100 countries in Africa, the Middle East, Eastern and
Central Europe, Australia and Asia. With the exception of Australia, where the
Company directly supports its dealer network, the Company utilizes independent
distributors, associates and licensees to sell its products. These arrangements
allow AGCO to benefit from local market expertise to establish strong market
positions with limited investment. In some cases, AGCO also sells agricultural
equipment directly to governmental agencies. The Company will continue to
actively support the local production and distribution of Massey-licensed
products by third party distributors, associates and licensees. Sales outside
Western Europe, North America, and South America accounted for 13%, 17% and 16%
of the Company"s net sales in 1997, 1996 and 1995, respectively.
In Western Europe and the rest of the world, associates and licensees
provide a significant distribution channel for the Company's products and a
source of low cost production for certain Massey Ferguson products. Associates
are entities in which the Company has an ownership interest, most notably in
India. Licensees are entities in which the Company has no direct ownership
interest, most notably in Pakistan, Turkey and Argentina. The associate or
licensee generally has the exclusive right to produce and sell Massey Ferguson
equipment in its home country, but may not sell these products in other
countries. The Company generally licenses to these associate companies certain
technology, as well as the right to use Massey Ferguson's trade names. The
Company sells products to associates and licensees in the form of components
used in local manufacturing operations, tractor sets supplied in completely
knocked down ("CKD") kits for local assembly and distribution and fully
assembled tractors for local distribution only. In certain countries, the
arrangements with licensees and associates have evolved to where the Company is
principally providing technology, technical assistance and quality control. In
these situations, licensee manufacturers sell certain tractor models under the
Massey Ferguson brand name in the licensed territory and may also become a
source of low cost production to the Company.
Parts Distribution
In Western Europe, the parts operation is supported by master
distribution facilities in Desford, England and Ennery, France and regional
parts facilities in Spain and Denmark. The Company supports its sales of
replacement parts in North America through its master parts warehouse in
Batavia, Illinois and regional warehouses throughout North America. In the
Asia/Pacific region, the Company's parts operation is supported by a master
distribution facility in Melbourne, Australia. In South America, replacement
parts are maintained and distributed primarily from its manufacturing
facilities.
Dealer Support and Supervision
The Company believes that one of the most important criteria affecting
a farmer's decision to purchase a particular brand of equipment is the quality
of the dealer who sells and services the equipment. The Company provides
significant support to its dealers in order to improve the quality and size of
its dealer network. The Company monitors each dealer's performance and
profitability as well as establishes programs which focus on the continual
improvement of the dealer. In North America, the
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Company also identifies open markets with the greatest potential for each brand
and selects an existing AGCO dealer, or a new dealer, who would best represent
the brand in that territory. AGCO protects each existing dealer's territory and
will not place the same brand within that protected area. Internationally, the
Company also focuses on the development of its dealers. The Company analyzes, on
an ongoing basis, the regions of each country where market share is not
acceptable. Based on this analysis, an additional dealer may be needed in that
territory, or a nonperforming dealer may need to be replaced or refocused on
performance standards.
The Company believes that its ability to offer its dealers a full
product line of agricultural equipment and related replacement parts as well as
its ongoing dealer training and support programs, which focus on business and
inventory management, sales, marketing, warranty and servicing matters and
products, help ensure the vitality and increase the competitiveness of its
dealer network. In addition, the Company maintains dealer advisory groups to
obtain dealer feedback on its operations. The Company believes all of these
programs contribute to the good relations the Company generally enjoys with its
dealers.
The Company agrees to provide dealers with competitive products, terms
and pricing. Dealers are also given volume sales incentives, demonstration
programs and other advertising to assist sales. The Company's competitive sales
programs, including retail financing incentives, and its policy for maintaining
parts and service availability with extensive product warranties are designed to
enhance its dealers' competitive position. Finally, a limited amount of
financial assistance is provided as part of developing new dealers in key market
locations. In general, dealer contracts are cancelable by either party within
certain notice periods.
WHOLESALE FINANCING
Primarily in the United States and Canada, the Company engages in the
standard industry practice of providing dealers with inventories of farm
equipment and replacement parts for extended periods. The terms of the Company's
finance agreements with its dealers vary by region and product line. In the
United States and Canada, dealers are typically not required to make a down
payment, and the Company effectively provides the dealer with the equipment
interest-free for a period of one to twelve months, depending on the product.
Thereafter, dealers are charged interest at varying spreads over the prime rate
until the product is sold. The Company also provides financing to dealers on
used equipment accepted in trade. The Company retains a security interest in all
new and used equipment it finances.
Typically, the sales terms outside the United States and Canada are of
a shorter duration. The sales terms range from 30 day terms to floorplan
financing similar to the arrangements provided to dealers in the United States
and Canada. In many cases, the Company retains a security interest in the
equipment sold on extended terms. In certain international markets, the
Company's sales are backed by letters of credit or credit insurance.
RETAIL FINANCING
Through its retail financing joint ventures located in North America,
the United Kingdom, France and Germany, the Company provides a competitive and
dedicated financing source for AGCO dealers' sales of the Company's products as
well as equipment produced by other manufacturers. These retail finance
companies are owned 49% by the Company and 51% by a wholly-owned subsidiary of
Rabobank. Finance programs can be tailored to prevailing market conditions and
can enhance the Company's sales efforts.
MANUFACTURING AND SUPPLIERS
Manufacturing and Assembly
The Company has consolidated the manufacture of its products in
locations where capacity, technology, or local costs are optimized. Furthermore,
the Company continues to balance its manufacturing resources with externally
sourced machinery, components, and replacement parts to enable the Company to
better control inventory and supply of components. The Company believes that its
manufacturing facilities are sufficient to meet its needs for the foreseeable
future.
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Western Europe
The Company's manufacturing operations in Western Europe are performed
in tractor manufacturing facilities located in Coventry, England; Beauvais,
France and Marktoberdorf, Germany. The Coventry facility produces tractors
marketed under the Massey Ferguson, AGCO Allis and White brand names ranging
from 38 to 110 horsepower that are sold worldwide in fully-assembled form or as
CKD kits for final assembly by licensees and associates. The Beauvais facility
produces 70 to 215 horsepower tractors sold in fully-assembled form also
marketed under the Massey Ferguson, AGCO Allis and White brand names. The
Marktoberdorf facility produces 50 to 260 horsepower tractors sold in
fully-assembled form and marketed under the Fendt brand name. The Company also
assembles forklifts for sale to third parties and manufactures hydraulics for
its Fendt tractors and for sale to third parties in its Kempten, Germany
facility, and assembles cabs for its Fendt tractors in Baumenheim, Germany.
Additionally, as part of the Dronningborg Acquisition, the Company began
manufacturing conventional combines marketed under the Massey Ferguson brand
name in a facility located in Randers, Denmark. The Company also formed a joint
venture with Renault Agriculture S.A. ("Renault"), for the manufacture of
driveline assemblies for high horsepower AGCO and Renault tractors at the
Company's facility in Beauvais (the "GIMA Joint Venture"). By sharing overhead
and engineering costs, the GIMA Joint Venture has resulted in a decrease in the
cost of these components.
North America
The Company manufactures and assembles GLEANER and Massey Ferguson
rotary and conventional combines and combine heads at its Independence, Missouri
facility. The Company leases a manufacturing facility in Coldwater, Ohio, where
it produces its White-New Idea line of hay tools and forage equipment and
implements; Black Machine planters; AGCO Allis, White, Massey Ferguson and
AGCOSTAR tractors; cultivating and tillage equipment marketed under the Glencoe
brand name and tillage equipment and loaders marketed under the Farmhand brand
name. The Company also leases a manufacturing facility in Lockney, Texas where
it produces drill planters and tillage equipment marketed under the Tye brand
name. As part of the HFI joint venture, the Company produces Hesston, White-New
Idea and Massey Ferguson hay tools and forage equipment in Hesston, Kansas. The
HFI partnership agreement provides for HFI to manufacture hay tools and forage
equipment for sale to the Company and Case at cost. By sharing the facilities
with Case, the Company is able to increase HFI's capacity utilization and reduce
the Company's product cost by sharing overhead and product development costs.
The Company also maintains a facility in Queretaro, Mexico where tractors are
assembled for distribution in the Mexican market.
South America
The Company's manufacturing operations in South America are located in
Brazil and Argentina. In Brazil, the Company manufactures and assembles Massey
Ferguson tractors, ranging from 50 to 173 horsepower, and industrial
loader-backhoes at its facility in Canoas, Rio Grande do Sul. The Company also
manufactures conventional combines marketed under the Massey Ferguson, Deutz and
IDEAL brand names in Santa Rosa, Rio Grande do Sul. In Argentina, the Company
manufactures Deutz branded tractors, ranging from 60 to 190 horsepower, and
engine components, and it also assembles light duty trucks in Haedo, Argentina.
The Noetinger, Argentina facility is used for the assembly of implements. In
December 1997, the Company formed the Argentina Engine Joint Venture for the
manufacture of diesel engines, for its equipment and for sale to third parties,
at the facility in San Luis, Argentina, which is owned 50% by the joint venture.
Third-Party Suppliers
The Company believes that managing the level of its company and dealer
inventory is critical to maintaining favorable pricing for its products. Unlike
many of its competitors, the Company externally sources many of its products,
components and replacement parts. This strategy minimizes the Company's capital
investment requirements and allows greater flexibility to respond to changes in
market conditions. As a result of its limited vertical integration relative to
its competitors, the Company believes it is better able to manage company and
dealer inventory levels.
The Company purchases certain products it distributes from third party
suppliers. The Company purchases its standard and specialty tractors from
Landini S.p.A. ("Landini") and distributes these tractors under the Landini
brand name in the United States and Canada and under the Massey Ferguson brand
name outside of North America. In addition, certain Massey Ferguson tractor
models are purchased from licensees in Poland and Turkey and from Iseki &
Company, Limited, a Japanese manufacturer. The Company also purchases certain
other tractors, implements, and hay and forage equipment from various
third-party suppliers.
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In addition to the purchase of machinery, significant components used
in the Company's manufacturing operations, such as engines, are supplied by
third-party companies. The Company selects third-party suppliers which it
believes have the lowest cost, highest quality and most appropriate technology.
The Company also assists in the development of these products or component parts
based upon its own design requirements. The Company's past experience with
outside suppliers has been favorable. Although the Company is currently
dependent upon outside suppliers for several of its products, the Company
believes that, if necessary, alternative sources of supply could be found.
COMPETITION
The agricultural industry is highly competitive. During the 1980s, the
industry experienced significant consolidation and retrenchment. The Company
competes with several large national and international full-line suppliers, as
well as numerous short-line and specialty manufacturers with differing
manufacturing and marketing methods. The Company's principal competitors on a
worldwide basis are Deere & Company, Case and New Holland N.V. In certain
Western European and South American countries, regional competitors exist which
have significant market share in a single country or a group of countries.
The Company believes several key factors influence a buyer's choice of
farm equipment, including the strength and quality of a company's dealers, the
quality and pricing of products, dealer or brand loyalty, product availability,
the terms of financing and customer service. The Company has improved and
continually seeks to improve in each of these areas but focuses primarily on
increasing the farmers' loyalty to the Company's dealers and overall dealer
organizational quality in order to distinguish itself in the marketplace. See
"Marketing and Distribution."
ENGINEERING AND RESEARCH
The Company makes significant expenditures for engineering and applied
research to improve the quality and performance of its products and to develop
new products. The Company expended approximately $54.1 million (1.7% of net
sales), $27.7 million (1.2% of net sales) and $24.1 million (1.1% of net sales)
in 1997, 1996 and 1995, respectively, on engineering and research.
PATENTS AND TRADEMARKS, TRADE NAMES AND BRAND NAMES
The Company owns and has licenses to the rights under a number of
domestic and foreign patents, trademarks, trade names and brand names relating
to its products and businesses. The Company defends its patent, trademark and
trade and brand name rights primarily by monitoring competitors' machines,
industry publications and conducting other investigative work. The Company
considers its intellectual property rights, including its rights to use the
AGCO, AGCO Allis, Massey Ferguson, Fendt, GLEANER, White, Hesston, New Idea,
Landini, Black Machine, AGCOSTAR, Tye, Farmhand, Glencoe, IDEAL, and Deutz
(South America) trade and brand names, important in the operation of its
businesses; however, the Company does not believe it is dependent on any single
patent, trademark or trade name or group of patents or trademarks, trade names
or brand names. AGCO, GLEANER, Hesston, Massey Ferguson, AGCOSTAR, New Idea,
Tye, Farmhand and Glencoe are registered trademarks of the Company. In addition,
Fendt is a registered trademark in Germany, and the Company has a pending
trademark registration for the Fendt brand name in the U.S. and Canada.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 11,000
employees, including approximately 2,700 employees in the United States and
Canada. A majority of the Company's employees at its manufacturing facilities,
both domestic and international, are represented by collective bargaining
agreements with expiration dates ranging from 1998 to 2002. The Company is
currently in negotiation with labor unions in Coldwater, Ohio and in the United
Kingdom relating to the terms of new agreements for collective bargaining
agreements which expire in March and April, 1998, respectively.
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENT REGULATION
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges of processed or other types of waste water and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. These laws and regulations are constantly changing, and it is
impossible to predict with accuracy the effect they may have on the Company in
the future. The Company has been made aware of possible solvent contamination at
the HFI facility in Hesston,
9
10
Kansas. The extent of any possible contamination is being investigated in
conjunction with the appropriate state authorities. It is the Company's policy
to comply with all applicable environmental, health and safety laws and
regulations, and the Company believes that any expense or liability it may incur
in connection with any noncompliance with any such law or regulation or the
cleanup of any of its properties will not have a material adverse effect on the
Company. The Company believes it is in compliance, in all material respects,
with all applicable laws and regulations.
The Environmental Protection Agency (the "EPA") has issued regulations
concerning permissible emissions from off-road engines. The Company does not
anticipate that the cost of compliance with the regulations will have a material
impact on the Company.
The Company is subject to various national, federal, state and local
laws affecting its business, as well as a variety of regulations relating to
such matters as working conditions and product safety. A variety of state laws
regulate the Company's contractual relationships with its dealers. These laws
impose substantive standards on the relationship between the Company and its
dealers, including events of default, grounds for termination, non-renewal of
dealer contracts and equipment repurchase requirements. Such state laws could
adversely affect the ability of the Company to rationalize its dealer network.
The Company's international operations are also subject to
environmental laws, as well as various other national and local laws, in the
countries in which it manufactures and sells it products. The Company believes
that it is in compliance with such laws in all material respects, and the cost
of compliance with such laws in the future will not have a material adverse
effect on the Company.
REGULATION AND GOVERNMENT POLICY
Domestic and foreign political developments and government regulations
and policies directly affect the agricultural industry in the United States and
abroad and indirectly affect the agricultural equipment business. The
application or modification of existing laws, regulations or policies or the
adoption of new laws, regulations or policies could have an adverse effect on
the Company's business.
FINANCIAL INFORMATION ON GEOGRAPHICAL AREAS
For financial information on geographic areas, see page 40 of the
Annual Report to Stockholders for the year ended December 31, 1997, which is
incorporated herein by reference.
FORWARD LOOKING STATEMENTS
Certain information included in Management's Discussion and analysis of
Financial Condition and Results of Operations constitute forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, including the information set forth under "--Outlook". Although the
company believes that the expectations reflected in such forward looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be achieved. Additionally, the Company's financial results
are sensitive to movement in interest rates and foreign currencies, as well as
general economic conditions, pricing and product actions taken by competitors,
production disruptions and changes in environmental, international trade and
other laws which impact the way in which it conducts its business. Important
factors that could cause actual results to differ materially from the Company's
current expectations are disclosed in conjunction with the Company's filing with
the Securities and Exchange Commission.
10
11
Item 2. PROPERTIES
The principal properties of the Company as of December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Leased Owned
Location Description of Property (sq. ft.) (sq. ft.)
-------- ----------------------- --------- ----------
<S> <C> <C> <C>
North America:
Duluth, Georgia ........................... Corporate Headquarters 125,000
Duluth, Georgia (A)....................... Corporate Office 47,000
Coldwater, Ohio (B)........................ Manufacturing 1,490,000
Hesston, Kansas (C)........................ Manufacturing 1,115,000
Independence, Missouri..................... Manufacturing 450,000
Lockney, Texas............................. Manufacturing 190,000
Queretaro, Mexico.......................... Manufacturing 13,500
Kansas City, Missouri...................... Warehouse 425,000
Batavia, Illinois.......................... Parts Distribution 310,200
Des Moines, Iowa (D)....................... Retail Finance Office 23,850
International:
Coventry, United Kingdom................... Regional Headquarters/Manufacturing 4,135,150
Beauvais, France........................... Manufacturing 3,740,000
Marktoberdorf, Germany..................... Manufacturing 2,411,000
Baumenheim, Germany........................ Manufacturing 1,890,000
Kempten, Germany........................... Manufacturing 582,000
Randers, Denmark........................... Manufacturing 683,000
Haedo, Argentina........................... Manufacturing 489,450
Noetinger, Argentina....................... Manufacturing 156,170
San Luis, Argentina (E).................... Manufacturing 57,860
Canoas, Rio Grande do Sul, Brazil.......... Regional Headquarters /Manufacturing 452,400
Santa Rosa, Rio Grande do Sul, Brazil...... Manufacturing 297,100
Ennery, France............................. Parts Distribution 269,100
Sunshine, Victoria, Australia.............. Regional Headquarters 37,200
Tottenham, Victoria, Australia............. Parts Distribution 179,960
Stoneleigh, United Kingdom................. Training Facility/Office 44,000
</TABLE>
-------------
(A) The Company is currently marketing this corporate office for sale.
(B) In conjunction with the White-New Idea Acquisition in December 1993,
the Company agreed to purchase the Coldwater, Ohio manufacturing
facility from Allied subject to satisfactory completion of an
environmental audit. During 1995, the Company entered into an agreement
with Allied to lease the Coldwater, Ohio facility for a period of up to
five years. During this time, Allied is responsible for the
environmental clean-up of the facility, including all costs associated
with the clean-up. Upon successful completion of the environmental
clean-up, the Company will acquire the Coldwater, Ohio facility for the
original agreed upon amount of $3.2 million.
(C) Owned by HFI, a joint venture in which the Company has a 50% interest.
(D) Owned by the Agricredit-North America Joint Venture, in which the
Company has a 49% interest.
(E) Owned by the Argentina Engine Joint Venture, in which the Company has a
50% interest.
The Company considers each of its facilities to be in good condition and
adequate for its present use. The Company believes that it has sufficient
capacity to meet its current and anticipated manufacturing requirements.
11
12
Item 3. LEGAL PROCEEDINGS
The Company is a party to various legal claims and actions incidental
to its business. The Company believes that none of these claims or actions,
either individually or in the aggregate, is material to the business or
financial condition of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The dividend and market price information under the heading "Trading
and Dividend Information" on page 15 of the Annual Report to Stockholders for
the year ended December 31, 1997 is incorporated herein by reference.
Item. 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Financial Data" for the
years ended December 31, 1993 through 1997 on page 15 of the Annual Report to
Stockholders for the year ended December 31, 1997 is incorporated herein by
reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 16 through 23 of the
Annual Report to Stockholders for the year ended December 31, 1997 is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the heading "Foreign Currency Risk Management" in
"Management's Discussion and Analysis and Results of Operations" and in Footnote
1 - "Financial Instruments" of the Notes to Consolidated Financial Statements on
pages 23 and 31, respectively, of the Annual Report to Stockholders for the year
ended December 31, 1997 is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its
subsidiaries included on pages 24 through 41 of the Annual Report to
Stockholders for the year ended December 31, 1997 are incorporated herein by
reference:
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995.
Consolidated Balance Sheets as of December 31, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The information under the heading "Quarterly Results" on pages 20 and
21 of the Annual Report to Stockholders for the year ended December 31, 1997 is
incorporated herein by reference.
12
13
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information under the heading "Election of Directors" and the
information under the heading "Directors Continuing in Office" on pages 2 and 3,
respectively, of the Proxy Statement for the Annual Meeting of Stockholders to
be held April 29, 1998 is incorporated herein by reference for information on
the directors of the Registrant. The information under the heading "Executive
Officers" on pages 20 through 22 of the Proxy Statement for the Annual Meeting
of Stockholders to be held April 29, 1998 is incorporated herein by reference
for information on the executive officers of the Registrant. The information
under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" on
page 22 of the Proxy Statement for the Annual Meeting of Stockholders to be
held April 29, 1998 is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information under the heading "Board of Directors and Certain
Committees of the Board," the information under the heading "Compensation
Committee Interlocks and Insider Participation" and the information under the
heading "Executive Compensation" on pages 4 and 5, page 5, and pages 12 through
14, respectively, of the Proxy Statement for the Annual Meeting of Stockholders
to be held April 29, 1998 are incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the heading "Principal Holders of Common Stock"
on pages 9 through 11 of the Proxy Statement for the Annual Meeting of
Stockholders to be held April 29, 1998 is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Certain Relationships and Related
Transactions" on page 22 of the Proxy Statement for the Annual Meeting of
Stockholders to be held April 29, 1998 is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. The following consolidated financial statements of AGCO Corporation
and its subsidiaries, included in the Annual Report of the registrant
to its stockholders for the year ended December 31, 1997, are
incorporated by reference in Part II, Item 8:
Consolidated Statements of Income for the years ended December
31, 1997, 1996 and 1995.
Consolidated Balance Sheets at December 31, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
13
14
(a)2. The following Report of Independent Public Accountants and the
Consolidated Financial Statement Schedule of AGCO Corporation and its
subsidiaries are included herein on pages F-1 through F-2.
<TABLE>
<CAPTION>
Schedule Description
-------- -----------
<S> <C>
Report of Independent Public Accountants on Schedule
Schedule II Valuation and Qualifying Accounts
</TABLE>
Schedules other than that listed above have been omitted
because the required information is contained in the Notes to
the Consolidated Financial Statements or because such
schedules are not required or are not applicable.
(a)3. The following exhibits are filed or incorporated by reference as part
of this report.
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Certificate of Incorporation of the Registrant incorporated by
reference to the Company's Quarterly Report Form 10-Q for the
quarter ended March 31, 1996.
3.2 By-Laws of the Registrant.
4.1 Rights Agreement between and among AGCO Corporation and
Chemical Bank, as rights agent, dated as of April 27, 1994
incorporated by reference to the Company's quarterly report on
Form 10-Q for the quarter ended March 31, 1994.
4.2 Certificate of Designation of the Junior Cumulative Preferred
Stock of the Company incorporated by reference to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1994.
4.3 Indenture between AGCO Corporation and SunTrust Bank, as
Trustee, dated as of March 20, 1996, incorporated by reference
to the Company"s Annual Report on Form 10-K for the year ended
December 31, 1995.
10.1 HFI Partnership Agreement incorporated by reference to the
Company's Registration Statement on Form S-1 (No. 33-43437)
dated April 16, 1992.
10.2 Joint Venture Agreement between Massey Ferguson S.A., Renault
Agriculture S.A. and Massey Ferguson Group Limited dated July
20, 1994 incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.3 Massey Ferguson Finance France SNC Agreement among and between
Massey Ferguson S.A. and DeLage Landen Leasing S.A. dated
September 15, 1992 incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994.
10.4 Shareholders Agreement in respect of Massey Ferguson Finance
Limited among and between Massey Ferguson Limited, DeLage
Landen Financial Services Limited and DeLage Landen B.V. dated
June 19, 1990 incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994.
10.5 Shareholders Agreement dated February 15, 1995 between Massey
Ferguson GmbH and DeLage Landen Leasing GmbH incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.6 Tractor Distributor Agreement by and between Landini S.p.A.
and AGCO Corporation dated February 1, 1995 incorporated by
reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994.
10.7 Deferred Compensation Plan incorporated by reference to the
Company's Registration Statement on Form S-1 (No. 33-43437)
dated April 16, 1992.
</TABLE>
14
15
<TABLE>
<S> <C>
10.8 1991 Stock Option Plan, as amended.
10.9 Form of Stock Option Agreements (Statutory and Nonstatutory)
incorporated by reference to the Company's Registration Statement
on Form S-1 (No. 33-43437) dated April 16, 1992.
10.10 Amended and Restated Long-Term Incentive Plan.
10.11 Nonemployee Director Stock Incentive Plan, as amended.
10.12 Management Incentive Compensation Plan incorporated by
reference to the Company"s Annual Report on Form 10-K for the
year ended December 31, 1995.
10.13 Purchase and Sale Agreement between and among AGCO Corporation
and Varity Holdings Limited, Varity GmbH, Massey Ferguson
GmbH, Massey Ferguson Industries Limited, Massey Ferguson
(Delaware) Inc. and Varity Corporation dated as of April 26,
1994 incorporated by reference to the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 1994.
10.14 Credit Agreement dated as of January 14, 1997 among AGCO
Corporation, AGCO Canada, Ltd., Massey Ferguson Manufacturing
Limited, Massey Ferguson Limited, AGCO Limited, Massey
Ferguson S.A., AGCO Holding B.V., and Massey Ferguson GmbH,
the lenders listed on the signatures pages thereof;
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York Branch ("Rabobank"), SunTrust
Bank Atlanta, and Deutsche Bank AG, New York Branch, as
Co-Managers; Deutsche Bank Canada, as Canadian administrative
agent, and Rabobank, as administrative agent for the lenders,
as amended by the parties thereto on February 24, 1997
incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
10.15 Limited Liability Company Agreement of Agricredit Acceptance
LLC dated November 1, 1996 incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
10.16 Agreement dated June 27, 1996 by and between Iochpe-Maxion S.A.
and AGCO Corporation incorporated by reference to the Company"s
current report on Form 8-K dated June 28, 1996.
10.17 Engine Supply Agreement dated June 27, 1996 by and between
Iochpe-Maxion S.A. and AGCO Corporation incorporated by reference
to the Company"s current report on Form 8-K dated June 28, 1996.
10.18 Employment and Severance Agreement by and between AGCO
Corporation and Robert J. Ratliff incorporated by reference to
the Company"s Annual Report on Form 10-K for the year ended
December 31, 1995.
10.19 Employment and Severance Agreement by and between AGCO
Corporation and John M. Shumejda incorporated by reference to
the Company"s Annual Report on Form 10-K for the year ended
December 31, 1995.
10.20 Employment and Severance Agreement by and between AGCO
Corporation and James M. Seaver incorporated by reference to
the Company"s Annual Report on Form 10-K for the year ended
December 31, 1995.
10.21 Employment and Severance Agreement by and between AGCO
Corporation and Daniel H. Hazelton incorporated by reference
to the Company"s Annual Report on Form 10-K for the year ended
December 31, 1995.
10.22 Employment and Severance Agreement by and between AGCO Corporation
and Chris E. Perkins.
10.23 Severance and Release Agreement by and between AGCO Corporation
and Jean-Paul Richard.
12.0 Statement re: Computation of Earnings to Combined Fixed Charges.
13.0 Portions of the AGCO Corporation Annual Report to Stockholders
for the year ended December 31, 1997 expressly incorporated herein
by reference.
</TABLE>
16
<TABLE>
<S> <C>
21.0 Subsidiaries of the Registrant.
23.0 Consent of Arthur Andersen LLP, independent public accountants.
27.1 Financial Data Schedule - December 31, 1997 (filed for SEC reporting
purposes only).
27.2 Restated Financial Data Schedule - December 31, 1996 (filed for
SEC reporting purposes only).
</TABLE>
(b) Reports on Form 8-K
None
17
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.
AGCO Corporation
By: /s/ Robert J. Ratliff
-------------------------
Robert J. Ratliff
Chairman of the Board and
Chief Executive Officer
Dated: March 31, 1998
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 in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
----------- ------- --------
<S> <C> <C>
/s/ Robert J. Ratliff Chairman of the Board and Chief Executive March 31, 1998
------------------------- Officer
Robert J. Ratliff
/s/ John M. Shumejda President and Chief Operating Officer March 31, 1998
-------------------------
John M. Shumejda
/s/ Chris E. Perkins Vice President and Chief Financial March 31, 1998
------------------------- Officer (Principal Financial Officer and
Chris E. Perkins Principal Accounting Officer)
/s/ Henry J. Claycamp Director March 31, 1998
-------------------------
Henry J. Claycamp
/s/ William H. Fike Director March 31, 1998
-------------------------
William H. Fike
/s/ Gerald B. Johanneson Director March 31, 1998
-------------------------
Gerald B. Johanneson
/s/ Richard P. Johnston Director March 31, 1998
-------------------------
Richard P. Johnston
/s/ Anthony D. Loehnis Director March 31, 1998
-------------------------
Anthony D. Loehnis
/s/ Alan S. McDowell Director March 31, 1998
-------------------------
Alan S. McDowell
/s/ Hamilton Robinson, Jr. Director March 31, 1998
-------------------------
Hamilton Robinson, Jr.
/s/ Wolfgang Sauer Director March 31, 1998
-------------------------
Wolfgang Sauer
/s/ Thomas H. Wyman Director March 31, 1998
-------------------------
Thomas H. Wyman
</TABLE>
17
18
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(2)
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1997
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of AGCO Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated balance sheets of AGCO CORPORATION and SUBSIDIARIES as of December
31, 1997 and 1996 and the related consolidated statements of income,
stockholders" equity, and cash flows for each of the three years in the period
ended December 31, 1997, and have issued our report thereon dated February 5,
1998. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The accompanying Schedule II-Valuation and
Qualifying Accounts is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 5, 1998
F-1
20
Schedule II
AGCO CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in millions)
<TABLE>
<CAPTION>
Additions
--------------------
Charged Charged
Balance at To Costs (Credited) Balance
Beginning Acquired and To Other at End
Description of Period Businesses Expenses Accounts Deductions of Period
------------------------ ---------- ---------- -------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Allowances for sales incentive discounts and
doubtful receivables:
Equipment Operations ........................... $ 75.8 $ 4.1 $ 116.1 $ -- $ (98.8) $ 97.2
========== ========== ======== ========= ========== =========
YEAR ENDED DECEMBER 31, 1996
Allowances for sales incentive discounts and
doubtful receivables:
Equipment Operations ........................... $ 62.5 $ 3.3 $ 91.5 $ -- $ (81.5) $ 75.8
========== ========== ======== ========= ========== =========
YEAR ENDED DECEMBER 31, 1995
Allowances for sales incentive discounts and
doubtful receivables:
Equipment Operations ........................... $ 60.1 $ 2.2 $ 83.9 $ -- $ (83.7) $ 62.5
---------- ---------- -------- --------- ---------- ---------
Finance Company ................................ 10.0 -- 4.3 -- (1.5) 12.8
---------- ---------- -------- --------- ---------- ---------
Consolidated receivable allowances ........... $ 70.1 $ 2.2 $ 88.2 $ -- $ (85.2) $ 75.3
========== ========== ======== ========= ========== =========
</TABLE>
F-2
21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of Registrant. *
3.2 By-Laws of the Registrant. -
4.1 Rights Agreement between and among AGCO Corporation and Chemical Bank. *
4.2 Certificate of Designation of the Junior Cumulative Preferred Stock of the Company. *
4.3 Indenture between AGCO Corporation and SunTrust Bank, as Trustee. *
10.1 HFI Partnership Agreement. *
10.2 Joint Venture Agreement between Massey Ferguson S.A., Renault Agriculture S.A. *
and Massey Ferguson Group Limited.
10.3 Massey Ferguson Finance France SNC Agreement among and between Massey Ferguson S.A. *
and DeLage Landen Leasing S.A.
10.4 Shareholders Agreement in respect of Massey Ferguson Finance
Limited among and between Massey * Ferguson Limited, DeLage
Landen Financial Services Limited and DeLage Landen B.V.
10.5 Shareholders Agreement between Massey Ferguson GmbH and DeLage Landen B.V. *
10.6 Tractor Distributor Agreement by and between Landini S.p.A. and AGCO Corporation. *
10.7 Deferred Compensation Plan. *
10.8 1991 Stock Option Plan, as amended. -
10.9 Form of Stock Option Agreements (Statutory and Nonstatutory). *
10.10 Amended and Restated Long-Term Incentive Plan. -
10.11 Nonemployee Director Stock Incentive Plan, as amended. -
10.12 Management Incentive Compensation Plan. *
10.13 Purchase and Sale Agreement between and among AGCO Corporation and Varity Holdings *
Limited, Varity GmbH, Massey Ferguson GmbH, Massey Ferguson Industries Limited, Massey
Ferguson (Delaware) Inc. and Varity Corporation.
10.14 Credit Agreement dated as of January 14, 1997, among AGCO Corporation, AGCO Canada, Ltd., *
Massey Ferguson Manufacturing Limited, Massey Ferguson Limited, AGCO Limited, Massey
Ferguson S.A., AGCO Holding B.V., Massey Ferguson GmbH and the lenders listed on the
signature pages thereof, Cooperatieve Centrale Raiffesen - Boerenleenbank B.A., "RABOBANK
NEDERLAND", New York Branch ("Rabobank"),SunTrust Bank, Atlanta, and Deutsche Bank AG,
New York Branch, as Co-Managers; Deutsche Bank Canada, as Canadian Administrative
Agent and Rabobank, as Administrative Agent for the lenders, as amended by the parties thereto
on February 24, 1997.
10.15 Limited Liability Company Agreement of Agricredit Acceptance LLC *
10.16 Agreement dated June 27, 1996 by and between Iochpe-Maxion S.A. and AGCO Corporation *
10.17 Engine Supply Agreement dated June 27, 1996 by and between Iochpe-Maxion S.A. and AGCO *
Corporation
10.18 Employment and Severance Agreement by and between AGCO Corporation and Robert J. Ratliff. *
10.19 Employment and Severance Agreement by and between AGCO Corporation and John M. Shumejda. *
10.20 Employment and Severance Agreement by and between AGCO Corporation and James M. Seaver. *
10.21 Employment and Severance Agreement by and between AGCO Corporation and Daniel H. Hazelton. *
10.22 Employment and Severance Agreement by and between AGCO Corporation and Chris E. Perkins. -
10.23 Severance and Release Agreement by and between AGCO Corporation and Jean-Paul Richard. -
12.0 Statement re: Computation of Earnings to Combined Fixed Charges. -
13.0 AGCO Corporation Annual Report to Stockholders for the year ended December 31, 1997. -
21.0 Subsidiaries of the Registrant. -
23.0 Consent of Arthur Andersen LLP, independent public accountants. -
27.1 Financial Data Schedule - December 31, 1997 (filed for SEC reporting purposes only) -
27.2 Restated Financial Data Schedule - December 31, 1996 (filed for SEC reporting purposes only) -
</TABLE>
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* Incorporated herein by reference
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EXHIBIT 3.2
BY-LAWS
OF
AGCO CORPORATION
ARTICLE I
STOCKHOLDERS MEETINGS
1. PLACES OF MEETINGS. All meetings of stockholders
shall be held at such place or places in or outside of Delaware as the board of
directors may from time to time determine or as may be designated in the notice
of meeting or waiver of notice thereof, subject to any provisions of the laws
of Delaware.
