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>
[GRAPHIC OMITTED]
RDO(R)
EQUIPMENT CO.
2829 SOUTH UNIVERSITY DRIVE
FARGO, NORTH DAKOTA 58103
(701) 297-4288
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1999
The annual meeting of stockholders of RDO Equipment Co. will
be held in the Centrum Room of the Knutson Center at Concordia College of
Moorhead, Moorhead, Minnesota, beginning promptly at 1:30 p.m. on Thursday, June
3, 1999, for the following purposes:
1. To elect directors.
2. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on April 9,
1999 are entitled to vote at the meeting.
We look forward to seeing you at the meeting. Whether or not
you expect to attend the meeting, please complete, date, sign and promptly
return the enclosed proxy card in the envelope provided, which requires no
postage if mailed in the United States.
For the Board of Directors,
Ronald D. Offutt
Paul T. Horn
Allan F. Knoll
OFFICE OF THE CHAIRMAN
April 23, 1999
<PAGE>
[GRAPHIC OMITTED]
RDO(R)
EQUIPMENT CO.
2829 SOUTH UNIVERSITY DRIVE
FARGO, NORTH DAKOTA 58103
(701) 297-4288
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1999
INTRODUCTION
The annual meeting of the stockholders ("Annual Meeting") of
RDO Equipment Co., a Delaware corporation ("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, June 3, 1999.
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, "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 or personal
conversation. The Company may reimburse brokerage firms and others for expenses
in forwarding proxy materials to the beneficial owners of 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 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 5, 1999.
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OUTSTANDING SHARES; VOTING
Only holders of Common Stock of record at the close of
business on April 9, 1999 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 either 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) 725,100 12.7% -- --
P. O. Box 7842
Madison, Wisconsin 53707
Tweedy, Browne Company LLC 704,725 12.3% -- --
and TBK Partners, L.P. (2)
52 Vanderbilt Avenue
New York, New York 10017
Wellington Management Company, LLP (3) 347,000 6.1% -- --
75 State Street
Boston, Massachusetts 02109
Dimensional Fund Advisors Inc. (4) 288,200 5.0% -- --
1299 Ocean Avenue
Santa Monica, California 90401
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Allan F. Knoll (5) 652,670 10.3% -- --
2829 South University Drive
Fargo, North Dakota 58103
Paul T. Horn (5) 427,080 7.0% -- --
2829 South University Drive
Fargo, North Dakota 58103
Ronald D. Offutt (6) 258,700 4.5% 7,450,492 100.0%
2829 South University Drive
Fargo, North Dakota 58103
</TABLE>
- ---------------------------------------
(1) Based solely upon information contained in Schedule 13G of the State of
Wisconsin Investment Board ("WIB") dated January 16, 1999. According to
this filing with the Securities and Exchange Commission ("SEC"), WIB is
a government agency which manages public pension funds, and WIB has
sole voting power and sole dispositive power over these shares.
(2) Based solely upon information contained in Schedule 13D of Tweedy,
Browne Company LLP ("TBC") and TBK Partners, L.P. ("TBK") dated
September 16, 1998. According to this filing with the SEC, 604,725 of
these shares are held in the accounts of various customers of TBC, and
TBC has sole voting power over 600,515 of these shares, and shared
dispositive power over 604,725 of these shares. In addition, TBK has
sole voting power and sole dispositive power over 100,000 of these
shares.
(3) Based solely upon information contained in Schedule 13G of Wellington
Management Company, LLP ("WMC") dated January 29, 1999. According to
this filing with the SEC, WMC is a registered investment adviser, and
all of these shares are held by clients of WMC. This filing also
indicates that WMC has shared voting power over 307,000 of these
shares, and shared dispositive power over all of these shares.
(4) Based solely upon information contained in Schedule 13G of Dimensional
Fund Advisors Inc. ("DFA") dated February 11, 1999. According to this
filing with the SEC, DFA is a registered investment advisor, and these
shares are owned by registered investment companies to which DFA
furnishes investment advice and by other investment vehicles for which
DFA serves as investment manager. This filing also indicates that DFA
has sole voting power and sole dispositive power over these shares.
(5) See "Election of Directors" and "Beneficial Ownership of Management"
below for more information about Messrs. Knoll and Horn, who are
directors and officers of the Company, and their respective beneficial
ownership of Class A Common Stock.
