SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
RDO EQUIPMENT CO.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO] RDO EQUIPMENT CO.
2829 SOUTH UNIVERSITY DRIVE
FARGO, NORTH DAKOTA 58103
(701) 297-4288
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
The annual meeting of the Stockholders (the "Annual Meeting") of RDO
Equipment Co., a Delaware corporation (the "Company"), will be held in the
Centrum Room of the Knutson Center at Concordia College of Moorhead, Moorhead,
Minnesota, beginning at 1:30 p.m. on Thursday, May 28, 1998, for the following
purposes:
1. To elect seven (7) persons to serve as directors until the
next Annual Meeting of the Stockholders or until their
respective successors shall be elected and qualified; and
2. To transact such other business as may properly come before
the meeting.
The record date for determination of the stockholders entitled to
notice of and to vote at the meeting and any adjournments thereof is the close
of business on April 3, 1998.
Whether or not you expect to attend the Annual Meeting in person,
please complete, sign, date and promptly return the enclosed proxy in the
envelope provided, which requires no postage if mailed in the United States.
By Order of the Board of Directors
Allan F. Knoll
CHIEF FINANCIAL OFFICER AND SECRETARY
April 24, 1998
<PAGE>
[LOGO] RDO EQUIPMENT CO.
2829 SOUTH UNIVERSITY DRIVE
FARGO, NORTH DAKOTA 58103
(701) 297-4288
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
INTRODUCTION
The annual meeting of the Stockholders (the "Annual Meeting") of RDO
Equipment Co., a Delaware corporation (the "Company"), will be held in the
Centrum Room of the Knutson Center at Concordia College of Moorhead, Moorhead,
Minnesota, beginning at 1:30 p.m. on Thursday, May 28, 1998.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS TO SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost of
soliciting proxies, including the preparation, assembly and mailing of proxies
and soliciting material to the recordholders of Class A Common Stock and Class B
Common Stock (collectively, the "Common Stock") of the Company, as well as the
cost of forwarding such material to the beneficial owners of Class A Common
Stock, will be borne by the Company. Directors, officers and regular employees
of the Company may, without compensation other than their regular compensation,
solicit proxies by telephone, telegraph or personal conversation. The Company
may reimburse brokerage firms and others for expenses in forwarding proxy
materials to the beneficial owners of the Class A Common Stock.
Any stockholder giving a proxy may revoke it at any time prior to
its use at the Annual Meeting either by giving written notice of such revocation
to the Secretary of the Company, by filing a duly executed proxy bearing a later
date with the Secretary of the Company, or by appearing at the Annual Meeting
and filing written notice of revocation with the Secretary of the Company prior
to use of the proxy. Proxies will be voted as specified by stockholders. Proxies
that are signed by stockholders but that lack any such specification will be
voted in favor of the election of the nominees for directors as listed in this
Proxy Statement. Because the seven director nominees who receive the greatest
number of votes cast for the election of directors at the Annual Meeting will be
elected as directors, votes that are withheld from the election of the director
nominees will be excluded entirely from the vote and will have no effect.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF
THE NOMINEES FOR DIRECTORS AS SET FORTH IN THIS PROXY STATEMENT.
The Company expects that this Proxy Statement and proxy card will be
first mailed to stockholders on or about May 6, 1998.
<PAGE>
OUTSTANDING SHARES; VOTING
Only holders of Common Stock of record at the close of business on
April 3, 1998 will be entitled to vote at the Annual Meeting. On such date, the
Company had 5,731,008 outstanding shares of Class A Common Stock, each such
share entitling the holder thereof to one vote per share of Class A Common Stock
(an aggregate of 5,731,008 votes) on each matter to be voted on at the Annual
Meeting, and 7,450,492 outstanding shares of Class B Common Stock, each such
share entitling the holder thereof to four votes per share of Class B Common
Stock (an aggregate of 29,801,968 votes) on each matter to be voted on at the
Annual Meeting. Accordingly, the aggregate number of potential votes at the
Annual Meeting is 35,532,976. Ronald D. Offutt, Chairman and Chief Executive
Officer of the Company, is the holder of all outstanding shares of Class B
Common Stock. Holders of shares of Common Stock vote as a single class on all
matters submitted to a vote of stockholders except with respect to future
issuances of Class B Common Stock and as otherwise required by law.
The presence, in person or by proxy, of the holders of a majority of
voting power of the shares of Common Stock entitled to vote at the Annual
Meeting (17,766,489 votes) is required for a quorum for the transaction of
business. In general, shares of Common Stock represented by a properly signed
and returned proxy card will be counted as shares present and entitled to vote
at the Annual Meeting for the purposes of determining a quorum, without regard
to whether the proxy card reflects votes withheld from a director nominee or an
abstention (or is left blank) or reflects a "broker non-vote" on a matter (I.E.,
a card returned by a broker because voting instructions have not been received
and the broker has no discretionary authority to vote). The election of
directors requires the affirmative vote of a plurality of the total shares
present and entitled to vote. Holders of shares of Common Stock are not entitled
to cumulate voting rights.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to each
stockholder who is known by the Company to be a beneficial owner of more than
five percent of any class of outstanding Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT NUMBER OF PERCENT
NAME AND ADDRESS CLASS A SHARES OF CLASS CLASS B SHARES OF CLASS
- ---------------- -------------- -------- -------------- --------
<S> <C> <C> <C> <C>
State of Wisconsin Investment Board (1) 424,300 7.4 --- ---
P. O. Box 7842
Madison, Wisconsin 53707
J. & W. Seligman & Co. Incorporated (2) 352,700 6.2 --- ---
100 Park Avenue
New York, New York 10017
FMR Corp. (3) 301,100 5.3 --- ---
82 Devonshire Street
Boston, Massachusetts 02109
Ronald D. Offutt (4) 161,000 2.8 7,450,492 100.0
2829 South University Drive
Fargo, North Dakota 58103
</TABLE>
<PAGE>
- ------------------------
(1) Based solely upon information contained in Schedule 13G of the State of
Wisconsin Investment Board ("WIB") dated January 20, 1998. According to
this filing with the Securities and Exchange Commission (the "SEC"), WIB
has sole voting and dispositive power over these shares.
