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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTIONS 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-14528
CNH GLOBAL N.V.
(Formerly New Holland N.V.)
(Exact name of registrant as specified in its charter)
KINGDOM OF THE NETHERLANDS
(State or other jurisdiction of
incorporation or organization)
WORLD TRADE CENTER
TOWER B, 10TH FLOOR
AMSTERDAM AIRPORT
THE NETHERLANDS
(Address of principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares, par value Euro 0.45 New York
Case Corporation 7 1/4% Notes due 2016 New York
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)OF
THE ACT: NONE
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: 149,660,000 Common Shares
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) been subject to such
filing requirements for the past 90 days. [X]
Indicate by check mark which financial statement item the registrant has
elected to follow: Item 17 [ ] or Item 18 [X].
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TABLE OF CONTENTS
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PART I
Item 1. Description of Business..................................... 5
Item 2. Description of Property..................................... 17
Item 3. Legal Proceedings........................................... 19
Item 4. Control of Registrant....................................... 19
Item 5. Nature of Trading Market.................................... 20
Item 6. Exchange Controls and Other Limitations Affecting Security 20
Holders.....................................................
Item 7. Taxation.................................................... 20
Item 8. Selected Financial Data..................................... 24
Item 9. Management's Discussion and Analysis of Financial Condition 26
and Results of Operations...................................
Item 9(a). Quantitative and Qualitative Disclosures About Market 42
Risk........................................................
Item 10. Directors and Officers of Registrant........................ 44
Item 11. Compensation of Directors and Officers...................... 45
Item 12. Options to Purchase Securities from Registrant or 46
Subsidiaries................................................
Item 13. Interest of Management in Certain Transactions.............. 46
PART II
Item 14. Description of Securities to be Registered.................. 47
PART III
Item 15. Defaults Upon Senior Securities............................. 47
Item 16. Changes in Securities and Changes in Security for Registered 47
Securities..................................................
PART IV
Item 17. Financial Statements........................................ 47
Item 18. Financial Statements........................................ 47
Item 19. Financial Statements and Exhibits........................... 48
Item 19(a). Index to Financial Statements and Exhibits.................. 48
Item 19(b). Index to Exhibits........................................... 93
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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION
CNH Global N.V. combines the operations of New Holland N.V. ("New Holland")
and Case Corporation ("Case") as a result of their business merger ("the
merger") on November 12, 1999 ("the merger date"). Effective with the closing of
the merger, New Holland changed its name to CNH Global N.V. As used in this
report, "CNH" refers to CNH Global N.V. and its consolidated subsidiaries.
The annual consolidated financial statements of New Holland were
historically prepared in accordance with International Accounting Standards or
IAS. CNH has prepared its annual consolidated financial statements in accordance
with generally accepted accounting principles in the United States or U.S. GAAP,
and certain reclassifications have been made to conform the historical financial
statements to the CNH presentation. The accompanying financial statements
reflect the historical operating results of CNH, including the results of
operations of Case since the merger date. CNH has prepared its consolidated
financial statements in U.S. dollars and, unless otherwise indicated, all
financial data set forth in this report is expressed in U.S. dollars.
Certain information in this report has been presented separately by
geographic area. CNH defines its geographic areas as (1) North America, (2)
Western Europe, (3) Latin America, and (4) Rest of World. As used in this
report, all references to "North America," "Western Europe," "Latin America" and
"Rest of World" are defined as follows:
- North America -- United States and Canada.
- Western Europe -- Austria, Belgium, Denmark, Finland, France, Germany,
Greece, Iceland, Ireland, Italy, Luxembourg, The Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland and the United Kingdom.
- Latin America -- Mexico, Central and South America, and the Caribbean
Islands.
- Rest of World -- Those areas not included in North America, Western
Europe and Latin America, as defined above.
In this report, management estimates of market share information are
generally based on registrations of equipment in most of Europe and on retail
data collected by a central information bureau from equipment manufacturers in
North America, as well as on shipment data collected by an independent service
bureau. Not all agricultural and construction equipment is registered, and
registration data may thus underestimate actual retail demand. In many
countries, there may also be a period of time between the delivery, sale and
registration of a vehicle; as a result, delivery or registration data for a
particular period may not correspond directly to retail sales in such a period.
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* * * * *
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The information included in this report contains certain forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from those in the forward-looking statements.
CNH's outlook is predominantly based on its interpretation of what it
considers key economic assumptions. Crop production and commodity prices are
strongly affected by weather and can fluctuate significantly. Housing starts and
other construction activity are sensitive to interest rates and government
spending. Some of the other significant factors for CNH include general economic
and capital market conditions, the cyclical nature of its business, foreign
currency movements, CNH's and its customers' access to credit, political
uncertainty and civil unrest in various areas of the world, pricing, product
initiatives and other actions taken by competitors, disruptions in production
capacity, excess inventory levels, the effect of changes in laws and regulations
(including government subsidies and international trade regulations), the effect
of conversion to the Euro, technological difficulties, changes in environmental
laws, and employee and labor relations. Additionally, CNH's achievement of the
anticipated benefits of the merger of New Holland and Case, including the
realization of expected annual operating synergies, depends upon, among other
things, its ability to integrate effectively the operations and employees of New
Holland and Case, and to execute its multi-branding strategy. Further
information concerning factors that could significantly impact expected results
is included in the following sections of this Form 20-F: Business -- Business
Strategy, Employees, Environmental Matters, Seasonality and Production Schedules
and Competition; Legal Proceedings; and Management's Discussion and Analysis of
Financial Condition and Results of Operations.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
CNH, a corporation organized under the laws of the Kingdom of The
Netherlands, is a leader in the agricultural equipment, construction equipment
and financial services industries. CNH is the largest manufacturer of
agricultural equipment in the world, the third largest manufacturer of
construction equipment and has one of the world's largest equipment finance
companies. CNH distributes its strong, globally recognized brands in over 160
markets through an extensive network of approximately 10,000 dealers and
distributors.
CNH combines the operations of New Holland and Case as a result of their
business merger on November 12, 1999. Effective with the closing of the merger,
New Holland changed its name to CNH. As used in this report, all references to
"New Holland" or "Case" refer to (1) the pre-merger business and/or operating
results of either New Holland or Case on a stand-alone basis, or (2) the CNH
multi-branding strategy that supports the continued use of the New Holland and
Case product brands.
CNH has three business segments: Agricultural Equipment, Construction
Equipment and Financial Services. CNH's equipment operations manufacture, market
and distribute a full line of farm and construction equipment on a worldwide
basis. CNH is the largest global manufacturer of agricultural tractors and also
has leading positions in combines, hay and forage equipment and specialty
harvesting equipment. In construction equipment, CNH has leading positions in
excavators, crawler dozers, graders, wheel loaders, loader/backhoes, skid steer
loaders and trenchers. CNH also provides a complete range of replacement parts
and services to support its equipment. On a pro forma basis after giving effect
to the merger, CNH's net sales from equipment operations were approximately $10
billion in 1999.
CNH offers a broad array of financial services products, including retail
financing for the purchase or lease of new and used CNH and other manufacturers'
products and other retail financing programs. To facilitate the sale of its
products, CNH offers wholesale financing to dealers and rental equipment yards.
Wholesale financing consists primarily of floorplan financing and allows dealers
to maintain a representative inventory of products. CNH's retail financing
alternatives are intended to be competitive with financing available from third
parties. At December 31, 1999, CNH's serviced portfolio of receivables was
approximately $11 billion. On a pro forma basis after giving effect to the
merger, CNH's revenues from financial services were approximately $785 million
in 1999.
NEW HOLLAND / CASE MERGER
On November 12, 1999, New Holland acquired Case for $4.6 billion in cash,
including related costs and expenses. CNH financed the merger with total
borrowings of $3.0 billion under short-term credit facilities, a subordinated
advance to capital of $1.4 billion from New Holland Holdings N.V., a wholly
owned subsidiary of Fiat S.p.A., and available cash of $200 million. As of the
merger date, New Holland Holdings N.V. held approximately 71.1% of the common
shares of CNH. For additional information on the merger of New Holland and Case,
see Note 3 to the CNH Financial Statements included in Item 18 of this report.
Case, a leading worldwide designer, manufacturer, marketer and distributor
of farm equipment and light-to medium-sized construction equipment, had 1999
revenues of $5.1 billion, including $4.6 billion for sales of farm and
construction equipment and approximately $500 million in revenues from its
financial services operations.
INDUSTRY OVERVIEW
Agricultural Equipment
Most agricultural equipment is purchased by the operators of food and grain
producing farms and by independent contractors that provide services to such
farms. One of the key factors influencing sales of agricultural equipment is the
level of total farm cash receipts, which is impacted by the volume of acreage
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planted, commodity prices, crop yields, farm operating expenses and government
subsidies or payments. General economic conditions, interest rates and the
availability of financing also influence sales. Farmers tend to postpone the
purchase of equipment when the farm economy is depressed, and to increase their
purchases when economic conditions improve. Weather conditions are a major
determinant of crop yields and therefore also affect equipment-buying decisions.
Government policies, including the availability and extent of government
subsidies, also affect the agricultural equipment market by directly or
indirectly regulating or influencing the levels of acreage planted and crop
prices.
Customer preferences regarding product types and features vary by region.
In North America, Europe, Australia and other areas where soil conditions,
climate, economic factors and population density allow for intensive mechanized
agriculture, farmers demand high capacity, sophisticated machines equipped with
current technology. In Europe, where farms are generally smaller than those in
North America and Australia, there is greater demand for somewhat smaller, yet
sophisticated, machines. In the developing regions of the world where labor is
abundant and infrastructure, soil conditions and/or climate are not adequate for
intensive agriculture, customers prefer simple, robust and durable machines with
lower purchase and operating costs. In many developing countries, tractors are
the primary, if not the sole, agricultural equipment, and much of the
agricultural work in such countries that cannot be performed by tractor is
carried out by hand. A growing number of "part-time" or "hobby" farmers in
Europe and North America also prefer simple, low-cost agricultural equipment.
CNH's position as the most geographically diversified manufacturer of
agricultural equipment with its broad geographic dealer network allows it to
supply customers in each of its significant markets with products that meet
their requirements and preferences.
Major trends in the agricultural industry include a growth in farm size and
machinery capacity, concurrent with a decline in the number of farms and units
of equipment sold. The agricultural equipment industry, in most markets, began
to experience an increase in demand in the early 1990s as a result of both
higher commodity prices and low levels of grain stocks worldwide. The amount of
land under cultivation also increased as government agricultural support
programs shifted away from mandatory set-aside programs. This trend was
maintained through 1997, but the markets started to decline in 1998 as a result
of generally unfavorable economic conditions, lower commodity prices and reduced
aid to developing countries. In 1999, global prices for agricultural commodities
remained low and, as a result, industry demand for agricultural equipment
continued at depressed levels.
Construction Equipment
Contractors, farmers, builders and rental fleet owners are the primary
purchasers of light- to medium-sized construction equipment, while major
customers of heavy equipment include construction companies, municipalities,
local governments and rental fleet owners. The principal factor influencing
sales of light construction equipment is the level of residential and commercial
construction, remodeling and renovation, each of which is primarily impacted by
prevailing interest rates. The light- to medium-sized equipment sector is
experiencing significant growth as smaller machines, equipped with multiple
attachments for specialized applications, replace other forms of tool carrying
and material handling equipment, including some heavy equipment. This trend,
which is partially related to low levels of public spending on new
infrastructure, favors increased sales of skid steer loaders, mini- and
midi-excavators, mini-wheeled loaders, loader/backhoes and telescopic handlers.
Construction equipment products are utilized similarly worldwide. In
developed markets, customers tend to favor more sophisticated machines equipped
with the latest technology and comfort features. In less developed markets,
customers tend to favor more basic equipment with greater perceived durability.
With respect to power capacity, customer demand and the range of products
offered does not vary significantly from one market to another. Customers in
North America and Europe place strong emphasis on product reliability, while in
other markets, customers often use a particular piece of equipment even after
its performance begins to diminish. In general, most construction equipment sold
in mature markets such as North America and Europe replaces older equipment. In
contrast, demand in less mature markets includes replacements and net increases
in equipment demand.
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Sales of heavy construction equipment are particularly dependent on the
levels of major infrastructure construction and repair projects, which is a
function of government spending and economic growth. The heavy equipment
industry in North and South America, as well as in Europe, is primarily a
replacement market that follows general economic patterns, whereas the industry
in newly industrialized and emerging markets exhibits an overall growth trend.
In recent years, demand for heavy construction equipment in North America has
increased as interest rates have remained relatively stable and the level of
government spending on infrastructure projects has increased. In Europe, demand
has also been increasing, primarily as a result of higher spending by European
governments.
Financial Services
To facilitate sales of agricultural and construction equipment products,
CNH and other major providers of financial services typically offer retail
financing to end-use customers and wholesale financing to equipment dealers.
Retail financing consists of the financing of retail installment sales
contracts, leases and similar products, including insurance, for the benefit of
retail customers in conjunction with the purchase of new and used equipment from
dealers. Wholesale financing consists primarily of dealer floorplan financing
and allows dealers the ability to maintain a representative inventory of
products. CNH also provides financing options to dealers and non-captive third
parties to finance inventory, working capital, real estate acquisitions,
construction and remodeling, business acquisitions, dealer systems and service
and maintenance equipment.
CNH competes primarily with banks, finance companies and other financial
institutions. Typically, this competition is based upon customer service and
finance rates charged. Long-term profitability in CNH's financial services
segment is largely dependent on the cyclical nature of the agricultural and
construction equipment industries and on prevailing interest rates.
BUSINESS STRATEGY
CNH's primary objectives are growth, value creation for shareholders and
increased customer satisfaction. As the first global full-line competitor in
both the agricultural and construction equipment markets, CNH plans to grow its
business through market expansion and product offering enlargement. CNH expects
that its commitment to cost controls and to more efficient and effective use of
resources will create value for its shareholders, and CNH believes that its
focus on further improving its products, distribution and services will lead to
increased customer satisfaction and loyalty.
CNH is managed as a global company, keeping separate Case and New Holland
brand names and dealer networks. CNH is organizing its manufacturing operations
with global product line responsibilities, and CNH will organize its sales and
marketing activities on a geographic basis, keeping separate the dealer- and
customer-related activities of New Holland and Case.
Capitalize on Global Brands Through Multi-Distribution
CNH intends to build on its global distribution network and world-class
brands to further strengthen its position in all principal existing markets and
to access growth opportunities by entering new markets. CNH will distribute New
Holland and Case products and services through their existing global dealer
networks. CNH believes this strategy will maintain a high level of dealer and
customer loyalty, enhance its global market position and create cross-selling
opportunities.
Leverage Operational Expertise to Enter New Markets
CNH believes that the merger of Case and New Holland will enable further
global expansion in the agricultural equipment and construction equipment
industries. The merger provides CNH with opportunities to significantly enhance
its worldwide equipment product offerings.
CNH views international expansion, particularly in the construction
industry, as a principal source of future growth and intends to expand primarily
into markets characterized by rapidly increasing food, housing
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and infrastructure demand. CNH plans to capitalize on its position as the most
geographically diversified manufacturer in its industries to identify and pursue
opportunities in these desirable markets. CNH expects to expand its local
manufacturing and distribution operations in selected developing markets through
a combination of internal development, joint ventures and acquisitions.
Invest in Product Development and Common Product Platforms
To retain existing customers, attract new customers and enhance its
competitive position, CNH plans to continue to invest in product development to
strengthen and broaden its product lines. CNH intends to:
- introduce products with leading-edge technology;
- tailor product offerings for entering new geographic markets and customer
segments;
- upgrade equipment models with an emphasis on quality, reliability and
product simplification; and
- pursue complementary product lines through strategic partnerships, joint
ventures and acquisitions.
CNH will seek to develop, over time, global products that maximize common
design elements and share capital-intensive components. The use of common
product platforms with differentiated product features for its different brands
should permit CNH to lower product development and manufacturing costs, increase
production efficiencies and reduce inventories and order-to-delivery cycle
times.
Focus on a Two-Tiered Agricultural Equipment Product Offering
In order to address the differing product feature requirements of its
global customer base, CNH will pursue an agricultural equipment product strategy
that focuses on offering two distinct classes of products.
In targeting customers in developed countries, as well as the largest
customers in some developing countries, CNH will continue to develop advanced or
"lead" products with technology that leads the market in terms of reliability,
performance, features and innovation. In addition, CNH intends to leverage its
product development capabilities to serve market niches and to satisfy the
specialized requirements of these customers.
For developing markets, CNH intends to adapt existing products or develop
new, value-oriented products for its "base" product line. CNH will design
products for fundamental functionality and, over time, will feature advancing
product technology. In a given market, CNH intends its base products to be the
best available in their class and to accommodate the evolution of local customer
needs.
Continue Reengineering Core Business Processes
CNH intends to improve its operations by identifying and implementing
throughout CNH the best practices of New Holland and Case. Through the
combination of New Holland and Case, CNH expects to achieve annual operating
synergies of $400 - $500 million within three to four years, and savings should
begin to be realized in the year 2000. To generate these cost savings, CNH will
focus on enhancing its core business processes, including product development,
manufacturing and supply chain, and on providing shared administrative services.
Expand Financial Services Operations
CNH intends to expand its financial services operations internationally by
cross-selling existing products in established markets, leveraging its
geographic presence in Europe, Brazil and Australia and introducing its products
and services in selected countries not previously served. CNH will also seek to
improve its penetration with respect to current customer purchases by broadening
the selection of financial services products that it offers in order to meet a
larger portion of the financing needs of its customers. CNH intends to diversify
its customer base by targeting the financing needs of purchasers of industrial
equipment not manufactured by CNH. In addition, CNH will generate cost savings
by jointly developing new products, leveraging funding opportunities and
migrating to common information technology systems and business processes. CNH
believes that a strong financial services base will provide a stable source of
earnings through the cycles of the agricultural and construction equipment
markets.
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PRODUCTS AND MARKETS
CNH designs, manufactures and distributes agricultural and construction
equipment and provides financial services through several subsidiaries and joint
ventures. CNH has operations in 16 countries and sells and distributes its
products in 160 markets through an extensive network of approximately 10,000
dealers and distributors.
On a pro forma basis after giving effect to the merger, CNH's 1999 sales of
farm and construction equipment represented 93% of total revenues, and financing
operations accounted for 7% of total revenues. CNH's pro forma sales of farm
equipment represented 62% of revenues from 1999 equipment sales, and sales of
construction equipment represented 38% of such revenues. For the year ended
December 31, 1999, CNH's pro forma net sales of equipment were generated from
the following geographic areas: North America 41%, Western Europe 42%, Latin
America 6%, and Rest of World 11%.
Equipment Operations
Agricultural Equipment
CNH is the world's largest manufacturer of agricultural equipment and the
largest global manufacturer of agricultural tractors. CNH also has leading
positions in combines, hay and forage equipment and specialty harvesting
equipment. CNH manufactures and distributes a full line of farm machinery and
implements, including two-wheel and four-wheel drive tractors, combines, cotton
pickers, grape and sugar cane harvesters, hay and forage equipment, planting and
seeding equipment, soil preparation and cultivation implements, and material
handling equipment.
CNH's net sales of agricultural equipment on a pro forma basis for the year
ended December 31, 1999, were approximately $6 billion and consisted of tractors
62%, combines/harvesters 20%, hay and forage equipment 12% and implements 6%.
These pro forma net sales of agricultural equipment were generated from the
following geographic areas: North America 38%, Western Europe 42%, Latin America
6%, and Rest of World 14%.
CNH sells agricultural equipment products primarily under the following
brand names: New Holland, Case, Case IH, DMI, AFS, Flexi-Coil and Steyr.
Construction Equipment
CNH is the third largest manufacturer of construction equipment. CNH
manufactures and distributes a full line of construction equipment and has
leading positions in excavators, crawler dozers, graders, wheel loaders,
loader/backhoes, skid steer loaders and trenchers.
CNH's net sales of construction equipment on a pro forma basis for the year
ended December 31, 1999, were approximately $4 billion and consisted of
loader/backhoes 33%, excavators 27%, skid steer loaders 15%, wheel loaders 10%,
crawler dozers 4%, trenchers and other construction equipment 11%. These pro
forma net sales of construction equipment were generated from the following
geographic areas: North America 48%, Western Europe 42%, Latin America 5%, and
Rest of World 5%.
CNH sells construction equipment products under the following brand names:
New Holland, New Holland Construction, Case, Fermec, Link-Belt (earthmoving
equipment), O&K, FiatAllis and Fiat-Hitachi.
Financial Services
CNH provides broad-based financial services for the global marketplace
through various wholly owned subsidiaries and joint ventures in the United
States, Canada, Argentina, Australia, Brazil and Europe. CNH provides and
administers retail financing to end-use customers for the purchase or lease of
new and used CNH and other agricultural and construction equipment. CNH also
facilitates and finances the sale of insurance products and other financing
programs to retail customers. In addition, CNH provides wholesale financing to
CNH dealers and rental equipment yards. CNH also provides financing options to
dealers and non-captive
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third parties to finance inventory, working capital, real estate acquisitions,
construction and remodeling, business acquisitions, dealer systems and service
and maintenance equipment.
RESTRUCTURING
CNH management is assessing and formulating a plan to integrate the
operations of the Case and New Holland businesses. CNH is evaluating the
divestiture or closure of approximately 20% of its manufacturing locations, as
well as the closure of approximately one-third of its 45 parts depots. Through
the consolidation of all functional areas, CNH expects to reduce its worldwide
workforce by approximately 20% by 2002. As of December 31, 1999, CNH has
recorded $90 million in purchase accounting reserves as part of its integration
plan with respect to Case. As management completes and commits to the activities
of the plan, CNH anticipates that it will record additional adjustments to
goodwill for identified actions relative to the Case business. CNH has also
announced that it will incur restructuring charges, beginning in 2000, to exit
certain other activities and to further restructure CNH operations related to
the New Holland business.
In 1999 and 1998, CNH recorded pre-tax restructuring charges of $19 million
and $40 million, respectively, primarily for actions related to New Holland
employee terminations.
DIVESTITURES
In conjunction with the merger, CNH has announced that it will divest or
close approximately 20% of its manufacturing locations, as well as close
approximately one-third of its 45 parts depots worldwide. In approving the
merger, the European and U.S. regulatory authorities identified a number of
competitive concerns related to the combined operations of Case and New Holland
in specified product lines and markets. To address these competitive concerns,
CNH committed to a number of actions, including divestiture of the following
product lines and facilities:
- Case's CX and MXC product lines and the Doncaster, United Kingdom, plant
in which they are assembled;
- New Holland's Laverda combine harvester product line (excluding hillside
models) and the Breganze, Italy, facility in which they are made;
- Case's large square balers assembled in Neustadt, Germany;
- Case's Fermec brand loader/backhoe and industrial tractor product lines
and the Fermec manufacturing plant in Manchester, United Kingdom;
- Case's ownership interest in Hay & Forage Industries in Hesston, Kansas,
a 50% owned joint venture with AGCO Corporation that produces hay and
forage implements; and
- New Holland's Versatile four-wheel drive and Genesis two-wheel drive
tractor lines, along with the Winnipeg, Canada, plant in which they are
manufactured.
In addition, to address specific market issues in Austria, the parties have
agreed to license or build the Steyr model M-948 and M-958 (and equivalent Case
IH models) for sale by a third party. In the opinion of management, the impact
of these divestitures will not be material to CNH's overall results of
operations.
MANUFACTURING
CNH manufactures equipment and components in 46 principal manufacturing
facilities, including 14 facilities in the United States, six in Italy, five in
France, four each in the United Kingdom, Germany and Brazil, two each in Canada
and Belgium, and one each in Australia, Austria, India, Mexico and Poland.
Similar manufacturing techniques are employed in the production of farm and
construction equipment, resulting in certain economies and efficiencies. For a
listing of CNH's principal manufacturing, engineering and administrative
facilities see Item 2, "Description of Property."
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In addition to the equipment manufactured by CNH and its joint ventures,
CNH also purchases both agricultural and construction equipment from other
sources. The terms of purchase from an original equipment manufacturer or OEM,
allow CNH to market the equipment under its brands and generally require CNH to
purchase agreed-upon volumes of products, although either party may terminate
the relationship upon notice. Manufactured components are also purchased on an
OEM basis. OEM purchases allow CNH to offer a broader line of products and range
of models to its dealer network and global customer base. In 1999, the total
value of OEM purchases comprised less than 5% of CNH's total purchases.
JOINT VENTURES AND ALLIANCES
CNH has entered into numerous joint ventures and alliances. The agreements
governing some of New Holland's pre-merger joint ventures contain terms
inconsistent with other agreements to which Case is a party. Likewise, the
agreements governing some of Case's pre-merger joint ventures contain terms
inconsistent with other agreements to which New Holland is a party. CNH is
discussing these issues with its joint venture partners and may need to modify
the terms of some of those joint venture agreements. However, the need for, and
scope of, any possible modifications remains uncertain at this time.
Agricultural Equipment
- Turkey -- CNH owns 37.5% of each of Turk Traktor Ve Ziraat Makineleri
A.S., a leading Turkish manufacturer of agricultural equipment, and
Trakmak Traktor Ve Ziraat Makineleri A.S., a leading Turkish distributor
of agricultural equipment. Turk Traktor produces various tractor series
under license from New Holland, and also supplies power trains to New
Holland de Mexico S.A. de C.V. and transmissions to CNH's facility in
Jesi, Italy.
- Mexico -- CNH and the Quimmco Group of Mexico each own 50% of New Holland
de Mexico, a manufacturer and distributor of tractors for sale in
domestic and export markets, including the United States. New Holland de
Mexico is the market leader in Mexico in its product class.
- United States -- CNH owns 50% of Hay and Forage, a joint venture with
AGCO that manufactures hay and forage equipment at a plant in Hesston,
Kansas. CNH has agreed to divest of its interest in Hay and Forage as a
condition of obtaining U.S. Department of Justice approval pursuant to
the merger.
- Canada -- As of December 31, 1999, CNH owned 39% of Flexi-Coil Ltd., a
manufacturer of air-seeding equipment. CNH acquired the remaining
ownership interests in Flexi-Coil on January 4, 2000.
- Japan -- CNH and H. Shibamoto each own 50% of New Holland HFT Japan Inc.,
a distributor of agricultural equipment in Japan. HFT is the leading
importer of agricultural tractors in the highly competitive Japanese
market and has a leading share of the Japanese markets for combine
harvesters and self-propelled forage harvesters.
- Pakistan -- CNH owns a 43.2% interest in Al-Ghazi Tractors Ltd., a
tractor manufacturing joint venture.
- Uzbekistan -- CNH owns a majority interest in several joint ventures in
Uzbekistan. UzCaseMash LLC and UzCaseTractor LLC produce two-row cotton
pickers and tractors, respectively, for sale in Uzbekistan and
neighboring countries. A third joint venture, UzCaseService LLC, provides
services for Case-branded agricultural and construction equipment. CNH
owns a 60% interest in UzCaseMash and a 51% interest in both
UzCaseTractor and UzCaseService.
- China -- CNH owns 70% of Harbin New Holland Beidahuant Tractors, Ltd., a
joint venture with Heilongiang Beidahuang State Farm Group for the
manufacture of 100-180 horsepower tractors.
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<PAGE> 12
Construction Equipment
- India -- CNH owns 50% of L&T-Case Equipment Limited, a joint venture with
Larsen & Toubro for the manufacture and sale of loader/backhoes and
vibratory compactors.
- Italy -- CNH owns 57% of Fiat-Hitachi Excavators S.p.A., a joint venture
that manufactures heavy construction equipment.
- United States -- CNH has a 50% global alliance with Sumitomo (S.H.I.)
Construction Machinery Co., Ltd. to market and manufacture hydraulic
crawler excavators.
Engine Joint Ventures and Alliances
In 1996, CNH, Iveco N.V. and Cummins Engine Company formed the European
Engine Alliance, a joint venture equally owned by its partners. The European
Engine Alliance is developing a new generation of one-liter-per-cylinder diesel
engines based on Cummins' latest (diesel) engine technology. Cummins has granted
the alliance exclusive rights for this project in the European market in return
for a one-time licensing fee of $33 million, and annual royalty payments made by
CNH and Iveco to Cummins on a per cylinder basis. This new generation of engines
will be designed to meet the European Union's stringent emissions standards that
are scheduled to take effect for trucks in 2001 and for other vehicles between
2002 and 2004. The European Engine Alliance will commence production of
components in 2000, and each of the partners anticipates assembling final
engines in their respective engine assembly facilities. CNH expects that the
first engines developed by the European Engine Alliance will replace the
medium-horsepower engines that CNH currently manufactures at its Basildon, U.K.,
facility. Intellectual property rights with respect to future generations of
engines developed by the European Engine Alliance, including the already-planned
second generation, will be owned jointly by the three partners.
In North America, CNH owns a 50% interest in a joint venture with Cummins
that manufactures a line of diesel engines in Rocky Mount, North Carolina. This
joint venture, Consolidated Diesel Company, provides CNH with a source of low
cost diesel engines that CNH has incorporated into many of its product lines.
Financial Services
- Europe - CNH and UFB LOCABAIL SA, a subsidiary of Compagnie Bancaire,
each own 50% of Case Credit Europe S.A.S., a joint venture that provides
financing for certain of CNH's European dealers and retail customers. CNH
also has a 49% interest in New Holland Finance Ltd., a joint venture with
the Barclays Bank plc group in the United Kingdom that offers retail
financing to CNH customers in the United Kingdom, Germany, France and
Italy.
- Uzbekistan - CNH owns a 51% interest in UzCaseagroleasing, a joint
venture that provides financing for the retail acquisition of new and
used Case agricultural equipment in Uzbekistan.
SUPPLIERS
In 1999, CNH purchased, on a pro forma basis after giving effect to the
merger, approximately $5 billion of material from outside suppliers, including
approximately $4 billion in materials used to produce products and $1 billion in
after-market parts and components support.
CNH also obtains certain engines and other components, as well as services
such as cash management, legal, consulting and other administrative services
from various companies affiliated with Fiat or the Fiat Group, either pursuant
to a renewable contract or on a purchase order basis. In 1999, CNH purchased
approximately $196 million in goods and approximately $99 million in services
from companies in the Fiat Group, including $111 million for engines purchased
from Iveco.
CNH is currently rationalizing its supply chain to reduce substantially the
number of its suppliers. In implementing this program, CNH plans to build
mutually beneficial partnerships with long-term suppliers based on increased
volumes and shared product development activities. CNH believes that a reduction
in the
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<PAGE> 13
number of suppliers will result in more cost-effective arrangements, reduce
investment requirements, provide greater access to technological developments
and result in lower per-unit costs. By rationalizing its supplier base, however,
CNH is increasing its dependence on its remaining suppliers, although in most
instances, the products CNH purchases from its suppliers are available from
other sources.
DISTRIBUTION AND SALES
CNH sells and distributes its products through an extensive network of more
than 10,000 dealers and distributors in more than 160 markets worldwide. Dealers
typically sell either farm equipment or construction equipment, although some
dealers sell both types of equipment. CNH plans to continue to distribute New
Holland and Case products and services through their pre-merger global dealer
networks.
In most established markets, the distribution of CNH products is
accomplished through the dealer network. In other parts of the world, CNH
products are sold initially to distributors and then to dealers (or initially to
dealers and then to sub-dealers), leveraging distributor expertise and
minimizing CNH's marketing costs. Distributors generally have responsibility for
marketing goods in very large geographic regions, including entire countries.
PRICING AND PROMOTION
The actual retail price of any particular piece of equipment is determined
by the individual dealer and generally depends on market conditions, features
and options. Actual retail sales prices may be lower than the suggested list
prices. CNH sells equipment to its dealers at wholesale prices, which reflect a
discount from the suggested list price. In the ordinary course of its business,
CNH engages in promotional campaigns that may include price incentives or
preferential credit terms on the purchase of certain products.
CNH regularly advertises its products to the community of farmers,
contractors, builders and agricultural and construction contractors, as well as
to distributors and dealers in each of its major markets. To reach its target
audience, CNH uses a combination of general media, specialized design and trade
magazines and direct mail. CNH also regularly participates in major
international and national trade shows and engages in co-operative advertising
programs with major distributors.
RESEARCH, DEVELOPMENT AND ENGINEERING
CNH's research, development and engineering personnel design, engineer,
manufacture and test new products, components and systems. CNH incurred $196
million, $152 million and $129 million of research, development and engineering
costs in the years ended December 31, 1999, 1998 and 1997, respectively. After
giving effect to the merger, 1999 and 1998 CNH pro forma research, development
and engineering costs would have been $357 million and $376 million,
respectively.
CNH also benefits from the research, development and engineering
expenditures of its joint ventures, which are not included in CNH's research,
development and engineering expenditure figures, and from the continuing
engineering efforts of its suppliers. With the merger of Case and New Holland,
CNH management expects the combined level of expenditures for research and
development, on a comparable basis, will decline, benefiting from synergies from
the combined company and elimination of duplicative expenditures.
PATENTS AND TRADEMARKS
CNH continues to operate the New Holland and Case businesses under their
respective corporate names, trademarks and trade names.
New Holland -- CNH sells its New Holland brand products under heritage
brand names such as Ford, Braud, FiatAllis, O&K Orenstein & Koppel
Aktiengesellschaft and FiatAgri, and is promoting the New Holland name and logo
as the primary brand name for its agricultural equipment. Under the terms of an
agreement dating to 1991, New Holland retains the right to use the Ford brand
name (in block letters) on
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<PAGE> 14
agricultural equipment through May 6, 2001. CNH also has a one-year, renewable,
royalty-bearing license from Fiat to use the FiatAgri trademark.
Case -- Case manufactures and distributes equipment primarily under the
brand names Case, IH, Case IH, Steyr, Austoft, Concord, Tyler, DMI, Fermec and
Case Poclain.
Other than the New Holland, Case, IH and Case IH trademarks, CNH does not
believe that its business is materially dependent on any single patent or
trademark or group of patents or trademarks.
CNH, through New Holland and Case, has a significant tradition of
technological innovation in the agricultural and construction equipment
industries. CNH holds over 2,450 patents, with 1,060 additional applications
pending. CNH believes that it is among the market leaders for patented
innovations in the product classes in which it operates.
INSURANCE
CNH maintains insurance with third-party insurers and with affiliates of
Fiat to cover various risks resulting from its business activities including,
but not limited to, risk of loss or damage to its facilities, business
interruption losses, general liability, product liability, automobile liability
and directors and officers liability insurance. Management believes that CNH's
present level of insurance coverage is adequate to cover any such potential
losses arising out of these and other insurable risks.
EMPLOYEES
At December 31, 1999, CNH had approximately 36,000 employees. CNH
management is assessing and formulating a plan to integrate the operations of
the Case and New Holland businesses. Through consolidation of all functional
areas, CNH expects to reduce its worldwide workforce by approximately 20% by
2002. As of December 31, 1999, CNH recorded $90 million in restructuring
reserves as part of its integration plan to consolidate operations and reduce
worldwide headcount.
Many of CNH's worldwide production and maintenance employees are
represented by unions. CNH's collective bargaining agreement with the United
Automobile, Aerospace and Agricultural Implement Workers of America (the "UAW").
CNH's contract with the UAW, which represents approximately 2,200 of CNH's
hourly production and maintenance employees in the United States, expires May 2,
2004. Labor agreements covering employees in certain European countries
generally expire annually. CNH can offer no assurance that future contracts with
the UAW or any of CNH's other union contracts or labor agreements will be
renegotiated upon terms acceptable to CNH.
CNH's employees in Europe are also protected by various worker
co-determination and similar laws that afford employees, through local and
central works councils, certain rights of consultation with respect to matters
involving the business and operations of their employers, including the
downsizing or closure of facilities and the termination of employment. Over the
years, CNH has experienced various work slow-downs, stoppages and other labor
disruptions.
ENVIRONMENTAL MATTERS
CNH's operations and products are subject to extensive environmental laws
and regulations in each of the countries in which it operates. CNH is a
voluntary participant in several government-sponsored initiatives that benefit
the environment. CNH has an ongoing Pollution Prevention Program to reduce
industrial waste, air emissions and water usage by incorporating adjustments in
business activity, recycling efforts and hazard assessments of raw materials.
CNH has a program designed to implement environmental management practices and
compliance, to promote continuing environmental improvements and to identify and
evaluate environmental risks at manufacturing and other facilities worldwide.
CNH engines and equipment are subject to extensive statutory and regulatory
requirements that impose standards with respect to air emissions. Further
emissions reductions in the future from non-road engines and
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<PAGE> 15
equipment have been promulgated or are contemplated in the United States as well
as by non-U.S. regulatory authorities in many jurisdictions throughout the
world. CNH expects to make significant capital and research expenditures to
comply with these standards now and in the future. CNH anticipates that these
costs are likely to increase as emissions limits become more stringent, however,
at this time, CNH is not able to quantify the dollar amount of such
expenditures. Failure to comply could result in adverse effects on future
financial results.
CNH will incur capital expenditures in connection with matters relating to
environmental control and will also be required to spend additional amounts in
connection with ongoing compliance with current and future laws and regulations.
In particular, the Clean Air Act Amendments of 1990 and European Commission
Directives will affect directly the operations of all of CNH's manufacturing
facilities in the United States and Europe. The manufacturing processes that
will be affected include painting, coating and foundry operations. Although
capital expenditures for environmental control equipment and compliance costs in
future years will depend on legislative, regulatory and technological
developments that cannot accurately be predicted at this time, CNH anticipates
that these costs are likely to increase as environmental requirements become
more stringent. CNH believes that these capital costs, exclusive of
product-related costs, will not have a material adverse effect on CNH's
financial position or results of operations.
Pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, or CERCLA, and other federal and state laws that impose similar
liabilities, Case, a wholly owned subsidiary of CNH, has received inquiries for
information or notices of its potential liability regarding 38 non-owned sites
to which Case allegedly sent hazardous substances for disposal ("Waste Sites").
Sixteen of the Waste Sites are on the National Priority List promulgated
pursuant to CERCLA. At 34 of the Waste Sites, the monetary amount or extent of
Case's liability has been resolved, Case has not been named as a potentially
responsible party ("PRP"), or Case's liability is likely de minimis in
comparison with other PRPs. As of December 31, 1999, reserves of approximately
$3 million had been established to address the potential liability at the 38
Waste Sites, of which approximately $1 million specifically relates to the
aforementioned 34 Waste Sites. Because estimates of remediation costs are
subject to revision as more information becomes available about the extent and
cost of remediation and because settlement agreements can be reopened under
certain circumstances, Case's potential liability for remediation costs
associated with the 38 Waste Sites could change. Moreover, because liability
under CERCLA and similar laws can be joint and several, Case could be required
to pay amounts in excess of its pro rata share of remediation costs. However,
when appropriate, CNH's understanding of the financial strength of other PRPs
has been considered in the determination of Case's potential liability. Under
the indemnification provisions of the 1991 merger with Ford Motor Company, Ford
has retained financial responsibility for Waste Sites associated with its former
operations that are now owned by New Holland, CNH's predecessor. CNH believes
that the costs associated with the Waste Sites will not have a material adverse
effect on CNH's financial position or results of operations.
CNH has conducted environmental investigatory or remedial activities at
certain properties that are currently or were formerly owned and/or operated or
which are being decommissioned. CNH believes that the outcome of these
activities will not have a material adverse effect on CNH's financial position
or results of operations. The preceding sentence is a forward-looking statement,
and the actual costs could differ materially from those costs currently
anticipated due to the nature of the historical disposal and release activities
typical of manufacturing and related operations that have occurred in the United
States and other countries, and as a result of laws which now and in the future
may impose liability for previously lawful disposal and release activities. As
it has in the past, CNH intends to fund its costs of environmental compliance
from operating cash flows.
SEASONALITY AND PRODUCTION SCHEDULES
Seasonal demand for agricultural equipment varies by region and product,
primarily due to differing climates and farming calendars. Seasonal demand
fluctuations for construction equipment are somewhat less significant than for
farm equipment. Sales to independent dealers closely correspond with production
levels,
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<PAGE> 16
which are based upon CNH's estimates of demand. Also see Item 9, "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
COMPETITION
The agricultural equipment industry is highly competitive, particularly in
North America, Europe and Latin America. CNH competes primarily with large
global full-line suppliers, including Deere & Company and AGCO; manufacturers
focused on particular industry segments, including Caterpillar Inc., Kubota
Corporation and various implement manufacturers; regional manufacturers in
mature markets, including Class KGa and SAME Duetz-Fahr Group, that are
expanding worldwide to build a global presence; and local, low cost
manufacturers in individual markets, particularly in emerging markets such as
Eastern Europe, India and China.
The construction equipment industry is highly competitive, particularly in
Western Europe, North America, South America and the Asia Pacific region. CNH
competes primarily with two large full-line suppliers, Caterpillar and Komatsu
Construction Equipment, that together account for approximately 40% of the world
industry; product specialists operating on a global basis, including Kobelco
Construction Equipment, Ingersoll-Rand Company and Hitachi, Ltd.; and local and
multi-regional manufacturers such as Volvo Construction Equipment Corporation,
Deere and J.C. Bamford Excavators Ltd., or JCB.
CNH believes that the combination of New Holland and Case agricultural and
construction equipment will allow it to compete strongly against Deere,
Caterpillar and others in the agricultural equipment market and against
Caterpillar, Komatsu, Volvo and others in the construction equipment market.
CNH believes that multiple factors influence a buyer's choice of equipment.
These factors include product performance, availability of a full product range,
the strength and quality of a company's dealers, the quality and pricing of
products, brand loyalty, technological innovations, product availability,
financing terms, parts and warranty programs, resale value, customer service and
satisfaction and timely delivery. CNH continually seeks to improve in each of
these areas but focuses primarily on providing high-quality and high-value
products and supporting those products through its dealer network. In both the
agricultural and construction equipment industries, buyers tend to favor brands
based on past experience with the product and the dealer. Customers' perceptions
of value in terms of product productivity, reliability, resale value and dealer
support are formed over many years.
The financial services industry is highly competitive. CNH competes
primarily with banks, finance companies and other financial institutions.
Typically, this competition is based upon customer service and finance rates
charged.
SERVICE AND WARRANTY
CNH products are warranted to the end-user to ensure end-user confidence in
design, workmanship and material quality. Warranty lengths vary depending on
competitive standards established within individual markets. In general,
warranties tend to be for one to three years, with some as short as six months,
and cover all parts and labor for non-maintenance repairs and wear items,
provided operator abuse, improper use or negligence did not necessitate the
repair. Authorized CNH dealers and distributors must perform warranty work.
Warranty on some products is limited by hours of use, and purchased warranty is
available on most products. Dealers submit claims for warranty reimbursement to
CNH and are credited for the cost of repairs if the repairs meet CNH's
prescribed standards. Warranty expense is accrued at the time of sale, and
purchased warranty revenue is deferred and amortized over the life of the
warranty contract.
CNH distributors and dealers provide service support outside of the
warranty period. Service personnel are trained in one of several CNH training
facilities around the world or on location at the dealership by CNH service
engineers or service training specialists.
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<PAGE> 17
ITEM 2. DESCRIPTION OF PROPERTY.
The following table provides information about each of CNH's principal
manufacturing, engineering and administrative facilities:
<TABLE>
<CAPTION>
APPROXIMATE OWNERSHIP
LOCATION PRIMARY FUNCTIONS COVERED AREA * STATUS
-------- ----------------- -------------- ------------
<S> <C> <C> <C>
UNITED STATES
Belleville, PA................. Skid Steer Loaders; Manure Spreaders 540 Owned
Benson, MN..................... Agricultural Sprayers 219 Owned
Burlington, IA................. Loader/Backhoes; Crawler/Dozers; Fork 989 Owned
Lift Trucks
Nevada, IA..................... Marketing and Training Center 76 Owned
Burr Ridge, IL................. Technology (Engineering) Center 549 Owned
Dublin, GA..................... Compact Tractors 60 Leased
East Moline, IL................ Combine Harvesters; Cotton Pickers; 2,375 Owned
Grain Heads
Lincolnshire, IL............... Administrative Facilities 13 Leased
Fargo, ND...................... Tractors, Wheel Loaders 531 Owned
Fargo, ND...................... Planters/Seeders 146 Leased
Goodfield, IL.................. Soil Management (Tillage) 233 Owned
Grand Island, NE............... Combine Harvesters; Hay & Forage 680 Owned
New Holland, PA................ Administrative Facilities; Hay & 1,190 Owned
Forage; Engineering Center
Racine, WI..................... Tractors; Transmissions; Foundry 2,834 Owned
Racine, WI..................... Principal Administrative Facilities 400 Owned/Leased
Wichita, KS.................... Skid Steer Loaders; Directional 455 Owned
Drills; Trenchers
ITALY
Breganze(1).................... Combine Harvesters; Hay & Forage; 660 Owned
Engineering Center
Imola.......................... Loader/Backhoes; Engineering Center 384 Owned
Jesi........................... Tractors 710 Owned
Lecce.......................... Construction Equipment; Engineering 1,550 Owned
Center
Modena......................... Components; Engineering Center 1,150 Owned
San Matteo..................... Research and Development 540 Owned
San Mauro...................... Construction Equipment; Engineering 590 Owned
Center
FRANCE
Coex........................... Grape Harvesters; Engineering Center 280 Owned
Crepy-En-Valois................ Excavators; Loader/Backhoes 676 Owned
Croix.......................... Cabs 466 Owned
St. Dizier..................... Transmissions 234 Owned
Tracy-Le-Mont.................. Hydraulic Cylinders 204 Owned
Villepinte..................... Administrative Facilities 55 Leased
UNITED KINGDOM
Brentford...................... Administrative Facilities 50 Leased
Basildon....................... Tractors; Components; Engineering 1,390 Owned
Center
Doncaster(1)/Carr Hill......... Tractors; Gears; Shafts 1,074 Owned
Lincoln........................ Agricultural Sprayers 24 Owned
Manchester(1).................. Skid Steer Loaders; Excavators 529 Owned
</TABLE>
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<PAGE> 18
<TABLE>
<CAPTION>
APPROXIMATE OWNERSHIP
LOCATION PRIMARY FUNCTIONS COVERED AREA * STATUS
-------- ----------------- -------------- ------------
<S> <C> <C> <C>
GERMANY
Berlin......................... Construction Equipment 1,113 Leased
Dortmund....................... Administrative Facilities; Test and 348 Leased
Parts Centers
Hattingen...................... Components 535 Owned
Heidelberg..................... Administrative and Warehouse 162 Owned
Facilities
Kissing........................ Cylinders 142 Leased
Neustadt....................... Forage and Combine Harvesters; Square 515 Owned
Balers
BRAZIL
Curitiba....................... Tractors; Combine Harvesters; 760 Owned
Engineering Center
Belo Horizonte................. Construction Equipment; Engineering 510 Owned
Center
Piracicaba..................... Sugar Cane Harvesters 108 Owned
Sorocaba....................... Wheel Loaders; Loader/Backhoes; 525 Owned
Excavators
CANADA
Saskatoon...................... Air-Seeding Equipment 750 Owned
Winnipeg(1).................... Tractors; Engineering Center 750 Owned
BELGIUM
Antwerp........................ Components 850 Leased
Zedelgem....................... Combine Harvesters; Hay & Forage; 1,590 Owned
Tractor Loaders; Engineering Center
MEXICO
Leon........................... Tractor Assembly 24 Owned
Mexico City.................... Administrative Facilities 9 Owned
OTHERS
Buenos Aires, Argentina........ Administrative Facilities 10 Leased
Bundaberg, Australia........... Sugar Cane Harvesters 206 Owned
St. Valentin, Austria.......... Tractors 398 Leased
New Delhi, India............... Tractors; Engineering Center 360 Owned
Plock, Poland.................. Combine Harvesters 1,020 Owned
</TABLE>
- ------------
* in thousands of square feet
(1) Facilities to be divested pursuant to the merger to comply with European and
U.S. regulatory authorities.