(6) Mr. Offutt is the Company's founder and principal stockholder. See
"Election of Directors" and "Beneficial Ownership of Management" below
for more information about Mr. Offutt and his beneficial ownership of
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 ("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, 1999, the Board resolved to fix the number of directors at
seven and to nominate seven persons to stand for election at the 1999 Annual
Meeting of Stockholders. All of the nominees are
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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 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 9, 1999
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 calendar 2000:
<TABLE>
<CAPTION>
DIRECTOR
NOMINEES FOR ELECTION AGE PRINCIPAL OCCUPATION SINCE
- --------------------- --- -------------------- --------
<S> <C> <C> <C>
Ronald D. Offutt 56 Chairman and Chief Executive Officer of R.D. Offutt Company 1968
Paul T. Horn 56 President and Chief Operating Officer of the Company 1986
Allan F. Knoll 55 Chief Financial Officer and Secretary of R.D. Offutt Company 1974
Bradford M. Freeman 57 Partner of Freeman Spogli & Co. 1997
Ray A. Goldberg 72 George M. Moffett Professor of Agriculture and Business, 1997
Emeritus, at the Harvard Graduate School of Business
Administration
Norman M. Jones 68 Member, Board of Directors of LB Community Bank & Trust 1997
James D. Watkins 51 Owner and President of J.D. Watkins Enterprises, Inc. 1997
</TABLE>
4
<PAGE>
OTHER INFORMATION ABOUT NOMINEES
RONALD D. OFFUTT is the Company's founder, Chairman, Chief
Executive Officer and principal stockholder. He has served as a member of the
Company's Office of the Chairman since December 1998, and served as President of
the Company from its formation in 1968 until August 1996. 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,
"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 1999. 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 degree in Economics. Mr.
Offutt is the brother-in-law of Larry E. Scott, the Company's Senior Vice
President - Southwest Construction Equipment, and the father of Christi J.
Offutt, the Company's Vice President - Strategic Development.
PAUL T. HORN has served as a member of the Company's Office of
the Chairman since December 1998, 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
one-fourth 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 a member of the Company's Office
of the Chairman since December 1998 and as Secretary and a director of the
Company since 1974. He served as Chief Financial Officer of the Company from
1974 through January 1999. 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 1999. 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 Richard Ellis Services, 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. In December 1996, Mr. Jones organized Metro Bancorp, Inc., a
regional banking firm located in Minneapolis, Minnesota, and served as its
Chairman until its acquisition by LB Community Bank & Trust ("LB") in March 1999
at
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which time he became a member of the Board of Directors of LB. 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 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 six meetings during the fiscal year ended January 31, 1999.
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 1999.
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 three meetings during fiscal
1999. 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 1999 and took action in writing on two 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 1999. Messrs.
Offutt, Horn, Knoll and Freeman are the current members of the Executive
Committee.
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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 exercisable in full and have an exercise price of $15.50 per
share, which was the fair market value on the date of grant.
Each of the non-employee directors (Messrs. Freeman, Goldberg,
Jones and Watkins) was granted an option on November 19, 1998 to purchase 2,000
shares of Class A Common Stock at an exercise price of $9.0625 per share, the
fair market value on the date of grant. These options are exercisable in full.
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, 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 are approved both by a majority of all members of the Board and by a
majority of the independent and disinterested outside directors, and are 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 equipment,
trucks and related parts and service totaling $6.9 million in fiscal 1999. The
Company also had sales in fiscal 1999 to agricultural operations affiliated with
Mr. Watkins totaling $81,318 and to agricultural operations affiliated with Gary
R. Allan, Executive Vice President - Agriculture Division, totaling $59,760.
The Company leases 23 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 $5.0 million in fiscal 1999. These leases have
terms expiring at various times from 1999 to 2010. The Company also leases two
of its agricultural dealership facilities from an affiliate of Mr. Allan, and
three of its construction equipment rental facilities, one rental administration
building and one construction equipment dealership facility from an affiliate of
William R. Hutton, President of RDO Rental Co. Total rent expenses in fiscal
1999 for these leases were $240,000 and $221,310, respectively.
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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 tax exempt voluntary employee benefit trust and
real estate management services. Total charges for such services were $457,265
in fiscal 1999. 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 1999 was $26.2 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 $2.6 million as of
January 31, 1999.