2. ANNUAL MEETINGS. Unless otherwise determined from
time to time by the board of directors, the annual meeting of stockholders
shall be held each year for the election of directors and the transaction of
such other business as may properly come before the meeting on the first Monday
in the fourth month following the close of the fiscal year commencing at some
time between 10 A.M. and 3 P.M., if not a legal holiday and if a legal holiday,
then on the day following at the same time. If the annual meeting is not held
on the date designated, it may be held as soon thereafter as convenient and
shall be called the annual meeting. Written notice of the time and place of
the annual meeting shall be given by mail to each stockholder entitled to vote
at his address as it appears on the records of the corporation not less than
the minimum nor more than the maximum number of days permitted under the laws
of Delaware prior to the scheduled date thereof, unless such notice is waived
as provided by Article VIII of these By-Laws.
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3. SPECIAL MEETINGS. A special meeting of stockholders
may be called at any time by order of the board of directors or the executive
committee. Written notice of the time, place and specific purposes of such
meetings shall be given by mail to each stockholder entitled to vote thereat at
his address as it appears on the records of the corporation not less than the
minimum nor more than the maximum number of days prior to the scheduled date
thereof permitted under the laws of Delaware, unless such notice is waived as
provided in Article VIII of these By-Laws.
4. MEETINGS WITHOUT NOTICE. Meetings of the
stockholders may be held at any time without notice when all the stockholders
entitled to vote thereat are present in person or by proxy.
5. VOTING. At all meetings of stockholders, each
stockholder entitled to vote on the record date as determined under Article V,
Section 3 of these By-Laws or if not so determined as prescribed under the laws
of Delaware shall be entitled to one vote for each share of stock standing on
record in his name, subject to any restrictions or qualifications set forth in
the certificate of incorporation or any amendment thereto.
6. QUORUM. At any stockholders' meeting, a majority of
the number of shares of stock outstanding and entitled to vote thereat present
in person or by proxy shall constitute a quorum but a smaller interest may
adjourn any meeting from time to time, and the meeting may be held as adjourned
without further notice, subject to such limitation as may be imposed under the
laws of Delaware. When a quorum is present at any meeting, a majority of the
number of shares of stock entitled to vote present thereat shall decide any
question brought before such meeting unless the question is one upon which a
different vote is required by express provision of the laws of Delaware, the
certificate of incorporation or these By-Laws, in which case such express
provisions shall govern.
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7. LIST OF STOCKHOLDERS. At least ten days before every
meeting, a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order and showing the address of and the number of
shares registered in the name of each stockholder, shall be prepared by the
secretary or the transfer agent in charge of the stock ledger of the
corporation. Such list shall be open for examination by any stockholder as
required by the laws of Delaware. The stock ledger shall be the only evidence
as to who are the stockholders entitled to examine such list or the books of
the corporation or to vote in person or by proxy at such meeting.
8. NO ACTION IN WRITING. Any action required or
permitted to be taken by the stockholders of the Corporation must be effected
at an annual or special meeting of stockholders of the Corporation and may not
be effected by any consent in writing by such stockholders.
9. NOTICE OF BUSINESS. No business may be transacted at
any meeting of stockholders, whether annual or special, other than business
that is either (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors (or any duly
authorized committee thereof), (b) otherwise properly brought before the
meeting by or at the direction of the board of directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
meeting by any stockholder of the Corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 9
of this Article I and on the record date for the determination of stockholders
entitled to vote at such meeting and (ii) who complies with the notice
procedures set forth in Section 9 of this Article I. The nomination by a
stockholder of any person for election as a director, other than the persons
nominated by the board of directors or any duly authorized committee thereof,
shall be considered business other than business specified in clauses (a) and
(b) above and shall be permitted only upon compliance with the requirements of
this Section 9 of this Article I.
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In addition to any other applicable requirements for
business to be properly brought before a meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
In the case of a meeting of stockholders which is an
annual meeting, to be timely, a stockholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs. In the case of a meeting of stockholders which is not an annual
meeting, to be timely, a stockholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the meeting; provided, however, that in the event that less than forty-five
(45) days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth (10) day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs.
To be in proper written form, a stockholder's notice
to the secretary must be set forth as to each matter such stockholder proposes
to bring before the meeting (i) a brief description of the business described
to be brought before the meeting and
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the reasons for conducting such business at the meeting, (ii) the name and
record address of such stockholder, (iii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially or of
record by such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by
such stockholder and any material interest of such stockholder in such
business, (v) a representation that such stockholder intends to appear in
person or by proxy at the meeting to bring such business before the meeting,
and (vi) in the case of the nomination of a person as a director, a brief
description of the background and credentials of such person including (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the Corporation which are beneficially owned by such person, and (D)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors, or as otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including without limitation such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected).
No business shall be conducted at a meeting of
stockholders except business brought before such meeting in accordance with the
procedures set forth in this Section 9 of this Article I, provided, however,
that, once business has been properly brought before a meeting in accordance
with such procedures, nothing in this Section 9 of this Article I shall be
deemed to preclude discussion by any stockholder of any such business. If the
chairman of a meeting determines that business was not properly brought before
the meeting in accordance with the foregoing procedures, the chairman shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
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ARTICLE II
BOARD OF DIRECTORS
1. NUMBER AND ELECTION OF DIRECTORS. The business and
affairs of the Corporation shall be managed by or under the direction of a
Board of Directors consisting of not less than three nor more than 13
directors, the exact number of directors to be determined from time to time by
resolution adopted by the affirmative vote of a majority of the directors then
in office. The directors shall be divided into three classes, designated Class
I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. Immediately following the adoption by the Corporation of
this by-law, a majority of the Board of Directors shall elect Class I directors
for a one-year term, Class II directors for a two-year term and Class III
directors for a three-year term. At the next ensuing annual meeting of
stockholders (the "First Meeting"), the term of office of the Class I directors
shall expire and successors to the Class I directors shall be elected for a
three-year term. At the next ensuing annual meeting of stockholders held after
the First Meeting (the "Second Meeting"), the term of office of the Class II
directors shall expire and successors to the Class II directors shall be
elected for a three-year term. At the next ensuing annual meeting of
stockholders held after the Second Meeting, the term of office of the Class III
directors shall expire and successors to the Class III directors shall be
elected for a three-year term. Thereafter, at each annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, but in no case shall a decrease in the number of directors shorten
the term of any incumbent director.
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A director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Notwithstanding the foregoing, whenever the holders
of any one or more classes or series of preferred stock issued by the
Corporation, if any, shall have the right, voting separately by class or
series, to elect directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of the Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 1 of this Article III unless
expressly provided by such terms.
2. POWERS. The business and affairs of the Corporation
shall be carried on by or under the direction of the board of directors, which
shall have all the powers authorized by the laws of Delaware, subject to such
limitations as may be provided by the certificate of incorporation or these
By-Laws.
3. COMPENSATION. The board of directors may from time
to time by resolution authorize the payment of fees or other compensation to
the directors for services as such to the corporation, including, but not
limited to, fees for attendance at all meetings of the board or of the
executive or other committees, and determine the amount of such fees and
compensation. Directors shall in any event be paid their traveling expenses
for attendance at all meetings of the board or of the executive or other
committees. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor in amounts authorized or otherwise approved from time to
time by the board or the executive committee.
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4. MEETINGS AND QUORUM. Meetings of the board of
directors may be held either in or outside of Delaware. A quorum shall be
one-third the then authorized total number of directors, but not less than two
directors. A director will be considered present at a meeting, even though not
physically present, to the extent and in the manner authorized by the laws of
Delaware.
The board of directors elected at any annual stockholders'
meeting shall, at the close of that meeting without further notice if a quorum
of directors be then present or as soon thereafter as may be convenient, hold a
meeting for the election of officers and the transaction of any other business.
At such meeting they shall elect a president, a secretary and a treasurer, and
such other officers as they may deem proper, none of whom except the chairman
of the board, if elected, need be members of the board of directors.
The board of directors may from time to time provide for the
holding of regular meetings with or without notice and may fix the times and
places at which such meetings are to be held. Meetings other than regular
meetings may be called at any time by the president or the chairman of the
board and must be called by the president or by the secretary or an assistant
secretary upon the request of any director.
Notice of each meeting, other than a regular meeting (unless
required by the board of directors), shall be given to each director by mailing
the same to each director at his residence or business address at least two
days before the meeting or by delivering the same to him personally or by
telephone or telegraph to him at least one day before the meeting unless, in
case of exigency, the chairman of the board, the president or secretary shall
prescribe a shorter notice to be given personally or by telephone, telegraph,
cable or wireless to all or any one or more of the directors at their
respective residences or places of business.
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Notice of any meeting shall state the time and place of such
meeting, but need not state the purpose thereof unless otherwise required by
the laws of Delaware, the certificate of incorporation, the By-Laws, or the
board of directors.
5. EXECUTIVE COMMITTEE. The board of directors may by
resolution passed by a majority of the whole board provide for an executive
committee of two or more directors and shall elect the members thereof to serve
during the pleasure of the board and may designate one of such members to act
as chairman. The board may at any time change the membership of the committee,
fill vacancies in it, designate alternate members to replace any absent or
disqualified members at any meeting of the committee, or dissolve it.
During the intervals between the meetings of the
board of directors, the executive committee shall perform all the powers of the
Board except as limited by the General Corporation Law of the State of Delaware
or by the Company's Certificate of Incorporation or By-Laws.
The executive committee may determine its rules of
procedure and the notice to be given of its meetings, and it may appoint such
committees and assistants as it shall from time to time deem necessary. A
majority of the members of the committee shall constitute a quorum.
6. AUDIT COMMITTEE. The functions of the audit
committee shall be to meet with external auditors to discuss the current year
audit plan; meet with external auditors to discuss the results of the audit and
their opinion regarding the fairness of the annual financial statements; review
audit fees and fees for management advisory services; meet with management to
discuss the internal audit plan and current staffing; meet with management,
internal and external auditors to discuss the auditor's "management letter" and
management's response; and meet with management and the internal auditors to
discuss the corporate control
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environment and regulatory compliance. The audit committee is hereby
authorized to perform such functions. The audit committee shall meet once
before the external audit begins and again near the completion date with
meetings at other times as appropriate.
7. COMPENSATION COMMITTEE. The functions of the
compensation committee shall be to review, approve, recommend and report to the
chief executive officer and the board matters specifically relative to the
compensation of the Company's chief executive officer and other key executives
and administration of the Company's 1991 Stock Option Plan and Management
Incentive Compensation Plan, and the compensation committee is hereby
authorized to perform such functions.
8. NOMINATING COMMITTEE. The functions of the
nominating committee are to identiy candidates and recommend to the board
nominees for membership on the board of directors, recommend candidates for
membership and chairmanship of standing committees, perform annual evaluations
of board performance and recommend actions to improve board performance and
governance. Nominations for board membership shall be consistent with criteria
approved by a majority of the whole board for director selection. In
nominations for committee membership and chairmanship the nominating committee
shall:
a. include the chairman of the board, chief
executive officer and chairmen of the standing committees as members of the
executive committee;
b. include the chairman of the board and the
chief executive officer as members of the strategic planning committee;
c. include only outside directors as members of
the audit, compensation and nominating committees; and
d. consider differences in individual director
expertise and availability and the efficiencies of continuity of committee
experience versus the desirability of altering committee composition at
reasonable intervals.
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9. OTHER COMMITTEES. The board of directors may by
resolution provide for such other committees as it deems desirable and may
discontinue the same at its pleasure. Each such committee shall have the
powers and perform such duties, not inconsistent with law, as may be assigned
to it by the board.
10. ACTION WITHOUT MEETINGS. Any action required or
permitted to be taken at any meeting of the board of directors or any committee
thereof may be taken without meeting by written consent setting forth the
action so taken signed by all of the directors entitled to vote with respect to
the subject matter thereof.
ARTICLE III
OFFICERS
1. TITLES AND ELECTION. The officers of the corporation
shall be a president, a secretary and a treasurer, who shall initially be
elected as soon as convenient by the board of directors and thereafter, in the
absence of earlier resignations or removals, shall be elected at the first
meeting of the board following any annual stockholders' meeting, each of whom
shall hold office at the pleasure of the board except as may otherwise be
approved by the board or executive committee, or until his earlier resignation,
removal under these By-Laws or other termination of his employment. Any person
may hold more than one office if the duties can be consistently performed by
the same person, and to the extent permitted by the laws of Delaware.
The board of directors, in its discretion, may also
at any time elect or appoint a chairman of the board of directors who shall be
a director, and one or more vice presidents, assistant secretaries and
assistant treasurers and such other officers as it may deem advisable, each of
whom shall hold office at the pleasure of the board, except as may otherwise be
approved by the board or executive committee, or until his earlier
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resignation, removal or other termination of employment, and shall have such
authority and shall perform such duties as may be prescribed or determined from
time to time by the board or in case of officers other than the chairman of the
board, it not so prescribed or determined by the board, as the president or the
then senior executive officer may prescribe or determine.
The board of directors may require any officer or
other employee or agent to give bond for the faithful performance of his duties
in such form and with such sureties as the board may require.
2. DUTIES. Subject to such extension, limitations, and
other provisions as the board of directors or the By-Laws may from time to time
prescribe or determine, the following officers shall have the following powers
and duties:
(a) CHAIRMAN OF THE BOARD. The chairman of the
board, when present, shall preside at all meetings of the stockholders and of
the board of directors and shall be charged with general supervision of the
management and policy of the corporation, and shall have such other powers and
perform such other duties as the board of directors may prescribe from time to
time.
(b) PRESIDENT. Subject to the board of directors
and the provisions of these By-Laws, the president shall be the chief executive
officer of the corporation, shall exercise the powers and authority and perform
all of the duties commonly incident to his office, shall in the absence of the
chairman of the board preside at all meetings of the stockholders and of the
board of directors if he is a director, and shall perform such other duties as
the board of directors or executive committee shall specify from time to time.
The president or a vice president, unless some other person is thereunto
specifically authorized by the board of directors or executive committee, shall
sign all bonds, debentures, promissory notes, deeds and contracts of the
corporation.
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(c) VICE PRESIDENT. The vice president or vice
presidents shall perform such duties as may be assigned to them from time to
time by the board of directors or by the president if the board does not do so.
In the absence or disability of the president, the vice presidents in order of
seniority may, unless otherwise determined by the board, exercise the powers
and perform the duties pertaining to the office of president, except that if
one or more executive vice presidents has been elected or appointed, the person
holding such office in order or seniority shall exercise the powers and perform
the duties of the office of president.
(d) SECRETARY. The secretary or in his absence
the assistant secretary shall keep the minutes of all meetings of stockholders
and of the board of directors, give and serve all notices, attend to such
correspondence as may be assigned to him, keep in safe custody the seal of the
corporation, and affix such seal to all such instruments properly executed as
may require it, and shall have such other duties and powers as may be
prescribed or determined from time to time by the board of directors or by the
president if the board does not do so.
(e) TREASURER. The treasurer, subject to the
order of the board of directors, shall have the care and custody of the moneys,
funds, valuable papers and documents of the corporation (other than his own
bond, if any, which shall be in the custody of the president), and shall have,
under the supervision of the board of directors, all the powers and duties
commonly incident to his office. He shall deposit all funds of the corporation
in such bank or banks, trust company or trust companies, or with such firm or
firms doing a banking business as may be designated by the board of directors
or by the president if the board does not do so. He may endorse for deposit or
collection all checks, notes, etc., payable to the corporation or to its order.
He shall keep accurate books of account of the corporation's
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transactions, which shall be the property of the corporation, and together with
all its property in his possession, shall be subject at all times to the
inspection and control of the board of directors. The treasurer shall be
subject in every way to the order of the board of directors, and shall render
to the board of directors and/or the president of the corporation, whenever
they may require it, an account of all his transactions and of the financial
condition of the corporation. In addition to the foregoing, the treasurer
shall have such duties as may be prescribed or determined from time to time by
the board of directors or by the president if the board does not do so.
3. DELEGATION OF AUTHORITY. The board of directors or
the executive committee may at any time delegate the powers and duties of any
officer for the time being to any other officer, director or employee.
4. COMPENSATION. The compensation of the chairman of
the board, the president, all vice presidents, the secretary and the treasurer
shall be fixed by the board of directors or the executive committee, and the
fact that any officer is a director shall not preclude him from receiving
compensation or from voting upon the resolution providing the same.
ARTICLE IV
RESIGNATIONS, VACANCIES AND REMOVALS
1. RESIGNATIONS. Any director or officer may resign at
any time by giving written notice thereof to the board of directors, the
president or the secretary. Any such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof; and
unless otherwise specified therein, the acceptance of any resignation shall not
be necessary to make it effective.
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2. VACANCIES. (a) DIRECTORS. When the office of any
directors, becomes vacant or unfilled whether by reason of death, resignation,
removal, increase in the authorized number of directors or otherwise, such
vacancy or vacancies may be filled by the remaining director or directors,
although less than a quorum. Any director so elected by the board shall serve
until the election and qualification of his successor or until his earlier
resignation or removal as provided in these By-Laws. The directors may also
reduce their authorized number by the number of vacancies in the board,
provided such reduction does not reduce the board to less than the minimum
authorized by the Charter or the laws of Delaware.
(b) OFFICERS. The board of directors may at any
time or from time to time fill any vacancy among the officers of the
corporation.
3. REMOVALS. (a) DIRECTORS. The stockholders may
remove directors from office only for cause.
(b) OFFICERS. Subject to the provisions of any
validly existing agreement, the board of directors may at any meeting remove
from office any officer, with or without cause, and may elect or appoint a
successor; provided that if action is to be taken to remove the president the
notice of meeting or waiver of notice thereof shall state that one of the
purposes thereof is to consider and take action on his removal.
ARTICLE V
CAPITAL STOCK
1. CERTIFICATE OF STOCK. Every stockholder shall be
entitled to a certificate or certificates for shares of the capital stock of
the corporation in such form as may be prescribed or authorized by the board of
directors, duly numbered and setting forth the number and
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kind of shares represented thereby. Such certificates shall be signed by the
chairman of the board, the president or a vice president and by the treasurer
or an assistant treasurer or by the secretary or an assistant secretary. Any
or all of such signatures may be in facsimile if and to the extent authorized
under the laws of Delaware.
In case any officer, transfer agent or registrar who
has signed or whose facsimile signature has been placed on a certificate has
ceased to be such officer, transfer agent or registrar before the certificate
has been issued, such certificate may nevertheless be issued and delivered by
the corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
2. TRANSFER OF STOCK. Shares of the capital stock of
the corporation shall be transferable only upon the books of the corporation
upon the surrender of the certificate or certificates properly assigned and
endorsed for transfer. If the corporation has a transfer agent or agents or
transfer clerk and registrar of transfers acting on its behalf, the signature
of any officer or representative thereof may be in facsimile.
The board of directors may appoint a transfer agent
and one or more cotransfer agents and a registrar and one or more coregistrars
of transfer and may make or authorize the transfer agents to make all such rule
and regulations deemed expedient concerning the issue, transfer and
registration of shares of stock.
3. RECORD DATES. (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other
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lawful action, the board of directors may fix in advance a record date which,
in the case of a meeting, shall be not less than the minimum nor more than the
maximum number of days prior to the scheduled date of such meeting permitted
under the laws of Delaware and which, in the case of any other action, shall be
not more than the maximum number of days prior to any such action permitted by
the laws of Delaware.
(b) If no such record date is fixed by the board,
the record date shall be that prescribed by the laws of Delaware.
(c) A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to an
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
4. LOST CERTIFICATES. In case of loss or mutilation or
destruction of a stock certificate, a duplicate certificate may be issued upon
such terms as may be determined or authorized by the board of directors or
executive committee or by the president if the board or the executive committee
does not do so.
ARTICLE VI
FISCAL YEAR, BANK DEPOSITS, CHECKS, ETC.
1. FISCAL YEAR. The fiscal year of the corporation
shall commence or end at such time as the board of directors may designate.
2. BANK DEPOSITS, CHECKS, ETC. The funds of the
corporation shall be deposited in the name of the corporation or of any
division thereof in such banks or trust companies in the United States or
elsewhere as may be designated from time to time by the board of directors or
executive committee, or by such officer or officers as
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the board or executive committee may authorize to make such designations.
All checks, drafts or other orders for the withdrawal
of funds from any bank account shall be signed by such person or persons as may
be designated from time to time by the board of directors or executive
committee or as may be designated by an officer or officers authorized by the
board of directors or executive committee to make such designations. The
signatures on checks, drafts or other orders for the withdrawal of funds may be
in facsimile if authorized in the designation.
ARTICLE VII
BOOKS AND RECORDS
1. PLACE OF KEEPING BOOKS. Unless otherwise expressly
required by the laws of Delaware, the books and records of the corporation may
be kept outside of Delaware.
2. EXAMINATION OF BOOKS. Except as may otherwise be
provided by the laws of Delaware, the certificate of incorporation or these
By-Laws, the board of directors shall have power to determine from time to time
whether and to what extent and at what times and places and under what
conditions any of the accounts, records and books of the corporation are to be
open to the inspection of any stockholder. No stockholder shall have any right
to inspect any account or book or document of the corporation except as
prescribed by statute or authorized by express resolution of the stockholders
or of the board of directors.
ARTICLE VIII
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NOTICES
1. REQUIREMENTS OF NOTICE. Whenever notice is required
to be given by statute, the certificate of incorporation or these By-Laws, it
shall not mean personal notice unless so specified, but such notice may be
given in writing by depositing the same in a post office letter box, or mail
chute, postpaid and addressed to the person to whom such notice is directed at
the address of such person on the records of the corporation, and such notice
shall be deemed given at the time when the same shall be thus mailed.
2. WAIVERS. Any stockholder, director or officer may,
in writing or by telegram or cable, at any time waive any notice or other
formality required by statute, the certificate of incorporation or these
By-Laws. Such waiver of notice, whether given before or after any meeting or
action, shall be deemed equivalent to notice. Presence of a stockholder either
in person or by proxy at any stockholders' meeting and presence of any director
at any meeting of the board of directors shall constitute a waiver of such
notice as may be required by any statute, the certificate of incorporation or
these By-Laws.
ARTICLE IX
SEAL
The corporate seal of the corporation shall consist of two
concentric circles between which shall be the name of the corporation and in
the center of which shall be inscribed "Corporate Seal, Delaware."
ARTICLE X
POWERS OF ATTORNEY
19
20
The board of directors or the executive committee may
authorize one or more of the officers of the corporation to execute powers of
attorney delegating to named representatives or agents power to represent or
act on behalf of the corporation, with or without power of substitution.
In the absence of any action by the board or the executive
committee, the president, any vice president, the secretary or the treasurer of
the corporation may execute for and on behalf of the corporation waivers of
notice of stockholders' meetings and proxies for such meetings in any company
in which the corporation may hold voting securities.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. DEFINITIONS. As used in this article, the term
"person" means any past, present or future director or officer of the
corporation or a designated officer of an operating division of the
corporation.
2. INDEMNIFICATION GRANTED. The corporation shall
indemnify, defend and hold harmless against all liability, loss and expenses
(including attorneys' fees reasonably incurred), to the full extent and under
the circumstances permitted by the Delaware General Corporation Law of the
State of Delaware in effect from time to time, any person as defined above,
made or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer of
the corporation or designated officer of an operating division of the
corporation, or is or was as an employee or agent of the corporation acting as
a director, officer, employee or agent of another company or other enterprise
in which the corporation owns, directly or indirectly, an equity or other
interest or of which it may be a creditor.
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21
If a person indemnified herein must retain an attorney
directly, the corporation may, in its discretion, pay the expenses (including
attorneys' fees) incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses incurred by a
director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should be ultimately determined that the director or
officer is not entitled to be indemnified under this article or otherwise.
This right of indemnification shall not be deemed exclusive of
any other rights to which a person indemnified herein may be entitled by
By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, and shall continue as to a person who has ceased to be a director,
officer, designated officer, employee or agent and shall inure to the benefit
of the heirs, executors, administrators and other legal representatives of such
person. It is not intended that the provisions of this article be applicable
to, and they are not to be construed as granting indemnity with respect to,
matters as to which indemnification would be in contravention of the laws of
Delaware or of the United States of America whether as a matter of public
policy or pursuant to statutory provision.
3. MISCELLANEOUS. The board of directors may also on
behalf of the corporation grant indemnification to any individual other than a
person defined herein to such extent and in such manner as the board in its
sole discretion may from time to time and at any time determine.
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22
ARTICLE XII
AMENDMENTS
These By-Laws may be amended or repealed either:
(a) at any meeting of stockholders at which a quorum
is present by vote of a majority of the number of shares of stock entitled to
vote present in person or by proxy at such meeting as provided in Article I
Sections 5 and 6 of these By-Laws, or
(b) at any meeting of the board of directors by a
majority vote of the directors then in office;
provided the notice of such meeting of stockholders or
directors or waiver of notice thereof contains a statement of the substance of
the proposed amendment or repeal.
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EXHIBIT 10.8
AGCO CORPORATION
1991 STOCK OPTION PLAN, as amended
April 23, 1997
2
AGCO Corporation
1991 STOCK OPTION PLAN
<TABLE>
<S> <C> <C>
I. Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
II. Amount of Stock Subject to the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
III. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
IV. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
V. Maximum Allotment of Incentive Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
VI. Option Price and Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
VII. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
VIII. Loans, Loan Guarantees and Installment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
IX. Term of Options and Limitations on the Right of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . 7
X. Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
XI. Nontransferability of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
XII. Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
XIII. Adjustment of Shares; Effect of Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 10
XIV. Right to Terminate Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
XV. Purchase for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
XVI. Issuance of Certificates; Legends; Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 11
XVII. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
XVIII. Listing of Shares and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
XIX. Amendment of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
XX. Termination or Suspension of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
XXI. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
XXII. Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
XXIII. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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AGCO Corporation
1991 STOCK OPTION PLAN
I. PURPOSES
AGCO Corporation (the "Company") desires to afford certain
directors, key employees and consultants of the Company and its subsidiaries
who are responsible for the continued growth of the Company an opportunity to
acquire a proprietary interest in the Company, and thus to create in such
persons interest in and a greater concern for the welfare of the Company.
The stock options offered pursuant to this 1991 Stock Option
Plan (the "Plan") are a matter of separate inducement and are not in lieu of
any salary or other compensation for services.
The Company, by means of the Plan, seeks to retain the services
of persons now holding key positions and to secure the services of persons
capable of filling such positions.
The options granted under the Plan may be designated as either
incentive stock options ("Incentive Options") within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not meet the requirements for Incentive Options ("Non-Qualified Options")
but the Company makes no warranty as to the qualification of any option as an
Incentive Option. Only key employees may be granted Incentive Options under
the Plan.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which
may be purchased pursuant to the exercise of options granted under the Plan
shall not exceed, in the aggregate, 2,400,000 shares of the authorized common
stock, $0.01 par value, per share, of the Company (the "Shares").
Shares which may be acquired under the Plan may be either
authorized but unissued Shares or Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent that
options granted under the Plan expire or terminate without having been
exercised, new options may be granted with respect to the Shares covered by
such expired or terminated options, provided that the grant and the terms of
such new options shall in all respects comply with the provisions of the Plan.
Except as provided in Article XX, the Company may, from time to
time during the period beginning September 18, 1991 (the "Effective Date") and
ending September 17, 2001 (the
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"Termination Date") grant options to certain directors, key employees and
consultants under the terms hereinafter set forth.
No individual shall be granted options to purchase in the
aggregate more than 250,000 shares.
III. ADMINISTRATION
The Board of Directors of the Company (the "Board of Directors")
shall designate from among its members an option committee (the "Committee") to
administer the Plan. The Committee shall consist of no fewer than three (3)
members of the Board of Directors, each of whom shall be a "nonemployee
director" within the meaning of Rule 16b-3 (or any successor rule or
regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and an "outside director" within the meaning of Section
162(m)(4)(C)(i) of the Code. A majority of the members of the Committee shall
constitute a quorum, and the act of a majority of the members of the Committee
shall be the act of the Committee. Any member of the Committee may be removed
at any time, either with or without cause, by resolution adopted by a majority
of the Board of Directors, and any vacancy on the Committee may at any time be
filled by resolution adopted by a majority of the Board of Directors.
Any or all powers and functions of the Committee may at any time
and from time to time be exercised by the Board of Directors; provided,
however, that, with respect to the participation in the Plan by persons who are
members of the Board of Directors, such powers and functions of the Committee
may be exercised by the Board of Directors only if, at the time of such
exercise, all of the members of the Board of Directors acting in the particular
matter are "nonemployee directors" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Exchange Act and "outside
directors" within the meaning of Section 162(m)(4)(C)(i) of the Code.
Subject to the express provisions of the Plan, the Board of
Directors or the Committee, as the case may be, shall have authority, in its
discretion, to determine the persons to whom options shall be granted, the time
when such options shall be granted, the number of Shares which shall be subject
to each option, the purchase price of each Share which shall be subject to each
option, the period(s) during which such options shall be exercisable (whether
in whole or in part) and the other terms and provisions thereof. In
determining the employees to whom options shall be granted and the number of
Shares for which options shall be granted to each person, the Board of
Directors or the Committee, as the case may be, shall consider the length of
service, the amount of earnings, and the responsibilities and duties of such
person.
Subject to the express provisions of the Plan, the Board of
Directors or the Committee, as the case may be, also shall have authority to
construe the Plan and options granted thereunder, to amend the Plan and options
granted thereunder, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
options
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(which need not be identical) and to make all other determinations necessary or
advisable for administering the Plan. The Board of Directors or the Committee,
as the case may be, also shall have the authority to require, in its
discretion, as a condition of the granting of any such option, that the
optionee agree (i) not to sell or otherwise dispose of Shares acquired pursuant
to the option for a period of six (6) months following the date of acquisition
of such Shares and (ii) that in the event of termination of service of the
optionee with the Company or any subsidiary of the Company, other than as a
result of dismissal without cause, such optionee will not, for a period to be
fixed at the time of the grant of the option, enter into any other employment
or participate directly or indirectly in any other business or enterprise which
is competitive with the business of the Company or any subsidiary of the
Company, or enter into any employment in which such optionee will be called
upon to utilize special knowledge obtained through service with the Company or
any subsidiary of the Company.
The determination of the Board of Directors or the Committee, as
the case may be, on matters referred to in this Article III shall be
conclusive.
The Board of Directors or the Committee, as the case may be, may
employ such legal counsel, consultants and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from any
such counsel or consultant and any computation received from any such
consultant or agent. Expenses incurred by the Board of Directors or the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company. No member or former member of the Committee or of the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted hereunder.
IV. ELIGIBILITY
Options may be granted only to directors, key employees and
consultants of the Company and its subsidiaries who are not members of the
Committee.
An Incentive Option shall not be granted to any person who, at
the time the option is granted, owns stock of the Company or any subsidiary or
parent of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
subsidiary or parent of the Company unless (i) the option price is at least one
hundred ten percent (110%) of the fair market value per share (as defined in
Article VI) of the stock subject to the option and (ii) the option is not
exercisable after the fifth anniversary of the date of grant of the option. In
determining stock ownership of an employee, the rules of Section 424 (d) of the
Code shall be applied, and the Board of Directors or the Committee, as the case
may be, may rely on representations of fact made to it by the employee and
believed by it to be true.
V. MAXIMUM ALLOTMENT OF INCENTIVE OPTIONS
If the aggregate fair market value of stock with respect to
which Incentive Options are exercisable for the first time by an employee
during any calendar year (under all stock option plans of the Company and any
parent or any subsidiary of the Company) exceeds $100,000, any options
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which otherwise qualify as Incentive Options, to the extent of the excess, will
be treated as Non-Qualified Options.
VI. OPTION PRICE AND PAYMENT
The price per Share under any option granted hereunder shall be
such amount as the Board of Directors or the Committee, as the case may be,
shall determine but, in the case of an Incentive Option, such price shall not
be less than one hundred percent (100%) of the fair market value of the Shares
subject to such option, as determined in good faith by the Board of Directors
or the Committee, as the case may be, at the date the option is granted.
If the Shares are listed on a national securities exchange in
the United States on the date any option is granted, the fair market value per
Share shall be deemed to be the average of the high and low quotations at which
such Shares are sold on such national securities exchange in the United States
on the date next preceding the date upon which the option is granted, but if
the Shares are not traded on such date, or such national securities exchange is
not open for business on such date, the fair market value per Share shall be
determined as of the closest preceding date on which such exchange shall have
been open for business and the Shares were traded. If the Shares are listed on
more than one national securities exchange in the United States on the date any
such option is granted, the Committee shall determine which national securities
exchange shall be used for the purpose of determining the fair market value per
Share. If the Shares are not listed on a national securities exchange but are
reported on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the fair market value per share shall be deemed to be the
average of the high bid and low asked prices on the date next preceding the
date upon which the option is granted as reported by NASDAQ.
For purposes of this Plan, the determination by the Board of
Directors or the Committee, as the case may be, of the fair market value of a
Share shall be conclusive.
Upon the exercise of an option granted hereunder, the Company
shall cause the purchased Shares to be issued only when it shall have received
the full purchase price for the Shares in cash; provided, however, that in lieu
of cash, the holder of an option may, if and to the extent the terms of such
option so provide and to the extent permitted by applicable law, exercise an
option in whole or in part, by delivering to the Company shares of common stock
of the Company (in proper form for transfer and accompanied by all requisite
stock transfer tax stamps or cash in lieu thereof) owned by such holder having
a fair market value equal to the cash exercise price applicable to that portion
of the option being exercised by the delivery of such Shares. The fair market
value of the stock so delivered shall be determined as of the date immediately
preceding the date on which the option is exercised, or as may be required in
order to comply with or to conform to the requirements of any applicable laws
or regulations.