(2) Based solely upon information contained in Schedule 13G of J. & W.
Seligman & Co. Incorporated ("JWS") and William C. Morris ("Mr. Morris")
dated February 13, 1998. According to this joint filing with the SEC, all
of these shares are held by investment advisory accounts and registered
investment companies under the management of JWS. This filing also
indicates that Mr. Morris owns a majority of the outstanding voting
securities of JWS and may be deemed to beneficially own these shares of
the Company's Common Stock. JWS and Mr. Morris report that they have
shared voting power and shared dispositive power over these shares.
(3) Based solely upon information contained in Schedule 13G of FMR Corp.
("FMR"), Edward C. Johnson 3d ("Mr. Johnson") and Abigail P. Johnson ("Ms.
Johnson") dated February 14, 1998. According to this joint filing with the
SEC, all of these shares are held by institutional accounts for which
Fidelity Management Trust Company ("FMTC"), a wholly-owned subsidiary of
FMR, serves as investment manager. This filing also indicates that Mr.
Johnson and FMR (through its control of FMTC) each has sole voting and
dispositive power over these shares of the Company's Common Stock and that
Mr. Johnson and Ms. Johnson may be deemed to form a controlling group with
respect to FMR and thus may be deemed to beneficially own these shares.
(4) Mr. Offutt is the Company's founder, Chairman and Chief Executive Officer.
See "Election of Directors" and "Beneficial Ownership of Management" below
for more information about Mr. Offutt and his beneficial ownership of the
Company's Common Stock. Mr. Offutt has informed the Company that he
intends to vote his shares in accordance with the recommendations of the
Company's Board of Directors.
ELECTION OF DIRECTORS
NOMINATION
The Company's Bylaws provide that the number of directors that shall
constitute the Board of Directors (the "Board") shall be not less than three and
not more than nine members, the exact number of which shall be fixed by the
Board. There are currently seven members of the Board. By action of the Board
taken on March 18, 1998, the Board resolved to fix the number of directors at
seven and to nominate seven persons to stand for election at the 1998 Annual
Meeting of Stockholders. All of the nominees are currently members of the Board.
Directors elected at the Annual Meeting will hold office until the next Annual
Meeting or until their successors are duly elected and qualified.
The seven director nominees who receive the greatest number of votes
cast for the election of directors at the Annual Meeting will be elected as
directors. Votes that are withheld from the election of the director nominees
will be excluded entirely from the vote and have no effect. The Board recommends
a vote FOR the election of each of the nominees listed in this Proxy Statement.
The Board intends to vote the proxies solicited on its behalf (other than
proxies in which the vote is withheld) for the election of each of the nominees
as directors. If, prior to the Annual Meeting, the Board should learn that any
of the nominees will be unable to serve by reason of death, incapacity or other
unexpected occurrence, the proxies will be cast for another nominee to be
designated by the Board to fill such vacancy, unless a shareholder
<PAGE>
indicates to the contrary on his or her proxy. Alternatively, the proxies may,
at the Board's discretion, be voted for such fewer nominees as results from such
death, incapacity or other unexpected occurrence. The Board has no reason to
believe that any of the nominees will be unable to serve. Under an agreement
with Deere & Company ("Deere"), a principal supplier of equipment to the
Company, Deere has the right to have input with respect to the selection of
nominees to the Company's Board and the removal of directors. All of the
nominees were selected by the Board, and the selections were not based on any
input from Deere. There are no other agreements or arrangements between a
nominee and any other person pursuant to which such nominee was selected.
INFORMATION ABOUT NOMINEES
The following table sets forth certain information as of April 3,
1998 which has been furnished to the Company by the persons who have been
nominated by the Board to serve as directors until the Annual Meeting in 1999:
<TABLE>
<CAPTION>
DIRECTOR
NOMINEES FOR ELECTION AGE PRINCIPAL OCCUPATION SINCE
- --------------------- --- -------------------- -----
<S> <C> <C> <C>
Ronald D. Offutt 55 Chairman and Chief Executive Officer of R.D. 1968
Offutt Company
Paul T. Horn 55 President and Chief Operating Officer of the 1986
Company
Allan F. Knoll 54 Chief Financial Officer and Secretary of R.D. 1974
Offutt Company
Bradford M. Freeman 56 Partner of Freeman Spogli & Co. 1997
Ray A. Goldberg 71 George M. Moffett Professor of Agriculture and 1997
Business, Emeritus, at the Harvard Graduate
School of Business Administration
Norman M. Jones 67 Chairman of Metro Bancorp, Inc. 1997
James D. Watkins 50 Owner and President of J.D. Watkins Enterprises, 1997
Inc.