The Company securitizes (i.e., sells) certain loan and lease
receivables to a special-purpose corporation which is a wholly-owned subsidiary
of Ag Capital. Upon sale, a gain is recognized on the receivables for the
difference between carrying value and the sales proceeds based on estimates of
future expected cash flows including adjustments for prepayments and credit
losses. The Company services the underlying receivables on behalf of the
special-purpose corporation in return for a fee. The Company sold approximately
$57.1 million of loan and lease receivables during fiscal 1999. Approximately
$2.2 million of gains on sales and servicing fee income were recognized. In
connection with the securitization, the Company is liable for up to 10% of the
amount of the aggregate outstanding contracts to the special-purpose corporation
which was approximately $4.8 million as of January 31, 1999.
The Company finances certain of its working capital needs,
primarily inventory financing for non-Deere equipment, receivables, fixed assets
and acquisitions, through Ag Capital. Such financing typically bears interest
based on LIBOR and the prime rate as they vary from time to time. Total interest
paid by the Company to Ag Capital was $2.1 million in fiscal 1999. The total
amount outstanding under these financing arrangements at January 31, 1999 was
$40.4 million, with interest rates based on LIBOR and the prime rate (7.44% to
8.50%).
The Company sold the operating assets of its agricultural
irrigation equipment business to an Offutt Entity during fiscal 1999. The Offutt
Entity assumed related liabilities and paid cash of $230,069 in exchange for the
assets which were valued by an independent appraiser.
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, 1999, the required amount of
the letter of credit to replace Mr. Offutt's personal guaranty was approximately
$37.9 million. The Company estimates that it would cost approximately $190,000
per year to replace Mr. Offutt's personal guarantee with a letter of credit.
Mr. Allan was the principal stockholder and operator of a
Washington agricultural dealership acquired by the Company in fiscal 1997. Upon
completion of the acquisition, Mr. Allan became an officer of the Company. The
purchase price for this acquisition 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, 1999,
$600,000 of this note remained outstanding. The Company also agreed to make an
additional payment, up to a maximum of $750,000, in the event the acquired
dealership
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met certain operating and profit objectives during the three years after the
acquisition. These objectives were not met during fiscal 1999. As of January 31,
1999, the amount of $97,000 had been incurred and accrued for as a result of
this obligation for periods prior to fiscal 1999.
In fiscal 1998, the Company acquired an 80% equity interest in
a construction equipment rental business owned by Mr. Hutton who continued as
its President. Total consideration for the net assets acquired was $2.7 million.
The Company has the right to purchase the 20% equity interest beneficially owned
by Mr. Hutton. In connection with its acquisition of the 80% equity interest,
the Company also agreed to make an additional payment, up to $1.0 million, in
the event this business met certain operating and profit objectives during the
five years after the acquisition. As of January 31, 1999, these objectives have
not been met since the acquisition and no amount had been incurred or accrued
for as a result of this obligation.
Historically and prior to the Offering, the Company 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.
In connection with the termination of the Company's S
corporation status, the Company and Mr. Offutt 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.
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the
beneficial ownership of Common Stock of the Company as of April 9, 1999, unless
otherwise noted, for (a) each director, nominee for director and officer named
in the Summary Compensation Table (set forth below), and (b) all officers and
directors of
9
<PAGE>
the Company as a group. The address for all officers and directors of the
Company is 2829 South University Drive, Fargo, North Dakota 58103.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES PERCENT OF TOTAL
- ------------------- ----------------------------- CLASS A AND PERCENT OF TOTAL
CLASS A(1) CLASS B CLASS B SHARES VOTING POWER (2)
---------- ------- ---------------- ----------------
<S> <C> <C> <C> <C>
Ronald D. Offutt......................................... 258,700(3)(4) 7,450,492 58.4% 84.5%
Paul T. Horn ............................................ 427,080(5) -- 3.2% 1.2%
Allan F. Knoll........................................... 652,670(6) -- 4.9% 1.8%
Charles Calhoun.......................................... 8,500 -- * *
H. David Frambers........................................ 113,742 -- * *
Randolph F. Goss......................................... 2,600 -- * *
Larry E. Scott........................................... 211,377(7) -- 1.6% *
Bradford M. Freeman...................................... 62,000 -- * *
Ray A. Goldberg.......................................... 12,200 -- * *
Norman M. Jones.......................................... 58,615 -- * *
James D. Watkins......................................... 47,000 -- * *
All officers and directors as a group (27 persons)....... 1,084,303(3)(4)(7) 7,450,492 65.2% 87.0%
</TABLE>
- ----------------------
* Less than one percent.