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VII. USE OF PROCEEDS
The cash proceeds of the sale of Shares subject to the options
granted hereunder are to be added to the general funds of the Company and used
for its general corporate purposes as the Board of Directors shall determine.
VIII. LOANS, LOAN GUARANTEES AND INSTALLMENT PAYMENTS
In order to assist an optionee (including an optionee who is an
officer or director of the Company or any subsidiary of the Company) in the
acquisition of shares of Common Stock pursuant to an option granted under the
Plan, the Board of Directors or the Committee, as the case may be, may
authorize, at either the time of the grant of an option or the time of the
acquisition of Common Stock pursuant to the option, (i) the extension of a loan
to the optionee by the Company, (ii) the payment by the optionee of the
purchase price, if any, for the Common Stock in installments, or (iii) the
guarantee by the Company or a subsidiary of the Company of a loan obtained by
the optionee from a third party. The terms of any loans, guarantees or
installment payments, including the interest rate and terms of repayment, will
be subject to the discretion of the Board of Directors or the Committee, as the
case may be. Loans, installment payments and guarantees may be granted without
security, the maximum credit available being the purchase price, if any, of the
Common Stock acquired plus the maximum federal and state income and employment
tax liability which may be incurred in connection with the acquisition. In no
event, however, may the amount of any loan exceed the amounts allowable to the
loan to such individual for the purposes stated hereunder as provided by any
regulation of the United States Treasury or other State or Federal statute.
IX. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE
Unless the Board of Directors or the Committee, as the case may
be, shall determine otherwise (in which event the instrument evidencing the
option granted hereunder shall so specify), any option granted hereunder shall
be exercisable during a period of not more than ten (10) years from the date of
grant of such option.
The Board of Directors or the Committee, as the case may be,
shall have the right to accelerate, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option granted
hereunder.
To the extent that an option is not exercised within the period
of exercisability specified therein, it shall expire as to the then unexercised
part.
X. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the
optionee as to all or part of the Shares covered thereby by the giving of
written notice of the exercise thereof to the Corporate Secretary of the
Company and the stock transfer agent for the Company at the principal business
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office of the Company, specifying the number of Shares to be purchased and
specifying a business day not more than fifteen (15) days from the date such
notice is given, for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Articles XV, XVI, XVII and
XVIII, the Company shall cause certificates for the Shares so purchased to be
delivered to the optionee, against payment of the full purchase price, on the
date specified in the notice of exercise.
XI. NONTRANSFERABILITY OF OPTIONS
An option granted hereunder shall not be transferable, whether
by operation of law or otherwise, other than by will or the laws of descent and
distribution, and any option granted hereunder shall be exercisable, during the
lifetime of the holder, only by such holder.
XII. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the Company
or any subsidiary of the Company any option previously granted to such
employee, unless otherwise specified by the Board of Directors or the
Committee, as the case may be, shall, to the extent not theretofore exercised,
terminate and become null and void, provided that:
(a) if the employee shall die while in the employ of the
Company or any subsidiary of the Company or during either the
three (3) month or one (1) year period, whichever is applicable,
specified in clause (b) below and at a time when such employee
was entitled to exercise an option as herein provided, the legal
representative of such employee, or such person who acquired
such option by bequest or inheritance or by reason of the death
of the employee, may, not later than one (1) year from the date
of death, exercise such option, to the extent not theretofore
exercised, in respect of any or all of such number of Shares as
specified by the Board of Directors or the Committee, as the
case may be, in such option grant; and
(b) if the employment of any employee to whom such option
shall have been granted shall terminate by reason of the
employee's retirement (at such age or upon such conditions as
shall be specified by the Board of Directors or the Committee,
as the case may be), disability (as described in Section 22(e)
(3) of the Code) or dismissal by the employer other than for
cause (as defined below), and while such employee is entitled to
exercise such option as herein provided, such employee shall
have the right to exercise such option so granted, to the extent
not theretofore exercised, in respect of any or all of such
number of Shares as specified by the Board of Directors or the
Committee, as the case may be, in such option at any time up to
and including (i) three (3) months after the date of such
termination of employment in the case of termination by reason
of retirement or dismissal other than for cause and (ii) one (1)
year after the date of termination of employment in the case of
termination by reason of disability.
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In no event, however, shall any person be entitled to exercise
any option after the expiration of the period of exercisability of such option
as specified therein.
If an employee voluntarily terminates his or her employment, or
is discharged for cause, any option granted hereunder shall, unless otherwise
specified by the Board of Directors or the Committee, as the case may be, in
the option, forthwith terminate with respect to any unexercised portion
thereof.
Notwithstanding any other provision of this Article XII, if the
employment of any employee with the Company or any subsidiary of the Company is
terminated, whether voluntarily or involuntarily, within a one-year period
following a change in the ownership or effective control of the Company (within
the meaning of Section 280G(b)(2)(A)(i) of the Code) and while such employee is
entitled to exercise an option as herein provided, other than a termination of
such employment by the Company or any subsidiary of the Company for cause, such
employee shall have the right to exercise all or any portion of such option at
any time up to and including three (3) months after the date of such
termination of employment, at which time such option shall cease to be
exercisable.
If an option granted hereunder shall be exercised by the legal
representative of a deceased employee or former employee, or by a person who
acquired an option granted hereunder by bequest or inheritance or by reason of
the death of any employee or former employee, written notice of such exercise
shall be accompanied by a certified copy of letters testamentary or equivalent
proof of the right of such legal representative or other person to exercise
such option.
For the purposes of the Plan, the term "for cause" shall mean
(i) with respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
any subsidiary of the Company, which agreement or plan contains a definition of
"for cause or cause" (or words of like import) for purposes of termination of
employment thereunder by the Company or such subsidiary of the Company, "for
cause" or "cause" as defined in the most recent of such agreements or plans, or
(ii) in all other cases, as determined by the Committee or the Board of
Directors, as the case may be, in its sole discretion, (a) the willful
commission by an employee of a criminal or other act that causes or will
probably cause substantial economic damage to the Company or a substantial
injury to the business reputation of the Company; (b) the commission by an
employee of an act of fraud in the performance of such employee's duties on
behalf of the Company or any subsidiary of the Company; or (c) the continuing
willful failure of an employee to perform the duties of such employee to the
Company or any subsidiary of the Company (other than such failure resulting
from the employee's incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
employee by the Board of Directors or the Committee, as the case may be. For
purposes of the Plan, no act, or failure to act, on the employee's part shall
be considered "willful" unless done or omitted to be done by the
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employee not in good faith and without reasonable belief that the employee's
action or omission was in the best interest of the Company or a subsidiary of
the Company.
For the purposes of the Plan, an employment relationship shall
be deemed to exist between an individual and a corporation if, at the time of
the determination, the individual was an "employee" of such corporation for
purposes of Section 422(a) of the Code. If an individual is on military, sick
leave or other bona fide leave of absence such individual shall be considered
an "employee" for purposes of the exercise of an option and shall be entitled
to exercise such option during such leave if the period of such leave does not
exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company is guaranteed either by statute or by contract.
If the period of leave exceeds ninety (90) days, the employment relationship
shall be deemed to have terminated on the ninety-first (91st) day of such
leave, unless the individual's right to re-employment is guaranteed by statute
or contract.
A termination of employment shall not be deemed to occur by
reason of (i) the transfer of an employee from employment by the Company to
employment by a subsidiary of the Company or (ii) the transfer of an employee
from employment by a subsidiary of the Company to employment by the Company or
by another subsidiary of the Company.
XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
In the event of any change in the outstanding Shares through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or other like change in capital structure of the Company, an adjustment
shall be made to each outstanding option such that each such option shall
thereafter be exercisable for such securities, cash and/or other property as
would have been received in respect of the Shares subject to such option had
such option been exercised in full immediately prior to such change, and such
an adjustment shall be made successively each time any such change shall occur.
The term "Shares" shall after any such change refer to the securities, cash
and/or property then receivable upon exercise of an option. In addition, in
the event of any such change, the Board of Directors or the Committee, as the
case may be, shall make any further adjustment as may be appropriate to the
maximum number of Shares subject to the Plan, the maximum number of Shares for
which options may be granted to any one employee, and the number of Shares and
price per Share subject to outstanding options as shall be equitable to prevent
dilution or enlargement of rights under such options, and the determination of
the Board of Directors or the Committee, as the case may be, as to these
matters shall be conclusive. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option granted hereunder other than an
incentive stock option for purposes of Section 422 of the Code without the
consent of the grantee.
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XIV. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or any
subsidiary of the Company to continue the employment of any holder of an option
and it shall not impose any obligation on the part of any holder of an option
to remain in the employ of the Company or of any subsidiary thereof.
XV. PURCHASE FOR INVESTMENT
Except as hereafter provided, the holder of an option granted
hereunder shall, upon any exercise thereof, execute and deliver to the Company
a written statement, in form satisfactory to the Company, in which such holder
represents and warrants that such holder is purchasing or acquiring the Shares
acquired thereunder for such holder's own account, for investment only and not
with a view to the resale or distribution thereof, and agrees that any
subsequent offer for sale or sale or distribution of any of such Shares shall
be made only pursuant to either (a) a Registration Statement on an appropriate
form under the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
Shares being offered or sold, or (b) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption the holder
shall, prior to any offer for sale or sale of such Shares, obtain a prior
favorable written opinion, in form and substance satisfactory to the Company,
from counsel for or approved by the Company, as to the applicability of such
exemption thereto. The foregoing restriction shall not apply to (i) issuances
by the Company so long as the Shares being issued are registered under the
Securities Act and a prospectus in respect thereof is current or (ii)
reofferings of Shares by affiliates of the Company (as defined in Rule 405 or
any successor rule or regulation promulgated under the Securities Act) if the
Shares being reoffered are registered under the Securities Act and a prospectus
in respect thereof is current.
XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
Upon any exercise of an option which may be granted hereunder
and payment of the purchase price, a certificate or certificates for the Shares
as to which the option has been exercised shall be issued by the Company in the
name of the person exercising the option and shall be delivered to or upon the
order of such person or persons.
The Company may endorse such legend or legends upon the
certificates for Shares issued upon exercise of an option granted hereunder and
may issue such "stop transfer" instructions to its transfer agent in respect of
such Shares as, in its discretion, it determines to be necessary or appropriate
to (i) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act, (ii) implement the provisions
of the Plan and any agreement between the Company and the optionee or grantee
with respect to such Shares, or (iii) permit the Company to determine the
occurrence of a disqualifying disposition, as described in Section 421(b) of
the Code, of Shares transferred upon exercise of an Incentive Option granted
under the Plan.
-11-
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The Company shall pay all issue or transfer taxes with respect
to the issuance or transfer of Shares upon exercise of an option, as well as
all fees and expenses necessarily incurred by the Company in connection with
such issuance or transfer, except fees and expenses which may be necessitated
by the filing or amending of a Registration Statement under the Securities Act,
which fees and expenses shall be borne by the recipient of the Shares unless
such Registration Statement has been filed by the Company for its own corporate
purposes (and the Company so states) in which event the recipient of the Shares
shall bear only such fees and expenses as are attributable solely to the
inclusion of the Shares he or she receives in the Registration Statement,
provided that the Company shall have no obligation to include any shares in any
Registration statement.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XVII. WITHHOLDING TAXES
The Company may require an employee exercising a Non-Qualified
Option or disposing of Shares acquired pursuant to the exercise of an Incentive
Option in a disqualifying disposition (within the meaning of Section 421(b) of
the Code) to reimburse the corporation that employs such employee for any taxes
required by any government to be withheld or otherwise deducted and paid by
such corporation in respect of the issuance or disposition of Shares. In lieu
thereof, the corporation that employs such employee shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the employee upon such terms and conditions as the Board of
Directors or the Committee, as the case may be, shall prescribe.
XVIII. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board of Directors shall determine in its
discretion that the listing, registration or qualification of the Shares
covered by the Plan upon any national securities exchange or under any state or
federal law or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares under the Plan, no Shares shall be issued unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
XIX. AMENDMENT OF THE PLAN
The Board of Directors may, from time to time, amend the Plan
without stockholder approval except to the extent that any such amendment fails
to comply with any applicable provision of the Code, the Employee Retirement
Income Security Act of 1974 or the rules of the New York Stock Exchange or
causes the Plan to fail to be treated as qualified performance-based
compensation under applicable Treasury Regulations.
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XX. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the
Plan. The Plan, unless sooner terminated by action of the Board of Directors,
shall terminate at the close of business on the Termination Date. An option
may not be granted while the Plan is suspended or after it is terminated.
Rights and obligations under any option granted while the Plan is in effect
shall not be altered or impaired by suspension or termination of the Plan,
except upon the consent of the person to whom the option was granted. The
power of the Board of Directors or the Committee, as the case may be, to
construe and administer any options granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue after such
termination or during such suspension.
XXI. GOVERNING LAW
The Plan, such options as may be granted thereunder and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware.
XXII. PARTIAL INVALIDITY
The invalidity or illegality of any provision herein shall not
be deemed to affect the validity of any other provision.
XXIII. EFFECTIVE DATE
The Plan shall become effective at 5:00 p.m., New York City
time, on the Effective Date; provided, however, that if the Plan is not
approved by a vote of the shareholders of the Company at an annual meeting or
any special meeting or by unanimous written consent within twelve (12) months
before or after the Effective Date, the Plan and any options granted thereunder
shall terminate.
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EXHIBIT 10.10
AGCO CORPORATION
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
SECTION I. PURPOSE
The AGCO Corporation Long-Term Incentive Plan (the "LTIP" or the
"Plan") is intended to be the primary long-term incentive vehicle for senior
management. While other managers and key employees are eligible to receive
stock option grants, participants in the LTIP do not receive stock options.
The Plan is designed to advance the interests of AGCO Corporation (the
"Company") by encouraging senior management to seek ways to improve
efficiencies, spend capital wisely, reduce debt and generate cash, all of which
should combine to cause stock price appreciation. The Plan is not subject to
any provisions of the Employee Retirement Income Security Act of 1974 ("ERISA")
nor is it qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code").
The Company's address is 4830 River Green Parkway, Duluth, Georgia
30136, and its telephone number is (770) 813-9200.
SECTION II. ADMINISTRATION
a. The Plan is administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee") consisting of not less than
three members of the Board of Directors. Each member of the Committee is
selected annually by the Board of Directors. Any member of the Committee may
be removed at any time, either with or without cause, and any vacancy on the
Committee may at any time be filled, by resolution adopted by the Board of
Directors. All members of the Committee are required to be "nonemployee
directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Code. For additional information about the
Committee, participants should contact the Company at the address and telephone
number listed above.
b. The Committee selects the participants and determines: (i)
when to grant a restricted stock award; (ii) the base price and the amount of
Common Stock subject to each restricted stock award; and (iii) the vesting
schedule of the award. The Committee also has authority to construe and amend
the Plan and all awards granted under it, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine (subject to Sections VI and
VII) the terms and provisions of the awards granted under the Plan (which need
not be identical) and to make all other determinations necessary or advisable
for administering the Plan.
April 23, 1997
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SECTION III. SHARES SUBJECT TO THE PLAN
a. Awards for a total of 4,750,000 shares of the Company's $.01
par value Common Stock (the "Common Stock") may be granted pursuant to the
terms of the Plan. The Common Stock subject to the Plan may be unissued shares
of Common Stock or shares of issued Common Stock held in the Company's
treasury, or both. No individual may receive awards for over 1,000,000 shares
of Common Stock over the life of the Plan.
b. The number of shares of the Company's Common Stock available
under the Plan, the maximum number of shares for which awards may be granted to
any one individual and the number of shares of outstanding awards are subject
to appropriate adjustment by the Committee in accordance with Section IX.
c. If any award granted under the Plan expires or otherwise
terminates for any reason without having been vested in full, the forfeited
stock again becomes available for issuance under the Plan.
SECTION IV. DURATION, AMENDMENT, AND TERMINATION
a. Unless sooner terminated by the Board of Directors, the Plan
will terminate on December 14, 2003. The termination or any amendment of the
Plan may not impair or adversely affect, without the consent of the
participants, the rights of holders of outstanding awards. The Boards of
Directors may amend or terminate the Plan at any time, and from time to time.
b. The Board of Directors may, from time to time, amend the Plan
without stockholder approval except to the extent that any such amendment fails
to comply with any applicable provision of the Code, ERISA or the rules of the
New York Stock Exchange or causes the Plan to fail to be treated as qualified
performance-based compensation under applicable Treasury Regulations.
SECTION V. ELIGIBILITY
Awards may be granted under the Plan only to executive officers and
senior managers of the Company or any of its subsidiaries. Members of the
Committee are not eligible to receive awards.
SECTION VI. TERMS AND CONDITIONS OF AWARDS
a. The LTIP provides opportunities for participants to earn
shares of the Company's Common Stock if performance goals and continued
employment requirements are met.
b. The LTIP operates over a five-year performance period. Under
the LTIP, each participant receives a contingent allocation of shares which can
be earned during the five-year performance period. The size of the
participant's total share allocation is established to provide a
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long-term incentive opportunity which is competitive with the practices of a
cross-section of U.S. industrial companies. If the share allocation is not
fully earned during the performance period, any remaining opportunity is
forfeited.
c. The share allocation is earned in increments for each 20%
increase in average stock price (with the average calculated over 20
consecutive trading days) over the base price set by the Committee (the fair
market value of the stock at the time the contingent allocations are made or,
where the Committee deems appropriate and the contingent allocations are made
within 10 business days after a prior allocation has been fully earned, the
stock price at which such prior allocation has been fully earned); accordingly,
the stock price must double during a five-year period for the full allocation
to be earned. The increments of award earnings for each 20% increase in stock
price are as follows:
<TABLE>
<CAPTION>
% OF
% INCREASE IN STOCK PRICE AWARD EARNED
------------------------- ------------
<S> <C>
20% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%
40% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%
60% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45%
80% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70%
100% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
d. Absent any action by the Committee to the contrary, when an
increment of the share allocation is earned, it will be awarded in the form of
restricted stock which will carry a five-year vesting period. Under such
vesting period, one-third of each award vests on the last day of the 36th,
48th, and 60th month, respectively, after each award is earned. The Committee
has discretionary authority to alter the normal vesting period relating to any
participant's award of restricted shares.
e. The ultimate value of the restricted stock is determined by
the stock price at the end of the vesting period. During the vesting period,
the earned awards of restricted stock are forfeitable upon voluntary
termination of employment prior to age 65 or upon termination of employment by
the Company for "cause." Upon retirement, at no earlier than age 65, awards
earned on or prior to that date immediately vest to the benefit of the
participant.
f. The LTIP requires stock price appreciation to earn awards, the
earned awards are 100% forfeitable for a period of three years if service is
broken, and the actual value of the award is determined at the time the stock
vests. During the vesting period, participants receive any dividends issued on
their restricted shares and have full voting rights, but they may not sell,
transfer, pledge or otherwise dispose of such shares except as provided in
Section XII(c).
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SECTION VII. CASH BONUS AWARDS
a. When the restricted shares are vested, a cash payment designed
to satisfy a portion of the federal and state income tax obligations of the
participant is then payable by the Company to the participant. Cash bonus
awards will be made on the last day of the 36th, 48th, and 60th month after
each award is earned unless the vesting schedule is altered by the Committee.
The cash bonus award shall be an amount equal to 40% of the value of the vested
shares on the date the stock award is earned.
b. The tax payment is provided to remove the necessity for the
executive to sell a significant portion of the stock earned under the LTIP to
pay taxes. The value of the tax payments is considered in determining the
appropriate size of the participant's share allocations.
SECTION VIII. DEATH, DISABILITY OR RETIREMENT OF PARTICIPANT
a. Upon the death or total disability of a participant or upon
retirement, at no earlier than age 65, the program will terminate on the date
of such event with respect to the participant, and award shares earned to that
date shall be considered vested and pass to the estate of the deceased or to
the disabled or retired participant.
b. The cash bonus award shall likewise be made to the estate of
the deceased or the disabled or retired participant.
SECTION IX. ADJUSTMENTS
The Committee may adjust the number of shares of Common Stock under
the Plan at any time to reflect any change in the outstanding shares of Common
Stock through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares, or other like change in capital structure of the Company.
With respect to outstanding awards, such adjustment shall be made such that the
participant shall be made whole and suffer no dilution as a result of any
change.
SECTION X. FEDERAL INCOME TAX CONSEQUENCES
a. Restricted Stock Awards. An individual receiving an award
under the Plan does not recognize taxable income on the date of grant of the
award, assuming that no Code Section 83(b) election is made with respect to the
restricted stock. An individual will ordinarily recognize taxable income on
the date he or she earns an award of shares based on the fair market value of
the Common Stock on the date the award is earned, and the Company is entitled
to a tax deduction at the same time and in the same amount. Upon subsequent
disposition, any further gain or loss is taxable either as a short-term or
long-term capital gain or loss, depending upon the length of time that the
shares of Common Stock are held.
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b. Dividends on Restricted Stock. Any dividends paid on
restricted stock are taxable to the individual recipient, and are deductible by
the Company, as ordinary compensation when paid, if no Code Section 83(b)
election has been made with respect to such stock.
c. Cash Bonus Awards. An individual receiving a cash bonus award
under the Plan must recognize ordinary income upon receipt of the award. The
cash bonus award is deductible by the Company in the year that the income is
recognized by the individual.
SECTION XI. CHANGE OF CONTROL
a. In the event of a Change in Control (as defined herein), the
Company will require any successor to fulfill the terms and conditions of the
Plan in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. However, effective
with the Change in Control, the participant will be immediately vested for all
shares earned under the Plan.
b. "Change in Control" shall mean change in the ownership of a
corporation, change in the effective control of a corporation or change in
ownership of a substantial portion of the corporation's assets, as described in
Section 280G of the Code, including the following:
(1) A change in the ownership of a corporation occurs on
the date that any one person, or more than one person acting as a
group, acquires ownership of stock of that corporation that, together
with stock held by such person or group, possess more than fifty
percent (50%) of the total fair market value or total voting power of
the stock of such corporation (unless any one person, or more than one
person acting as a group, who is considered to own more than fifty
percent (50%) of the total fair market value or total voting power of
the stock of a corporation, acquires additional stock).
(2) A change in the effective control of a corporation is
presumed (which presumption may be rebutted by the Committee) to occur
on the date that either: any one person, or more than one person
acting as a group, acquires (or has acquired during the twelve
(12)-month period ending on the date of the most recent acquisition by
such person or persons) ownership of stock of the corporation
possessing twenty percent (20%) or more of the total voting power of
the stock of such corporation; or a majority of members of the
corporation's board of directors is replaced during any twenty four
(24)-month period by directors whose appointment or election is not
endorsed by a majority of the members of the corporation's board of
directors prior to the date of the appointment or election of such new
directors.
(3) A change in the ownership of a substantial portion of
a corporation's assets occurs on the date that any one person, or more
than one person acting as a group, acquires (or has acquired during
the twelve (12)-month period ending on the date of the most recent
acquisition by such person or persons) assets from the corporation
that have a total fair
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market value equal to or more than one-third of the total fair market
value of all of the assets of the corporation immediately prior to
such acquisition or acquisitions unless the assets are transferred to:
a stockholder of the corporation (immediately before the asset
transfer) in exchange for or with respect to its stock; an entity,
fifty percent (50%) or more of the total value or voting power of
which is owned, directly or indirectly by the corporation; a person,
or more than one person acting as a group, that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting
power of all of the outstanding stock of the corporation; or an
entity, at least fifty percent (50%) of the total value or voting
power is owned, directly or indirectly, by a person, or more than one
person acting as a group, that owns directly or indirectly, fifty
percent (50%) or more of the total value of voting power of all of the
outstanding stock of the corporation.
SECTION XII. RESTRICTIONS ON RESALES
a. An employee shall have no right to sell, assign, transfer,
pledge or otherwise dispose of or encumber any interest in any right to receive
shares of Common Stock granted under the LTIP except by will or the laws of
descent and distribution, and, if any employee earns any shares of Common Stock
during the first six months of any five-year performance period, the employee
shall hold (within the meaning of Rule 16b-3 of the Exchange Act) such stock at
least until the end of such six month period.
b. Since the participants in the Plan would generally be
considered "affiliates" of the Company, as that term is defined in the Rules
and Regulations under the Securities Act of 1933 (the "Securities Act"), shares
of the Company's Common Stock acquired under awards may be subject to
restrictions on resale imposed by the Securities Act. Such shares could be
resold under the terms of Rule 144 of the Rules and Regulations, pursuant to
another applicable exemption, if any, from the registration requirements of the
Securities Act, or pursuant to an effective registration statement, should the
Company elect to prepare and file one with the Securities and Exchange
Commission. Rule 144 limits the number of shares which may be sold by an
affiliate within a three-month period. An "affiliate" of the Company is
defined by the Rules and Regulations as a person that "directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with" the Company. Directors, officers, substantial
stockholders and others, who by one means or another have the ability to
exercise control over the Company, may be deemed to be "affiliates." In
connection with the awards, the Company may, in order to ensure that resales
are made in compliance with the Securities Act, imprint a legend on
certificates representing shares awarded to the effect that the shares may not
be resold in the absence of compliance with the applicable restrictions or a
determination that no restrictions are applicable.
c. Notwithstanding any language to the contrary, during the
vesting period participants shall have the right (subject to Section XII(a)) to
transfer all or any portion of the participants' restricted shares to any of
the following: a revocable living trust primarily for the benefit of the
participant, an irrevocable trust in which the participant is the settlor, or a
partnership in which the participant is a general partner.
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SECTION XIII. MISCELLANEOUS
a. No award payable under the Plan shall be deemed salary or
compensation for the purpose of computing benefits under any employee benefit
plan unless the Company shall determine otherwise.
b. The Plan and the grant of awards shall be subject to all
applicable federal and state laws, rules and regulations and to such approval
by any governmental or regulatory agency as may be required.
c. The terms of the Plan shall be binding upon the Company and
its successors and assigns.
d. Captions preceding the sections hereof are inserted solely as
a matter of convenience and in no way define or limit the scope or intent of
any provision hereof.
e. Nothing contained in this Plan shall prevent the Company from
adopting or continuing in effect other or additional compensation arrangements.
SECTION XIV. EFFECTIVE DATE
a. The Effective Date of the Plan shall be December 14, 1993. No
awards will be granted under the Plan after the expiration of ten years from
the Effective Date.
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EXHIBIT 10.11
AGCO CORPORATION
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
SECTION I. PURPOSE
The AGCO Corporation Nonemployee Director Stock Incentive Plan (the
"Plan") is designed to enhance the Company's long-term growth and financial
performance by strengthening the Company's ability to attract and retain the
services of experienced and knowledgeable nonemployee directors. The Plan is
structured to enable nonemployee directors to participate in the Company's
growth and link their personal interests to those of Company stockholders. The
Plan is not subject to any provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") nor is it qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
SECTION II. ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors of the Company (the "Committee") consisting of not less than three
members of the Board of Directors. The Committee has the authority to construe
the Plan and all awards granted under it, to prescribe, amend and rescind rules
and regulations relating to the Plan and to make all other determinations
necessary or advisable for administering the Plan. Any action taken by the
Committee with respect to the administration of the Plan which would result in
the Plan ceasing to be administered in accordance with the requirements of Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") shall be null and void.
SECTION III. SHARES SUBJECT TO THE PLAN
a. A total of 100,000 shares of the Company's $.01 par value Common
Stock (the "Common Stock") may be issued pursuant to the terms of the Plan.
The stock subject to the Plan may be unissued shares or shares of issued stock
held in the Company's treasury, or both.
b. The number of shares of the Company's Common Stock available under
the Plan, and the number of shares of outstanding awards, are subject to
adjustment by the Board of Directors, on the same basis as all other shares of
Common Stock in the event of any merger, reorganization, consolidation,
recapitalization, liquidation, stock dividend, split-up, share combination, or
other change in the corporate structure of the Company affecting shares of
Common Stock.
c. If any award granted under the Plan expires or otherwise terminates
for any reason without having been earned, the related shares shall again
become available for award under the Plan.
April 23, 1997
2
Section IV. DURATION, AMENDMENT, AND TERMINATION
a. Unless sooner terminated by the Board of Directors, the Plan
will terminate on December 14, 2006. The Board of Directors may amend or
terminate the Plan at any time, and from time to time. Any amendment to the
Plan shall become effective as of the date set forth in such amendment.
b. The Board of Directors may, from time to time, amend the Plan
without stockholder approval except to the extent that any such amendment fails
to comply with any applicable provision of the Code, ERISA or the rules of the
New York Stock Exchange.
Section V. ELIGIBILITY
Awards may be granted under the Plan only to nonemployee directors of the
Company.
Section VI. TERMS AND CONDITIONS OF AWARDS
a. The Plan provides opportunities for nonemployee directors to
earn shares of the Company's Common Stock if stock appreciation goals are met.
The Plan operates on three-year performance periods. Under the Plan, each
nonemployee director will be awarded the right to receive 2,000 shares of
Common Stock which can be earned during a three-year performance period in
effect for that participant. If the awarded shares are not fully earned before
the end of the three-year performance period or before the departure from the
Board of Directors for any reason, whichever comes first, any unearned awards
are forfeited.
b. Each person who was a nonemployee director on December 14,
1994 shall be awarded a right to receive 2,000 shares of Common Stock. Each
person who thereafter becomes a nonemployee director shall be awarded a right
to receive 2,000 shares of Common Stock as of the date he or she first begins
to serve as a nonemployee director. At the end of each three-year performance
period or at the end of the period over which all shares awarded for a three-
year performance period are earned in full, whichever comes first, each
continuing nonemployee director shall be awarded a right to receive an
additional 2,000 shares of Common Stock which can be earned during an
additional three-year period.
c. Awarded shares are earned in increments for each 15% increase
in average stock price (with the average calculated over 20 consecutive trading
days using the closing price for a share of Common Stock as reported in the
record of composite transactions for the New York Stock Exchange) over the base
price. The base price is defined as the closing price for a share of Common
Stock on the date the award is made as reported for such date in the record of
composite transactions for the New York Stock Exchange. The stock price must
increase 60% for the full award to be earned. The increments of award earnings
for each 15% increase over the base price are as follows:
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<TABLE>
<CAPTION>
% Increase
In Base % of
Stock Price Award Earned
----------- ------------
<S> <C>
15% 25%
30% 50%
45% 75%
60% 100%
</TABLE>
d. When an increment of the awarded shares is earned, the shares
shall be issued to the participant in the form of restricted stock which vests
12 months after the end of the three-year performance period for which the
shares were awarded or 12 months after the date all of the shares awarded for
the three-year performance period have been earned in full, whichever comes
first. In the event of departure from the Company's Board of Directors for any
reason, all earned awards vest.
e. The Plan requires stock price appreciation to earn awards and
the actual value of the award is determined at the time the stock vests
pursuant to the vesting period described above. During the vesting period,
participants receive any dividends issued on their restricted shares and have
full voting rights, but they may not sell, assign, transfer, pledge or
otherwise dispose of such shares.
f. A nonemployee director shall have no right to sell, assign,
transfer, pledge or otherwise dispose of or encumber any interest in any right
to receive shares of Common Stock granted under the Plan, and, if a nonemployee
director earns any shares of Common Stock during the first six months of any
three-year performance period, the nonemployee director shall hold (within the
meaning of Rule 16b-3 of the Exchange Act) such stock at least until the end of
such six month period.
Section VII. CASH BONUS AWARDS
When the restricted shares are earned, a cash payment designed to
satisfy a portion of the federal and state income tax obligations of the
participant is then payable by the Company to the participant. The cash bonus
award shall be an amount equal to 40% of the value of the shares on the date
the stock award is earned and will be paid on the last day of the calendar year
in which the awarded shares are earned. Such value shall be determined using
the closing price for a share of Common Stock as reported in the record of
composite transactions for the New York Stock Exchange on the date the awarded
shares are earned. The tax payment is provided to remove the necessity for the
nonemployee director to sell a significant portion of the stock earned under
the Plan to pay taxes.
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Section VIII. DEATH, DISABILITY OR RETIREMENT OF PARTICIPANT
a. Upon the death or total disability of a participant or upon
retirement, the program will terminate on the said date of the event with
respect to the participant, and awarded shares earned to that date shall be
considered vested and pass to the estate of the deceased or to the disabled or
retired participant.
b. The cash bonus award shall likewise be made to the estate of the
deceased or the disabled or retired participant.
Section IX. RESTRICTIONS ON RESALES
Since the participants in the Plan are directors of the Company and
would generally be considered "affiliates" of the Company, as that term is
defined in the Rules and Regulations under the Securities Act of 1933 (the
"Act"), shares of the Company's Common Stock acquired under awards may be
subject to restrictions on resale imposed by the Act. Such shares could be
resold under the terms of Rule 144 of the Rules and Regulations, pursuant to
another applicable exemption, if any, from the registration requirements of the
Act, or pursuant to an effective registration statement, should the Company
elect to prepare and file one with the Securities and Exchange Commission.
Rule 144 limits the number of shares which may be sold by an affiliate within a
three-month period. An "affiliate" of the Company is defined by the Rules and
Regulations as a person that "directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with"
the Company. Directors, officers, substantial shareholders and others, who by
one means or another have the ability to exercise control over the Company, may
be deemed to be "affiliates." In connection with the awards, the Company may,
in order to ensure that resales are made in compliance with the Act, imprint a
legend on certificates representing shares awarded to the effect that the
shares may not be resold in the absence of compliance with the applicable
restrictions or a determination that no restrictions are applicable.
Section X. MISCELLANEOUS
a. Shares awarded and earned under the Plan shall be in addition to
any annual retainer, committee fees, or other compensation payable to each
nonemployee director as a result of his or her service on the Board of
Directors.
b. The Plan and awards granted under the Plan shall be
subject to all applicable federal and state laws, rules and regulations and to
such approval by any governmental or regulatory agency as may be required.
With respect to any nonemployee directors subject to Section 16 of the Exchange
Act, transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the
extent any provision of the Plan or action by the Board of Directors fails to
so comply, it shall be deemed null and void to the extent permitted by law and
deemed advisable by the Board of Directors.
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c. The terms of the Plan shall be binding upon the Company and its
successors and assigns.
d. Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.
e. Nothing contained in this Plan shall prevent the Company from
adopting or continuing in effect other or additional compensation arrangements.