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
RONALD D. OFFUTT is the Company's founder, Chairman, Chief Executive
Officer and principal stockholder. Mr. Offutt was first elected President of the
Company in 1968 upon formation of the Company. Mr. Offutt also serves as Chief
Executive Officer and Chairman of the Board of R. D. Offutt Company ("Offutt
Co.") and other entities he owns, controls or manages (collectively, the "Offutt
Entities") which are engaged in a variety of businesses such as farming, food
processing, auto dealerships and agricultural financing activities, some of
which transact business with the Company. See "Certain Relationships and Related
Transactions." Mr. Offutt spent approximately one-half of his time on the
business of the Company during fiscal 1998. He serves on the Board of Directors
of High Plains Corporation, an ethanol producer based in Wichita, Kansas. Mr.
Offutt is Chairman of the Board of Regents of Concordia College of Moorhead and
is a graduate of Concordia College of Moorhead with a
<PAGE>
degree in Economics. Mr. Offutt is the brother-in-law of Larry E. Scott, the
Company's Senior Vice President - Southwest Construction Division.
PAUL T. HORN has served as President of the Company since August
1996, and as Chief Operating Officer and a director of the Company since 1986.
Prior to October 1, 1996, he was an employee of Offutt Co. and spent
approximately 25% of his time on the business of the Company. Since such date,
he has been an employee of the Company and has spent substantially all of his
time on the business of the Company. Mr. Horn serves as a director and officer
and is a beneficial stockholder of many of the Offutt Entities. Mr. Horn
currently serves as Vice Chairman of the Board of Directors of Northern Grain
Company, a regional grain elevator. Mr. Horn is a graduate of Michigan State
University with degrees in Business Administration and Agronomy.
ALLAN F. KNOLL has served as Chief Financial Officer, Secretary and
a director of the Company since 1974. Mr. Knoll also serves as Chief Financial
Officer and Secretary of Offutt Co., and serves as a director and officer and is
a beneficial stockholder of many of the Offutt Entities. Mr. Knoll spent
approximately two-thirds of his time on the business of the Company during
fiscal 1998. Mr. Knoll is a graduate of Moorhead State University with degrees
in Business Administration and Accounting.
BRADFORD M. FREEMAN has been a director of the Company since January
1997. Mr. Freeman is a founding partner of Freeman Spogli & Co., a private
equity investment firm with offices in Los Angeles and New York. Since its
founding in 1983, Freeman Spogli & Co. has organized the acquisitions of 25
companies with aggregate transaction values in excess of $6.5 billion. Mr.
Freeman serves on the Board of Directors of CB Commercial Real Estate Services
Group, Inc. and serves on the Board of Trustees of Stanford University. Mr.
Freeman is a graduate of Stanford University and Harvard Business School.
RAY A. GOLDBERG has been a director of the Company since January
1997. Mr. Goldberg has been a professor at the Harvard Graduate School of
Business Administration since 1955 and became emeritus in July 1997. Mr.
Goldberg also serves as faculty chairman of the Agribusiness Senior Management
Seminar.
NORMAN M. JONES has been a director of the Company since January
1997. Mr. Jones has served as Chairman of Metro Bancorp, Inc., a regional
banking firm located in Minneapolis, Minnesota, since he organized it in
December 1996. From 1995 to July 1997, Mr. Jones was the Chairman of First Bank
Savings, fsb, the thrift subsidiary of U.S. Bancorp (formerly First Bank System,
Inc.). Prior to 1995, Mr. Jones was the Chairman and Chief Executive Officer of
Metropolitan Financial Corporation, a regional thrift holding company, where he
was employed from 1952 through 1995 when it was acquired by U.S. Bancorp. Mr.
Jones serves on the Board of Directors of Lutheran Health Systems, Inc., an
owner and manager of a network of hospitals. Mr. Jones is a board member and
Chairman of Luther Seminary Foundation, an Advisory Board Member for
Slumberland, Inc., a retail furniture chain, and an Advisory Board Member for
the Board of Pension for the Evangelical Lutheran Church of America. Mr. Jones
is a graduate of Concordia College of Moorhead.
JAMES D. WATKINS has been a director of the Company since January
1997. Mr. Watkins founded J.D. Watkins Enterprises, Inc. (an investment company
involved in domestic and international companies, acquisitions and investments)
in June 1993 and continues to serve as its President. Mr. Watkins founded Golden
Valley Microwave Foods, Inc. (a company specializing in food products designed
for use in microwave ovens) in 1978 and continuously served as its Chairman and
Chief Executive Officer until it was acquired by ConAgra, Inc. (a diversified
international food company) in July 1991. Mr. Watkins served in ConAgra's Office
of the President as President and Chief Operating Officer of ConAgra
<PAGE>
Diversified Products Companies until July 1997. Mr. Watkins currently serves as
a Trustee of Ronald McDonald House Charities and as a member of the Board of
Overseers, Carlson School of Management, University of Minnesota. Mr. Watkins is
a graduate of the University of Minnesota with a degree in Economics and Fine
Arts.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board,
which held five meetings during the fiscal year ended January 31, 1998 and took
action in writing on four other occasions. Committees established and maintained
by the Board include the Audit Committee, the Compensation Committee and the
Executive Committee. Each director attended at least 75% of all meetings of the
Board and committees on which he served during fiscal 1998.