(1) Includes 26,000, 6,500, 6,500, 8,000, 2,600, 2,600, 2,600, 12,000,
12,000, 12,000, 12,000 and 161,480 shares subject to option which are
held by Messrs. Offutt, Horn, Knoll, Calhoun, Frambers, Goss, Scott,
Freeman, Goldberg, Jones, Watkins and all officers and directors as a
group, respectively, which were exercisable on or within 60 days after
April 9, 1999.
(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) Excludes 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. Mr. Offutt purchased an additional 1,100 shares of Class A Common
Stock on April 12, 1999.
(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.
(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.
Excludes 100 shares of Class A Common Stock owned by Mr. Knoll's spouse
as to which shares he disclaims any beneficial ownership.
(7) Excludes 100,784 shares of Class A Common Stock owned by Mr. Scott's
spouse as to which shares he disclaims any beneficial ownership.
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
10
<PAGE>
are also required to furnish the Company with copies of all Section 16(a)
reports they file. Based solely upon a review of the copies of such reports
furnished to the Company and written representations from its directors and
executive officers that no other reports were required for fiscal 1999, the
Company believes that all directors, executive officers or beneficial owners of
more than 10% of the Company's Class A Common Stock have filed with the SEC on a
timely basis all reports required to be filed under Section 16 of the Exchange
Act.
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
Messrs. Offutt, Horn and Knoll and by each of the four other most highly paid
officers of the Company for the fiscal years ended January 31, 1999, 1998 and
1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL 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) 1999 -- -- 130,000 --
CHAIRMAN AND CHIEF EXECUTIVE 1998 $50,000 -- -- --
OFFICER 1997 $50,000 -- 50,000 (6) --
Paul T. Horn (3) 1999 $150,000 -- 32,500 --
PRESIDENT AND CHIEF OPERATING 1998 $150,000 -- -- --
OFFICER 1997 $83,333 -- 50,000 (6) --
Allan F. Knoll (3) 1999 $50,000 -- 32,500 --
CHIEF FINANCIAL OFFICER AND 1998 $50,000 -- -- --
SECRETARY 1997 $50,000 -- 50,000 (6) --
Charles Calhoun (4) 1999 $120,000 $38,932 6,500 --
EXECUTIVE VICE PRESIDENT - 1998 $110,000 $70,000 -- --
USED EQUIPMENT DIVISION 1997 $59,416 -- 20,000 --
H. David Frambers 1999 $150,000 $9,390 13,000 --
EXECUTIVE VICE PRESIDENT - 1998 $130,000 $126,485 -- --
EMERGING DIVISIONS 1997 $130,000 $101,400 20,000 (6) --
Randolph F. Goss (5) 1999 $128,292 $86,137 33,000 --
EXECUTIVE VICE PRESIDENT - 1998 $110,000 $111,013 -- --
CONSTRUCTION EQUIPMENT 1997 $9,308 -- 20,000 (6) --
DIVISION
Larry E. Scott 1999 $135,000 $24,435 13,000 --
SENIOR VICE PRESIDENT - SOUTH- 1998 $130,000 $60,261 -- --
WEST CONSTRUCTION EQUIPMENT 1997 $130,000 $101,400 20,000 (6) --
</TABLE>
11
<PAGE>
- ------------------------
(1) All options were granted under the Incentive Plan.
(2) No person named in this table received perquisites or other personal
benefits exceeding $50,000 or 10% of such person'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 fiscal 1997 is the
amount of compensation paid to each of them for the services provided by
each of them to the Company.
(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 was an employee of the Company from January 1997 until April
1999. His compensation for fiscal 1997 represents the one-month period of
January 1997.
(6) This option was exchanged for a new option during fiscal 1999 as
discussed below in "Compensation Committee Report on Executive
Compensation - Options Repriced in Fiscal 1999."