SECTION XI. EFFECTIVE DATE AND STOCKHOLDER APPROVAL
a. The Effective Date of the Plan shall be December 14, 1994,
subject to approval by the holders of a majority of the Company's common stock
at the 1995 Annual Meeting and all awards made before such approval shall be
made subject to such approval. No awards will be granted under the Plan after
the expiration of twelve years from the Effective Date.
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EXHIBIT 10.22
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (the "Agreement") entered into
this 1st day of February, 1995, by and between AGCO CORPORATION, a Delaware
corporation (the "Company"), and Chris Perkins (the "Executive"),
witnesseth:
In consideration of the mutual covenants and agreements hereinafter set
forth, the Company and the Executive do hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive and the Executive
hereby agrees to serve the Company on the terms and conditions set forth herein.
(b) The employment term shall commence on February 1, 1995 and
shall be for a term of three (3) years. Each year, at the end of the first year
of service and on the anniversary date of the end of the first year of service
under the Agreement, the Agreement shall be automatically extended for an
additional year, unless the Company notifies the Executive prior to the
anniversary date, in writing, that it desires to terminate the Agreement or
unless otherwise terminated earlier in accordance with Section 6 or any other
provision of the Agreement. The Company may terminate the Agreement in this
manner without cause. If the Executive is notified of the termination of the
Agreement, the Executive will continue similar service to the Company as
directed, and the Company shall pay the Executive his Base Salary (as defined in
Section 3(a) of the Agreement) then in effect and will continue the Executive's
group health and life insurance for the balance of the two (2) year period
remaining on the Agreement. If the Executive fails to perform similar duties as
directed by the Company or voluntarily terminates the availability of services
to accept other employment, the Company may cease payment of the Base Salary and
insurance coverage upon thirty (30) days written notice. In the event of notice
of termination without cause, the Company will reasonably
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cooperate with the Executive and not be unreasonable in providing the use of
facilities or free time for outplacement.
2. POSITION AND DUTIES.
The Executive shall serve as Vice President of Finance,
International Division, of the Company and shall perform such duties and
responsibilities as may from time to time be prescribed by the Company's board
of directors (the "Board"), provided that such duties and responsibilities are
consistent with the Executive's position. The Executive shall perform and
discharge faithfully, diligently and to the best of his/her ability such duties
and responsibilities and shall devote all of his/her working time and efforts to
the business and affairs of the Company and its affiliates.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay to the Executive an
annual base salary ("Base Salary") of One Hundred Thousand Dollars
($100,000.00), payable in equal semi-monthly installments throughout the term of
such employment subject to Sections 5 and 6 hereof and subject to applicable tax
and payroll deductions. The Company shall consider increases in the Executive's
Base Salary annually, and any such increase in salary implemented by the Company
shall become the Executive's Base Salary for purposes of this Agreement.
(b) INCENTIVE COMPENSATION. Provided Executive has duly
performed his/her obligations pursuant to this Agreement, the Executive shall be
entitled to participate in or receive benefits under the Management Incentive
Compensation Plan implemented by the Company.
(c) OTHER BENEFITS. During the term of this Agreement, the
Executive shall be entitled to participate in the Stock Option Plan implemented
by the Company and any employee benefit plans and arrangements which are
available to senior executive officers of the Company, including, without
limitation, group health and life insurance, pension and savings and the Senior
Management Employment Policy.
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(d) FRINGE BENEFITS. The Company shall pay or reimburse
Executive for all reasonable and necessary expenses incurred by him/her in
connection with his/her duties hereunder, upon submission by Executive to the
Company of such written evidence of such expense as the Company may require.
Throughout the term of this Agreement, the Company will provide Executive with
the use of a vehicle for purposes within the scope of his/her employment and
shall pay all expenses for fuel, maintenance and insurance in connection with
such use of the automobile. The Company further agrees that Executive shall be
entitled to four (4) weeks of vacation in any year of the term of employment
hereunder. Nothing paid to the Executive under any such Company plans or
arrangements shall be deemed to be in lieu of compensation to the Executive
hereunder.
4. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION
COVENANTS.
(a) ACKNOWLEDGEMENTS. The Executive acknowledges that as
Vice President of Finance, International Division of the Company (i) he/she
frequently will be exposed to certain "Trade Secrets" and "Confidential
Information" of the Company (as those terms are defined in Subsection 4(b)),
(ii) his/her responsibilities on behalf of the Company will extend to all
geographical areas where the Company is doing business, and (iii) any
competitive activity on his/her part during the term of his employment and for a
reasonable period thereafter would necessarily involve his/her use of the
Company's Trade Secrets and Confidential Information and, therefore, would
unfairly threaten the Company's legitimate business interests, including its
substantial investment in the proprietary aspects of its business and the
goodwill associated with its customer base. Moreover, the Executive acknowledges
that, in the event of the termination of his/her employment with the Company,
he/she would have sufficient skills to find alternative, commensurate work in
his/her field of expertise that would not involve a violation of any of the
provisions of this Section 4. Therefore, the Executive acknowledges and agrees
that it is reasonable for the Company to require him/her to abide by the
covenants set forth in this Section 4. The parties acknowledge and agree that if
the nature of the Executive's responsibilities for or on behalf of the Company
and the geographical areas in which the Executive must fulfill them materially
change, the parties will execute appropriate amendments to the scope of the
covenants in this Section 4.
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(b) DEFINITIONS. For purposes of this Section 4, the following
terms shall have the following meanings:
(i) "COMPETITIVE POSITION" shall mean (i) the Executive's
direct or indirect equity ownership (excluding equity ownership of less than one
percent (1%) or control of all or any portion of a Competitor, or (ii) any
employment, consulting, partnership, advisory, directorship, agency, promotional
or independent contractor arrangement between the Executive and any Competitor
whereby the Executive is required to perform executive level services
substantially similar to those that he will perform for the Company as its Vice
President of Finance, International Division.
(ii) "COMPETITOR" of the Company shall refer to any person or
entity engaged, wholly or partly, in the business of manufacturing and
distributing farm equipment machinery and replacement parts.
(iii) "CONFIDENTIAL INFORMATION" shall mean the proprietary
and confidential data or information of the Company, other than "Trade Secrets"
(as defined below), which is of tangible or intangible value to the Company and
is not public information or is not generally known or available to the
Company's competitors.
(iv) "TRADE SECRETS" shall mean information of the Company,
including, but not limited to, technical or non-technical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, products plans, or lists of actual
or potential customers or suppliers, which: (a) derives economic value, actual
or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
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(v) "WORK PRODUCT" shall mean all work product, property,
data, documentation, "know-how", concepts or plans, inventions, improvements,
techniques, processes or information of any kind, relating to the Company and
its business prepared, conceived, discovered, developed or created by the
Executive for the Company or any of the Company's customers.
(c) NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY
(i) The Executive hereby covenants and agrees that: (i) with
regard to information constituting a Trade Secret, at all times during the
Executive's employment with the Company and all times thereafter during which
such information continues to constitute a Trade Secret; and (ii) with regard to
any Confidential Information, at all times during the Executive's employment
with the Company and for three (3) years after the termination of the
Executive's employment with the Company, the Executive shall regard and treat
all information constituting a Trade Secret or Confidential Information as
strictly confidential and wholly owned by the Company and will not, for any
reason in any fashion, either directly or indirectly, use, sell, lend, lease,
distribute, license, give, transfer, assign, show, disclose, disseminate,
reproduce, copy, appropriate or otherwise communicate any such information to
any party for any purpose other than strictly in accordance with the express
terms of this Agreement and other than as may be required by law.
(ii) To the greatest extent possible, any Work Product shall
be deemed to be "work made for hire" (as defined in the Copyright Act, 17
U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the Company. The
Executive hereby unconditionally and irrevocably transfers and assigns to the
Company all rights, title and interest the Executive may currently have or in
the future may have by operation of law or otherwise in or to any Work Product,
including, without limitation, all patents, copyrights, trademarks, service
marks and other intellectual property rights. The Executive agrees to execute
and deliver to the Company any transfers, assignments, documents or other
instruments which the Company may deem necessary or appropriate to vest complete
title and ownership of any Work Product, and all rights therein, exclusively in
the Company.
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(iii) The Executive shall immediately notify the Company of
any intended or unintended, unauthorized disclosure or use of any Trade Secrets
or Confidential Information by the Executive or any other person of which the
Executive becomes aware. In addition to complying with the provisions of Section
4(c) (i) and 4 (c) (ii), the Executive shall exercise his best efforts to assist
the Company, to the extent the Company deems reasonably necessary, in the
procurement of any protection of the Company's rights to or in any of the Trade
Secrets or Confidential Information.
(iv) Immediately upon termination of the Executive's
employment with the Company, or at any point prior to or after that time upon
the specific request of the Company, the Executive shall return to the Company
all written or descriptive materials of any kind in the Executive's possession
or to which the Executive has access that constitute or contain any Confidential
Information or Trade Secrets, and the confidentiality obligations of this
Agreement shall continue until their expiration under the terms of this
Agreement.
(d) NON-COMPETITION. The Executive agrees that during the term of
his/her employment, he/she will not, either directly or indirectly, alone or in
conjunction with any other party, (i) accept or enter into a Competitive
Position with a Competitor of the Company, or (ii) take any action in
furtherance of or in conjunction with a Competitive Position with a Competitor
of the Company. The Executive agrees that for two (2) years after any
termination of his employment with the Company, he/she will not, in the
"Restricted Territory" (as defined in the next sentence), either directly or
indirectly, alone or in conjunction with any other party, (A) accept or enter
into a Competitive Position with a Competitor of the Company, or (B) take any
action in furtherance of or in conjunction with a Competitive Position with a
Competitor of the Company. For purposes of this Section 4, "Restricted
Territory" shall refer to all geographical areas comprised within the fifty
United States of America, Western Europe and Canada. The Executive and the
Company each acknowledge that the scope of the Restricted Territory is
reasonable because (1) the Company is conducting substantial business in all
fifty states (as well as several foreign countries), (2) the Executive occupies
one of the top executive positions with the Company, and (3) the
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Executive will be carrying out his employment responsibilities in all locations
where the Company is doing business.
(e) NON-SOLICITATION OF CUSTOMERS. The Executive agrees that
during the term of his/her employment, he/she will not, either directly or
indirectly, along or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate any customer or
actively sought prospective customer of the Company for or on behalf of any
Competitor of the Company. The Executive agrees that for two (2) years after any
termination of his employment with the Company, he/she will not, in the
Restricted Territory, either directly or indirectly, alone or in conjunction
with any other party, for or on behalf of a Competitor of the Company, solicit,
divert or appropriate or attempt to solicit, divert or appropriate any customer
or actively sought prospective customer of the Company with whom he had
substantial contact during a period of time of up to, but no longer than,
eighteen (18) months prior to any termination of his/her employment with the
Company.
(f) NON-SOLICITATION OF COMPANY PERSONNEL. The Executive agrees
that, except to the extent that he/she is required to do so in connection with
his/her express employment responsibilities on behalf of the Company, during the
term of his/her employment he/she will not, either directly or indirectly, alone
or in conjunction with any other party, solicit or attempt to solicit any
employee, consultant, contractor or other personnel of the Company to terminate,
alter or lessen that party's affiliation with the Company or to violate the
terms of any agreement or understanding between such employee, consultant,
contractor or other person and the Company. The Executive agrees that for two
(2) years after any termination of his/her employment with the Company, and in
the Restricted Territory, he/she will not, either directly or indirectly, alone
or in conjunction with any other party, solicit or attempt to solicit any
"material" or "key" (as those terms are defined in the next sentence) employee,
consultant, contractor or other personnel of the Company to terminate, alter or
lessen that party's affiliation with the Company or to violate the terms of any
agreement or understanding between such employee, consultant, contractor or
other person and the Company. For purposes of the preceding sentence, "material"
or "key" employees, consultants, contractors or other
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personnel of the Company are those who have access to the Company's Trade
Secrets and Confidential Information and whose position or affiliation with the
Company is significant.
(g) REMEDIES. Executive agrees that damages at law for the
Executive's violation of any of the covenants in this Section 4 would not be an
adequate or proper remedy and that should the Executive violate or threaten to
violate any of the provisions of such covenants, the Company or its successors
or assigns shall be entitled to obtain a temporary or permanent injunction
against Executive in any court having jurisdiction prohibiting any further
violation of any such covenants, in addition to any award or damages,
compensatory, exemplary or otherwise, for such violation, if any.
(h) PARTIAL ENFORCEMENT. The Company has attempted to limit
the rights of the Executive to compete only to the extent necessary to protect
the Company from unfair competition. The Company, however, agrees that, if the
scope of enforceability of these restrictive covenants is in any way disputed at
any time, a court or other trier of fact may modify and enforce the covenant to
the extent that it believes to be reasonable under the circumstances existing at
the time.
5. SEVERANCE.
(a) CHANGE IN CONTROL. In order to induce the Executive to
remain in the employ of the Company, the Executive is provided the severance
benefits set forth in this Section 5, in the event the Executive's employment
with the Company is terminated subsequent to a change in control under the
circumstances described below. In exchange for the severance benefits the
Executive agrees that in the event of a Change in Control (as defined in
Subsection (f) below), the Executive will not voluntarily terminate his
employment with the Company until thirty (30) days after the Change in Control.
(b) SEVERANCE BENEFITS. No benefits shall be payable under
this Section 5 unless there shall have been a Change in Control. In the event a
Change in Control occurs, the Executive is entitled to the following benefits
upon any subsequent termination of the Executive's employment within two (2)
years from the date of such Change in Control, unless such termination is (a)
because of the death or Incapacity (as
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defined in Section 6(b) below) of the Executive, (b) by the Company for Cause
(as defined in Subsection (f) below), (c) by the Executive other than for Good
Reason (as defined in Subsection (f) below) or (d) upon the Executive's
voluntary retirement.
(i) The Company shall pay the Executive within thirty
(30) days of the date of termination (subject to Subsection (ii) below)
an amount in cash equal to three times the Executive's Annual Base
Compensation (as defined in Subsection (f) below; provided that in no
event shall the amount payable pursuant to this Section 5, when added
to any other payments which are deemed to be "parachute payments" as
defined in Section 280G of the Internal Revenue Code, as amended (and
as hereafter amended) (the "Code"), equal or exceed three (3) times the
Executive's "base amount" as determined pursuant to Section 280G of the
Code for purposes of any excise tax under Section 4999 of the Code. The
foregoing shall be calculated and determined by Arthur Andersen & Co.
or such other nationally recognized independent accounting firm as may
be mutually acceptable to the Company and the Executive hereafter. In
all events and notwithstanding anything herein to the contrary, any
amounts payable under this Section 5, when taken together with the
present value of all other payments in the nature of compensation to
the Executive which are contingent on a Change in Control, shall be
reduced by the smallest amount necessary to reduce the aggregate amount
of all such payments to an amount equal to three (3) times such base
amount less One Dollar ($1.00).
(ii) The Executive may elect by written notice given to
the Company prior to a Change in Control to receive all or any portion
of the payments to which the Executive is entitled to receive as
described above in one or more installment payments at such time or
times as the Executive shall specify in the written notice, together
with interest thereon calculated at a rate of interest equal to the
prime rate of Chemical Bank of NYC as in effect from time to time from
the date of termination.
(iii) The Company shall continue to cover the Executive
under, or provide the Executive with insurance coverage no less
favorable than, the life, disability and health benefit plans
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which are provided to the Company's then-current, similarly situated
Executives for a period equal to the lesser of (X) three (3) years
following the date of termination, or (Y) until the Executive is
provided benefits by another employer substantially comparable to the
benefits provided by the Company.
(iv) In the event of the Executive's death subsequent to
termination, all payments or benefits to which the Executive is
entitled under this Section 5 shall be paid to the Executive's
designated beneficiary or beneficiaries or, if none are designated, to
the Executive's estate.
(v) All payments and benefits to which the Executive is
entitled under this Section 5 shall be made and provided without
offset, deduction or mitigation on account of income the Executive may
receive from other employment or otherwise.
(vi) All payments and benefits due or required to be made
or provided in the future to the Executive under this Section 5 shall
become immediately due and payable without further notice or demand,
upon the occurrence of any Event of Acceleration.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business of the Company, by agreement satisfactory to the Executive, to
expressly assume and agree to perform the terms of this Section 5 in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place. The provisions of this Section 5 shall
continue to apply to each subsequent successor.
(c) The Company shall pay all of the costs and expenses, including
all attorneys' fees and disbursements, at least monthly, in connection with any
disputes, legal proceedings, arbitrations or other conflicts, whether or not
instituted by the Company or the Executive relating to the interpretation or
enforcement of any provision of this Section.
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(d) EFFECT. This Section 5 is not intended and shall not be deemed
to guarantee the Executive of any term of employment with the Company but only
to designate the severance benefits the Executive is entitled to under the
circumstances set forth in this Section 5. Moreover, this Section 5 is not
intended to and shall not effect, limit or terminate any other agreement or
arrangement between the Executive and the Company presently in effect or entered
into hereafter.
(e) EXCLUSIVE REMEDY. The Executive and the Company acknowledge
and agree that in the event the Executive receives compensation under this
Section 5, the Company shall be relieved of any and all other obligations under
this Agreement except for full compliance with the terms of this Section 5. By
way of illustration and not limitation, if the Executive's employment is
terminated in connection with a Change in Control the Company would pay the
Executive severance benefits pursuant to the terms of this Section 5 and would
not be obligated to the Executive for continuation of the Executive's employment
pursuant to Section 2 or payment under Section 6(e) below.
(f) DEFINITIONS. As used in this Section 5, the following
capitalized terms have the meaning indicated below:
(i) "ANNUAL BASE COMPENSATION" shall mean the Executive's
annualized includable compensation for the base period as defined,
discussed and illustrated in Section 280G of the Code and the duly
promulgated Treasury Regulations thereunder.
(ii) "CAUSE" shall be defined as set forth in Section
6(c) below.
(iii) "CHANGE IN CONTROL" shall mean changes in the
ownership of a corporation, changes in the effective control of a
corporation and changes in ownership of a substantial portion of a
corporation's assets all as defined, discussed and illustrated in
Section 280G of the Code and the duly promulgated Treasury Regulations
thereunder and specifically Q-27, Q-28 and Q-29
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respectively of proposed Treasury Regulation Section 1.280G-1. Without
limiting the foregoing and by way of example:
(A) A change in the ownership of a corporation occurs on the
date that any one person, or more than one person acting as a group,
acquires ownership of stock of that corporation that, together with
stock held by such person or group, possess more than fifty percent
(50%) of the total fair market value or total voting power of
the stock of such corporation. However, if any one person, or more than
one person acting as a group, is considered to own more than fifty
percent (50%) of the total fair market value or total voting power of
the stock of a corporation, the acquisition of additional stock by the
same person or persons is not considered to cause a change in the
ownership of the corporation. An increase in the percentage of stock
owned by any one person, or persons acting as a group, as a result of a
transaction in which the corporation acquires its stock in exchange for
property will be treated as an acquisition of stock.
(B) A change in the effective control of a corporation is
presumed (which presumption may be rebutted) to occur on the date that
either: any one person, or more than one person acting as a group,
acquires (or has acquired during the twelve (12)-month period ending on
the date of the most recent acquisition by such person or persons)
ownership of stock of the corporation possessing twenty percent (20%)
or more of the total voting power of the stock of such corporation; or
a majority of members of the corporation's board of directors is
replaced during any twenty four (24)-month period by directors whose
appointment or election is not endorsed by a majority of the members of
the corporation's board of directors prior to the date of the
appointment or election of such new directors.
(C) A change in the ownership of a substantial portion of a
corporation's assets occurs on the date that any one person, or more
than one person acting as a group, acquires (or has acquired during the
twelve (12) month period ending on the date of the most
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recent acquisition by such person or persons) assets from the
corporation that have a total fair market value equal to or more than
one-third of the total fair market value of all of the assets of the
corporation immediately prior to such acquisition or acquisitions. The
transfer of assets by a corporation is not treated as a change in the
ownership of such assets if the assets are transferred to: a
shareholder of the corporation (immediately before the asset transfer)
in exchange for or with respect to its stock; an entity, fifty percent
(50%) or more of the total value or voting power of which is owned,
directly or indirectly by the corporation; a person, or more than one
person acting as a group, that owns, directly or indirectly, fifty
percent (50%) or more of the total value or voting power of all of the
outstanding stock of the corporation; or an entity, at least fifty
percent (50%) of the total value or voting power is owned, directly or
indirectly, by a person, or more than one person acting as a group,
that owns directly or indirectly, fifty percent (50%) or more of the
total value of voting power of all of the outstanding stock of the
corporation.
(iv) "EVENT OF ACCELERATION" SHALL MEAN:
(A) The failure of the Company to make any
payment or provide any benefit to which the Executive is
entitled under this Agreement when due or as accelerated,
which failure continues thirty (30) days after the due date
thereof; or
(B) The failure by the Company to obtain the
assumption of the agreement to perform this Agreement by any
successor as contemplated herein; or
(C) A decrease by more than forty percent
(40%) within any two (2) year period of the book value of the
net assets of the Company and its subsidiaries, taken as a
whole; or
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(D) The filing of a petition by or against
the Company for adjudication as a bankrupt under the Federal
Bankruptcy Act, or for reorganization, or the filing of any
petitions for similar relief; the commencement of any action
or proceeding for the appointment of a receiver or a trustee
of all or substantially all of the property of the Company;
the taking or possession of any property of the Company by any
governmental or judicial officer or agency pursuant to
statutory authority for the dissolution, rehabilitation,
reorganization, or liquidation of the Company; the dissolution
or commencement of any action or proceeding, whether voluntary
or involuntary, for the dissolution or liquidation of the
Company; or the making by the Company of an assignment for the
benefit of creditors; provided that the Company shall have
ninety (90) days within which to affect the dismissal of any
involuntary proceedings of a type referred to above that is
commenced against it.
(v) "GOOD REASON" shall mean, without the written consent of
the Executive:
(A) A reduction in the Executive's base salary or a
reduction in the Executive's benefits received from the
Company other than in connection with an across the board
reduction in salaries and/or benefits for similarly situated
employees of the Company or pursuant to the Company's standard
retirement policy; or
(B) The relocation of the Executive's full time
office to a location greater than fifty (50) miles from the
Company's current corporate office; or
(C) A reduction in the Executive's corporate title or
duties; or
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(D) A material breach by the Company of this
Agreement.
(vi) "NORMAL RETIREMENT DATE" shall mean the first day of the
month coincident with or next following the Executive's sixty-fifth
(65th) birthday.
6. TERMINATION.
(A) DEATH. The Executive's employment hereunder shall
terminate upon the death of the Executive, provided, however, that for purposes
of the payment of compensation and benefits to the Executive under this
Agreement the death of the Executive shall be deemed to have occurred ninety
(90) days from the last day of the month in which the death of the Executive
shall have occurred.
(b) INCAPACITY. The Company may terminate the Executive's
employment hereunder at the end of any calendar month by giving written Notice
of Termination to the Executive in the event of the Executive's incapacity due
to physical or mental illness which prevents the proper performance of the
duties of the Executive set forth herein or established pursuant hereto for a
substantial portion of any six (6) month period of the Executive's term of
employment hereunder. Any question as to the existence, extent or potentiality
of illness or incapacity of Executive upon which Company and Executive cannot
agree shall be determined by a qualified independent physician selected by the
Company and approved by Executive (or, if Executive is unable to give such
approval, by any adult member of the immediate family or the duty appointed
guardian of the Executive). The determination of such physician certified in
writing to the Company and to Executive shall be final and conclusive for all
purposes of this Agreement.
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice of Termination to the
Executive. For the purposes of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment hereunder upon the Executive's (i) habitual
drunkenness or willful failure materially to perform and discharge the duties
and responsibilities of the Executive hereunder or any breach of the Executive
of the provisions of Section 4 hereof, or (ii)
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misconduct that is materially injurious to the Company or (iii) conviction of a
felony involving the personal dishonesty of the Executive or moral turpitude.
(d) NOTICE OF TERMINATION. Any termination by the Company pursuant to
the Subsections (b) or (c) above shall be communicated by written Notice of
Termination to the Executive. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision of this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination. A date of termination specified in Notice of Termination shall not
be dated earlier than ninety (90) days from the date such Notice is delivered
or mailed to the Executive.
(e) Obligation to Pay. Except upon voluntary termination by the
Executive or termination of the Executive's employment in connection with a
Change in Control (in which case Section 5 shall govern) and subject to Section
7 below, the Company shall pay the compensation specified in this Agreement to
the Executive for the remainder of the term set forth in Section l(b) or for
the period specified in this Subsection 6 (e), whichever period is the lesser.
The Company also will continue insurance benefits during the remainder of the
term set forth in Section l(b). If the Executive's employment shall be
terminated by reason of death, the estate of the Executive shall be paid all
sums otherwise payable to The Executive through the end of the third month
after the month in which the death of the Executive occurred and all bonus or
other incentive benefits accrued or accruable to the Executive through the end
of the month in which the death of the Executive occurred and the Company shall
have no further obligations to the Executive under this Agreement. If the
Executive's employment is terminated by reason of incapacity, the Executive or
the person charged with legal responsibility for the Executive's estate shall
be paid all sums otherwise payable to the Executive, including the bonus and
other benefits accrued or accruable to the Executive, through the date of
termination specified in the Notice of Termination, and the Company shall have
no further obligations to the Executive under this Agreement. If the
Executive's employment shall be terminated for Cause, the Company shall pay the
Executive his Base Salary through the date of termination
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specified in the Notice of Termination and the Company shall have no further
obligations to the Executive under this Agreement.
7. Effect of Re-Employment/Other Compensation.
(a) If at any time after the termination of the Executive's
employment, the Company is continuing to pay benefits to the Executive pursuant
to Section 6(e) above, and the Executive enters into new employment with a
party other than the Company ("Re-Employment"), the Executive shall immediately
notify the Company in writing of the Executive's monthly compensation to be
received from such Re-Employment and any insurance coverage provided pursuant
thereto, and the following provisions shall apply:
(i) If the Executive's monthly compensation from Re-Employment is
equal to or in excess of the compensation being paid by the Company, the
Company shall promptly pay the Executive, in full satisfaction of all
obligations to compensate the Executive under Section 6(e), an amount equal
to fifty percent (50%) of Company's remaining compensation obligation.
Notwithstanding anything herein to the contrary and except for the
obligations in Subsection (b) below, upon payment by the Company of the
amounts set forth in this Section 7(a)(i), the Company shall cease to have
any obligation under Section 6(e) of this Agreement.
(ii) If the Executive's monthly compensation from Re-Employment is
less than the compensation being paid by the Company, compensation payable
to the Executive shall automatically be reduced by the amount of the
Executive's monthly compensation from Re-Employment provided, however, that
at the end of the Company's obligations to pay under Section 6(e) it shall
pay the Executive an amount equal to 100 percent (100%) of the remainder of:
(A) total compensation obligations of the Company under Section 6(e) less
(b) the actual compensation paid the Executive during the post-termination
period. Notwithstanding anything herein to the contrary and except for the
obligations in Subsection (b) below, upon payment of the final payment the
Company shall cease to have any obligations under this Agreement. The
Executive shall immediately notify the Company of any change in the level of
compensation received from Re-Employment and, if
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such compensation increases to a level equal to or in excess of the
compensation being paid by the Company, the provisions of Section 7
(a)(i) shall then apply.
(b) Provided COBRA requirements have been met, the
Company's obligation to provide insurance coverage to the Executive under
Section 3(c) or Section 5(b)(iii) hereof shall terminate as to any specific
coverage if and when comparable coverage is made available to the Executive in
connection with Re-Employment.
8. NOTICES. For the purpose of this Agreement, notices and all other
communications to either party hereunder provided for in the Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person
or mailed by certified first-class mail, postage prepaid, addressed:
in the case of the Company to:
AGCO Corporation
4830 River Green Parkway
Duluth, Georgia 30136
Attention: R. J. Ratliff
in the case of the Executive to:
Chris Perkins
83 Willes Road
Leamingston Spa
Warwickshire England
or to such other address as either party shall designate by giving written
notice of such change to the other party.
9. ARBITRATION. Any claim, controversy, or dispute arising between
the parties with respect to this Agreement, to the maximum extent allowed by
applicable law, shall be submitted to and resolved by binding arbitration. The
arbitration shall be conducted pursuant to the terms of the Federal Arbitration
Act
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and (except as otherwise specified herein) the Commercial Arbitration Rules of
the American Arbitration Association in effect at the time the arbitration is
commenced. The venue for the arbitration shall be the Atlanta, Georgia offices
of the American Arbitration Association. Either party may notify the other
party at any time of the existence of an arbitrable controversy by delivery in
person or by certified mail of a Notice of Arbitrable Controversy. Upon receipt
of such a Notice, the parties shall attempt in good faith to resolve their
differences within fifteen (15) days after the receipt of such Notice. Notice
to the Company and the Executive shall be sent to the addresses specified in
Section 8 above. If the dispute cannot be resolved within the fifteen (15) day
period, either party may file a written Demand for Arbitration with the
American Arbitration Association's Atlanta, Georgia Regional Office, and shall
send a copy of the Demand for Arbitration to the other party. The arbitration
shall be conducted before a panel of three (3) arbitrators. The arbitrators
shall be selected as follows: (a) The party filing the Demand for Arbitration
shall simultaneously specify his or its arbitrator, giving the name, address
and telephone number of said arbitrator, (b) The party receiving such notice
shall notify the party demanding the arbitration of his or its arbitrator,
giving the name, address and telephone number of the arbitrator within five (5)
days of the receipt of such Demand for Arbitration; (c) A neutral person shall
be selected through the American Arbitration Association's arbitrator selection
procedures to serve as the third arbitrator. The arbitrator designated by any
party need not be neutral. In the event that any person fails or refuses timely
to name his arbitrator within the time specified in this Section 9, the
American Arbitration Association shall (immediately upon notice from the other
party) appoint an arbitrator. The arbitrators thus constituted shall promptly
meet, select a chairperson, fix the time, date(s), and place of the hearing,
and notify the parties. To the extent practical, the arbitrators shall schedule
the hearing to commence within sixty (60) days after the arbitrators have been
impaneled. A majority of the panel shall render an award within ten (10) days
of the completion of the hearing, which award may include an award of interest,
legal fees and costs of arbitration. The panel of arbitrators shall promptly
transmit an executed copy of the award to the respective parties. The award of
the arbitrators shall be final binding and conclusive upon the parties hereto.
Each party shall have the right to have the award enforced by any court of
competent jurisdiction.
Executive initials: /S/ CP Company initials: /S/ RJR
------ ---------
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10. NO WAIVER. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is approved by the
Board and agreed to in a writing signed by the Executive and such officer as
may be specifically authorized by the Board. No waiver by either party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of any other provisions or conditions of this
Agreement at the same or at any prior or subsequent time.
11. SUCCESSORS AND ASSIGNS. The rights and obligations of the Company
under this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company and the Executive's rights under this
Agreement shall inure to the benefit of and be binding upon his heirs and
executors. Neither this Agreement or any rights or obligations of the Executive
herein shall be transferable or assignable by the Executive.
12. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect. The parties intend for each of the covenants contained in Section 4 to
be severable from one another.
13. SURVIVAL. The provisions of Section 4 hereof shall survive the
termination of Executive's employment and shall be binding upon the Executive's
personal or legal representative, executors, administrators, successors, heirs,
distributee, devisees and legatees and the provisions of Sections 5 and 6
hereof relating to payments and termination of the Executive's employment
hereunder shall survive such termination and shall be binding upon the Company.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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15. ENTIRE AGREEMENT. This Agreement constitutes the full agreement
and understanding of the parties hereto with respect to the subject matter
hereof and all prior or contemporaneous agreements or understandings are merged
herein. The parties to this Agreement each acknowledge that both of them and
their respective agents and advisors were active in the negotiation and
drafting of the terms of this Agreement.
16. GOVERNING LAW. The validity, construction and enforcement of this
Agreement, and the determination of the rights and duties of the parties
hereto, shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
AGCO CORPORATION
By: /s/ R.J. Ratliff
-----------------------
Name: R.J. Ratliff
---------------------
Title: Chairman
--------------------
EXECUTIVE
/s/ Chris E. Perkins
----------------------------
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AMENDMENT TO EMPLOYMENT AND SEVERANCE AGREEMENT
This Agreement is to amend the Employment and Severance Agreement
(the "Agreement") between AGCO Corporation, a Delaware corporation, (the
"Company") and Chris E. Perkins, (the "Executive"), dated February 1, 1995.
Section 5 of the Agreement is amended to add Section 5 (g) as
follows:
(g) Long Term Incentive and Other Stock Plans. In the event of a
Change In Control (as defined in Subsection (f) above), the Company
will require any successor to fulfill the terms and conditions of the
Long Term Incentive Plans and any Stock Option Plans previously
provided to the Executive in the same manner and to the same extent
that the Company would be required to perform if no such succession
had taken place. However, effective with the Change in Control, the
Executive will be immediately vested for all shares earned under the
Long Term Incentive Plans and for those shares awarded under any
Stock Option Plan.
AGCO Corporation Executive
By: /s/ Allen W. Ritchie /s/ Chris E. Perkins
------------------------- ------------------------------
Title: President Chris E. Perkins
----------------------
1
EXHIBIT 10.23
SEVERANCE AND RELEASE AGREEMENT
THIS SEVERANCE AND RELEASE AGREEMENT (the "Agreement") is made and
entered into this 28th day of August, 1997, to be effective as of the 31st day
of August, 1997 (the "Effective Date"), by and between AGCO CORPORATION, a
Delaware corporation ("AGCO"), and JEAN-PAUL RICHARD a resident of Fulton
County, Georgia ("Richard"). For purposes of this Agreement, the term "AGCO"
shall be deemed to include all subsidiaries and affiliates of AGCO Corporation.
RECITALS
A. AGCO and Richard are parties to an Employment and
Severance Agreement, dated as of November 18, 1996 (the "Employment
Agreement"); and
B. AGCO and Richard mutually desire to terminate the
Employment Agreement and Richard's employment with AGCO, all subject to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Resignation. Contemporaneously with the execution of this
Agreement, Richard shall execute and deliver to AGCO a letter of resignation
substantially in the form of Exhibit A attached hereto, which provides that
Richard is voluntarily resigning as an officer, director and employee of AGCO
as of the Effective Date. Richard shall continue to perform his obligations as
an officer, director and employee of AGCO through the Effective Date or any
earlier date determined by AGCO.