In addition, CNH owns or leases a number of other non-manufacturing
facilities, including office facilities, parts depots and dealerships,
worldwide. For information on operating lease commitments, see Note 17 to the
CNH Financial Statements included in Item 18 of this report.
As a result of the merger, management believes it has excess capacity in
certain of its product lines when compared with current market demand. CNH
management is assessing and formulating a plan to integrate the operations of
the Case and New Holland businesses and to address overall combined
manufacturing capacity. This preliminary plan includes the divestiture or
closure of approximately 20 percent of CNH's manufacturing locations. In 1999,
as a result of the continued industry-wide downturn in the agricultural
equipment market, CNH produced below forecasted demand in order to maintain
inventories at appropriate levels, resulting in temporary excess capacity in
some of its agricultural equipment manufacturing facilities until market
conditions improve. CNH believes that it has sufficient capacity to meet its
current construction equipment market demand.
CNH considers each of its facilities currently in use to be in good
operating condition and adequate for its present use. CNH also owns other
facilities that are currently idle and available for sale.
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<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS.
For information pertaining to legal proceedings, see Note 17 to the CNH
Financial Statements included in Item 18 of this report, which is incorporated
by reference herein.
ITEM 4. CONTROL OF REGISTRANT.
CNH's capital stock consists of common shares, par value Euro 0.45. As of
February 29, 2000, there were 149,660,000 common shares outstanding.
CNH is controlled by its largest single shareholder, New Holland Holdings,
a wholly owned subsidiary of Fiat. As of February 29, 2000, New Holland Holdings
owned 106,411,400 common shares, representing approximately 71.1% of CNH's
outstanding common shares as of such date. As a result, Fiat controls all
matters submitted to a vote of CNH's shareholders, including approval of annual
dividends, election and removal of its directors and approval of extraordinary
business combinations. As of February 29, 2000, the directors and executive
officers of CNH as a group owned 686,646 common shares.
Prior to the merger, New Holland relied on Fiat to provide guarantees of
its external debt financing requirements and to maintain supportive financial
arrangements. CNH continues to rely on Fiat to provide similar guarantees in
connection with some of its external financing needs, including the short-term
credit facilities that CNH used to finance the merger. Fiat has stated that it
intends to continue the guarantee for as long as it maintains control of CNH
and, in any event, at least until December 31, 2003. After that time, Fiat has
committed that it will not terminate CNH's access to these financing
arrangements without affording CNH an opportunity to develop suitable
substitutes. The terms of any alternative sources of financing may not be as
favorable as those provided or facilitated by Fiat.
CNH purchases some of its engines and other components from the Fiat Group,
and companies of the Fiat Group provide CNH administrative services such as
accounting, cash management and legal services. In addition, CNH may from time
to time enter into hedging arrangements with counterparties that are members of
the Fiat Group. If these goods or services or financing arrangements were not
available from Fiat, CNH would have to obtain them from other sources. CNH can
offer no assurance that such alternative sources would provide goods and
services on terms as favorable as those offered by Fiat.
Also see Item 13, "Interest of Management in Certain Transactions," and
Note 21 to the CNH Financial Statements included in Item 18 of this report.
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<PAGE> 20
ITEM 5. NATURE OF TRADING MARKET.
The outstanding common shares of CNH are listed on the New York Stock
Exchange under the symbol "CNH." Prior to the merger, the common shares were
listed on the New York Stock Exchange under the symbol "NH."
The following table sets forth the high and low closing prices per share of
CNH common shares on the New York Stock Exchange Composite Transactions Tape
during the periods indicated:
<TABLE>
<CAPTION>
CLOSING PRICES
---------------
HIGH LOW
------ ------
<S> <C> <C> <C>
1999
1st quarter.......................................... $13.75 $ 8.75
2nd quarter.......................................... 18.00 10.31
3rd quarter.......................................... 17.19 13.94
4th quarter.......................................... 15.69 11.38
1998
1st quarter.......................................... $28.31 $23.50
2nd quarter.......................................... 27.31 19.19
3rd quarter.......................................... 20.19 9.75
4th quarter.......................................... 14.50 10.81
</TABLE>
At the end of trading on February 29, 2000, CNH's common share closing
price was $11.06 and 149,660,000 common shares were outstanding. Accordingly, at
such date, CNH's total market capitalization, including those shares held by the
Fiat Group, was approximately $1,655 million.
As of February 29, 2000, 43,038,053 of the common shares were held of
record in the United States by 985 holders and represented, in the aggregate,
approximately 29% of the number of common shares outstanding. Since certain of
the common shares are held by brokers or other nominees, the number of direct
record holders in the United States may not be fully indicative of the number of
direct beneficial owners in the United States or of where the direct beneficial
owners of such shares are resident.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
No exchange consent is required in The Netherlands for the transfer to
persons outside of The Netherlands of dividends or other distributions with
respect to, or of the proceeds from the sale of, shares of a Dutch company.
ITEM 7. TAXATION.
UNITED STATES TAXATION
The following discussion contains a description of the principal U.S.
federal income tax consequences of the purchase, ownership and disposition of
CNH's common shares or shares, by a holder that is a citizen or resident of the
United States or a U.S. domestic corporation or that otherwise will be subject
to U.S. federal income tax on a net income basis in respect of the shares. The
discussion is based on laws, regulations, rulings and decisions now in effect,
all of which are subject to change, including changes made on a retroactive
basis. It is not a full description of all tax considerations that may be
relevant to ownership of shares or a decision to purchase shares. In particular,
the discussion is directed only to U.S. holders that will hold shares as capital
assets and whose functional currency is the U.S. dollar. The discussion does not
address the tax treatment of holders that are subject to special tax rules such
as banks, security dealers, dealers in currencies, securities traders who elect
to account for their investment in shares on a mark-to-market basis, persons
that hold shares as a position in a straddle or conversion transaction,
insurance companies, tax-exempt entities and holders of ten percent or more of
the voting shares of CNH.
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Prospective purchasers and current holders of shares are advised to consult
their own tax advisors about the U.S., Netherlands, or other tax consequences to
them of the purchase, beneficial ownership and disposition of shares including,
in particular, the effect of any state, local or national tax laws.
Taxation of Dividends
The gross amount of cash dividends paid in respect of the shares (including
amounts withheld in respect of Dutch taxes) generally will be included in the
gross income of a U.S. holder as ordinary income on the day on which the
dividends are actually or constructively received by the U.S. holder, and will
not be eligible for the dividends-received deduction allowed to corporations.
Subject to generally applicable limitations and the discussion below, any
Dutch withholding tax imposed on dividends will be treated as a foreign income
tax eligible for credit against a U.S. holder's U.S. federal income tax
liability (or, at a U.S. holder's election, may be deducted in computing taxable
income). Dividends generally will constitute foreign-source "passive income" or,
in the case of certain holders, "financial services income," for U.S. foreign
tax credit purposes. Under rules enacted by Congress in 1997 and other guidance
issued by the U.S. Treasury, foreign tax credits will not be allowed for
withholding taxes imposed in respect of certain short-term or hedged positions
in securities or in respect of arrangements in which a U.S. holder's expected
economic profit, after non-U.S. taxes, is insubstantial. U.S. holders should
consult their own tax advisors concerning the implications of these rules in
light of their particular circumstances.
CNH generally will fund dividend distributions on the shares with dividends
received from its non-Dutch subsidiaries. Assuming that certain conditions are
met, CNH would be entitled to a reduction in the amount payable to the Dutch tax
authorities in respect of withholding taxes equal to 3% of the lesser of gross
dividends it receives from its non-Dutch subsidiaries or dividends, net of
withholding tax, it pays to its shareholders. There is a risk that such a credit
constitutes a partial subsidy in respect of, or reduction of, the Dutch
withholding tax payable on CNH's dividends and that, therefore, a U.S. holder
would not be entitled to a foreign tax credit with respect to the amount of the
credit so allowed to CNH.
Taxation of Capital Gains
Gain or loss realized by a U.S. holder on the sale or other disposition of
shares will be subject to U.S. federal income taxation as capital gain or loss.
Such gain or loss will be a long-term capital gain or loss if the shares were
held for more than one year. Long-term capital gain realized by a U.S. holder
that is an individual generally is subject to a maximum rate of 20%, although a
lesser rate may be applicable based upon the tax stature of the holder and the
length of the holding period of the shares. Gain realized by a U.S. holder on a
sale or other disposition of shares generally will be treated as U.S.-source
income for U.S. foreign tax credit purposes.
Backup Withholding Tax
Distributions made on shares and proceeds from the sale of shares to or
through certain brokers may be subject to a "backup" withholding tax unless, in
general, the U.S. holder complies with certain procedures or is a corporation or
other person exempt from such withholding. Any amounts withheld from
distributions on the shares would be refunded by the Internal Revenue Service or
allowed as a credit against the federal income tax of the U.S. shareholders.
NETHERLANDS TAXATION
The following summary of Dutch tax considerations is limited to the tax
implications for an owner of shares who owns less than 10% of the voting power
of CNH.
Withholding Tax
Dividends distributed by CNH generally are subject to a withholding tax
imposed by The Netherlands at a rate of 25%. The expression "dividends
distributed by CNH" as used herein includes, but is not limited to:
(1) distributions in cash or in kind, deemed and constructive distributions
and repayments of paid-in capital not recognized for Netherlands
dividend withholding tax purposes;
21
<PAGE> 22
(2) liquidation proceeds, proceeds of redemption of shares or, as a rule,
consideration for the repurchase of shares by CNH in excess of the
average paid-in capital recognized for Netherlands dividend withholding
tax purposes;
(3) the par value of shares issued to a holder of shares or an increase of
the par value of shares, as the case may be, to the extent that it does
not appear that a contribution, recognized for Netherlands dividend
withholding tax purposes, has been made or will be made; and
(4) partial repayment of paid-in capital, recognized for Netherlands
dividends withholding tax purposes, if and to the extent that there are
net profits ("zuivere winst"), unless the general meeting of
shareholders of CNH has resolved in advance to make such repayment and
provided that the par value of the shares concerned has been reduced by
an equal amount by way of an amendment of the Articles of Association.
If a holder of shares is a resident in a country other than The Netherlands
and if a double taxation convention is in effect between The Netherlands and
such country, such holder of shares may, depending on the terms of such double
taxation convention, be eligible for a full or partial exemption from, or refund
of, Netherlands dividend withholding tax.
Under the treaty in effect between The Netherlands and the United States
(the "U.S./NL Income Tax Treaty"), dividends paid by CNH to a resident of the
United States (other than an exempt organization or exempt pension organization)
are generally eligible for a reduction of the 25% Netherlands withholding tax to
15%, unless the shares held by such resident are attributable to an enterprise
or part of an enterprise that is, in whole or in part, carried on though a
permanent establishment or a permanent representative in The Netherlands. The
U.S./NL Income Tax Treaty provides for a complete exemption for dividends
received by exempt pension organizations and exempt organizations, as defined
therein. Except in the case of exempt organizations, the reduced dividend
withholding rate can be applied at source upon payment of the dividends,
provided that the proper forms have been filed in advance of the payment. A
holder of shares other than an individual will not be eligible for the benefits
of the U.S./NL Income Tax Treaty if such holder of shares does not satisfy one
or more of the tests set forth in the limitations on benefits provisions of
Article 26 of such Treaty.
A holder of shares (other than an exempt organization) generally may claim
the benefits of a reduced withholding tax rate or an exemption from withholding
tax pursuant to the U.S./NL Income Tax Treaty by submitting a duly signed Form
IB 92 USA, which form includes a banker's affidavit stating that the shares are
in the bank's custody in the name of the applicant, or that the shares have been
exhibited to the bank as being the property of the applicant. If the Form IB 92
USA is submitted prior to the dividend payment date, CNH can apply the reduced
withholding tax rate to the dividend payment. A shareholder unable to claim
withholding tax relief in this manner can obtain a refund of excess tax withheld
by filing a Form IB 92 USA and describing the circumstances that prevented
claiming withholding tax relief at the source.
Qualifying U.S. exempt organizations must seek a full refund of the tax
withheld by using the Form IB 95 USA, which form also includes a banker's
affidavit.
Taxes on Income and Capital Gains
A holder of shares will not be subject to any Netherlands taxes on income
or capital gains in respect of dividends distributed by CNH or in respect of any
gain realized on the disposal of shares (other than the withholding tax
described above), provided that:
(1) such holder is neither resident nor deemed to be resident in The
Netherlands;
(2) such holder does not have an enterprise or an interest in an enterprise
that is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to
which enterprise or part of an enterprise, as the case may be, the
shares are attributable; and
22
<PAGE> 23
(3) such holder does not have a substantial interest or a deemed
substantial interest in CNH or, if such holder does have such an
interest, it forms part of the assets of an enterprise.
Generally, a holder of shares will not have a substantial interest if he,
his spouse, certain other relatives (including foster children) or certain
persons sharing his household, do not hold, alone or together, whether directly
or indirectly, the ownership of, or certain other rights over, shares
representing 5% or more of the total issued and outstanding capital (or the
issued and outstanding capital of any class of shares) of CNH, or rights to
acquire shares, whether or not already issued, that represent at any time (and
from time to time) 5% or more of the total issued and outstanding capital (or
the issued and outstanding capital of any class of shares) of CNH or the
ownership of certain profit participating certificates that relate to 5% or more
of the annual profit of CNH and/or to 5% or more of the liquidation proceeds of
CNH. A deemed substantial interest is present if (part of) a substantial
interest has been disposed of, or is deemed to have been disposed of, on a
non-recognition basis.
Net Wealth Tax
A holder of shares will not be subject to Netherlands net wealth tax in
respect of the shares, provided that such holder is not an individual or, if he
is an individual, provided that the conditions mentioned under paragraphs (1)
and (2) of the section "Taxes on Income and Capital Gains" above are met.
Gift, Estate and Inheritance Taxes
No gift, estate or inheritance taxes will arise in The Netherlands with
respect to an acquisition of shares by way of a gift by, or on the death of, a
holder of shares who is neither resident nor deemed to be resident in The
Netherlands unless:
(1) such holder at the time of the gift has, or at the time of his death
had, an enterprise or an interest in an enterprise that is or was, in
whole or in part, carried on through a permanent establishment or a
permanent representative in The Netherlands and to which enterprise or
part of an enterprise, as the case may be, the shares are or were
attributable; or
(2) in the case of a gift of shares by an individual who at the time of the
gift was neither resident nor deemed to be resident in The Netherlands,
such individual dies within 180 days after the date of the gift, while
being resident or deemed to be resident in The Netherlands.
For purposes of Netherlands gift, estate and inheritance tax, an individual
who holds The Netherlands nationality will be deemed to be resident in The
Netherlands if he has been resident in The Netherlands at any time during the
ten years preceding the date of the gift or his death.
For purposes of Netherlands gift tax, an individual not holding The
Netherlands nationality will be deemed to be resident in The Netherlands if he
has been resident in The Netherlands at any time during the twelve months
preceding the date of the gift.
Capital Tax Payable by CNH
Netherlands capital tax will be payable by CNH at the rate of 0.9% of any
contribution made in respect of the shares.
Other Taxes and Duties
No Netherlands registration tax, transfer tax, stamp duty or any other
similar documentary tax or duty will be payable in The Netherlands in respect of
or in connection with the subscription, issue, placement, allotment or delivery
of the shares.
23
<PAGE> 24
ITEM 8. SELECTED FINANCIAL DATA.
The financial data set forth below at December 31, 1999 and 1998, and for
each of the years in the three-year period ended December 31, 1999, have been
derived from the audited consolidated financial statements of CNH included in
Item 18 of this report. Financial data at December 31, 1997, 1996 and 1995, and
for each of the years in the two-year period ended December 31, 1996, have been
derived from CNH's published financial statements not included herein.
The financial data at December 31, 1999 and 1998, and for each of the years
in the three-year period ended December 31, 1999, should be read in conjunction
with Item 9, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and are qualified in their entirety by reference to the
audited consolidated financial statements and notes thereto included in Item 18
of this report. CNH has presented the selected historical financial data as of
and for each of the five years ended December 31, 1999, in accordance with U.S.
GAAP, and certain reclassifications have been made to conform the historical
financial statements to the 1999 presentation.
CNH acquired Case on November 12, 1999. The accompanying selected financial
data reflects the historical operating results of CNH, including the results of
operations of Case since November 12, 1999. On December 22, 1998, CNH acquired
75.0001% of O&K Orenstein & Koppel Aktiengesellschaft ("O&K"), and the
accompanying selected financial data reflects the results of operations and the
net assets of O&K since January 1, 1999, and December 22, 1998, respectively. In
January 1997, CNH completed the acquisition of the remaining 51% ownership
interests in two North American credit companies. These acquisitions affect the
comparability of the respective prior-year data. For information on the pro
forma impact of the 1999 acquisition of Case, see Note 3 to the CNH Financial
Statements included in Item 18 of this report.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
--------- -------- -------- -------- --------
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Net sales............................................ $ 5,949 $5,474 $5,798 $5,474 $5,003
Interest income and other............................ 324 223 193 58 38
------- ------ ------ ------ ------
Total revenues..................................... $ 6,273 $5,697 $5,991 $5,532 $5,041
======= ====== ====== ====== ======
Net income........................................... $ 148 $ 258 $ 388 $ 250 $ 221
======= ====== ====== ====== ======
Earnings per Share:
Basic........................................... $ 0.99 $ 1.73 $ 2.60 $ 1.68 $ 1.48
Diluted......................................... $ 0.97 $ 1.73 $ 2.60 $ 1.68 $ 1.48
Cash dividends declared per common share............. $ 0.55 $ 0.55 $ 0.55 $ -- $ 0.84
BALANCE SHEET DATA (AT THE END OF YEAR):
Total assets......................................... $17,678 $7,296 $6,330 $5,111 $4,558
Long-term debt, including current maturities......... $ 4,558 $1,011 $ 651 $ 72 $ 89
Shareholders' equity................................. $ 1,710 $1,784 $1,621 $1,374 $1,077
</TABLE>
24
<PAGE> 25
DIVIDENDS
In each of the years ended December 31, 1999, 1998 and 1997, CNH
distributed cash dividends of $82 million, or $0.55 per share. In 1995, CNH
declared and paid a single, extraordinary cash dividend of $125 million, or
$0.84 per share, with respect to the 1995 fiscal year. CNH did not declare a
cash dividend for the year ended December 31, 1996.
The declaration and payment of dividends are at the discretion of the Board
of Directors and must be ratified at the annual general meeting of CNH's
shareholders. CNH's ability to pay cash dividends will depend upon many factors
including CNH's competitive position, financial condition, earnings and capital
requirements. As a holding company, CNH is dependent on dividends or other
advances from its subsidiaries to fund future cash dividends. In addition, the
ability of CNH and its principal operating subsidiaries to pay dividends is
subject to statutory limitations applicable in their respective jurisdictions
that primarily relate to the required allocation of a nominal percentage of
earnings to the establishment and maintenance of statutory reserves. As a
result, the ability of these subsidiaries to pay dividends may be limited.
Accordingly, there is no requirement or assurance that dividends will be
declared or paid.
Dividends from several of CNH's subsidiaries, including its U.S.
subsidiaries, are subject to withholding taxes that will reduce the amount of
such dividends available to CNH. Dividends payable by CNH are subject to Dutch
withholding tax at the current rate of 25%. The withholding tax on dividends
paid to shareholders that are not residents of The Netherlands may be reduced by
virtue of an applicable income tax convention in effect between The Netherlands
and the country of residence of the recipient of the dividends. See Item 7,
"Taxation -- Netherlands Taxation."
25
<PAGE> 26
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CNH is a leader in the agricultural equipment, construction equipment and
financial services industries. CNH is the largest manufacturer of agricultural
equipment in the world, the third largest manufacturer of construction equipment
and has one of the world's largest equipment finance companies.
CNH combines the operations of New Holland N.V. and Case, a leading
worldwide designer, manufacturer, marketer and distributor of farm equipment and
light- to medium-sized construction equipment, as a result of their business
merger ("the merger") on November 12, 1999 ("the merger date"). Effective with
the closing of the merger, New Holland N.V. changed its name to CNH Global N.V.
Unless otherwise noted, the financial data disclosed in this Item 9 reflects the
historical operating results of CNH, including the results of operations of Case
since the merger date.
New Holland historically prepared its financial statements in accordance
with International Accounting Standards or IAS. CNH has prepared its financial
statements, including the financial data disclosed in this Item 9, in accordance
with generally accepted accounting principles in the United States or U.S. GAAP,
and certain reclassifications have been made to conform the historical financial
statements to the CNH presentation. The impact of acquisitions, particularly the
impact of the merger and the December 1998 acquisition of O&K Orenstein & Koppel
Aktiengesellschaft, has affected the comparability of the respective prior-year
data. For information on the pro forma impact of the 1999 acquisition of Case,
see Note 3 to the CNH Financial Statements included in Item 18 of this report.
As used in this Item 9, CNH's agricultural and construction equipment
businesses are collectively referred to as CNH's "Equipment Operations." CNH's
financial services businesses are collectively referred to as "Financial
Services." As used herein, "New Holland" or "Case" refers to (1) the pre-merger
business and/or operating results of either New Holland or Case on a stand-alone
basis, or (2) the CNH multi-branding strategy that supports the continued use of
the New Holland and Case product brands. Unless otherwise indicated, all
financial data set forth in this Item 9 is expressed in U.S. dollars.
Acquisitions and Investments
Case
New Holland acquired Case on November 12, 1999, for approximately $4.6
billion in cash, including related costs and expenses. CNH accounted for this
acquisition as a purchase and, accordingly, the purchase price was allocated to
the assets and liabilities of Case based upon their respective estimated fair
values, including identifiable intangibles, with the remainder allocated to
goodwill. The allocation of purchase price resulted in goodwill of approximately
$2.4 billion. Goodwill allocated to Case's equipment operations of approximately
$2.3 billion is being amortized on a straight-line basis over 30 years, and
goodwill of approximately $129 million allocated to Case's financial services
business is being amortized on a straight-line basis over 20 years.
Sales of Case agricultural and construction equipment products for the
post-merger period (November 12, 1999 -- December 31, 1999) were approximately
$620 million. In 1999, Case had full-year revenues of $5.1 billion, including
$4.6 billion for sales of its farm and construction equipment and approximately
$500 million in revenues from its financial services operations.
O&K
On December 22, 1998, CNH acquired 75.0001% of the outstanding shares of
O&K, a German manufacturer of hydraulic excavators and other construction
equipment, for a purchase price of $15 million. The acquisition of O&K has
enabled CNH to increase its penetration in the global excavator market and to
expand its participation in a number of regions around the world. In 1999, CNH
entered into a domination agreement with O&K that permits CNH to fully integrate
O&K into its operations and allows CNH to offer to purchase outstanding shares
of O&K from minority shareholders. As of December 31, 1999, CNH owned
approximately 90% of O&K.
26
<PAGE> 27
CNH did not record the results of operations of O&K in its operating
results until January 1, 1999, as the results of operations from the date of
acquisition to December 31, 1998, were not significant. O&K recorded full-year
revenues related to the construction equipment products acquired by CNH of
approximately $450 million (unaudited) in 1998.
Other
On December 23, 1998, CNH acquired all the voting shares of its
agricultural equipment distributor in Argentina, Inchcape Argentina S.A.,
including its wholly owned subsidiary, Agrotecnia S.A., at a cost of
approximately $11 million. The acquisition has enabled CNH to achieve a higher
level of integration across its Mercosur operations, including product design,
manufacture, sales and service.
On September 30, 1998, CNH acquired an additional 4% of the voting shares
of Flexi-Coil Ltd., a Canadian manufacturing company, at a cost of approximately
$6 million. On September 30, 1997, CNH acquired an initial 35% interest in
Flexi-Coil for approximately $55 million. These investments were accounted for
as purchases, and the allocation of the combined purchase price resulted in
goodwill of approximately $57 million. In January 2000, CNH completed the
acquisition of the remaining ownership interests in Flexi-Coil.
On July 29, 1998, CNH acquired 90.87% of the voting shares of Bizon
Sp.zo.o., a Polish manufacturer of combine harvesters, for approximately $33
million. This acquisition was accounted for as a purchase and, accordingly, the
excess of the purchase price over the estimated fair market value of the net
assets acquired resulted in goodwill of approximately $18 million. This
acquisition has enabled CNH to establish a foothold in the Polish combine
harvester market and has enhanced CNH's expansion in many emerging markets. In
March 1999, CNH completed the acquisition of the remaining ownership interests
in Bizon.
On June 22nd and July 2nd of 1998, CNH acquired 37.3% and 0.9%,
respectively, of the shares in Al-Ghazi Tractors Limited, a tractor
manufacturing joint venture operation in Pakistan, at a total cost of
approximately $12 million. The investment was accounted for as a purchase, and
the excess of the purchase price over the fair market value of the net assets
acquired resulted in goodwill of approximately $6 million.
On June 4, 1998, CNH increased its stake in Turk Traktor Ve Ziraat
Makineleri A.S. ("Turk Traktor"), CNH's manufacturing joint venture with the Koc
Group in Turkey, from 25.0% to 37.5%. CNH also acquired 37.5% of Trakmak Traktor
Ve Ziraat Makineleri Ticaret A.S. ("Trakmak Traktor"), a leading Turkish
distributor of agricultural equipment. The combined cost of these investments
was approximately $51 million. These acquisitions were accounted for using the
purchase method of accounting and, accordingly, the excess of the purchase price
over the estimated fair market value of the net assets acquired resulted in
goodwill of approximately $24 million.
In January 1997, CNH completed the acquisition of the remaining 51%
ownership interests in the U.S. and Canadian credit companies that were
previously owned by a former parent company of CNH. As a result of the
acquisition, the U.S. and Canadian credit companies became wholly owned
subsidiaries of CNH effective January 1, 1997. In addition to a cash payment of
approximately $50 million, CNH assumed approximately $1.3 billion of funding
that the former parent company had previously advanced to the credit companies.
This acquisition was accounted for as a purchase, and the allocation of the
purchase price resulted in goodwill of approximately $30 million.
27
<PAGE> 28
CNH reported incremental net sales of approximately $1,070 million in 1999
related to its acquisition activities. The sales impact of CNH's acquisition
activities in 1997 and 1998 was not material. Also see Note 3 to the CNH
Financial Statements included in Item 18 of this report.
SUMMARY OF REVENUES
CNH's revenues were derived from the following sources (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Revenues:
Net sales
Agricultural equipment....................... $3,904 $4,151 $4,576
Construction equipment....................... 2,045 1,323 1,222
------ ------ ------
Total net sales............................ 5,949 5,474 5,798
Financial services.............................. 412 361 317
Eliminations and other.......................... (88) (138) (124)
------ ------ ------
Total revenues............................... $6,273 $5,697 $5,991
====== ====== ======
</TABLE>
CNH's revenues are derived from the manufacture and distribution of a full
line of farm and construction equipment and from the financing of a broad array
of financial services products for its retail and wholesale customers. CNH's
revenues are affected by worldwide agricultural production and demand, housing
starts and other construction levels, commodity prices, government subsidies,
weather, interest and exchange rates, industry capacity and equipment levels.
Net sales of CNH products were made into the following geographic regions
(in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Net sales
Western Europe.................................. $2,918 $2,334 $2,290
North America................................... 2,076 2,107 2,278
Latin America................................... 386 528 506
Rest of World................................... 569 505 724
------ ------ ------
Total net sales.............................. $5,949 $5,474 $5,798
====== ====== ======
</TABLE>
1999 COMPARED TO 1998
Worldwide revenues were $6,273 million in 1999 versus $5,697 million in
1998. Net sales of farm and construction equipment were $5,949 million in 1999,
up 9% from $5,474 million in 1998. The year-over-year improvement in net sales
was attributable to a 20% increase from acquisitions, largely driven by the Case
and O&K acquisitions, partially offset by a 7% decrease in base volumes and a 4%
deterioration from the impact of foreign exchange. In 1999, sales of CNH
agricultural equipment continued at depressed levels, primarily reflecting
ongoing market weakness as a result of low global prices for agricultural
commodities. Sales of CNH agricultural equipment in 1999 were down 6% from
prior-year levels to $3,904 million, largely due to low commodity prices and
excess farm products inventory. The impact of the slowdown was most significant
in North America, where demand for high-horsepower agricultural tractors was
considerably lower than the previous year. Sales of CNH construction equipment
were up 55% over 1998 levels to $2,045 million, driven by the impact of the O&K
and Case acquisitions.
28
<PAGE> 29
Sales in Western Europe were $2,918 million in 1999 versus $2,334 million
in 1998. This 25%, year-over-year increase primarily reflects higher sales of
CNH construction equipment, largely due to the full-year impact of the O&K
acquisition. Total sales of CNH agricultural equipment in Western Europe
remained unchanged from prior-year levels, as lower year-over-year sales of New
Holland brand tractors and combines were offset by incremental sales from the
fourth quarter acquisition of Case. In North America, sales of CNH agricultural
and construction equipment were $2,076 million in 1999, down slightly from
$2,107 million in 1998. Incremental sales from the Case acquisition partially
offset a significant decline in year-over-year sales of New Holland brand
agricultural equipment as a result of the continued industry downturn. Sales of
CNH construction equipment in North America were up approximately 56%,
reflecting the impact of significant year-over-year increases in most New
Holland brand product categories, as well as the impact of the Case acquisition.
In Latin America, 1999 sales of CNH equipment were $386 million, down 27% from
prior-year levels, largely due to unfavorable market conditions as a result of
the year-over-year devaluation of the Brazilian Real. In the Rest of World
markets, sales of CNH agricultural and construction equipment were $569 million,
up 13% from the $505 million reported in 1998, reflecting strong year-over-year
increases in most product categories.
Revenues for Financial Services increased to $412 million in 1999, up 14%
as compared with $361 million in 1998, largely driven by the impact of New
Holland's first retail asset-backed securitization ("ABS") transaction, the
fourth quarter acquisition of Case and slight growth in new business in Western
Europe, Australia and Brazil. Financial Services' year-over-year revenue growth
was partially offset by the impact of the continuing weakness in the
agricultural equipment market.
Earnings
CNH recorded net income of $148 million in 1999, as compared to net income
of $258 million in 1998. Diluted earnings per share for 1999 was $0.97, as
compared to $1.73 in 1998. In 1999, CNH recorded restructuring charges of $19
million ($14 million after tax) for actions taken in response to lower retail
demand in the global agricultural equipment market. In 1998, CNH recorded a $40
million restructuring charge ($29 million after tax) for employee termination
payments. Excluding the impact of restructuring, 1999 net income was $162
million, with diluted earnings per share of $1.05, and comparable 1998 net
income was $287 million, with diluted earnings per share of $1.92. Basic
earnings per share, before restructuring, was $1.09 in 1999 versus $1.92 in
1998.
In 1999, CNH's Equipment Operations recorded net income, before equity
income of Financial Services, of $76 million, versus comparable net income of
$198 million in 1998. The decrease in earnings primarily resulted from lower
agricultural equipment sales volumes driven by the continued downturn in the
agricultural equipment market. Increased acquisition-related costs, including
increased interest expense, as well as the amortization of fair value purchase
accounting adjustments and goodwill related to the merger, also negatively
impacted CNH's 1999 net income. The impact of these factors was partially offset
by favorable foreign exchange and hedging activities, the inclusion of $21
million for the amortization of negative goodwill related to the O&K acquisition
and lower income tax expense. Throughout 1999, CNH progressively lowered
agricultural equipment production to address declining retail demand. On a
pretax basis, CNH's Equipment Operations recorded income of $166 million, as
compared to $383 million in 1998.
Financial Services recorded net income of $72 million in 1999, as compared
to net income of $60 million in 1998. The year-over-year increase in net income
was primarily due to the gain on sale from the successful completion of CNH's
first retail ABS transaction, increased operating lease income, and increased
finance income earned on retail and other notes and finance leases, including
the impact of the acquisition of Case.
Consolidated interest expense was $266 million in 1999, as compared to $162
million in 1998. This year-over-year increase primarily reflects the impact of
acquisition-related debt and rising interest rates.
The consolidated income tax provision for 1999 was $55 million, as compared
to $148 million in 1998. CNH's 1999 and 1998 effective income tax rates were 27%
and 36%, respectively. These rates differ from the Dutch statutory rate of 35%
primarily due to differences in the geographical mix of profits, losses in
29
<PAGE> 30
jurisdictions for which no immediate tax benefit is recognizable and the
reduction of valuation reserves attributable to the utilization of prior-year
losses.
Business Segment Operating Results
The following is a discussion of CNH's industry segment operating results.
CNH defines operating earnings as the income of CNH's Equipment Operations
before interest, taxes and restructuring charges, including the net income of
Financial Services on an equity basis. Operating earnings for Financial Services
are reported on a net income basis. Also see Note 20 to the CNH Financial
Statements included in Item 18 of this report.
CNH's operating earnings for 1999 were $335 million versus $495 million in
1998. Financial Services recorded net income of $72 million in 1999, as compared
to net income of $60 million in 1998. A reconciliation of CNH's Equipment
Operations' net income to operating earnings is as follows (in millions):
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED
DECEMBER 31,
-------------
1999 1998
----- -----
<S> <C> <C>
EQUIPMENT OPERATIONS
Net income................................................ $148 $258
Income tax provision...................................... 14 118
Interest expense.......................................... 154 79
Restructuring charge...................................... 19 40
---- ----
Operating earnings..................................... $335 $495
==== ====
</TABLE>
Agricultural Equipment
Operating earnings for CNH's worldwide agricultural equipment business
decreased from $316 million in 1998 to $146 million in 1999. The decrease in
operating earnings was driven by the continued weakness in the agricultural
equipment industry. This weakness resulted in lower dealer orders, reflecting
the ongoing decline in the near-term fundamentals in the global agricultural
market. Low commodity prices, driven principally by continued higher than normal
grain inventory levels, adversely affected net farm income. Throughout 1999, CNH
progressively lowered its agricultural equipment production levels to align
production relative to declining retail demand.
Worldwide sales of CNH agricultural equipment in 1999 declined $247 million
or 6% from prior-year levels. Excluding the impact of the Case merger in the
fourth quarter of 1999, year-over-year sales of New Holland brand agricultural
equipment would have declined $591 million or 14% from 1998 levels. On a full
year, pro forma basis after giving effect to the merger, net sales of CNH
agricultural equipment were $6,144 million, down 20% from $7,683 million in
1998.
In addition to the overall volume decline, 1999 operating earnings for
CNH's agricultural equipment business were adversely impacted by variations in
geographic and product line sales mix, including significantly lower sales of
higher margin, large equipment. Worldwide sales of CNH tractors decreased 9%
while worldwide sales of combines decreased 11% from the same period last year.
Sales of CNH hay and forage equipment declined 14% as compared to prior-year
levels. The lower retail demand and resulting decrease in dealer orders were due
to the continued decline in the global agricultural market and the overall
economic uncertainties in several emerging markets. In addition, commodity
prices have dropped substantially year-over-year, affecting large-scale
production agriculture. CNH's 1999 operating earnings also reflect the impact of
higher year-over-year costs for increased research and development expenses and
costs associated with the acquisition of Case, including the amortization of
fair value purchase accounting adjustments and goodwill related to the merger.
These decreases in operating earnings were partially offset by the impact of
30
<PAGE> 31
favorable manufacturing performance, as well as by benefits from CNH's
restructuring actions and ongoing cost improvement initiatives.
Construction Equipment
Operating earnings for CNH's worldwide construction equipment business were
$117 million in 1999, as compared to $119 million in 1998. The year-over-year
increase in sales of CNH construction equipment, coupled with the $21 million of
income from the amortization of O&K negative goodwill, was more than offset by
the impact of an adverse product mix, including higher sales of lower margin
products. In addition, CNH incurred additional costs associated with advancing
CNH's presence in the North American construction equipment market. Costs
associated with the acquisition of Case, including the amortization of fair
value purchase accounting adjustments and goodwill related to the merger, also
negatively impacted operating earnings. Additionally, the year-over-year
comparison of operating earnings was negatively impacted by the inclusion of $14
million of income in CNH's 1998 operating earnings from an equity method
investment that conducts research and development in Italy.
Worldwide sales of CNH construction equipment increased $722 million or 55%
in 1999 from 1998 levels, largely driven by strong retail demand in Western
Europe, including the full-year impact of the December 1998 acquisition of O&K.
Increased sales of skid steer loaders and graders, as well as additional sales
from the acquisition of Case, also contributed to the year-over-year sales
growth. Excluding the impact of the Case merger, year-over-year sales of New
Holland brand construction equipment increased $446 million or 34% from 1998
levels. On a full year, pro forma basis after giving effect to the merger, net
sales of CNH construction equipment were $3,785 million, up 7% from $3,529
million in 1998.
Financial Services
Financial Services recorded net income of $72 million in 1999, as compared
to net income of $60 million in 1998. Pretax income for Financial Services
increased to $113 million in 1999 from $90 million in 1998. The year-over-year
increase in pretax income was primarily due to a $27 million gain on retail
notes sold as a result of the successful completion of CNH's first retail ABS
transaction, increased operating lease income, and increased finance income
earned on retail and other notes and finance leases, including the impact of the
acquisition of Case. These increases in pretax income were partially offset by
the impact of lower margins on receivables due to a rising interest rate
environment and competitive market conditions, net amortization expense for
purchase accounting adjustments related to the merger and additional provisions
for loan losses. The increased loan loss provisions support the significant
growth in Financial Services' serviced portfolio, including higher losses
associated with portfolio diversification, as well as higher losses resulting
from the depressed agricultural equipment market. In addition, operating results
for the full year reflect higher operating expenses as a result of Financial
Services' growth initiatives, including operating expenses associated with the
acquisition of Case.
Pro Forma 1999 Segments
CNH has prepared the following unaudited pro forma segment operating
earnings data to illustrate the estimated effects of the acquisition of Case by
New Holland as if this transaction had occurred on January 1, 1999. The pro
forma data reflects the impact of the fair market value adjustments to the Case
assets and
31
<PAGE> 32
liabilities acquired, and is presented for illustrative purposes only. Also see
Note 3 and Note 20 to the CNH Financial Statements included in Item 18 of this
report.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C>
1999
Pro forma Operating Earnings:
Agricultural equipment.................................... $(41) $ 80 $(47) $(131)
Construction equipment.................................... 58 96 38 24
Financial services........................................ 30 30 32 20
---- ---- ---- -----
Total............................................. $ 47 $206 $ 23 $ (87)
==== ==== ==== =====
</TABLE>
1998 COMPARED TO 1997
Worldwide revenues were $5,697 million in 1998 versus $5,991 million in
1997. Net sales of CNH farm and construction equipment were $5,474 million in
1998, down 6% from $5,798 million in 1997. The decline in 1998 sales as compared
to the prior year reflects a 4% decrease in base volumes and a 2% deterioration
from the impact of foreign exchange. The year-over-year decline in net sales
reflects reduced shipments of agricultural equipment products, including an
adverse change in North America product mix, as well as the impact of
unfavorable currency translation arising from the stronger U.S. dollar,
partially offset by a slight increase in product pricing. Sales of agricultural
equipment were $4,151 million in 1998, down 9% from 1997 levels, reflecting
weakness in the agricultural equipment market as a result of low global prices
for agricultural commodities. Sales of construction equipment were $1,323
million, up slightly from $1,222 million in 1997, largely driven by higher sales
of skid steer loaders and loader/backhoes.
Sales in Western Europe were $2,334 million in 1998 versus $2,290 million
in 1997. This year-over-year increase reflects higher sales of construction
equipment, primarily skid steer loaders and loader/backhoes, partially offset by
lower tractor sales and the impact of unfavorable currency translation related
to a stronger U.S. dollar. In North America, sales of agricultural and
construction equipment were $2,107 million, down slightly from $2,278 million in
1997, reflecting lower year-over-year sales of tractors and combines, partially
offset by increased sales of skid steer loaders and loader/backhoes. In Latin
America, 1998 sales of agricultural and construction equipment were $528
million, up slightly over prior year. In the Rest of World markets, sales of CNH
agricultural and construction equipment were $505 million, down 30% from $724
million in 1997, reflecting generally unfavorable economic conditions, including
the impact of low agricultural commodity prices and reduced aid in developing
nations.
Revenues from Financial Services were $361 million in 1998, up 14% from
$317 million in 1997, primarily driven by an increase in retail and lease
acquisitions.
Earnings
CNH recorded net income of $258 million in 1998, as compared to net income
of $388 million in 1997. Earnings per share, basic and diluted, for 1998 were
$1.73, as compared to $2.60 in 1997. In 1998, CNH recorded restructuring charges
of $40 million ($29 million after tax) primarily for headcount-related actions.
Net income, before restructuring, was $287 million in 1998, with earnings per
share of $1.92. Basic earnings per share, before restructuring, was $1.92 in
1998 versus $2.60 in 1997.
In 1998, CNH's Equipment Operations recorded net income, before equity
income of Financial Services, of $198 million, versus comparable net income of
$320 million in 1997. CNH's 1998 performance primarily includes the impact of
lower agricultural equipment sales volumes as a result of the downturn in the
agricultural equipment market, partially offset by increased construction
equipment volumes. In addition, CNH incurred a restructuring charge of $40
million in 1998 to reduce headcount and realign its processes to address the
agricultural equipment market decline. CNH also incurred higher research,
development and
32
<PAGE> 33
engineering expenses in 1998 as compared to prior year, largely in support of
new and updated product introductions planned for 1999 and beyond. These
decreases in net income were partially offset by lower 1998 income tax expense.
On a pretax basis, CNH's Equipment Operations recorded income of $383 million,
as compared to $613 million in 1997.
Financial Services recorded net income of $60 million in 1998, as compared
to net income of $68 million in 1997. Pretax income increased to $90 million in
1998, as compared to $86 million in 1997, largely due to an overall increase in
retail receivable income as a result of the growth in Financial Services'
serviced portfolio, partially offset by higher interest expense and higher
operating expenses in support of Financial Services' growth initiatives. The
increase in pretax income was more than offset by the impact of higher taxes,
primarily resulting from the geographical mix of profits.
Consolidated interest expense was $162 million in 1998, as compared to $137
million in 1997. The year-over-year increase in consolidated interest expense
primarily reflects the impact of higher average on-balance-sheet receivables for
Financial Services.
The consolidated income tax provision for 1998 was $148 million, as
compared to $240 million in 1997. CNH's 1998 and 1997 effective income tax rates
were 36% and 38%, respectively. These rates differ from the Dutch statutory rate
of 35% primarily due to differences in the geographical mix of profits, losses
in jurisdictions for which no immediate tax benefit is recognizable, the
reduction of valuation reserves attributable to the utilization of prior-year
losses and certain permanent differences.
Business Segment Operating Results
The following is a discussion of CNH's industry segment operating results.
CNH defines operating earnings as the income of CNH's Equipment Operations
before interest, taxes and restructuring charges, including the net income of
Financial Services on an equity basis. Operating earnings for Financial Services
are reported on a net income basis. Also see Note 20 to the CNH Financial
Statements included in Item 18 of this report.
CNH's operating earnings for 1998 were $495 million versus $685 million in
1997. Financial Services recorded net income of $60 million in 1998, as compared
to net income of $68 million in 1997. A reconciliation of CNH's Equipment
Operations' net income to operating earnings is as follows (in millions):
<TABLE>
<CAPTION>
FOR THE
YEARS ENDED
DECEMBER 31,
-------------
1998 1997
----- -----
<S> <C> <C>
EQUIPMENT OPERATIONS
Net income................................................ $258 $388
Income tax provision...................................... 118 222
Interest expense.......................................... 79 75
Restructuring charge...................................... 40 --
---- ----
Operating earnings..................................... $495 $685
==== ====
</TABLE>
Agricultural Equipment
Operating earnings for CNH's worldwide agricultural equipment business
decreased from $538 million in 1997 to $316 million in 1998. The decrease in
operating earnings includes the impact of CNH's production cuts in the second
half of 1998 in response to market weakness in the agricultural equipment
industry. CNH cut production schedules of agricultural tractors by 18% and 22%
in the second half and fourth quarter of 1998, respectively, as compared with
the respective prior-year periods. The lower retail demand and resulting
decrease in dealer orders reflect the decline in the near-term fundamentals in
the global agricultural market.
33
<PAGE> 34
Low commodity prices, driven principally by continued higher than normal grain
inventory levels, adversely affected net farm income.
Worldwide sales of CNH agricultural equipment declined $425 million or 9%
in 1998 from prior-year levels. In addition to the overall volume decline, 1998
operating earnings for CNH's agricultural equipment business were negatively
impacted by adverse changes in product mix and inflation in labor costs,
partially offset by increased manufacturing efficiencies.