The responsibilities of the Audit Committee include the authority to
review (i) the accounting, auditing and reporting practices of the Company, (ii)
the annual financial statements of the Company, (iii) the selection and work of
the Company's independent auditors, and (iv) the adequacy of internal controls.
The Audit Committee held two meetings during fiscal 1998. Messrs. Goldberg and
Jones are the current members of the Audit Committee.
The responsibilities of the Compensation Committee include reviewing
and recommending the compensation for executive officers, reviewing Company-wide
employee benefit plans, and administering the Company's 1996 Stock Incentive
Plan (the "Incentive Plan"). The Compensation Committee held two meetings during
fiscal 1998 and took action in writing on four other occasions. Messrs. Knoll,
Freeman and Watkins are the current members of the Compensation Committee.
The Executive Committee has the authority to take all actions that
the Board as a whole is able to take, except as limited by applicable law. The
Executive Committee did not hold any meetings during fiscal 1998 and took action
in writing on one occasion. Messrs. Offutt, Horn, Knoll and Freeman are the
current members of the Executive Committee.
COMPENSATION OF DIRECTORS
Directors who are not employees or officers of the Company receive
$1,000 per month and $500 for each Board and committee meeting attended.
Directors who are employees or officers of the Company do not receive additional
compensation for service as a director. In addition, all directors are entitled
to be reimbursed for certain expenses in connection with attendance at Board and
committee meetings.
The Incentive Plan provides that a non-employee who becomes a
director of the Company will receive an option to purchase 10,000 shares of
Class A Common Stock, with such vesting periods as the Board or the Compensation
Committee may determine. The current non-employee directors are Messrs. Freeman,
Goldberg, Jones and Watkins, and each was granted an option to purchase 10,000
shares of Class A Common Stock at the time they became a director in connection
with the Company's initial public offering in January 1997 (the "Offering").
These options are currently exercisable in full and have an exercise price of
$15.50 per share, which was the fair market value on the date of grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company historically has engaged, and expects to engage in
the future, in business transactions with various Offutt Entities, including Ag
Capital Company ("Ag Capital"), ACL Company,
<PAGE>
LLC ("ACL") and Farmers Equipment Rental, Inc. ("FER"), financing institutions
which are controlled by Mr. Offutt and provide significant working capital and
floor plan financing to the Company and financing to the Company's customers.
Messrs. Offutt, Horn and Knoll each serve as officers or directors and have
ownership interests in various of the Offutt Entities, including all of the
Offutt Entities which have engaged in and will continue to engage in
transactions with the Company, as described below. The Company believes that all
of these transactions were made on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties. All transactions
between the Company and any of the Offutt Entities or any of the Company's
officers, directors, principal stockholders and their affiliates will be
approved both by a majority of all members of the Board and by a majority of the
independent and disinterested outside directors, and will continue to be on
terms believed to be no less favorable to the Company than could be obtained
from unaffiliated third parties.
The Company had sales to various Offutt Entities of agricultural
equipment and related parts and service totaling $10.4 million in fiscal 1998.
The Company also had sales to businesses and projects affiliated with Mr.
Watkins of agricultural equipment and related parts and service totaling $45,675
in fiscal 1998.
The Company leases 14 of its dealership facilities from an Offutt
Entity, and leases many of its service vehicles from ACL and FER. Total rent
expense for these leases was $2.5 million in fiscal 1998. These leases have
terms expiring at various times from 1999 to 2010.
The Company receives corporate support services from various
Offutt Entities, including office space for its executive offices, use of
conference and meeting facilities, use of an aircraft for Company business,
administration of the Company's 401(k) plan and real estate management services.
Total charges for such services were $235,000 in fiscal 1998. All such services
are provided to the Company pursuant to a corporate services agreement, which is
terminable by the Company in whole or in part on 30 days' notice, on the same
cost basis as in prior years (based on pro rata usage of services or at a fixed
charge).
Ag Capital, ACL and FER provide financing to the Company's
customers. The total amount of such customer financing outstanding as of the end
of fiscal 1998 was $43.5 million. To facilitate sales to certain customers, the
Company guarantees a portion of the outstanding balances of certain customer
notes and lease contracts financed by third parties, including customer
financing provided by Ag Capital, ACL and FER. The amount guaranteed by the
Company to Ag Capital, ACL and FER for customer financing was $4.3 million as of
January 31, 1998.
The Company finances certain of its working capital needs,
primarily inventory financing for non-Deere equipment, fixed assets and
acquisitions, through Ag Capital. Such financing typically bears interest based
on the prime rate as it varies from time to time. Total interest paid by the
Company to Ag Capital was $1.1 million in fiscal 1998. The total amount
outstanding under these financing arrangements at January 31, 1998 was $7.1
million, with interest rates based on prime (8.125% to 8.5%).
Under an agreement with Deere, Mr. Offutt personally guarantees
all Company obligations to Deere. Mr. Offutt has the right to terminate his
personal guaranty at any time, which would require the Company to obtain a
letter of credit in an amount meeting Deere's then current guidelines from a
bank acceptable to Deere. As of January 31, 1998, the required amount of the
letter of credit to replace Mr. Offutt's personal guaranty was approximately
$38.7 million. The Company estimates that it would cost approximately $194,000
per year to replace Mr. Offutt's personal guarantee with a letter of credit.