2. Termination of Existing Agreements. The Employment
Agreement and, except as otherwise provided in this Agreement, all other
agreements and arrangements (whether written or oral) between AGCO and Richard
shall be terminated as of the Effective Date, and all of such terminated
agreements shall thereafter be null and void and of no further force or effect
after the Effective Date.
3. Severance. As severance compensation, AGCO shall continue
to pay Richard's annual base salary of Five Hundred Thousand Dollars ($500,000)
from the Effective Date through November 18, 2001, in accordance with AGCO's
normal payroll policies and procedures and subject to all required
withholdings.
4. Benefits.
(a) Incentive Compensation. AGCO shall pay to
Richard all amounts earned by Richard as incentive compensation under AGCO's
Incentive Compensation Plan with respect
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to the full 1997 year as and when in 1998 such amounts are paid by AGCO in the
ordinary course of its business, consistent with past practices, under its
Incentive Compensation Plan.
(b) Health Insurance. AGCO shall continue to
provide to Richard, at AGCO's expense, until November 18, 2001, the group
health insurance coverage provided to him immediately prior to the Effective
Date or such substitute group health insurance coverage as is provided from
time to time by AGCO to its senior management executives; provided, however,
that AGCO's obligations to provide and pay for such coverage shall cease if and
when Richard becomes employed elsewhere and first becomes eligible for
comparable group health insurance coverage at such other place of employment.
(c) Disability Insurance. Upon the written
request of Richard, at Richard's expense AGCO shall continue to provide to
Richard for any period ending on or prior to November 18, 2001, the disability
insurance coverage provided to him immediately prior to the Effective Date;
provided, however, that AGCO's obligations to provide such coverage shall cease
if and when Richard becomes employed elsewhere and first becomes eligible for
comparable disability insurance coverage at such other place of employment.
(d) Long Term Incentive Plans. Exhibit B attached
hereto accurately reflects all shares of AGCO common stock earned by Richard
pursuant to any long-term incentive plan and any director's stock plan
maintained by AGCO (the "Earned Shares"), and Richard shall retain all of such
Earned Shares. All of the Earned Shares which have not vested under the terms
of such long-term incentive and director's stock plans prior to the Effective
Date shall vest over time and in accordance with the terms of such plans as if
Richard had remained employed by AGCO during such vesting period; provided,
however, that any Earned Shares which are unvested shall be subject to
forfeiture either (i) in the event of a material breach by Richard of any of
his obligations under any of the Business Protection Covenants set forth in
paragraph 7 herein or (ii) a willful failure to provide the consulting services
as provided in paragraph 11 herein. In addition, as and when such Earned
Shares vest, and to satisfy a portion of Richard's Federal and state income tax
obligations arising therefrom, AGCO shall make cash bonus payments required
under such plans consistent with its current practices with other participants.
Richard shall have no further rights with respect to any shares awarded,
granted or allocated to, but not yet earned by, him as of the Effective Date
under any such long term incentive or director's stock plan.
(e) Split Dollar Life Insurance. The parties
acknowledge that AGCO has made certain premium payments required prior to the
date hereof under that certain Executive Life Insurance Program (Split
Dollar) between AGCO and Richard (the "Split Dollar Program"), pursuant to which
the life insurance policy scheduled on Exhibit F has been purchased.
Contemporaneously with this Agreement, AGCO and Richard shall terminate and
cancel such Split Dollar Program and the split dollar insurance arrangement
reflected thereby. AGCO shall have the right to receive and/or retain all
refunds and other payments resulting from the cancellation of the life
insurance policy scheduled on Exhibit F and any other issued life insurance
policies and from the termination and cancellation of the split dollar
insurance arrangement; and Richard shall have no further interest in, or
benefits under, such split dollar arrangement.
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(f) Deferred Compensation and 401(k) Contributions.
Richard shall be entitled to receive any deferred compensation accrued during
his employment with AGCO and the disposition of Richard's 401(k) account with
AGCO. As of the Effective Date, AGCO shall cease making any contributions to
Richard's 401(k) account.
(g) No Other Benefits. Except as specifically set
forth in this Agreement, all other benefits provided to Richard by AGCO
pursuant to the Employment Agreement or otherwise, including, without
limitation, all country club dues, automobile and aircraft privileges, shall
cease as of the Effective Date.
(b) The benefits afforded to Richard under
paragraph 3 and subparagraph 4(d) herein shall survive the death of Richard and
shall accrue to the benefit of Richard's estate.
5. Forgiveness of Loan. In connection with a special
relocation program provided by AGCO, Richard borrowed $500,000 (the "Employee
Loan") from AGCO, and the Employee Loan remains unpaid and outstanding as of
the date hereof. The Employee Loan is evidenced by a Promissory Note in the
principal amount of $500,000, dated November 22, 1996 (the "Note").
Notwithstanding anything else contained in the Note to the contrary, the
indebtedness evidenced by the Employee Loan shall be, as of the Effective Date,
forgiven and canceled.
6. Purchase of Residence by AGCO: Assumption of Automobile
Lease.
(a) Upon the consummation of the transactions
provided for herein, AGCO and Richard shall enter into that certain Real Estate
Purchase Contract (the "Sales Contract") in the form attached hereto as Exhibit
C, which provides that AGCO shall purchase from Richard his residence in
Memphis, Shelby County, Tennessee, which is more particularly described on an
exhibit to the Sales Contract (the "Property"), for a purchase price of
$716,250 (the "Purchase Price") less existing indebtedness to be assumed by
AGCO of approximately $445,657, for a net purchase price of approximately
$270,593. The closing under the Sales Contract shall be held at the offices of
AGCO on or before 30 days subsequent to the Effective Date. At the closing
under the Sales Contract, AGCO shall reimburse Richard for any amount in any
escrow account (maintained to fund annual property taxes and homeowners
insurance premiums) upon an irrevocable assignment to AGCO of any such escrow
account. AGCO further agrees to assume the real estate agent listing contract
with Judy Piovarcy, which contract has a remaining term of less than 6 months.
Richard represents to AGCO that the Purchase Price represents the average of
four recently obtained independent residential real estate appraisals of the
Property.
(b) Upon the consummation of the transactions
provided for herein, AGCO shall assign to Richard, who shall assume and agree
to pay and perform, that certain Motor Vehicle Lease Agreement covering the
1996 Jeep Grand Cherokee used by Richard, the vehicle information page of such
Motor Vehicle Lease Agreement being attached hereto as Exhibit D. Such
assignment shall provide that AGCO shall be released from the obligations under
such Motor Vehicle Lease Agreement.
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7. Business Protection Covenants.
(a) Definitions. For purposes of this Agreement,
the following terms shall have the following respective meanings:
(i) "Confidential Information" shall
mean all valuable, proprietary and confidential information in any
way relating to, belonging to or pertaining to AGCO that does not
constitute a "Trade Secret" (as hereinafter defined) and that is not
generally known by or available to AGCO's competitors.
(ii) "Trade Secrets" shall mean all
"trade secrets" of AGCO as defined under applicable law.
(iii) "Competing Business" shall mean
any business that, directly or indirectly, engages in the
development, manufacture, distribution or sale of agricultural
equipment or related products or parts.
(iv) "Restricted Territory" shall mean
North America, South America, Europe, Africa, Asia and Australia.
(b) Non-Disclosure. Richard hereby covenants and
agrees that he shall not, without the prior written consent of AGCO in each
instance, use, disclose, transfer, assign, disseminate, reproduce, copy or
otherwise communicate, directly or indirectly, in any way for himself or for
any other person or entity: (i) any Confidential Information for a period of
three (3) years after the Effective Date; or (ii) any Trade Secret at any time
during which such information shall constitute a trade secret under applicable
law. Richard hereby represents and warrants to AGCO that he has not, prior to
the execution of this Agreement, disclosed any Confidential Information or
Trade Secrets in a manner which would have constituted a breach of this Section
7(b) had it occurred after the execution hereof.
(c) Non-Competition. Richard hereby covenants and
agrees that he shall not, without the prior written consent of AGCO in each
instance, directly or indirectly, engage in (whether as an owner, investor,
manager, operator, partner, consultant, creditor, advisor, independent
contractor or otherwise) or assist any other person or entity in engaging in a
Competing Business in the Restricted Territory for a period of two (2) years
after the Effective Date; provided, however, that it shall not constitute a
violation of this Section 7(c) for Richard to own for investment purposes only
less than one percent (1%) of the issued and outstanding shares of common stock
of any entity engaged in a Competing Business if such common stock is publicly
traded on a national or international stock market or exchange.
(d) Non-Solicitation of Company Personnel.
Richard hereby covenants and agrees that he shall not, without the prior
written consent of AGCO in each instance, directly or indirectly, for a period
of two (2) years after the Effective Date: (i) hire any "key" (as defined in
the next sentence) employee of AGCO; or (ii) solicit or attempt to solicit any
"key" employee, consultant, contractor or other personnel of AGCO to terminate,
alter or lessen such party's affiliation or relationship with AGCO or to
violate the terms of any agreement or
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understanding between such party and AGCO. For purposes of the preceding
sentence, "key" employees, consultants, contractors and other personnel of AGCO
are those who have access to Confidential Information or Trade Secrets.
(e) Non-Solicitation of Dealers and Customers.
Richard hereby covenants and agrees that he shall not, without the prior
written consent of AGCO in each instance, directly or indirectly, for a period
of three (3) years after the Effective Date, solicit or attempt to solicit for
or on behalf of any person or entity engaged in a Competing Business any
dealer, customer or actively sought prospective dealer or customer of AGCO with
whom he had significant contact within twelve (12) months prior to the
Effective Date.
(f) Acknowledgement. Richard hereby acknowledges
and agrees that he has sufficient skills to find alternative commensurate work
in his field of expertise that would not involve a violation of this Section 7.
Additionally, Richard hereby acknowledges and agrees that the covenants set
forth in this Section 7 are reasonable as to time, scope, territory and
otherwise given AGCO's need to protect its legitimate business interests and
given the substantial benefits Richard is receiving hereunder. Richard further
acknowledges and agrees that monetary damages may not be an adequate remedy for
any breach of the provisions of this Section 7 and that AGCO may (in its sole
discretion) apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relieve in order to enforce or prevent
any violation (or threatened violation) of this Section 7. In the event any
covenant or agreement contained in this Section 7 shall be determined by a
court of competent jurisdiction to be unenforceable by reason of its extending
for too great a period of time or over too great a geographical area or by
reason of its being too extensive in any other respect, it is the intention of
the parties hereto that this Section 7 be interpreted to extend only over the
maximum period of time for which it may be enforceable and/or over the maximum
geographical area as to which it may be enforceable and/or to the maximum
extent in all other respects as to which it may be enforceable, all as
determined by such court in such action.
8. Return of AGCO Property. On or before the Effective Date,
Richard shall return to AGCO all AGCO property in his possession or under his
control, including, without limitation, all keys to AGCO premises, the
automobiles and computer equipment provided by AGCO for his use, all AGCO
corporate credit cards, and all Confidential Information, Trade Secrets, and
documents and files containing any non-public information regarding AGCO. In
the event any additional AGCO property comes into Richard's possession or under
his control after the Effective Date, he will promptly return such property to
AGCO. Richard also hereby agrees to reimburse AGCO for any personal expenses
charged on any AGCO corporate credit card. AGCO agrees to promptly reimburse
Richard, in accordance with its current policies, for any bona fide business
expenses incurred by Richard in the conduct of AGCO's business prior to the
Effective Date.
9. Mutual Release. Richard hereby releases and discharges
AGCO and all of AGCO's officers, directors, shareholders, employees and agents
from and against any and all claims, demands, liabilities, rights, remedies,
causes of action, damages and suits under any federal or state law (each a
"Claim"), whether known or unknown, which Richard has, has ever
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had or may ever have arising from or in any way related to Richard's employment
relationship with AGCO or the termination thereof, except for the specific
obligations of AGCO arising under this Agreement. AGCO hereby releases and
discharges Richard from and against any and all Claims, whether know or
unknown, which AGCO has, has ever had or may ever have arising from or in any
way related to Richard's employment relationship with AGCO or the termination
thereof, except for the specific obligations of Richard arising under this
Agreement.
10. Confidentiality. Richard hereby agrees not to disclose
any of the terms of this Agreement or any of the details of the negotiations
thereof to any person or entity, except for his attorney, his tax advisor,
financial advisor, and the members of his immediate family (provided each such
individual agrees in advance to keep such information confidential), and
Richard hereby represents and warrants to AGCO that he has not prior to the
execution of this Agreement disclosed any of such information in a manner which
would have constituted a breach of this Section 10 had it occurred after the
execution hereof.
11. Consulting.
(a) AGCO agrees to engage Richard, and Richard
agrees to accept such engagement in further consideration of the various
payments to be made to Richard herein, as a consultant to AGCO for a period
ending June 30, 2002 (the "Consulting Term"). As a consultant, Richard shall
report to AGCO's chief executive of fleer and shall perform consulting services
during the Consulting Term for AGCO as may be reasonably requested from time to
time by AGCO's chief executive officer, with such consulting services to be
principally related to providing advice with respect to the strategic
development of AGCO's international non-U.S. business and the implementation of
non-U.S. acquisitions. Richard shall make himself available to perform the
consulting services during the Consulting Term at times to be mutually agreed
upon by AGCO's chief executive officer and Richard (provided that such times
shall not unreasonably interfere with Richard's employment obligations to a
successor employer), and it is the understanding of the parties that such
consulting services shall not exceed five (5) hours per month.
(b) In furnishing such consulting services
hereunder, Richard shall not be an employee of AGCO but shall be an independent
contractor; and, as such, Richard is not authorized to assume, incur or create
any obligation or liability, expressed or implied, on behalf of, or in the name
of, AGCO or to bind AGCO in any manner.
12. Public Statements. Richard hereby agrees that he will not
make any disparaging public remarks about AGCO or any of its officers,
directors or employees. AGCO hereby agrees that it will not make any
disparaging public remarks about Richard. Further, attached hereto as Exhibit E
is a press release which has been issued by AGCO regarding Richard's
termination, which press release was submitted to Richard for his review and
approval.
13. Consequence of Breach. In the event of any breach by
Richard of any provision contained in Sections 7, 8, 10, 11 or 12 hereof, AGCO
shall have, and may avail itself of, all appropriate and available remedies at
law or in equity.
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14. Notices.
(a) All notices, consents, requests and other
communications hereunder shall be in writing and shall be sent by hand
delivery, by certified or registered mail (return-receipt requested), or by a
recognized national overnight courier service as set forth below:
If to AGCO: AGCO Corporation
4830 River Green Parkway
Duluth, Georgia 30136
Attention: Michael F. Swick, Esq.
Vice President and General Counsel
If to Richard: Jean-Paul Richard
1295 Heards Ferry Road
Atlanta, GA 30328
(b) Notices delivered pursuant to this Section 14
shall be deemed given: (i) at the time delivered, if personally delivered; (ii)
at the time received, if mailed; and (iii) one (1) business day after timely
delivery to the courier, if by overnight courier service.
(c) Either party hereto may change the address to
which notice is to be sent by written notice to the other party in accordance
with this Section 14.
15. Dispute Resolution. Except as otherwise provided in
Section 7(f) hereof, all disputes arising out of or in connection with the
interpretation, application or enforcement of this Agreement shall be settled
by final and binding arbitration. Such arbitration shall be conducted in
Atlanta, Georgia, pursuant to the commercial arbitration rules of the American
Arbitration Association in effect at the time the arbitration is commenced,
before a panel of three (3) arbitrators. The decision of the arbitrators, which
may include interest, shall be final and binding on the parties hereto and may
be entered and enforced in any court of competent jurisdiction by either party.
The arbitration shall be pursued and brought to conclusion as rapidly as
possible. The prevailing party in the arbitration proceeding shall be awarded
reasonable attorneys' fees, expert witness costs and expenses, and all other
costs and expenses incurred in connection with such proceeding, unless the
arbitrators shall for good cause determine otherwise.
Acknowledged, accepted and initialed by:
/s/ J-PR /s/ RJR
---------- ----------
J-PR AGCO
-7-
8
16. Miscellaneous.
(a) Entire Agreement. This Agreement, including
all Exhibits hereto (all of which are incorporated herein by this reference),
contains the entire agreement and understanding concerning the subject matter
hereof between the parties hereto and specifically supersedes the Employment
Agreement.
(b) Waiver; Amendment. No waiver, termination or
discharge of this Agreement, or any of the terms or provisions hereof, shall be
binding upon either party hereto unless confirmed in writing. No waiver by
either party hereto of any term or provision of this Agreement or of any
default hereunder shall affect such party's rights thereafter to enforce such
term or provision or to exercise any right or remedy in the event of any other
default, whether or not similar. This Agreement may not be modified or amended
except by a writing executed by both parties hereto.
(c) Severability. If any provision of this
Agreement shall be held void, voidable, invalid or inoperative, no other
provision of this Agreement shall be affected as a result thereof, and,
accordingly, the remaining provisions of this Agreement shall remain in full
force and effect as though such void, voidable, invalid or inoperative
provision had not been contained herein.
(d) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia.
(e) Assignment. Neither party hereto may assign
this Agreement, in whole or in part, without the prior written consent of the
other party hereto, and any attempted assignment not in accordance herewith
shall be null and void and of no force or effect.
(f) Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.
(g) Interpretation. This Agreement was fully
negotiated by both parties hereto and shall not be construed more strongly
against either party hereto regardless of which party is responsible for its
preparation.
(h) Further Assurances. Upon the reasonable
request of the other party, each party hereto shall take any and all actions
necessary or appropriate to give effect to the terms and conditions set forth
in this Agreement.
(i) Counterparts; Fax Signatures. This Agreement
may be executed in one or more counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute the same Agreement.
Any signature page of any such counterpart, or any electronic facsimile
thereof, may be attached or appended to any other counterpart to complete a
fully executed counterpart of this Agreement, and any telecopy or other
facsimile transmission of any signature shall be deemed an original and shall
bind such party.
-8-
9
IN WITNESS WHEREOF, the undersigned have executed, or caused their
respective duly authorized representatives to execute, this Agreement as of the
day and year first above written to be effective as of the Effective Date.
"AGCO"
AGCO CORPORATION
By: /s/ R.J. Ratliff
-------------------------------
Title: Chairman
----------------------------
RICHARD HEREBY ACKNOWLEDGES THAT HE HAS CAREFULLY READ AND FULLY UNDERSTANDS
ALL THE PROVISIONS OF THIS AGREEMENT, THAT HE HAS BEEN GIVEN ADEQUATE TIME
WITHIN WHICH TO CONSIDER SIGNING THIS AGREEMENT, THAT HE HAS CONSULTED WITH AN
ATTORNEY REGARDING THIS AGREEMENT, AND THAT HE KNOWINGLY AND VOLUNTARILY HAS
ENTERED INTO THIS AGREEMENT IN EXCHANGE FOR VALUABLE CONSIDERATION.
"Richard"
/s/ Jean-Paul Richard
----------------------------------
Jean-Paul Richard
-9-
10
EXHIBIT A
FORM OF LETTER OF RESIGNATION
August _____, 1997
AGCO Corporation
4830 River Green Parkway
Duluth, Georgia 30136
Gentlemen:
I hereby resign effective as of August 31, 1997, as an officer,
director and employee of, and from all other positions held in, AGCO
Corporation and its subsidiaries and affiliates.
Very truly yours,
Jean-Paul Richard
11
EXHIBIT B
SHARES EARNED BY RICHARD UNDER LONG-TERM INCENTIVE PLANS
Thirty Thousand (30,000) shares under the Amended and Restated Long-Term
Incentive Plan, and
Two Thousand Five Hundred (2,500) shares under the [directors' plan]
12
EXHIBIT C
FORM OF REAL ESTATE SALES CONTRACT
The parties agree to use the Memphis, Tennessee realtors board
standard form of residential sales contract.
13
EXHIBIT D
ORIGINAL
MOTOR VEHICLE LEASE AGREEMENT
LEASE INFORMATION
MATERIAL TERMS
Parties: Automotive Rentals, Inc. ("ARI")
AGCO
Assignment: Assignment by ARI of right, title and interest to
Corestates Bank NA Agent
Date: December 16, 1996
Vehicle: 1996 Jeep/Eagle
ZJJL74 Grand Cherokee
Total Cost: $31,376
14
EXHIBIT E
AGCO FOUNDER AND CHAIRMAN ROBERT RATLIFF
RESUMES ROLE OF PRESIDENT AND CEO
ATLANTA, August 29, 1997 AGCO Corporation (NYSE:AG) today announced that
Robert J. Ratliff, AGCO's founder and Chairman of the Board, will play an
expanded role in the management of the Company, resuming the role of President
and Chief Executive Officer. Mr. Ratliff will remain Chairman of the Board.
Mr. Ratliff founded AGCO in a management buyout in 1990. Since that time,
the company has grown from $200 million in sales to a global manufacturer and
distributor of agricultural equipment with 1996 revenue of $2.3 billion. Mr.
Ratliff has an employment contract through 2003.
J-P Richard, a member of AGCO's Board of Directors who assumed the role of
President and Chief Executive Officer in November 1996, has submitted his
resignation from AGCO Corporation and its board effective immediately. Mr.
Ratliff stated, "J-P Richard served with distinction during his tenure as a
director and executive and contributed to the achievement of profitable growth
and global expansion that has marked AGCO's history".
(AGCO Corporation Description paragraph)
15
EXHIBIT F
JEAN PAUL RICHARD
INSURANCE SUMMARY
<TABLE>
<CAPTION>
July, 1997
-------------------------------------------------------------------------------------------------------------
FACE
CARRIER POLICY # DATE TYPE AMOUNT PREMIUM FREQUENCY
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Life Insurance
Mass Mutual 9 907 164 04/01/97 WL $6,920,000 $500,000.00 Annual
Liability Insurance
Paul Revere 1028497030 02/01/97 Disability 5,500/mo. 401.03 Monthly
MassMutual 9 576 218 04/16/97 Disability 9,500/mo. 18,002.10 Annual
Metropolitan Group Dis. 9,500/mo. Monthly
</TABLE>
<TABLE>
----------------------------------------------------------------------------------------------
CASH
CARRIER VALUE ASSIGNED OWNER BENEFICIARY
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life Insurance
Mass Mutual $314,617.70 AGCO Trust Trust
Liability Insurance
Paul Revere Benefits payable to age 65 JPR JPR
after 180 day wait
MassMutual Benefits payable for 5 yrs. JPR JPR
after 180 day wait.
Metropolitan Benefits payable to age 65 AGCO JPR
after 180 day wait.
</TABLE>
1
Exhibit 12
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(in millions, except ratio data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Fixed Charges Computation:
Interest expense ........................................... $ 69.1 $ 45.2 $ 73.3 $ 52.7 $ 17.9
Interest component of rent expense (a) ..................... 5.6 5.4 5.0 2.4 1.1
Proportionate share of fixed charges of 50%-owned affiliates 1.8 2.0 2.0 2.1 10.1
Amortization of debt costs ................................. 1.6 1.4 1.6 0.7 -
------ ------ ------ ------ ------
Total fixed charges .................................... $ 78.1 $ 54.0 $ 81.9 $ 57.9 $ 29.1
====== ====== ====== ====== ======
Earnings Computation:
Pretax earnings ............................................ $245.7 $171.6 $190.6 $102.3 $ 34.1
Fixed charges .............................................. 78.1 54.0 81.9 57.9 29.1
------ ------ ------ ------ ------
Total earnings as adjusted ............................. $323.8 $225.6 $272.5 $160.2 $ 63.2
====== ====== ====== ====== ======
Ratio of earnings to combined fixed charges ............ 4.2:1 4.2:1 3.3:1 2.8:1 2.2:1
====== ====== ====== ====== ======
</TABLE>
--------------------------
(a) The interest factor was calculated to be one-third of rental expense and
is considered to be a representative interest factor.
1
EXHIBIT 13
SELECTED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA AND NUMBER OF EMPLOYEES)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997(1) 1996(1) 1995(1) 1994(1) 1993(1)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $3,224.4 $2,317.5 $2,068.4 $1,319.3 $595.7
Finance income -- -- 56.6 39.7 --
Total revenue 3,224.4 2,317.5 2,125.0 1,359.0 595.7
Gross profit(2) 666.8 470.3 440.7 276.3 125.3
Income from operations(2)(3) 319.1 211.9 220.6 119.8 47.9
Net income(3) 168.7(4) 125.9(4) 129.1 115.5(5) 34.1
Net income per common share-diluted(3)(6) $ 2.71(4) $ 2.20(4) $ 2.31 $ 2.35(5) $ 0.94
Weighted average number of common
and common equivalent shares
outstanding-diluted(6) 62.1 57.4 56.6 49.1 36.4
Dividends declared per common share(6) $ 0.04 $ 0.04 $ 0.02 $ 0.013 $0.013
-------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Working capital
Consolidated $ 884.3 $ 750.5 $ 485.5 $ 497.8 $340.0
Equipment operations 884.3 750.5 661.5 513.9 340.0
Total assets
Consolidated 2,620.9 2,116.5 2,162.9 1,823.3 578.3
Equipment operations 2,620.9 2,116.5 1,628.6 1,399.5 578.3
Long-term debt
Consolidated 727.4 567.1 568.9(7) 589.8 173.9
Equipment operations 727.4 567.1 415.9(7) 366.8 173.9
Stockholders' equity 991.6 774.6 588.9 476.7 212.2
Number of employees 10,997 7,801 5,548 5,789 2,417
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) AGCO acquired a 50% joint venture interest in Agricredit-North America in
1993 and the Agricredit-North America operations were reflected in the
Company's consolidated financial statements using the equity method of
accounting for the year ended December 31, 1993. AGCO acquired the
remaining 50% interest in Agricredit-North America in 1994 and accordingly
reflected the Agricredit-North America operations in the Company's
consolidated financial statements on a consolidated basis for the period
from February 11, 1994 to December 31, 1994 and the year ended December 31,
1995. AGCO sold a 51% joint venture interest in Agricredit-North America
effective November 1, 1996. Accordingly, the Company's consolidated
financial statements as of and for the years ended December 31, 1996 and
1997 reflect Agricredit-North America on the equity method of accounting
for the entire periods presented.
(2) Gross profit represents net sales less cost of goods sold. Income from
operations represents net sales less cost of goods sold, selling, general
and administrative expenses for the Equipment Operations, engineering
expenses and nonrecurring expenses.
(3) These amounts include nonrecurring expenses of $18.2 million, $22.3
million, $6.0 million, $19.5 million and $14.0 million for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993, respectively. The effect of
these nonrecurring charges reduced net income per common share, on a
diluted basis, by $0.19, $0.25, $0.07, $0.33 and $0.38 for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Charges for Nonrecurring Expenses."
(4) Includes extraordinary loss, net of taxes, of $2.1 million, or $0.03 per
share, and $3.5 million, or $0.06 per share, for the write-off of
unamortized debt costs related to the refinancing in January 1997 and March
1996, respectively, of the Company's revolving credit facility.
(5) These amounts include a deferred income tax benefit of $29.9 million
related to the reduction of a portion of the valuation allowance. The
deferred income tax benefit had the effect of increasing net income by
$29.9 million and net income per common share, on a diluted basis, by
$0.61.
(6) Net income per common share - diluted, weighted average number of common
and common equivalent shares outstanding - diluted and dividends declared
per common share have been restated for all periods to reflect all stock
splits.
(7) These amounts include $37.6 million of the Company's 6.5% Convertible
Subordinated Debentures. See Note 7 to the Consolidated Financial
Statements.
TRADING AND DIVIDEND INFORMATION(1)
<TABLE>
<CAPTION>
---------------------------------------------------------------
DIVIDENDS
(IN DOLLARS) HIGH LOW DECLARED
---------------------------------------------------------------
<S> <C> <C> <C>
1997
First Quarter $30 3/8 $27 $.01
Second Quarter 35 1/2 25 9/16 .01
Third Quarter 35 1/8 30 11/16 .01
Fourth Quarter 32 5/8 25 9/16 .01
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------
DIVIDENDS
(IN DOLLARS) HIGH LOW DECLARED
---------------------------------------------------------------
<S> <C> <C> <C>
1996
First Quarter $28 5/8 $21 3/16 $.01
Second Quarter 31 5/8 22 .01
Third Quarter 27 7/8 19 1/4 .01
Fourth Quarter 29 3/8 23 3/4 .01
</TABLE>
(1) The Company's stock trades on the New York Stock Exchange under the symbol
AG. As of February 27, 1998, there were approximately 693 stockholders of
record.
15
2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
During the periods discussed below, the Company's results of
operations were significantly affected by a series of acquisitions that expanded
the size and geographic scope of its distribution network, enabled it to offer
new products and increased its manufacturing capacity. Primarily as a result of
these acquisitions, revenues increased from $2,125.0 million in 1995 to $3,224.4
million in 1997. The results of operations for the years ended December 31,
1995, 1996 and 1997 were affected by the following transactions completed by the
Company:
- In March 1995, the Company further expanded its product offerings through
its acquisition of AgEquipment Group, a manufacturer and distributor of
farm implements and tillage equipment (the "AgEquipment Acquisition"), and
its agreement to become the exclusive distributor of Landini tractors in
the United States and Canada (the "Landini Distribution Agreement").
- In June 1996, the Company acquired the agricultural and industrial
equipment business of Iochpe-Maxion S.A. (the "Maxion Acquisition"), which
expanded its product offerings and its distribution network in South
America, particularly in Brazil.
- In July 1996, the Company acquired certain assets of Western Combine
Corporation and Portage Manufacturing, Inc., which were the Company's
suppliers of Massey Ferguson combines and other harvesting equipment sold
in North America (the "Western Combine Acquisition"). The Western Combine
Acquisition provided the Company with access to advanced technology and
increased the Company's profit margin on certain combines and harvesting
equipment sold in North America.
- In November 1996, the Company sold a 51% interest in Agricredit Acceptance
Company ("Agricredit-North America"), the Company's retail finance
subsidiary in North America, to a wholly-owned subsidiary of Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank")
(the "Agricredit Sale"). The Company retained a 49% interest in
Agricredit-North America and now operates the finance company with Rabobank
as a joint venture (the "Agricredit-North America Joint Venture"). The
Agricredit-North America Joint Venture has continued the business of
Agricredit-North America and seeks to build a broader asset-based finance
business through the addition of other lines of business. The Company's
benefits from the transaction also include deleveraging the consolidated
balance sheet by approximately $550.0 million and the redeployment of
approximately $44.3 million of capital.
- In December 1996, the Company further enhanced its market presence in
Argentina and South America by acquiring the operations of Deutz Argentina
S.A. ("Deutz Argentina"), a manufacturer and distributor of agricultural
equipment, engines and trucks to Argentina and other markets in South
America (the "Deutz Argentina Acquisition").
- In January 1997, the Company acquired the operations of Xaver Fendt GmbH &
Co. KG ("Fendt"), a manufacturer and distributor of tractors, primarily in
Germany and throughout Europe and Australia (the "Fendt Acquisition"). The
Fendt Acquisition added a new line of tractors to the Company's product
offerings and expanded the Company's market presence in Germany and
throughout Europe and Australia. In December 1997, the Company sold Fendt's
caravan and motor home business in order to focus on its core agricultural
equipment business.
- In December 1997, the Company acquired the remaining 68% of Dronningborg
Industries a/s (the "Dronningborg Acquisition"), the Company's supplier of
combine harvesters sold under the Massey Ferguson brand name in Europe. The
Company previously owned 32% of this combine manufacturer which developed
and manufactured combine harvesters exclusively for AGCO. The Dronningborg
Acquisition is expected to enable the Company to achieve certain synergies
within its worldwide combine manufacturing and will give AGCO the
opportunity to generate margin improvement on combines sold primarily in
Europe.
- In December 1997, the Company sold 50% of Deutz Argentina's engine
production and distribution business to Deutz AG, a global supplier of
diesel engines. This joint venture will allow the Company to share in
research and development costs and gain access to advanced technology.
As a result of these transactions, the historical results of the Company
are not comparable from year to year in the periods presented and may not
be indicative of future performance.
RESULTS OF OPERATIONS
Sales are recorded by the Company when equipment and replacement parts are
shipped by the Company to its independent dealers, distributors or other
customers. To the extent possible, the Company attempts to ship products to its
dealers and distributors on a level basis throughout the year to reduce the
effect of seasonal demands on its manufacturing operations and to minimize its
investment in inventory. Retail sales by dealers to farmers are highly seasonal
and are a function of the timing of the planting and harvesting seasons. In
certain markets, particularly in North America, there is often a time lag,
generally from one to twelve months, between the date the Company records a sale
and the date a dealer sells the equipment to a farmer. During this time lag
between the wholesale and retail sale, dealers may not return equipment to the
Company unless the Company terminates a dealer's contract or agrees to accept
returned products. Commissions payable under the Company's salesman incentive
programs are paid at the time of retail sale, as opposed to when products are
sold to dealers.
Effective November 1, 1996, the Company completed the Agricredit Sale.
Accordingly, the Company's consolidated financial statements as of and for the
years ended December 31, 1997 and 1996 reflect Agricredit-North America on the
equity method of accounting for the entire periods presented. The consolidated
financial statements for the year ended December 31, 1995 reflect
Agricredit-North America on a consolidated basis with the Company's other
majority-owned subsidiaries. As a result of the change in the basis of
presentation, the historical results of the Company are not comparable from year
to year.
For the year ended December 31, 1995, the consolidated financial statements
include, on a separate, supplemental basis, the
16
3
Company's Equipment Operations, and its Finance Company. "Equipment Operations"
reflect the consolidation of all operations of the Company and its
majority-owned subsidiaries with the exception of Agricredit-North America,
which is included using the equity method of accounting. The results of
operations of Agricredit-North America are included under the caption "Finance
Company."