Construction Equipment
Operating earnings for CNH's worldwide construction equipment business
increased from $79 million in 1997 to $119 million in 1998. The higher 1998
operating earnings primarily reflect an 8% increase in year-over-year sales of
CNH construction equipment, largely driven by strong retail demand in North
America, Western Europe and Latin America.
Worldwide sales of CNH construction equipment increased $101 million in
1998 from 1997 levels. In addition to the volume increase, CNH's 1998 operating
earnings also include the impact of increased manufacturing efficiencies and the
inclusion of $14 million of income from an equity method investment that
conducts research and development in Italy.
Financial Services
Financial Services recorded net income of $60 million in 1998, as compared
to net income of $68 million in 1997. Pretax income for Financial Services
increased to $90 million in 1998, as compared to $86 million in the prior year.
The increase in 1998 pretax income is largely due to an overall increase in
retail receivable income as a result of the growth in Financial Services'
serviced portfolio. The year-over-year comparison of pretax income was
negatively impacted by the inclusion of a $7 million one-time gain from the 1997
securitization of certain wholesale receivables in North America. In addition,
the year-over-year increase in 1998 pretax income was partially offset by higher
operating expenses in support of CNH's growth initiatives, including the
expansion of the financial services business in Europe and higher interest
expense. Financial Services recorded higher taxes in 1998 as compared to the
prior year, primarily due to the geographical mix of profits.
RESTRUCTURING
1998 Restructuring Activity
In 1998, CNH reviewed its manufacturing, selling and administrative
processes in an effort to strengthen its competitive position and to better
align its operations in response to current economic and market conditions. As a
result, CNH announced a pretax restructuring charge of $40 million for severance
and other costs related to headcount reductions. CNH refers to these actions as
the 1998 restructuring program.
The 1998 restructuring program included termination costs to eliminate
approximately 420 salaried and 600 hourly positions. These termination payments
included the cost of severance and contractual benefits in accordance with
collective bargaining agreements and CNH policy, and also included costs for
outplacement services, medical and supplemental vacation and retirement
payments.
In connection with the 1998 acquisition of O&K, CNH recorded additional
restructuring reserves of approximately $29 million for employee and dealer
termination costs. These costs were recorded in conjunction with the allocation
of the initial O&K purchase price.
1999 Restructuring Activity
In conjunction with the merger, CNH's management is in the process of
assessing and formulating a plan to integrate the operations of the Case and New
Holland businesses. CNH refers to these adjustments as the 1999 restructuring
program.
34
<PAGE> 35
As part of its merger integration, CNH is evaluating the divestiture or
closure of approximately 20% of its manufacturing locations, as well as the
closure of approximately one-third of its 45 parts depots. Through the
consolidation of all functional areas, including the impact of divestiture
actions required by the European and U.S. regulatory agencies pursuant to the
merger, CNH expects to reduce its worldwide workforce by approximately 20%, or
7,000 people, by 2002. The 1999 restructuring program takes into consideration
duplicate capacity and other synergies including purchasing and supply chain
management, research and development and selling, general and administrative
functions.
As of December 31, 1999, CNH had recorded $90 million in merger-related
restructuring reserves for severance and other costs associated with identified
headcount reductions as part of CNH's initial plan to integrate the Case
operations. These costs were recorded in conjunction with the allocation of the
initial Case purchase price.
The $90 million merger-related restructuring reserve was determined based
on formal plans approved by CNH's management using the best information
available at the time. The amounts that CNH may ultimately incur may change as
the balance of CNH's merger-related initiatives to integrate the Case and New
Holland businesses are executed. As management completes and commits to
additional activities of the plan, CNH anticipates that it will record
additional restructuring reserves as an adjustment to goodwill for identified
actions relative to the Case business. CNH has also announced that it will incur
restructuring charges, beginning in 2000, to exit certain other activities and
to further restructure CNH operations related to the New Holland business.
In 1999, CNH also recorded additional restructuring charges of $19 million
related to the remaining headcount actions contemplated under the 1998
restructuring program. These charges primarily represent severance and other
related costs for the elimination of approximately 340 of the remaining salaried
positions under the original plan.
The following table sets forth the CNH restructuring activities for the
years ended December 31, 1998 and 1999 (in millions):
<TABLE>
<CAPTION>
1998 ACTIVITIES
----------------------------------------------------------------
BALANCE AT BALANCE AT
DECEMBER 31, RESERVES CHANGES IN DECEMBER 31,
1997 ADDITIONS UTILIZED* ESTIMATES 1998
------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Severance and other employee-related
costs.................................... $18 $ 67 $(14) $ -- $ 71
Costs related to closing / selling/
downsizing existing facilities........... -- 2 (2) -- --
--- ---- ---- ---- ----
Total restructuring.............. $18 $ 69 $(16) $ -- $ 71
=== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
1999 ACTIVITIES
----------------------------------------------------------------
BALANCE AT BALANCE AT
DECEMBER 31, RESERVES CHANGES IN DECEMBER 31,
1998 ADDITIONS UTILIZED* ESTIMATES 1999
------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Severance and other employee-related
costs.................................... $71 $ 19 $(52) $(26) $ 12
Case purchase accounting reserve........... -- 90 -- -- 90
--- ---- ---- ---- ----
Total restructuring.............. $71 $109 $(52) $(26) $102
=== ==== ==== ==== ====
</TABLE>
- ------------
* Includes currency translation.
In 1999, CNH expended $52 million for severance costs as contemplated under
its restructuring programs. In 1999, CNH reversed $26 million of purchase
accounting reserves as CNH was unable to complete the required actions within
one year of the O&K acquisition. The reversal of the $26 million restructuring
reserve was recorded against the initial O&K purchase accounting goodwill.
35
<PAGE> 36
The $90 million for severance and other employee-related costs established
as part of the merger primarily includes the cash severance costs to reduce
approximately 1,650 Case personnel in conjunction with CNH's integration
activities. These termination payments include the cost of severance and
contractual benefits in accordance with collective bargaining arrangements and
CNH policy, and also include costs for outplacement services, medical,
supplemental unemployment and supplemental vacation and retirement payments. As
of February 29, 2000, CNH had terminated approximately 350 people related to
this action.
The specific restructuring measures and associated estimated costs were
based on management's best business judgment under prevailing circumstances.
Management believes that the restructuring reserve balance of $102 million at
December 31, 1999, is adequate to carry out the restructuring activities as
outlined above, and CNH anticipates that all actions will be completed by
December 31, 2000. As prescribed under U.S. GAAP, if future events warrant
changes to the reserve, such adjustments will be reflected in the applicable
statements of income as "Restructuring charges," or in the applicable balance
sheets as an adjustment to goodwill, as appropriate. CNH expects to fund the
cash requirements of its restructuring activities with cash flows from
operations and additional borrowings under CNH's existing credit facilities.
DIVESTITURES
In approving the merger, the European and U.S. regulatory agencies
identified a number of competitive concerns related to the combined operations
of Case and New Holland in specified product lines and markets. To address these
competitive concerns, CNH committed to a number of actions, including
divestiture of the following product lines and facilities:
- Case's CX and MXC product lines and the Doncaster, United Kingdom, plant
in which they are assembled;
- New Holland's Laverda combine harvester product line (excluding hillside
models) and the Breganze, Italy, facility in which they are made;
- Case's large square balers assembled in Neustadt, Germany;
- Case's Fermec brand loader/backhoe and industrial tractor product lines
and the Fermec manufacturing plant in Manchester, United Kingdom;
- Case's ownership interest in Hay & Forage Industries in Hesston, Kansas,
a 50% joint venture with AGCO Corporation that produces hay and forage
implements; and
- New Holland's Versatile four-wheel drive and Genesis two-wheel drive
tractor lines, along with the Winnipeg, Canada, plant in which they are
manufactured.
In addition, to address specific market issues in Austria, the parties have
agreed to license or build the Steyr model M-948 and M-958 (and equivalent Case
IH models) for sale by a third party. In the opinion of management, the impact
of these divestitures is not material to CNH's overall results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The discussion of liquidity and capital resources focuses on the balance
sheets and statements of cash flows. CNH's operations are capital intensive and
subject to seasonal variations in financing requirements for dealer receivables
and inventories. Whenever necessary, funds provided from operations are
supplemented from external sources.
36
<PAGE> 37
Net Indebtedness
CNH's consolidated net indebtedness, defined as short- and long-term
borrowings less cash and cash equivalents, is as follows (in millions):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1999 1998
------ ------
<S> <C> <C>
Short-term borrowings.................................... $4,953 $1,682
Long-term borrowings, including current maturities....... 4,558 1,011
Cash and cash equivalents................................ (466) (677)
------ ------
Net indebtedness....................................... $9,045 $2,016
====== ======
</TABLE>
CNH's net indebtedness at December 31, 1999, primarily reflects $2.8
billion outstanding on the $3.0 billion borrowed under short-term credit
facilities to finance the acquisition of Case, and $4.9 billion of Case debt
assumed in the merger. Certain short-term borrowings were reduced during the
year with the proceeds from Financial Services' $1.0 billion retail ABS
transaction.
Cash Flow from Operating Activities
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Equipment Operations.............................. $ 377 $ 70 $ 444
Financial Services................................ 708 (233) 503
------ ------ ------
Consolidated.................................... $1,085 $ (163) $ 947
====== ====== ======
</TABLE>
In 1999, cash provided by operating activities primarily related to reduced
working capital. The Equipment Operations generated cash primarily by reducing
inventory levels in response to the continued weakness in the agricultural
equipment industry. Cash generated by Financial Services primarily resulted from
the selling of $1.0 billion in retail receivables in a retail ABS transaction in
November 1999, partially offset by growth in the retail receivables portfolio.
The increase in cash generated by operating activities is due to greater
decreases in levels of inventory and receivables in 1999 versus 1998, partially
offset by lower earnings. In 1998, inventory increased during the second half of
the year due to reduced market demand. In 1999, production cuts made in response
to these conditions brought inventory and receivable levels down further. The
increased cash provided by operating activities for Financial Services resulted
from the $1.0 billion retail ABS transaction.
The decreased cash provided by operating activities in 1998 versus 1997
primarily resulted from reduced profits and increased working capital. Inventory
increased in 1998 due to reduced market demand in the second half of the year.
This effect was partially offset by reduced production schedules. Trade
receivables increased in 1998, but trade payables more closely matched
production cuts.
Cash Flow from Investing Activities
Cash used in investment activities in 1999 was $4,552 million, the majority
of which was for the acquisition of 100% of the outstanding shares of Case,
including related costs and expenses. In 1998, CNH expended $73 million, net of
cash acquired, for its acquisition and investment activities.
In 1997 CNH expended $95 million for acquisition-related activities. In
September 1997, CNH acquired a 35% interest in Flexi-Coil for approximately $55
million. In January 1997, CNH acquired the remaining
37
<PAGE> 38
51% partnership interest in two financial services joint ventures that it
previously owned with a former parent company of CNH for aggregate consideration
of $50 million. In connection with this acquisition, CNH assumed approximately
$1.3 billion in outstanding financing obligations. CNH funded these acquisitions
through $757 million in proceeds received from the securitization of wholesale
receivables in North America, as well as through additional short-term and
long-term borrowings.
Capital expenditures in 1999, 1998 and 1997 totaled $210 million, $150
million and $154 million, respectively. CNH made these capital expenditures to
acquire the property, plant and equipment necessary to introduce new products,
enhance manufacturing efficiency and further environmental and safety programs.
Cash Flow from Financing Activities
In 1999, cash provided by financing activities was $3,327 million,
primarily resulting from funds raised to finance the acquisition of Case. In
conjunction with the acquisition, CNH drew $3.0 billion from two, 364-day credit
facilities arranged specifically to finance the transaction. Of this amount,
$200 million was repaid in December 1999, and $1.0 billion was refinanced with
an affiliate of Fiat in February 2000. Of the $1.0 billion refinanced with Fiat,
$400 million is due in February 2003, with an interest rate of 7.7125%, and $600
million is due in February 2005, with an interest rate of 7.8125%. Proceeds from
a $1.4 billion advance to capital from an affiliate of Fiat was also used to
finance the acquisition. See Note 11 to the CNH Financial Statements included in
Item 18 of this report for additional information about this advance.
Cash provided by financing activities was partially reduced by cash used by
Financial Services to reduce short-term debt. Specifically, the cash proceeds
from the $1.0 billion retail ABS transaction were used to reduce levels of
commercial paper and other short-term borrowings.
Cash provided by financing activities in 1998 was $241 million, and cash
used in financing activities in 1997 was $585 million. In 1998, CNH increased
its short-term borrowings to finance the growth of its retail receivables
portfolio, and paid dividends to common shareholders. In 1997, CNH significantly
increased its medium- and long-term borrowings and applied the proceeds,
together with cash flow from operating activities, to reduce short-term
borrowings.
Future Liquidity and Capital Resources
CNH has various lines of credit and liquidity facilities that include
borrowings under both committed credit facilities and uncommitted lines of
credit. A significant portion of CNH's financing has historically come from Fiat
and Fiat affiliates. See Note 21, "Related Party Information," to the CNH
Financial Statements included in Item 18 of this report.
CNH also has the ability to issue commercial paper in various countries
under the following programs (in millions):
<TABLE>
<CAPTION>
COMMERCIAL PAPER
-----------------------------
AVAILABILITY AT
PROGRAM DECEMBER 31,
SIZE 1999
------- ---------------
<S> <C> <C>
United States..................................... $4,200 $3,445
Canada............................................ 345 154
Europe............................................ 500 475
Australia......................................... 423 299
------ ------
Total........................................ $5,468 $4,373
====== ======
</TABLE>
Under the terms of CNH's commercial paper programs, the principal amounts
of the commercial paper outstanding, combined with amounts outstanding under the
committed credit facilities, cannot exceed the total amount available under the
committed credit facilities. Borrowings under Financial Services' $1.5 billion
commercial paper program are guaranteed by Fiat.
38
<PAGE> 39
The following credit facilities were available to CNH at December 31, 1999:
- $2.3 billion in revolving credit facilities that expire in August 2001;
- a $1.0 billion revolving credit facility with an affiliate of Fiat,
expiring in October 2001;
- a $500 million revolving credit facility, guaranteed by an affiliate of
Fiat, that expires December 31, 2001;
- a total of $828 million in committed lines of credit expiring between
2000 and 2003;
- a total of $1,105 million in committed lines of credit expiring between
2000 and 2004, and guaranteed by an affiliate of Fiat;
- a 364-day, $750 million U.S. asset-backed commercial paper liquidity
facility that expires in August 2000; and
- a total of $1.7 billion in uncommitted credit facilities, including $759
million that are guaranteed by an affiliate of Fiat.
At December 31, 1999, CNH had approximately $5.5 billion available under
its total lines of credit. In addition to these credit facilities, CNH also had
at December 31, 1999, (1) a 364-day, $2.4 billion term loan facility, and (2) a
364-day, $600 million term loan, with an affiliate of Fiat. These facilities,
which were established in October 1999 in conjunction with the financing of the
Case acquisition, were fully utilized at December 31, 1999.
Certain of CNH's short-term credit facilities are also available to other
members of the Fiat Group, and borrowings by them against these lines of credit
reduce the amount available to CNH.
At the option of CNH, borrowings under the revolving credit facilities bear
interest at (1) prime rate; (2) LIBOR, plus an applicable margin; or (3)
banker's bills of acceptance rates, plus an applicable margin. Borrowings under
commercial paper and commercial paper liquidity facilities bear interest at
prevailing commercial paper rates. The weighted-average interest rate on
consolidated short-term borrowings at December 31, 1999, was 6.37%.
CNH also has three securitization programs through which it may sell, on a
revolving basis, fractional undivided interests in pools of wholesale
receivables generated in the United States and Canada. Under these facilities,
the maximum amount of proceeds that can be accessed at one time is $1.2 billion,
and is subject to change based on the level of eligible wholesale receivables.
Unused capacity under these securitization programs was $140 million at December
31, 1999. CNH expects to sell additional pools of receivables in the future.
In addition to the above availability, CNH has other sources of future
liquidity including the asset-backed securities markets in the United States and
Canada and public debt offerings. In the United States, Canada and Australia,
CNH has also established medium-term note programs. As of December 31, 1999, CNH
has issued $375 million of medium-term notes pursuant to its $800 million U.S.
shelf registration statement; $224 million of medium-term notes under its $517
million Canadian program; and $114 million of medium-term notes under its $390
million Australian program.
CNH maintains sufficient committed lines of credit and liquidity facilities
to cover its expected funding needs on both a short-term and long-term basis.
CNH manages its aggregate short-term borrowings so as not to exceed availability
under its committed lines of credit. CNH accesses short-term debt markets,
predominantly through commercial paper issuances and committed and uncommitted
credit facilities, to fund its short-term financing requirements and to ensure
near-term liquidity. As funding needs are determined to be of a longer-term
nature, CNH accesses medium- and long-term debt markets, as appropriate, to
refinance short-term borrowings and, thus, replenish its short-term liquidity.
In managing its future liquidity requirements, CNH expects to pursue a
financing strategy that includes:
- consolidating existing bank credit arrangements and other borrowing
facilities available to CNH at the time of the merger, developing common
standards for borrowing terms and conditions;
- maintaining a relationship with Fiat, including credit support when
appropriate;
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<PAGE> 40
- maintaining continuous access to a variety of financing sources,
including U.S. and international capital markets and commercial bank
lines; and
- funding Financial Services with a combination of financing and
receivables securitizations.
CNH pays a guarantee fee of 0.0625% per annum on the average amount
outstanding under facilities guaranteed by Fiat. Fiat has stated that it intends
to continue the guarantee for as long as it controls CNH and, in any event, at
least until December 31, 2003. Fiat has committed that it will not terminate
these facilities after this period expires without first giving a reasonable
period for CNH to secure alternative financing.
CNH estimates that for 2000, capital expenditures and other investments
amounting to $45 million in the aggregate will be required to complete projects
authorized as of December 31, 1999, for which substantial commitments by CNH
have been made. CNH expects that these commitments will be funded with cash
flows from operations.
YEAR 2000
The Year 2000 issue refers to the risk that systems, products and equipment
having date-sensitive components will not recognize the year 2000, resulting in
potential system failures or miscalculations that could cause disruption of
operations.
CNH has implemented those procedures that it deemed necessary to safeguard
it from computer-related issues associated with adverse effects as a result of
improperly recognizing the millennial data change. As a result of its Year 2000
preparation efforts, CNH experienced no significant Year 2000-related failures
to date. CNH plans to continue monitoring its systems and CNH also has
contingency plans available in the event that a Year 2000 failure should occur.
These contingency plans were designed to mitigate the impact on CNH if its Year
2000 compliance efforts were not successful.
As of December 31, 1999, CNH has incurred, in the aggregate, approximately
$24 million of costs for Year 2000 remediation. These costs were expensed as
incurred and do not include approximately $36 million in the aggregate,
including $14 million in 1999, for Case's Year 2000 remediation expenses that
were incurred prior to the merger. CNH's cost estimates do not include the cost
of implementing contingency plans and also do not include any potential
litigation or warranty costs related to Year 2000 issues if CNH's remediation
efforts are not successful. CNH anticipates that remaining Year 2000 remediation
costs will be minimal.
EURO
CNH has implemented systems to prepare for the transition from European
national currencies to the Euro. CNH believes that the greatest impact on CNH
brought about by the introduction of the Euro has been the increased price
transparency on European sales of European manufactured products.
Management believes that the price convergence from the Euro introduction
has not resulted in any material adverse impact on the financial results of
CNH's existing operations in the participating member states. In addition, the
elimination of currency exchange fluctuations as a result of the Euro
introduction has reduced CNH's exposure to foreign exchange risk within the Euro
member states.
CNH has not found it necessary to make significant investments in systems
hardware or software to prepare for and operate in the Euro. CNH is not in a
position to quantify any possible long-term impact of the Euro on its revenues
or expenses. However, at this time, CNH has no reason to believe that it is in a
weak or unfavorable position relative to the Euro introduction as compared to
its competitors or other companies dealing in Europe.
OUTLOOK
Global prices for agricultural commodities remained low in the fourth
quarter of 1999 and, as a result, industry demand for agricultural equipment
continued at depressed levels. The impact was strongest in
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<PAGE> 41
combines and row-crop tractors in North America. Further, dairy prices have been
under pressure. While a stabilization of Asian economies may stimulate increased
farm commodity purchases in 2000, supply continues to be the primary driver.
With grain inventory stocks at higher than normal levels, future commodity
prices will largely depend upon the 2000 harvests from both the Southern and
Northern Hemispheres. However, farmers have received significant government
support and land values are relatively stable. This has resulted in farmers'
overall financial conditions being stronger than expected. Given these market
conditions, CNH expects retail sales of agricultural equipment to be moderately
lower in 2000 as compared to 1999.
The global outlook for the construction equipment market in 2000 is
expected to be unchanged from that of 1999. Western Europe is projected to be
comparable to 1999 and significant improvement is expected in Latin America and
in markets in the Rest of World, including Australia and New Zealand. These
improvements will be offset by North America, where the market is anticipated to
be slightly lower compared to the strong conditions of the last several years.
SEASONALITY AND PRODUCTION SCHEDULES
Seasonal demand for agricultural equipment varies by region and product,
primarily due to differing climates and farming calendars. Peak retail demand
for tractors and tillage machines occurs in the March-June months in the
Northern Hemisphere and in the September-November months in the Southern
Hemisphere. Equipment dealers generally order harvesting equipment in the
Northern Hemisphere in the fall and winter so that they can receive inventory
during the winter and spring prior to the peak equipment selling season, which
begins in May and June. In the Southern Hemisphere, equipment dealers generally
order between September and November and the primary selling season for
harvesting equipment extends from November through February. Harvesting in the
Southern Hemisphere begins in December and January. The retail-selling season
for combine harvesters and hay and forage equipment is concentrated in the few
months around harvest time.
Seasonal demand fluctuations for construction equipment are somewhat less
significant than for farm equipment. Nevertheless, in North America, housing
construction slows down, especially in the Midwest and on the East Coast, during
the first quarter. North American and European retail demand for construction
equipment is strongest in the second and fourth quarters.
Sales to independent dealers closely correspond with production levels,
which are based upon CNH's estimates of demand. These estimates take into
account the timing of dealer shipments (which are in advance of retail demand),
dealer inventory levels, the need to retool manufacturing facilities to produce
new or different models and the efficient use of manpower and facilities. CNH
expects to adjust its production levels to reflect changes in estimated demand,
dealer inventory levels, labor disruptions and other matters not within its
control. Because CNH spreads its production and wholesale shipments throughout
the year to take into account the factors described above, wholesale sales of
agricultural equipment products in any given period may not reflect the timing
of dealer orders and retail demand.
INFLATION
Inflation impacts CNH's business in both the costs of production and the
demand for its products.
A significant portion of the cost of CNH machinery is comprised of material
costs. Therefore, material price inflation could result in increased
manufacturing costs through supplier price increases to CNH. CNH's ability to
recover increased supplier costs would be dependent, in part, on its
competitors' responses to these economic conditions. Manufacturing cost
increases in excess of increased pricing in the market could have an adverse
effect on CNH.
Increases in inflation tend to cause higher interest rates. The demand for
farm and, to a greater extent, construction equipment, is negatively impacted by
high interest rates. As interest rates on farm debt escalate, farmers tend to
delay equipment purchases. CNH's construction equipment business is heavily tied
to the housing construction sector, and in the face of rising mortgage rates,
potential homeowners tend to delay
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<PAGE> 42
purchases. Increases in the level of worldwide inflation could have a negative
effect on the level of demand for farm and construction equipment.
OTHER RISK FACTORS
CNH may not fully achieve the anticipated benefits of the merger
CNH's ability to achieve the anticipated benefits of the merger, including the
realization of $400 - $500 million in expected annual operating synergies over
the next three to four years, depends on, among other things, CNH's ability to
integrate effectively the operations and employees of New Holland and Case.
Other factors that may affect the success of the merger include:
- dealer acceptance of the combined operations and multi-branding strategy;
- the impact of the merger on Case's and New Holland's pre-merger market
shares;
- the reconciliation of inconsistent terms in the respective pre-merger
joint venture agreements of New Holland and Case; and
- the timing of the synergies and other benefits expected to result from
the merger.
An oversupply of used and rental equipment may negatively affect CNH's sales
In recent years, short-term lease programs and commercial rental agencies
for agricultural and construction equipment have expanded significantly. As this
equipment comes off lease or is replaced with newer equipment by rental
agencies, there will be a significant increase in the availability of late-model
used equipment. An oversupply in used equipment could depress sales of new
equipment. CNH cannot predict how much an oversupply of used equipment would
affect demand for, and the market prices of, new and used equipment in the event
of a continued downturn in market demand, and the effect could be substantial.
ITEM 9(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
CNH is exposed to market risk from changes in both foreign currency
exchange rates and interest rates. CNH monitors its exposure to these risks, and
manages the underlying economic exposures through the use of financial
instruments such as forward contracts, currency options, interest rate swaps and
forward rate agreements. CNH does not hold or issue derivative or other
financial instruments for speculative or trading purposes. Fiat has executed, on
CNH's behalf, certain foreign exchange and interest rate-related contracts. As
of December 31, 1999, CNH and its subsidiaries were parties to derivative or
other financial instruments having an aggregate contract value of $45 million to
which affiliates of Fiat were counterparties. CNH management believes that the
terms of the contracts entered into with Fiat and its affiliates are at least as
favorable to those available from unaffiliated third parties.
FOREIGN CURRENCY RISK MANAGEMENT
CNH has significant international manufacturing operations. Foreign
exchange risk exists to the extent that CNH has payment obligations or receipts
denominated in currencies other than the functional currency of the various
manufacturing operations. To manage these exposures, CNH identifies naturally
offsetting positions and then purchases hedging instruments to protect the
remaining net anticipated exposures. In addition, CNH hedges the anticipated
repayment of intercompany loans to foreign subsidiaries denominated in foreign
currencies. For further information on CNH's foreign exchange rate risk
management, see Note 14 to the CNH Financial Statements included in Item 18 of
this report.
CNH regularly monitors its currency exchange rate exposure, executes
policy-defined hedging strategies and reviews the ongoing effectiveness of such
strategies. At December 31, 1999, the notional amount of forward contracts and
currency swaps was approximately $774 million, purchased options was $26 million
and sold options was $11 million. The potential loss in fair value of such
financial instruments resulting from a hypothetical 10% change in foreign
currency exchange rates would be approximately $64 million.
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<PAGE> 43
The above sensitivity analysis assumes an unfavorable 10% fluctuation in
the exchange rates affecting the foreign currencies in which the financial
instruments are denominated. As consistently and simultaneously unfavorable
movements in all relevant exchange rates are unlikely, this assumption may
overstate the impact of exchange rate fluctuations on such financial
instruments. Further, this calculation does not include trade receivables or
trade payables denominated in foreign currencies or anticipated cash flows
related to the underlying business transactions. Management believes that the
above movement in foreign exchange rates would have an offsetting impact on the
underlying business transactions that the financial instruments are used to
hedge.
INTEREST RATES
CNH reduces exposure to interest rate fluctuations through the use of
financial instruments, swaps and forward rate agreements. These instruments aim
to stabilize funding costs by managing the exposure created by the differing
maturities and interest rate structures of CNH's financial assets and
liabilities.
CNH uses a model to monitor interest rate risk and to achieve a
predetermined level of matching between the interest rate structure of its
financial assets and liabilities. Fixed-rate financial instruments are
segregated from floating-rate financial instruments in evaluating the potential
impact of changes in applicable interest rates. The potential loss in fair
market value of financial instruments held at December 31, 1999, resulting from
a hypothetical, instantaneous and unfavorable change of 10% in the interest rate
applicable to such financial instruments would be approximately $4 million. This
would be fully attributable to the impact of the above interest rate change on
fixed-rate financial assets and liabilities. A hypothetical and instantaneous
change of 10% in interest rates applicable to floating-rate financial assets and
liabilities held at December 31, 1999 (excluding floating-rate financial
instruments converted into fixed rate through derivatives), would result in an
additional annual cash outflow of approximately $16 million.
The above sensitivity analyses are based on the assumption of an
unfavorable 10% movement of the interest rates applicable to each homogeneous
category of financial assets and liabilities. A homogeneous category is defined
according to the currency in which financial assets and liabilities are
denominated and assumes the same interest rate movement within each homogeneous
category. As a result, CNH's interest rate risk sensitivity model may overstate
the impact of interest rate fluctuations for such financial instruments, as
consistently unfavorable movements of all interest rates are unlikely.
CHANGES IN MARKET RISK EXPOSURE AS COMPARED TO 1998
CNH's exposure to interest rate and foreign currency risk has changed
significantly from 1998 as a result of the merger with Case due to the increase
in long- and short-term borrowings, long-term receivables, and the increased
level of economic activity transacted and assets denominated in U.S. dollars.
CNH's exposure to interest rate risk has increased at December 31, 1999,
due to the $8,218 million increase in total debt, including the advance to
capital, as well as the increase in long-term receivables of $1,578 million.
CNH's exposure to foreign currency exchange risk has decreased since, as a
result of the merger, a larger percentage of CNH's revenues and long-term assets
are denominated in its reporting currency, which is the U.S. dollar.
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ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
Responsibility for the management of CNH lies with the Board of Directors
of CNH, which supervises the policies of CNH and the general course of corporate
affairs. The members of the Board are appointed at the Annual General Meeting of
Shareholders and do not have fixed terms of office.
At March 27, 2000, the directors and executive officers of CNH are as set
forth below:
<TABLE>
<CAPTION>
DIRECTOR /
EXECUTIVE
NAME AGE POSITION WITH CNH OFFICER SINCE
---- --- ----------------- -------------
<S> <C> <C> <C>
Jean-Pierre Rosso........... 59 Director and Chairman and Chief Executive Officer 1999
Umberto Quadrino............ 53 Director and Co-Chairman 1996
Paolo Cantarella............ 55 Director 1996
Pei-yuan Chia............... 61 Director 1999
Damien Clermont............. 48 Director 1999
Alfredo Diana............... 69 Director 1999
Katherine M. Hudson......... 53 Director 1999
Kenneth Lipper.............. 58 Director 1996
James L.C. Provan........... 63 Director 1995
Paolo Monferino............. 53 President and Chief Operating Officer 2000
Theodore R. French.......... 45 President, Financial Services and Chief Financial 1999
Officer
Harold D. Boyanovsky........ 55 President, Worldwide Agricultural Equipment Products 1999
Fausto Lanfranco............ 55 President, Worldwide Construction Equipment Business 1996
Andrew E. Graves............ 41 President, CNH Capital 1999
William T. Kennedy.......... 57 President, New Holland Agricultural Business 1996
Leopold Plattner............ 53 President, Case IH Agricultural Business 1999
Gustavo Bracco.............. 51 Senior Vice President, People and Organization 1999
Development
Roberto Miotto.............. 53 Senior Vice President, General Counsel and Secretary 1991
David Pegg.................. 56 Senior Vice President and Controller 1997
</TABLE>
Mr. Quadrino served as Chairman of the Board of Directors of CNH from May
24, 1999, to November 11, 1999, and as its President and Chief Executive Officer
since 1996. On November 12, 1999, Mr. Quadrino was appointed Co-Chairman.
Mr. Monferino was appointed President and Chief Operating Officer of CNH on
March 24, 2000.
The Company has both an Audit Committee and a Nominating and Compensation
Committee of the Board of Directors.
The principal functions of the Audit Committee are to recommend the
selection and review the activities of CNH's independent public accountants, and
to exercise general oversight with respect to CNH's financial reporting process
and internal accounting controls. The Committee currently consists of Ms. Hudson
and Messrs. Lipper and Provan. Mr. Lipper serves as Chairperson of this
Committee.
The principal functions of the Nominating and Compensation Committee are to
aid in attracting qualified candidates to serve as outside directors and
exercise general oversight of CNH's executive compensation program, including
fixing the compensation of executive and certain other senior officers of CNH.
The Committee currently consists of Messrs. Cantarella, Chia and Diana. Mr.
Cantarella serves as Chairperson of this Committee.
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ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
The aggregate amount of compensation paid by CNH and its subsidiaries to
the 19 directors and executive officers named in Item 10 who were directors and
executive officers during 1999 was approximately $8,619,000, of which
approximately $255,000 represented a provision for termination indemnities and
social security charges required by Italian law with respect to the officers
employed in Italy. The aggregate amount set aside by CNH with respect to pension
and similar benefits during 1999 totaled approximately $517,000. Such aggregate
amounts respectively include compensation paid and pension and similar benefits
set aside for Steven G. Lamb, who served as President and Chief Operating
Officer of Case prior to the merger and thereafter in the same capacity for CNH
until March 24, 2000.
CNH maintains a management bonus program that links a portion of the
compensation paid to senior executives to CNH's achievement of financial
performance criteria specified by the Nominating and Compensation Committee of
CNH's Board of Directors.
During 1999, CNH granted to the executive officers named in Item 10 and to
Mr. Lamb an aggregate of 660,000 restricted common shares under its Equity
Incentive Plan or EIP. CNH granted the restricted shares issued under this plan
at no cost to the executive officers. The restricted shares remain subject to
restrictions for periods ranging from twelve months to seven years. Of the
restricted shares granted, 330,000 vest ratably over three years from the award
date, while the remaining 330,000 performance-based shares vest subject to the
attainment of specified performance criteria. Such performance-based shares vest
no later than seven years from the award date. The aggregate fair market value,
determined as of the date of grant on December 20, 1999, of the restricted
shares granted to executive officers by CNH in 1999 was $7.9 million. For a
description of the terms of the EIP, see Item 12, "Options to Purchase
Securities from CNH or its Subsidiaries."
Several executive officers of CNH are also eligible to participate in the
incentive stock option plan of Fiat. Under this plan, on March 30, 1999, these
executive officers received, in the aggregate, a total of 116,200 options to
purchase Fiat's ordinary shares at an exercise price of Euro 28.45, which was
the fair market value of the ordinary shares at the time of grant. Fifty percent
of these options vest on April 1, 2001, and the remainder vest on April 1, 2002.
If not exercised before March 31, 2007, these options will expire on that date.
Each outside director of CNH is paid a fee of $1,250 plus expenses for each
Board of Directors and committee meeting attended. Outside directors also
receive an annual retainer fee of $35,000. In addition, each outside director
who chairs a committee is paid an annual retainer fee of $5,000 per committee
chair held. The value of these fees is included in the aggregate compensation
amount set forth above. Under the Outside Directors' Compensation Plan, all
outside director annual retainer fees are paid in the form of CNH common shares
unless a director elects to receive a portion of his or her fees, up to a
maximum of 50%, in cash. In addition, outside directors may also elect to forego
payment of all or any portion of their fees otherwise payable in common shares
and to instead receive an option to purchase common shares at a purchase price
equal to the fair market value of the common shares on the date that such fees
would otherwise have been paid to the director. The number of shares subject to
such an option will be equal to the amount of fees that the director elected to
forego, multiplied by four and divided by the fair market value of a common
share on the date the fees would otherwise have been paid to the director. Stock
options granted as a result of such an election vest immediately upon grant, but
the shares purchased under the option cannot be sold for six months following
the date of grant. Outside directors also receive an annual grant of options to
purchase CNH common shares that vest on the third anniversary of the grant date.
The exercise price of all options granted under the Outside Directors'
Compensation Plan equal the fair market value of CNH's common shares on the date
of grant. There are one million common shares reserved for issuance under the
Outside Directors' Compensation Plan. See Item 12, "Options to Purchase
Securities from CNH or its Subsidiaries."
Mr. Rosso is party to an employment agreement with CNH under which he
receives a salary, an annual cash bonus and an annual target value of stock
awards aggregating not less than $1 million per year.
Mr. Quadrino is party to an employment contract with Fiat. Under this
agreement, Mr. Quadrino performed various services for Fiat during 1999 and
received approximately $451,000 in compensation from
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Fiat, of which approximately $181,000 represented a provision for termination
indemnities and social security charges required by Italian law with respect to
individuals employed in Italy. This payment was in addition to the salary and
bonus compensation that Mr. Quadrino received from CNH. On November 12, 1999, in
connection with the merger, Mr. Quadrino stepped down as the Chief Executive
Officer of CNH, however, he continues to serve as a director and as Co-Chairman
of CNH.
Certain CNH officers are party to "Change in Control" agreements that
provide for severance benefits if the officer's employment terminates other than
for "cause" within 12 months following a potential change in control or within
24 to 36 months following a change in control.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
CNH has adopted the CNH Equity Incentive Plan or EIP. The EIP authorizes
the grant of stock options, restricted stock, stock appreciation rights and
other equity-based awards to officers and employees of CNH. There are 28 million
common shares reserved for issuance under the EIP. Options granted under the EIP
have an exercise price that is no less than the fair market value of the common
shares on the date of grant, vest ratably between six months and seven years
from the award date and expire after ten years. As of March 27, 2000, options to
purchase an aggregate of 4,810,350 CNH common shares were outstanding under the
EIP with an exercise price of $13.77. The options expire on December 19, 2009.
As of March 27, 2000, an aggregate of 34,796 options to purchase CNH common
shares were outstanding under the Outside Directors' Compensation Plan. The
exercise prices of the outstanding options range from $11.22 to $15.41 with a
weighted-average exercise price of $13.48. The options expire ten years after
the date of grant. The expiration dates of the outstanding options range from
November 11, 2009 through February 28, 2009. See Item 11, "Compensation of
Directors and Officers."
As of March 27, 2000, the named directors and executive officers held an
aggregate of 2,874,796 options to purchase CNH common shares.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
On November 12, 1999, New Holland Holdings N.V., the majority shareholder
of CNH, contributed $1.4 billion to CNH in the form of an advance to capital to
partially finance the merger of New Holland and Case. The terms of this advance
to capital provide that New Holland Holdings will receive common shares of CNH
in exchange for its advance at the earlier of (1) any public equity offering by
CNH, or (2) June 30, 2000. If CNH conducts a public equity offering before June
30, 2000, then New Holland Holdings will receive that number of CNH common
shares that it could have purchased with $1.4 billion at the public offering
price, less any underwriting discount. Otherwise, New Holland Holdings will
receive that number of CNH common shares that it could have purchased with $1.4
billion at a price determined by averaging the daily closing prices (after
excluding the highest and lowest prices) of CNH common shares on the New York
Stock Exchange during the 20 trading days immediately preceding June 30, 2000.
CNH may pay a discretionary return to New Holland Holdings on its advance to
capital at a maximum annual rate of 6.25% when, as and if declared by the Board
of Directors of CNH.
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<PAGE> 47
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
On March 28, 2000, CNH amended the indenture governing Case's 7 1/4% notes
due 2016, Case's 7 1/4% notes due 2005 and Case's 6 1/4% notes due 2003, to
provide for a full and unconditional guarantee by CNH of Case's obligations
under this indenture. Approximately $288 million, $297 million and $289 million
of these respective notes remained outstanding at December 31, 1999.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
Not applicable.
ITEM 18. FINANCIAL STATEMENTS.
Reference is made to Item 19(a) for a list of all financial statements
filed as part of this annual report.
47
<PAGE> 48
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
ITEM 19(a). INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
INDEX TO FINANCIAL STATEMENTS:
CNH GLOBAL N.V. AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Reports of independent accountants.......................... 49
Statements of income for each of the three years in the
period ended December 31, 1999............................ 51
Balance sheets as of December 31, 1999 and 1998............. 52
Statements of cash flows for each of the three years in the
period ended December 31, 1999............................ 53
Statements of changes in shareholders' equity for each of
the three years in the period ended
December 31, 1999......................................... 54
Notes to financial statements............................... 55
</TABLE>
INDEX TO SCHEDULES:
<TABLE>
<S> <C>
Schedule II -- Valuation and qualifying accounts and
reserves for each of the three years ended December 31,
1999...................................................... 93
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or the notes thereto.
</TABLE>
48
<PAGE> 49
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of CNH Global N.V.
We have audited the accompanying consolidated balance sheets of CNH Global
N.V. (formerly New Holland N.V.) and its subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of income, of cash flows and
of changes in shareholders' equity for each of the three years in the period
ended December 31, 1999, all expressed in U.S. dollars. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of the Company's wholly
owned subsidiary, Case Corporation, which was acquired on November 12, 1999,
which statements reflect total assets of U.S. $11,613 million at December 31,
1999, and net sales and revenues of U.S. $684 million for the period from date
of acquisition through December 31, 1999. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for Case Corporation, is
based solely on the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CNH Global
N.V. and its subsidiaries as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with generally accepted accounting
principles in the United States.
Our audits, and the audit of the other auditors, were made for the purpose
of forming an opinion on the consolidated financial statements taken as a whole.
The supplemental financial information for the financial position and results of
operations of the Equipment Operations and Financial Services businesses of CNH
Global N.V. is presented for purposes of additional analysis and is not a
required part of the basic consolidated financial statements. This information
has been subjected to the auditing procedures applied in our audits of the
consolidated financial statements and, in our opinion, based on our audits and
the report of the other auditors, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole. Also,
the schedule listed in the index to Item 19 is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, based on our audits and the report of the other auditors, fairly states
in all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers N.V.
Amsterdam, The Netherlands
February 1, 2000
49
<PAGE> 50
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of CNH Global N.V.
We have audited the accompanying consolidated balance sheet of Case
Corporation (a Delaware Corporation and wholly owned subsidiary of CNH Global
N.V.) and subsidiaries as of December 31, 1999, and the related statements of
income, shareholders' investment and cash flows for the period November 12, 1999
to December 31, 1999. These consolidated financial statements and the
supplemental financial statements referred to below are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the supplemental financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Case Corporation and
subsidiaries as of December 31, 1999, and the results of their operations and
their cash flows for the period November 12, 1999 to December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The supplemental financial
statements of Equipment Operations and Financial Services are presented for
purposes of additional analysis and are not a required part of the basic
consolidated financial statements. This information has been subjected to the
auditing procedures applied in our audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 24, 2000
50
<PAGE> 51
CNH GLOBAL N.V.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS FINANCIAL SERVICES
------------------------ ------------------------ ------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Net sales.................... $5,949 $5,474 $5,798 $5,949 $5,474 $5,798 $ -- $ -- $ --
Finance and interest
income.................... 324 223 193 17 -- -- 412 361 317
------ ------ ------ ------ ------ ------ ---- ---- ----
6,273 5,697 5,991 5,966 5,474 5,798 412 361 317
COSTS AND EXPENSES:
Cost of goods sold........... 4,884 4,348 4,521 4,884 4,348 4,521 -- -- --
Selling, general and
administrative............ 726 585 568 657 536 524 69 49 44
Research, development and
engineering............... 196 152 129 196 152 129 -- -- --
Restructuring charge......... 19 40 -- 19 40 -- -- -- --
Interest expense............. 266 162 137 154 79 75 217 221 186
Other, net................... (16) 11 23 (29) 10 21 13 1 2
------ ------ ------ ------ ------ ------ ---- ---- ----
6,075 5,298 5,378 5,881 5,165 5,270 299 271 232
EQUITY IN INCOME OF
UNCONSOLIDATED SUBSIDIARIES
AND AFFILIATES:
Financial Services........... -- -- 1 72 60 68 -- -- 1
Equipment Operations......... 9 14 17 9 14 17 -- -- --
------ ------ ------ ------ ------ ------ ---- ---- ----
Income before taxes and
minority interest............ 207 413 631 166 383 613 113 90 86
Income tax provision........... 55 148 240 14 118 222 41 30 18
Minority interest.............. 4 7 3 4 7 3 -- -- --
------ ------ ------ ------ ------ ------ ---- ---- ----
Net income..................... $ 148 $ 258 $ 388 $ 148 $ 258 $ 388 $ 72 $ 60 $ 68
====== ====== ====== ====== ====== ====== ==== ==== ====
PER SHARE DATA:
Basic earnings per share....... $ 0.99 $ 1.73 $ 2.60
------ ------ ------
Diluted earnings per share..... $ 0.97 $ 1.73 $ 2.60
====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Income.
Reference is made to Note 2 for definitions of "Equipment Operations" and
"Financial Services."
51
<PAGE> 52
CNH GLOBAL N.V.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(IN MILLIONS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
EQUIPMENT FINANCIAL
CONSOLIDATED OPERATIONS SERVICES
---------------- ---------------- ---------------
1999 1998 1999 1998 1999 1998
------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 466 $ 677 $ 387 $ 588 $ 79 $ 89
Accounts and notes receivable........................ 4,136 2,057 2,216 1,219 2,061 1,351
Inventories.......................................... 2,422 1,512 2,422 1,512 -- --
Deferred income taxes................................ 442 169 424 168 18 1
Prepayments and other................................ 304 39 238 30 104 31
------- ------ ------- ------ ------ ------
TOTAL CURRENT ASSETS............................... 7,770 4,454 5,687 3,517 2,262 1,472
------- ------ ------- ------ ------ ------
Long-Term Receivables.................................. 3,037 1,459 330 114 2,707 1,345
Property, Plant and Equipment, net..................... 1,875 724 1,867 721 8 3
OTHER ASSETS:
Investments in unconsolidated subsidiaries and
affiliates......................................... 328 215 305 209 23 6
Investment in Financial Services..................... -- -- 1,080 318 -- --
Equipment on operating leases, net................... 557 19 -- -- 557 19
Goodwill and intangibles............................. 3,495 250 3,338 221 157 29
Other................................................ 616 175 321 174 295 1
------- ------ ------- ------ ------ ------
TOTAL OTHER ASSETS................................. 4,996 659 5,044 922 1,032 55
------- ------ ------- ------ ------ ------
TOTAL.............................................. $17,678 $7,296 $12,928 $5,274 $6,009 $2,875
======= ====== ======= ====== ====== ======
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................. $ 130 $ 83 $ 25 $ 30 $ 105 $ 53
Short-term debt...................................... 4,953 1,682 3,879 553 1,160 1,634
Accounts payable..................................... 1,362 890 1,373 890 28 --
Restructuring liability.............................. 102 71 102 71 -- --
Other accrued liabilities............................ 1,690 1,015 1,613 1,020 117 25
------- ------ ------- ------ ------ ------
TOTAL CURRENT LIABILITIES.......................... 8,237 3,741 6,992 2,564 1,410 1,712
------- ------ ------- ------ ------ ------
Long-Term Debt......................................... 4,428 928 1,073 95 3,369 833
OTHER LIABILITIES:
Pension, postretirement and postemployment
benefits........................................... 1,079 571 1,066 559 13 12
Advance to capital................................... 1,400 -- 1,400 -- -- --
Other................................................ 754 199 618 199 136 --
------- ------ ------- ------ ------ ------
TOTAL OTHER LIABILITIES............................ 3,233 770 3,084 758 149 12
------- ------ ------- ------ ------ ------
Commitments and Contingencies (Note 17)................ -- -- -- -- -- --
Minority Interest...................................... 70 73 69 73 1 --
SHAREHOLDERS' EQUITY:
Common Shares, Euro 0.45 par value; authorized
444,444,460 shares, issued 149,660,000 shares in
1999 and 149,000,000 shares in 1998................ 88 88 88 88 12 2
Paid-in capital...................................... 1,645 1,637 1,645 1,637 856 181
Retained earnings.................................... 250 184 250 184 212 136
Accumulated other comprehensive income (loss)........ (265) (125) (265) (125) -- (1)
Unearned compensation on restricted shares........... (8) -- (8) -- -- --
------- ------ ------- ------ ------ ------
TOTAL SHAREHOLDERS' EQUITY......................... 1,710 1,784 1,710 1,784 1,080 318
------- ------ ------- ------ ------ ------
TOTAL.............................................. $17,678 $7,296 $12,928 $5,274 $6,009 $2,875
======= ====== ======= ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
Reference is made to Note 2 for definitions of "Equipment Operations" and
"Financial Services."