<PAGE>
The principal stockholder and operator of the Washington
agricultural dealership acquired in fiscal 1997 by the Company became, upon
completion of the acquisition, the Senior Vice President - Northwest
Agricultural Division of the Company. The purchase price of the acquired
Washington operations was approximately $2.7 million, including cash in the
amount of $1.7 million, and a five-year note in the amount of $1.0 million, with
an interest rate of 8.25% per annum. As of January 31, 1998, $800,000 remained
outstanding. The Company also leases the dealership facilities from the former
owners incurring $240,000 of lease expense for fiscal 1998. In addition, the
Company agreed to make an additional payment, up to a maximum of $750,000, in
the event the acquired Washington operations meet certain operating and profit
objectives during the three years after the acquisition. As of January 31, 1998,
the amount of $97,000 had been incurred and accrued for.
Effective February 1, 1997, the Company acquired an 80% equity
interest in a construction equipment rental company with five retail stores in
Arizona. Total consideration for the net assets acquired was $2.7 million. The
owner of the acquired business, who beneficially owns the remaining 20%, was
appointed by the Company as President of this construction equipment rental
business. The Company has the right to purchase this 20% equity interest. In
addition, the Company leases four rental stores from an affiliate of the former
owner incurring $194,384 of lease expense for fiscal 1998.
Historically and prior to the Offering, the Company had elected
to be taxed as an S corporation. Through fiscal 1996, a portion of the net
income of the Company was distributed to the stockholders, primarily to enable
them to pay the tax liability incurred by them due to the Company's election to
be taxed as an S corporation. During fiscal 1997 and prior to the Offering, the
Company declared dividends to its stockholders of all the net income of the
Company for fiscal 1997. Simultaneously with the Offering, the Company paid from
the net proceeds of the Offering to its pre-Offering stockholders an additional
aggregate distribution of $15.0 million. This amount represents substantially
all of the previously undistributed, accumulated net income of the Company as of
January 31, 1996 with respect to which such stockholders had previously paid
taxes. The Company entered into a tax agreement with its pre-Offering
stockholders prior to the Offering. This agreement provides that, to the extent
such undistributed taxable income of the Company, as subsequently established in
connection with the filing of the Company's tax return for the Company's last S
corporation tax year, is less than these distributions, such stockholders will
make a payment equal to such difference to the Company, and if such
undistributed taxable income is greater than these distributions, the Company
will make an additional distribution equal to such difference to such
stockholders. This agreement also provides that the Company will indemnify its
pre-Offering stockholders against additional income taxes resulting from
adjustments made (as a result of a final determination made by a competent tax
authority) to the taxable income reported by the Company as an S corporation for
periods prior to termination of the S corporation status, but only to the extent
those adjustments provide a tax benefit to the Company.
The Company and Mr. Offutt have entered into a mutual
indemnification agreement relating to federal and certain state and local income
tax liabilities of the Company and for tax years during which the Company
elected to be treated as an S corporation. This agreement generally provides
that the Company will indemnify Mr. Offutt, and Mr. Offutt will indemnify the
Company, against any increase in the indemnified party's income tax liabilities
(including interest and penalties and all expenses, attorneys' fees and
accountants' fees incurred in connection therewith) for those jurisdictions in
which an S corporation election was made or deemed to have been made. Mr.
Offutt's indemnification is limited to the prior S corporation distributions he
received.
<PAGE>
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership and percentage of total voting power of the Common Stock of the
Company as of April 3, 1998, unless otherwise noted, for (a) each director,
nominee for director and executive officer named in the Summary Compensation
Table (set forth below), and (b) all executive officers and directors of the
Company as a group. The address for all executive officers and directors of the
Company is 2829 South University Drive, Fargo, North Dakota 58103.
<TABLE>
<CAPTION>
NUMBER OF CLASS A NUMBER OF CLASS PERCENT OF TOTAL
NAME OF STOCKHOLDER SHARES (1) B SHARES VOTING POWER (2)
- ------------------- ---------- -------- ----------------
<S> <C> <C> <C>
Ronald D. Offutt.............................. 7,611,492 (3)(4)(5)(6) 7,450,492 84.3%
Paul T. Horn.................................. 430,580 (5) -- 1.2
Allan F. Knoll................................ 657,270 (6) -- 1.8
Charles Calhoun............................... 4,500 -- *
H. David Frambers............................. 110,142 -- *
Randolph F. Goss.............................. 4,000 -- *
Larry E. Scott................................ 215,777 (7) -- *
Bradford M. Freeman........................... 60,000 -- *
Ray A. Goldberg............................... 10,200 -- *
Norman M. Jones............................... 31,615 -- *
James D. Watkins.............................. 45,000 -- *
All executive officers and directors
as a group (17 persons)..................... 8,474,523 (3)(4)(7) 7,450,492 86.5
</TABLE>
- ------------------------
* Less than 1%
(1) Includes 10,000, 10,000, 10,000, 4,000, 4,000, 4,000, 4,000, 10,000,
10,000, 10,000, 10,000 and 122,500 shares subject to option which are held
by Messrs. Offutt, Horn, Knoll, Calhoun, Frambers, Goss, Scott, Freeman,
Goldberg, Jones, Watkins and all executive officers and directors as a
group, respectively, which are exercisable within 60 days after April 3,
1998.
(2) In calculating the percent of total voting power, the voting power of
shares of Class A Common Stock (one vote per share) and Class B Common
Stock (four votes per share) is aggregated.
(3) Includes the 7,450,492 shares of Class A Common Stock into which Mr.
Offutt's 7,450,492 shares of Class B Common Stock are convertible on a
one-for-one basis.