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items included in the Company's Consolidated
Statements of Income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales 100.0% 100.0% 97.3%
Finance income -- -- 2.7
-------------------------------------------------------------------
100.0 100.0 100.0
-------------------------------------------------------------------
Costs and Expenses:
Cost of goods sold(1) 79.3 79.7 76.6
Selling, general and
administrative expenses 8.5 9.0 9.6
Engineering expenses 1.7 1.2 1.1
Interest expense, net 1.7 1.4 3.0
Other expense, net 0.6 0.3 0.4
Nonrecurring expenses 0.6 1.0 0.3
-------------------------------------------------------------------
92.4 92.6 91.0
-------------------------------------------------------------------
Income before income taxes,
equity in net earnings of
unconsolidated affiliates
and extraordinary loss 7.6 7.4 9.0
Provision for income taxes 2.7 2.6 3.1
-------------------------------------------------------------------
Income before equity
in net earnings of
unconsolidated affiliates
and extraordinary loss 4.9 4.8 5.9
Equity in net earnings of
unconsolidated affiliates 0.4 0.8 0.2
-------------------------------------------------------------------
Income before
extraordinary loss 5.3 5.6 6.1
Extraordinary loss, net of taxes (0.1) (0.2) --
-------------------------------------------------------------------
Net income 5.2% 5.4% 6.1%
===================================================================
</TABLE>
(1) Cost of goods sold as a percent of net sales for the years ended December
31, 1997, 1996 and 1995 was 79.3%, 79.7%, and 78.7%, respectively. Gross
profit, which is defined as net sales less cost of goods sold, was 20.7%,
20.3% and 21.3% for the years ended December 31, 1997, 1996 and 1995,
respectively.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The Company recorded net income for the year ended December 31, 1997 of $168.7
million compared to $125.9 million for the year ended December 31, 1996. Net
income per common share on a diluted basis was $2.71 for 1997 compared to $2.20
for 1996. Net income for 1997 included nonrecurring expenses of $18.2 million,
or $0.19 per share on a diluted basis, primarily related to the restructuring of
the Company's European operations which were acquired in the purchase of Massey
Ferguson Group Limited in June 1994 (the "Massey Acquisition"), the integration
of the Deutz Argentina and Fendt operations, acquired in December 1996 and
January 1997, respectively, and executive severance costs (see "Charges for
Nonrecurring Expenses"). In addition, net income for 1997 included an
extraordinary after-tax charge of $2.1 million, or $0.03 per share on a diluted
basis, for the write-off of unamortized debt costs related to the refinancing of
the Company's March 1996 Credit Facility (see "Liquidity and Capital
Resources"). Net income for 1996 included nonrecurring expenses of $22.3
million, or $0.25 per share on a diluted basis, primarily related to the
restructuring of the Company's European operations, the integration and
restructuring of the Company's Brazilian operations acquired in the Maxion
Acquisition in June 1996 and executive severance costs (see "Charges for
Nonrecurring Expenses"). In addition, net income for 1996 included an
extraordinary after-tax charge of $3.5 million, or $0.06 per share on a diluted
basis, for the write-off of unamortized debt costs related to the refinancing of
the Company's $550.0 million secured revolving credit facility which was
refinanced with the March 1996 Credit Facility and a gain on the Agricredit Sale
of $4.7 million, or $0.05 per share on a diluted basis. The Company's improved
results for the year ended December 31, 1997 primarily reflected the positive
impact of the Fendt Acquisition completed in January 1997 and improved operating
margins, particularly in the Company's South American operations, partially
offset by the negative currency translation effect of the strengthening dollar
against most European currencies.
RETAIL SALES
Conditions in the United States and Canadian agricultural markets were favorable
in 1997 compared to 1996. Industry unit retail sales of tractors, combines and
hay and forage equipment for 1997 increased approximately 12%, 9% and 8%,
respectively, over 1996. The Company believes general market conditions were
positive due to favorable economic conditions relating to high net cash farm
incomes, stable commodity prices and strong domestic and export demand. Company
unit retail sales of tractors in the United States and Canada increased 5% in
1997 compared to 1996 and were negatively impacted by a change in the timing of
the Massey Ferguson volume bonus plan from January 1997 to December 1996.
Company unit retail sales of combines in the United States and Canada for 1997
were flat compared to 1996. Company hay and forage equipment retail sales
increased in line with the industry compared to the prior year primarily due to
new products and improvements in the dairy and cattle industry. The Company
believes that aggressive competitor pricing and the introduction of certain new
products contributed to the strong industry growth while the Company maintained
its focus on improved profit margins.
Industry conditions in Western Europe showed mixed results in 1997 with
unit retail sales of tractors decreasing approximately 3% compared to 1996
primarily due to the declining markets in the U.K., France and Germany. The
industry decline was partially due to farm consolidation in Western Europe and
the relatively strong retail sales of tractors in 1996. Company unit retail
sales of tractors in Western Europe, including sales of Fendt tractors in both
periods, decreased in line with the industry compared to 1996. In addition to
the industry conditions, the strength of the British pound against other
European currencies also had a nega-
17
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
tive impact on sales and gross margins of the Company's tractors produced in the
U.K.
Industry unit retail sales of tractors in South America increased
approximately 35% compared to the prior year. This increase was primarily due to
a recovery in Brazil resulting from increasingly favorable economic conditions
and reduced farm debt levels. Company retail unit sales of tractors in South
America increased approximately 25% and were negatively impacted by competitor
discounting which the Company chose not to match. In other international
markets, Company retail unit sales of tractors increased approximately 11%,
consistent with the industry.
REVENUES
Net sales for 1997 increased 39.1% to $3,224.4 million compared to $2,317.5
million for 1996. The increase was primarily the result of the Company's recent
acquisitions, however, net sales were negatively impacted by the currency
translation effect of the strengthening dollar against most European currencies.
Net sales for 1997 were approximately $181.0 million lower than they would have
been at 1996 foreign exchange rates. On a regional basis in 1997, the Company
experienced increased net sales of $94.0 million, or 11% over 1996, in North
America primarily due to the strong industry conditions and introduction of new
products. The Company achieved net sales increases in Western Europe of $541.4
million, or 55% over 1996, primarily resulting from the Fendt Acquisition, which
was acquired effective January 1, 1997. In South America, the Company achieved
net sales increases of $234.1 million, or 234% over 1996, primarily related to
the impact of acquired operations in Brazil and Argentina, acquired in June 1996
and December 1996, respectively. In the remaining international markets, the
Company achieved net sales increases of $37.4 million, or 10% over 1996,
primarily related to increased sales in Eastern Europe and the Middle East.
COSTS AND EXPENSES
Cost of good sold was $2,557.6 million (79.3% of net sales) for 1997 compared to
$1,847.2 million (79.7% of net sales) for 1996. Gross profit, defined as net
sales less cost of goods sold, was $666.8 million (20.7% of net sales) for 1997
as compared to $470.3 million (20.3% of net sales) for 1996. Gross margins were
favorably impacted by gross margin improvements due to cost reduction efforts,
particularly in the Company's South American operations, partially offset by the
negative effect of foreign exchange related to the Company's products sourced
from the U.K. resulting from the strength of the British pound.
Selling, general and administrative expenses were $275.4 million (8.5% of
net sales) for 1997 compared to $208.4 million (9.0% of net sales) for 1996. The
decrease in selling, general and administrative expenses as a percentage of net
sales compared to 1996 was primarily due to a decrease in the amortization of
stock-based compensation expense of $5.2 million related to the Company's
long-term incentive plan, which is tied to stock price appreciation. Excluding
the amortization expense related to the long-term incentive plan, selling,
general and administrative expenses were $260.5 million (8.1% of net sales) in
1997 compared to $188.3 million (8.1% of net sales) in 1996. Selling, general
and administrative expenses as a percentage of net sales in 1997 were flat
compared to 1996 primarily due to cost reduction initiatives in the Company's
European operations offset by increased marketing expenses related to new
product introductions. The cost reduction efforts involved the centralization of
certain selling, general and administrative functions. See "Charges for
Nonrecurring Expenses" for further discussion.
Engineering expenses were $54.1 million (1.7% of net sales) for 1997
compared to $27.7 million (1.2% of net sales) for 1996. The increase in
engineering expenses as a percentage of net sales compared to 1996 primarily
related to the higher level of engineering expenses in the newly acquired Fendt
operations relative to the Company's other operations.
Interest expense, net was $53.5 million for 1997 compared to $32.7 million
for 1996. The increase in interest expense, net was primarily due to the
additional borrowings associated with the financing of the Maxion, Deutz
Argentina and Fendt Acquisitions. The increased interest expense related to
acquisition indebtedness was partially offset by proceeds from the Company's
offering of 5.2 million shares of common stock in March 1997. See "Liquidity and
Capital Resources" for further discussion of the stock offering.
Other expense, net was $19.9 million for 1997 compared to $7.6 million for
1996. The increase in other expense, net was primarily due to increased
amortization of intangible assets resulting from the Maxion, Deutz Argentina and
Fendt Acquisitions and a gain of $4.7 million recorded in 1996 for the
Agricredit Sale.
Nonrecurring expenses were $18.2 million in 1997 compared to $22.3 million
in 1996. The nonrecurring charge recorded in 1997 related to the restructuring
of the Company's European operations, the integration of the Deutz Argentina and
Fendt operations, acquired in December 1996 and January 1997, respectively, and
executive severance costs. The 1996 nonrecurring charge primarily related to the
restructuring of the Company's European operations, the integration and
restructuring of the Company's Brazilian operations, acquired in the Maxion
Acquisition in June 1996, and executive severance costs. See "Charges for
Nonrecurring Expenses" for further discussion.
The Company recorded a net income tax provision of $87.5 million for 1997
compared to $59.9 million for 1996. In 1997 and 1996, the Company's income tax
provision approximated statutory rates, although actual income tax payments
remained at rates below statutory rates. The Company's effective tax rate
increased slightly in 1997 compared to 1996 due to a change in the mix of income
to jurisdictions with higher tax rates. At December 31, 1997, the Company had
net operating loss carryforwards totaling $140.0 million, primarily in Brazil
and Argentina.
Equity in net earnings of unconsolidated subsidiary and affiliates was
$12.6 million in 1997 compared to $17.7 million in 1996. The decrease in equity
in net earnings of unconsolidated subsidiary and affiliates was primarily due to
a decrease in net income recognized relating to Agricredit-North America. As a
result of the Agricredit Sale in November 1996, the Company recognized only
18
5
49% of net income of the North American retail finance company in 1997 compared
to 100% through October 31, 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO
YEAR ENDED DECEMBER 31, 1995
NET INCOME
The Company recorded net income for the year ended December 31, 1996 of $125.9
million compared to $129.1 million for the year ended December 31, 1995. Net
income per common share on a diluted basis was $2.20 for 1996 compared to $2.31
for 1995. Net income for 1996 included nonrecurring expenses of $22.3 million,
or $0.25 per share on a diluted basis, primarily related to the restructuring of
the Company's European operations, acquired in the Massey Acquisition in June
1994, the integration and restructuring of the Company's Brazilian operations,
acquired in the Maxion Acquisition in June 1996 and executive severance costs
(see "Charges for Nonrecurring Expenses"). In addition, net income for 1996
included an extraordinary after-tax charge of $3.5 million, or $0.06 per share
on a diluted basis, for the write-off of unamortized debt costs related to the
refinancing of the Company's $550.0 million secured revolving credit facility
which was refinanced with the March 1996 Credit Facility and a gain on the
Agricredit Sale of $4.7 million, or $0.05 per share on a diluted basis. Net
income for 1995 included nonrecurring expenses of $6.0 million, or $0.07 per
share on a diluted basis, associated with the initial integration of the Massey
Acquisition (see "Charges for Nonrecurring Expenses"). The Company's results for
the year ended December 31, 1996 were also negatively impacted by losses,
including the related financing costs, in the newly acquired Brazilian
operations as a result of the poor industry conditions experienced in the
region. Excluding the items discussed above, the Company's results of operations
were improved over 1995, primarily the result of sales growth in existing
markets.
RETAIL SALES
Conditions in the United States and Canadian agricultural markets were favorable
in 1996 compared to 1995. Industry unit retail sales of tractors, combines and
hay and forage equipment for 1996 increased approximately 7%, 6% and 2%,
respectively, over 1995. The Company believes general market conditions were
positive due to favorable economic conditions relating to high net cash farm
incomes, strong commodity prices and increased export demand. Company unit
retail sales of tractors in the United States and Canada were slightly above the
industry in 1996 compared to 1995. The increase in tractor settlements was
attributable to the favorable industry conditions and the impact of the
Company's expanded dealer network, which resulted primarily from dealers
entering into crossover contracts whereby an existing dealer carrying one of the
Company's brands contracts to sell an additional AGCO brand. In addition, the
Company has benefited from the successful acceptance of improved tractor product
offerings, including the new Massey Ferguson high horsepower tractors which were
introduced in the middle of 1995. Company unit retail sales of combines in the
United States and Canada for 1996 increased 24% compared to 1995 primarily due
to the Company's increased sales to contract harvesters and dealer development
activities which strengthened the Company's dealer network for combines. Company
hay and forage equipment retail sales increased in line with the industry.
Industry conditions in Western Europe were favorable in 1996 with retail
sales of tractors increasing approximately 12% compared to 1995 primarily due to
higher net cash farm incomes, improved economic conditions, strong commodity
prices and increased export demand. Retail sales of Massey Ferguson tractors in
Western Europe increased approximately 15% over 1995 with the most significant
market share increases in France, Spain and Scandinavia, primarily due to the
Company's focus on dealer development. Outside North America and Western Europe,
industry retail sales of tractors also showed gains in most markets where the
Company competes due to a general improvement in economic conditions. Retail
sales of Massey Ferguson tractors increased in these markets with significant
growth in the Middle East, Africa, East Asia/Pacific and Australia compared to
1995, primarily due to improved market conditions and the Company's strong
distribution channels in these regions. Company retail sales of tractors in
Brazil were affected by industry conditions in Brazil which remained depressed
throughout 1996 relative to historic volumes due to high farm debt levels and
the suspension and subsequent reinstatement of Brazilian Central Bank loan
programs.
REVENUES
Net sales for 1996 increased 12.0% to $2,317.5 million compared to $2,068.4
million for 1995 for the Company's Equipment Operations. A portion of the
increase was the result of the Company's sales of $85.1 million in Brazil for
the six months ended December 31, 1996 resulting from the Maxion Acquisition.
The Company achieved net sales increases in 1996 in Western Europe of $63.8
million, or 7% over 1995. In the remaining international markets, the Company
achieved net sales increases of $63.2 million, or 19% over 1995. The increase in
Western Europe and other international markets primarily related to increased
sales of tractors due to the Company's favorable retail sales performance and
increased sales of combines and other non-tractor products resulting from the
Company's successful efforts to expand non-tractor sales in all international
markets. The Company also experienced increased net sales of $37.0 million, or
4% over 1995, in North America primarily due to a 17% increase in the Company's
North American retail dollar sales compared to 1995. Total revenues on a
consolidated basis for 1995 also included finance income of $56.6 million
associated with the operations of Agricredit-North America.
COSTS AND EXPENSES
Cost of good sold was $1,847.2 million (79.7% of net sales) for 1996 compared to
$1,627.7 million (78.7% of net sales) for 1995 for the Company's Equipment
Operations. Gross profit, defined as net sales less cost of goods sold, was
$470.3 million (20.3% of net sales) for 1996 as compared to $440.7 million
(21.3% of net sales) for 1995. Gross margins in 1996 were negatively impacted by
the
19
6
Management's Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
following: (1) lower margins related to the Brazilian operations acquired in the
Maxion Acquisition due to low volumes related to depressed industry conditions
and (2) a change in the mix of products sold, particularly due to a lower mix of
high margin North American replacement parts, a shift in North American sales
from higher margin utility tractors (under 100 horsepower) to high horsepower
tractors (over 100 horsepower) and increased sales of combines in Europe, which
have lower than average margins.
Selling, general and administrative expenses were $208.4 million (9.0% of
net sales) for 1996 compared to $190.0 million (9.2% of net sales) for 1995 for
the Company's Equipment Operations. The increase in selling, general and
administrative expenses was primarily due to an increase in sales volume and an
increase in the amortization of stock-based compensation expense of $10.1
million compared to 1995 related to the Company's long-term incentive plan which
is tied to stock price appreciation. Excluding the amortization expense related
to the long-term incentive plan, selling, general and administrative expenses
were $188.3 million (8.1% of net sales) for 1996 and $180.0 million (8.7% of net
sales) for 1995 for the Company's Equipment Operations. The decrease in selling,
general and administrative expenses as a percentage of net sales was primarily
due to cost reduction initiatives in the Company's European operations. In
connection with the Massey Acquisition, the Company implemented a restructuring
plan which has eliminated duplicate costs by centralizing certain sales,
marketing and administrative functions. See "Charges for Nonrecurring Expenses"
for further discussion. On a consolidated basis for 1995, selling, general and
administrative expenses were $203.8 million, which included $13.8 million
related to the operations of Agricredit-North America.
Engineering expenses were $27.7 million (1.2% of net sales) for 1996
compared to $24.1 million (1.2% of net sales) for 1995 for the Company's
Equipment Operations. The increase in engineering expenses compared to 1995
primarily related to the development of new products including a new Massey
Ferguson utility tractor line introduced in 1997.
Interest expense, net was $32.7 million for 1996 compared to $31.5 million
for 1995 for the Company's Equipment Operations. The increase in interest
expense, net was primarily due to the additional borrowings associated with the
financing of the Maxion Acquisition and higher fixed interest rates associated
with the 8 1/2% Senior Subordinated Notes which were issued in March 1996 as
compared to the floating rates on the Company's revolving credit facility. The
Company financed the entire purchase price for the Maxion Acquisition with
additional indebtedness. On a consolidated basis, interest expense, net was
$63.2 million for 1995, which included $31.7 million relating to the operations
of Agricredit-North America.
Other expense, net was $7.6 million for 1996 compared to $9.6 million for
1995. The decrease in other expense, net was primarily due to the gain recorded
on the Agricredit Sale in 1996 and foreign exchange gains recorded in 1996
compared to foreign exchange losses in 1995 related to the Company's
international operations. The decrease in other expense, net was partially
offset by increased amortization of intangible assets resulting from the Maxion
and Western Combine Acquisitions.
Nonrecurring expenses were $22.3 million in 1996 compared to $6.0 million
in 1995. The nonrecurring charge recorded in 1996 related to the restructuring
of the Company's European operations, the integration and restructuring of the
Brazilian operations, acquired in the Maxion Acquisition in June 1996 and
executive severance costs. The 1995 nonrecurring charge primarily related to the
initial integration and restructuring of the Company's European operations. See
"Charges for Nonrecurring Expenses" for further discussion.
The Company recorded a net income tax provision of $59.9 million for 1996
compared to $61.6 million for 1995 for the Company's Equipment Operations. On a
consolidated basis for 1995, the Company recorded an income tax provision of
$65.9 million, which included $4.3 million related to the operations of
Agricredit-North America. In 1996 and 1995, the Company's income tax provision
approximated statutory rates, although actual income tax payments remained at
rates below statutory rates resulting from the utilization of net operating loss
carryforwards acquired in the Massey Acquisition.
Equity in net earnings of unconsolidated subsidiary and affiliates was
$17.7 million in 1996 compared to $11.2 million in 1995 for the Company's
Equipment Operations. The increase in equity in net earnings of unconsolidated
subsidiary and affiliates was primarily due to an increase in the Company's
pro-rata share in net earnings of Agricredit-North America from $6.8 million in
1995 to $10.4 million in 1996 despite the Company recognizing only 49% of the
equity in net earnings of Agricredit-North America from November 1, 1996 to
December 31, 1996 as a result of the Agricredit Sale. In addition, the increase
in equity in net earnings of unconsolidated subsidiary and affiliates related to
the Company's pro-rata share in net earnings of certain equity investments in
the European operations, including its 49% interest in its retail finance joint
ventures in the United Kingdom, France and Germany. On a consolidated basis,
equity in net earnings of unconsolidated subsidiary and affiliates for 1995 was
$4.4 million due to Agricredit-North America being presented on a consolidated
basis rather than the equity method of accounting.
QUARTERLY RESULTS
To the extent possible, the Company attempts to ship products to its dealers on
a level basis throughout the year to reduce the effect of seasonal demands on
its manufacturing operations and to minimize investments in inventory. However,
retail sales of agricultural equipment are highly seasonal, with farmers
traditionally purchasing agricultural equipment in the spring and fall in
conjunction with the major planting and harvesting seasons. The Company's net
sales and income from operations have historically been the lowest in the first
quarter and have increased in subsequent quarters as dealers increase inventory
in anticipation of increased retail sales in the third and fourth quarters.
20
7
The following table presents unaudited interim operating results of the
Company. The Company believes that the following information includes all
adjustments (consisting only of normal, recurring adjustments) that the Company
considers necessary for a fair presentation, in accordance with generally
accepted accounting principles. The operating results for any interim period are
not necessarily indicative of results for any future interim period or the
entire fiscal year.
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------------------------------------------------
March 31 June 30 September 30 December 31
------------------------------------------------------
(in millions, except per share data)
<S> <C> <C> <C> <C>
1997:
Net sales $704.3 $871.9 $759.5 $888.7
Gross profit(1) 134.3 175.8 169.5 187.2
Income from operations(1)(3) 56.6 89.2 82.4 90.9
Income before extraordinary loss(3) 27.8 48.8 44.2 50.0
Net income(3) 25.7(4) 48.8 44.2 50.0
Net income per common share before extraordinary loss - diluted(3) 0.47(4) 0.77 0.70 0.79
1996:(2)
Net sales $453.9 $584.7 $588.8 $690.1
Gross profit(1) 93.8 115.8 123.5 137.2
Income from operations(1)(3) 34.6 59.6 54.0 63.7
Income before extraordinary loss(3) 20.6 37.5 31.3 40.0(5)
Net income(3) 17.1(4) 37.5 31.3 40.0(5)
Net income per common share before extraordinary loss - diluted(3) 0.37(4) 0.66 0.54 0.69(5)
</TABLE>
(1) Gross profit is defined as net sales less cost of goods sold, and income
from operations is defined as net sales less cost of goods sold, selling,
general and administrative expenses, engineering expenses and nonrecurring
expenses.
(2) As a result of the Agricredit Sale, the 1996 operating results are restated
for each quarter presented to reflect Agricredit-North America on the
equity method of accounting.
(3) The 1997 operating results include nonrecurring expenses of $2.6 million,
or $0.03 per share, for the three months ended March 31, 1997, $5.2
million, or $0.05 per share, for the three months ended June 30, 1997, $4.9
million, or $0.05 per share, for the three months ended September 30, 1997
and $5.5 million, or $0.06 per share, for the three months ended December
31, 1997. The 1996 operating results include nonrecurring expenses of $5.9
million, or $0.07 per share, for the three months ended March 31, 1996,
$0.8 million, or $0.01 per share, for the three months ended June 30, 1996,
$6.2 million, or $0.07 per share, for the three months ended September 30,
1996 and $9.4 million, or $0.10 per share, for the three months ended
December 31, 1996.
(4) The 1997 operating results include an extraordinary after-tax charge of
$2.1 million, or $0.03 per share, for the write-off of unamortized debt
costs related to the refinancing of the Company's March 1996 Credit
Facility for the three months ended March 31, 1997. The 1996 operating
results include an extraordinary after-tax charge of $3.5 million, or $0.06
per share, for the write-off of unamortized debt costs related to the
refinancing of the Company's $550.0 million secured revolving credit
facility for the three months ended March 31, 1996.
(5) The 1996 operating results include a gain on the sale of a 51% interest in
Agricredit-North America of $4.7 million, or $0.05 per share, for the three
months ended December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements are subject to variations due to seasonal
changes in inventory and dealer receivable levels. Internally generated funds
are supplemented when necessary from external sources, primarily the Company's
revolving credit facility.
In January 1997, the Company replaced its $650.0 million unsecured
revolving credit facility (the "March 1996 Credit Facility") with a new $1.2
billion unsecured revolving credit facility (the "January 1997 Credit
Facility"). The January 1997 Credit Facility is the Company's primary source of
financing. In March 1997, the lending commitment for the January 1997 Credit
Facility was reduced by $141.2 million which represented the proceeds to the
Company, net of underwriting discounts, from the Company's common stock
offering. Lending commitments under the January 1997 Credit Facility reduce from
the current commitment of $1.06 billion as of December 31, 1997 to $1.0 billion
on January 1, 1999. In addition, borrowings under the January 1997 Credit
Facility may not exceed the sum of 90% of eligible accounts receivable and 60%
of eligible inventory. As of December 31, 1997, approximately $460.7 million was
outstanding under the January 1997 Credit Facility and available borrowings were
approximately $596.2 million. Total long-term debt for the Company increased
from $567.1 million at December 31, 1996 to $727.4 million at December 31, 1997.
The increase in long-term debt was due to the financing of the Fendt and
Dronningborg Acquisitions, partially offset by the March 1997 common stock
offering and the use of operating cash flow to repay indebtedness.
In March 1997, the Company completed a public offering of 5.2 million
shares of its common stock (the "Offering"). The net proceeds to the Company
from the Offering were approximately $140.4 million after deduction of
underwriting discounts and commissions and other expenses. The Company used the
proceeds from the Offering to reduce a portion of the borrowings outstanding
under the January 1997 Credit Facility.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The net proceeds from the sale of the Notes were used to repay outstanding
indebtedness. The sale of the Notes provided the Company with subordinated
capital and replaced a portion of its floating rate debt with longer term fixed
rate debt.
The Company's working capital requirements for its Equipment Operations are
seasonal, with investments in working capital typically building in the first
half of the year and then reducing in the second half of the year. As of
December 31, 1997, the Company's Equipment Operations had $884.3 million of
working capital compared to $750.5 million as of December 31, 1996 and $661.5
million as of December 31, 1995. The increase in working capital in 1997
compared to 1996 was primarily due to working capital acquired in the Fendt
Acquisition. The increase in working
21
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
capital in 1996 compared to 1995 was primarily due to working capital acquired
in the Maxion and Deutz Argentina Acquisitions.
Cash flow provided by operating activities was $100.0 million for 1997,
$206.7 million for 1996 and $67.1 million for 1995. The operating cash flow for
1996 was impacted favorably by the collection in 1996 of unusually high accounts
receivable levels at December 31, 1995. The 1995 international receivables were
unusually high due to the timing of shipments of tractors in Western Europe
which were delayed until the fourth quarter of 1995 due to tire supply shortages
resulting from a labor strike of a major supplier. While this impacted the
Company's cash flow at that time, the Company has alternative sources of supply
and adequate borrowing availability should a similar situation occur in the
future. Excluding this impact, cash flow provided by operating activities for
1997 was lower compared to 1996 primarily due to (i) increases in inventory
compared to the prior year partially caused by higher inventory levels related
to the recent introduction of new tractors sourced from the Company's U.K. and
France production facilities and (ii) increased accounts receivable related to
sales growth in certain markets that require longer than average payment terms.
Cash flow provided by operating activities for 1996 was also higher compared to
1995 due to strong retail sales in North America during 1996 which resulted in
lower levels of dealer inventories relative to sales in 1996 compared to 1995.
Capital expenditures were $72.1 million in 1997 compared to $45.2 million
in 1996 and $45.3 million in 1995. For all years, the Company's capital
expenditures related to the development of new and existing products as well as
the maintenance and improvement of existing facilities. The increase in capital
expenditures in 1997 compared to 1996 and 1995 was due primarily to capital
expenditures at Fendt. The Company currently estimates that aggregate capital
expenditures for 1998 will range from approximately $65 million to $75 million
and will primarily be used to support the development and enhancement of new and
existing products. The capital expenditures for 1998 are expected to be funded
with cash flows from operations.
The Company's debt to capitalization ratio was 42.3% at both December 31,
1997 and 1996. The Company offset additional indebtedness used to fund the Fendt
and Dronningborg Acquisitions with increases in equity from the Offering and
strong earnings in 1997.
In December 1997, the Company's Board of Directors authorized the
repurchase of up to $150.0 million of its outstanding common stock. The
purchases will be made through open market transactions, and the timing and
actual number of shares purchased will depend on various factors, such as price
and other market conditions.
The Company believes that available borrowings under the January 1997
Credit Facility, available cash and internally generated funds will be
sufficient to support its working capital, capital expenditures, and debt
service requirements for the foreseeable future.
The Company from time to time reviews and will continue to review
acquisition and joint venture opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect to
take advantage of favorable opportunities in the capital markets, the Company
may supplement availability or revise the terms under its credit facilities or
complete public or private offerings of equity or debt securities.
CHARGES FOR NONRECURRING EXPENSES
In 1997, the Company recorded nonrecurring expenses of $18.2 million which
consisted of (i) $15.0 million related to the restructuring of the Company's
European operations and the integration of the Deutz Argentina and Fendt
operations, acquired in December 1996 and January 1997, respectively, and (ii)
$3.2 million related to executive severance. The costs associated with the
restructuring and integration activities primarily related to the centralization
and rationalization of certain manufacturing, selling and administrative
functions in addition to the rationalization of a small portion of the Company's
European dealer network. These restructuring and integration activities are
expected to result in cost savings related to manufacturing costs and selling,
general and administrative expenses. In addition, the European dealer
rationalization is expected to improve sales in certain markets. While the
Company believes that the cost savings and sales improvements can be attained,
there can be no assurance that all objectives will be achieved.
In 1996, the Company recorded nonrecurring expenses of $22.3 million which
consisted of (i) $15.0 million related to the restructuring of the Company's
European operations and the integration and restructuring of the Company's
Brazilian operations, acquired in the Maxion Acquisition in June 1996, and (ii)
$7.3 million related to executive severance. The European restructuring costs
are primarily related to the centralization of certain parts warehousing,
administrative, sales and marketing functions. As a result of these actions, the
Company achieved savings in reduced selling, general and administrative expenses
primarily relating to the Company's parts warehousing, finance, dealer
communications, sales and marketing functions. The Brazilian integration costs
are primarily related to the rationalization of manufacturing, sales and
administrative functions designed to resize the operations to current sales and
production volumes. The Company achieved savings from the integration and
restructuring of the Brazilian operations resulting primarily in reduced
selling, general and administrative expenses and product cost reductions.
In 1995, the Company recorded nonrecurring expenses of $6.0 million as a
portion of the costs related to the initial centralization and rationalization
of the Company's European operations' administrative, sales and marketing
functions. Prior to the Massey Acquisition in June 1994, these operations were
organized in a decentralized business unit structure. The Company's
restructuring plan has centralized many functions duplicated under the previous
organization. This restructuring has resulted in a reduction in personnel and
the elimination of administrative offices, thereby eliminating excessive costs
and redundancies in future periods.
OUTLOOK
The Company's operations are subject to the cyclical nature of the agricultural
industry. Sales of the Company's equipment have been and are expected to
continue to be affected by changes in net cash farm income, farm land values,
weather conditions, the demand for agricultural commodities and general economic
conditions.
Overall, industry conditions support a stable outlook for worldwide sales
of agricultural equipment expenditures in 1998. In
22
9
North America, as a result of relatively low worldwide grain stocks, stable
commodity prices, and solid forecasted domestic and export demand, net cash farm
income should remain at high levels and enable farmers to make necessary
purchases of equipment in 1998. In Western Europe, farmers also benefited from
strong worldwide demand and low grain stocks. Changing farm legislation toward a
more open trade environment and less government support is contributing to
consolidation to fewer but larger farms. This consolidation will contribute to a
slow, modest decline in agricultural equipment sales, but is expected to be
offset, to some extent, by increased sales of more expensive higher horsepower
equipment to support larger farms. In South America, a large commodity exporter,
the agricultural economy has been supported by worldwide demand. However,
economic uncertainty in Brazil may impact further sales growth of equipment in
1998. In general, outside of North America, Western Europe and South America,
continued general economic improvement, the increasing affluence of the
population in certain developing countries and the increased availability of
funding sources should positively support equipment demand; however, the weak
market conditions resulting from the Asian economic crisis will likely result in
a decline in near-term capital investment, particularly in the Asia/Pacific
markets.
FOREIGN CURRENCY RISK MANAGEMENT
The Company has significant manufacturing operations in the United States, the
United Kingdom, France, Germany, Denmark, Brazil and Argentina, and it purchases
a portion of its tractors, combines and components from third party foreign
suppliers primarily in various European countries and in Japan. The Company also
sells products in over 140 countries throughout the world. Fluctuations in the
value of foreign currencies create exposures which can adversely affect the
Company's results of operations.
The Company attempts to manage its foreign exchange exposure by hedging
identifiable foreign currency commitments arising from receivables, payables,
and expected purchases and sales. Where naturally offsetting currency positions
do not occur, the Company hedges certain of its exposures through the use of
foreign currency forward contracts. The Company's hedging policy prohibits
foreign currency forward contracts for speculative trading purposes.
OTHER
The Company has assessed the impact of the Year 2000 issue on its reporting
systems and operations. Based on its review, the Company estimates that the
required costs to modify existing computer systems and applications will be
approximately $10 - $12 million which will be incurred in 1998 and 1999. The
Company believes that its plans are adequate to ensure that this issue will not
materially impact future operations.
For 1997 and 1996, the Company accounted for its operations in Brazil using
the highly inflationary economy provisions of Financial Accounting Standard
Board Statement No. 52 "Foreign Currency Translation", where the U.S. dollar is
substituted as the functional currency. As a result of lower inflation rates in
Brazil over the past three years, the Company, effective January 1, 1998, will
no longer utilize highly inflationary accounting and the functional currency of
the Brazilian operations will be the Brazilian Real. The change in the Company's
functional currency in Brazil will have the effect of reflecting translation
adjustments from exchange rate changes in the Brazilian Real to equity rather
than to the results of operations.
ACCOUNTING CHANGES
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which must be adopted by
December 31, 1998. These statements will have no effect on the Company's
financial position or results of operations.
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share," which specifies
the computation, presentation and disclosure requirements for earnings per
share. All prior period earnings per share data has been restated to conform
with the provisions for SFAS 128. The per share amounts reported under SFAS 128
are not materially different that those calculated and presented under the
previous method of calculation as specified under Accounting Principles Board
Opinion No. 15.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation," which requires companies to
estimate the value of all stock-based compensation using a recognized pricing
model. The Company has adopted the disclosure requirements of this statement and
has chosen to continue to apply the accounting provisions of Accounting
Principles Board Opinion No. 25 to stock-based employee compensation
arrangements as allowed by Statement No. 123. As a result, the adoption of this
new standard did not have an effect on the Company's financial position or
results of operations.