52
<PAGE> 53
CNH GLOBAL N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
CONSOLIDATED EQUIPMENT OPERATIONS FINANCIAL SERVICES
------------------------- ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ----- ------- ------- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................. $ 148 $ 258 $ 388 $ 148 $ 258 $ 388 $ 72 $ 60 $ 68
Adjustments to reconcile net income to net
cash provided (used) by operating
activities:
Depreciation and amortization............ 183 132 122 160 126 119 23 6 3
Deferred income tax expense (benefit).... 45 43 73 31 45 73 14 (2) --
(Gain) loss on disposal of fixed
assets................................. (5) (2) 1 (7) (2) 1 2 -- --
Undistributed earnings of unconsolidated
subsidiaries........................... (9) (14) (18) (81) (74) (85) -- -- (1)
Changes in operating assets and
liabilities:
(Increase) decrease in receivables..... 615 (342) 253 (86) (68) (187) 585 (252) 426
(Increase) decrease in inventories..... 256 (61) (81) 256 (61) (81) -- -- --
(Increase) decrease in prepayments and
other current assets................. (185) (45) (47) (135) (39) (51) (67) (19) (3)
Increase (decrease) in payables........ 27 (104) 124 99 (105) 148 5 (1) (31)
Increase (decrease) in accrued and
other liabilities.................... (45) (34) 128 (104) (16) 115 84 (25) 41
Other, net................................. 55 6 4 96 6 4 (10) -- --
------- ----- ------- ------- ----- ----- ----- ----- -------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES................................. 1,085 (163) 947 377 70 444 708 (233) 503
------- ----- ------- ------- ----- ----- ----- ----- -------
INVESTING ACTIVITIES:
Acquisitions and investments, net of cash
acquired................................. (4,394) (73) (95) (4,442) (73) (105) 36 -- (40)
Proceeds from sale of businesses and
assets................................... 86 13 13 83 12 13 3 1 --
Expenditures for property, plant and
equipment................................ (210) (150) (154) (209) (149) (153) (1) (1) (1)
Expenditures for equipment on operating
leases................................... (63) (18) (6) -- -- -- (63) (18) (6)
Other, net................................. 29 (3) -- 30 (5) 11 (1) 2 (11)
------- ----- ------- ------- ----- ----- ----- ----- -------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES................................... (4,552) (231) (242) (4,538) (215) (234) (26) (16) (58)
------- ----- ------- ------- ----- ----- ----- ----- -------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt... 268 288 609 61 52 27 207 236 582
Payment of long-term debt.................. (112) (108) (27) (59) (18) (27) (53) (90) --
Net increase (decrease) in short-term
revolving credit facilities.............. 1,945 143 (1,085) 2,803 (21) (33) (858) 164 (1,052)
Capital contributions...................... -- -- -- -- -- -- 12 -- 50
Advance to capital......................... 1,400 -- -- 1,400 -- -- -- -- --
Dividends paid............................. (82) (82) (82) (82) (82) (82) -- -- --
Other, net................................. (92) -- -- (92) -- -- -- -- --
------- ----- ------- ------- ----- ----- ----- ----- -------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES................................. 3,327 241 (585) 4,031 (69) (115) (692) 310 (420)
------- ----- ------- ------- ----- ----- ----- ----- -------
Effect of foreign exchange rate changes on
cash and cash equivalents.................. (71) 5 (22) (71) 1 (21) -- 4 (1)
------- ----- ------- ------- ----- ----- ----- ----- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ (211) (148) 98 (201) (213) 74 (10) 65 24
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR....................................... 677 825 727 588 801 727 89 24 --
------- ----- ------- ------- ----- ----- ----- ----- -------
CASH AND CASH EQUIVALENTS, END OF YEAR....... $ 466 $ 677 $ 825 $ 387 $ 588 $ 801 $ 79 $ 89 $ 24
======= ===== ======= ======= ===== ===== ===== ===== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Cash Flows.
Reference is made to Note 2 for definitions of "Equipment Operations" and
"Financial Services."
53
<PAGE> 54
CNH GLOBAL N.V.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN MILLIONS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
ACCUMULATED
RETAINED OTHER
EARNINGS COMPREHENSIVE
COMMON PAID-IN UNEARNED (ACCUMULATED INCOME COMPREHENSIVE
SHARES CAPITAL COMPENSATION DEFICIT) (LOSS) TOTAL INCOME
------ ------- ------------ ------------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 $88 $1,637 $-- $(298) $ (53) $1,374
Comprehensive income:
Net income................ -- -- -- 388 -- 388 $388
Translation adjustment.... -- -- -- -- (82) (82) (82)
Pension liability
adjustment.............. -- -- -- -- 23 23 23
----
Total................ $329
====
Dividends declared.......... -- -- -- (82) -- (82)
--- ------ --- ----- ----- ------
BALANCE, DECEMBER 31, 1997 $88 $1,637 -- 8 (112) 1,621
Comprehensive income:
Net income................ -- -- -- 258 -- 258 $258
Translation adjustment.... -- -- -- -- 9 9 9
Pension liability
adjustment.............. -- -- -- -- (22) (22) (22)
----
Total................ $245
====
Dividends declared.......... -- -- -- (82) -- (82)
--- ------ --- ----- ----- ------
BALANCE, DECEMBER 31, 1998 $88 $1,637 -- 184 (125) 1,784
Comprehensive income:
Net income................ -- -- -- 148 -- 148 $148
Translation adjustment.... -- -- -- -- (162) (162) (162)
Pension liability
adjustment.............. -- -- -- -- 22 22 22
----
Total................ $ 8
====
Dividends declared.......... -- -- -- (82) -- (82)
Issuance of restricted
shares.................... -- 8 (8) -- -- --
--- ------ --- ----- ----- ------
BALANCE, DECEMBER 31, 1999 $88 $1,645 $(8) $ 250 $(265) $1,710
=== ====== === ===== ===== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Changes in Shareholders' Equity
54
<PAGE> 55
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS
CNH Global N.V. ("CNH," and formerly New Holland N.V.), is incorporated in
The Netherlands under Dutch law. CNH's equipment operations manufacture, market
and distribute a full line of agricultural and construction equipment on a
worldwide basis. CNH's financial services business offers a broad array of
financial services products, including retail financing for the purchase or
lease of new and used CNH and other manufacturers' products and other retail
financing programs. To facilitate the sale of its products, CNH offers wholesale
financing to dealers and equipment rental yards.
On November 12, 1999 ("the merger date"), New Holland N.V. ("New Holland")
acquired Case Corporation ("Case") by merging a wholly owned subsidiary of New
Holland with and into Case ("the merger"). As a result of the merger Case, as
the surviving company, became a wholly owned subsidiary of New Holland.
Effective with the closing of the merger, New Holland changed its name to CNH
Global N.V. Reference is made to Note 3, "Acquisitions of Businesses and
Investments," for further information regarding the acquisition of Case.
CNH is controlled by New Holland Holdings N.V., a wholly owned subsidiary
of Fiat S.p.A. ("Fiat"), a company organized under the laws of Italy, which
owned approximately 71.1% of the outstanding shares of CNH at December 31, 1999.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements present the operating results,
financial position and cash flows of CNH as of and for the year ended December
31, 1999. The comparability of CNH's financial position at December 31, 1999,
with the prior year is affected by the inclusion of the fair value of the Case
assets acquired and liabilities assumed. The comparability of CNH's operating
results for the year ended December 31, 1999, with the respective prior year
data, is significantly affected by (1) the year-end 1998 acquisition of O&K
Orenstein & Koppel Aktiengesellschaft ("O&K"); (2) the inclusion of Case's
results of operations from the merger date; (3) the impact of incremental
financing and other costs related to the merger; (4) the amortization of fair
value adjustments to the Case assets acquired and liabilities assumed; and (5)
the amortization of goodwill. Reference is made to Note 3, "Acquisitions of
Businesses and Investments" for further information regarding the acquisitions
of Case and O&K.
Principles of Consolidation and Presentation
The annual consolidated financial statements of New Holland were
historically prepared in accordance with International Accounting Standards or
IAS. CNH has prepared the accompanying consolidated financial statements in
accordance with generally accepted accounting principles in the United States or
U.S. GAAP, and certain reclassifications have been made to conform the
historical financial statements to the CNH presentation. The accompanying
financial statements reflect the historical operating results of CNH, including
the results of operations of Case since the merger date. CNH has prepared its
consolidated financial statements in U.S. dollars and, unless otherwise
indicated, all financial data set forth in these financial statements is
expressed in U.S. dollars. The financial statements include the accounts of
CNH's majority-owned subsidiaries, except where control is expected to be
temporary, and reflect the interests of the minority owners of the subsidiaries
that are not fully owned for the periods presented, as applicable. The financial
statements reflect the consolidated results of CNH and also include, on a
separate and supplemental basis, the consolidation of CNH's equipment operations
and financial services operations as follows:
Equipment Operations - The financial information captioned "Equipment
Operations" reflects the consolidation of all majority-owned subsidiaries except
for CNH's financial services business. CNH's financial
55
<PAGE> 56
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
services business has been included using the equity method of accounting
whereby the net income and net assets of CNH's financial services business are
reflected, respectively, in "Equity in income of unconsolidated subsidiaries and
affiliates - Financial Services" in the accompanying Statements of Income, and
in "Investment in Financial Services" in the accompanying Balance Sheets.
Financial Services - The financial information captioned "Financial
Services" reflects the consolidation of CNH's credit operations.
All significant intercompany transactions, including activity within and
between "Equipment Operations" and "Financial Services," have been eliminated in
deriving the consolidated financial data.
Investments in unconsolidated subsidiaries and affiliates that are at least
20% owned, or where CNH exercises significant influence, are accounted for using
the equity method. Under this method, the investment is initially recorded at
cost and is increased or decreased by CNH's proportionate share of the entity's
respective profits or losses, and decreased by amortization of any related
goodwill. Dividends received from these entities reduce the carrying value of
the investments. Investments wherein CNH owns less than 20% and where CNH does
not exercise significant influence are stated at lower of cost or net realizable
value.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reported period. Actual results could differ
from those estimates.
Revenue Recognition
Sales to dealers are recorded at the time of shipment to those dealers. In
accordance with standard dealer terms, all shipments are final and irrevocable,
with the risks and rewards of ownership passing to the dealer at the time of
shipment. CNH grants certain sales incentives to stimulate sales of CNH products
to retail customers. The expense for such incentive programs is recorded as a
deduction in arriving at net sales at the time of sale to the dealer.
To facilitate the sale of its products, CNH offers wholesale financing to
its dealers. Under terms of most dealer agreements, wholesale notes receivable
are generally interest free for periods ranging from three to twelve months,
after which interest is based on market rates. During these interest-free
periods, CNH bears the cost of financing, and such costs are provided for at the
time of sale.
Financial Services records earned finance charges (interest income) on
retail and other notes receivables and finance leases using the simple interest
method.
Modification Programs and Warranty Costs
The costs of major programs to modify products in the customer's possession
are accrued when these costs can be identified and quantified. Normal warranty
costs are recorded at the time of sale.
Advertising
CNH expenses advertising costs as incurred. Advertising expense totaled $51
million, $48 million and $46 million, for the years ended December 31, 1999,
1998 and 1997, respectively.
56
<PAGE> 57
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Research and Development
Research and development costs are expensed as incurred.
Software Developed for Internal Use
CNH defines internal-use software as software acquired or internally
developed or modified solely to meet the internal needs of CNH. Internal and
external costs incurred during the preliminary project stage are expensed as
incurred. Capitalization of such costs begins upon completion of the preliminary
project stage and upon management's authorization and commitment to fund the
software project, and capitalization ceases at the point at which the computer
software project is substantially complete and the software is ready for its
intended use. Internal and external costs for data conversion, training and
maintenance are expensed as incurred, and overhead costs are not capitalized.
The capitalized costs of software acquired or developed for internal use are
amortized on a straight-line basis over the useful life of the software,
generally not exceeding 5 years.
Foreign Currency Translation
CNH's non-U.S. subsidiaries and affiliates maintain their books and
accounting records using local currency as the functional currency, except for
those operating in hyperinflationary economies. Assets and liabilities of
non-U.S. subsidiaries are translated into U.S. dollars at period-end exchange
rates, and net exchange gains or losses resulting from such translation are
included in "Accumulated other comprehensive income (loss)" in the accompanying
Balance Sheets. Income and expense accounts of non-U.S. subsidiaries are
translated at the average exchange rates for the period, and gains and losses
from foreign currency transactions are included in net income in the period
during which they arise. The U.S. dollar is used as the functional currency for
subsidiaries and affiliates operating in highly inflationary economies for which
both translation adjustments and gains and losses on foreign currency
transactions are included in the determination of net income in the period
during which they arise.
As a result of changes in Brazil's three-year inflation index, CNH ceased
applying highly inflationary accounting for its Brazilian operations effective
January 1, 1998. Through 1997, CNH reported its Brazilian operations as highly
inflationary, and adjustments resulting from the translation of Brazil's
pre-1998 financial statements are reflected in the accompanying Statements of
Income.
The Brazilian Real was significantly devalued against the U.S. dollar
during the first quarter of 1999. As a result of its unhedged foreign exchange
exposure in its Brazilian companies, CNH recorded a net exchange loss of
approximately $15 million. Also in the first quarter of 1999, CNH reorganized
its corporate activities for tax and treasury planning purposes and transferred
U.S. dollar deposits to a foreign subsidiary with Euro functional currency. As a
result of the translation of the monetary asset described above during this
period, an exchange gain of approximately $30 million was recognized. The
aforementioned net foreign exchange gains and losses are reflected in "Other,
net" in the accompanying Statements of Income.
Accounting Pronouncements
Effective January 1, 1999, CNH adopted Statement of Position ("SOP") No.
98-5, "Reporting on the Costs of Start-Up Activities." This statement requires
costs of start-up activities and organizational costs to be expensed as
incurred. CNH's accounting for the costs of start-up activities is consistent
with the guidelines established in the SOP and, as a result, the adoption of
this statement had no effect on CNH's financial position or results of
operations.
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This
57
<PAGE> 58
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The required adoption of this statement
was extended to January 1, 2001, by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133 - an Amendment of FASB Statement No. 133," although earlier
application is permitted. CNH is evaluating the impact of adopting SFAS No. 133.
Cash and Cash Equivalents
Cash equivalents are comprised of all highly liquid investments with an
original maturity of three months or less. Cash equivalents also include amounts
deposited with affiliates, principally Fiat and its affiliates, which are
repayable to CNH upon one day's notice. The carrying value of cash equivalents
approximates fair value because of the short maturity of these investments.
Receivables
Receivables are recorded at face value, net of allowances for doubtful
accounts.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost
is determined by the first-in, first-out (FIFO) method. The cost of finished
goods and work in progress includes the cost of raw materials, other direct
costs and production overheads. Net realizable value is the estimate of the
selling price in the ordinary course of business, less the cost of completion
and selling. Provision is made for obsolete and slow-moving inventories.
Equipment on Operating Leases
Financial Services purchases equipment that is leased to retail customers
under operating leases from dealers. Income from operating leases is recognized
over the term of the lease. Financial Services' investment in operating leases
is based on estimated residual values of the leased equipment, which are
calculated at the lease inception date. Realization of the residual values is
dependent on Financial Services' future ability to market the equipment under
the then prevailing market conditions. Although realization is not assured,
management believes that it is more likely than not that the estimated residual
values will be realized. Each of these assets is depreciated on a straight-line
basis over a period of time consistent with the term of the lease. Expenditures
for maintenance and repairs are the responsibility of the lessee.
Goodwill and Intangibles
Goodwill represents the excess of the purchase price paid plus the
liabilities assumed over the fair value of the tangible and identifiable
intangible assets purchased. Goodwill is amortized on a straight-line basis over
10 to 30 years. Goodwill relating to acquisitions of unconsolidated subsidiaries
and affiliates is included in "Investments in unconsolidated subsidiaries and
affiliates" in the accompanying Balance Sheets, and the related amortization is
charged to "Equity in income of unconsolidated subsidiaries and affiliates" in
the accompanying Statements of Income. CNH continually evaluates whether events
and circumstances have occurred that indicate the remaining estimated useful
life of goodwill may warrant revision or that the remaining balance of goodwill
may not be recoverable. When factors indicate that goodwill should be evaluated
for possible impairment, CNH uses an estimate of the undiscounted cash flows
over the remaining life of the goodwill in measuring whether the goodwill is
recoverable.
58
<PAGE> 59
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1999 and 1998, goodwill totaled $2,723 million and $321
million, respectively, while accumulated amortization of goodwill was $109
million and $89 million at those respective dates. Amortization expense totaled
$20 million, $10 million and $8 million for the years ended December 31, 1999,
1998 and 1997, respectively.
Negative goodwill represents the excess of the fair value of the tangible
and identifiable intangible assets purchased, with the fair value of non-current
assets having been reduced to zero, over the purchase price paid plus
liabilities assumed. Negative goodwill is being amortized on a straight-line
basis over approximately 3 years. At December 31, 1999 and 1998, negative
goodwill, net of accumulated amortization, totaled $72 million and $87 million,
respectively.
Intangibles consist primarily of acquired dealer network, trademarks,
product drawings and patents, and are being amortized on a straight-line basis
over 5 to 30 years. At December 31, 1999 and 1998, intangibles, net of
accumulated amortization, totaled $881 million and $18 million, respectively.
Amortization expense totaled $6 million for the year ended December 31, 1999,
and totaled $7 million for each of the years ended December 31, 1998 and 1997.
Reference is made to Note 3, "Acquisitions of Businesses and Investments,"
for further information regarding goodwill and intangibles.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated
depreciation. Expenditures for improvements that increase asset values and
extend useful lives are capitalized. Expenditures for maintenance and repairs
are expensed as incurred. Depreciation is provided on a straight-line basis over
the estimated useful lives of the respective assets as follows:
<TABLE>
<S> <C>
Buildings and improvements........................ 8 - 40 years
Plant and machinery............................... 4 - 16 years
Other equipment................................... 3 - 12 years
</TABLE>
CNH capitalizes interest costs as part of the cost of constructing certain
facilities and equipment. CNH capitalizes interest costs only during the period
of time required to complete and prepare the facility or equipment for its
intended use. The amount of interest capitalized in 1999, 1998 and 1997 is not
significant in relation to the consolidated financial results.
Income Taxes
CNH follows an asset and liability approach for financial accounting and
reporting for income taxes. CNH recognizes a current tax liability or asset for
the estimated taxes payable or refundable on tax returns for the current year. A
deferred tax liability or asset is recognized for the estimated future tax
effects attributable to temporary differences and carryforwards. The measurement
of current and deferred tax liabilities and assets is based on provisions of the
enacted tax law; the effects of future changes in tax laws or rates are not
anticipated. The measurement of deferred tax assets is reduced, if necessary, by
the amount of any tax benefits that, based on available evidence, are more
likely than not expected to be realized.
Retirement Programs
CNH operates numerous defined benefit and defined contribution pension
plans, the assets of which are held in separate trustee-administered funds. The
pension plans are generally funded by payments from employees and CNH. The cost
of providing pension and other postretirement benefits is based upon actuarial
59
<PAGE> 60
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
valuations and is charged to income during the period of the employees' service.
The liability for termination indemnities is accrued in accordance with labor
legislation in each country where such benefits are required.
Derivatives
CNH utilizes derivative financial instruments, including interest rate
swaps, interest rate caps, treasury rate locks and foreign exchange contracts to
manage its exposure to interest rate and foreign currency exchange rate risks.
CNH does not hold or issue financial instruments for trading purposes.
Net interest to be paid or received under interest rate hedges is accrued
and recognized as an adjustment to interest expense. The costs of interest rate
hedges, as well as gains or losses on terminated interest rate swap and cap
agreements, are deferred and charged to interest expense over the shorter term
of the remaining contractual life of the agreement or the remaining term of the
underlying debt.
Foreign exchange contracts, which effectively meet risk reduction and
correlation criteria, are accounted for using hedge accounting. Under this
method, gains and losses are recognized in income and offset the foreign
exchange gains and losses on the related transactions. Contracts that do not
meet the risk reduction and correlation criteria are recorded at fair value with
the unrealized gain or loss included in "Other, net" in the accompanying
Statements of Income. If a foreign exchange contract hedging a net investment in
a foreign subsidiary is terminated, the gain or loss is recognized in other
comprehensive income, net of tax, consistent with the accounting treatment of
the hedged item. If a transactional hedge is terminated, the gain or loss is
recognized in income.
Reference is made to Note 14, "Financial Instruments," for further
information regarding CNH's use of derivative financial instruments.
Restructuring
CNH records restructuring liabilities at the time management approves and
commits CNH to a restructuring plan that identifies all significant actions to
be taken and the expected completion date of the plan. The restructuring
liability includes those restructuring costs that (1) can be reasonably
estimated, (2) are not associated with or do not benefit activities that will be
continued, and (3) are not associated with or are not incurred to generate
revenues after the plan's commitment date. Restructuring costs are incurred as a
direct result of the plan and (1) are incremental to other costs incurred by CNH
in the conduct of its activities prior to the commitment date, or (2) existed
prior to the commitment date under a contractual obligation that will either
continue after the exit plan is completed with no economic benefit to the
enterprise or reflect a penalty to cancel a contractual obligation. Reference is
made to Note 4, "Restructuring," for further information regarding CNH's
restructuring programs.
NOTE 3: ACQUISITIONS OF BUSINESSES AND INVESTMENTS
Case
On November 12, 1999, New Holland acquired Case for $4.6 billion in cash,
including related costs and expenses, pursuant to an agreement and plan of
merger dated as of May 15, 1999, by and among Case, New Holland, the merging
subsidiary and Fiat. As a result of the merger Case, as the surviving company,
became a wholly owned subsidiary of New Holland. Effective with the closing of
the merger, New Holland changed its name to CNH. CNH financed the merger with
total borrowings of $3.0 billion under short-term credit facilities, an advance
to capital of $1.4 billion from New Holland Holdings N.V. and available cash of
$200 million. Reference is made to Note 11, "Principal Shareholder's Advance to
Capital."
60
<PAGE> 61
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The merger was accounted for as a purchase and, accordingly, the
accompanying consolidated financial statements include the results of operations
of Case as of the merger date. Case engages in two types of operations. Case's
equipment operations manufacture, market and distribute a full line of
agricultural equipment and light- to medium-sized construction equipment on a
worldwide basis. Case's financial services business provides financing for
retail installment sales contracts and leases, commercial lending within the
equipment industry, multiple lines of insurance products and offers a
private-label credit card.
The total purchase price of $4.6 billion was allocated to the assets and
liabilities of Case based upon their respective fair values, including
identifiable intangibles consisting of acquired trademarks, dealer networks and
product engineering drawings, with the remainder allocated to goodwill. The
purchase price paid plus the liabilities assumed exceeded the fair value of the
tangible and identifiable intangible assets purchased by $2,400 million, on a
preliminary basis. The goodwill associated with Case's equipment operations of
$2,271 million and Case's financial services business of $129 million is being
amortized on a straight-line basis over 30 and 20 years, respectively. The fair
value adjustments to Case's historical balance sheet were as follows (in
millions):
<TABLE>
<CAPTION>
PURCHASE
PRICE
ALLOCATION
----------
<S> <C>
Net assets at historical cost*.............................. $2,057
Fair value adjustments:
Identifiable intangibles.................................. 817
Property, plant and equipment............................. 222
Inventory................................................. 40
Elimination of historical goodwill........................ (292)
Deferred income taxes..................................... (241)
Pension and postretirement................................ (180)
Restructuring liability related to the Case business...... (90)
Accounts and notes receivable............................. (29)
Other, net................................................ (104)
------
2,200
Goodwill.................................................... 2,400
------
Total............................................. $4,600
======
</TABLE>
- ------------
* Includes liabilities assumed of $6,622 million.
As CNH finalizes its merger-related restructuring plans during 2000, CNH
anticipates that significant additional adjustments will be made to goodwill as
additional liabilities are recorded for the restructuring of Case's operations.
61
<PAGE> 62
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CNH GLOBAL N.V.
PRO FORMA STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
CNH has prepared the following unaudited pro forma income statements to
illustrate the estimated effects of the acquisition of Case by New Holland as if
this transaction had occurred as of the beginning of each of the periods
presented. The pro forma data reflects the impact of the fair market value
adjustments to the Case assets and liabilities acquired, as well as incremental
interest expense related to the merger financing. These adjustments are being
amortized over the periods estimated to be benefited and primarily include
additional depreciation of fixed assets and the amortization of the fair value
adjustments for acquired receivables and inventories, identifiable intangibles
and goodwill.
<TABLE>
<CAPTION>
CONSOLIDATED
------------------
1999 1998
------- -------
<S> <C> <C>
Revenues
Net sales............................................ $ 9,929 $11,212
Finance and interest income.......................... 744 648
------- -------
Total.................................................. 10,673 11,860
------- -------
Costs and Expenses
Cost of goods sold................................... 8,320 9,088
Selling, general and administrative.................. 1,315 1,242
Research, development and engineering................ 357 376
Restructuring charge................................. 19 172
Interest expense..................................... 794 718
Other, net........................................... 150 183
------- -------
Total.................................................. 10,955 11,779
------- -------
Equity in income of unconsolidated subsidiaries and
affiliates:
Equipment Operations................................. 1 9
------- -------
Income (loss) before taxes and minority interest....... (281) 90
Income tax provision (benefit)......................... (97) 44
Minority interest...................................... 4 5
------- -------
Net income (loss)...................................... $ (188) $ 41
======= =======
Earnings per share:
Basic................................................ $ (1.26) $ 0.28
======= =======
Diluted.............................................. $ (1.26) $ 0.28
======= =======
</TABLE>
CNH has presented this unaudited pro forma financial data for illustrative
purposes only. This pro forma data is based on an allocation of the purchase
price and is not necessarily indicative of (1) the results of operations that
would have occurred had the transaction been effective as of the beginning of
each of the years presented, or (2) the results of operations that CNH will
attain in the future. In addition, the pro forma financial data does not reflect
any synergies or cost savings that may occur as a result of the merger.
The pro forma financial data does not include the impact of any regulatory
divestitures as required by the European Commission or the U.S. Department of
Justice pursuant to the merger. In approving the merger, a number of competitive
concerns related to the combined operations of Case and New Holland in specified
62
<PAGE> 63
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
product lines and markets were identified. These competitive concerns have been
addressed and Case and New Holland have committed to a number of actions,
including divestiture of the following product lines and facilities:
- Case's CX and MXC product lines and the Doncaster, United Kingdom, plant
in which they are assembled;
- New Holland's Laverda combine harvester product line (excluding hillside
models) and the Breganze, Italy, facility in which they are made;
- Case's large square balers assembled in Neustadt, Germany;
- Case's Fermec brand loader/backhoe and industrial tractor product lines
and the Fermec manufacturing plant in Manchester, United Kingdom;
- Case's ownership interest in Hay & Forage Industries in Hesston, Kansas,
a 50% joint venture with AGCO Corporation that produces hay and forage
implements; and
- New Holland's Versatile four-wheel drive and Genesis two-wheel drive
tractor lines, along with the Winnipeg, Canada, plant in which they are
made.
In addition, to address specific market issues in Austria, the parties have
agreed to license or build the Steyr model M-948 and M-958 (and equivalent Case
IH models) for sale by a third party.
In the opinion of management, the impact of these divestiture actions is
not material to the overall pro forma results of operations of CNH.
O&K
On December 22, 1998, CNH acquired 75.0001% of the outstanding shares of
O&K, a German manufacturer of hydraulic excavators and other construction
equipment, for a purchase price of $15 million. The terms of the acquisition,
which was accounted for using the purchase method of accounting, included
certain contingent considerations, some of which were based on the audited net
equity of O&K at December 31, 1998. Based on the initial purchase consideration,
the acquisition of O&K resulted in an excess of the fair market value of the net
assets acquired over the purchase cost of approximately $87 million. The
estimated fair market value of the assets acquired and liabilities assumed have
been included in the accompanying Balance Sheets as of December 31, 1998. The
results of operations of O&K have been included in the accompanying Statements
of Income from January 1, 1999, as O&K's results of operations from the date of
acquisition to December 31, 1998, were not significant.
The final determination of the net equity of O&K did not result in any
significant adjustments to the purchase consideration. However, in December
1999, the excess of the net assets acquired was adjusted to reflect the reversal
of $26 million of the $29 million restructuring reserves included in the initial
purchase price allocation, as the finalization of the underlying restructuring
plan was not achieved within one year from the date of the O&K acquisition.
Reference is made to Note 4, "Restructuring," for further information regarding
CNH's restructuring programs.
Effective August 15, 1999, CNH entered into a domination agreement in
connection with its acquisition of O&K. This agreement allows CNH to freely run
the affairs of O&K without legal restrictions from the minority shareholders. In
order to effect the domination agreement, CNH agreed to make a minimum
guaranteed dividend payment of DM 0.5 per share to the minority shareholders in
each year in which the agreement remains effective. CNH also agreed to provide
the minority shareholders protection against losses incurred by O&K during the
effective period of the domination agreement. Concurrent with the agreement, CNH
commenced a tender offer to acquire all of the outstanding shares not presently
owned at a price of DM 31 per share. This price may be contested by any
shareholder in the court of law and, if successful, CNH may be obliged to offer
a higher price to all minority shareholders, including those who previously
tendered
63
<PAGE> 64
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
their shares at the lower price. As a result of the above, CNH increased its
ownership interest in O&K to approximately 90% at December 31, 1999.
Other
On September 29, 1999, CNH's joint venture in China, Harbin New Holland
Beidahuang Tractor Ltd., received its business license from Heilongjiant State
Administration for Industry and Commerce of the People's Republic of China. The
license grants the joint venture full permission to begin operations and conduct
business in the People's Republic of China. New Holland owns approximately 70%
of the joint venture.
On December 23, 1998, CNH acquired all the voting shares of its
agricultural equipment distributor in Argentina, Inchcape Argentina S.A.
(including its wholly owned subsidiary, Agrotecnia S.A., collectively
"Inchcape"), at a cost of approximately $11 million. The acquisition has been
accounted for as a purchase and, accordingly, the assets and liabilities of
Inchcape are included in the accompanying Balance Sheets as of December 31,
1998. The results of operations of Inchcape have been included in the
accompanying Statements of Income from January 1, 1999, as Inchcape's results of
operations from the date of acquisition to December 31, 1998, were not
significant. The excess of the purchase price over the fair market value of the
net assets acquired was approximately $3 million.
On September 30, 1998, CNH acquired an additional 4% of the voting shares
of Flexi-Coil Ltd., a Canadian manufacturing company, at a cost of approximately
$6 million. On September 30, 1997, CNH acquired an initial 35% interest in
Flexi-Coil for approximately $55 million. These investments were accounted for
as purchases, and the allocation of the combined purchase price resulted in
goodwill of approximately $57 million. Also see Note 24, "Subsequent Events."
On July 29, 1998, CNH acquired approximately 91% of the voting shares of
Bizon Sp.zo.o. ("Bizon"), a Polish manufacturer of combine harvesters, at a cost
of approximately $33 million. The acquisition was accounted for as a purchase,
and the excess of the purchase price over the fair market value of the net
assets acquired resulted in goodwill of approximately $18 million. Bizon had
sales of approximately $38 million (unaudited) in 1998. In March 1999, CNH
completed the acquisition of the remaining ownership interests in Bizon.
On June 22nd and July 2nd of 1998, CNH acquired 37.3% and 0.9%,
respectively, of the shares in Al-Ghazi Tractors Limited, a tractor
manufacturing joint venture operation in Pakistan, at a total cost of
approximately $12 million. The acquisition was accounted for as a purchase, and
the excess of the purchase price over the fair market value of the net assets
acquired resulted in goodwill of approximately $6 million.
On June 4, 1998, CNH increased its stake in Turk Traktor Ve Ziraat
Makineleri A.S. ("Turk Traktor"), CNH's manufacturing joint venture with the Koc
Group in Turkey, from 25.0% to 37.5%. CNH also acquired 37.5% of Trakmak Traktor
Ve Ziraat Makineleri Ticaret A.S. ("Trakmak Tractor"), a leading Turkish
distributor of agricultural equipment. The combined cost of these investments
was approximately $51 million. These acquisitions were accounted for using the
purchase method of accounting and, accordingly, the excess of the purchase price
over the estimated fair market value of the net assets acquired resulted in
goodwill of approximately $24 million.
NOTE 4: RESTRUCTURING
1998 Restructuring Activity
In 1998, CNH reviewed its manufacturing, selling and administrative
processes in an effort to strengthen its competitive position and to better
align its operations in response to current economic and market
64
<PAGE> 65
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
conditions. As a result, CNH announced a pretax restructuring charge of $40
million for severance and other costs related to headcount reductions. CNH
refers to these actions as the 1998 restructuring program.
The 1998 restructuring program included termination costs to eliminate
approximately 420 salaried and 600 hourly positions. These termination payments
included the cost of severance and contractual benefits in accordance with
collective bargaining agreements and CNH policy, and also included costs for
outplacement services, medical and supplemental vacation and retirement
payments.
In connection with the 1998 acquisition of O&K, CNH recorded additional
restructuring reserves of approximately $29 million for employee and dealer
termination costs. These costs were recorded in conjunction with the allocation
of the initial O&K purchase price.
1999 Restructuring Activity
In conjunction with the merger, CNH's management is in the process of
assessing and formulating a plan to integrate the operations of the Case and New
Holland businesses. CNH refers to these adjustments as the 1999 restructuring
program.
As part of its merger integration, CNH is evaluating the divestiture or
closure of approximately 20% of its manufacturing locations, as well as the
closure of approximately one-third of its 45 parts depots. Through the
consolidation of all functional areas, including the impact of divestiture
actions required by the European and U.S. regulatory agencies pursuant to the
merger, CNH expects to reduce its worldwide workforce by approximately 20%, or
7,000 people, by 2002. The 1999 restructuring program takes into consideration
duplicate capacity and other synergies including purchasing and supply chain
management, research and development and selling, general and administrative
functions.
As of December 31, 1999, CNH had recorded $90 million in merger-related
restructuring reserves for severance and other costs associated with identified
headcount reductions as part of CNH's initial plan to integrate the Case
operations. These costs were recorded in conjunction with the allocation of the
initial Case purchase price.
The $90 million merger-related restructuring reserve was determined based
on formal plans approved by CNH's management using the best information
available at the time. The amounts that CNH may ultimately incur may change as
the balance of CNH's merger-related initiatives to integrate the Case and New
Holland businesses are executed. As management completes and commits to
additional activities of the plan, CNH anticipates that it will record
additional restructuring reserves as an adjustment to goodwill for identified
actions relative to the Case business. CNH has also announced that it will incur
restructuring charges, beginning in 2000, to exit certain other activities and
to further restructure CNH operations related to the New Holland business.
In 1999, CNH also recorded additional restructuring charges of $19 million
related to the remaining headcount actions contemplated under the 1998
restructuring program. These charges primarily represent severance and other
related costs for the elimination of approximately 340 of the remaining salaried
positions under the original plan.
65
<PAGE> 66
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the CNH restructuring activities for the
years ended December 31, 1998 and 1999 (in millions):
<TABLE>
<CAPTION>
1998 ACTIVITIES
--------------------------------------------------------------------
BALANCE AT BALANCE AT
DECEMBER 31, RESERVES CHANGES IN DECEMBER 31,
1997 ADDITIONS UTILIZED* ESTIMATES 1998
------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Severance and other employee-related
costs................................... $18 $67 $(14) $-- $71
Costs related to
closing/selling/downsizing existing
facilities.............................. -- 2 (2) -- --
--- --- ---- --- ---
Total restructuring................ $18 $69 $(16) $-- $71
=== === ==== === ===
</TABLE>
<TABLE>
<CAPTION>
1999 ACTIVITIES
--------------------------------------------------------------------
BALANCE AT BALANCE AT
DECEMBER 31, RESERVES CHANGES IN DECEMBER 31,
1998 ADDITIONS UTILIZED* ESTIMATES 1999
------------ --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Severance and other employee-related
costs................................... $71 $ 19 $(52) $(26) $ 12
Case purchase accounting reserves......... -- 90 -- -- 90
--- ---- ---- ---- ----
Total restructuring................ $71 $109 $(52) $(26) $102
=== ==== ==== ==== ====
</TABLE>
- ------------
* Includes currency translation.
In 1999, CNH expended $52 million for severance costs as contemplated under
its restructuring programs. In 1999, CNH reversed $26 million of purchase
accounting reserves as CNH was unable to complete the required actions within
one year of the O&K acquisition. The reversal of the $26 million restructuring
reserve was recorded against the initial O&K purchase accounting goodwill.
The $90 million for severance and other employee-related costs established
as part of the merger primarily includes the cash severance costs to reduce
approximately 1,650 Case personnel in conjunction with CNH's integration
activities. These termination payments include the cost of severance and
contractual benefits in accordance with collective bargaining arrangements and
CNH policy, and also include costs for outplacement services, medical,
supplemental unemployment and supplemental vacation and retirement payments. As
of February 29, 2000, CNH had terminated approximately 350 people related to
this action.
The specific restructuring measures and associated estimated costs were
based on management's best business judgment under prevailing circumstances.
Management believes that the restructuring reserve balance of $102 million at
December 31, 1999, is adequate to carry out the restructuring activities as
outlined above, and CNH anticipates that all actions will be completed by
December 31, 2000. As prescribed under U.S. GAAP, if future events warrant
changes to the reserve, such adjustments will be reflected in the applicable
statements of income as "Restructuring charges," or in the applicable balance
sheets as an adjustment to goodwill, as appropriate. CNH expects to fund the
cash requirements of its restructuring activities with cash flows from
operations and additional borrowings under CNH's existing credit facilities.
66
<PAGE> 67
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5: INVENTORY
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Raw materials.......................................... $ 350 $ 227
Work-in-process........................................ 332 286
Finished goods......................................... 1,740 999
------- -------
Total inventories.................................... $ 2,422 $ 1,512
======= =======
</TABLE>
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Land, buildings and improvements....................... $ 800 $ 469
Plant and machinery.................................... 1,471 885
Other equipment........................................ 615 599
Construction in progress............................... 199 37
------- -------
3,085 1,990
Accumulated depreciation............................... (1,210) (1,266)
------- -------
Net property, plant and equipment.................... $ 1,875 $ 724
======= =======
</TABLE>
Depreciation expense totaled $141 million, $113 million and $107 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
NOTE 7: EQUIPMENT ON OPERATING LEASES
A summary of equipment on operating leases is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Equipment on operating leases.......................... $ 577 $ 21
Accumulated depreciation............................... (20) (2)
------- -------
Net equipment on operating leases.................... $ 557 $ 19
======= =======
</TABLE>
Depreciation expense totaled $18 million and $2 million for the years ended
December 31, 1999 and 1998, respectively. CNH did not have an operating lease
program in 1997.
67
<PAGE> 68
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Lease payments owed to CNH for equipment under non-cancelable operating
leases as of December 31, 1999, are as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
2000.............................................. $ 93
2001.............................................. 55
2002.............................................. 27
2003.............................................. 13
2004.............................................. 3
2005 and thereafter............................... --
----
Total........................................... $191
====
</TABLE>
NOTE 8: INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1999 1998
----- -----
(IN MILLIONS)
<S> <C> <C>
Investments using:
Equity method.............................. $324 $213
Cost method................................ 4 2
---- ----
Total................................. $328 $215
==== ====
</TABLE>
At December 31, 1999, investments accounted for using the equity method
primarily include the following non-controlling interests:
- 39% in Flexi-Coil;
- 50% in New Holland de Mexico S.A. de C.V.;
- 37.5% in each of Turk Traktor and Trakmak Traktor;
- 50% in New Holland HFT Japan Inc.;
- 43.2% in Al-Ghazi Tractors Ltd.;
- 6.8% in ELASIS Societa Consortile per Azioni;
- 49% in New Holland Finance Ltd.;
- 50% in Hay & Forage Industries *;
- 50% in Consolidated Diesel Company;
- 50% in L&T-Case Equipment Ltd.;
- 50% in LBX Company LLC; and
- 50% in Case Credit Europe S.A.S.
- ------------
* To be divested pursuant to the merger to comply with European and U.S.
regulatory authorities.
In addition, CNH has various ownership interests in dealer development
companies. Dealer development companies are legal entities in North America
through which approved dealer candidates purchase a CNH dealership over a fixed
period of years.
68
<PAGE> 69
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On January 4, 2000, CNH completed the acquisition of the remaining 61%
ownership interest in Flexi-Coil. Reference is made to Note 24, "Subsequent
Events," for further information regarding the Flexi-Coil acquisition.
The carrying costs of these investments are included in "Investments in
unconsolidated subsidiaries and affiliates" in the accompanying Balance Sheets
and include goodwill of approximately $70 million and $75 million at December
31, 1999 and 1998, respectively.
NOTE 9: SHORT-TERM DEBT
CNH has various lines of credit and liquidity facilities that include
borrowings under both committed credit facilities and uncommitted lines of
credit. CNH also has the ability to issue commercial paper in the United States,
Canada, Europe and Australia. Under the terms of CNH's commercial paper
programs, the principal amount of the commercial paper outstanding, combined
with the amounts outstanding under the committed credit facilities, cannot
exceed the total amount available under the committed credit facilities.
CNH has historically obtained, and may continue to obtain, a significant
portion of its external financing from Fiat, on terms that CNH believes are at
least as favorable as those available from unaffiliated third parties. CNH pays
a guarantee fee of 0.0625% per annum on the average amount outstanding under
facilities guaranteed by Fiat. Fiat has stated that it intends to continue the
guarantee for as long as it maintains control of CNH and, in any event, until
December 31, 2003. Fiat has committed that it will not terminate these
facilities after this period expires without first giving CNH a reasonable
period to secure alternative financing.
The following credit facilities were available to CNH at December 31, 1999:
- - $2.3 billion in revolving credit facilities that expire in August 2001;
- - a $1.0 billion revolving credit facility with an affiliate of Fiat, expiring
in October 2001;
- - a $500 million revolving credit facility, guaranteed by an affiliate of Fiat,
that expires December 31, 2001;
- - a total of $828 million in committed lines of credit expiring between 2000 and
2003;
- - a total of $1,105 million in committed lines of credit expiring between 2000
and 2004, and guaranteed by an affiliate of Fiat;
- - a 364-day, $750 million U.S. asset-backed commercial paper liquidity facility
that expires in August 2000; and
- - a total of $1.7 billion in uncommitted credit facilities, including $759
million that are guaranteed by an affiliate of Fiat.
At December 31, 1999, CNH had approximately $5.5 billion available under
its total lines of credit. In addition to these credit facilities, CNH also had
at December 31, 1999, (1) a 364-day, $2.4 billion term loan facility, and (2) a
364-day, $600 million term loan, with an affiliate of Fiat. These facilities,
which were established in October 1999 in conjunction with the financing of the
Case acquisition, were fully utilized at December 31, 1999.
Certain of CNH's short-term credit facilities are also available to other
members of the Fiat Group, and borrowings by them against these lines of credit
reduce the amount available to CNH.
69
<PAGE> 70
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of short-term debt is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1999 1998
------ ------
<S> <C> <C>
Equipment Operations
Credit agreements*........................................ $2,644 $ 185
Commercial paper.......................................... 316 --
Affiliated short-term debt................................ 861 214
Short-term debt payable to Financial Services............. 58 154
------ ------
Total short-term debt - Equipment Operations...... 3,879 553
------ ------
Financial Services
Credit agreements*........................................ 134 606
Commercial paper.......................................... 459 335
Commercial paper liquidity facility....................... 184 --
Affiliated short-term debt................................ 355 342
Short-term debt payable to Equipment Operations........... 28 351
------ ------
Total short-term debt - Financial Services........ 1,160 1,634
Less intracompany short-term debt........................... (86) (505)
------ ------
Total short-term debt............................. $4,953 $1,682
====== ======
</TABLE>
- ------------
* The credit agreements for both Equipment Operations and Financial Services
include borrowings under both committed credit facilities and uncommitted
lines of credit and similar arrangements.
The weighted-average interest rates on consolidated short-term debt at
December 31, 1999 and 1998, were 6.37% and 5.69%, respectively. At December 31,
1999, the unused portion of the committed credit facilities was $3,679 million,
and the unused portion of the asset-backed commercial paper liquidity facility
was $586 million. At December 31, 1998, the unused portion of the committed
credit facilities was $685 million.
At the option of CNH, borrowings under the nonaffiliated third party
revolving credit facilities bear interest at: (1) prime rate; (2) LIBOR, plus an
applicable margin; or (3) banker's bills of acceptance rates, plus an applicable
margin. Borrowings may be obtained in U.S. dollars and certain other foreign
currencies. Certain of CNH's revolving credit facilities contain restrictive
covenants that require the maintenance of certain financial conditions,
including a maximum debt to capitalization ratio and a minimum net worth, and
also impose restrictions on certain indebtedness, liens on assets and ownership
of certain subsidiaries. At December 31, 1999, CNH was in compliance with all
debt covenants. The nonaffiliated third party credit facilities generally
provide for facility fees on the total commitment, whether used or unused, and
also provide for annual agency fees to the administrative agents for the
facilities.