OPTIONS GRANTED IN FISCAL 1999
The following table provides information regarding option
grants made during fiscal 1999 under the Incentive Plan to the persons named in
the foregoing Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES
SHARES TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM
OPTIONS GRANTED IN PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL 1999 PER SHARE DATE 5% 10%
- ---- ---------- ----------- --------- ----------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Offutt (1)........................ 130,000 28.9% $10.00 11/18/08 $619,042 $1,755,753
Paul T. Horn (1)............................ 32,500 7.2% $10.00 11/18/08 $154,760 $438,938
Allan F. Knoll (1).......................... 32,500 7.2% $10.00 11/18/08 $154,760 $438,938
Charles Calhoun (2)......................... 6,500 1.4% $9.0625 11/18/08 $37,046 $93,881
H. David Frambers (1)....................... 13,000 2.9% $10.00 11/18/08 $61,904 $175,575
Randolph F. Goss (1)........................ 13,000 2.9% $10.00 11/18/08 $61,904 $175,575
(2)........................ 20,000 4.5% $9.0625 11/18/08 $113,987 $288,866
Larry E. Scott (1).......................... 13,000 2.9% $10.00 11/18/08 $61,904 $175,575
</TABLE>
- ----------------------------------
(1) This option was granted on November 19, 1998 in exchange for an
outstanding option. See "Compensation Committee Report on Executive
Compensation - Options Repriced in Fiscal 1999" below. The fair market
value of Common Stock on the date of grant was $9.0625 per share. This
option becomes exercisable in twenty percent annual installments
commencing November 19, 1998 and becomes immediately exercisable in full,
as provided in the Incentive Plan, upon death, disability, retirement or
change in control of the Company.
(2) This option was granted on November 19, 1998 at the then fair market
value of Common Stock. It becomes exercisable in twenty percent annual
installments commencing November 19, 1999 and becomes immediately
exercisable in full, as provided in the Incentive Plan, upon death,
disability, retirement or change in control of the Company.
12
<PAGE>
OPTION EXERCISES AND OPTION VALUES
The following table provides 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 1999
AND OPTION VALUES AT THE END OF FISCAL 1999
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JANUARY 31, 1999 AT JANUARY 31, 1999 (1)
ACQUIRED VALUE ------------------------------ -------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Offutt....... 0 0 26,000 104,000 -- --
Paul T. Horn........... 0 0 6,500 26,000 -- --
Allan F. Knoll......... 0 0 6,500 26,000 -- --
Charles Calhoun........ 0 0 8,000 18,500 -- --
H. David Frambers...... 0 0 2,600 10,400 -- --
Randolph F. Goss....... 0 0 2,600 30,400 -- --
Larry E. Scott......... 0 0 2,600 10,400 -- --
</TABLE>
- -------------------------------
(1) Since the closing price of Common Stock on the last trading day of fiscal
1999 ($8.50 per share) was less than the exercise prices of all
unexercised options held by these persons, there were no unexercised
in-the-money options at fiscal year end.
CONFIDENTIALITY AGREEMENTS
Option grants are conditioned upon the recipient signing an
agreement regarding confidential information, non-competition and inventions.
These agreements generally prohibit disclosure of confidential information to
anyone outside the Company both during and after employment, restricts the
employee from competing with the Company for a period of time after termination
of employment with the Company, and 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1999, 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 1999, no 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 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 officers served on the Board,
other than Messrs. Offutt, Horn and Knoll with respect to the Offutt Entities.
13
<PAGE>
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). During fiscal 1999, the Compensation Committee was
comprised of two non-employee directors (Bradford M. Freeman and James D.
Watkins) and Allan F. Knoll, the Company's Chief Financial Officer until January
31, 1999. The Compensation Committee has furnished this report on executive
compensation for fiscal 1999.
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
Prior to October 1, 1996, Messrs. Offutt, Horn and Knoll were
not compensated directly by the Company for their services, which represented
approximately one-fourth of each of their time. Their services were provided to
the Company pursuant to an arrangement with Offutt Co. which compensated each of
them directly at the rate of $50,000 per year for their services to the Company.
Commencing October 1, 1996, each of these officers has been paid directly or
otherwise compensated by the Company for their services to the Company.
Mr. Offutt received a salary from the Company of $50,000 per
year for his services from October 1, 1996 until fiscal 1999 when he offered to
forego this salary in exchange for the grant of an additional option. Since the
amount of time devoted to the Company by Mr. Offutt was greater than expected at
the time of the Offering thus enlarging his responsibilities and duties, the
Compensation Committee determined that he was deserving of an additional option
and that his offer to forego his salary in exchange for an additional option
would benefit and further the objectives of the Company and its stockholders.