Effective January 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used, as well as for long-lived assets and certain identifiable intangibles to
be disposed. The adoption of this new standard did not have a material effect on
the Company's financial position.
FORWARD LOOKING STATEMENTS
Certain information included in Management's Discussion and Analysis of
Financial Condition and Results of Operations constitute forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, including the information set forth under "Charges for Nonrecurring
Expenses" and "Outlook". Although the Company believes that the expectations
reflected in such forward looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be achieved.
Additionally, the Company's financial results are sensitive to movement in
interest rates and foreign currencies, as well as general economic conditions,
pricing and product actions taken by competitors, production disruptions and
changes in environmental, international trade and other laws which impact the
way in which it conducts its business. Important factors that could cause actual
results to differ materially from the Company's current expectations are
disclosed in conjunction with the Company's filings with the Securities and
Exchange Commission.
23
10
Consolidated Statements of Income
(in millions, except per share data)
<TABLE>
<CAPTION>
EQUIPMENT FINANCE
CONSOLIDATED OPERATIONS COMPANY
------------------------------------- ---------- ---------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1995 1995
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales $ 3,224.4 $ 2,317.5 $ 2,068.4 $ 2,068.4 $ --
Finance income -- -- 56.6 -- 56.6
-----------------------------------------------------------------------------------------------------------------
3,224.4 2,317.5 2,125.0 2,068.4 56.6
-----------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of goods sold 2,557.6 1,847.2 1,627.7 1,627.7 --
Selling, general and administrative expenses 275.4 208.4 203.8 190.0 13.8
Engineering expenses 54.1 27.7 24.1 24.1 --
Interest expense, net 53.5 32.7 63.2 31.5 31.7
Other expense, net 19.9 7.6 9.6 9.6 --
Nonrecurring expenses 18.2 22.3 6.0 6.0 --
-----------------------------------------------------------------------------------------------------------------
2,978.7 2,145.9 1,934.4 1,888.9 45.5
-----------------------------------------------------------------------------------------------------------------
Income before income taxes, equity in
net earnings of unconsolidated subsidiary
and affiliates and extraordinary loss 245.7 171.6 190.6 179.5 11.1
Provision for income taxes 87.5 59.9 65.9 61.6 4.3
-----------------------------------------------------------------------------------------------------------------
Income before equity in net earnings of
unconsolidated subsidiary and affiliates
and extraordinary loss 158.2 111.7 124.7 117.9 6.8
Equity in net earnings of unconsolidated
subsidiary and affiliates 12.6 17.7 4.4 11.2 --
-----------------------------------------------------------------------------------------------------------------
Income before extraordinary loss 170.8 129.4 129.1 129.1 6.8
Extraordinary loss, net of taxes (2.1) (3.5) -- -- --
-----------------------------------------------------------------------------------------------------------------
Net income 168.7 125.9 129.1 129.1 6.8
Preferred stock dividends -- -- 2.0 2.0 --
-----------------------------------------------------------------------------------------------------------------
Net income available for common stockholders $ 168.7 $ 125.9 $ 127.1 $ 127.1 $ 6.8
=================================================================================================================
Net income per common share:
Basic:
Income before extraordinary loss $ 2.82 $ 2.44 $ 2.87
Extraordinary loss (0.03) (0.07) --
-----------------------------------------------------------------------------------------------------------------
Net income $ 2.79 $ 2.37 $ 2.87
=================================================================================================================
Diluted:
Income before extraordinary loss $ 2.74 $ 2.26 $ 2.31
Extraordinary loss (0.03) (0.06) --
-----------------------------------------------------------------------------------------------------------------
Net Income $ 2.71 $ 2.20 $ 2.31
=================================================================================================================
Weighted average number of common and
common equivalent shares outstanding:
Basic 60.4 53.0 44.3
=================================================================================================================
Diluted 62.1 57.4 56.6
=================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
11
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 31.2 $ 41.7
Accounts and notes receivable, net of allowances 978.7 857.0
Receivables from affiliates 18.5 12.5
Inventories, net 622.7 473.8
Other current assets 63.7 81.5
------------------------------------------------------------------------------------------------------------
Total current assets 1,714.8 1,466.5
Property, plant and equipment, net 403.7 292.4
Investments in affiliates 87.6 80.5
Other assets 75.8 71.5
Intangible assets, net 339.0 205.6
------------------------------------------------------------------------------------------------------------
Total assets $2,620.9 $2,116.5
============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 350.1 $ 361.5
Payables to affiliates 17.4 14.6
Accrued expenses 430.0 317.0
Other current liabilities 33.0 22.9
------------------------------------------------------------------------------------------------------------
Total current liabilities 830.5 716.0
------------------------------------------------------------------------------------------------------------
Long-term debt 727.4 567.1
Postretirement health care benefits 24.5 24.4
Other noncurrent liabilities 46.9 34.4
------------------------------------------------------------------------------------------------------------
Total liabilities 1,629.3 1,341.9
Commitments and Contingencies (Note 13)
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares authorized, 62,972,423 and
57,260,151 shares issued and outstanding in 1997 and 1996, respectively 0.6 0.6
Additional paid-in capital 515.0 360.1
Retained earnings 577.6 411.4
Unearned compensation (20.0) (17.8)
Cumulative translation adjustment (81.6) 20.3
------------------------------------------------------------------------------------------------------------
Total stockholders' equity 991.6 774.6
------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,620.9 $2,116.5
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
25
12
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK COMMON STOCK ADDITIONAL MINIMUM CUMULATIVE
--------------- ---------------- PAID-IN RETAINED UNEARNED PENSION TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION LIABILITY ADJUSTMENT TOTAL
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 301,558 $ -- 21,689,609 $0.2 $324.6 $161.5 $(10.6) $(0.3) $ 1.3 $ 476.7
Net income -- -- -- -- -- 129.1 -- -- -- 129.1
Issuance of restricted stock -- -- 454,000 -- 19.2 -- (19.2) -- -- --
Two-for-one common
stock split -- -- 25,278,520 0.3 (0.3) -- -- -- -- --
Conversions of subordinated
debentures into common
stock -- -- 2,315,661 -- 29.3 -- -- -- -- 29.3
Conversions of preferred
stock into subordinated
debentures (267,453) -- -- -- (66.9) -- -- -- -- (66.9)
Conversions of preferred
stock into common stock (34,105) -- 673,094 -- -- -- -- -- -- --
Stock options exercised -- -- 146,156 -- 1.3 -- -- -- -- 1.3
Common stock dividends -- -- -- -- -- (0.9) -- -- -- (0.9)
Preferred stock dividends -- -- -- -- -- (2.0) -- -- -- (2.0)
Amortization of unearned
compensation -- -- -- -- -- -- 7.2 -- -- 7.2
Additional minimum
pension liability -- -- -- -- -- -- -- (2.3) -- (2.3)
Change in cumulative
translation adjustment -- -- -- -- -- -- -- -- 17.4 17.4
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 -- -- 50,557,040 0.5 307.2 287.7 (22.6) (2.6) 18.7 588.9
Net income -- -- -- -- -- 125.9 -- -- -- 125.9
Issuance of restricted stock -- -- 474,500 -- 13.7 -- (13.7) -- -- --
Conversions of subordinated
debentures into common
stock -- -- 5,916,319 0.1 37.5 -- -- -- -- 37.6
Stock options exercised -- -- 312,292 -- 1.7 -- -- -- -- 1.7
Common stock dividends -- -- -- -- -- (2.2) -- -- -- (2.2)
Amortization of unearned
compensation -- -- -- -- -- -- 18.5 -- -- 18.5
Additional minimum
pension liability -- -- -- -- -- -- -- 2.6 -- 2.6
Change in cumulative
translation adjustment -- -- -- -- -- -- -- -- 1.6 1.6
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 -- -- 57,260,151 0.6 360.1 411.4 (17.8) -- 20.3 774.6
Net income -- -- -- -- -- 168.7 -- -- -- 168.7
Issuance of common stock,
net of offering expenses -- -- 5,175,000 -- 140.4 -- -- -- -- 140.4
Issuance of restricted stock -- -- 373,017 -- 12.7 -- (12.7) -- -- --
Stock options exercised -- -- 164,255 -- 1.8 -- -- -- -- 1.8
Common stock dividends -- -- -- -- -- (2.5) -- -- -- (2.5)
Amortization of unearned
compensation -- -- -- -- -- -- 10.5 -- -- 10.5
Change in cumulative
translation adjustment -- -- -- -- -- -- -- -- (101.9) (101.9)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 -- $ -- 62,972,423 $0.6 $515.0 $577.6 $(20.0) $ -- $ (81.6) $ 991.6
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
26
13
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
EQUIPMENT FINANCE
CONSOLIDATED OPERATIONS COMPANY
---------------------------------- ---------- --------
YEAR ENDED DECEMBER 31, 1997 1996 1995 1995 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 168.7 $ 125.9 $ 129.1 $ 129.1 $ 6.8
-------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary loss, net of taxes 2.1 3.5 -- -- --
Gain on sale of Agricredit -- (4.7) -- -- --
Depreciation and amortization 49.4 29.2 24.3 24.2 0.1
Equity in net earnings of
unconsolidated subsidiary and
affiliates, net of cash received (12.6) (17.7) (4.4) (11.2) --
Deferred income tax provision (benefit) 53.4 20.1 32.9 33.9 (1.0)
Amortization of intangibles 12.1 5.8 4.0 4.0 --
Amortization of unearned compensation 10.5 18.5 7.2 7.2 --
Provision for losses on credit receivables -- -- 4.3 -- 4.3
Changes in operating assets and liabilities,
net of effects from purchase of businesses:
Accounts and notes receivable, net (94.7) 3.7 (131.3) (144.5) --
Inventories, net (100.4) (22.6) (32.3) (32.3) --
Other current and noncurrent assets (10.0) (14.1) 2.8 3.1 (0.3)
Accounts payable 25.5 (9.4) 8.0 32.8 (11.6)
Accrued expenses (1.3) 54.3 16.6 14.3 2.3
Other current and noncurrent liabilities (2.7) 14.2 5.9 5.2 0.7
-------------------------------------------------------------------------------------------------------------------
Total adjustments (68.7) 80.8 (62.0) (63.3) (5.5)
-------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 100.0 206.7 67.1 65.8 1.3
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired (289.2) (347.0) (27.0) (27.0) --
Purchase of property, plant and equipment (72.1) (45.2) (45.3) (45.2) (0.1)
Credit receivables originated -- -- (393.5) -- (393.5)
Principal collected on credit receivables -- -- 286.0 -- 286.0
Proceeds from disposition of unconsolidated
subsidiary and affiliates -- 45.2 1.1 1.1 --
-------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (361.3) (347.0) (178.7) (71.1) (107.6)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term debt 932.2 977.8 1,467.5 366.1 1,101.4
Payment on long-term debt (813.8) (803.2) (1,352.6) (354.6) (998.0)
Payment of debt issuance costs (3.5) (12.5) -- -- --
Proceeds from issuance of common stock 142.2 1.7 1.3 1.3 --
Dividends received from (paid to)
finance company -- -- -- 0.5 (0.5)
Dividends paid on common stock (2.5) (2.2) (0.9) (0.9) --
Dividends paid on preferred stock -- -- (2.4) (2.4) --
(Payments) proceeds on short-term borrowings
from unconsolidated subsidiary -- -- -- (7.3) 7.3
-------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 254.6 161.6 112.9 2.7 110.2
-------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (3.8) 0.4 0.8 0.8 --
(Decrease) increase in cash and
cash equivalents (10.5) 21.7 2.1 (1.8) 3.9
Cash and cash equivalents, beginning of period 41.7 20.0 25.8 21.8 4.0
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 31.2 $ 41.7 $ 27.9 $ 20.0 $ 7.9
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
AGCO Corporation (the "Company") is a leading manufacturer and distributor of
agricultural equipment throughout the world. The Company sells a full range of
agricultural equipment and related replacement parts, including tractors,
combines, hay tools and forage equipment and implements. The Company's products
are widely recognized in the agricultural equipment industry and are marketed
under the following brand names: Massey Ferguson, Fendt, AGCO Allis, White,
GLEANER, Hesston, White-New Idea, Landini, AGCOSTAR, Black Machine, Glencoe,
Farmhand, Tye, Deutz (South America) and IDEAL. The Company distributes its
products through a combination of over 8,500 independent dealers, wholly-owned
distribution companies, associates and licensees. In addition, the Company
provides retail financing in North America, the United Kingdom, France and
Germany through its finance joint ventures with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank").
BASIS OF PRESENTATION
Effective November 1, 1996, the Company sold a 51% interest in Agricredit
Acceptance Company ("Agricredit-North America"), the Company's retail finance
subsidiary in North America (Note 2). Accordingly, the Company's consolidated
financial statements as of and for the years ended December 31, 1997 and 1996
reflect Agricredit-North America on the equity method of accounting for the
entire periods presented. For the year ended December 31, 1995, the consolidated
financial statements reflect Agricredit-North America on a consolidated basis
with the Company's other majority-owned subsidiaries. All significant
intercompany transactions have been eliminated to arrive at the consolidated
financial statements.
For the year ended December 31, 1995, the consolidated financial statements
include, on a separate, supplemental basis, the Company's Equipment Operations
and its Finance Company. "Equipment Operations" reflect the consolidation of all
operations of the Company and its majority-owned subsidiaries with the exception
of Agricredit-North America, which is included using the equity method of
accounting. The results of operations of Agricredit-North America are included
under the caption "Finance Company."
Certain prior period amounts have been reclassified to conform with the
current period presentation.
REVENUE RECOGNITION
Sales of equipment and replacement parts are recorded by the Company when
shipped to independent dealers, distributors or other customers. Provisions for
sales incentives and returns and allowances are made at the time of sale to the
dealer for existing incentive programs or at the inception of new incentive
programs. Provisions are revised in the event of subsequent modification to the
incentive programs. In certain markets, particularly in North America, there is
a time lag, which varies based on the timing and level of retail demand, between
the date the Company records a sale and when the dealer sells the equipment to a
retail customer.
FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's foreign subsidiaries are translated
into United States currency in accordance with Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." Assets and liabilities are
translated to United States dollars at period-end exchange rates. Income and
expense items are translated at average rates of exchange prevailing during the
period. Translation adjustments are accumulated as a separate component of
stockholders' equity. Gains and losses which result from foreign currency
transactions are included in the accompanying consolidated statements of income.
For subsidiaries operating in highly inflationary economies, financial
statements are remeasured into the United States dollar with adjustments
resulting from the translation of monetary assets and liabilities reflected in
the accompanying consolidated statements of income.
For 1997 and 1996, the Company accounted for its operations in Brazil using
the highly inflationary economy provisions of Statement No. 52 where the U.S.
dollar is substituted as the functional currency. As a result of lower inflation
rates in Brazil over the past three years, the Company, effective January 1,
1998, will no longer utilize highly inflationary accounting and the functional
currency of the Brazilian operations will be the Brazilian Real.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
estimates made by management primarily relate to receivable and inventory
allowances and certain accrued liabilities, principally relating to reserves for
volume discounts and sales incentives, warranty and insurance.
28
15
TRANSACTIONS WITH AFFILIATES
The Company enters into transactions with certain affiliates relating primarily
to the purchase and sale of inventory. All transactions were in the ordinary
course of business and are not considered material to the financial statements.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three months
or less to be cash equivalents.
ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable arise from the sale of parts and finished goods
inventory to independent dealers, distributors or other customers. Terms vary by
market, generally ranging from 30 day terms to requiring payment when the
equipment is sold to retail customers. Interest is charged on the balance
outstanding after certain interest-free periods, which generally range from 1 to
12 months.
Accounts and notes receivable are shown net of allowances for sales
incentive discounts available to dealers and for doubtful accounts. Accounts and
notes receivable allowances at December 31, 1997 and 1996 were as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Sales incentive discounts $53.1 $45.8
Doubtful accounts 44.1 30.0
------------------------------------------------------------
$97.2 $75.8
============================================================
</TABLE>
INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method. Market is net realizable value for finished goods and repair
and replacement parts. For work in process, production parts and raw materials,
market is replacement cost.
Inventory balances at December 31, 1997 and 1996 were as follows (in
millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Finished goods $267.7 $171.1
Repair and replacement parts 250.2 222.6
Work in process, production
parts and raw materials 184.5 134.7
------------------------------------------------------------
Gross inventories 702.4 528.4
Allowance for surplus and
obsolete inventories (79.7) (54.6)
------------------------------------------------------------
Inventories, net $622.7 $473.8
============================================================
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is provided on a straight-line basis over the
estimated useful lives of 10 to 40 years for buildings and improvements, 3 to 15
years for machinery and equipment, and 3 to 10 years for furniture and fixtures.
Expenditures for maintenance and repairs are charged to expense as incurred.
The property, plant and equipment balances at December 31, 1997 and 1996
were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Land $ 51.5 $ 32.5
Buildings and improvements 127.7 93.2
Machinery and equipment 274.9 206.1
Furniture and fixtures 45.0 31.2
------------------------------------------------------------
Gross property, plant and
equipment 499.1 363.0
Accumulated depreciation
and amortization (95.4) (70.6)
------------------------------------------------------------
Property, plant and
equipment, net $403.7 $292.4
============================================================
</TABLE>
INTANGIBLE ASSETS
Intangible assets at December 31, 1997 and 1996 consisted of the following (in
millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Goodwill $287.1 $139.3
Trademarks 66.0 66.0
Other 2.9 5.2
Accumulated amortization (17.0) (4.9)
------------------------------------------------------------
Intangible assets $339.0 $205.6
============================================================
</TABLE>
The excess of cost over net assets acquired ("goodwill") is being amortized
to income on a straight-line basis over periods ranging from 10 to 40 years.
Goodwill and accumulated amortization are shown above net of the excess of net
assets over cost ("negative goodwill") of $23.2 million for both 1997 and 1996
and its related accumulated amortization of $17.4 million and $16.0 million for
1997 and 1996, respectively. The Company also assigned values to certain
acquired trademarks which are being amortized to income on a straight-line basis
over 40 years. The net amortization expense included in other expense, net in
the accompanying consolidated statements of income was $12.1 million, $5.8
million and $4.0 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
The Company periodically reviews the carrying values assigned to goodwill
and other intangible assets based upon expectations of future cash flows and
operating income generated by the underlying tangible assets.
29
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ACCRUED EXPENSES
Accrued expenses at December 31, 1997 and 1996 consisted of the following
(in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Reserve for volume discounts and
sales incentives $ 86.9 $ 69.1
Warranty reserves 63.5 47.1
Accrued employee compensation
and benefits 58.4 47.0
Accrued taxes 88.7 51.5
Other 132.5 102.3
------------------------------------------------------------
$430.0 $317.0
============================================================
</TABLE>
WARRANTY RESERVES
The Company's agricultural equipment products are generally under warranty
against defects in material and workmanship for a period of one to four years.
The Company accrues for future warranty costs at the time of sale based upon
historical warranty experience.
INSURANCE RESERVES
Under the Company's insurance programs, coverage is obtained for significant
liability limits as well as those risks required to be insured by law or
contract. It is the policy of the Company to self-insure a portion of certain
expected losses related primarily to workers' compensation and comprehensive
general, product and vehicle liability. Provisions for losses expected under
these programs are recorded based on the Company's estimates of the aggregate
liabilities for the claims incurred.
EXTRAORDINARY LOSS
In 1997, the Company recorded an extraordinary loss of $2.1 million, net of
taxes of $1.4 million, for the write-off of unamortized debt costs related to
the March 1996 Credit Facility (Note 6) which was refinanced with the January
1997 Credit Facility (Note 6). In 1996, the Company recorded an extraordinary
loss of $3.5 million, net of taxes of $2.2 million, for the write-off of
unamortized debt costs related to the Company's $550.0 million secured revolving
credit facility which was refinanced with the March 1996 Credit Facility.
NET INCOME PER COMMON SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which specifies
the computation, presentation and disclosure requirements for earnings per
share. All prior period earnings per share data has been restated to conform
with the provisions of SFAS No. 128. The per share amounts reported under SFAS
128 are not materially different than those calculated and presented under the
previous method of calculation as specified under Accounting Principles Board
Opinion No. 15.
Basic earnings per common share is computed by dividing net income
available for common stockholders (net income less preferred stock dividend
requirements) by the weighted average number of common shares outstanding during
each period. Diluted earnings per share assumes exercise of outstanding stock
options, vesting of restricted stock and the conversion of the Convertible
Subordinated Debentures (Note 7) and the Preferred Stock (Note 10) into common
stock during the periods outstanding. All references in the financial statements
and the accompanying notes to the financial statements to the weighted average
number of common shares outstanding and net income per common share have been
restated to reflect stock splits (Note 11).
A reconciliation of net income and the weighted average number of common
shares outstanding used to calculate basic and diluted earnings per common share
for the years ended December 31, 1997, 1996 and 1995 is as follows (in millions,
except per share data):
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE
1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average number of
common shares outstanding 60.4 53.0 44.3
==========================================================================
Income before extraordinary loss $ 170.8 $ 129.4 $ 129.1
Extraordinary loss (2.1) (3.5) --
--------------------------------------------------------------------------
Net income 168.7 125.9 129.1
Preferred stock dividends -- -- 2.0
--------------------------------------------------------------------------
Net income available for
common stockholders $ 168.7 $ 125.9 $ 127.1
==========================================================================
Net income per common share:
Income before extraordinary loss $ 2.82 $ 2.44 $ 2.87
Extraordinary loss (0.03) (0.07) --
--------------------------------------------------------------------------
Net income $ 2.79 $ 2.37 $ 2.87
==========================================================================
DILUTED EARNINGS PER SHARE
Weighted average number of
common shares outstanding 60.4 53.0 44.3
Shares issued upon assumed
vesting of restricted stock 1.4 1.7 1.2
Shares issued upon assumed
conversion of the Convertible
Subordinated Debentures and
Preferred Stock -- 2.2 10.5
Shares issued upon assumed exercise
of outstanding stock options 0.3 0.5 0.6
--------------------------------------------------------------------------
Weighted average number of common
and common equivalent shares
outstanding 62.1 57.4 56.6
==========================================================================
Income before extraordinary loss $ 170.8 $ 129.4 $ 129.1
Extraordinary loss (2.1) (3.5) --
--------------------------------------------------------------------------
Net income 168.7 125.9 129.1
Interest expense on Convertible
Subordinated Debentures, net of
applicable income taxes -- 0.5 1.4
--------------------------------------------------------------------------
Net income available for
common stockholders $ 168.7 $ 126.4 $ 130.5
==========================================================================
Net income per common share:
Income before extraordinary loss $ 2.74 $ 2.26 $ 2.31
Extraordinary loss (0.03) (0.06) --
--------------------------------------------------------------------------
Net income $ 2.71 $ 2.20 $ 2.31
==========================================================================
</TABLE>
30
17
FINANCIAL INSTRUMENTS
The carrying amounts reported in the Company's consolidated balance sheets for
cash and cash equivalents, accounts and notes receivable, receivables from
affiliates, accounts payable and payables to affiliates approximate fair value
due to the immediate or short-term maturity of these financial instruments. The
carrying amount of long-term debt under the Company's revolving credit facility
(Note 6) approximates fair value based on the borrowing rates currently
available to the Company for loans with similar terms and average maturities. At
December 31, 1997, the estimated fair value of the Company's 8 1/2% Senior
Subordinated Notes (Note 6), based on its listed market value, was $266.1
million compared to the carrying value of $248.1 million.
The Company enters into foreign exchange forward contracts to hedge the
foreign currency exposure of certain receivables, payables and expected
purchases and sales. These contracts are for periods consistent with the
exposure being hedged and generally have maturities of one year or less. Gains
and losses on foreign exchange forward contracts are deferred and recognized in
income in the same period as the hedged transaction. The Company's foreign
exchange forward contracts do not subject the Company's results of operations to
risk due to exchange rate fluctuations because gains and losses on these
contracts generally offset gains and losses on the exposure being hedged. The
Company does not enter into any foreign exchange forward contracts for
speculative trading purposes. At December 31, 1997 and 1996, the Company had
foreign exchange forward contracts with gross notional amounts of $609.0 million
and $558.9 million, respectively. The deferred gains or losses from these
contracts were not material at December 31, 1997 and 1996.
The notional amounts of foreign exchange forward contracts do not represent
amounts exchanged by the parties and therefore, are not a measure of the
Company's risk. The amounts exchanged are calculated on the basis of the
notional amounts and other terms of the foreign exchange hedging contracts. The
credit and market risks under these contracts are not considered to be
significant.
ACCOUNTING CHANGES
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which specifies
the computation, presentation and disclosure requirements for earnings per
share. See Net Income per Common Share in Note 1 for further description of the
accounting change.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation," which requires companies to
estimate the value of all stock-based compensation using a recognized pricing
model. The Company has adopted the disclosure requirements of this statement and
has chosen to continue to apply the accounting provisions of Accounting
Principles Board Opinion No. 25 to stock-based employee compensation
arrangements as allowed by Statement No. 123 (Note 12). As a result, the
adoption of this new standard did not have an effect on the Company's financial
position or results of operations for the years ended December 31, 1997 and
1996.
Effective January 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used, as well as for long-lived assets and certain identifiable intangibles to
be disposed. The adoption of this standard did not have a material effect on the
Company's financial position.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
The Company completed the following acquisitions in 1997, 1996 and 1995 which
were primarily financed with borrowings under the Company's revolving credit
facility (Note 6). In most cases, the Company acquired assets and assumed
liabilities consisting primarily of accounts receivable, inventories, property,
plant and equipment, trademarks, trade names and technology, accounts payable
and accrued liabilities. The results of operations for the Company's
acquisitions are included in the Company's consolidated financial statements as
of and from the respective dates of acquisition.
On December 4, 1997, the Company acquired the remaining 68% of Dronningborg
Industries a/s ("Dronningborg") for approximately $22.0 million (the
"Dronningborg Acquisition"). Prior to the acquisition, the Company owned 32% of
Dronningborg which manufactures combine harvesters sold exclusively to AGCO for
sale under the Massey Ferguson brand name.
Effective January 1, 1997, the Company acquired Xaver Fendt GmbH & Co. KG
("Fendt") for approximately $283.5 million plus approximately $38.3 million of
assumed working capital debt (the "Fendt Acquisition"). Fendt's primary business
is the manufacture and distribution of tractors through a network of independent
agricultural cooperatives, dealers and distributors in Germany and throughout
Europe and Australia. Effective December 31, 1997, the Company sold Fendt's
caravan and motor home business for approximately $10.0 million.
On December 27, 1996, the Company acquired Deutz Argentina S.A. ("Deutz
Argentina") for approximately $62.5 million (the "Deutz Argentina Acquisition").
Deutz Argentina is a manufacturer and distributor of a broad range of
agricultural equipment, engines and light trucks in Argentina and other South
American markets.
31
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Effective July 8, 1996, the Company acquired certain assets of Western
Combine Corporation and Portage Manufacturing, Inc., the Company's suppliers of
Massey Ferguson combines and certain other harvesting equipment sold in North
America (the "Western Combine Acquisition") for approximately $19.4 million.
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Agricultural Equipment Business") for
approximately $260.0 million (the "Maxion Acquisition"). Prior to the
acquisition, the Maxion Agricultural Equipment Business was AGCO's Massey
Ferguson licensee in Brazil, manufacturing and distributing agricultural and
industrial equipment in Brazil and other South American markets.
Effective March 31, 1995, the Company acquired substantially all the net
assets of AgEquipment Group, a manufacturer and distributor of agricultural
implements and tillage equipment (the "AgEquipment Acquisition") for
approximately $25.1 million.
The above acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16, and accordingly, each purchase price
has been allocated to the assets acquired and the liabilities assumed based on
the estimated fair values as of the acquisition dates. The purchase price
allocations for the Maxion, Deutz Argentina, Fendt and Western Combine
Acquisitions resulted in a decrease in goodwill of $53.9 million from the
amounts originally recorded. These adjustments were a result of the completion
of certain asset and liability valuations related primarily to property, plant
and equipment and certain allowance and reserve accounts. The purchase price
allocations for the Dronningborg and Fendt Acquisitions are preliminary and will
be completed in 1998.
In addition, the purchase price allocations for the Deutz Argentina, Fendt
and Western Combine Acquisitions included liabilities associated with certain
costs to integrate the acquired businesses into the Company's operations. These
costs related to the consolidation of certain acquired manufacturing operations
into existing Company facilities and the integration of certain sales and
marketing functions. As of December 31, 1997, the Company had established
liabilities totaling $6.5 million for employee severance and relocation and
other integration costs and had incurred $3.9 million of expenses charged
against these liabilities.
DISPOSITIONS
Effective November 1, 1996, the Company entered into an agreement with De Lage
Landen International, B.V., a wholly-owned subsidiary of Rabobank, to be its
joint venture partner in Agricredit-North America, the Company's wholly-owned
retail finance subsidiary in North America (the "Agricredit-North America Joint
Venture"). As a result of the agreement, the Company sold a 51% interest in
Agricredit-North America to Rabobank. The Company received total consideration
of approximately $44.3 million in the transaction and recorded a gain, before
taxes, of approximately $4.7 million. Under the Agricredit-North America Joint
Venture, Rabobank has a 51% interest and the Company retained a 49% interest in
the finance company. Substantially all of the net assets of Agricredit-North
America were transferred to the Agricredit-North America Joint Venture. Proceeds
from the transaction were used to repay outstanding borrowings under the
Company's revolving credit facility.
3. CHARGES FOR NONRECURRING EXPENSES
The results of operations for 1997 included a charge for nonrecurring expenses
of $18.2 million, or $.19 per common share on a diluted basis. This nonrecurring
charge included $15.0 million related to the restructuring of the Company's
European operations which were acquired in the purchase of Massey Ferguson Group
Limited in June 1994 (the "Massey Acquisition") and certain costs associated
with the integration of the Deutz Argentina and Fendt operations. The
nonrecurring charge for 1997 also included $3.2 million related to executive
severance costs. The costs included for these restructuring and integration
activities in 1997 primarily related to the centralization and rationalization
of certain manufacturing, selling and administrative functions in addition to
the rationalization of a certain portion of the Company's European dealer
network. The nonrecurring charge for 1997 included $9.2 million for employee
related costs, consisting of employee severance, and $4.7 million of payroll
costs incurred through December 31, 1997 for employees that have been terminated
or will be terminated in the future. Of the total $15.0 million charge, $7.2
million has been incurred through December 31, 1997.
The results of operations for 1996 included a charge for nonrecurring
expenses of $22.3 million, or $0.25 per common share on a diluted basis. This
nonrecurring charge included $15.0 million related to the restructuring of the
Company's European operations and the integration and restructuring of the
Company's Brazilian operations, acquired in the Maxion Acquisition (Note 2) in
June 1996. In addition, the nonrecurring charge included $7.3 million related to
executive severance costs. The nonrecurring charge for the integration and
restructuring activities in 1996 included costs associated with the
rationalization and centraliza-
32
19
tion of certain manufacturing, parts warehousing, sales, and administrative
functions. The $15.0 million recorded in 1996 included $9.0 million for employee
related costs, including severance costs, and $6.0 million for other
nonrecurring costs. Included in the $9.0 million of employee related costs was
$1.3 million of payroll costs incurred through December 31, 1996 for personnel
that have been terminated. All costs associated with the 1996 nonrecurring
charge have been incurred.
The results of operations for the year ended December 31, 1995 included
charges of $6.0 million, or $0.07 per common share, for nonrecurring expenses
primarily related to the initial integration and restructuring of the Company's
European operations. The nonrecurring charge included costs primarily associated
with the centralization and rationalization of the Company's European operations
administrative, sales and marketing functions and other nonrecurring costs. All
of the costs associated with the initial integration and restructuring of the
Company's European operations from the acquisition date through the year ended
December 31, 1995 have been incurred.
4. INVESTMENTS IN AFFILIATES
At December 31, 1997 and 1996, the Company's investments in unconsolidated
affiliates primarily consisted of (i) the Company's retail finance joint
ventures with Rabobank which includes the Agricredit-North America Joint Venture
(Note 2), (ii) the Company's 50% investments in manufacturing joint ventures
with various unrelated manufacturers to produce hay and forage equipment in
North America, driveline assemblies in Europe, and engines in South America and
(iii) certain other minority investments in farm equipment manufacturers and
licensees.
Investments in affiliates, accounted for under the equity method, as of
December 31, 1997 and 1996 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
------------------------------------------------------------
<S> <C> <C>
Retail finance joint ventures $55.6 $48.4
Manufacturing joint ventures 23.4 17.4
Other 8.6 14.7
------------------------------------------------------------
$87.6 $80.5
============================================================
</TABLE>
The Company's equity in net earnings of unconsolidated affiliates for 1997,
1996, and 1995 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------
<S> <C> <C> <C>
Retail finance joint ventures $10.9 $14.8 $3.4
Other 1.7 2.9 1.0
------------------------------------------------------------
$12.6 $17.7 $4.4
============================================================
</TABLE>
The manufacturing joint ventures of the Company primarily sell their
products to the joint venture partners at prices which result in their operating
at or near breakeven on an annual basis. The Company also has various minority
interest investments which are accounted for under the cost method.
Summarized financial information of the Agricredit-North America Joint
Venture as of and for the year ended December 31, 1997 and 1996 is as follows
(in millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Current assets $317.5 $220.7
Noncurrent assets 473.4 453.0
-------------------------------------------------------------------
Total assets 790.9 673.7
-------------------------------------------------------------------
Current liabilities 690.5 533.4
Noncurrent liabilities 29.2 83.1
Partners' equity 71.2 57.2
-------------------------------------------------------------------
Total liabilities and partners' equity $790.9 $673.7
===================================================================
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Interest and finance fees $ 82.2 $ 69.5
Expenses 64.6 58.1
-------------------------------------------------------------------
Net income $ 17.6 $ 11.4
===================================================================
</TABLE>
5. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
The sources of income before income taxes, equity in net earnings of
unconsolidated subsidiary and affiliates and extraordinary loss were as follows
for the years ended December 31, 1997, 1996 and 1995 (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 51.7 $ 31.9 $ 41.9
Foreign 194.0 139.7 148.7
--------------------------------------------------------------------------
Income before income taxes, equity
in net earnings of unconsolidated
subsidiary and affiliates and
extraordinary loss $245.7 $171.6 $190.6
==========================================================================
</TABLE>
33
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision (benefit) for income taxes by location of the taxing
jurisdiction for the years ended December 31, 1997, 1996 and 1995 consisted of
the following (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States:
Federal $(2.6) $ 9.7 $15.8
State (0.8) 0.5 1.5
Foreign 37.5 29.6 15.7
---------------------------------------------------------------
34.1 39.8 33.0
---------------------------------------------------------------
Deferred:
United States:
Federal 19.0 (1.1) (2.5)
State 2.6 0.1 0.3
Foreign 31.8 21.1 35.1
---------------------------------------------------------------
53.4 20.1 32.9
---------------------------------------------------------------
Provision for income taxes $87.5 $59.9 $65.9
===============================================================
</TABLE>
Certain foreign operations of the Company are subject to United States as
well as foreign income tax regulations. Therefore, the preceding sources of
income before income taxes by location and the provision (benefit) for income
taxes by taxing jurisdiction are not directly related.