70
<PAGE> 71
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10: LONG-TERM DEBT
A summary of long-term debt is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1999 1998
------ ----
<S> <C> <C>
Equipment Operations
Notes:
Payable in 2003, interest rate of 6.25%................. $ 289 $ --
Payable in 2005, interest rate of 7.25%................. 297 --
Payable in 2016, interest rate of 7.25%................. 288 --
Affiliated long-term debt, interest rate of 5.12% and
6.12%................................................... 79 46
Long-term portion of borrowings under revolving credit
facilities, average interest rate of 5.7%............... 55 --
Other debt................................................ 90 79
------ ----
1,098 125
Less-current maturities................................... (25) (30)
------ ----
Total long-term debt - Equipment Operations........ 1,073 95
------ ----
Financial Services
Notes:
Payable in 2000, interest rate, of 6.90%, floating...... 100 --
Payable in 2001, interest rate of 6.125%................ 84 --
Payable in 2002, interest rate of 6.17% and 5.07%....... 82 82
Payable in 2003, interest rate of 6.125%................ 200 --
Payable in 2007, interest rate of 6.75%................. 150 --
Medium-term notes due 2001 - 2002, weighted-average
interest rate of 5.98%.................................. 1,490 --
Long-term portion of borrowings under committed revolving
credit facility, weighted-average interest rate of 6.25%
and 5.52%............................................... 500 500
Long-term portion of borrowings under commercial paper
programs, weighted-average interest rate of 5.87%....... 320 --
Affiliated long-term debt, interest rate of 5.67% and
5.96%................................................... 396 304
Intercompany debt with Equipment Operations, interest
rate of 7.44%........................................... 14 --
Other debt................................................ 138 --
------ ----
3,474 886
Less - current maturities................................. (105) (53)
------ ----
Total long-term debt - Financial Services.......... 3,369 833
Less long-term debt payable to Equipment Operations....... (14) --
------ ----
Total long-term debt............................... $4,428 $928
====== ====
</TABLE>
71
<PAGE> 72
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the minimum annual repayments of long-term debt as of December
31, 1999, are as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
2001......................................... $1,251
2002......................................... 609
2003......................................... 650
2004......................................... 44
2005 and thereafter.......................... 1,874
------
Total.............................. $4,428
======
</TABLE>
CNH has entered into swap arrangements where interest and principal
exposure on a privately placed Yen-denominated bond have been swapped into U.S.
dollars, with an effective interest rate of 6.17% at December 31, 1999. The
Yen-denominated bond equivalent of $82 million was issued in October 1997 with a
five-year maturity and is guaranteed by an affiliate of Fiat.
Affiliated long-term debt relates to the long-term portion of borrowings
under the $1.0 billion committed line of credit with Fiat that expires in
October 2001.
NOTE 11: PRINCIPAL SHAREHOLDER'S ADVANCE TO CAPITAL
On November 12, 1999, New Holland Holdings N.V., the majority shareholder
of CNH, contributed $1.4 billion to CNH in the form of an advance to capital to
partially finance the merger of New Holland and Case. The terms of this advance
to capital provide that New Holland Holdings will receive common shares of CNH
in exchange for its advance at the earlier of (1) any public equity offering by
CNH, or (2) June 30, 2000. If CNH conducts a public equity offering before June
30, 2000, then New Holland Holdings will receive that number of CNH common
shares that it could have purchased with $1.4 billion at the public offering
price, less any underwriting discount. Otherwise, New Holland Holdings will
receive that number of CNH common shares that it could have purchased with $1.4
billion at a price determined by averaging the daily closing prices (after
excluding the highest and lowest prices) of CNH common shares on the New York
Stock Exchange during the 20 trading days immediately preceding June 30, 2000.
CNH may pay a discretionary return to New Holland Holdings on its advance to
capital at a maximum annual rate of 6.25% when, as and if declared by the Board
of Directors of CNH.
NOTE 12: SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION
As of December 31, 1999, CNH has 444,444,460 authorized common shares, of
which 149,660,000 shares are issued and outstanding.
During the last three years, changes in CNH Common Shares issued were as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1999 1998 1997
------- ------- -------
(SHARES ISSUED, IN THOUSANDS)
<S> <C> <C> <C>
Issued as of beginning of year............... 149,000 149,000 149,000
Issuances of CNH Common Shares:
CNH Equity Incentive Plan.................. 660 -- --
------- ------- -------
Issued as of end of year.............. 149,660 149,000 149,000
======= ======= =======
</TABLE>
72
<PAGE> 73
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Dividends of $0.55 per common share were paid in each year, and totaled $82
million for each of the years ended December 31, 1999, 1998 and 1997.
Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income (loss) as of
December 31, 1999 and 1998, are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
----- -----
<S> <C> <C>
Cumulative translation adjustment...................... $(265) $(103)
Minimum pension liability adjustment................... -- (22)
----- -----
Total........................................... $(265) $(125)
===== =====
</TABLE>
CNH Outside Directors' Compensation Plan
In 1999, CNH established the CNH Global N.V. Outside Directors'
Compensation Plan ("CNH Directors' Plan") that provides for (1) the payment of
an annual retainer fee and committee chair fee (collectively, the "Annual Fees")
to independent outside members of the Board in the form of common shares of CNH;
(2) an annual grant of options to purchase common shares of CNH; (3) an
opportunity to receive up to 50% of their Annual Fees in cash; and (4) an
opportunity to convert all or a portion of their Annual Fees into stock options.
There are one million common shares reserved for issuance under this plan.
CNH Equity Incentive Plan
In 1999, CNH established the CNH Equity Incentive Plan or CNH EIP that
provides for grants of various types of awards to officers and employees of CNH
and its subsidiaries. There are 28 million common shares reserved for issuance
under this plan. Options granted under the CNH EIP have an exercise price that
is no less than the fair market value of the common shares on the date of grant.
Certain options vest ratably over three or four years from the award date, while
certain performance-based options vest subject to the attainment of specified
performance criteria. Such performance-based options vest no later than seven
years from the award date. All options expire after ten years.
Under the CNH EIP, shares may also be granted as restricted shares. During
1999, CNH granted 660,000 restricted common shares under the CNH EIP. These
shares were granted at no cost to the employees and the shares remain subject to
restrictions for periods ranging from twelve months to seven years. Of the
restricted shares granted, 330,000 vest ratably over three years from the award
date, while the remaining 330,000 performance-based shares vest subject to the
attainment of specified performance criteria. Such performance-based shares vest
no later than seven years from the award date. The aggregate fair market value
at the date of grant for these restricted shares was $7.9 million.
Fiat Stock Option Program
CNH also participates in the stock option plan of Fiat ("Fiat Option
Program"), whereby eligible employees of Fiat and its subsidiaries may be
granted options to purchase up to 3,650,000 ordinary shares of Fiat. On March
30, 1999, the Board of Directors of Fiat approved the first granting of
1,248,000 stock options to purchase Fiat ordinary shares to eligible senior
management of Fiat and its subsidiaries. Under the terms of this first phase of
stock option issuance, referred to as Options 1999, eligible senior management
of CNH received in the aggregate, a total of 116,200 options. Such options were
granted at the price of Euro 28.45, which was the average official price on the
Milan Stock Exchange during the twenty-day period preceding the
73
<PAGE> 74
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
date of grant. The options vest 50% on April 1, 2001, and 100% on April 1, 2002,
and expire March 31, 2007. The number of options granted and the share price
above reflects a one-for-ten reverse stock split of Fiat ordinary shares that
occurred in August 1999.
SFAS No. 123 Disclosure
CNH has retained the intrinsic value method of accounting for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and, as a result, no compensation
expense for stock options was recognized. For disclosure purposes only under
SFAS No. 123, "Accounting for Stock-Based Compensation," the Black Scholes
pricing model was used to calculate the "fair value" of stock options. Based on
this model, the weighted-average fair values of stock options awarded during
1999 were $5.12, $3.58 and $11.76 per option for the CNH Directors' Plan, the
CNH EIP and Options 1999, respectively. CNH's 1999 reported net income of $148
million and basic and diluted earnings per share of $0.99 and $0.97,
respectively, are the same as the pro forma net income and earnings per share
calculations assuming the fair value of accounting for stock-based compensation
as prescribed under SFAS No.123.
The weighted-average assumptions used under the Black Scholes pricing model
were as follows:
<TABLE>
<CAPTION>
CNH FIAT
DIRECTORS' OPTION
PLAN CNH EIP PROGRAM
---------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate....................... 6.3% 6.5% 6.4%
Dividend yield................................ 4.0% 4.0% 2.0%
Stock price volatility........................ 43.0% 43.0% 31.0%
Option life (years)........................... 5.0 5.4 4.5
</TABLE>
During 1999, changes in shares subject to issuance under stock options were
as follows:
<TABLE>
<CAPTION>
CNH EIP PLAN CNH DIRECTORS' PLAN FIAT OPTION PROGRAM
----------------------- -------------------- ---------------------
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... -- N/A -- N/A -- N/A
Granted........................... 5,291,050 $13.77 18,750 $15.41 116,200 $30.72
--------- ------ -------
Forfeited......................... -- -- -- -- (13,000) $30.72
Outstanding at end of year.......... 5,291,050 $13.77 18,750 $15.41 103,200 $30.72
========= ====== =======
Exercisable at end of year.......... -- N/A -- N/A -- N/A
========= ====== =======
</TABLE>
The remaining contractual life of the options issued pursuant to the CNH
Directors' Plan and the CNH EIP is approximately ten years, while the remaining
contractual life of the options issued pursuant to the Fiat Option Program is
approximately seven years. As of December 31, 1999, there were 22,048,950 common
shares and 981,250 common shares available for issuance under the CNH EIP and
the CNH Directors' Plan, respectively.
74
<PAGE> 75
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13: ACCOUNTS AND NOTES RECEIVABLE
A summary of long-term receivables is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Wholesale notes and accounts........................... $ 2,574 $ 1,196
Retail and other notes and finance leases.............. 3,991 2,042
Bank deposits.......................................... 84 115
Other.................................................. 721 291
------- -------
Total receivables.................................... 7,370 3,644
Less-Allowance for doubtful accounts................... (197) (128)
Less-Current portion................................... (4,136) (2,057)
------- -------
Total long-term receivables, net..................... $ 3,037 $ 1,459
======= =======
</TABLE>
Repayment of wholesale receivables is required in accordance with the
standard terms of the wholesale receivable agreements, with repayment
accelerated upon the sale of the underlying equipment by the dealer.
Classification of wholesale receivables for financial statement presentation is
based on interest-bearing dates. The terms of retail and other notes and finance
leases generally range from two to six years, and interest rates on retail and
other notes and finance leases vary depending on prevailing market interest
rates and certain incentive programs offered by CNH.
At December 31, 1999, CNH had $357 million of retail notes that secure the
asset-backed commercial paper liquidity facility related to the Case business
acquired in November 1999.
Maturities of long-term receivables as of December 31, 1999, are estimated
as follows (in millions):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
2001.............................................. $1,189
2002.............................................. 667
2003.............................................. 463
2004.............................................. 308
2005 and thereafter............................... 410
------
Total long-term receivables, net................ $3,037
======
</TABLE>
It has been CNH's experience that substantial portions of retail
receivables are repaid before their contractual maturity dates. As a result, the
above table is not to be regarded as a forecast of future cash collections.
Wholesale and retail notes receivable have significant concentrations of
credit risk in the agricultural and construction business sectors. CNH typically
retains, as collateral, a security interest in the equipment associated with
wholesale and retail notes receivable.
Wholesale Receivables Securitizations
CNH has sold undivided interest in pools of U.S. and Canadian wholesale
receivables under receivable purchase agreements pursuant to privately
structured facilities. Maximum proceeds under these facilities are $650 million
for the U.S. securitization vehicle and C$200 million for the Canadian
securitization vehicle.
CNH also has, as a result of the merger, a fractional interest in certain
wholesale receivables that were sold (with limited recourse), on a revolving
basis pursuant to a privately structured facility. This facility
75
<PAGE> 76
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
consists of a five-year committed, $300 million non-renewable facility that
expires in June 2002, and a 364-day, $100 million facility that is renewable
annually at the sole discretion of the purchasers.
CNH has established reserves for estimated losses under its wholesale
receivable securitizations, and such losses are included in "Accounts and notes
receivable" on the accompanying Balance Sheets. CNH maintains a security
interest in the equipment financed by wholesale receivables such that in the
event of non-performance by the dealer, CNH can repossess the related equipment
to minimize losses.
Under these programs, CNH records a discount each time receivables are sold
to the counterparties to the facilities. This discount, which reflects the
difference between the current and future value of the receivables sold along
with related transaction expenses, is computed at the then prevailing market
rates as stated in the sale agreement.
Retail Receivables Securitizations
During 1999, CNH consummated its first sale of retail notes originated by
New Holland Credit Company to a limited-purpose business trust in the United
States. Receivables purchased by the trust were used as collateral for the
issuance of asset-backed securities (asset-backed securitizations) to outside
investors. As a result of the transaction, $1.1 billion of retail notes were
sold and CNH recorded a gain on the sale of approximately $27 million, and such
gain is recorded in "Finance and other income" in the accompanying Statements of
Income.
During 1999, Case Capital Corporation, a wholly-owned subsidiary of Case,
sold $2.1 billion of retail notes (net of unearned finance charges) to
limited-purpose business trusts in the United States and Canada. Receivables
purchased by these trusts were used as collateral for the issuance of
asset-backed securities to outside investors.
The trusts referred to above are controlled by third parties and meet
minimum equity capitalization standards, and therefore, the assets of the trusts
are not included in the financial statements of CNH. The proceeds received from
the sales of retail notes are reduced by certain amounts pursuant to recourse
provisions in the sale agreements. These reductions in cash proceeds are held in
escrow by the trusts to provide security in the event of uncollectible notes and
are released to CNH when the notes are collected. As of December 31, 1999,
approximately $176 million was held in escrow by these trusts, and such amounts
are included in "Accounts and notes receivable" in the accompanying Balance
Sheets. CNH has established reserves for estimated losses on amounts held in
escrow that are also included in "Accounts and notes receivable" in the
accompanying Balance Sheets. CNH maintains a security interest in the equipment
financed by retail notes such that in the event of non-performance by the
customer, CNH can repossess the related equipment to minimize losses.
NOTE 14: FINANCIAL INSTRUMENTS
Fair Market Value of Financial Instruments
The estimated fair market values of financial instruments that do not
approximate their carrying values in the financial statements are as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1999 1998
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Accounts and notes receivable......... $7,173 $7,207 $3,516 $3,576
Long-term debt........................ $4,428 $4,360 $ 928 $ 929
</TABLE>
76
<PAGE> 77
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of accounts and notes receivable was based on discounting
the estimated future payments at prevailing market rates. The fair value of the
interest only strip component of CNH's accounts and notes receivables was based
on loss, prepayment and interest rate assumptions approximating those currently
experienced by CNH. The fair value of fixed-rate, long-term debt was based on
the market value of debt with similar maturities and interest rates; the
carrying amount of floating-rate, long-term debt was assumed to approximate its
fair value. The fair values and carrying values of CNH's foreign exchange
forward contracts, currency options, interest rate swaps and treasury rate
locks, were not significant.
Derivatives
CNH uses derivative financial instruments to manage its interest rate and
foreign currency exposures. CNH does not hold or issue financial instruments for
trading purposes. The notional amounts of these contracts do not represent
amounts exchanged by the parties and, thus, are not a measure of CNH's risk. The
net amounts exchanged are calculated on the basis of the notional amounts and
other terms of the contracts, such as interest rates or exchange rates, and only
represent a small portion of the notional amounts. The credit and market risk
under these agreements is minimized through diversification among counterparties
with high credit ratings.
Depending on the item being hedged, gains and losses on derivative
financial instruments are either recognized in the results of operations as they
accrue or are deferred until the hedged transaction occurs. Derivatives used as
hedges are effective at reducing the risk associated with the exposure being
hedged and are designated as a hedge at the inception of the derivative
contract. Accordingly, changes in the market value of the derivative are highly
correlated with changes in the market value of the underlying hedged item at the
inception of the hedge and over the life of the hedge contract.
Foreign Exchange Contracts
CNH enters into foreign exchange hedging contracts to hedge certain
purchase commitments and loans made to foreign subsidiaries denominated in
foreign currencies. The term of these contracts is generally one year or less.
The purpose of CNH's foreign currency hedging activities is to protect CNH from
the risk that the eventual cash flows resulting from loan repayments and
inventory purchases will be adversely affected by changes in exchange rates.
The recognition of gains and losses on contracts entered into to hedge
intercompany debt are deferred and included in net income as an adjustment to
"Financial and interest income" on the date the forward contract matures. The
recognition of gains or losses on contracts entered into to hedge purchase and
sale commitments are included in net income as an adjustment to "Cost of goods
sold" as foreign exchange rates change. Gains and losses resulting from the
termination of foreign exchange contracts prior to maturity are also included in
net income.
77
<PAGE> 78
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following foreign currency exchange contracts were held by CNH to hedge
certain currency exposures. All 1999 foreign currency contracts mature in 2000,
with the exception of the swap contract described in Note 10, "Long-Term Debt,"
which matures in 2002.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1999 1998
----------------------- -----------------------
CURRENCIES TO BE CURRENCIES TO BE
RECEIVED DELIVERED RECEIVED DELIVERED
-------- --------- -------- ---------
(IN MILLIONS OF STATED CURRENCIES)
<S> <C> <C> <C> <C>
U.S. Dollar.......................... 497 214 118 122
Euro................................. 57 136 -- --
Canadian Dollar...................... 168 144 -- --
Japanese Yen......................... 11,000 -- 10,000 --
Pound Sterling....................... 6 84 -- 7
Australian Dollar.................... -- 90 -- 10
Brazilian Real....................... -- 234 -- 142
Indian Rupee......................... -- 82 -- --
Italian Lire......................... -- -- 79,841 --
Belgian Franc........................ -- -- 347 --
</TABLE>
CNH also had, at December 31, 1999, purchased options with a notional value of
$26 million and sold options with a notional value of $11 million.
Interest Rate Swaps and Forward Rate Agreements
CNH enters into interest rate swaps and forward rate agreements or FRAs, to
stabilize funding costs by minimizing the effect of potential interest rate
increases on floating-rate debt in a rising interest rate environment. Under
these agreements, CNH contracts with a counterparty to exchange the difference
between a fixed rate and a floating rate applied to the notional amount of the
swap or FRA. Swap contracts are principally between one and four years in
duration, and FRAs have starting dates within two months from the contract date
and a maturity ranging from four to six months. The differentials to be paid or
received on interest rate swap agreements and FRAs are accrued as interest rates
change and are recognized in net income as an adjustment to interest expense.
Gains and losses resulting from terminated interest rate swap agreements
and FRAs are deferred and recognized in net income over the shorter term of the
remaining contractual life of the agreement or the remaining term of the debt
underlying the agreement. If swap agreements or FRAs are terminated due to the
underlying debt being extinguished in conjunction with an asset-backed
securitization transaction or refinancing, any resulting gain or loss is
recognized in net income as an adjustment to interest expense at the time of the
termination.
The weighted-average pay and receive rates for the swaps outstanding at
December 31, 1999, were 5.74% and 5.50%, respectively, at a notional amount of
$1,711 million. The weighted-average pay and receive rates for the swaps
outstanding at December 31, 1998, were 5.89% and 5.36%, respectively, at a
notional amount of $1,296 million. At December 31, 1999, CNH had FRAs with a
notional amount of $1.1 billion with start dates in 2000, with a
weighted-average fixed rate of 6.05%.
Back-to-Back Interest Rate Caps
The asset-backed commercial paper liquidity facility (the "Liquidity
Facility") requires CNH to have interest rate cap agreements in place. Due to
the relatively high expense of obtaining such an instrument,
78
<PAGE> 79
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CNH sells an identical cap, concurrent with the cap purchase, to the same
counterparty. This effectively minimizes the overall expense to CNH, meets the
requirements of the Liquidity Facility and eliminates any risk of financial loss
on the purchased cap. The defined term of the cap is approximately 48 months.
Premiums paid for interest rate cap agreements purchased and sold are
included in "Other assets" and "Other liabilities," respectively, in the
accompanying Balance Sheets, and are amortized to interest expense over the
terms of the agreements. Amounts receivable or payable under cap agreements are
recognized in net income as adjustments to interest expense over the term of the
related debt. If interest rate cap agreements are terminated due to the
underlying debt being extinguished, any resulting gain or loss is recognized in
net income as an adjustment to "Finance and interest income" at the time of the
termination.
At December 31, 1999, CNH had a back-to-back cap at a rate of 7.00%, at a
notional amount of approximately $307 million.
Treasury Rate Lock Agreements
A Treasury rate lock is a commitment to either purchase or sell the
designated financial instrument at a future date (the determination date) for a
specified price (the reference yield). The purpose of this instrument is to
protect fixed-rate debt from fluctuations in the yield of the Treasury Note that
forms the basis of pricing the debt. As of December 31, 1999, CNH had entered
into $200 million of Treasury rate locks based on one-, two- and three-year
Treasury notes at a weighted-average yield of 6.11%.
Guarantees
At December 31, 1999, CNH had guaranteed payment and performance of
approximately $28 million, primarily related to affiliated debt, performance
bonds and letters of credit.
NOTE 15: INCOME TAXES
The sources of income before taxes are as follows (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
The Netherlands source............................... $(22) $ 13 $ 22
Foreign sources...................................... 229 400 609
---- ---- ----
Income before taxes................................ $207 $413 $631
==== ==== ====
</TABLE>
The provision for income taxes consisted of the following (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current income taxes.................................. $10 $105 $167
Deferred income taxes................................. 45 43 73
--- ---- ----
Total tax provision................................. $55 $148 $240
=== ==== ====
</TABLE>
79
<PAGE> 80
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of CNH's statutory and effective income tax
provision is as follows (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax provision at the Dutch statutory rate of 35%..... $ 72 $144 $221
Foreign income taxed at different rates.............. 6 6 15
Effect of tax loss carryforwards..................... 18 (9) (7)
Change in valuation allowance........................ (16) 24 28
Dividend withholding taxes and credits............... (3) (6) (4)
Other................................................ (22) (11) (13)
---- ---- ----
Total tax provision................................ $ 55 $148 $240
==== ==== ====
</TABLE>
During 1999, 1998 and 1997, CNH generated income in certain jurisdictions
that supported reductions in the valuation allowance and recognized losses in
certain jurisdictions that supported increases in the valuation allowance.
The components of the net deferred tax asset are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1999 1998
----- -----
<S> <C> <C>
Deferred tax assets:
Marketing and selling incentives........................ $ 204 $ 120
Bad debt reserves....................................... 52 34
Postretirement and postemployment benefits.............. 197 95
Inventories............................................. 86 53
Warranty reserves....................................... 102 50
Other reserves.......................................... 207 81
Tax loss carryforwards.................................. 568 180
Other................................................... 99 28
Less: Valuation allowance............................... (690) (269)
----- -----
Total deferred tax assets............................ 825 372
----- -----
Deferred tax liabilities:
Fixed assets basis difference/depreciation.............. 262 57
Intangibles............................................. 279 --
Inventories............................................. 36 32
Other................................................... 195 58
----- -----
Total deferred tax liabilities....................... 772 147
----- -----
Net deferred tax assets............................ $ 53 $ 225
===== =====
</TABLE>
The net deferred tax assets are reflected in the accompanying
consolidated Balance Sheets as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1999 1998
----- ----
<S> <C> <C>
Current deferred tax asset................................. $ 442 $169
Long-term deferred tax asset............................... 99 92
Current deferred tax liability............................. (3) (4)
Long-term deferred tax liability........................... (485) (32)
----- ----
Net deferred tax asset................................... $ 53 $225
===== ====
</TABLE>
80
<PAGE> 81
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CNH has net operating tax loss carryforwards in a number of foreign tax
jurisdictions within its global operations. The net tax value of these
carryforwards and the years in which they expire are as follows: $7 million in
2000; $6 million in 2001; $7 million in 2002; $11 million in 2003; $4 million in
2004 and $1 million in 2005. CNH also has net operating tax loss carryforwards
of $532 million with indefinite expiration dates. As a result of regulatory
divestitures required by the relevant authorities pursuant to the merger,
certain tax loss carryforwards related to the Case business may be at risk. The
actual risk and degree of certainty are not known or quantifiable at this time.
CNH has recorded deferred tax assets in tax jurisdictions where CNH has
been profitable as management believes it is more likely than not that such
assets will be realizable. CNH continues to have valuation reserves in certain
tax jurisdictions where net operating losses exist. Realization of these
deferred tax assets is dependent on generating future income and is thus subject
to change. Additionally, with respect to the valuation reserves recorded against
the deferred tax assets of Case, any reduction in the amounts attributable to
the pre-acquisition operations of Case will, in the future, be treated as a
reduction to the goodwill recorded in conjunction with the acquisition and will
not impact future periods' tax expense. As of December 31, 1999, the valuation
allowance that is potentially subject to being allocated to goodwill as part of
the Case merger totaled $419 million.
Effective fiscal years beginning on January 1, 1998, new tax legislation
was introduced in Italy whereby the combined tax rate was reduced from 53.2% to
41.2% or, in certain circumstances, to 31.2% under the Dual Income Tax Scheme. A
portion of the new combined tax rate, or 4.25%, is based upon an adjusted tax
base that approximates CNH's gross margin, excluding payroll costs and other
items.
At December 31, 1999, the undistributed earnings of foreign subsidiaries
totaled approximately $2,571 million. In most cases, such earnings will continue
to be reinvested. Provision has generally not been made for additional taxes on
the undistributed earnings of foreign subsidiaries. These earnings could become
subject to additional tax if they are remitted as dividends or if CNH were to
dispose of its investment in the subsidiaries. It has not been practical to
estimate the amount of additional taxes that might be payable on the foreign
earnings, and CNH believes that additional tax credits and tax planning
strategies would largely eliminate any tax on such earnings.
CNH paid cash of $99 million, $157 million and $128 million for taxes
during 1999, 1998 and 1997, respectively.
NOTE 16: EMPLOYEE BENEFIT PLANS AND POSTRETIREMENT BENEFITS
Defined Benefit and Postretirement Benefit Plans
CNH has various defined benefit plans that cover certain employees.
Benefits are based on years of service and, for most salaried employees, on
final average compensation. CNH's funding policies are to contribute to the
plans amounts necessary to, at a minimum, satisfy the funding requirements as
prescribed by the laws and regulations of each country. Plan assets consist
principally of listed equity and fixed income securities. Effective December 31,
1998, CNH adopted SFAS No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits."
CNH has postretirement health and life insurance plans that cover
substantially all of its U.S. and Canadian employees. For New Holland U.S.
salaried and hourly employees, and for Case U.S. salaried employees, the plans
cover employees retiring on or after attaining age 55 who have had at least 10
years of service with the respective company. Case Canadian salaried employees
with seven or more years of consecutive service are covered under the plans upon
retirement. For Case U.S. and Canadian hourly employees, the plans generally
cover employees who retire pursuant to their respective hourly plans. These
benefits may be subject to deductibles, copayment provisions and other
limitations, and CNH has reserved the right to change these benefits, subject to
the provisions of any collective bargaining agreement.
81
<PAGE> 82
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In connection with CNH's acquisition of O&K in December 1998, as described
in Note 3, "Acquisitions of Businesses and Investments," CNH recorded an
unfunded pension obligation of approximately $140 million related to pension
rights of non-active employees of O&K who are retired or whose employment has
been terminated and who have vested rights. The pension obligation reserve of
approximately $140 million has been calculated in accordance with German
statutory requirements. Effective January 1, 1999, CNH entered into an agreement
with the seller of O&K whereby the seller, in return for a payment of $140
million (in equivalent Deutsche Marks) from O&K, has agreed to reimburse O&K for
all future pension payments, including death benefits and medical support
liabilities and any funding obligations under the collective bargaining
agreement related to the non-active employees of O&K. An irrevocable, revolving
bank guarantee was obtained to back the seller's guarantee of the future pension
payment reimbursement.
Former parent companies of New Holland and Case have retained certain
accumulated pension benefit obligations and related assets and certain
accumulated postretirement health and life insurance benefit obligations.
The following assumptions were utilized in determining the funded status of
CNH's defined benefit pension plans:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
--------------------------------------
NEW HOLLAND CASE
----------------- -----------------
U.S. NON-U.S. U.S. NON-U.S.
(NEW HOLLAND AND CASE) PLANS PLANS PLANS PLANS
---------------------- ----- -------- ----- --------
<S> <C> <C> <C> <C>
Weighted-average discount rates............................ 7.50% 5.50% 7.50% 5.85%
Rate of increase in future compensation.................... 4.00% 3.80% N/A 4.30%
Weighted-average, long-term rates of return on plan
assets................................................... 9.00% 7.50% 9.00% 9.37%
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997
----------------- -----------------
U.S. NON-U.S. U.S. NON-U.S.
(NEW HOLLAND) PLANS PLANS PLANS PLANS
------------- ----- -------- ----- --------
<S> <C> <C> <C> <C>
Weighted-average discount rates............................ 6.50% 5.40% 7.50% 6.90%
Rate of increase in future compensation.................... 4.00% 4.00% 4.10% 6.30%
Weighted-average, long-term rates of return on plan
assets................................................... 9.00% 7.90% 9.00% 8.90%
</TABLE>
The following assumptions were utilized in determining the accumulated
postretirement benefit obligation of CNH's postretirement health and life
insurance plans:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------
1999
-------------------------------- 1998 1997
NEW HOLLAND CASE CASE ----- -----
U.S. U.S. CANADIAN U.S. U.S.
(NEW HOLLAND AND CASE) PLANS PLANS PLAN PLANS PLANS
---------------------- ----------- ----- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Weighted-average discount rates.................. 7.50% 7.50% 7.00% 6.50% 7.50%
Rate of increase in future compensation.......... 4.00% 3.00% 3.00% 4.00% 4.00%
Weighted-average, assumed health care cost trend
rate........................................... 7.50% 7.00% 10.00% 6.00% 6.80%
</TABLE>
82
<PAGE> 83
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The measurement period for CNH's defined benefit pension plans and
postretirement health and life insurance plans is January 1 through December 31.
The following depicts (in millions):
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
---------------- --------------
1999 1998 1999 1998
------- ----- ----- -----
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATIONS:
Actuarial present value of benefit obligation at beginning
of measurement period..................................... $ 912 $896 $ 345 $ 294
Service cost................................................ 18 20 6 5
Interest cost............................................... 60 60 24 21
Plan participants' contributions............................ 6 3 2 1
Gross benefits paid......................................... (57) (37) (20) (18)
Curtailment loss............................................ -- 3 -- 2
Acquisitions................................................ 734 -- 268 --
Adjustments to reflect re-measurement of benefit
obligation................................................ 53 (44) -- --
Actuarial (gain) loss....................................... (75) 4 (27) 40
Currency fluctuations....................................... (20) 7 -- --
------ ---- ----- -----
Actuarial present value of benefit obligation at end of
measurement period........................................ 1,631 912 598 345
------ ---- ----- -----
CHANGE IN PLAN ASSETS:
Plan assets at fair value at beginning of measurement
period.................................................... 924 921 -- --
Actual return on plan assets................................ 132 75 -- --
Employer contributions...................................... 23 17 18 17
Plan participants' contributions............................ 6 3 2 1
Gross benefits paid......................................... (57) (37) (20) (18)
Acquisitions................................................ 637 -- -- --
Adjustments to reflect re-measurement of benefit
obligation................................................ 2 (62) -- --
Purchase accounting adjustment.............................. (76) -- -- --
Currency fluctuations....................................... (20) 7 -- --
------ ---- ----- -----
Plan assets at fair value at end of measurement period...... 1,571 924 -- --
------ ---- ----- -----
FUNDED STATUS:.............................................. (60) 12 (598) (345)
Unrecognized prior service cost............................. 17 18 (6) (3)
Unrecognized net loss (gain) resulting from plan experience
and changes in actuarial assumptions...................... 6 78 (8) 15
Remaining unrecognized net asset at initial application..... (5) (1) 71 82
------ ---- ----- -----
Net amount recognized at end of year........................ $ (42) $107 $(541) $(251)
====== ==== ===== =====
AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION
CONSIST OF:
Prepaid benefit cost...................................... $ 210 $ 98 $ -- $ --
Accrued benefit liability................................. (252) (13) (541) (251)
Intangible asset.......................................... -- -- -- --
Accumulated other comprehensive income.................... -- 22 -- --
------ ---- ----- -----
Net amount recognized at end of year...................... $ (42) $107 $(541) $(251)
====== ==== ===== =====
</TABLE>
83
<PAGE> 84
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
OTHER
POSTRETIREMENT
PENSION BENEFITS BENEFITS
-------------------- --------------------
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost............................................ $ 18 $ 20 $ 16 $ 6 $ 5 $ 5
Interest cost........................................... 60 60 55 24 21 22
Expected return on assets............................... (84) (75) (68) -- -- --
Amortization of:
Transition asset...................................... (1) (1) (1) 9 9 9
Prior service cost.................................... 2 2 2 (1) (1) (1)
Actuarial loss........................................ 1 2 1 -- (1) (1)
---- ---- ---- --- --- ---
Net periodic benefit cost............................... (4) 8 5 38 33 34
Reduction in unrecognized prior service cost due to
curtailment........................................... -- 2 -- -- -- --
Curtailment............................................. -- 2 -- -- -- --
---- ---- ---- --- --- ---
Total (income) expense................................ $ (4) $ 12 $ 5 $38 $33 $34
==== ==== ==== === === ===
</TABLE>
The aggregate projected benefit obligation, aggregate accumulated benefit
obligation and aggregate fair value of plan assets for pension plans with
benefit obligations in excess of plan assets were $348 million, $344 million and
$183 million, respectively, as of December 31, 1999, and $363 million, $354
million and $354 million, respectively, as of December 31, 1998.
The weighted-average assumed health care cost trend rate used in
determining the 1999 accumulated postretirement benefit obligation covering Case
and New Holland U.S. employees was 7.0% and 7.5%, respectively, and gradually
declining to 5.5% in 2002 and remaining at that level thereafter. The weighted-
average assumed health care cost trend rate used in determining the 1998
accumulated postretirement benefit obligation covering New Holland U.S.
employees was 6.0%, and gradually declining to 5.0%. The weighted-average
assumed health care cost trend rate used in determining the 1999 accumulated
postretirement benefit obligation related to Canadian employees was 10.0%,
declining to 7.0% in 2002 and remaining at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage point
would increase the total accumulated postretirement benefit obligation at
December 31, 1999, by approximately $85 million, and would increase the
aggregate of the service cost and interest cost components of the net 1999
postretirement benefit cost by approximately $9 million. Decreasing the assumed
health care cost trend rate by one percentage point would decrease the total
accumulated postretirement benefit obligation at December 31, 1999, by
approximately $69 million, and would decrease the aggregate of the service cost
and interest cost components of the net 1999 postretirement benefit cost by
approximately $7 million.
Other Programs
In Belgium, early retirement liabilities were accrued in connection with
the restructuring of CNH's Belgian facilities initiated in 1991. Such
liabilities were $18 million and $23 million at December 31, 1999 and 1998,
respectively. Programs in other countries are provided through payroll tax and
other social contributions in accordance with local statutory requirements.
As required by Italian labor legislation, an accrual for employee severance
indemnities has been provided for a portion of CNH's Italian employees' annual
salaries, indexed for inflation. At December 31, 1999 and 1998, the indemnity
accruals were $86 million and $105 million, respectively.
84
<PAGE> 85
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Defined Contribution Plans
CNH has various defined contribution plans that cover certain U.S. and
non-U.S. employees. New Holland has a savings plan for its U.S. salaried and
hourly employees whereby employees may make pre-tax contributions of up to 15%
of base compensation. New Holland will match 50% of the first 10% of a
participant's contribution. This matching contribution is directed based on the
participant's investment elections. During 1999, 1998 and 1997, New Holland
contributed $5 million, $6 million and $6 million, respectively, to the savings
plan.
Case has a retirement savings plan pursuant to the Internal Revenue Code
for its U.S. salaried employees. Under the retirement savings plan, certain
salaried participants may make pre-tax contributions of up to 10% of base
compensation. Case will match 100% of the first 8% of a participant's
contribution in cash. During 1999, Case contributed $2 million to the retirement
savings plan. Annually, Case makes a fixed contribution to the retirement
savings plan equal to 4% of each participant's eligible compensation, which
amounted to $9 million in 1999. Subject to CNH's operating results, Case may
make additional profit sharing contributions to the retirement savings plan.
Case made additional profit sharing contributions of $4 million in 1999.
NOTE 17: COMMITMENTS AND CONTINGENCIES
Environmental
CNH is involved in environmental remediation activities with regard to
potential liabilities under U.S. federal, U.S. state and non-U.S. environmental
laws. These activities involve Waste Sites and properties currently or formerly
owned by CNH where it is believed there has been a release of hazardous
substance. These properties comprise a number of manufacturing sites currently
or formerly operated by CNH, as well as former retail dealerships that had been
operated by CNH's predecessors. Expenditures for ongoing compliance with
environmental regulations that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or future
revenue generation are expensed. Liabilities are recorded when environmental
assessments indicate that remedial efforts are probable and the costs can be
reasonably estimated. Estimates of the liability are based upon currently
available facts, existing technology and presently enacted laws and regulations.
All available evidence is considered, including prior experience in remediation
of contaminated sites, other parties' share of liability at the Waste Sites and
their ability to pay and data concerning the Waste Sites released by the U.S.
Environmental Protection Agency or other organizations. These liabilities are
included in the accompanying Balance Sheets at their undiscounted amounts.
Based upon information currently available, management estimates potential
environmental remediation, decommissioning, restoration, monitoring and other
closure costs associated with current or formerly owned or operated facilities
to be in the range of $65 million to $135 million. As of December 31, 1999,
environmental reserves of approximately $80 million had been established to
address these specific estimated potential liabilities. Such reserves are
undiscounted. After considering these reserves, management is of the opinion
that the outcome of these matters will not have a material adverse effect on
CNH's financial position or results of operations.
Product liability
Product liability claims against CNH arise from time to time in the
ordinary course of business. There is an inherent uncertainty as to the eventual
resolution of unsettled claims. However, in the opinion of management, any
losses with respect to existing claims will not have a material adverse effect
on CNH's financial position or results of operations.
85
<PAGE> 86
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Other Litigation
CNH is the subject of various other legal claims arising from its
operations, including product warranty, dealer disputes, workmen's compensation,
customs and employment matters. In addition, certain of CNH's Brazilian
subsidiaries are currently contesting certain claims made by the Brazilian tax
authorities related to taxation and employer social contributions.
Management is of the opinion that the resolution of these claims,
individually and in the aggregate, will not have a material adverse effect on
CNH's financial position or results of operations.
Commitments
Minimum rental commitments at December 31, 1999, under non-cancelable
operating leases with lease terms in excess of one year are as follows (in
millions):
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
2000................................................... $ 35
2001................................................... 24
2002................................................... 14
2003................................................... 12
2004 and thereafter.................................... 78
----
Total minimum rental commitments............. $163
====
</TABLE>
Total rental expense for all operating leases was $27 million, $18 million
and $10 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
CNH has a supply agreement with Consolidated Diesel Company, a joint
venture company that is 50% owned by CNH. Under the terms of this supply
agreement, CNH is required to purchase engine products in amounts to provide for
the recovery of specified fixed and variable costs of the joint venture. CNH
purchased engine products totaling $20 million in 1999, and CNH is required to
make future minimum purchases (representing only fixed costs) of $16 million in
2000, $14 million in 2001, $14 million in 2002, $13 million in 2003, $13 million
in 2004, and $59 million in the aggregate, in subsequent years.
86
<PAGE> 87
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: EARNINGS PER SHARE
The following reconciles the numerators and denominators of the basic and
diluted earnings per share computations for income from continuing operations
(in millions, except per share data):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------
BASIC 1999 1998 1997
- ------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Net income....................................... $ 148 $ 258 $ 388
Weighted-average shares outstanding.............. 149 149 149
Basic earnings per share......................... $0.99 $1.73 $2.60
===== ===== =====
DILUTED
- -------------------------------------------------
Net income....................................... $ 148 $ 258 $ 388
Effect of dilutive securities (when dilutive):
Conversion of advance to capital
subscription................................ 12 N/A N/A
----- ----- -----
Net income after adjustment for dilutive
conversions.................................... $ 160 $ 258 $ 388
===== ===== =====
Weighted-average shares outstanding -- Basic..... 149 149 149
Effect of dilutive securities (when dilutive):
Conversion of advance to capital
subscription................................ 16 N/A N/A
----- ----- -----
Weighted-average shares outstanding -- Diluted... 165 149 149
===== ===== =====
Diluted earnings per share....................... $0.97 $1.73 $2.60
===== ===== =====
</TABLE>
Reference is made to Note 11, "Principal Shareholder's Advance to Capital,"
for further information regarding the advance to capital.
NOTE 19: QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1999
- ----------------------------------------------------------
Revenues.................................................. $1,392 $1,569 $1,307 $2,005
Gross profit*............................................. $ 229 $ 270 $ 186 $ 184
Income (loss) before restructuring charge, net of tax..... $ 65 $ 88 $ 45 $ (31)
Net income (loss)......................................... $ 60 $ 86 $ 37 $ (35)
Basic earnings (loss) per share........................... $ 0.40 $ 0.58 $ 0.25 $(0.23)
Diluted earnings (loss) per share......................... $ 0.40 $ 0.58 $ 0.25 $(0.23)
1998
- ----------------------------------------------------------
Revenues.................................................. $1,523 $1,687 $1,278 $1,209
Gross profit*............................................. $ 299 $ 339 $ 199 $ 137
Net income (loss)......................................... $ 106 $ 132 $ 50 $ (30)
Basic earnings (loss) per share........................... $ 0.71 $ 0.89 $ 0.33 $(0.20)
Diluted earnings (loss) per share......................... $ 0.71 $ 0.89 $ 0.33 $(0.20)
</TABLE>
- ------------
* Gross profit is defined as net sales less cost of goods sold and research and
development expenses.
87
<PAGE> 88
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 20: SEGMENT AND GEOGRAPHICAL INFORMATION
SEGMENT INFORMATION
CNH has three reportable segments: Agricultural Equipment, Construction
Equipment and Financial Services. Certain reclassifications have been made to
conform the historical segment and geographical information to the current CNH
management reporting format.
Agricultural Equipment
The agricultural equipment segment manufactures and distributes a full line
of farm machinery and implements, including two-wheel and four-wheel drive
tractors, combines, cotton pickers, grape and sugar cane harvesters, hay and
forage equipment, planting and seeding equipment, soil preparation and
cultivation implements and material handling equipment.
Construction Equipment
The construction equipment segment manufactures and distributes a full line
of construction equipment and has leading positions in excavators, crawler
dozers, graders, wheel loaders, loader/backhoes, skid steer loaders and
trenchers.
Financial Services
The financial services segment provides broad-based financial services for
the global marketplace through various wholly owned subsidiaries and joint
ventures in the United States, Canada, Argentina, Australia, Brazil and Europe.
CNH provides and administers retail financing to end-use customers for the
purchase or lease of new and used CNH and other agricultural and construction
equipment. CNH also facilitates and finances the sale of insurance products and
other financing programs to retail customers. In addition, CNH provides
wholesale financing to CNH dealers and rental equipment yards. CNH also provides
financing options to dealers and non-captive third parties to finance inventory,
working capital, real estate acquisitions, construction and remodeling, business
acquisitions, dealer systems and service and maintenance equipment.
The accounting policies of the segments are described in Note 2, "Summary
of Significant Accounting Policies." CNH evaluates segment performance based on
operating earnings. CNH defines operating earnings as the income of Equipment
Operations before interest expense, taxes and restructuring charges, including
the income of Financial Services on an equity basis. Transfers between segments
are accounted for at market value.
CNH's reportable segments are strategic business units that offer different
products and services. Each segment is managed separately as they require
different technology and marketing strategies.
88
<PAGE> 89
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of CNH's reportable segment information is set forth in the
following table (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
REVENUES:
Net sales
Agricultural equipment.................................... $ 3,904 $4,151 $4,576
Construction equipment.................................... 2,045 1,323 1,222
------- ------ ------
Total net sales...................................... 5,949 5,474 5,798
External financial services............................... 324 223 193
Intersegment financial services........................... 88 138 124
Eliminations and other.................................... (88) (138) (124)
------- ------ ------
Total................................................ $ 6,273 $5,697 $5,991
======= ====== ======
SEGMENT PROFIT:
Agricultural equipment...................................... $ 146 $ 316 $ 538
Construction equipment...................................... 117 119 79
Financial services.......................................... 72 60 68
------- ------ ------
Total................................................ $ 335 $ 495 $ 685
======= ====== ======
RECONCILIATION OF SEGMENT PROFIT TO CONSOLIDATED NET INCOME:
Segment profit.............................................. $ 335 $ 495 $ 685
Equipment Operations:
Income tax provision...................................... (14) (118) (222)
Interest expense.......................................... (154) (79) (75)
Restructuring charge...................................... (19) (40) --
------- ------ ------
Net income............................................. $ 148 $ 258 $ 388
======= ====== ======
INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
(AT THE END OF YEAR):
Agricultural equipment...................................... $ 254 $ 209 $ 123
Construction equipment...................................... 51 -- --
Financial services.......................................... 23 6 6
------- ------ ------
Total................................................ $ 328 $ 215 $ 129
======= ====== ======
DEPRECIATION AND AMORTIZATION:
Agricultural equipment...................................... $ 130 $ 104 $ 97
Construction equipment...................................... 33 22 22
Financial services.......................................... 20 6 3
------- ------ ------
Total................................................ $ 183 $ 132 $ 122
======= ====== ======
</TABLE>
89
<PAGE> 90
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
SEGMENT ASSETS (AT THE END OF YEAR):
Agricultural equipment...................................... $ 7,207 $2,710 $2,406
Construction equipment...................................... 3,614 1,107 686
Financial services.......................................... 6,009 2,874 2,381
Eliminations and other...................................... 848 605 857
------- ------ ------
Total................................................ $17,678 $7,296 $6,330
======= ====== ======
EXPENDITURES FOR ADDITIONS TO LONG-LIVED ASSETS*:
Agricultural equipment...................................... $ 167 $ 122 $ 129
Construction equipment...................................... 46 26 25
Financial services.......................................... 60 20 6
------- ------ ------
Total................................................ $ 273 $ 168 $ 160
======= ====== ======
</TABLE>
- ------------
* Includes equipment on operating leases and property, plant and equipment.