(4) Excludes 12,903 shares of Class A Common Stock owned by Mr. Offutt's
spouse as to which shares he disclaims any beneficial ownership. Mr.
Offutt has no ability to direct or influence the investment and voting
decisions of his spouse.
(5) Includes 383,005 shares of Class A Common Stock that Mr. Horn has the
right to acquire from Mr. Offutt pursuant to an option agreement.
(6) Includes 608,595 shares of Class A Common Stock that Mr. Knoll has the
right to acquire from Mr. Offutt pursuant to an option agreement.
<PAGE>
(7) Excludes 103,784 shares of Class A Common Stock owned by Mr. Scott's
spouse, as to which shares he disclaims any beneficial ownership.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation
for each of the last three fiscal years awarded to or earned by the Chief
Executive Officer, the Chief Operating Officer and the Chief Financial Officer
of the Company and by each of the four other most highly paid executive officers
of the Company for the fiscal years ended January 31, 1998, 1997 and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
NUMBER OF SHARES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY CASH BONUS OPTIONS (1) COMPENSATION(2)
- --------------------------- ---- ------ ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Ronald D. Offutt (3) 1998 $50,000 ---- ---- ----
CHAIRMAN AND CHIEF EXECUTIVE 1997 $50,000 ---- 50,000 ----
OFFICER 1996 $50,000 ---- ---- ----
Paul T. Horn (3) 1998 $150,000 ---- ---- ----
PRESIDENT AND CHIEF OPERATING 1997 $83,333 ---- 50,000 ----
OFFICER 1996 $50,000 ---- ---- ----
Allan F. Knoll (3) 1998 $50,000 ---- ---- ----
CHIEF FINANCIAL OFFICER AND 1997 $50,000 ---- 50,000 ----
SECRETARY 1996 $50,000 ---- ---- ----
Charles Calhoun (4) 1998 $110,000 $70,000 ---- ----
SENIOR VICE PRESIDENT - USED 1997 $59,416 ---- 20,000 ----
CONSTRUCTION EQUIPMENT
DIVISION
H. David Frambers 1998 $130,000 $126,485 ---- ----
SENIOR VICE PRESIDENT - 1997 $130,000 $101,400 20,000 ----
MIDWEST CONSTRUCTION DIVISION 1996 $52,000 $148,813 ---- ----
Randolph F. Goss (5) 1998 $110,000 $111,013 ---- ----
SENIOR VICE PRESIDENT - SOUTH 1997 $9,308 ---- 20,000 ----
CENTRAL CONSTRUCTION DIVISION
Larry E. Scott 1998 $130,000 $60,261 ---- ----
SENIOR VICE PRESIDENT - SOUTH- 1997 $130,000 $101,400 20,000 ----
WEST CONSTRUCTION DIVISION 1996 $52,000 $147,986 ---- ----
</TABLE>
- ---------------------------
(1) All stock options were granted under the Incentive Plan on January 23,
1997.
<PAGE>
(2) No executive officer of the Company received perquisites or other personal
benefits exceeding $50,000 or 10% of such officer's total annual salary
and bonus.
(3) Prior to October 1, 1996, Messrs. Offutt, Horn and Knoll were not
compensated directly by the Company, but were compensated by Offutt Co.
The amount reflected in the table with respect to periods prior to October
1, 1996 is the amount of compensation paid to each of them for the
services provided by each of them to the Company in the period presented.
(4) Mr. Calhoun became an employee of the Company in July 1996. His
compensation for fiscal 1997 represents the seven-month period through
January 1997.
(5) Mr. Goss became an employee of the Company in January 1997. His
compensation for fiscal 1997 represents the one-month period through
January 1997.
OPTIONS GRANTED OR REPRICED
No stock options were granted during fiscal 1998 to the persons
named in the foregoing Summary Compensation Table. No repricing of outstanding
stock options occurred during fiscal 1998.
OPTION EXERCISES AND OPTION VALUES
The following table sets forth information regarding option
exercises and the value of unexercised options held by the persons named in the
foregoing Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND OPTION VALUES AT JANUARY 31, 1998
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT JANUARY 31, 1998 (1)
ACQUIRED VALUE -------------------------- -----------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Offutt 0 0 10,000 40,000 $30,000 $120,000
Paul T. Horn 0 0 10,000 40,000 30,000 120,000
Allan F. Knoll 0 0 10,000 40,000 30,000 120,000
Charles Calhoun 0 0 4,000 16,000 12,000 48,000
H. David Frambers 0 0 4,000 16,000 12,000 48,000
Randolph F. Goss 0 0 4,000 16,000 12,000 48,000
Larry E. Scott 0 0 4,000 16,000 12,000 48,000
</TABLE>
- ------------------------
(1) "In-the-Money Options" are options outstanding at the end of fiscal 1998
for which the closing price of the Common Stock on the last business day
of the fiscal year ($18.50 per share) exceeded the exercise price of the
options.
CONFIDENTIALITY AGREEMENTS
In connection with the granting of options by the Company, the
Company entered into an Agreement Regarding Confidentiality, Assignment of
Inventions and Non-Competition with each of its
<PAGE>
executive officers. These agreements generally prohibit disclosure of
confidential information to anyone outside the Company both during and after
employment, provides that any inventions or other works of authorship relating
to or resulting from the employee's work for the Company will be the exclusive
property of the Company and restricts the employee from competing with the
Company for a period of two years after termination of employment with the
Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, no member of the Compensation Committee (i) was
an officer or employee of the Company, except Mr. Knoll, (ii) was formerly an
officer of the Company or (iii) had any business relationship or conducted any
transactions with the Company, other than the relationships disclosed under
"Election of Directors - Certain Relationships and Related Transactions"
involving Messrs. Knoll and Watkins.