The Board then acted upon the recommendation of the Compensation Committee and
granted Mr. Offutt an option covering 150,000 shares at an exercise price of
$17.25 per share (the fair market value on the date of grant). This option was
subsequently exchanged for a new option as discussed below in "Options Repriced
in Fiscal 1999."
Since October 1, 1996 Mr. Horn has received 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. Mr. Knoll receives a salary from the Company of $50,000 per year for
his services. 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. 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").
14
<PAGE>
Base salaries for executive 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 executive corporate officers are based on
individual performance and the Company's overall performance. No cash bonuses
were paid to executive corporate officers for fiscal 1999.
Executive operating officers generally have the opportunity
for their cash bonus to constitute a substantial portion of their total
compensation. Cash bonus eligibility can equal 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 and are paid 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 ("SARs"), 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.
OPTIONS REPRICED IN FISCAL 1999
At its meeting held in November 1998, the Compensation
Committee took action it believed would revitalize near-term incentives under
the Company's stock option program. The stock prices of public companies in the
capital goods/heavy machinery industry had declined markedly during the year,
and the Company's stock price was substantially below the exercise price of then
outstanding options. The Compensation Committee was concerned that this
situation was resulting in sagging morale and could lead to difficulty in
retaining key employees.
After carefully considering the number of shares, exercise
prices and other aspects of then outstanding options, and after assessing
various alternatives, the Compensation Committee determined it was in the best
interests of the Company and its stockholders to offer each holder of an
outstanding option
15
<PAGE>
(other than the four non-employee directors and any person employed by an
operation being sold or discontinued by the Company) to exchange his or her old
option for a new option. Each new option was granted at an exercise price of
$10.00 per share (the fair market value at the time was $9.0625 per share), the
number of shares was reduced to sixty-five percent of the shares covered by the
old option, and the vesting and expiration dates were changed.
The following table provides information for the persons named
in the foregoing Summary Compensation Table who accepted this exchange offer:
OPTION REPRICINGS
<TABLE>
<CAPTION>
MARKET LENGTH OF
NUMBER OF PRICE OF EXERCISE ORIGINAL OPTION
SHARES STOCK AT PRICE AT NEW TERM REMAINING
UNDERLYING TIME OF TIME OF EXERCISE AT DATE OF
NAME DATE NEW OPTIONS REPRICING REPRICING PRICE REPRICING
- ---- ---- ----------- --------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Offutt (1).... 11/19/98 97,500 $9.0625 $17.25 $10.00 9 years 190 days
(2).... 11/19/98 32,500 $9.0625 $15.50 $10.00 8 years 64 days
Paul T. Horn (2)........ 11/19/98 32,500 $9.0625 $15.50 $10.00 8 years 64 days
Allan F. Knoll (2)...... 11/19/98 32,500 $9.0625 $15.50 $10.00 8 years 64 days
H. David Frambers (2)... 11/19/98 13,000 $9.0625 $15.50 $10.00 8 years 64 days
Randolph F. Goss (2).... 11/19/98 13,000 $9.0625 $15.50 $10.00 8 years 64 days
Larry E. Scott (2)...... 11/19/98 13,000 $9.0625 $15.50 $10.00 8 years 64 days
</TABLE>
- ---------------------------
(1) The old option was granted on May 28, 1998, became exercisable in twenty
percent annual installments commencing May 28, 1999, and had an
expiration date of May 27, 2008.
(2) The old option was granted on January 23, 1997, became exercisable in
twenty percent annual installments commencing July 23, 1997, and had an
expiration date of January 22, 2007.
CEO COMPENSATION
As the Company's principal stockholder, Mr. Offutt's interests
are closely tied to Company performance and stock price appreciation. As
discussed above, his base salary was eliminated during fiscal 1999 and an
additional option was granted to him. The Compensation Committee believes that
Mr. Offutt is fully motivated to enhance long-term stockholder value.
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.