GEOGRAPHICAL INFORMATION
The following highlights the results of CNH's operations by geographic
area, by origin (in millions):
<TABLE>
<CAPTION>
UNITED UNITED
STATES CANADA KINGDOM ITALY BELGIUM OTHER TOTAL
------ ------ ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1999, and for the
year then ended:
Total revenues...................... $1,809 $293 $ 902 $1,589 $511 $1,169 $6,273
====== ==== ====== ====== ==== ====== ======
Long-lived assets*.................. $1,439 $ 77 $ 221 $ 237 $ 81 $ 377 $2,432
====== ==== ====== ====== ==== ====== ======
At December 31, 1998, and for the
year then ended:
Total revenues...................... $1,503 $480 $1,038 $1,509 $642 $ 525 $5,697
====== ==== ====== ====== ==== ====== ======
Long-lived assets*.................. $ 141 $ 27 $ 84 $ 281 $ 78 $ 132 $ 743
====== ==== ====== ====== ==== ====== ======
At December 31, 1997, and for the
year then ended:
Total revenues...................... $1,344 $648 $1,327 $1,644 $567 $ 461 $5,991
====== ==== ====== ====== ==== ====== ======
Long-lived assets*.................. $ 137 $ 23 $ 85 $ 256 $ 69 $ 14 $ 584
====== ==== ====== ====== ==== ====== ======
</TABLE>
- ------------
* Includes equipment on operating leases and property, plant and equipment.
CNH is organized under the laws of the Kingdom of The Netherlands.
Geographical information for CNH pertaining to The Netherlands is not
significant or not applicable, as CNH primarily maintains a corporate presence
in that country.
NOTE 21: RELATED PARTY INFORMATION
CNH purchases materials and components from and sells certain products to
subsidiaries and affiliates of Fiat. CNH's principal purchases of services from
Fiat and its affiliates include cash management, legal, consulting and other
administrative services. Additionally, CNH participates in the stock option
program of Fiat as described in Note 12, "Shareholders' Equity and Stock-Based
Compensation."
90
<PAGE> 91
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CNH's principal purchases of goods from Fiat and its affiliates include
diesel engines from Iveco N.V., electric and mechanical components from Magneti
Marelli S.p.A., castings from Teksid S.p.A., and lubricants from Fiat
Lubrificanti S.p.A. CNH has an agreement by which the license fees paid to Fiat
for certain trade names and brand marks is 0.3% of sales of related products.
CNH also purchases tractors from its Mexican joint venture for resale in the
United States.
The following table summarizes CNH's sales, purchases, and finance income
and expense with affiliates of Fiat and CNH dealer development companies and
joint ventures (in millions):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Sales of equipment............................... $ 14 $ 22 $ 19
Sales to dealer development companies and joint
ventures....................................... 259 261 278
------ ------ ------
Total sales to affiliates................. $ 273 $ 283 $ 297
====== ====== ======
Purchase of materials, production parts,
merchandise and services....................... $ 295 $ 297 $ 304
Finance and interest income...................... $ 32 $ 59 $ 39
Interest expense................................. $ 79 $ 56 $ 39
</TABLE>
CNH management believes that the terms of sales and purchases provided to
CNH by Fiat and its affiliates are at least as favorable as those available from
unaffiliated third parties.
NOTE 22: OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1999 1998
------ ------
(IN MILLIONS)
<S> <C> <C>
Warranty provisions...................................... $ 298 $ 191
Marketing and sales incentive programs................... 429 307
Accrued payroll.......................................... 197 118
Value-added taxes and other taxes payable................ 140 131
Other accrued expenses................................... 626 268
------ ------
Total other accrued liabilities................... $1,690 $1,015
====== ======
</TABLE>
91
<PAGE> 92
CNH GLOBAL N.V.
NOTES TO FINANCIAL STATEMENTS -- (CONCLUDED)
NOTE 23: GUARANTEE OF SUBSIDIARY'S OUTSTANDING DEBT SECURITIES
CNH fully, unconditionally and irrevocably guaranteed Case's $900 million
in outstanding debt securities that were issued pursuant to two registration
statements under the Securities Act of 1933, as amended. The following tables
present summarized financial information for Case (in millions):
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION BASIS OF ACCOUNTING
BASIS OF ACCOUNTING ---------------------------------------------
-------------------- FOR THE YEARS ENDED
FOR THE PERIOD FROM FOR THE PERIOD FROM DECEMBER 31,
NOVEMBER 12, 1999 TO JANUARY 1, 1999 TO --------------------
DECEMBER 31, 1999 NOVEMBER 11, 1999 1998 1997
-------------------- ------------------- ------- -------
<S> <C> <C> <C> <C>
Net sales.............................. $620 $3,980 $5,738 $5,718
Gross profit*.......................... $ 30 $ 416 $ 814 $1,075
Net income (loss)...................... $(45) $ (94) $ 64 $ 403
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
POST- PRE-
ACQUISITION ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
----------- -----------
<S> <C> <C>
Current assets.............................................. $4,172 $4,369
Non-current assets.......................................... $7,441 $4,331
Current liabilities......................................... $2,519 $2,844
Non-current liabilities..................................... $5,530 $3,662
Minority interests.......................................... $ 8 $ 7
Preferred stock with mandatory redemption provisions........ $ -- $ 77
</TABLE>
- ------------
* Gross profit is defined as net sales less cost of goods sold and research and
development expenses.
NOTE 24: SUBSEQUENT EVENTS
Acquisition
On January 4, 2000, CNH completed the acquisition of the remaining 61%
ownership interests in Flexi-Coil. Prior to that date, CNH had maintained a 39%
ownership interest in Flexi-Coil. The purchase price for the additional 61%
ownership interest was C$74 million. The acquisition will be accounted for as a
step purchase and, accordingly, the excess of the purchase price over the
estimated fair value of the net assets acquired will be recognized as goodwill
and amortized over its estimated remaining useful life.
Borrowings (unaudited)
On February 10, 2000, CNH borrowed $1.0 billion from an affiliate of Fiat,
the proceeds of which were used to repay short-term credit facilities. Of this
amount, $400 million is due in February 2003 and bears interest at a rate of
7.71%, and $600 million is due in February 2005 and bears interest at a rate of
7.81%.
Asset-Backed Securitization (unaudited)
In March 2000, limited-purpose business trusts organized by Financial
Services issued $1.1 billion of asset-backed securities to outside investors, of
which $427 million was prefunded and will be sold to the trusts as receivables
are generated. The net proceeds from this securitization will be used to repay
outstanding debt and to fund Financial Services' growing portfolio of
receivables.
92
<PAGE> 93
SCHEDULE II
CNH GLOBAL N.V.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
OF YEAR EXPENSE ACCOUNTS DEDUCTIONS YEAR
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1999:
Accounts and notes receivable........... $128 $58 $71 (a) $(60) $197
Inventories............................. 171 29 55 (b) (13) 242
For the year ended December 31, 1998:
Accounts and notes receivable........... 128 27 (2)(c) (25) 128
Inventories............................. 180 19 (2)(c) (26) 171
For the year ended December 31, 1997:
Accounts and notes receivable........... 135 30 (19)(c) (18) 128
Inventories............................. 173 42 (12)(c) (23) 180
</TABLE>
- -------------------------
(a) Reflects $118 million related to the acquisition of Case and $(47) million
for the impact of exchange rate changes.
(b) Reflects $68 million related to the acquisition of Case and $(13) million
for the impact of exchange rate changes.
(c) Reflects the impact of exchange rate changes.
ITEM 19(B). INDEX TO EXHIBITS
A list of exhibits included as part of this Form 20-F is set forth in the
Index to Exhibits that immediately precedes such exhibits, which is incorporated
herein by reference.
93
<PAGE> 94
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CNH GLOBAL N.V.
(Registrant)
/s/ THEODORE R. FRENCH
--------------------------------------
Theodore R. French
President, Financial Services and
Chief Financial Officer
Dated: March 31, 2000
94
<PAGE> 95
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
- ------- ------------------------------------------------------------ ------------
<C> <S> <C>
3.1 Articles of Association of CNH Global N.V., as last amended
on November 12, 1999.
3.2 Regulations of the Board of Directors of CNH Global N.V.
dated December 8, 1999.
4.1 Intercompany Credit Facility dated as of October 28, 1999
between Fiat Finance and Trade Ltd. S.A., as lender, and New
Holland N.V., as borrower.
4.2 Credit Agreement dated 28 October 1999 between New Holland
N.V., as borrower, Fiat S.p.A., as guarantor, the banks
named therein, Chase Manhattan International Limited, as
agent, and Chase Manhattan plc and Credit Suisse First
Boston, as lead arrangers.
4.3 First Supplemental Indenture dated as of March 28, 2000,
among Case Corporation, CNH Global N.V., as guarantor, and
The Bank of New York, as trustee under the Indenture dated
as of July 31, 1995, between Case Corporation and The Bank
of New York, as trustee.
10.1 Outside Directors' Compensation Plan of CNH Global N.V.
adopted November 12, 1999.
10.2 Equity Incentive Plan of CNH Global N.V. adopted November
12, 1999.
27.1 Financial Data Schedule.
</TABLE>
95
<PAGE> 1
Exhibit 3.1
[NAUTA DUTILH LETTERHEAD]
Afschrift Office translation
ener akte; houdende of a deed of
STATUTENWIJZIGING AMENDMENT OF THE ARTICLES OF
ASSOCIATION
van de naamloze vennootschap of the limited liability company
New Holland N.V. New Holland N.V.
thans genaamd: presently named:
CNH Global N.V. CNH Global N.V.
gevestigd te Amsterdam with corporate seat at
Amsterdam
Verkl. d.d. 20 oktober 1999 DecI. dated October 20, 1999
N.V. nummer 571.060 N.V. number 571.060
Akte d.d. 12 november 1999 Deed dated November 12, 1999
<PAGE> 2
NAUTA DUTILH -1-
DE/cm/80019721/3
On this, the twelfth day of November nineteen hundred and ninety-nine, appeared
before me, Maitre Bart Theodoor Derogee, civil-law notary in Rotterdam:
Mr. Bartholomeus Johannes Kuck, employed at the offices of me, civil-law
notary, located at Weena 750, 3014 DA Rotterdam, born at Haarlem on the
nineteenth day of January nineteen hundred and seventy.
The appearer has declared that the general meeting of shareholders of the
limited liability company New Holland N.V., having its corporate seat at
Amsterdam and its registered office at World Trade Center Amsterdam Airport,
Schiphol Boulevard 217, 1118 BH Amsterdam, in its meeting of the fifth day of
October nineteen hundred and ninety-nine resolved:
a. to amend the articles of association of the company as set forth
hereinafter;
b. to authorize him, the appearer, to apply for the ministerial declaration
of non-objection in respect of the draft of the present deed, to make such
changes in the said draft as may be required for obtaining the said
declaration and after the obtainment thereof effect the amendment of the
articles of association by the passing of a notarial deed.
The appearer further declared that the said ministerial declaration of
non-objection has been obtained as appears from the ministerial declaration,
number N.V. 571.060, dated the twentieth day of October nineteen hundred and
ninety-nine, which is hereto attached.
Implementing the aforesaid resolution the appearer declared to amend the
articles of association of the company as follows:
<PAGE> 3
NAUTA DUTILH -2-
[SEAL]
Article 1 paragraph 1 shall read as follows:
"1. The name of the company is: CNH Global N.V."
Article 6 paragraph 1 shall read as follows:
"1. In the event of an issue of shares every shareholder shall have a right of
preference with regard to the shares to be issued in proportion to the
aggregate amount of his shares, provided however that no such right of
preference shall exist in respect of shares to be issued to employees of the
company or of a group company pursuant to any option plan of the company."
Article 13 paragraph 2 and 3 shall read as follows:
"2. The board of directors shall, from among their number, appoint a chairman,
a co-chairman, and a chief executive officer and shall have power to appoint
one or more presidents and vice-presidents.
The board of directors shall furthermore have power to appoint a secretary of
the board of directors. The office of chairman and chief executive officer
shall be capable of being held by one and the same person.
3. The board of Directors shall draw up board regulations to deal with
matters that concern the board internally. The regulations may include an
allocation of tasks amongst the directors and the chairman and the co-chairman
and may provide for delegation of powers. The regulations shall contain
provisions concerning the manner meetings of the board of directors are called
and held. These meetings may be held by telephone conference or video
conference, provided all participating directors can hear each other
simultaneously."
Article 15 first sentence shall read as follows:
"The general authority to represent the company shall be vested in the board of
directors, the chairman, the co-chairman and in the chief executive officer
severally."
Article 17 paragraph 2 shall read as follows:
"2. Furthermore, general meetings of shareholders shall be held in the case
referred to in article 108a, Book 2 of the Civil Code and as often as the board
of directors,
<PAGE> 4
- 3 -
the chairman or co-chairman of the board or the chief executive officer deems
it necessary to hold them, without prejudice to what has been provided in the
next paragraph hereof."
Article 17 paragraph 4 first sentence shall read as follows:
"4. General meetings of shareholders shall be held in Amsterdam, Schiphol
Airport, Rotterdam, or The Hauge, and shall be called by the board of
directors, the chairman or the co-chairman of the board or the chief executive
officer, by means of publication of a notice to that effect in a nationally
distributed daily newspaper and in such other manner as may be required to
comply with applicable stock exchange regulations, not later than on the
fifteenth day prior to the meeting."
Article 18 paragraph 1 shall read as follows:
"1. The general meeting of shareholders shall be presided over by the chairman
of the board of directors or, in his absence, by the co-chairman or in the
absence of the latter by the person chosen by the board of directors to act as
chairman for such meeting."
The appearer is known to me, civil-law notary.
This deed
was executed
in Rotterdam on the date mentioned in its heading. After I, civil-law notary,
had conveyed and explained the contents of the deed in substance to the person
appearing, he declared that he had taken note of the contents of the deed and
did not with it to be read out in full.
Following a partial reading, the deed was signed by the person appearing and
me, civil law notary.
<PAGE> 5
[NAUTA DUTILH LETTERHEAD]
De ondergetekende: The undersigned:
Mr Bart Theodoor Derogee, Me Bart Theodoor Derogee,
notaris te Rotterdam civil-law notary in
verklaart hierbij, Rotterdam, the Netherlands,
dat hij zich naar beste weten hereby declares that an
overtuigd, office translation of the
dat de statuten van de te Articles of Association of the
Amsterdam gevestigde naamloze limited liability company,
vennootschap: having its corporate seat
at Amsterdam:
CNH Global N.V. CNH Global N.V.
(voorhten genaamd: (formerly named:
New Holland N.V.) New Holland N.V.)
luiden overeenkomstig de aan dit reads as per the attached
certificaat genechte teket. text.
De statuten zijn laatstelijk The Articles of Association were
gewijzigd bij akte verleden lastly amended by notarial deed
op 12 november 1999. executed on November 12, 1999.
De ministeriele verklaring van The ministerial declaration of
geen bezwaar werd verleend op no-objection was granted on
20 oktober 1999. October 20, 1999.
N.V. nummer 571.060 N.V. number 571.060
Getekend te Rotterdam op Signed at Rotterdam on
10 december 1999. December 10, 1999.
<PAGE> 6
ARTICLES OF ASSOCIATION
NAME AND CORPORATE SEAT
Article 1
1. The name of the company is: CNH Global N.V.
2. It has its corporate seat in Amsterdam.
OBJECTS
Article 2
The objects of the company are:
a. to engage in, and/or to participate in and operate one or more companies
engaged in the design, engineering, manufacture, sale or distribution of
machines whether pulled or selfpropelled, for agricultural and construction use
as well as implements, components, assemblies, sub-assemblies, spare parts,
accessories thereof and more generally any other activity related to the field
of agricultural and construction equipment;
b. to engage in and/or to participate in and operate one or more companies
engaged in any business, financial or otherwise which the company may deem
suitable to be carried on in conjunction with the foregoing;
c. to render management and advisory services;
d. to do anything which a company may lawfully do under the laws of the
Netherlands which may be deemed conducive to the attainment of the objects set
out in paragraphs a, b and c foregoing.
DURATION
Article 3
The company shall continue for an indefinite time.
SHARE CAPITAL AND SHARES
Article 4
1. The authorized share capital of the company amounts to two hundred million
and seven euro (EUR 200,000.007. --), divided into four hundred forty-four
million four hundred forty-four thousand four hundred and sixty (444,444,460)
<PAGE> 7
-2-
common shares of forty-five euro cents (EUR 0.45) each. Those shares are
referred to hereinafter as "shares".
2. When shares are subscribed for, there shall be paid-up thereon the par value
thereof and in addition, if the shares are subscribed at a higher amount, the
difference between such amounts, without prejudice to the provision of article
80 paragraph 2 of Book 2 of the Civil Code.
3. The Company shall not lend its cooperation to the issue of certificates of
beneficial ownership ("certificaten van aandelan") for shares in its share
capital.
4. The power to confer voting rights and rights as referred to in article 89
paragraph 4 of Book 2 of the Civil Code on those who have a right of pledge over
shares is excluded.
ISSUE OF SHARES
Article 5
1. The general meeting of shareholders or alternatively the board of directors,
if it has been designated to do so by the general meeting of shareholders, shall
have authority to resolve on any further issue of shares; the general meeting of
shareholders shall, for as long as the designation of the board of directors for
this purpose is in force, no longer have authority to decide on a further issue
of shares.
2. The general meeting of shareholders or the board of director if so designated
as provided in paragraph 1 above, shall decide on the price and the further
terms and conditions of issue, with due observance of what has been provided in
relation thereto in the law and in the articles of association.
3. If the board of directors is designated to have authority to decide on a
further issue of shares, such designation shall provide how many shares shall be
allowed to be issued. When making such designation the duration thereof, which
shall not be for more than five years, shall at the same time be resolved upon.
The designation may be extended from time to time for periods
<PAGE> 8
-3-
not exceeding five years. The designation may not be withdrawn unless otherwise
provided in the resolution in which the designation is made.
4. Within eight days after the passing of a resolution of the general meeting of
shareholders to issue shares or to designate the board of directors as provided
in paragraph 1 hereof the board of directors shall deposit the complete text of
such resolution at the office of the Trade Register where the company has its
corporate seat. Within eight days after each issue of shares the board of
directors shall report the same to the office of such Trade Register stating the
number of shares issued.
5. What has been provided in the paragraphs 1 to 3 inclusive shall mutatis
mutandis be applicable to the granting of rights to subscribe for shares but
shall not be applicable to the issuing of shares to anyone who exercises a
previously acquired right to subscribe for shares.
6. The shares shall be paid-up in cash unless another form of contribution -
subject to the provision of Article 80b of Book 2 of the Civil Code - has been
agreed upon. When the shares are paid up in cash, payment shall be made in Dutch
currency or, subject to the provision of Article 80a paragraphs 2 and 3 of Book
2 of the Civil Code, in foreign currency.
7. The board of directors is expressly authorized to enter into the legal acts
referred to in article 94 of Book 2 of the Civil Code, without the prior consent
of the general meeting of shareholders.
RIGHT OF PREFERENCE
Article 6
1. In the event of an issue of shares every shareholder shall have a right of
preference with regard to the shares to be issued in proportion to the aggregate
amount of his shares, provided however that no such right of preference shall
exist in respect of shares to be issued to employees of the company or of a
group company pursuant
<PAGE> 9
-4-
to any option plan of the Company.
2. A shareholder shall have no right of preference for shares that are issued
against a non-cash contribution
3. The general meeting of shareholders or the board of directors, as the case
may be, shall decide when passing the resolution to issue shares in which manner
and within which time limit the right of preference may be exercised.
4. The company shall give notice of an issue of shares that is subject to a
right of preference and of the period during which such right may be exercised,
by announcement in the State Gazette and as provided in article 17 paragraph 4
hereof.
5. The right of preference may be exercised during at least two weeks after the
announcement.
6. The right of preference may be limited or excluded by resolution of the
general meeting of shareholders or resolution of the board of directors if it
has been designated to do so by the general meeting of shareholders provided the
board of directors has also been authorized to resolve on the issue of shares of
the company. In the proposal to the general meeting of shareholders in respect
thereof the reasons for the proposal and the choice of the intended price of
issue shall be explained in writing.
With respect to the designation the provisions of the last three sentences of
paragraph 3 of article 5 shall apply mutatis mutandis.
7. For a resolution of the general meeting of shareholders to limit or exclude
the right of preference or to designate the board of directors as authorized to
do so, a majority is required of at least two thirds of the votes cast, if in
the general meeting less than one half of the issued share capital is
represented. Within eight days from the resolution the board of directors shall
deposit a complete text thereof at the office of the Trade Register.
<PAGE> 10
-5-
8. When rights are granted to subscribe for shares the shareholders shall have a
right of preference; what has been provided hereinbefore in this article shall
be applicable mutatis mutandis. Shareholders shall have no right of preference
in respect of shares that are issued to anyone who exercises a previously
acquired right.
ACQUISITION AND TRANSFER BY THE COMPANY OF SHARES IN ITS OWN SHARE CAPITAL
Article 7
1. The company shall have authority to acquire fully paid-up shares in its own
share capital, for no consideration or for value, if:
a. the general meeting of shareholders has authorized the board of directors
to make such acquisition and with the authorization - which shall be valid
for no more than eighteen months - has specified the number of shares which
may be acquired, the manner in which they may be acquired and the limits
within which the price must be set; and
b. the company's equity, after deduction of the price of acquisition, is not
less than the sum of the paid-up portion of the share capital and the
reserves that have to be maintained by provision of law; and
c. the aggregate par value of the shares to be acquired and the shares in its
share capital the company already holds, holds as pledgee or are held by a
subsidiary company, does not amount to more than one tenth of the aggregate
par value of the issued share capital.
The company's equity as shown in the last confirmed and adopted balance sheet,
after deduction of the price of acquisition for shares in the share capital of
the company and distributions from profits or reserves to any other persons that
became due by the company and its subsidiary companies after the date of the
balance sheet, shall be decisive for what has been provided under item b above.
If no annual accounts have been confirmed and
<PAGE> 11
-6-
adopted when more than six months have expired after the end of any financial
year, then an acquisition by virtue of this paragraph shall not be allowed.
2. Any acquisition by the company of shares that have not been fully paid up
shall be void.
3. Shares as referred to in this article shall include certificates of
beneficial ownership.
REDUCTION OF THE ISSUED SHARE CAPITAL
Article 8
1. The general meeting of shareholders shall have power to pass a resolution to
reduce the issued share capital by the cancellation of shares or by reducing
the amount of the shares by means of an amendment to the company's Articles of
Association. The shares to which such resolution relates shall be stated in the
resolution and it shall also be stated therein how the resolution shall be
implemented.
2. A resolution to cancel shares may only relate to shares in its own share
capital, that are being held by the company itself or of which it holds the
certificates of beneficial ownership.
3. Any reduction of the nominal amount of shares without redemption must be
made pro rata on all shares.
4. A partial repayment on shares shall only be allowed in implementation of a
resolution to reduce the nominal amount of the shares. Such a repayment must be
made pro rata on all shares. The pro rata requirement may be waived with the
consent of all the shareholders.
5. For a resolution to reduce the capital a majority of at least two-thirds of
the votes cast shall be required, if less than one half of the issued capital
is represented at the meeting.
6. The notice convening a meeting at which a resolution, as mentioned in this
article, is to be passed shall state the purpose of the reduction of the share
capital and the manner in which effect is to be given thereto.
The second, third and fourth paragraphs of Article 123 of
<PAGE> 12
Book 2 of the Civil Code shall mutatis mutandis be applicable.
7. The company shall deposit the resolutions referred to in paragraph 1 of this
article at the office of the Trade Register and shall publish a notice of such
deposit in a nationally distributed daily newspaper; what has been provided in
Article 100, paragraphs 2 and 6 inclusive of Book 2 of the Civil Code shall be
applicable to the company.
SHARES AND SHARE CERTIFICATES
Article 9
1. The shares shall be registered shares and they shall be numbered and may
also be provided with letters as the board of directors shall determine.
2. The board of directors may resolve that, at the request of the shareholder,
share certificates shall be issued in respect of shares in such denominations
as the board shall determine, which certificates are exchangeable at the
request of the shareholder.
3. Share certificates shall not be provided with a set of dividend coupons and
a talon.
4. Each share certificate carries the number(s) and letter(s), if any, of the
share(s) in respect of which they were issued.
5. The exchange referred to in paragraph 2 shall be free of charge.
6. Share certificates shall be signed by a member of the board of directors.
The board of directors may resolve that the signature shall be replaced by a
facsimile signature.
7. The board of directors may determine that for the purpose of trading and
transfer of shares at a foreign stock exchange, share certificates shall be
issued in such form as shall comply with the requirements of such foreign stock
exchange.
8. On a request in writing by the party concerned and upon provision of
satisfactory evidence as to tile,
<PAGE> 13
replacement share certificates may be issued of share certificates which have
been mislaid, stolen or damaged, on such conditions, including, without
limitation, the provision of indemnity to the company as the board of directors
shall determine.
The costs charged to the issue of replacement share certificates may be charged
to the applicant. By the issue of replacement share certificates the original
share certificates will become void and the company will have no further
obligation with respect to such original share certificates. Replacement share
certificates will bear the numbers and letters of the documents they replace.
REGISTER OF SHAREHOLDERS
ARTICLE 10
1. The board of directors shall keep a register of share holders in which the
name and address of each shareholder shall be entered, recording the amount
paid-up on each share, as well as, in so far as applicable, the further
particulars referred to in Article 85 of Book 2 of the Civil Code.
2. The board of directors shall be authorized to keep a part of the register
outside the Netherlands if required to comply with applicable foreign
legislation or the rules of the stock exchange where the shares of the company
are listed.
3. The board of directors shall determine the form and contents of the register
with due observance of the provisions of paragraphs 1 and 2 hereof.
4. Every entry in the register shall be signed by a member of the board of
directors; and register shall be kept regularly up to date.
5. Upon request the board of directors shall provide shareholders and those who
have a right of usufruct or pledge in respect of such shares free of charge
with an extract from the register in respect of their rights to a share.
6. The board of directors shall be authorized to provide
<PAGE> 14
-9-
the authorities with information and data contained in the register of
shareholders or have the same inspected to the extent that this is requested to
comply with applicable foreign legislation or rules of the stock exchange where
the company's shares are listed.
TRANSFER OF SHARES
Article 11
1. The transfer of shares or of a restricted right thereto shall require an
instrument intended for such purpose and, save when the company itself is a
party to such legal act, the written acknowledgement by the company of the
transfer. The acknowledgement shall be made in the instrument or by a dated
statement on the instrument or on a copy or extract thereof mentioning the
acknowledgement signed as a true copy by the notary or the transferor, or in
the manner referred to in paragraph 2. Service of such instrument or such copy
or extract on the company shall be considered to have the same effect as an
acknowledgement.
2. If a share certificate has been issued for a share the surrender to the
company of the share certificate shall also be required for such transfer.
The company may acknowledge the transfer by making an annotation on such share
certificate as proof of the acknowledgement or by replacing the surrendered
certificate by a new share certificate registered in the name of the transferee.
MANAGEMENT
Article 12
1. The company shall have a board of directors, consisting of one or more
members.
2. The chairman of the board of directors shall fix the number of the
directors. If the office of the chairman is vacated the number shall be fixed
by the board itself.
3. The general meeting of shareholders shall appoint the directors and shall at
all times have power to suspend or to dismiss every one of the directors.
<PAGE> 15
-10-
4. The chairman of the board of directors may fix a remuneration for the
directors in respect of the performance of their duties, provided that nothing
herein contained shall preclude any directors from serving the company or any
subsidiary or related company thereof in any other capacity and receiving
compensation therefore.
Article 13
1. The board of directors shall, subject to the limitations contained in these
Articles of Association, be in charge of the management of the company.
2. The board of directors shall, from among their number, appoint a chairman, a
co-chairman, and a chief executive officer and shall have power to appoint one
or more presidents and vice-presidents.
The board of directors shall furthermore have power to appoint a secretary of
the board of directors.
The office of chairman and chief executive officer shall be capable of being
held by one and the same person.
3. The board of directors shall draw up board regulations to deal with matters
that concern the board internally. The regulations may include an allocation of
tasks amongst the directors and the chairman and the co-chairman and may
provide for delegation of powers.
The regulations shall contain provisions concerning the manner meetings of the
board of directors are called and held. These meetings may be held by telephone
conference or video conference, provided all participating directors can hear
each other simultaneously.
4. The board of directors can only adopt valid resolutions when the majority of
the directors in office shall be present at the board meeting or be represented
thereat.
5. A member of the board of directors may only be represented by a co-member of
the board authorized in writing.
The expression in writing shall include any message
<PAGE> 16
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transmitted by current means of communication and received in writing.
A member of the board of directors may not act as proxy for more than one
co-member.
6. All resolutions shall be adopted by the favourable vote of the majority of
the directors present or represented at the meeting. Each director shall have
one vote. If there is a tie in a vote, the chairman of the board of directors
shall have a casting vote.
7. The board of directors shall be authorized to adopt resolutions without
convening a meeting if all directors shall have expressed their opinions in
writing, unless one or more directors shall object against a resolution being
adopted in this way. A resolution shall in this case be adopted if the majority
of all directors shall have expressed themselves in favour of the resolution
concerned. The provision of the second sentence of paragraph 5 shall apply
mutatis mutandis.
8. If the office(s) of one or more directors be vacated or if one or more
directors be otherwise unavailable, the remaining directors or the remaining
director shall temporarily be vested with the entire management. If the offices
of all directors be vacated or if all directors be otherwise unable to act, the
management shall temporarily be vested in the person or persons whom the general
meeting of shareholders shall every year appoint for that purpose.
COMMITTEES
Article 14
The board of directors shall have power to appoint committees, composed of
directors and officers of the company and of group companies. The board of
directors shall determine their duties and powers.
REPRESENTATION
Article 15
The general authority to represent the company shall be vested in the board of
directors, the chairman, the co-
<PAGE> 17
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chairman and in the chief executive officer severally. The board of directors
may also confer authority to represent the company, jointly or severally, to
any one or more directors and/or officers of the company who would thereby be
granted powers of representation with respect to such acts or categories of acts
as the board may determine and shall notify to the Trade Register.
INDEMNITY
Article 16
The company shall indemnify any and all of its directors or officers or former
directors or officers or any person who may have served at its request as a
director or officer of another company in which it owns shares or of which it
is a creditor against expenses actually and necessarily incurred by them in
connection with the defense of any action, suit or proceeding in which they, or
any of them, are made parties, or a party, by reason of being or having been
directors or officers or a former director or officer of the company, or of
such other company, except in relation to matters as to which any such director
or officer or former director or officer or person shall be adjudged in such
action, suit or proceeding to be liable for negligence or misconduct in the
performance of duty. Such indemnification shall not be deemed exclusive of any
other rights to which those indemnified may be entitled otherwise.
GENERAL MEETING OF SHAREHOLDERS
Article 17
1. At least one general meeting of shareholders shall be held every year, which
meeting shall be held within six months after the close of the financial year.
2. Furthermore, general meetings of shareholders shall be held in the case
referred to in article 108a, Book 2 of the Civil Code and as often as the board
of directors, the chairman or co-chairman of the board or the chief executive
officer deems it necessary to hold them, without prejudice to what has been
provided in the next
<PAGE> 18
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paragraph hereof.
3. The board of directors shall have the obligation to call a general meeting of
shareholders, if one or more of those having the right to vote who hold, as
between them at least the right to vote who hold, as between them, at least ten
percent of the issue share capital make a request in writing to the board to
that effect, stating the matters to be dealt with.
If the board of directors fails in that event to call a meeting, in such a
way that it is held within six weeks after the aforesaid request has been
received, then every one of those who have made such a request shall be
entitled himself to call such a meeting, subject to due observance of what has
been provided thereon in these Articles of Association.
4. General meetings of shareholders shall be held in Amsterdam, Schiphol
Airport, Rotterdam, or The Hague, and shall be called by the board of directors,
the chairman or the co-chairman of the board or the chief executive officer, by
means of publication of a notice to that effect in a nationally distributed
daily newspaper and in such other manner as may be required to comply with
applicable stock exchange regulations, not later than on fifteenth day prior to
the meeting.
Additionally the board of directors shall give notice of the meeting to the
shareholders by letter, cable, telex or telefax to be sent to the addresses
recorded in the register of shareholders at least fifteen days prior to the
meeting.
5. The notice shall state the place, date and hour of the meeting and the agenda
of the meeting or shall state that the shareholders and all other persons who
shall have the statutory right to attend the meeting may inspect the same at the
office of the company and at such other place(s) as the board of directors shall
determine.
6. The agenda shall contain such subjects as the person(s) convening the meeting
shall decide, and furthermore such other subjects as one or more of those having
<PAGE> 19
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the right to vote who hold, as between them, at least ten percent of the issued
capital, have so requested the board of directors in writing at least seven
days before the date on which the meeting is convened.
7. The notice shall further state the manner and the place where others than
the shareholders who are permitted by law to attend the meeting must deposit
documentary evidence of their right to attend, and the day on which this must
take place at the latest, which day may not be set earlier than the seventh day
prior to the meeting.
8. If a proposal to amend the company's Articles of Association is to be dealt
with, a copy of that proposal, in which the proposed amendments are stated
verbatim, shall be made available for inspection to the shareholders and others
who are permitted by law to attend the meeting, at the office of the company,
as from the day the meeting of shareholders is called until after the close of
that meeting, and each of them shall be entitled, upon his request, to obtain a
copy thereof, without charge.
Article 18
1. The general meeting of shareholders shall be presided over by the chairman
of the board of directors or, in his absence, by the co-chairman or in the
absence of the latter by the person chosen by the board of director to act as
chairman for such meeting.
2. One of the persons present designated for that purpose by the chairman of
the meeting shall act as secretary and take minutes of the business transacted.
The minutes shall be confirmed by the chairman of the meeting and the secretary
and signed by them in witness thereof.
3. If an official notarial record is made of the business transacted at the
meeting then minutes need not be drawn up and it shall suffice that the
official notarial record be signed by the notary. Each director shall at all
times have power to give instructions for having an official
<PAGE> 20
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notarial record made at the company's expense.
4. Shareholders and those permitted by law to attend the meetings may cause
themselves to be represented at any meeting by a proxy duly authorized in
writing, provided they shall notify the company in writing of their wish to be
represented at such time and place as shall be stated in the notice of the
meetings.
The board of directors may determine further rules concerning the deposit of
the powers of attorney; these shall be mentioned in the notice of the meeting.
5. The chairman of the meeting shall decide on the admittance to the meeting of
persons other than those who are entitled to attend.
6. The chairman may determine the time for which shareholders and others who are
permitted to attend the general meeting of shareholders may speak if he
considers this desirable with a view to the order by conduct of the meeting.
7. Every share shall confer the right to cast one vote.
8. all resolutions shall be passed with an absolute majority of the votes
validly cast unless otherwise specified herein. Blank votes shall not be
counted as votes cast.
9. No voting rights shall be exercised in the general meeting of shareholders
for shares owned by the company or by a subsidiary of the company; likewise no
voting rights shall be exercised for shares of which the certificates of
beneficial ownership are held by the company or the subsidiary. Usufructuaries
of shares owned by the company and its subsidiaries shall however not be
excluded from exercising their voting rights, if the usufruct was created before
the shares were owned by the company or a subsidiary.
Article 19
1. Resolutions of shareholders shall alternatively be capable of being passed in
writing - which shall include cable, telefax and telex messages - instead of at
a
<PAGE> 21
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general meeting of shareholders, provided that these are passed with a
unanimous vote of all the shareholders who are entitled to vote.
2. The board of directors shall enter the resolutions that have been passed in
the manner specified in the preceding paragraph of this article, in the
register of minutes of the general meetings of shareholders.
AUDIT
Article 20
1. The general meeting of shareholders shall appoint an accountant as referred
to in Article 393 of Book 2 of the Civil Code, to examine the annual accounts
drawn up by the board of directors, to report thereon to the board of
directors, and to express an opinion with regard thereto.
2. If the general meeting fails to appoint the accountant as referred to in
paragraph 1 of this article, this appointment shall be made by the board of
directors.
3. The appointment provided for in paragraph 1 may at all times be cancelled by
the general meeting and if the appointment has been made by the board of
directors, also by the board of directors.
FINANCIAL YEAR, ANNUAL ACCOUNTS AND DISTRIBUTION OF PROFITS
Article 21
1. The financial year of the company shall coincide with the calendar year.
2. The board of directors shall annually close the books of the company as at
the last day of every financial year and shall within five months thereafter -
subject to any extension of this time limit up to a maximum extension of six
months, by the general meeting by reason of special circumstances - draw up
annual accounts consisting of a balance sheet, a profit and loss account and
explanatory notes, and shall within that period make these documents available
to the shareholders for inspection at the offices of the company. The board of
directors shall within that period similarly make the annual report
<PAGE> 22
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available to shareholders for inspection.
3. If the activity of the company or the international structure of its group
justifies the same, its annual accounts or only its consolidated accounts may
be prepared in a foreign currency.
4. The annual accounts shall be signed by all the directors; should any
signature be missing, then this shall be mentioned in the annual accounts,
stating the reason.
5. The company shall ensure that the annual accounts, the annual report and the
particulars to be added in accordance with article 392 paragraph 1 of Book 2 of
the Civil Code are available at its office as from the date on which the
general meeting of shareholders at which they are intended to be dealt with is
called. The shareholders and those who are permitted by law to attend the
meetings of shareholders shall be enabled there to inspect these documents and
to obtain copies thereof free of charge.
6. The general meeting of shareholders shall adopt the annual accounts; this
adoption shall constitute a release from liability for the directors with
relation to all acts that appear from those documents or the result of which is
embodied therein, unless a provision has explicitly been made, and without
prejudice to what has been or will be provided thereon by law.
Article 22
1. From the profits, shown in the annual accounts, as adopted, such amounts
shall be reserved as the board of directors shall determine.
2. Profits remaining thereafter shall be at the disposal of the general meeting
of shareholders, subject to the provision of paragraph 7.
3. The general meeting of shareholders may declare and pay dividends in United
States Dollars or in shares of the company or in the form of a combination
thereof.
4. The company shall only have power to make
<PAGE> 23
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distributions to shareholders and other persons entitled to distributable
profits to the extent the company's equity exceeds the sum of the paid-up
portion of the share capital and the reserves that must be maintained in
accordance with provision of law. No distribution of profits may be made to the
company itself for shares that the company holds in its own share capital.
5. The distribution of profits shall be made after the adoption of the annual
accounts, from which it appears that the same is permitted.
6. The board of directors shall have power to declare one or more interim
dividends, provided that the requirements of the fourth paragraph hereof are
duly observed as evidenced by an interim statement of assets and liabilities as
referred to in article 105 paragraph 4 of Book 2 of the Civil Code.
The provisions of paragraph 3 hereof shall apply mutatis mutandis.
7. The board of directors may determine that dividends or interim dividends, as
the case may be, shall be paid, in whole or in part, from the company's share
premium reserve or from any other reserve.
8. Dividends and other distributions of profit shall be made payable in the
manner and at such date(s) - within four weeks after declaration thereof - and
notice thereof shall be given, as the board of directors shall determine.
9. Dividends and other distributions of profit, which have not been collected
within six years after the same have become payable, shall become the property
of the company.
DISSOLUTION AND WINDING UP
Article 23
1. In the event a resolution is passed to dissolve the company, the company
shall be wound-up by the board of directors, unless the general meeting of
shareholders should resolve otherwise.
<PAGE> 24
2. The general meeting of shareholders shall appoint and decide on the
remuneration of the liquidators.
3. Until the winding-up of the company has been completed, these Articles of
Association shall to the extent possible, remain in full force and effect.
4. Whatever remains of the company's equity after all its debts have been
discharged shall be distributed to the shareholders in proportion to the par
value of the shares held by them. No liquidation distribution may be made to
the company itself for shares that the company holds in its own share capital.
5. After the company has ceased to exist the books and records of the company
shall remain in the custody of the person designated for that purpose by the
liquidators during a ten-year period.
<PAGE> 1
EXHIBIT 3.2
CNH GLOBAL N.V.
REGULATIONS OF THE
BOARD OF DIRECTORS
AMENDED AND RESTATED
DECEMBER 8, 1999
I. MEETINGS OF THE BOARD OF DIRECTORS
1. TIME AND PLACE OF MEETINGS
Regular meetings of the Board of Directors may be held at such time and
place as the Board of Directors from time to time shall determine.
The person or persons authorized to call special meetings of the Board
of Directors may fix the time and place of any such meeting.
2. NOTICE OF MEETINGS
Notice of each regular or special meeting of the Board of Directors
shall be given by the Chairman of the Board of Directors or, in his or
her absence, by the Co-Chairman, the Chief Executive Officer or the
Secretary of the Board of Directors, to each director at his or her
usual place of business or residence. The notice of the meeting shall
state the time and place of the meeting and the business anticipated to
be considered at the meeting.
Notice of regular meetings shall be given at least seven days before
the date of the meeting. Such notice period may be shortened at the
discretion of the Chairman of the Board of Directors or, in his or her
absence, of the Co-Chairman, or of the Chief Executive Officer, for
good cause and the taking of any such action by such officer shall be
conclusive evidence that it was for good cause.
Notice of special meetings shall be given at least 24 hours prior to
such meeting.
<PAGE> 2
A meeting of the Board of Directors may be held at any time without
notice if all the directors are present or if those not present waive
notice either before or after the meeting.
Notice of each meeting of the Board of Directors shall be given either
by (i) personal delivery, (ii) postal delivery in the form of
first-class or overnight mail (with postage or other charges thereon
prepaid) or other equivalent service available at the point of mailing,
(iii) courier service, (iv) telegram (with charges prepaid), or (v)
telecopy, electronic mail or other similar transmission. If sent by
first-class mail or other equivalent service, such notice shall be
deemed adequately delivered when deposited in the mails at least three
days before the required period of notice. If by overnight mail,
courier service or telegram, such notice shall be deemed adequately
delivered when the notice is delivered to the overnight mail, courier
service or telegraph company at least 24 hours before the required
period of notice. If by telecopy, electronic mail or other similar
transmission, such notice shall be deemed adequately delivered when the
notice is transmitted at least 12 hours before the required period of
notice.
3. CALLING OF SPECIAL MEETINGS
Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman of the Board of Directors or, in
his or her absence, by the Co-Chairman, the Chief Executive Officer or
by a majority of the total number of directors then in office.
4. ORGANIZATION
The Chairman of the Board of Directors or, in his or her absence, the
Co-Chairman, the Chief Executive Officer or, in their absence, a
director chosen by a majority of the directors present at a meeting,
shall preside at, and act as Chairman of, each meeting of the Board of
Directors.
The Secretary of the Board of Directors or, in his or her absence, an
Assistant Secretary designated by the Chairman of the meeting or, in
the absence of the Secretary and all Assistant Secretaries, any person
designated by the Chairman of the meeting shall act as Secretary of
each meeting of the Board of Directors.
The minutes of meetings of the Board of Directors shall be confirmed by
the Chairman and the Secretary of the meeting, signed by them in
witness thereof and filed with the minutes of the proceedings of the
Board of Directors.
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<PAGE> 3
5. PROXY
A member of the Board of Directors may be represented at a meeting of
the Board of Directors only by another Board member duly authorized in
writing, and such authorization shall constitute presence by proxy at
such meeting. A member of the Board of Directors may not act as a proxy
for more than one other member of the Board of Directors.
6. PARTICIPATION
Members of the Board of Directors may participate in a meeting of the
Board of Directors by means of telephone or video conference or similar
communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting
shall constitute presence in person at such meeting.
7. QUORUM
Except as otherwise required by applicable law or the Articles of
Association of the Company, the presence either in person or by proxy
of a majority of the total number of directors then in office shall be
required and constitute a quorum for the transaction of business,
including the adoption of resolutions. If at any meeting of the Board
of Directors a quorum is not present, a majority of the directors
present may adjourn the meeting from time to time, without notice other
than adjournment at the meeting, until a quorum shall be present.
8. BOARD ACTION AT MEETING
The vote of the majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors.
Each director shall have one vote. if there is a tie in a vote, the
Chairman of the Board of Directors shall have a casting vote.
Resolutions shall be recorded either in the minutes of a meeting or in
a separate document signed by all directors present at any meeting at
which a quorum is present. Any such latter resolutions shall be filed
with the minutes of the proceedings of the Board of Directors.
9. BOARD ACTION WITHOUT MEETING
Resolutions may be adopted by the Board of Directors without convening
a meeting if all directors shall have expressed their opinions in
writing, unless one or more directors shall object against a resolution
being adopted in this way. A resolutions shall in this case be adopted
if the majority of all
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<PAGE> 4
directors then in office shall have expressed themselves in favour of
the resolution concerned. The Secretary of the Board of Directors, or,
in his or her absence, any Assistant Secretary shall file any such
resolution with the minutes of the proceedings of the Board of
Directors.
10. AGENDA FOR MEETINGS
The Chairman of the Board of Directors or, in his or her absence, the
Co-Chairman or, in their absence, the Chief Executive Officer will
establish the agenda for each meeting of the Board of Directors. Each
director is free to suggest the inclusion of items of business on the
agenda.
11. MATERIALS DISTRIBUTED IN ADVANCE
Information and data that is important to the understanding of the
items of business to be considered at a meeting of the Board of
Directors shall be distributed in writing to directors to allow
sufficient time for review prior to the meeting.
12. "IN WRITING" DEFINED
The expression "in writing" as used herein shall include any message
transmitted by current means of communication and received in writing.