During fiscal 1998, no executive officer of the Company served as
(i) a member of the compensation committee (or other board committee performing
equivalent functions or, in the absence of any such committee, the entire board
of directors) of another entity, one of whose executive officers served on the
Board, other than Messrs. Offutt, Horn and Knoll with respect to the Offutt
Entities, or (ii) a director of another entity, one of whose executive officers
served on the Board, other than Messrs. Offutt, Horn and Knoll with respect to
the Offutt Entities.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board (the "Compensation
Committee") is authorized to recommend compensation for the Company's directors
and corporate officers, review compensation for the Company's operating
officers, review the Company's retirement, health and welfare plans that cover
substantially all employees (including the management of such plans), and
administer the Incentive Plan (including determining the participants in the
Incentive Plan and the amount, timing and other terms and conditions of awards
under the Incentive Plan). The Compensation Committee is currently comprised of
three directors, including two non-employee directors. During fiscal 1998,
Bradford M. Freeman, James D. Watkins, and Allan F. Knoll, the Company's Chief
Financial Officer, served as members of the Compensation Committee. The
Compensation Committee has furnished this report on executive compensation for
fiscal 1998.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company has developed a compensation policy which is designed to
attract and retain executive officers responsible for the success of the Company
and to motivate these persons to enhance long-term stockholder value. The
executive compensation program presently consists primarily of annual base
salary, short-term incentives in the form of annual cash bonuses, and long-term
incentives in the form of stock options.
BASE SALARY
Historically, Messrs. Offutt, Horn and Knoll were not compensated
directly by the Company for their services, which represented approximately 25%
of each of their time. Their services were provided to the Company pursuant to
an arrangement with Offutt Co. The compensation paid by Offutt Co. to each of
Messrs. Offutt, Horn and Knoll for their services to the Company was $50,000 in
fiscal 1996.
<PAGE>
Commencing as of October 1, 1996, each of these officers has been paid directly
by the Company for their services to the Company. Messrs. Offutt and Knoll each
receive salaries from the Company of $50,000 per year for their services, and
Mr. Horn receives from the Company a salary of $150,000 per year for his
services. Mr. Horn's salary was increased to compensate him for the expansion of
his duties in becoming the President of the Company. While the Compensation
Committee believes that these salaries are substantially below competitive
salaries for corresponding positions at similar organizations of comparable size
and complexity as the Company, the Compensation Committee believes that Messrs.
Offutt, Horn and Knoll are fully motivated to enhance long-term stockholder
value as a result of their beneficial ownership of the Common Stock of the
Company (see "Beneficial Ownership of Management").
Base salaries for operating officers are determined annually. This
assessment involves a number of criteria and information including individual
performance, cost of living and total compensation being paid for comparable
positions at companies with which the Company competes for executive and
management talent (e.g., specialty retailers such as equipment dealerships and
equipment rental companies). Principles of internal equity are also considered
by evaluating salaries of comparable levels of responsibility within the
Company.
CASH BONUS
All executive officers are eligible to receive annual cash bonuses.
The amount and performance criteria are determined annually and are based in
part, as mentioned above in "Base Salary," on an assessment of total
compensation being paid for comparable positions at companies with which the
Company competes for executive and management talent.
Cash bonuses for corporate officers are based on individual
performance and the Company's overall performance. No cash bonuses were paid to
corporate officers for fiscal 1998.
Operating officers generally have the opportunity for their cash
bonus to constitute a substantial portion of their total compensation. Cash
bonus eligibility equals or exceeds base salary for these persons. Cash bonuses
are determined based on achievement of a variety of performance factors and
criteria, including targeted return on assets, earnings per share growth,
efficiency of asset management, profitability, sales growth, productivity and
product support. Bonuses accrue monthly based on performance targets, with
portions payable quarterly. The balance is paid after the final amount of the
bonus is determined at the end of the fiscal year.
STOCK OPTION PROGRAM
The Company adopted the Incentive Plan in connection with becoming a
public company as a mechanism to advance the best interests of the Company and
its stockholders by attracting, retaining and motivating employees, directors,
advisors and consultants of the Company. The Incentive Plan provides for the
grant of stock options (which may be non-qualified stock options or incentive
stock options for tax purposes), stock appreciation rights issued independent of
or in tandem with such options ("SAR's"), restricted stock awards and
performance stock awards, thereby increasing the personal stake of Incentive
Plan participants in the continued success and growth of the Company. Equity
participation in the Company, particularly through the grant of stock options,
is anticipated to continue as an important part of future executive and
management compensation.
<PAGE>
ADDITIONAL INFORMATION
The Omnibus Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code of 1986, as amended (the "Code"), limiting corporate
deductions to $1,000,000 for certain compensation paid to the chief executive
officer and each of the four other most highly compensated executives of
publicly held companies. The Compensation Committee does not anticipate the
Company will pay "compensation" within the meaning of Section 162(m) to such
executive officers in excess of $1,000,000 in the foreseeable future. Therefore,
the Compensation Committee and the Company do not have a policy at this time
regarding qualifying compensation paid to its executive officers for
deductibility under Section 162(m), but the Compensation Committee will
formulate a policy on behalf of the Company if compensation levels approach
$1,000,000.