A reconciliation of income taxes computed at the United States federal
statutory income tax rate (35%) to the provision for income taxes reflected in
the consolidated statements of income for the years ended December 31, 1997,
1996 and 1995 is as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for income taxes at United
States federal statutory rate of 35% $86.0 $60.1 $66.7
State and local income taxes, net of
federal income tax benefit 1.8 0.3 1.2
Taxes on foreign income which
differ from the United States
statutory rate (0.5) (0.8) (1.2)
Other 0.2 0.3 (0.8)
---------------------------------------------------------------------------
$87.5 $59.9 $65.9
===========================================================================
</TABLE>
The significant components of the net deferred tax assets at December 31,
1997 and 1996 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards $56.7 $63.2
Sales incentive discounts 5.4 18.3
Inventory valuation reserves 11.5 11.1
Postretirement benefits 10.3 9.5
Other 47.5 48.6
Valuation allowance (66.4) (63.7)
--------------------------------------------------------------
Total deferred tax assets 65.0 87.0
--------------------------------------------------------------
Deferred Tax Liabilities:
Tax over book depreciation 28.4 2.8
Tax over book amortization of goodwill 7.1 6.6
Other 10.0 5.4
--------------------------------------------------------------
Total deferred tax liabilities 45.5 14.8
--------------------------------------------------------------
Net deferred tax assets 19.5 72.2
Less: Current portion of deferred
tax liability (asset) 1.6 (48.1)
--------------------------------------------------------------
Noncurrent net deferred tax assets $21.1 $24.1
==============================================================
</TABLE>
As reflected in the preceding table, the Company established a valuation
allowance of $66.4 million and $63.7 million as of December 31, 1997 and 1996,
respectively, due to the uncertainty regarding the realizability of certain
deferred tax assets. The valuation allowance relates primarily to acquired
operating loss carryforwards which are available to reduce future taxable income
of certain foreign entities. If realized, the acquired net operating loss
carryforwards would have the effect of reducing the corresponding goodwill in
future periods.
The Company has net operating loss carryforwards of $140.0 million as of
December 31, 1997, with expiration dates as follows: 1998 - $11.5 million, 1999
- $9.0 million, 2000 - $28.8 million, 2001 - $28.6 million, 2002 - $11.3
million, thereafter and unlimited - $50.8 million.
The Company paid income taxes of $42.0 million, $23.1 million and $22.6
million for the years ended December 31, 1997, 1996, and 1995, respectively.
34
21
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1997 and 1996 (in
millions):
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------
<S> <C> <C>
Revolving Credit Facility $460.7 $317.4
Senior Subordinated Notes 248.1 248.0
Other Long-Term Debt 18.6 1.7
--------------------------------------------------------------
Total Long-Term Debt $727.4 $567.1
==============================================================
</TABLE>
In January 1997, the Company replaced its $650.0 million unsecured
revolving credit facility (the "March 1996 Credit Facility") with a new credit
facility (the "January 1997 Credit Facility"), which allowed for borrowings up
to $1.2 billion. In March 1997, the lending commitment for the January 1997
Credit Facility was reduced by $141.2 million which represented the proceeds to
the Company, net of underwriting discounts, from the Company's common stock
offering (Note 11). Aggregate borrowings outstanding under the January 1997
Credit Facility are subject to a borrowing base limitation and may not at any
time exceed the sum of 90% of eligible accounts receivable and 60% of eligible
inventory. Interest accrues on borrowings outstanding under the January 1997
Credit Facility primarily at LIBOR plus an applicable margin, as defined. At
December 31, 1997, interest rates on the outstanding borrowings ranged from 4.2%
to 8.0%, with a weighted average interest rate during 1997 of 6.6%. The January
1997 Credit Facility contains certain covenants, including covenants restricting
the incurrence of indebtedness and the making of certain restrictive payments,
including dividends. In addition, the Company must maintain certain financial
covenants including, among others, a debt to capitalization ratio, an interest
coverage ratio and a ratio of debt to cash flow, as defined. At December 31,
1997, $460.7 million was outstanding under the January 1997 Credit Facility and
available borrowings were $596.2 million.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The Notes are unsecured obligations of the Company and are redeemable at the
option of the Company, in whole or in part, at any time on or after March 15,
2001 initially at 104.25% of their principal amount, plus accrued interest,
declining ratably to 100% of their principal amount plus accrued interest, on or
after March 15, 2003. The Notes include certain covenants, including covenants
restricting the incurrence of indebtedness and the making of certain restrictive
payments, including dividends. The net proceeds from the sale of the Notes were
used to repay outstanding indebtedness.
At December 31, 1997, the aggregate scheduled maturities of long-term debt
are primarily in the year 2002 and thereafter. The scheduled maturities in years
1998 through 2001 are not material. Cash payments for interest were $70.9
million, $54.1 million and $77.3 million for the years ended December 31, 1997,
1996 and 1995, respectively.
The Company has arrangements with various banks to issue letters of credit
or similar instruments which guarantee the Company's obligations for the
purchase or sale of certain inventories and for potential claims exposure for
insurance coverage. At December 31, 1997, outstanding letters of credit totaled
$28.9 million, of which $1.8 million was issued under the January 1997 Credit
Facility. At December 31, 1996, outstanding letters of credit totaled $35.1
million, of which $4.8 million was issued under the March 1996 Credit Facility.
7. CONVERTIBLE SUBORDINATED DEBENTURES
In June 1995, the Company exchanged all of its outstanding 2,674,534 depositary
shares (the "Exchange"), each representing 1/10 of a share of Convertible
Preferred Stock (Note 10), into $66.8 million of 6.5% Convertible Subordinated
Debentures due 2008 (the "Convertible Subordinated Debentures"). The effect of
this transaction resulted in a reduction to stockholders' equity and an increase
to liabilities in the amount of $66.8 million. The Convertible Subordinated
Debentures were convertible at any time at the option of the holder into shares
of the Company's common stock at a conversion rate of 157.85 shares of common
stock for each $1,000 principal amount of the debentures. In addition, on or
after June 1, 1996, the Convertible Subordinated Debentures were redeemable at
the option of the Company initially at an amount equivalent to $1,045.50 per
$1,000 principal amount of the debentures and thereafter, at prices declining to
an amount equivalent to the face amount of the debentures on or after June 1,
2003, plus all accrued and unpaid interest.
35
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In April 1996, the Company announced its election, effective June 1, 1996,
to redeem all of its outstanding Convertible Subordinated Debentures. Prior to
the execution of redemption, all of the outstanding Convertible Subordinated
Debentures were converted into common stock.
8. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering certain hourly and
salaried employees in the United States and certain foreign countries,
principally in the United Kingdom and Germany. Under the United States plans,
benefits under the salaried employees' plan are generally based upon participant
earnings, while the hourly employees' benefits are determined by stated monthly
benefit amounts for each year of credited service. The United States salaried
employees' retirement plan was amended to freeze all future benefit accruals and
participation after December 31, 1988, but to continue the plan provisions with
respect to service accumulations toward achieving eligibility for, and vesting
in, plan benefits. Under the foreign plans, benefits are based on the employees'
highest average eligible compensation. The Company's policy is to fund amounts
to the defined benefit plans necessary to comply with the funding requirements
as prescribed by the laws and regulations in each country where the plans are
located.
Net periodic pension cost for the plans for the years ended December 31,
1997, 1996 and 1995 included the following components (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 6.5 $ 5.2 $ 3.8
Interest cost 24.4 22.3 19.6
Actual return on plan assets (68.2) (37.9) (34.4)
Net amortization and deferral 41.5 12.9 13.0
-----------------------------------------------------------------
$ 4.2 $ 2.5 $ 2.0
=================================================================
</TABLE>
The following assumptions were used to measure the projected benefit
obligation for the plans at December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------
U.S. Plans Foreign Plans U.S. Plans Foreign Plans U.S. Plans Foreign Plans
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average discount rate 7.25% 7.00% 7.50% 8.50% 7.25% 8.75%
Rate of increase in future compensation N.A. 4.00% N.A. 5.00% N.A. 5.00%
Expected long-term rate of return on
plan assets 8.00% 8.00% 8.00% 9.75% 8.00% 10.00%
</TABLE>
For 1997, the change in assumptions in the foreign plans reflects the
addition of plans assumed in the Fendt Acquisition.
The following table sets forth the defined benefit plans' funded status at
December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
1997 1996 1997 1996
-------------------------------------------------------
Plans in which Assets Plans in which Accumulated
Exceed Accumulated Benefits Benefits Exceed Assets
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation $304.5 $252.8 $ 46.3 $ 30.8
========================================================================================================================
Accumulated benefit obligation $304.7 $257.3 $ 48.1 $ 31.6
========================================================================================================================
Projected benefit obligation $315.9 $266.7 $ 48.1 $ 32.7
Plan assets at fair value, primarily listed stock and U.S. bonds 321.8 277.2 30.7 26.6
------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than (in excess of) plan assets 5.9 10.5 (17.4) (6.1)
Unrecognized net loss 13.1 2.0 (2.2) 0.3
Unrecognized prior service cost -- -- 2.6 3.2
Additional minimum liability -- -- -- (2.3)
------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $ 19.0 $ 12.5 $(17.0) $ (4.9)
========================================================================================================================
</TABLE>
36
23
In addition, the Company accrues pension costs relating to various pension
plans in foreign countries other than the U.K. and Germany, all of which are
substantially funded.
The Company maintains a separate defined contribution 401(k) savings plan
covering certain salaried employees in the United States. Under the plan, the
Company contributes a specified percentage of each eligible employee's
compensation. The Company contributed $1.7 million, $1.6 million and $1.3
million for the years ended December 31, 1997, 1996 and 1995, respectively.
9. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides certain postretirement health care and life insurance
benefits for United States salaried and hourly employees and their eligible
dependents who retire after attaining specified age and service requirements.
Net periodic postretirement benefit cost for the years ended December 31,
1997, 1996 and 1995 included the following components (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $0.8 $0.9 $0.9
Interest cost on accumulated
postretirement benefit obligation 1.2 1.3 1.3
Net amortization of transition
obligation and prior service cost (0.6) (0.7) (0.7)
Net amortization of unrecognized
net gain (0.7) (0.4) (0.5)
---------------------------------------------------------------------
$0.7 $1.1 $1.0
=====================================================================
</TABLE>
The following table sets forth the postretirement benefit plans' funded
status at December 31, 1997 and 1996 (in millions):
<TABLE>
<CAPTION>
1997 1996
--------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retiree $ 5.6 $ 4.9
Fully eligible active plan participants 3.2 3.5
Other active participants 10.1 10.2
--------------------------------------------------------------------
18.9 18.6
Plan assets at fair value -- --
--------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan assets 18.9 18.6
Unrecognized prior service cost 0.8 1.5
Unrecognized transition obligation (0.4) (0.4)
Unrecognized net gain 5.2 4.7
--------------------------------------------------------------------
Accrued postretirement benefit liability $24.5 $24.4
====================================================================
</TABLE>
For measuring the expected postretirement benefit obligation, a 9.75%
health care cost trend rate was assumed for 1997, decreasing 0.75% per year to
6% and remaining at that level thereafter. For 1996, a 10.5% health care cost
trend rate was assumed. The weighted average discount rate used to determine the
accumulated postretirement benefit obligation was 7.25% and 7.50% at December
31, 1997 and 1996, respectively.
Increasing the assumed health care cost trend rates by one percentage point
each year and holding all other assumptions constant would increase the
accumulated postretirement benefit obligation at December 31, 1997 and 1996 by
$1.9 million and $1.7 million, respectively, and would increase the aggregate of
the service and interest cost components of the net periodic postretirement
benefit cost by $0.2 million for both the years ended December 31, 1997 and
1996.
10. PREFERRED STOCK
At December 31, 1997, the Company had 1,000,000 authorized shares of preferred
stock with a par value of $0.01 per share and no shares outstanding.
In May 1993, the Company completed an offering of 3,680,000 depositary
shares, each representing 1/10 of a share of $16.25 Cumulative Convertible
Exchangeable Preferred Stock (the "Convertible Preferred Stock") at $25.00 per
depositary share (the "Convertible Preferred Stock Offering"). The net proceeds
to the Company from the Convertible Preferred Stock Offering, after deducting
the underwriters' discount and offering expenses, were $88.0 million. Dividends
on the Convertible Preferred Stock were cumulative from the date of original
issue and were payable quarterly at $1.625 per annum per depositary share.
Shares of the Convertible Preferred Stock were convertible at any time at the
option of the holder into shares of the Company's common stock at a conversion
price of $6.33. In June 1995, the Company exchanged all of its outstanding
2,674,534 depositary shares of Convertible Preferred Stock into $66.8 million of
Convertible Subordinated Debentures (Note 7).
In April 1994, the Company designated 300,000 shares as Junior Cumulative
Preferred Stock (the "Junior Preferred Stock") in connection with the adoption
of a Stockholders' Rights Plan (the "Rights Plan" - Note 11). No shares of
Junior Preferred Stock have been issued.
37
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMON STOCK
At December 31, 1997, the Company had 150,000,000 authorized shares of common
stock with a par value of $0.01, with 62,972,423 shares of common stock
outstanding, 1,064,473 shares reserved for issuance under the Company's 1991
Stock Option Plan (Note 12), 70,500 shares reserved for issuance under the
Company's Nonemployee Director Stock Incentive Plan (Note 12) and 2,295,000
shares reserved for issuance under the Company's Long-Term Incentive Plan (Note
12).
In April 1994, the Company adopted the Rights Plan. Under the terms of the
Rights Plan, one-third of a preferred stock purchase right (a "Right") is
attached to each outstanding share of the Company's common stock. The Rights
Plan contains provisions that are designed to protect stockholders in the event
of certain unsolicited attempts to acquire the Company. Under the terms of the
Rights Plan, each Right entitles the holder to purchase one one-hundredth of a
share of Junior Preferred Stock, par value of $0.01 per share, at an exercise
price of $200 per share. The Rights are exercisable a specified number of days
following (i) the acquisition by a person or group of persons of 20% or more of
the Company's common stock or (ii) the commencement of a tender or exchange
offer for 20% or more of the Company's common stock. In the event the Company is
the surviving company in a merger with a person or group of persons that owns
20% or more of the Company's outstanding stock, each Right will entitle the
holder (other than such 20% stockholder) to receive, upon exercise, common stock
of the Company having a value equal to two times the Right's exercise price. In
addition, in the event the Company sells or transfers 50% or more of its assets
or earning power, each Right will entitle the holder to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
Right's exercise price. The Rights may be redeemed by the Company at $0.01 per
Right prior to their expiration on April 27, 2004.
In March 1997, the Company completed a public offering of 5,175,000 shares
of its common stock (the "Offering"). The net proceeds to the Company from the
Offering were approximately $140.4 million, after deduction of underwriting
discounts and commissions and other expenses. The Company used the proceeds from
the Offering to reduce a portion of the borrowings outstanding under the
Company's revolving credit facility.
On January 31, 1996, the Company effected a two-for-one stock split of the
Company's outstanding common stock in the form of a stock dividend payable to
stockholders of record on January 15, 1996. All references to common share and
per share information and the weighted average number of common and common
equivalent shares outstanding, with the exception of stock offering information,
have been restated to reflect the stock split.
12. STOCK PLANS
The Company's Nonemployee Director Stock Incentive Plan (the "Director Plan")
provides for restricted stock awards to nonemployee directors based on increases
in the price of the Company's common stock. The awarded shares are earned in
specified increments for each 15% increase in the average market value of the
Company's common stock over the initial base price established under the plan.
When an increment of the awarded shares is earned, the shares are issued to the
participant in the form of restricted stock which vests at the earlier of 12
months after the specified performance period or upon departure from the board
of directors. When the restricted shares are earned, a cash bonus equal to 40%
of the value of the shares on the date the restricted stock award is earned is
paid by the Company to satisfy a portion of the estimated income tax liability
to be incurred by the participant. At December 31, 1997, 50,000 shares have been
contingently awarded to plan participants, 29,500 shares awarded under the
Director Plan had been earned and 8,500 shares have vested.
The Company's Long-Term Incentive Plan (the "LTIP") provides for restricted
stock awards to executives based on increases in the price of the Company's
common stock. The awarded shares are earned in specified increments for each 20%
increase in the average market value of the Company's common stock over the
initial base price established under the plan. When an increment of the awarded
shares is earned, the shares are issued to the participant in the form of
restricted stock which generally carries a five year vesting period with
one-third of each award vesting on the last day of the 36th, 48th and 60th
month, respectively, after each award is earned. When the restricted shares are
vested, a cash bonus equal to 40% of the value of the vested shares on the date
the restricted stock award is earned is paid by the Company to satisfy a portion
of the estimated income tax liability to be incurred by the participant.
At the time the awarded shares are earned, the market value of the stock is
added to common stock and additional paid-in capital and an equal amount is
deducted from stockholders' equity as unearned compensation. The LTIP unearned
compensation and the amount of cash bonus to be paid when the awarded shares
become vested are amortized to expense ratably over the vesting period. The
Company recognized compensation expense associated with the LTIP of $14.8
million, $25.8 million and $9.8 million for the years ended December 31, 1997,
1996 and 1995, respectively, consisting of amortization of the stock award and
the related cash bonus. The compensation expense in 1996 includes $5.8 million
of accelerated vesting related to executive severance.
38
25
Additional information regarding the LTIP for the years ended December 31,
1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares awarded but not earned
at January 1 1,597,500 -- 891,000
Shares awarded, net of
forfeitures (270,000) 2,070,000 --
Shares earned (362,500) (472,500) (891,000)
------------------------------------------------------------------------------
Shares awarded but not earned
at December 31 965,000 1,597,500 --
Shares available for grant 1,330,000 60,000 180,000
------------------------------------------------------------------------------
Total shares reserved for
issuance 2,295,000 1,657,500 180,000
==============================================================================
Shares vested 194,000 792,500 --
==============================================================================
</TABLE>
The Company's Stock Option Plan (the "Option Plan") provides for the
granting of nonqualified and incentive stock options to officers, employees,
directors and others. The stock option exercise price is determined by the board
of directors except in the case of an incentive stock option for which the
purchase price shall not be less than 100% of the fair market value at the date
of grant. Each recipient of stock options is entitled to immediately exercise up
to 20% of the options issued to such person, and an additional 20% of such
options vest ratably over a four-year period and expire not later than ten years
from the date of grant.
Stock option transactions during the three years ended December 31, 1997
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
January 1 787,250 899,190 1,198,400
Options granted 193,900 229,720 20,000
Options exercised (164,255) (312,292) (292,312)
Options canceled (18,927) (29,368) (26,898)
------------------------------------------------------------------------
Options outstanding at
December 31 797,968 787,250 899,190
========================================================================
Options available for
grant at December 31 266,505 441,478 641,830
========================================================================
Option price ranges
per share:
Granted $ 31.25 $ 25.50 $14.69-18.25
Exercised 1.52-31.25 1.52-25.50 1.52-18.25
Canceled 14.63-31.25 14.63-25.50 1.52-14.63
Weighted average option
prices per share:
Granted $ 31.25 $ 25.50 $ 16.47
Exercised 10.36 5.58 4.43
Canceled 21.68 18.94 10.00
Outstanding at
December 31 18.87 14.14 8.43
</TABLE>
At December 31, 1997, the outstanding options had a weighted average
remaining contractual life of approximately 7.8 years and there were 451,622
options currently exercisable with option prices ranging from $1.52 to $31.25
and with a weighted average exercise price of $13.40.
The Company accounts for the Director Plan, the LTIP, and the Option Plan
under the provisions of APB No. 25. The following pro forma information is based
on estimating the fair value of grants under the above plans based upon the
provisions of SFAS No. 123. For the Option Plan, the fair value of each option
granted since 1995 has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rate of 6.1% for 1997 and 5.7% for 1996 and
1995, expected life for the option plan of 7 years, expected dividend yield of
2.0%, and expected volatility of 35.0%. For the Director Plan and LTIP, the fair
value of each award granted since 1995 has been estimated using the
Black-Scholes option pricing model with the same assumptions above for the risk
free interest rate, expected dividend yield, and expected volatility. Under
these assumptions for the Option Plan, the weighted average fair value of
options granted in 1997, 1996 and 1995 was $15.75, $12.22 and $8.52,
respectively. Under these assumptions for the Director Plan and the LTIP, the
weighted average fair value of awards granted in 1995 and 1997 under the
Director Plan, including the related cash bonus, was $22.22 and $39.96,
respectively, and the weighted average fair value of awards granted in 1996
under the LTIP, including the related cash bonus, was $31.36. There were no
awards under the Director Plan in 1996 or under the LTIP in 1995 or 1997. The
fair value of the grants and awards would be amortized over the vesting period
for stock options and earned awards under the Director Plan and LTIP and over
the performance period for unearned awards under the Director Plan and LTIP.
Accordingly, the Company's pro forma net income and net income per common share,
assuming compensation cost was determined under SFAS No. 123, would have been
the following (in millions):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 1996
-----------------------------------------------------------------
(in millions, except per share data)
<S> <C> <C>
Net income $166.5 $123.9
Net income per common
share - diluted $ 2.68 $ 2.16
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
grants and awards prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that expected in future years.
39
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS AND CONTINGENCIES
The Company leases land, buildings, machinery, equipment and furniture under
various noncancelable operating lease agreements. At December 31, 1997, future
minimum lease payments under noncancelable operating leases were as follows (in
millions):
<TABLE>
<S> <C>
1998 $10.9
1999 8.5
2000 6.0
2001 4.0
2002 2.7
Thereafter 13.2
---------------------------------------------------
$45.3
===================================================
</TABLE>
Total lease expense under noncancelable operating leases was $16.8 million,
$16.2 million, and $15.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
The Company is party to various claims and lawsuits arising in the normal
course of business. It is the opinion of management, after consultation with
legal counsel, that those claims and lawsuits, when resolved, will not have a
material adverse effect on the financial position or results of operations of
the Company.
14. SEGMENT REPORTING
The Company's operations consist of the following geographic segments (in
millions):
<TABLE>
<CAPTION>
United States Western Europe and
YEAR ENDED DECEMBER 31, 1997 and Canada South America Other International Consolidated (1)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers $947.5 $331.8 $1,945.1 $3,224.4
Net sales between geographic segments 41.6 0.7 228.3 --
------------------------------------------------------------------------------------------------------------------------
Total revenues $989.1 $332.5 $2,173.4 $3,224.4
========================================================================================================================
Income from operations (2) $ 56.3 $ 12.5 $ 243.5 $ 307.1
========================================================================================================================
Identifiable assets $969.0 $415.2 $1,689.0 $2,620.9
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
United States Western Europe and
YEAR ENDED DECEMBER 31, 1996 and Canada South America Other International Consolidated (1)
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers $850.0 $ 85.2 $1,382.3 $2,317.5
Net sales between geographic segments 38.6 2.9 149.3 --
------------------------------------------------------------------------------------------------------------------------
Total revenues $888.6 $ 88.1 $1,531.6 $2,317.5
========================================================================================================================
Income from operations (2) $ 46.8 $ (6.8) $ 166.3 $ 206.2
========================================================================================================================
Identifiable assets $867.9 $404.3 $1,258.0 $2,116.5
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
United States Western Europe and
YEAR ENDED DECEMBER 31, 1995 and Canada Other International Consolidated (1)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers $ 807.5 $1,260.9 $2,068.4
Net sales between geographic segments 20.2 203.9 --
---------------------------------------------------------------------------------------------------------
827.7 1,464.8 2,068.4
Finance Income 56.6 -- 56.6
---------------------------------------------------------------------------------------------------------
Total revenues $ 884.3 $1,464.8 $2,125.0
=========================================================================================================
Income from operations (2) $ 65.2 $ 163.9 $ 227.7
=========================================================================================================
Identifiable assets $1,406.8 $ 943.6 $2,162.9
=========================================================================================================
</TABLE>
(1) Consolidated information reflects the elimination of intersegment
transactions. Intersegment sales are made at selling prices that are
intended to reflect the market value of the products.
(2) Income from operations represents revenue less cost of goods sold, selling,
general and administrative expenses, engineering expenses, nonrecurring
expenses, interest expense for Agricredit-North America for the year ended
December 31, 1995 and intangible asset amortization.
40
27
Net sales by customer location for the years ended December 31, 1997, 1996
and 1995 were as follows (in millions):
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
Europe $1,616.9 $1,021.0 $ 947.6
United States 734.0 681.1 660.9
South America 334.3 100.2 20.0
Canada 182.6 153.8 134.4
Middle East 105.7 92.3 79.7
Asia 87.8 102.7 96.5
Australia 64.3 67.0 39.5
Africa 63.3 80.6 71.7
Mexico, Central America and Caribbean 35.5 18.8 18.1
----------------------------------------------------------------------------------
$3,224.4 $2,317.5 $2,068.4
==================================================================================
</TABLE>
Total export sales from the United States were $249.1 million in 1997,
$194.5 million in 1996, and $157.7 million in 1995, with the large majority of
products sold in Canada.
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of AGCO Corporation:
We have audited the accompanying consolidated balance sheets of AGCO
CORPORATION AND SUBSIDIARIES as of December 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AGCO Corporation and
subsidiaries as of December 31, 1997 and 1996 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 5, 1998
41
28
DIRECTORY
DIRECTORS
ROBERT J. RATLIFF
HENRY J. CLAYCAMP
President, Mosaix Associates
WILLIAM H. FIKE
Vice Chairman and
Executive Vice President,
Magna International,Inc.
GERALD B. JOHANNESON
President and
Chief Executive Officer,
Haworth, Inc.
RICHARD P. JOHNSTON
Chairman, RoyalPrecision, Inc.
ANTHONY D. LOEHNIS
Director of St. James' Place
Capital PLC and Chairman of its
J. Rothschild International
Marketing Limited subsidiary
ALAN S. MCDOWELL
Private Investor
HAMILTON ROBINSON, JR.
Managing Director -
Hamilton Robinson &
Company, Inc.
WOLFGANG SAUER
Principal - WS Consult-
Wolfgang Sauer & Associates
S/C Ltda.
THOMAS H. WYMAN
Former Chairman of CBS, Inc.
BOARD COMMITTEES
AUDIT COMMITTEE
Mr. Robinson, Chairman
Mr. Loehnis
Mr. McDowell
Dr. Sauer
COMPENSATION COMMITTEE
Mr. Johnston, Chairman
Mr. Fike
Mr. Loehnis
Mr. McDowell
EXECUTIVE COMMITTEE
Mr. Claycamp, Chairman
Mr. Johanneson
Mr. Johnston
Mr. Ratliff
Mr. Robinson
NOMINATING COMMITTEE
Mr. Claycamp, Chairman
Mr. Fike
Mr. McDowell
STRATEGIC PLANNING
COMMITTEE
Mr. Ratliff, Chairman
Mr. Fike
Mr. Johanneson
Dr. Sauer
SUCCESSION PLANNING
COMMITTEE
Mr. Johanneson, Chairman
Mr. Claycamp
Mr. Johnston
Mr. Robinson
EXECUTIVE OFFICERS
ROBERT J. RATLIFF
Chairman of the Board and
Chief Executive Officer
JOHN M. SHUMEJDA
President and
Chief Operating Officer
JAMES M. SEAVER
Executive Vice President,
Sales and Marketing
NORMAN L. BOYD
Vice President,
Europe/Middle East/Africa Distribution
JUDITH A. CZELUSNIAK
Vice President - Corporate Relations
LARRY W. GUTEKUNST
Vice President - Global Engineering
DANIEL H. HAZELTON
Vice President - Worldwide Parts
AARON D. JONES
Vice President -
Manufacturing and Technology
STEPHEN D. LUPTON
Vice President -
Legal Services, International
JOHN G. MURDOCH
Vice President,
North America Distribution
WILLIAM A. NIX
Vice President - Treasurer
CHRIS E. PERKINS
Vice President and
Chief Financial Officer
BRUCE W. PLAGMAN
Vice President -
North American Sales
DEXTER E. SCHAIBLE
Vice President - Global Product Development
PATRICK S. SHANNON
Vice President - Corporate Finance
MICHAEL F. SWICK
Vice President and General Counsel
EDWARD R. SWINGLE
Vice President - Parts,
North America
STOCKHOLDER INFORMATION
CORPORATE HEADQUARTERS
4205 River Green Parkway
Duluth, Georgia 30096
(770) 813-9200
ANNUAL MEETING
The annual meeting of the Company's stockholders will be held at 9:00 a.m. on
April 29, 1998 at the offices of AGCO Corporation, 4205 River Green Parkway,
Duluth, Georgia 30096.
TRANSFER AGENT & REGISTRAR
SunTrust Bank Atlanta
P.O. Box 4625
Mail Code 008
Atlanta, GA 30302
STOCK EXCHANGE
AGCO Corporation common stock (trading symbol "AG") is traded on the New York
Stock Exchange.
FORM 10-K
The Form 10-K annual report to the Securities and Exchange Commission will be
available to the stockholders in April upon written request to the Investor
Relations Department at corporate headquarters.
AUDITORS
Arthur Andersen LLP
Atlanta, Georgia
1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
------------------ ----------------
<S> <C>
AGCO Corporation Delaware
Blue Corp Delaware
AGCO Farm Finance Corp. Delaware
Gleaner-Allis Company, Ltd. Delaware
The Hesston Company Ltd. Delaware
Massey Ferguson Corp. Delaware
Financial Services Insurance Co. of Tennessee Tennessee
Manufacturers Leasing Corp. Delaware
Hesston Ventures Corp. Kansas
AGCO Export Corp. Barbados
AGCO Finance Corporation Delaware
AGCO Canada, Ltd. Canada
AGCO, Ltd. United Kingdom
AGCO de Mexico SA de CV Mexico
Massey Ferguson de Mexico, SA de CV Mexico
AGCO Manufacturing Ltd. United Kingdom
AGCO Holding BV Netherlands
AGCO Services, Ltd. United Kingdom
AGCO International, Ltd. United Kingdom
Massey Ferguson Works Pension Trust Ltd. United Kingdom
Massey Ferguson Executive Pension Trust Ltd. United Kingdom
Eikmaskin AS Norway
AGCO SA France
AGCO Iberia SA Spain
AGCO Australia Ltd. Australia
Massey Ferguson Europa BV Netherlands
AGCO AB Sweden
Massey Ferguson Staff Pension Trust Ltd. United Kingdom
AGCO GmbH Germany
AGCO Verwaltungs Germany
AGCO do Brazil Brazil
Massey Ferguson Servisleri AS Turkey
Deutz do Brazil Brazil
AGCO Danmark AS Denmark
AGCO Argentina SA Argentina
AGCO Romania SRL Romania
Massey Ferguson SPA Italy
Kemptener Maschinenfabrik GmbH Germany
Dronningborg Industries AS Denmark
AGCO France SA France
MF Europa BV Netherlands
AGCO Vertriebs GmbH Germany
</TABLE>
2
SUBSIDIARIES OF THE REGISTRANT (CONTINUED)
<TABLE>
<S> <C>
Wohungsbau GmbH Germany
Fendt Italiana GmbH Italy
Araus SA Argentina
Terramec SA Argentina
Actium Germany
Indamo SA Argentina
</TABLE>
1
Exhibit 23.0
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included (or incorporated by reference) in this Form 10-K into the
Company's previously filed Registration Statements on Form S-8 (File No.
33-63802, File No. 33-83104, File No. 33-91686 and File No. 333-04707).
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 979
<ALLOWANCES> 0
<INVENTORY> 623
<CURRENT-ASSETS> 64
<PP&E> 404
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,621
<CURRENT-LIABILITIES> 831
<BONDS> 727
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 1
<OTHER-SE> 991
<TOTAL-LIABILITY-AND-EQUITY> 2,621
<SALES> 3,224
<TOTAL-REVENUES> 3,224
<CGS> 2,558
<TOTAL-COSTS> 2,558
<OTHER-EXPENSES> 54
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 246
<INCOME-TAX> 88
<INCOME-CONTINUING> 171
<DISCONTINUED> 0
<EXTRAORDINARY> (2)
<CHANGES> 0
<NET-INCOME> 169
<EPS-PRIMARY> 2.79<F1>
<EPS-DILUTED> 2.71
<FN>
<F1>(EPS-PRIMARY) DENOTES BASIC EPS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 41,707
<SECURITIES> 0
<RECEIVABLES> 856,985
<ALLOWANCES> 0
<INVENTORY> 473,844
<CURRENT-ASSETS> 1,466,462
<PP&E> 292,437
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,116,531
<CURRENT-LIABILITIES> 715,988
<BONDS> 567,055
<PREFERRED-MANDATORY> 0
<PREFERRED> 0
<COMMON> 573
<OTHER-SE> 774,092
<TOTAL-LIABILITY-AND-EQUITY> 2,116,531
<SALES> 2,317,486
<TOTAL-REVENUES> 2,317,486
<CGS> 1,847,166
<TOTAL-COSTS> 1,847,166
<OTHER-EXPENSES> 27,705
<LOSS-PROVISION> 5,736
<INTEREST-EXPENSE> 32,684
<INCOME-PRETAX> 171,629
<INCOME-TAX> 59,963
<INCOME-CONTINUING> 129,390
<DISCONTINUED> 0
<EXTRAORDINARY> (3,503)
<CHANGES> 0
<NET-INCOME> 125,887
<EPS-PRIMARY> 2.37<F1>
<EPS-DILUTED> 2.20
<FN>
<F1>TAG (EPS-PRIMARY) DENOTES BASIC EPS
</FN>
</TABLE>