II. MEETINGS OF COMMITTEES OF THE
BOARD OF DIRECTORS
1. TIME AND PLACE OF MEETINGS
Meetings of Committees of the Board of Directors shall be held at such
time and place as the Chairperson of the Committee or, in his or her
absence or disability, a majority of the members of the Committee shall
determine and call.
2. NOTICE OF MEETINGS
Notice of each meeting of a Committee of the Board of Directors shall
be given by the Chairperson of the Committee or, in his or her absence,
by the Secretary of the Board of Directors, to each Committee member at
his or her usual place of business or residence. The notice of the
meeting shall state the time and place of the meeting and the business
anticipated to be considered at the meeting.
-4-
<PAGE> 5
Notice of meetings of Committees of the Board of Directors shall be
given at least seven days before the date of the meeting. Such notice
period may be shortened at the discretion of the Chairperson of the
committee for good cause and the taking of any such action shall be
conclusive evidence that it was for good cause.
A meeting of a Committee of the Board of Directors may be held at any
time without notice if all Committee members are present or if those
not present waive notice either before or after the meeting.
Notice of each meeting of a Committee of the Board of Directors shall
be given either by (i) personal delivery, (ii) postal delivery in the
form of first-class or overnight mail (with postage or other charges
thereon prepaid) or other equivalent service available at the point of
mailing, (iii) courier service, (iv) telegram (with charges prepaid),
or (v) telecopy, electronic mail or other similar transmission. If sent
by first-class mail or other equivalent service, such notice shall be
deemed adequately delivered when deposited in the mails at least three
days before the required period of notice. If by overnight mail,
courier service or telegram, such notice shall be deemed adequately
delivered when the notice is delivered to the overnight mail, courier
service or telegraph company at least 24 hours before the required
period of notice. If by telecopy, electronic mail or other similar
transmission, such notice shall be deemed adequately delivered when the
notice is transmitted at least 12 hours before the required period of
notice.
3. ORGANIZATION
The Chairperson of a Committee of the Board of Directors or, in his or
her absence, a Committee member chosen by a majority of the Committee
members present at a meeting shall preside at, and act as Chairperson
of, each meeting of such Committee.
The Secretary of the Board of Directors or, in his or her absence, an
Assistant Secretary designated by the Chairperson of a meeting of a
Committee of the Board of Directors or, in the absence of the Secretary
and all Assistant Secretaries, any person designated by such
Chairperson shall act as Secretary of each meeting of the Committee.
Notwithstanding anything to the contrary in the preceding paragraph,
the Chairperson of a meeting of Committee of the Board of Directors may
make a determination that such Chairperson or other member of the
Committee shall record the proceedings of the meeting.
-5-
<PAGE> 6
The minutes of meetings of a Committee of the Board of Directors shall
be confirmed by the Chairperson and the Secretary of the meeting,
signed by them in witness thereof and filed with the minutes of the
proceedings of the Committee.
4. PARTICIPATION
Members of a Committee of the Board of Directors may participate in a
meeting of such Committee by means of telephone or video conference or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at such
meeting.
5. QUORUM
Except as otherwise required by applicable law, the Articles of
Association of the Company or the resolution of the Board of Directors
designating the Committee, the presence in person of a majority of the
total number of members of a Committee of the Board of Directors shall
be required and constitute a quorum for the transaction of business,
including the adoption of resolutions. If any meeting of a Committee of
the Board of Directors a quorum is not present, a majority of the
Committee members present may adjourn the meeting from time to time,
without notice other than adjournment at the meeting, until a quorum
shall be present.
Whenever a quorum cannot be secured for any meeting of a Committee of
the Board of Directors from the members of such Committee, the member
or members thereof present and not disqualified from voting may
unanimously appoint one or more non-executive directors who are not
regular members of the Committee to act at the meeting in the place of
any absent or disqualified member or members of the Committee.
6. COMMITTEE ACTION AT MEETING
The vote of the majority of the members of a Committee of the Board of
Directors present at any meeting at which a quorum is present shall be
the act of the Committee. Each Committee member shall have one vote. if
there is a tie in a vote, the Chairperson of the Committee shall have a
casting vote.
Resolutions shall be recorded either in the minutes of a meeting or in
a separate document signed by all Committee members present at any
meeting at which a quorum is present. Any such latter resolutions shall
be filed with the minutes of the proceedings of a Committee of the
Board of Directors.
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<PAGE> 7
7. COMMITTEE ACTION WITHOUT MEETING
Resolutions may be adopted by a Committee of the Board of Directors
without convening a meeting if all Committee members shall have
expressed their opinions in writing, unless one or more committee
members shall object against a resolution being adopted in this way. A
resolution shall in this case be adopted if the majority of all
Committee members shall have expressed themselves in favour of the
resolution concerned. The Secretary of the Board of Directors or, in
his or her absence, any Assistant Secretary shall file any such
resolution with the minutes of the proceedings of the Committee.
8. AGENDA FOR MEETINGS
The Chairperson of a Committee of the Board of Directors, in
consultation with other Committee members and appropriate members of
management, will establish the agenda for each meeting of the
Committee.
9. MATERIALS DISTRIBUTED IN ADVANCE
Information and data that is important to the understanding of the
items of business to be considered at a meeting of a Committee of the
Board of Directors shall be distributed in writing to Committee members
to allow sufficient time for review prior to the meeting.
10. "IN WRITING" DEFINED
The expression "in writing" as used herein shall include any message
transmitted by current means of communication and received in writing.
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<PAGE> 1
EXHIBIT 4.1
INTERCOMPANY CREDIT FACILITY
THIS AGREEMENT is made and entered as of this 28th day of October 1999, by and
BETWEEN
(1) FIAT FINANCE AND TRADE Ltd. S.A., 13 Rue Aldringen, L-111B Luxembourg
hereinafter referred to as the LENDER,
(2) NEW HOLLAND N.V.-Schiphol Boulevard 217, WTC Airport-1118BH Luchthaven
Schiphol, Netherlands
hereinafter referred to as the BORROWER
IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Save as otherwise provided in this Agreement, the following words and
phrases have the following meanings throughout this Agreement:
ADVANCE: means the principal amount of an advance made or to be made by the
Lender under this Agreement;
AVAILABLE FACILITY: means at any time in relation to the Lender the amount of
the Facility less the amount of each Advance which has then been made hereunder;
BUSINESS DAY: means a day on which banks are open for foreign and domestic
business in London and New York;
EVENT OF DEFAULT: means any of the events specified in Clause 8;
INTEREST PERIOD: means each of the periods determined in accordance with this
Agreement for which a rate of interest is to be established hereunder;
US DOLLARS: means the lawful currency for the time being of the United States
of America;
FINAL MATURITY DATE: means 28th October 2000.
LIBOR: means in respect of any period and amount the rate for deposits for such
period in US Dollars which appears on the Reuters page FRBD (or such other page
as may replace it) as of 11:00 a.m. on the second Business Day before the first
day of that period. If no such rate is displayed in such page, Libor will be
determined on the basis of the cost to the Lender of funding the relevant
advance for the relevant duration, such cost to be comparable to the rate of
interest on annual basis then paid to the international market by prime banks
for deposit in the relevant duration;
LOAN: means the aggregate principal amount for the time being advanced and
outstanding pursuant to this Agreement;
<PAGE> 2
MARGIN: up to 0.25% per annum as shall have been agreed upon by the Lender and
the Borrower;
PREPAYMENT DATE: in relation to any Advance, means the time of expiry of a
notice of prepayment;
REPAYMENT DATE: in relation to any Advance, means the last day of the Interest
Period thereof;
REVOLVING CREDIT FACILITY or FACILITY: means the revolving credit facility
available in US Dollars granted to the Borrower in this Agreement.
2. THE FACILITY
2.1 Availability to the Borrower
The Lender grants to the Borrower, upon and subject to the conditions
of this Agreement, a Revolving Credit Facility in the aggregate
amount not exceeding USD 600,000,000 for a period of one year from
the date of this Facility Agreement.
3. UTILISATION OF THE FACILITY
3.1 Conditions of Utilisation
Save as otherwise provided in this Agreement, an Advance will be made
by the Lender to the Borrower on its request if:
3.1.1 the amount of such Advance does not exceed the Available
Facility.
3.1.2 the amount of the proposed Advance which shall be an amount
which is not less then USD 500,000.
3.1.3 the proposed term of such Advance shall be any period up to
6 months or such other longer period as may be agreed
between the Lender and the Borrower.
3.1.4 any Interest Period would otherwise and on a day which is
not a Business Day that Interest Period shall be extended
to the next succeeding Business Day.
3.1.5 no Event of Default has occurred as of the proposed date of
the making of such Advance.
3.2 Termination
The Lender has the right to terminate the Facility at any time, by
giving to the Borrower not less than thirty days' prior notice to
that effect (such notice hereinafter referred to as the "Termination
Notice") whereupon:
a) with effect from the date of expiry of such Termination Notice
the amount of the Available Facility, if any, shall be cancelled
and reduced to zero; and
<PAGE> 3
b) the loan with any interest and other amounts accrued and/or
owing hereunder shall be repaid at maturity to the Lender; and
c) upon repayment of all Advances the Facility shall be cancelled
and reduced to zero.
4. INTEREST
4.1 Date of Payment
On the Repayment Date, relating to each Advance, the Borrower shall
pay accrued interest on that Advance.
4.2 Rate of Interest
The rate of interest applicable to each Advance from time to time
during its interest period shall be the rate per annum which is the
sum of (1) Libor applicable to such Advance for such Interest Period
and (2) the Margin at such time.
4.3 Computation of Interest
All payments of interest hereunder shall be calculated on the basis
of the number of days elapsed and a year of 360.
5. REPAYMENT
5.1 Repayments Generally
Each Advance shall be repaid by the Borrower in full on the Repayment
Date relating thereto. The Borrower shall not repay all or any part
of any Advance outstanding hereunder except at the times and in the
manner expressly provided herein but, subject to the terms and
conditions hereof, shall be entitled to reborrow any amount repaid
under this Clause 5.
5.2 Requirement to Gross-up
All payments to be made by the Borrower under this Agreement shall be
made free and clear of and without deduction for or on account of tax
unless the Borrower is required by law to make such a payment subject
to the deduction or withholding of tax, in which case the sum payable
by the Borrower in respect of which such deduction or withholding is
required to be made shall be increased to the extent necessary to
ensure that, after the making of such deduction or withholding, the
Lender receives and retains (free from any liability in respect of any
such deduction or withholding) a net sum equal to the sum which it
would have received and so retained had no such deduction or
withholding been made or been required to be made.
6. PREPAYMENT
The Borrower will have the option, by giving to the Lender not less than 30
days' prior notice to that effect, to prepay in whole or in part (being an
amount or integral multiple of USD 500,000.) any advance as at the time of
expiry of such notice. In this case, the Borrower shall pay the
<PAGE> 4
advance (in whole or in part) together with accrued interest thereon on the
Prepayment date for such Advance in the currency in which it is denominated
without penalty subject to the payment to the Lender of the difference, if
negative, between (a) the amount of interest which the Lender is able to
obtain by placing an amount equal to the amount prepaid on deposit with
prime banks in the relevant interbank market for the remainder of the
relevant interest period, as soon as reasonably practicable after receipt
thereof from the Borrower and (b) the amount of interest which would
otherwise be payable to the Lender on the relevant amount received for the
remainder of the relevant interest period (less the margin).
7. CANCELLATION
The Borrower may, by giving to the Lender not less than 30 day's prior
notice to that effect, cancel the whole or any part of the Facility as at
the time of expiry of such notice. Any such notice shall take effect on its
expiry and shall reduce the Available Facility rateably.
8. EVENTS OF DEFAULT
8.1 the Borrower shall fail to pay when due any principal of or interest
on the Loan or any other amount payable hereunder; or
8.2 the Borrower shall default in the due performance and observance of
any other material provision contained in this Agreement and such
default (if capable of remedy) shall remain unremedied for thirty days
after notice thereof shall have been given by the Lender to the
Borrower; or
8.3 any representation, warranty or statement made or deemed to be
repeated in this Agreement by the Borrower hereunder or in connection
herewith shall be at any time incorrect in any respect or any such
representation, warranty or statement would, if made or repeated at
any time with reference to the facts and circumstances then
subsisting, be than incorrect; or
8.4 the Borrower shall propose, commence negotiations with a view to
enter into any arrangement or composition with or for the benefit of
its creditors or any of them, or if any receiver, trustee, custodian,
liquidator or similar officer is appointed for it or for all or any
part of its property, or if the Borrower is the subject, with or
without its own consent, of any bankruptcy, insolvency, readjustment
of debt, reorganisation, dissolution or other similar procedure, and
such procedure continues undismissed or unstrayed for thirty (30) days
after commencement; or
8.5 Fiat S.p.A., Turin, Italy shall cease to control directly or
indirectly at least 50% of the voting share capital of the Borrower
or, if the Borrower is merged into another company or such a merger is
approved by the relevant corporate bodies of the Borrower, the
surviving entity is no longer at least 50% directly or indirectly
controlled by Fiat S.p.A.;
at any time after the occurrence of any event set out in this Clause 8 when
such event is continuing unwaived, the Lender may by notice to the Borrower
declare that this Facility shall be terminated and demand immediate
repayment of all the Advances together with accrued interest to the date of
actual repayment and any other sum due under the Facility. The Borrower
shall indemnify the Lender against all losses or expenses reasonably
incurred as a result of the occurrence of an Event of Default.
<PAGE> 5
9. REPRESENTATIONS
The Borrower represents to the Lender as follows at present:
9.1 it is a company incorporated and validly existing and in good
standing under the laws of its incorporation;
9.2 it has necessary corporate power to borrow under this Facility and
has taken all necessary corporate and other action to authorise the
execution, delivery and performance of this Facility Letter;
9.3 this Facility Letter has been duly executed and delivered by the
Borrower, and constitutes legally binding, direct and unconditional
obligations enforceable against the Borrower in accordance with its
terms; and
9.4 the execution, delivery and performance of this Facility do not
violate any provision of any existing law or regulation or statute
applicable to it.
10. EXPENSES
The Borrower shall reimburse the Lender on demand for all reasonable
charges and expenses incurred in connection with the enforcement of, or the
preservation of any rights under, this Agreement (including legal and
out-of-pocket expenses and all value added tax thereon), upon presentation
of appropriate documentation.
Any notice to be given by either party hereunder to the other shall be
given in writing to such party at its address stated above or such other
address last notified to the other party for that purpose and shall be
deemed to be given when dispatched (if given by telex), or when hand
delivered to the relevant address or five days after posting (if given by
mail) provided that any such notice shall be effective only when received.
11. ASSIGNMENT
This Agreement may not be assigned by any party hereto without the prior
written consent of the other party.
12. LAW
This Agreement shall be governed by and construed in accordance with the
laws of England and Wales.
13. JURISDICTION
13.1 Each of the parties hereto agrees, without prejudice to the right of
either party to take proceedings in relation hereto before any other
court of competent jurisdiction, that the courts of London shall have
jurisdiction to hear and determine any suit, action or proceeding, and
to settle any disputes, which may arise in relation hereto and, for
such purposes, irrevocably submits to the jurisdiction of such courts.
<PAGE> 6
13.2 The Lender agree that the process by which any suit, action or
proceeding in the courts of England are begun may be served on
the lender by being delivered by hand to Fiat Finance and Trade
Ltd., UK Branch, Berkeley Square, London W1X 6AL or its other
registered office for the time being.
13.3 The Borrower agree that the process by which any suit, action or
proceeding in the courts of England are begun may be served on
the Borrower by being delivered by hand to Fiat UK Limited,
Berkeley Square, London W1X 6AL or its other registered office
for the time being.
14. SEVERABILITY OF PROVISIONS
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, which shall remain in full force and effect.
15. NOTICES
15.1 Addresses
15.1.1 Any notice required to be given to the Lender shall be
deemed properly given when addressed to the Lender at:
Fiat Finance and Trade Ltd., Luxembourg
c/o Fiat Finance and Trade Ltd., Luxembourg
Succursale di Paradiso
Riva Paradiso 14 - 6002 Lugano Paradiso
Switzerland
15.1.2 Any notice to be given to the Borrower hereunder should
be deemed properly given when addressed to the Borrower
at:
NEW HOLLAND N.V.
c/o NEW HOLLAND Limited
Attn. The Treasurer
950 Great West Road
Brentford Middlesex TW8 9ES
U.K.
16. COUNTERPARTS
This Agreement shall be executed in any number of counterparts, each of
which shall constitute an original.
<PAGE> 1
EXHIBIT 4.2
=============================================================================
28TH OCTOBER 1999
[FIAT LOGO]
[NEW HOLLAND LOGO]
CREDIT AGREEMENT RELATING TO A
$2,400,000,000 TERM LOAN FACILITY
TO NEW HOLLAND N.V.
GUARANTEED BY FIAT S.P.A.
ARRANGED BY
CHASE MANHATTAN PLC
CREDIT SUISSE FIRST BOSTON
[CHASE LOGO] [CREDIT SUISSE/FIRST BOSTON LOGO]
[WILDE SAPTE LONDON LOGO]
=============================================================================
<PAGE> 2
Conformed Copy
DATED 28TH October 1999
NEW HOLLAND N.V.
As Borrower
And
FIAT S.p.A.
As Guarantor
and
THE BANKS
And
CHASE MANHATTAN INTERNATIONAL LIMITED
As Agent
And
CHASE MANHATTAN plc
CREDIT SUISSE FIRST BOSTON
As Lead Arrangers
------------------------------------------------------------
CREDIT AGREEMENT
relating to a
dollar term loan facility
of $2,400,000,000
------------------------------------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax 0171 246 7777
<PAGE> 3
TABLE OF CONTENTS
Clause Heading Page Number
- ------ ------- -----------
1. DEFINITIONS AND INTERPRETATION............................ 1
1.1 Definitions............................................... 1
1.2 Headings.................................................. 6
1.3 Interpretation............................................ 6
2. FACILITY.................................................. 7
2.1 Facility.................................................. 7
2.2 Obligations several....................................... 7
2.3 Rights several............................................ 7
3. PURPOSE................................................... 8
3.1 Purpose................................................... 8
3.2 No monitoring............................................. 8
4. CONDITIONS PRECEDENT...................................... 8
5. DRAWDOWN.................................................. 8
5.1 Drawdown Period........................................... 8
5.2 Conditions to each Advance................................ 8
5.3 Drawdown Notice........................................... 8
5.4 Limitations on Advances................................... 9
5.5 Notification to Banks..................................... 9
5.6 Participations............................................ 9
6. INTEREST.................................................. 9
6.1 Interest rate............................................. 9
6.2 Interest Periods.......................................... 9
6.3 Default interest.......................................... 10
6.4 Calculation and payment of interest....................... 10
6.5 Agent's determination..................................... 11
7. REPAYMENT AND PREPAYMENT.................................. 11
7.1 Repayment................................................. 11
7.2 Voluntary Prepayment...................................... 11
7.3 Mandatory Reduction and Prepayment........................ 11
7.4 Accrued interest and broken funding costs................. 12
7.5 Effect of repayment or prepayment......................... 12
7.6 Limitation................................................ 12
8. CANCELLATION.............................................. 12
8.1 Cancellation.............................................. 12
8.2 Notice.................................................... 12
8.3 Effect of cancellation.................................... 12
8.4 Limitation................................................ 12
9. CHANGES IN CIRCUMSTANCE................................... 12
9.1 Illegality................................................ 12
9.2 Increased Costs........................................... 13
9.3 Market disruption......................................... 14
9.4 Mitigation................................................ 15
9.5 Certificates.............................................. 15
<PAGE> 4
10. PAYMENTS................................................. 15
10.1 Place and time........................................... 15
10.2 Funds.................................................... 15
10.3 Distribution............................................. 15
10.4 Business Days............................................ 16
10.5 Currency................................................. 16
10.6 Accounts as evidence..................................... 16
10.7 Partial payments......................................... 16
10.8 Set-off and counterclaim................................. 17
10.8 Grossing-up.............................................. 17
11. GUARANTEE................................................ 18
11.1 Guarantee................................................ 18
11.2 Guarantee Provisions..................................... 19
12. REPRESENTATIONS AND WARRANTIES........................... 21
12.1 Representations and warranties........................... 21
12.2 Repetition............................................... 22
13. UNDERTAKING.............................................. 22
13.1 Information undertakings................................. 22
13.2 Positive undertakings.................................... 23
13.3 Negative pledge.......................................... 23
14. DEFAULT.................................................. 23
14.1 Default.................................................. 23
14.2 Acceleration............................................. 25
15. PRO RATA SHARING......................................... 25
15.1 Redistribution........................................... 25
15.2 Legal proceedings........................................ 26
15.3 Reversal of redistribution............................... 26
15.4 Information.............................................. 26
16. THE AGENT, THE LEAD ARRANGERS AND THE BANKS.............. 26
16.1 Appointment and duties................................... 26
16.2 Payments................................................. 27
16.3 Default.................................................. 28
16.4 Reliance................................................. 28
16.5 Legal proceedings........................................ 28
16.6 No liability............................................. 28
16.7 Credit decisions......................................... 29
16.8 Information.............................................. 29
16.9 Relationship with Banks.................................. 29
16.10 Agent's position......................................... 30
16.11 Indemnity................................................ 30
16.12 Resignation.............................................. 30
16.13 Change of office......................................... 31
17. FEES AND EXPENSES........................................ 31
17.1 Expenses and Costs....................................... 31
17.2 Arrangement and agency fees.............................. 31
17.3 Commitment fee........................................... 32
17.4 Documentary Taxes Indemnity.............................. 32
17.5 VAT...................................................... 32
18. AMENDMENTS AND WAIVERS................................... 32
18.1 Majority Banks........................................... 32
<PAGE> 5
18.2 All Banks............................................. 32
18.3 No implied waivers; remedies cumulative............... 33
19. MISCELLANEOUS......................................... 33
19.1 Severance............................................. 33
19.2 Counterparts.......................................... 33
20. NOTICES............................................... 33
20.1 Method................................................ 33
20.2 Delivery.............................................. 33
20.3 Addresses............................................. 34
20.4 Deemed receipt........................................ 34
20.5 Notices through Agent................................. 35
21. ASSIGNMENTS AND TRANSFERS............................. 35
21.1 Benefit of Agreement.................................. 35
21.2 Assignments and transfers by an Obligor............... 35
21.3 Assignment by Banks................................... 35
21.4 Transfers by Banks.................................... 35
21.5 Condition to assignments and transfers................ 36
21.6 Consequences of transfer.............................. 36
21.7 Disclosure of information............................. 36
22. INDEMNITIES........................................... 37
22.1 Breakage costs indemnity.............................. 37
22.2 Currency indemnity.................................... 37
22.3 General............................................... 38
23. LAW AND JURISDICTION.................................. 38
23.1 Law................................................... 38
23.2 Jurisdiction.......................................... 38
23.2 Agent for service..................................... 38
SCHEDULE 1 THE BANKS............................................. 39
SCHEDULE 2 CONDITIONS PRECEDENT.................................. 40
SCHEDULE 3 DRAWDOWN NOTICE....................................... 41
SCHEDULE 4 FORM OF TRANSFER CERTIFICATE.......................... 42
<PAGE> 6
THIS AGREEMENT is made on 28th October 1999
BY:
(1) NEW HOLLAND N.V., a company incorporated in the Netherlands whose
registered office is at Schiphol Boulevard 217, WTC Airport, 1118 BH
Luchthaven Schiphol, The Netherlands (the "Borrower");
(2) FIAT S.p.A., a company incorporated in the Republic of Italy whose
registered office is at Via Nizza 250, 10126 Turin, Italy (the
"Guarantor");
(3) THE BANKS listed in Schedule 1;
(4) CHASE MANHATTAN INTERNATIONAL LIMITED of Trinity Tower, 9 Thomas More
Street, London E1 9YT as the Agent (as that term is defined below);
and
(5) CHASE MANHATTAN plc of 125 London Wall, London EC2Y 5AJ and CREDIT
SUISSE FIRST BOSTON of 1-5 Cabot Square, London E14 4QR as the joint
lead arrangers of the facility made available under this Agreement (the
"Lead Arrangers").
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Agreement:
"ADDITIONAL COST RATE" means, in relation to a Participation of a Bank
in an Advance, the aggregate cost, if any, certified by such Bank as
the cost to it of complying with the reserve asset and other regulatory
requirements of the European Central Bank and/or the Financial Services
Authority in relation to that Participation or any class of loans of
which that Participation forms part, expressed as a percentage rate per
annum for the relevant Interest Period.
"ADVANCE" means an advance made or to be made to the Borrower under the
Facility or, as the case may be, the outstanding principal amount of
any such advance, and each advance into which an advance may be split
pursuant to Clause 6.2.4.
"AGENCY FEES LETTER" means the letter dated 17 September 1999 from the
Agent to the Obligors relating to certain fees payable to the Agent by
the Borrower in relation to this Agreement.
"AGENT" means Chase Manhattan International Limited in its capacity as
agent for the Banks and each successor agent appointed in accordance
with Clause 16.12.
"ARRANGEMENT FEES LETTER" means the letter dated 17 September 1999 from
the Lead Arrangers to the Obligors relating to certain fees payable to
the Lead Arrangers by the Borrower in relation to this Agreement.
"AVAILABLE COMMITMENT" means, in relation to a Bank, its Commitment
less its Participations in all outstanding Advances.
<PAGE> 7
"AVAILABLE FACILITY" means the aggregate of the Available Commitments
of the Banks.
"BANKS" means the banks and other financial institutions listed in
Schedule 1 and any Bank Transferee, together with their respective
successors in title, provided that any bank or financial institution
which transfers all of its Commitment in accordance with Clause 21.4
shall cease to be a "Bank".
"BANK TRANSFEREE" has the meaning given to that term in Clause 21.4.2.
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
banks are open for general interbank business in London and New York.
"CERTIFIED COPY" means, in relation to a document, a copy of that
document certified a true, complete and accurate copy, of the original
by a duly authorized officer of the relevant company.
"CHANGE" means, in relation to a Bank (or any company of which that
Bank is a Subsidiary), the introduction, implementation, repeal,
withdrawal or change in, or in the official interpretation or
application of (a) any law or regulation or (b) any official
directive requirement, request or guidance (whether or not having the
force of law but if not having the force of law, one which applies
generally to a class or category of financial institution of which
that Bank (or that company) forms part and compliance with which is
in accordance with the general practice of those financial
institutions) of the European Community, any central bank including
the European Central Bank, Financial Services Authority, or any other
fiscal, monetary or regulatory authority.
"COMMITMENT" means, in relation to a Bank, the amount set out opposite
its name in Schedule 1 or, in relation to a Bank which becomes a Bank
after the date hereof, under the heading "Amount of Commitment
Transferred" in the schedule to the Transfer Certificate(s) pursuant
to which it becomes a Bank, in each case as reduced or cancelled in
accordance with this Agreement.
"DEFAULT" means any event specified as such in Clause 14.1.
"DOLLARS" and "$" means the lawful currency for the time being of the
United States of America.
"DRAWDOWN DATE" means the date on which an Advance is made, or is
proposed to be made.
"DRAWDOWN NOTICE" means a notice substantially in the form set out in
Schedule 3.
"DRAWDOWN PERIOD" means the period starting on the date of this
Agreement and ending on the date falling 60 days after the date of
this Agreement.
"ENCUMBRANCE" means any mortgage, charge, pledge, lien or any other
security interest (other than arising by operation of law).
"FACILITY" means the Dollar term loan facility granted to the Borrower
under this Agreement.
"FACILITY PERIOD" means the period starting on the date of this
Agreement and ending on the date on which all the obligations and
liabilities of the Obligors under the Financing
<PAGE> 8
Documents are discharge in full and none of the Agent and the Banks
has any continuing obligation in relation to the Facility.
"FINANCIAL YEAR" means, in relation to an Obligor, each accounting
period of 12 months in respect of which it prepares its financial
statements.
"FINANCE PARTIES" means the Banks, the Agent and the Lead Arrangers.
"FINANCING DOCUMENTS" means this Agreement, the Agency Fees Letter and
the Arrangement Fees Letter.
"GAAP" means, in relation to a company, accounting principles,
concepts, bases and policies generally adopted and accepted in the
jurisdiction of its incorporation or, if appropriate, the
international accounting principles formulated by the International
Accounting Standards Committee.
"INDEBTEDNESS" means any obligation (whether incurred a principal or
as surety) for the payment or repayment of borrowed money, whether
present or future, including any contingent obligation in respect
thereof by reason of any guarantee or other assumption of liability
for obligation in respect thereof by reason of any guarantee or other
assumption of liability for obligations of third parties and any
actual or contingent obligation in respect of any interest rate swap
or cross-currency swap or forward sale or purchase contract or other
form of interest or currency hedging transaction.
"INFORMATION MEMORANDUM" means the information memorandum dated
September 1999 and prepared by the Borrower in connection with this
Agreement.
"INTEREST DATE" means the last day of an Interest Period.
"INTEREST PERIOD" means each period determined in accordance with
Clause 6 for the purpose of calculating interest on Advances or
overdue amounts.
"LENDING OFFICE" means, in relation to a Bank, the office set out
under its name in Schedule 1 or in the schedule to its relevant
Transfer Certificate, or such other office through which that Bank's
Commitment is maintained an through which its Participation is made
and maintained under this Agreement.
"LIBOR" means, in relation to an Advance or overdue amount and in
relation to a particular Interest Period:
(a) the interest rate for Dollar deposits (or, as the case may
be, deposits in the currency of such overdue amount) for a
period equal to that Interest Period which appears on the
screen display designated a "Page 3750" on the Telerate
Service (or such other screen display or service as may
replace it for the purpose of displaying British Bankers'
Association LIBOR Rates for Dollar deposits in the London
interbank market) at or about 11:00 a.m. on the applicable
Rate Fixing Day; and
(b) if no such interest rate appears on the Telerate Service (or
such replacement), the arithmetic mean (rounded upwards to 4
decimal places) of the rates per annum (as quoted to the
Agent at its request) at which each Reference Bank was
offering Dollar deposits (or, as the case may be, deposits in
the currency of such overdue amount) in an amount comparable
with that Advance or overdue amount, as the
<PAGE> 9
case may be, to leading banks in the London
interbank market for a period equal to that
Interest Period at or about 11:00 a.m. on
the applicable Rate Fixing Day.
"LOAN" means, at any time, the aggregate of all Advances
outstanding at this time.
"MAJORITY BANKS" means a group of Banks whose Participations
in the Advances together exceed 66 2/3 per cent. of all
Advances or, at any time when no Advance is outstanding, a
group of Banks whose Commitments together exceed 66 2/3 per
cent. of the Total Commitments (taking no account, for the
purposes of this definition, of the last sentence in Clause
14.2).
"MARGIN" means 0.375 per cent. per annum.
"OBLIGORS" means the Borrower and the Guarantor, and
"OBLIGOR" shall be construed accordingly.
"ORIGINAL FINANCIAL STATEMENTS" means:
(a) in relation to the Borrower, its audited
consolidated financial statements (including
the notes thereto) for its Financial Year ended
31 December 1998; and
(b) in relation to the Guarantor, its audited
consolidated financial statements (including the
notes thereto) for its Financial Year ended 31
December 1998.
"PARTICIPATION" means, in relation to a Bank and an Advance,
the part of that Advance made available or to be made
available by that Bank and thereafter the part of that
Advance owing to that Bank from time to time.
"PARTY" means a party to this Agreement.
"PERMITTED ENCUMBRANCE" means:
(a) any Encumbrance created or outstanding with the
prior written consent of the Majority Banks; or
(b) rights of set-off arising in the ordinary course of
trading activities between either Obligor and its
suppliers or customers; or
(c) rights of set-off or netting arising by operation
of law or by contract by virtue of the provision to
either Obligor of clearing bank facilities or
overdraft facilities; or
(d) any retention of title to goods supplied to either
Obligor where such retention is required by the
supplier in the ordinary course of its trading
activities and on customary terms and the goods in
question are supplied on credit; or
(e) Encumbrances (except floating charges) arising
under finance leases, hire purchase, conditional
sale agreements or other agreements for the
acquisition of assets on deferred payment terms over
the asset which is the subject matter of the
relevant agreement; or
(f) Encumbrances over any assets (or documents of title
thereto) acquired by either Obligor after the date
of this Agreement provided that:
<PAGE> 10
(i) any such Encumbrance is in existence before such
acquisition and is not created in contemplation of
such acquisition; and
(ii) the amount secured by Encumbrance does not exceed,
at any time, the maximum amount secured or agreed to
be secured thereby (in accordance with the terms, as
in force at the date of the acquisition of the asset
concerned on which such Encumbrance was created as
at the date of acquisition; or
(g) any Encumbrance created in favour of a plaintiff or defendant
in any action of the court or tribunal before whom such
action is brought as security for costs or expenses where
either Obligor is prosecuting or defending such action in the
bona fide interest of such Obligor; or
(h) any Encumbrance created pursuant to any order of attachment,
distraint, garnishee order or injunction restraining disposal
of assets or similar legal process arising in connection with
court proceedings; or
(i) any Encumbrances created in connection with the
securitisation of receivables of either Obligor over
the receivables to be securitised; or
(j) any Encumbrance over any asset of either Obligor created to
secure Indebtedness incurred by such Obligor either to fund
the purchase of such asset or to fund the development and/or
improvement of such asset; or
(k) Encumbrances created by the Obligors and not otherwise
permitted by paragraphs (a) to (j) above inclusive provided
that the aggregate principal amount of Indebtedness secured by
such Encumbrances shall not exceed US$ 200,000,000 or its
equivalent in other currencies.
"POTENTIAL DEFAULT" means an event which with the giving of notice or
the lapse of time or the making any determination or fulfilment of any
condition provided for in Clause 14 would or could reasonably be
expected to constitute a Default.
"RATE FIXING DAY" means, in relation to any Interest Period, the day
on which quotes are customarily given in the London interbank market
for deposits in Dollars for delivery on the first day of that Interest
Period.
"REFERENCE BANKS" means the principal London offices of The Chase
Manhattan Bank, Credit Suisse First Boston and Deutsche Bank AG and
such other bank or banks as may be agreed between the Agent (acting on
the instructions of the Majority Banks) and the Borrower.
"REPAYMENT DATE" means the date falling 364 days after the date of
this Agreement.
"RESERVATIONS" means the principle that equitable remedies are
remedies which may be granted or refused at the discretion of the
court, the limitation on enforcement as a result of laws relating to
bankruptcy, insolvency, liquidation, reorganisation, court schemes,
moratoria, administration and other laws affecting the rights of
creditors generally, the time-barring of claims under the Limitation
Acts, rules against penalties and similar principles of law in other
jurisdictions relevant in the context of the Financing Documents.
<PAGE> 11
"SUBSIDIARY" means a subsidiary within the meaning of section 736 of
the Companies Act 1985.
"TAXES" includes all present and future taxes, charges, imposts,
duties, levies or withholdings of any kind whatsoever, or any amount of
a similar nature (including any penalty or interest payable in
connection with any failure to pay or any delay in paying any of the
same); and "Tax" and "Taxation" shall be construed accordingly.
"TOTAL COMMITMENTS" means the aggregate of the Commitments of the
Banks.
"TRANSFER CERTIFICATE" means a document substantially in the form set
out in Schedule 4.
"VAT" means value added tax as provided for in the Value Added Tax Act
1994 and legislation (or purported legislation and whether delegated or
otherwise) supplemental to that Act or in any primary or secondary
legislation promulgated by the European Community or any official body
or agency of the European Community, and any tax similar of equivalent
to value added tax imposed by any country other than the United Kingdom
and any similar tax replacing or introduced in addition to any of the
same.
1.2 HEADINGS
The headings in this Agreement are for convenience only and shall be
ignored in construing this Agreement.
1.3 INTERPRETATION
In this Agreement (unless otherwise provided):
(a) words importing the singular shall include the plural and
vice versa;
(b) references to Clauses and Schedules are to be construed as
references to the clauses of, and schedules to this
Agreement;
(c) references to any Financing Document or any other document
shall be construed as references to that Financing Document
or that other document, as amended, varied, novated or
supplemented;
(d) references to any statute or statutory provision include any
statute or statutory provision which amends, extends,
consolidates or replaces the same, or which has been amended,
extended, consolidated or replaced by the same, and shall
include any orders, regulations, instruments or other
subordinate legislation made under the relevant statute;
(e) references to a document being "in the agreed form" means
that document the form and content of which has been approved
by the Agent and which has endorsed on it the words "in the
agreed form" and which is initialled by or on behalf of the
Agent and the Borrower;
(f) references to "assets" shall included revenues and property
and the right to revenues and property and rights of every
kind, present, future and contingent and whether tangible or
intangible (including uncalled share capital);
<PAGE> 12
(g) the words "including" and "in particular" shall be construed
as being by way of illustration or emphasis only and shall
not be construed as, nor shall they take effect as, limiting
the generality of any preceding words;
(h) the words "other" and "otherwise" shall not be construed
ejusdem generis with any foregoing words where a wider
construction is possible;
(i) references to a "person" shall be construed so as to include
that person's assigns, transferees or successors in title and
shall be construed as including references to an individual,
firm, partnership, joint venture, company, corporation, body
corporate, unincorporated body of persons or any state or any
agency of a state; and
(j) references to time are to London time.
2. FACILITY
2.1 FACILITY
2.1.1 Subject to the terms of this Agreement, the Banks agree to make
available to the Borrower a Dollar term loan facility in the maximum
principal amount of $2,400,000,000.
2.1.2 Notwithstanding any other term of this Agreement, no Bank shall be
obliged to lend more than its Commitment.
2.2 OBLIGATIONS SEVERAL
2.2.1 The obligations of the Finance Parties under this Agreement are
several.
2.2.2 The failure of a Finance Party to carry out its obligations under this
shall not relieve any other Party of any of its obligations under
this Agreement.
2.2.3 None of the Finance Parties shall be responsible for the obligations of
any other Party under this Agreement.
2.3 RIGHTS SEVERAL
2.3.1 The rights of the Finance Parties under this Agreement are several. All
amounts due, and obligations owed, to each of them are separate and
independent debts or, as the case may be, obligations.
2.3.2 Each Finance Party may, except as otherwise stated in this Agreement;
separately enforce its rights under this Agreement.
<PAGE> 13
3. PURPOSE
3.1 PURPOSE
The Borrower shall use the proceeds of all Advances to finance a
portion of the consideration payable for the direct and/or indirect
acquisition by the Borrower of the entire issued share capital of Case
Corporation and the costs and expenses relating thereto.
3.2 NO MONITORING
None of the Finance Parties shall be obliged to investigate or monitor
the use or application of the proceeds of the Advances.
4. CONDITIONS PRECEDENT
Notwithstanding any other term of this Agreement, none of the Finance
Parties shall be under any obligation to make the Facility available
to the Borrower unless the Agent has notified the Borrower and the
Banks that it has received all the documents listed in Schedule 2 (in
form and content satisfactory to the Agent).
5. DRAWDOWN
5.1 DRAWDOWN PERIOD
Subject to the terms of this Agreement, an Advance shall be made to
the Borrower at any time during the Drawdown Period when requested by
means of a Drawdown Notice in accordance with this Clause 5. At the
close of business on the day of the Drawdown Period the undrawn amount
of each Bank's Commitment shall be automatically cancelled.
5.2 CONDITIONS TO EACH ADVANCE
The obligation of each Bank to make available its Participation in an
Advance is subject to the conditions that on the date on which the
relevant Drawdown Notice is given and on the Drawdown Date:
(a) the representations and warranties in Clauses 12.1(a) to (d)
inclusive to be repeated on those dates are correct and will be
correct immediately after the Advance is made; and
(b) no Default or Potential Default has occurred and is continuing or
would occur on the making of the Advance.
5.3 DRAWDOWN NOTICE
5.3.1 Whenever the Borrower wishes an Advance to be made, it shall give a
duly completed Drawdown Notice to the Agent to be received not later
than 10.00 a.m. on the third Business Day before the Drawdown Date.
5.3.2 A Drawdown Notice shall be irrevocable and the Borrower shall be
obliged to borrow in accordance with its terms.
<PAGE> 14
5.4 LIMITATIONS ON ADVANCES
The following limitations apply to Advances:
(a) the Drawdown Date of an Advance shall be a Business Day
falling before the end of the Drawdown Period;
(b) the principal amount of an Advance shall be:
(i) a minimum of $100,000,000 and an integral
multiple of $25,000,000; or
(ii) the amount of the Available Facility;
(c) no Advance shall be made if the making of that Advance
would result in the aggregate of all Advances exceeding the
Total Commitments; and
(d) no more than 6 Advances may be outstanding at any one time.
5.5 NOTIFICATION TO BANKS
The Agent shall promptly notify each Bank of the details of each
Drawdown Notice received by it.
5.6 PARTICIPATIONS
Subject to the terms of this Agreement, each Bank acting through its
Lending Office shall make available to the Agent on the Drawdown Date
for an Advance amount equal to its Participation in that Advance. A
Bank shall participate in an Advance in the proportion borne by its
Available Commitment to the Available Facility on the Drawdown Date
of that Advance.
6. INTEREST
6.1 INTEREST RATE
Interest shall accrue on each Advance from and including the relevant
Drawdown Date to but excluding the date the Advance is repaid at the
rate determined by the Agent to be the aggregate of:
(a) the Margin; and
(b) LIBOR.
6.2 INTEREST PERIODS
6.2.1 Interest payable on each Advance shall be calculated by reference to
successive Interest Periods of 1, 2, 3 or 6 months' duration (or such
other Interest Period as the Agent, acting on the instructions of all
the Banks, may allow) as selected by the Borrower in accordance with
this Clause 6.2.
<PAGE> 15
6.2.2 The Borrower shall select an Interest Period for an Advance in either
the Drawdown Notice (in the case of the first Interest Period for an
Advance) or (in the case of any subsequent Interest Period for an
Advance) by notice received by the Agent no later than 3 Business
Days before the commencement of that Interest Period.
6.2.3 The first Interest Period for an Advance shall begin on the Drawdown
Date of that Advance. Each succeeding Interest Period for that
Advance shall begin on the Interest Date of the previous Interest
Period.
6.2.4 The Borrower may, by notice to the Agent at least 3 Business Days
before an Interest Date relating to an Advance, elect that that
Advance be split into two or more Advances of at least $100,000,000
each (and being multiples of $25,000,000). Any such notice shall take
effect in accordance with its terms from that Interest Date, provided
that there shall not be more than 6 Advances outstanding at any one
time.
6.2.5 Subject to the other terms of this Agreement, if the Interest Periods
for two or more Advances end on the same day those Advances shall be
deemed to be a single Advance from that day.
6.2.6 If the Borrower fails to select an Interest Period for an Advance in
accordance with Clause 6.2.2, that Interest Period shall, subject to
the other provisions of this Clause 6, be 1 month.
6.2.7 If an Interest Period would otherwise end on a day which is not a
Business Day, that Interest Period shall instead end on the next
Business Day in the same calendar month (if there is one) or the
preceding Business Day (if there is not).
6.2.8 If an Interest Period begins on the last Business Day in a calendar
month or on a Business Day for which there is no numerically
corresponding day in the calendar month in which that Interest Period
is to end, it shall end on the last Business Day in that calendar
month.
6.2.9 If an Interest Period would otherwise extend beyond the Repayment
Date, it shall be shortened so that it ends on the Repayment Date.
6.3 DEFAULT INTEREST
6.3.1 If the Borrower fails to pay any amount payable under any Financing
Document on the due date, it shall pay default interest on the
overdue amount from the due date to the date of actual payment
calculated by reference to successive Interest Periods (each of such
duration as the Agent may acting reasonably select and the first
beginning on the relevant due date) at the rate per annum being the
aggregate of (a) 1.00 per cent. per annum, (b) the Margin and (c)
LIBOR.
6.3.2 So long as the overdue amount remains unpaid, the default interest
rate shall be recalculated in accordance with the provisions of this
Clause 6.3 on the last day of each such Interest Period and any
unpaid interest shall be compounded at the end of each Interest
Period.
6.4 CALCULATION AND PAYMENT ON INTEREST
6.4.1 At the beginning of each Interest Period, the Agent shall notify the
Banks and the Borrower of the duration of the Interest Period and the
rate and amount of interest payable for the Interest Period (but in
the case of any default interest calculated under Clause 6.3, any
such
<PAGE> 16
notification need not be made more frequently than weekly). Each
notification shall set out in reasonable detail the basis of
computation of the amount of interest payable.
6.4.2 Interest due from the Borrower under this Agreement shall:
(a) accrue from day to day at the rate calculated under this
Clause 6;
(b) except as otherwise provided in this Agreement, be paid by
the Borrower to the Agent (for the account of the Banks or
the Agent, as the case may be) in arrear on each Interest
Date, provided that for any Interest Period which is for
longer than 6 months, the Borrower shall pay interest 6
monthly in arrear as well as on the relevant Interest Date;
(c) be calculated on the basis of the actual number of days
elapsed and a 360 day year; and
(d) be payable both before and after judgement.
6.5 AGENT'S DETERMINATION
The determination by the Agent of any interest payable under this
Clause 6 shall be conclusive and binding on the Borrower in the
absence of manifest error.
7. REPAYMENT AND PREPAYMENT
7.1 REPAYMENT
The Borrower shall repay the Loan to the Agent (for the account of the
Banks) on the Repayment Date.
7.2 VOLUNTARY PREPAYMENT
7.2.1 The Borrower may, by giving the Agent not less than 3 Business Days'
prior notice, prepay the whole or part (but if in part, in a minimum
amount of $10,000,000 and an integral multiple of $10,000,000) of any
Advance.
7.2.2 Any notice of prepayment shall be irrevocable, shall specify the date
on which the prepayment is to be made and the amount of the
prepayment, and shall oblige the Borrower to make that prepayment. The
Agent shall promptly notify the Banks of receipt of any such notice.
7.3 MANDATORY REDUCTION AND PREPAYMENT
7.3.1 The Total Commitments shall, on the date (a "REDUCTION DATE") the same
is received by the Borrower or any of its Subsidiaries, be cancelled
pro rata by the amount of the gross proceeds of any capital markets
issue of the Borrower or any of its Subsidiaries other than New
Holland Credit Company LLC, Case Capital Corporation and Subsidiaries
of Case Capital Corporation (but excluding (i) the proceeds of any
capital markets debt issue raised for working capital purposes and
(ii) the proceeds of any equity issue made in order to refinance an
equity bridging loan existing at the date of this Agreement).