16
<PAGE>
This report is given by the following members of the
Compensation Committee:
Bradford M. Freeman
Allan F. Knoll
James D. Watkins
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]
<TABLE>
<CAPTION>
---------------------- ---------------------- ----------------------- ------------------- -----------------
1/23/97 1/31/97 1/30/98 1/29/99
---------------------- ---------------------- ----------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
RDO 100.00 113.71 119.35 54.84
---------------------- ---------------------- ----------------------- ------------------- -----------------
S & P Machinery 100.00 101.05 126.60 102.20
---------------------- ---------------------- ----------------------- ------------------- -----------------
S & P 500 100.00 101.15 128.37 170.07
---------------------- ---------------------- ----------------------- ------------------- -----------------
</TABLE>
AUDITORS FOR FISCAL 2000
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, 2000. 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. These representatives will have an opportunity to
make a statement if they so desire, and will also be available to respond to
appropriate questions from stockholders.
17
<PAGE>
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder who intends to present a proposal at the
annual meeting of stockholders to be held in calendar 2000 and who wishes to
have the proposal included in the Company's proxy statement and form of proxy
for that meeting must deliver the proposal to the Company at its executive
offices no later than January 7, 2000 and must satisfy applicable SEC
requirements.
In addition, the proxy solicited by the Board for the 2000
annual meeting will confer discretionary authority to vote on any stockholder
proposal presented at that meeting, unless the Company is provided with notice
of such proposal no later than March 24, 2000.
OTHER BUSINESS
The Board knows of no other matters to be presented for
stockholder action at the Annual Meeting. However, if other matters do properly
come before the Annual Meeting, the Board intends that the persons named in the
proxies will vote upon such matters in accordance with their best judgment.
FORM 10-K
UPON WRITTEN REQUEST, THE COMPANY WILL MAIL WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO: RDO EQUIPMENT CO.,
STOCKHOLDER RELATIONS, 3030 HARBOR LANE, SUITE 202, PLYMOUTH, MINNESOTA 55447.
18
<PAGE>
RDO EQUIPMENT CO.
ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, JUNE 3, 1999
1:30 P.M., CENTRAL TIME
[MAP]
CONCORDIA COLLEGE
KNUTSON CENTER - CENTRUM ROOM
901 EIGHTH STREET SOUTH
MOORHEAD, MINNESOTA
DIRECTIONS FROM I-94:
Go north on U.S. Highway 75 (also known as 8th Street).
Turn left (west) on 12th Avenue S. to 5th Street S.
Turn right (north) on 5th Street S. to 9th Avenue S.
Turn right (east) on 9th Avenue S. to parking lots.
DIRECTIONS FROM U.S. HIGHWAY 10:
Go south on 8th Street to Concordia College campus.
Parking lot is on the right (west) side of the street
between 7th Avenue S. and 10th Avenue S.
[RDO LOGO] RDO Equipment Co.
2829 South University Drive, Fargo, North Dakota 58103 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON THURSDAY, JUNE 3, 1999.
The shares of stock you hold in your account will be voted as you specify on the
reverse side.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" THE NOMINEES LISTED IN
ITEM 1.
By signing the proxy, you revoke all prior proxies and appoint Ronald D. Offutt,
Paul T Horn and Allan F. Knoll, and each of them, with full power of
substitution, to vote your shares on the matters shown on the reverse side and
any other matters which may come before the Annual Meeting and all adjournments.
See reverse for voting instructions.
<PAGE>
PLEASE DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN ITEM 1.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1. Election of directors:
01 Ronald D. Offutt 05 Ray A. Goldberg [ ] Vote FOR [ ] Vote WITHHELD
02 Paul T. Horn 06 Norman M. Jones all nominees from all nominees
03 Allan F. Knoll 07 James D. Watkins
04 Bradford M. Freeman
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE ----------------------------------------------------
THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
----------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box [ ] Date , 1999.
Indicate changes below: ----------------------------------------
----------------------------------------------------
----------------------------------------------------
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy.
If held in joint tenancy, all persons must sign.
Trustees, administrators, etc., should include title
and authority. Corporations should provide full name
of corporation and title of authorized officer
signing the proxy.
</TABLE>
<PAGE>
[RDO LOGO]
RDO EQUIPMENTT CO.
c/o SHAREOWNER SERVICES(SM)
PO BOX 64854
ST PAUL MN 55164-0854
FIRST CLASS MAIL
NOTICE OF ANNUAL MEETING PLEASE VOTE, SIGN AND
AND PROXY STATEMENT RETURN PROMPTLY