This report is given by the following members of the Compensation
Committee:
Bradford M. Freeman
Allan F. Knoll
James D. Watkins
The foregoing report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, as amended (the "Securities Act")
or under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such acts.
COMPARATIVE PERFORMANCE GRAPH
The following performance graph compares the performance of the
Company's Common Stock to the Standard & Poor's 500 Stock Index and to the
Standard & Poor's Diversified Machinery Group Index. This graph assumes that
$100 was invested in the Company's Common Stock and in each of the two indices
at the time of the Offering, and that subsequent dividends were reinvested in
connection with those indices.
[PLOT POINTS GRAPH]
- --------------------------------------------------------------------------------
01/23/97 1/31/97 04/30/97 07/31/97 10/31/97 01/30/98
- --------------------------------------------------------------------------------
RDO 100.00 113.71 106.45 147.18 139.92 119.35
- --------------------------------------------------------------------------------
S & P Machinery 100.00 101.05 109.99 138.51 128.96 126.60
- --------------------------------------------------------------------------------
S & P 500 100.00 101.15 103.59 123.95 119.30 128.37
- --------------------------------------------------------------------------------
<PAGE>
The foregoing stock price performance comparisons shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act or under
the Exchange Act, except to the extent that the Company specifically
incorporates this graph by reference, and shall not otherwise be deemed filed
under such acts.
SELECTION OF AUDITORS
Upon the recommendation of the Company's Audit Committee, the Board
has selected Arthur Andersen LLP, independent public accountants, as auditors of
the Company for the fiscal year ending January 31, 1999. The Company does not
intend to request that the stockholders approve the selection of Arthur Andersen
LLP for the fiscal year ending January 31, 1998. Arthur Andersen LLP has acted
as independent certified public accountants for the Company since 1995.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, and such representatives will have an opportunity to make a statement
if they so desire and will be available to respond to questions.
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors
and executive officers and all persons who beneficially own more than 10% of the
outstanding shares of the Company's Class A Common Stock to file with the SEC
initial reports of ownership and reports of changes in ownership of the
Company's Class A Common Stock. Executive officers, directors and greater than
10% beneficial owners are also required to furnish the Company with copies of
all Section 16(a) forms they file. To the Company's knowledge, based upon a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the year ended
January 31, 1998, none of the directors, officers or beneficial owners of
greater than 10% of the Company's Class A Common Stock failed to file on a
timely basis any form required by Section 16 of the Exchange Act.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders intended to be presented in the proxy
materials relating to the Annual Meeting to be held in calendar 1999 must be
received by the Company at its principal executive offices no later than January
4, 1999.
OTHER BUSINESS
The Company does not know of any business that will be presented for
consideration at the Annual Meeting other than that described in this Proxy
Statement. As to other business, if any, that may properly come before the
Annual Meeting, it is intended that proxies solicited by the Board will be voted
in accordance with the judgment of the person or persons voting the proxies.
<PAGE>
MISCELLANEOUS
THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS ANNUAL
REPORT ON FORM 10-K (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR ENDED JANUARY
31, 1998, TO EACH PERSON WHO WAS A STOCKHOLDER OF THE COMPANY AS OF APRIL 3,
1998, UPON RECEIPT FROM ANY SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL
REPORT. SUCH REQUEST SHOULD BE SENT TO: RDO EQUIPMENT CO., STOCKHOLDER
RELATIONS, 3030 HARBOR LANE, SUITE 202, PLYMOUTH, MINNESOTA 55447.
By Order of the Board of Directors
Ronald D. Offutt Paul T. Horn
CHAIRMAN OF THE BOARD AND PRESIDENT AND
CHIEF EXECUTIVE OFFICER CHIEF OPERATING OFFICER
Dated: April 24, 1998
<PAGE>
[LOGO] RDO EQUIPMENT CO.
Proxy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 1998 ANNUAL MEETING.
The undersigned hereby appoints Ronald D. Offutt, Paul T. Horn and Allan F.
Knoll as proxies, each with power to act alone and with power of substitution
and revocation, and hereby authorizes them to represent and vote, as designated
on the other side, all the shares of Class A Common Stock of RDO Equipment Co.
held of record on April 3, 1998, and registered in the name of the under-signed
at the Annual Meeting of Stockholders of the Company to be held Thursday, May
28, 1998, and at any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED "FOR" THE NOMINEES LISTED IN ITEM 1 BELOW. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED BELOW.
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE [X]
ITEM 1. ELECTION OF DIRECTORS. NOMINEES: Ronald D. Offutt, Paul T. Horn, Allan
F. Knoll, Bradford M. Freeman, Ray A. Goldberg, Norman M. Jones and James D.
Watkins
[ ] FOR all nominees listed above (except [ ] WITHHOLD AUTHORITY to vote
those individuals whose names have for all nominees listed above
been written on the line below)
- --------------------------------------------------------------------------------
(CONTINUED ON REVERSE SIDE)
(CONTINUED FROM OTHER SIDE)
ITEM 2. OTHER MATTERS. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the meeting.
SIGNATURE(S):
________________________________________
________________________________________
DATE: ____________________________, 1998
Note: Please mark, date and sign exactly
as name(s) appears hereon and return
promptly in the enclosed envelope. Joint
owners should each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by an authorized person.