<PAGE> 17
7.3.2 Within 10 Business Days of a Reduction Date, the Borrower shall prepay
such part of the Loan (if any) as if necessary to ensure that the Loan
does not exceed the Total Commitments (as reduced on such Reduction
Date).
7.4 ACCRUED INTEREST AND BROKEN FUNDING COSTS
Any prepayment shall be made together with accrued interest on the
amount prepaid and any amounts payable under Clause 22.1.
7.5 EFFECT OF REPAYMENT OR PREPAYMENT
Any amount repaid or prepaid may not be re-borrowed and shall reduce
each Bank's Commitment rateably.
7.6 LIMITATION
The Borrower may not repay or prepay all or any part of the Loan
except as expressly provided in this Agreement.
8. CANCELLATION
8.1 CANCELLATION
The Borrower may, by giving the Agent not less than 3 Business Days'
prior notice, cancel all or part of the Available Facility (but if in
part, in a minimum amount of $10,000,000 and an integral multiple of
$10,000,000).
8.2 NOTICE
Any notice of cancellation shall be irrevocable and shall specify the
date on which the cancellation shall take effect and the amount of the
cancellation. The Agent shall promptly notify the Banks of receipt of
any such notice.
8.3 EFFECT OF CANCELLATION
The Borrower may not borrow any part of the Facility which has been
cancelled. Any cancellation shall reduce each Bank's Commitment
rateably.
8.4 LIMITATION
The Borrower may not cancel all or part of the Facility except as
expressly provided in this Agreement.
9. CHANGES IN CIRCUMSTANCES
9.1 ILLEGALITY
If it is or becomes illegal for a Bank to maintain its Commitment or
to continue to make available or fund its Participation in any
Advance, then:
<PAGE> 18
(a) that Bank shall notify the Agent and the Borrower; and
(b) (i) the Commitment of that Bank shall be cancelled
immediately; and
(ii) the Borrower shall prepay to the Agent (for the
account of that Bank) that Bank's Participation in
all Advances (together with accrued interest on
the amount prepaid and all other amounts owing to
that Bank under this Agreement) within 5 Business
Days of demand by that Bank (or, if permitted by
the relevant law, on the next Interest Date of the
relevant Advances).
Any such prepayment under paragraph (b)(ii) above shall be subject to
Clause 22.1.
9.2 INCREASED COSTS
9.2.1 If, after the date of this Agreement, a Change occurs which causes an
Increased Cost (as defined in Clause 9.2.3) to a Bank (or any company
of which that Bank is a Subsidiary) then the Borrower shall pay (as
additional interest) to the Agent (for the account of that Bank)
within 10 Business Days of demand all amounts which that Bank
certifies to be necessary to compensate that Bank (or any company of
which that Bank is a Subsidiary) for the Increased Cost.
9.2.2 Any demand made under Clause 9.2.1 shall be made by the relevant Bank
through the Agent and shall set out in reasonable detail so far as is
practicable the basis of computation of the Increased Cost.
9.2.3 In this Clause 9.2:
"INCREASED COST" means any cost to, or reduction in the amount payable
to, or reduction in the return on capital or regulatory capital
achieved by, a Bank (or any company of which that Bank is a
Subsidiary) to the extent that it arises, directly or indirectly, as a
result of the Change and is attributable to the Commitment or
Participation in any Advance of that Bank or the funding of that
Bank's Participation in any Advance including any liability to make
any payment on account of Tax or otherwise (other than Tax on Overall
Net Income) on or calculated by reference to the amount of such Bank's
Participation in any Advance and/or any sum received or receivable by
it hereunder.
"TAX ON OVERALL NET INCOME" means, in relation to a person, Tax (other
than Tax deducted or withheld from any payment) imposed on the net
income of that person by the jurisdiction in which its Lending Office
or its head office is situated.
9.2.4 The Borrower shall not be obligated to make a payment in respect of an
Increased Cost under this Clause 9.2 if and to the extend that the
Increased Cost has been compensated for by the operation of Clause
10.9 or the payment of the Additional Cost Rate.
9.2.5 If the Borrower is required to pay any amount to a Bank under this
Clause 9.2, then, without prejudice to that obligation and so long as
the circumstances giving rise to the relevant Increased Cost are
continuing and subject to the Borrower giving the Agent and that Bank
not less than 5 Business Day's prior notice (which shall be
irrevocable), the Borrower may prepay all, but not part, of the Bank's
Participation in the Advances together with accrued interest on the
amount prepaid. Any such prepayment shall be subject to Clause 22.1.
On any such prepayment the Commitment of the relevant Bank shall be
automatically cancelled.
<PAGE> 19
9.2.6 In the event that the Borrower over-compensates a Bank under this
Clause 9.2, such Bank shall promptly return to the Borrower an amount
equal to the amount of over-compensation.
9.3 MARKET DISRUPTION
9.3.1 If, in relation to an Advance and a particular Interest Period
selected by the Borrower in accordance with Clause 6.2.2;
(a) the Agent determines that, because of circumstances
affecting the London interbank market generally, reasonable
and adequate means do not exist for ascertaining LIBOR for
the Advance for the Interest Period; or
(b) the Agent has been notified by a group of Banks whose
Commitments together exceed 51 per cent. of the Total
Commitments that in their reasonable opinion matching
deposits may not be available to them in the London
interbank market in the ordinary course of business to fund
their Participations in that Advance for that Interest
Period the Agent shall promptly notify the Borrower and the
Banks of that event (such notice being a "Market Disruption
Notice").
9.3.2 If a Market Disruption Notice applies to a proposed Advance, that
Advance shall not be made unless the Borrower so requests. The Agent
and the Borrower shall immediately enter into negotiations in good
faith for a period of not more than 30 days with a view to agreeing a
substitute basis for calculating the interest rate for the Advance of
for funding the Advance (whether in Dollars or another currency). Any
substitute basis agreed by the Agent (with the consent of all the
Banks) and the Borrower shall take effect in accordance with its terms
and be binding on all the Parties.
9.3.3 If a Market Disruption Notice applies to an outstanding Advance or
a proposed Advance that the Borrower has requested shall be made and,
in each case, in respect of a particular Interest Period, then:
(a) the Agent and the Borrower shall immediately enter into
negotiations in good faith for a period of not more that
30 days with a view to agreeing a substitute basis for
calculating the rate of interest for the Advance (whether
in Dollars or another currency) for such Interest Period;
(b) any substitute basis agreed under Clause 9.3.3(a) by the
Agent (with the consent of all the Banks) and the Borrower
shall take effect in accordance with its terms and be
binding on all the Parties;
(c) if no substitute basis is agreed under Clause 9.3.3(a),
then, subject to Clause 9.3.4, each Bank shall (through the
Agent) certify 1 day before the first day of such Interest
Period a substitute basis for maintaining its Participation
in the Advance which shall reflect the cost to the Bank of
funding its Participation in the Advance from whatever
sources it selects plus the Margin; and
(d) each substitute basis so certified shall be binding on the
Borrower and the certifying Bank and treated as part of this
Agreement.
9.3.4 So long as the circumstances giving rise to the Market Disruption
Notice continue and subject to the Borrower giving the Agent and the
Banks not less than 3 Business Days' prior notice (which shall be
irrevocable), the Borrower may prepay the Advance to which the
<PAGE> 20
Market Disruption Notice applies together with accrued interest
on the amount prepaid. Any such prepayment shall be subject to
Clause 22.1.
9.4 MITIGATION
If any circumstances arise in respect of any Bank which would, or
upon the giving of notice would, result in the operation of
Clause 9.1, 9.2, 9.3 or 10.9 to the detriment of the Borrower,
then that Bank shall:
(a) promptly upon becoming aware of those circumstances and
their results, notify the Agent and the Borrower; and
(b) in consultation with the Agent and Borrower, take all such
steps as it determines are reasonably open to it to
mitigate the effects of those circumstances (including
changing its Lending Office or consulting with the
Borrower with a view to transferring some or all of its
rights and obligations under this Agreement to another
bank or other financial institution acceptable to the
Borrower) in a manner which will avoid the circumstances
in question and on terms acceptable to the Agent, the
Borrower and that Bank,
provided that no Bank shall be obliged to take any steps which in
its opinion would or might have an adverse effect on its business
or financial condition or the management of its Tax affairs or
cause it to incur any material costs or expenses.
9.5 CERTIFICATES
The certificate or notification of the Agent or, as the case may be,
the relevant Bank as to any of the matters referred to in this Clause
9 shall be in reasonable detail and shall be prima facie evidence of
the matters to which they relate.
10. PAYMENTS
10.1 PLACE AND TIME
All payments by the Borrower or a Bank under this Agreement shall be
made to the Agent to its account at such office or bank in New York at
such time as the Agent may notify to the Borrower or the Banks for
this purpose.
10.2. FUNDS
All payments to the Agent under this Agreement shall be made for value
on the due date in freely transferable and readily available funds.
10.3 DISTRIBUTION
10.3.1 Each payment received by the Agent under this Agreement for another
Party shall, subject to Clauses 10.3.2 and 10.3.3, be made available
by the Agent to that Party by payment (on the date and in the currency
and funds of receipt) to its account with such office or bank in New
York as it may notify to the Agent for this purpose by not less than 5
Business Days' prior notice.
<PAGE> 21
10.3.2 The Agent may apply any amount received by it for the Borrower in or
towards payment (on the date and in the currency and funds of receipt)
of any amount due from the Borrower under this Agreement or in or
towards the purchase of any amount of any currency to be so applied.
10.3.3 Where a sum is to be paid to the Agent under this Agreement for
another Party, the Agent is not obliged to pay that sum to that Party
until it has established that it has actually received that sum. The
Agent may, however, assume that the sum has been paid to it in
accordance with this Agreement, and, in reliance on that assumption,
make available to that Party a corresponding amount. If the sum has
not been made available but the Agent has paid a corresponding amount
to another Party, that Party shall immediately on demand by the Agent
refund the corresponding amount together with interest on that amount
from the date of payment to the date of receipt, calculated at a rate
determined by the Agent to reflect its cost of funds.
10.4 BUSINESS DAYS
If a payment under this Agreement is due on a day which is not a
Business Day, the due date for that payment shall instead be the next
Business Day in the same calendar month (if there is one) or the
preceding Business Day (if there is not).
10.5 CURRENCY
All payments under this Agreement relating to costs, losses, expenses
or Taxes shall be made in the currency in which the relative costs,
losses, expenses or Taxes were incurred. Any other amount payable
under this Agreement shall, except as otherwise provided, be made in
Dollars.
10.6 ACCOUNTS AS EVIDENCE
Each Bank shall maintain in accordance with its usual practice an
account which shall, as between the Borrower and that Bank and, in the
absence of manifest error, be prima facie evidence of the amounts from
time to time advanced by, owing to, paid and repaid to that Bank under
this Agreement.
10.7 PARTIAL PAYMENTS
10.7.1 If the Agent receives a payment insufficient to discharge all the
amounts then due and payable by the Borrower under this Agreement, the
Agent shall apply that payment towards the obligations of the Borrower
under this Agreement in the following order:
(a) first, in or towards payment of any unpaid costs and expenses
of the Agent under this Agreement;
(b) second, in or towards payment pro rata of any accrued interest
due but unpaid under this Agreement;
(c) third, in or towards payment pro rata of any principal due but
unpaid under this Agreement; and
<PAGE> 22
(d) fourth, in or towards payment pro rata of any other sum due but
unpaid under this Agreement.
10.7.2 The Agent shall, if so directed by all the Banks, vary the order set
out in Clauses 10.1.(b) to (d).
10.7.3 Clauses 10.7.1 and 10.7.2 shall override any appropriation made by
the Borrower.
10.8 SET-OFF AND COUNTERCLAIM
ALL payments by an Obligor under this Agreement shall be made without
set-off or counterclaim.
10.9 GROSSING-UP
10.9.1 Subject to Clause 10.9.2, all sums payable to any Finance Party
pursuant to or in connection with any Financing Document shall be
paid in full free and clear of all deductions or withholdings
whatsoever except only as may be required by law.
10.9.2 If any deduction or withholding is required by law in respect of any
payment due from an Obligor to any Finance Party pursuant to or in
connection with any Financing Document that Obligor shall:
(a) ensure or procure that the deduction or withholding is made and
that it does not exceed the minimum legal requirement therefor;
(b) pay, or procure the payment of, the full amount deducted or
withheld to the relevant Taxation or other authority in
accordance with the applicable law;
(c) increase the payment in respect of which the deduction or
withholding is required so that the net amount received by the
payee (which expression when used in this Clause 10.9.2 shall
mean any Finance Party) after the deduction or withholding (and
after taking account of any further deduction or withholding
which is required to be made as a consequence of the increase)
shall be equal to the amount which the payee would have been
entitled to receive in the absence of any requirement to make
any deduction or withholding; and
(d) upon request by any payee, promptly deliver or procure the
delivery to the relative payee of receipts reasonably
evidencing each deduction or withholding which has been made.
10.9.3 If the Agent is obliged to make any deduction or withholding from any
payment to any Bank (an "Agency Payment") which represents an amount
or amounts received by the Agent from an Obligor under any Financing
Document, that Obligor shall, after being notified by the relevant
Bank of its intention to make a claim under this Clause 10.9.3, pay
directly to that Bank such sum (an "Agency Compensating Sum") as
shall, after taking into account any deduction or withholding which
the Borrower is obliged to make from the Agency Compensating Sum,
enable that Bank to receive, on the due date for payment of the Agency
Payment, an amount equal to the Agency Payment which that Bank would
have received in the absence of any obligation to make any deduction
or withholding.
<PAGE> 23
10.9.4 If any Bank determines, in its absolute discretion, that it has
received, recovered, realised, utilised and retained a Tax benefit by
reason of any deduction or withholding in respect of which an Obligor
has made an increased payment or paid an Agency Compensating Sum under
this Clause 10.9, that Bank shall, provided that each Finance Party
has received all amounts which are then due and payable by the
Obligors under any Financing Document, pay to such Obligor (to the
extent that Bank can do so without prejudicing the amount of the
benefit or repayment and the right of that Bank to obtain any other
benefit, relief or allowance which may be available to it) such
amount, if any, as that Bank, in its absolute discretion shall
determine, will leave that Bank in no worse position than it would
have been in if the deduction or withholding had not been required,
provided that:
(a) each Bank shall have an absolute discretion as to the time at
which and the order and manner in which it realises or utilises
any Tax benefit and shall not be obliged to arrange its
business or its Tax affairs in any particular way in order to
be eligible for any credit or refund or similar benefit;
(b) no Bank shall be obliged to disclose any information regarding
its business, Tax affairs or Tax computations;
(c) if a Bank has made a payment to an Obligor pursuant to this
Clause 10.9.4 on account of any Tax benefit and it subsequently
transpires that Bank did not receive that Tax benefit, or
received a lesser Tax benefit, such Obligor shall, on demand,
pay to that Bank such sum as that Bank may determine as being
necessary to restore its after-tax position to that which it
would have been had no adjustment under this Clause 10.9.4 been
made provided that such sum shall not exceed the amount paid to
the Obligor by the Bank pursuant to this Clause 10.9.4.
10.9.5 No Bank shall be obliged to make any payment under Clause 10.9.4 if,
by doing so, it would contravene the terms of any applicable law or
any notice, direction or requirement of any governmental or regulatory
authority (whether or not having the force of law).
10.9.6 If an Obligor is required to make an increased payment for the
account of a Bank under Clause 10.9.2 or 10.9.3, then, without
prejudice to that obligation and so long as such requirement exists
and subject to the Borrower giving the Agent and that Bank not less
than 5 Business Days' prior notice (which shall be irrevocable), the
Borrower may prepay all, but not part, of that Bank's Participation in
the Advances together with accrued interest on the amount prepaid. Any
such prepayment shall be subject to Clause 22.1. On any such
prepayment the Commitment of the relevant Bank shall be automatically
cancelled.
10.9.7 Each Bank confirms to the Borrower that, as at the date such Bank
becomes a Party, the Borrower will be entitled to make payments to
that Bank in accordance with this Agreement without deduction or
withholding for or on account of any Taxes under the laws of the
Netherlands.
11. GUARANTEE
11.1 GUARANTEE
Subject to and with the benefit of the provisions in Clause 11.2, the
Guarantor hereby unconditionally and irrevocably guarantees to the
Finance Parties that if, for any reason, the Borrower does not pay any
sum from time to time payable by it to any Finance Party under
<PAGE> 24
this Agreement (including any other amount of whatever nature or
additional amounts which may become payable under any of the
foregoing) as and when the same shall become due and payable under any
of the foregoing, it shall on demand pay in the currency in which the
same falls due for payment under the terms of this Agreement, all
moneys which are now or at any time hereafter shall have become due or
owing by the Borrower to any or all of the Finance Parties pursuant to
this Agreement.
11.2. GUARANTEE PROVISIONS
11.2.1 The guarantee (the "Guarantee") given pursuant to this clause 11 is a
continuing security and shall remain in full force and effect until
all moneys, obligations and liabilities referred to in Clause 11.1
have been paid, discharged or satisfied in full notwithstanding the
liquidation or other incapacity or any change in the constitution of
the Borrower or in the name and style of the Borrower or any
settlement of account or other matter whatsoever.
11.2.2 The Guarantee is in addition to and shall not merge with or otherwise
prejudice or affect or be prejudiced by any other right, remedy,
guarantee, indemnity or security and may be enforced without first
having recourse to the same or any other bill, note, mortgage, charge,
pledge or lien now or hereafter held by or available to any Finance
Party.
11.2.3 Notwithstanding that the Guarantee ceases to be continuing
for any reason whatever any of the Finance Parties may continue any
accounts of the Borrower or open one or more new accounts and the
liability of the Guarantor hereunder shall not be reduced or affected
by any subsequent transactions or receipts or payments into or out of
any such accounts.
11.2.4 The Guarantor hereby unconditionally and irrevocably agrees
that any sum expressed to be payable by the Borrower under this
Agreement but which is for any reason (whether or not now known or
becoming known to the Borrower, the Guarantor or any Finance Party)
not recoverable from the Guarantor on the basis of the Guarantee will
nevertheless be recoverable from it as if it were the sole principal
debtor and will be paid by it to the Finance Parties on demand. This
indemnity constitutes a separate and independent obligation from the
other obligations in this Guarantee, gives rise to a separate and
independent cause of action and will apply irrespective of any
indulgence granted by all or any of the Finance Parties.
11.2.5 The Guarantor will be liable under the Guarantee as if it were the
sole principal debtor and not merely a surety. The liability of the
Guarantor shall not be affected nor shall the Guarantee be discharged
or diminished by reason of anything which would not discharge it or
affect its liability if it were the sole principal debtor, including:
(a) any time, indulgence, waiver or consent at any time given to
the Borrower or any other person;
(b) any amendment to the Financing Documents;
(c) the making or absence of any demand on the Borrower or any
other person for payment;
(d) the enforcement or absence of enforcement of any of the
provisions of this Agreement;
(e) the release of any guarantee or indemnity;
<PAGE> 25
(f) the dissolution, amalgamation, reconstruction or reorganisation
of the Borrower or any other person;
(g) the illegality, invalidity or unenforceability of or any defect
in any provision of the Financing Documents or any of the
Borrower's obligations under any of them; or
(h) any other act, event or omission which but for this paragraph
(h) might operate to discharge, impair or otherwise affect the
obligations expressed to be assumed by the Guarantor in this
Agreement or any of the rights, powers or remedies conferred upon
the Finance Parties by this Guarantee or by law.
11.2.6 The Guarantor agrees that, during the Facility Period, the Guarantor
will not exercise any right which the Guarantor may at any time have by
reason of the performance by the Guarantor of its obligations hereunder:
(a) to be indemnified by the Borrower;
(b) to claim any contribution from any other guarantor of the
Borrower's obligations under or in respect of the Facility;
(c) to take the benefit (in whole or in part) of any security enjoyed
in connection with the Facility by any Finance Party; or
(d) to be subrogated to the rights of any Finance Party against the
Borrower in respect of amounts paid by the Guarantor under this
Guarantee.
11.2.7 Any settlement or discharge between the Guarantor and the Finance
Parties or any of them shall be conditional upon no payment to the
Finance Parties or any of them by the Borrower or any other person on
the Borrower's behalf being avoided or reduced by virtue of any
laws relating to bankruptcy, insolvency, liquidation or similar laws
of general application for the time being in force and, in the event
of any such payment being so avoided or reduced, the Finance Parties
shall be entitled to recover the amount by which such payment is so
avoided or reduced from the Guarantor subsequently as if such
settlement or discharge had not occurred provided that such recovery
is not contrary to any law applicable thereto.
11.2.8 If any payment received by a Finance Party is, on the subsequent
liquidation or insolvency of the Borrower, avoided under any laws
relating to liquidation or insolvency, such payment will not be
considered as having discharged or diminished the liability of the
Guarantor and this Guarantee will continue to apply as if such
payment had at times remained owing by the Borrower.
11.2.9 The Finance Parties shall not be obliged before exercising any of the
rights, powers or remedies conferred upon them by the Guarantee or by
law:
(a) to make any demand of the Borrower;
(b) to take any action or obtain judgement in any court against the
Borrower or any other person; or
(c) to make or file any claim or proof in a bankruptcy or liquidation
of the Borrower or any other person.
<PAGE> 26
12 REPRESENTATIONS AND WARRANTIES
12.1 REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants to each Finance Party that:
(a) STATUS: it is a limited company duly incorporated under the laws
of its jurisdiction of incorporation and it possesses the
capacity to sue and be sued in its own name and has the power to
carry on its business and to own its property and other assets;
(b) POWERS AND AUTHORITY: it has power to execute, deliver and
perform its obligations under the Financing Documents and to
carry out the transactions contemplated by those documents and
all necessary corporate, shareholder and other action has been
taken to authorise the execution, delivery and performance of the
same;
(c) BINDING OBLIGATIONS: subject to the Reservations, its obligations
under the Financing Documents constitute its legal, valid,
binding and enforceable obligations;
(d) CONTRAVENTIONS: the execution, delivery and performance by it of
the Financing Documents does not:
(i) contravene any applicable law or regulation or any order of
any governmental or other official authority, body or
agency or any judgement, order or decree of any court
having jurisdiction over it, or
(ii) contravene or conflict with its constitutional documents;
(e) INSOLVENCY: it has not taken any action nor (to the best of its
knowledge, information and belief) have any steps been taken or
legal proceedings been started against it for its winding-up,
dissolution, administration or re-organisation or for the
appointment of a receiver, administrative receiver, or
administrator, trustee or similar officer of it or of a material
part of its assets;
(f) NO DEFAULT: to the best of its knowledge, information and belief
it is not in breach of or in default in any material respect
under any agreement relating to Indebtedness to which it is a
party or which is binding on it or any of its assets to an extent
which would have a material adverse effect on the ability of that
Obligor to comply with its payment obligations under this
Agreement;
(g) LITIGATION: to the best of its information, knowledge and belief,
no action, litigation, arbitration or administrative proceeding
has been commenced or is pending against it which would have a
material adverse effect on the ability of that Obligor to comply
with its payment obligations under the Financing Documents;
(h) ORIGINAL FINANCIAL STATEMENTS: the Original Financial Statements
of that Obligor were prepared in accordance with GAAP and give
a true and fair view of that Obligor's financial position at the
date to which they were prepared and the
<PAGE> 27
results of that Obligor's operations during the Financial Year
of that Obligor to which they relate;
(i) INFORMATION MEMORANDUM:
(i) the information contained in the Information Memorandum is
true and accurate in all material respects as at its date;
and
(ii) the Information Memorandum did not omit any information
which would make any fact or statement in it misleading in
any material respect;
(j) NO MATERIAL ADVERSE CHANGE: since the date of its Original
Financial Statements no event has occurred which has had a
material adverse effect on its business or financial condition;
and
(k) MARGIN STOCK: the proceeds of the Advances have not been used to
buy, purchase or maintain any Margin Stock which would impose
regulatory requirements under, and as such term is defined in,
Regulation U of the Board of Governors of the Federal Reserve of
the United States of America.
12.2 REPETITION
The representations and warranties in Clause 12.1(a) to (d) shall
survive the execution of this Agreement and shall be deemed to be
repeated by each Obligor on the date on which each Drawdown Notice is
given and on the date on which each Advance is made with reference to
the facts and circumstances existing at that time.
13. UNDERTAKINGS
13.1 INFORMATION UNDERTAKINGS
Each Obligor undertakes that during the Facility Period it shall, unless
the Agent (acting on the instructions of the Majority Banks) otherwise
agrees:
(a) ANNUAL STATEMENTS: as soon as the same become available (and in
any event within 210 days after the end of each of its Financial
Years), deliver to the Agent in sufficient copies for all the
Banks its audited consolidated financial statements for each
such Financial Year;
(b) SEMI-ANNUAL STATEMENTS: as soon as the same become available (and
in any event within 120 days after the end of the first half of
each of its Financial Years), deliver to the Agent in sufficient
copies for all the Banks its unaudited consolidated interim
financial statements for each such half-year but, in relation to
the Borrower, only to the extent such unaudited interim financial
half year statements are actually being prepared by the Borrower;
and
(c) SHAREHOLDER'S DOCUMENTS: deliver to the Agent as soon as
reasonably practicable in sufficient copies for all the Banks all
documents despatched by it to its creditors generally, or in the
case of the Guarantor, to its shareholders generally.
<PAGE> 28
13.2 POSITIVE UNDERTAKINGS
Each Obligor undertakes that during the Facility Period it shall, unless
the Agent (acting on the instructions of the Majority Banks) otherwise
agrees:
(a) AUTHORISATIONS: obtain, maintain and comply with the terms of any
authorisation, approval, licence, consent, exemption, clearance,
filing or registration required in or by the laws and regulations
of its jurisdiction of incorporation to enable it to lawfully
enter into and perform its obligations under, or for the
legality, validity, enforceability or admissibility in evidence
in its jurisdiction of incorporation of, each Financing Document;
(b) RANKING OF OBLIGATIONS: ensure that its obligations under the
Financing Documents shall at all times rank at least pari passu
with all its other present and future unsecured and
unsubordinated obligations (whether actual, contingent, present
or future) except for any obligations which are mandatorily
preferred by law; and
(c) NOTIFICATION OF DEFAULT: promptly, upon becoming aware of the
same, notify the Agent of the occurrence of a Default or
Potential Default and, upon receipt of a written request to that
effect from the Agent, confirm to the Agent that, save as
previously notified to the Agent or as notified in such
confirmation, no Default or Potential Default has occurred.
13.3 NEGATIVE PLEDGE
Each Obligor undertakes that during the Facility Period it shall not,
unless the Agent (acting on the instructions of the Majority Banks)
otherwise agrees, create any Encumbrance (other than a Permitted
Encumbrance) over any of its present or future assets to prefer any
of its Indebtedness unless such Encumbrance or such other security as
the Agent (acting on the instructions of the Majority Banks) considers
equivalent thereto is at the same time extended equally and ratably
to the obligations of such Obligor under the Financing Documents.
14. DEFAULT
14.1 DEFAULT
Each of the following shall be a Default:
(a) NON-PAYMENT: either of the Obligors does not pay on the due date
any amount payable by it under this Agreement at the place at and
in the currency and funds in which it is expressed to be payable
unless the failure to pay such amount is due solely to
administrative or technical delays in the transmission of funds
and such amount is paid within 5 Business Days after its due date
for payment; or
(b) OTHER DEFAULTS: either of the Obligors breaches any of its
obligations under any Financing Document (other than the
obligations referred to in Clause 14.1(a)) and if that breach is
capable of remedy, it is not remedied within 30 days after
written notice of that breach has been given by the Agent to the
relevant Obligor; or
<PAGE> 29
(c) BREACH OF REPRESENTATION OR WARRANTY: any representation, warranty
or statement made or deemed to be repeated by either of the
Obligors under this Agreement or in any document delivered by
it or on its behalf under or in connection with this Agreement is
or proves to have been incorrect or misleading when made or
deemed to have been repeated; or
(d) UNLAWFULNESS OR REPUDIATION: it is unlawful for either of the
Obligors to perform or comply with, or either of the Obligors
repudiates, any of its obligations under any Financing Document or,
subject to the Reservations, any of those obligations is not
legal, valid, binding, effective and enforceable; or
(e) CROSS-ACCELERATION: either or both of the Obligors;
(a) becomes bound to repay prematurely any Indebtedness by
reason of a default by either of the Obligors which default
is followed by an appropriate demand for such repayment; or
(b) fails to make any payment of principal, premium or interest
in respect of any Indebtedness on the due date for such
payment or within any grace period specified in the
agreement or other instrument constituting such
Indebtedness,
where such Indebtedness is in an aggregate amount in excess of
US$50,000,000 (or its equivalent in other currencies), except
where such Obligor is taking action by appropriate proceedings
in good faith to dispute the validity of the obligation to repay
prematurely such Indebtedness or to make such payment, as the
case may be, and unless such default or failure to pay shall have
been waived by the person to whom the relevant Indebtedness is
payable; or
(f) ATTACHMENT OR DISTRESS: a creditor or encumbrancer attaches or
takes possession of or a receiver or similar officer is appointed
over the whole or any material part of the assets of either of the
Obligors, or a distress, execution, sequestration or other process
is levied or enforced upon or sued out against, the whole or
any material part of the assets of either of the Obligors and
such process is not discharged within 30 days; or
(g) INABILITY TO PAY DEBTS: either of the Obligors:
(i) suspends payment of its debts generally or is unable or
admits its inability to pay generally as they fall due; or
(ii) proposes or enters into any composition or other arrangement
for the benefit of its creditors generally; or
(iii) has proceedings commenced against it with a view to the
readjustment or rescheduling of any of its Indebtedness
which it would not otherwise be able to pay as it fell
due; or
(h) INSOLVENCY PROCEEDINGS: either of the Obligors:
(i) is adjudicated or found insolvent; or
<PAGE> 30
(ii) has an order made against it by any competent court or
passes a resolution for its winding-up or dissolution
or for the appointment of a liquidator, administrator,
trustee, receiver, administrative receiver or similar
officer in respect of it or the whole or any
substantial part of its assets; or
(i) ANALOGOUS PROCEEDINGS: any event occurs which under the laws of
any jurisdiction has a similar or analogous effect to any of the
events mentioned in Clause 14.1(f), (g) or (h); or
(j) CESSATION OF BUSINESS: either of the Obligors suspends, ceases
or threatens to suspend or cease to carry on its business unless
such cessation, or threatened cessation, is in connection with a
merger, consolidation or any other form of combination with
another company and such company assumes all obligations of the
Borrower or the Guarantor respectively under the Financing
Documents; or
(k) CHANGE OF CONTROL: the Guarantor ceases to be the beneficial
owner of shares in the issued share capital of the Borrower
carrying the right to exercise more than 50 per cent. of the
votes exercisable at a general meeting of the Borrower or
otherwise ceases to exercise control over the Borrower; or
(l) GOVERNMENTAL INTERVENTION: all or a material part of the assets,
rights or revenues of, or shares or other ownership interests in,
either of the Obligors are seized, nationalised, expropriated or
compulsorily acquired by or under the authority of any
government.
14.2 ACCELERATION
If a Default occurs and remains unremedied the Agent may, and shall if
so instructed by the Majority Banks, by notice to the Borrower:
(a) cancel the Facility and require the Borrower immediately to
repay the Loan together with accrued interest and all other sums
payable under this Agreement, whereupon they shall become
immediately due and payable; or
(b) place the Facility on demand, whereupon the Loan together with
accrued interest and all other sums payable under this Agreement
shall become repayable on demand made by the Agent on the
instructions of the Majority Banks.
Upon the service of any such notice by the Agent the Commitment of
each Bank shall be cancelled.
15. PRO RATA SHARING
15.1 REDISTRIBUTION
If any amount owing by an Obligor under this Agreement to a Bank (the
"Sharing Bank") is discharged by voluntary or involuntary payment,
set-off or any other manner other than through the Agent in accordance
with Clause 10, then:
<PAGE> 31
(a) the Sharing Bank shall immediately notify the Agent of the
amount discharged and the manner of its receipt of recovery;
(b) the Agent shall determine whether the amount discharged is in
excess of the amount which the Sharing Bank would have received
had the amount discharged been received by the Agent and
distributed in accordance with Clause 10;
(c) the Sharing Bank shall pay the Agent an amount equal to that
excess (the "Excess Amount") within 5 Business Days of demand by
the Agent;
(d) the Agent shall treat the Excess Amount as it were a payment by
such Obligor under Clause 10 and shall pay the Excess Amount to
the Banks (other than the Sharing Bank) in accordance with Clause
10.7; and
(e) as between such Obligor and the Sharing Bank the Excess Amount
shall be treated as not having been received or recovered, and
accordingly the Borrower shall owe the Sharing Bank an
immediately payable debt equal to the Excess Amount.
15.2 LEGAL PROCEEDINGS
Notwithstanding Clause 15.1, no Sharing Bank shall be obliged to share
any Excess Amount which it receives or recovers pursuant to legal
proceedings taken by it to recover any sums owing to it under this
Agreement with any other Bank which has a legal right to, but does
not, either join in such proceedings or commence and diligently pursue
separate proceedings to enforce its rights, unless the proceedings
instituted by the Sharing Bank are instituted by it without prior
notice having been given to such Bank through the Agent and an
opportunity to such Bank to join in such proceedings.
15.3 REVERSAL OF REDISTRIBUTION
If any Excess Amount subsequently has to be wholly or partly refunded
to an Obligor by a Sharing Bank which has paid an amount equal to that
Excess Amount to the Agent under Clause 15.1, each Bank to which any
part of that amount was distributed shall on request from the Sharing
Bank repay to the Sharing Bank that Bank's proportionate share of the
amount which has to be so refunded by the Sharing Bank.
15.4 INFORMATION
Each Bank shall on request supply to the Agent such information as the
Agent may from time to time request for the purpose of this Clause 15.
16. THE AGENT, THE LEAD ARRANGERS AND THE BANKS
16.1 APPOINTMENT AND DUTIES
16.1.1 Each Bank irrevocably appoints the Agent to act as its agent in
connection with this Agreement and irrevocably authorises the Agent on
its behalf to perform the duties and to exercise the rights, powers
and discretions that are specifically delegated to it under or in
connection with this Agreement together with any other incidental
rights, powers and discretions.
<PAGE> 32
16.1.2 The Agent shall have no duties or responsibilities except those
expressly set out in this Agreement. As to any matters not expressly
provided for, the Agent shall act in accordance with the instructions
of the Majority Banks (but in the absence of any such instructions
shall not be obliged to act). Any such instructions, and any action
taken by the Agent in accordance with those instructions, shall be
binding upon all the Banks.
16.1.3 The Agent may:
(a) act in an agency, trustee, fiduciary or other capacity on behalf
of any other banks or financial institutions providing facilities
to an Obligor or any associated company of an Obligor, as freely
in all respects as if it had not been appointed to act as agent
for the Banks under this Agreement and without regard to the
effect on the Banks of acting in such capacity; and
(b) subscribe for, hold, be beneficially entitled to or dispose of
shares or securities, or options or other rights to and interests
in shares or securities in an Obligor or any associated company
of an Obligor (in each case, without liability to account).
16.1.4 Each division or department of the Agent (including, for so long as
Chase Manhattan International Limited is the Agent, the Loans Agency
Department of Chase Manhattan International Limited) shall be treated
as a separate entity from any other division or department of the
Agent. If any of the Agent's divisions or departments (including,
in the case of Chase Manhattan International Limited, its Loans
Agency Department) should act for an Obligor in any capacity (whether
as bankers or otherwise) in relation to any other matter, any
information given by such Obligor to any such division or department
may be treated as confidential and the Agent shall, as between itself
and Banks, not be obliged to disclose the same to any Bank or any
other person.
16.1.5 It is acknowledged that the role of the Lead Arrangers is and has
been confined solely to arranging the Facility and that in such
capacity they shall have no obligations and liabilities in relation to
this Agreement.
16.2 PAYMENTS
16.2.1 The Agent shall promptly account to the Lending Office of each Bank
for such Bank's due proportion of all sums received by the Agent for
such Bank's account, whether by way of repayment or prepayment of
principal or payment of interest, fees or otherwise.
16.2.2 The Agent shall maintain a memorandum account showing the principal
amount of each Advance outstanding under this Agreement and the amount
of each Bank's Participation in the Advances.
16.2.3 Each Bank confirms in favour of the Agent that, unless it notifies
the Agent to the contrary:
(a) it will be the beneficial owner of any interest paid to it under
this Agreement; and
(b) it is either:-
(i) a "bank" within Section 840A of the Income and
Corporation Taxes Act 1988; or
<PAGE> 33
(ii) an entity not resident in the United Kingdom (for the
purposes of the Income and Corporation Taxes Act
1988); and
(c) it will provide the Agent with such evidence or information as
the Agent may reasonably require from time to time to enable the
Agent to comply with statutory obligations relating to the
performance of its obligations under this Agreement.
16.3 DEFAULT
The Agent shall not be obliged to monitor or enquire as to whether or
not a Default or Potential Default has occurred. The Agent shall be
entitled to assume that no Default or Potential Default has occurred
unless it receives notice to the contrary from the Borrower or any
Bank describing the Default or Potential Default and stating that such
notice is a "Default Notice" or unless it is aware of a payment
default under this Agreement, in which case it shall promptly notify
each Bank.
16.4 RELIANCE
The Agent may:
(a) rely on any communication or document believed by it to be
genuine and correct and to have been communicated or signed by
the person by whom it purports to be communicated or signed; and
(b) engage, pay for and rely on the advice of any professional
advisers selected by it given in connection with this Agreement
or any of the matters contemplated by this Agreement,
and shall not be liable to any Party for any of the consequences of
such reliance except in case of negligence or wilful misconduct.
16.5 LEGAL PROCEEDINGS
16.5.1 The Agent shall not be obliged to take or commence any legal action
or proceeding against an Obligor or any other person arising out of or
in connection with this Agreement until it shall have been indemnified
or secured to its satisfaction against all costs, claims and expenses
(including any costs award which may be made against it as a result of
any such legal action or proceeding not being successful) which it may
expend or incur in such legal action or proceeding.
16.5.2 The Agent may refrain from doing anything which might in its opinion
constitute a breach of any law or any duty of secrecy or
confidentiality or be otherwise actionable at the suit of any person.
16.6 NO LIABILITY
16.6.1 Neither the Agent nor any of its officers, employees or agents shall
be liable for any action taken or not taken by it or any of them
under or in connection with this Agreement unless directly caused by
its or their negligence or wilful misconduct.
<PAGE> 34
16.6.2 Neither the Agent nor the Lead Arrangers shall be responsible for any
statements, representations or warranties in this Agreement or for any
information supplied or provided to any Bank by the Agent or the Lead
Arrangers in respect of an Obligor or any other person or for any
other matter relating to this Agreement or for the execution,
genuineness, validity, legality, enforceability or sufficiency of this
Agreement or any other document referred to in this Agreement or for
the recoverability of any Advance or any other sum to become due and
payable under this Agreement.
16.7 CREDIT DECISIONS
16.7.1 Each Bank:
(a) acknowledges that it has, independently and without reliance on
the Agent and the Lead Arrangers, made its own analysis of the
transaction contemplated by, and reached its own decision to
enter into, this Agreement and made it own investigation of the
financial condition and affairs and its own appraisal of the
creditworthiness of each Obligor; and
(b) agrees that it shall continue to make its own independent
appraisal of the creditworthiness of each Obligor.
16.7.2 Each Bank agrees that it shall, independently and without reliance on
the Agent and the Lead Arrangers, make its own decision to take or
not take action under this Agreement.
16.8 INFORMATION
16.8.1 The Agent shall provide the Banks with all information and copies of
all notices which are given to it and which by the terms of this
Agreement are to be provided or given to the Banks.
16.8.2 Except as specifically provided in this Agreement, the Agent shall
not be under any duty or obligation:
(a) either initially or on a continuing basis, to provide any Bank
with any credit information or other information with respect to
the financial condition of an Obligor or which is otherwise
relevant to the Facility; or
(b) to request or obtain any certificate, document or information
from an Obligor unless specifically requested to do so by a Bank
in accordance with this Agreement.
16.9 RELATIONSHIP WITH BANKS
16.9.1 In performing its functions and duties under this Agreement, the
Agent shall act solely as the agent for the Banks and except as
expressly provided in this Agreement shall not be deemed to be acting
as trustee for any Bank and shall not assume or be deemed to have
assumed any obligation as agent or trustee for, or any relationship of
agency or trust with, an Obligor.
16.9.2 None of the Agent, the Lead Arrangers or any Bank shall be under any
liability or responsibility of any kind to either Obligor or any other
Bank arising out of or in relation to any failure or delay in
performance or breach by either Obligor or any other Bank of any of
its or their respective obligations under this Agreement.
<PAGE> 35
16.10 Agent's position
16.10.1 With respect to its own Participation in an Advance, the Agent shall
have the same rights and powers under and in respect of this Agreement
as any other Bank and may exercise those rights and powers as though
it were not also acting as agent for the Banks. The Agent may, without
liability to account, accept deposits from, lend money to and
generally engage in any kind of banking, finance, advisory, trust or
other business with or for either Obligor as if it were not the agent
for the Banks under this Agreement.
16.10.2 The Agent may retain for its own use and benefit (and shall not be
liable to account to any Bank for all or any part of) any sums
received by it by way of agency or management or arrangement fees or
by way of reimbursement of expenses incurred by it.
16.11 Indemnity
Each Bank shall immediately on demand indemnify the Agent (to the
extent not reimbursed by the Borrower) rateably according to the
proportion which that Bank's Participation in the Advances bears to
all Advances (or, if no Advance shall then be outstanding, its
Commitment) from and against all liabilities, losses and expenses of
any kind or nature whatsoever (except in respect of any agency,
management or other fee due to the Agent) which may be incurred by the
Agent in its capacity as agent or trustee for the Banks or in any way
relating to or arising out of this Agreement or any action taken or
omitted by the Agent in enforcing or preserving the rights of the
Banks or the Agent under this Agreement, provided that no Bank shall
be liable for any portion of such liabilities, losses or expenses
resulting from the Agent's gross negligence or wilful misconduct.
16.12 Resignation
16.12.1 The Agent may resign by giving at least 60 days' notice to the
Borrower and each Bank. Upon receipt of a notice of resignation the
Borrower and the Majority Banks may select any bank or other financial
institution as successor Agent.
16.12.2 If no bank or other financial institution selected by the Borrower
and the Majority Banks shall have accepted such appointment within 20
days, after the Agent has given a notice of resignation then the
Majority Banks may, after consultation with the Borrower, appoint any
bank or other financial institution as successor Agent.
16.12.3 If no bank or other financial institution selected by the Majority
Banks shall have accepted such appointment within 40 days after the
Agent has given a notice of resignation then the resigning Agent may ,
after consultation with the Borrower, appoint any bank or other
financial institution of reputable standing with an office in London
as successor Agent.
16.12.4 The resignation of the Agent and the appointment of any successor
Agent shall both become effective only upon the successor Agent
notifying the retiring Agent, the Borrower and each Bank that it
accepts its appointment. On such notification:
(a) the resigning Agent shall be discharged from its obligations and
duties as Agent under this Agreement but it shall continue to be
able to rely on the provisions of this Clause 16 in respect of
all matters relating to the period of its appointment; and
(b) the successor Agent shall assume the role of Agent and shall
have all the rights, powers, discretions and duties which the
Agent has under this Agreement.
<PAGE> 36
16.12.5 The resigning Agent shall make available to the successor Agent all
records and documents held by it as Agent, and shall co-operate with
the successor Agent to ensure an orderly transition.
16.13 CHANGE OF OFFICE
The Agent may at any time in its sole discretion by notice to the
Borrower and each Bank designate a different office in the United
Kingdom from which its duties as the Agent will be performed.
17. FEES AND EXPENSES
17.1 EXPENSES AND COSTS
17.1.1 Subject to any limits on and other matters relating to the same that
may previously have been agreed by the Lead Arrangers prior to the
date of this Agreement, the Borrower shall reimburse all reasonable
expenses incurred, and any VAT on those expenses:
(a) by the Lead Arrangers and the Agent in connection with the
negotiation, preparation and execution of the Financing
Documents and the other documents contemplated by the
Financing Documents;
(b) by the Lead Arrangers and the Agent in respect of the
syndication of the Facilities;
(c) by the Agent or the Banks in connection with the granting of
any release, waiver or consent or in connection with any
amendment or variation of any Financing Document where such
release, waiver, consent, amendment or variation has been
requested by an Obligor; and
(d) by the Agent or the Banks in enforcing, perfecting,
protecting or preserving (or attempting so to do) any of
their rights, or in suing for or recovering any sum due from
either Obligor or any other person under any Financing
Document,
upon presentation of a statement of account reasonably documented for
administrative and fiscal purposes.
17.1.2 The Borrower shall on demand pay to the Agent for the account of the
relevant Bank any amount notified to it by each Bank within 10
Business Days of the commencement of an Interest Period as being the
Additional Cost Rate for such Bank in respect of such Interest Period.
17.2 ARRANGEMENT AND AGENCY FEES
The Borrower shall pay to the Lead Arrangers an arrangement fee in
accordance with the terms of the Arrangement Fees Letter and to the
Agent an agency fee in accordance with the terms of the Agency Fees
Letter. For the avoidance of doubt, all liabilities and obligations
of the Borrower under the Arrangement Fees Letter and the Agency Fees
Letter shall be deemed to be incurred under this Agreement.
<PAGE> 37
17.3 COMMITMENT FEE
The Borrower shall pay a commitment fee in Dollars to the Agent for
the account of the Banks at the rate of 0.125 per cent per annum on
the Available Facility. The commitment fee shall accrue from day to
day and be calculated on the basis of the actual number of days
elapsed and a 360 day year in respect of the Drawdown Period and shall
be payable on the last day in the Drawdown Period or on any earlier
date on which the Available Facility equals zero.
17.4 DOCUMENTARY TAXES INDEMNITY
All stamp, documentary, registration or other like duties or Taxes
which are imposed or chargeable on or in connection with this
Agreement shall be paid by the Borrower. The Agent shall be entitled
but not obliged to pay any such duties or Taxes (whether or not they
are its primary responsibility). If the Agent does so the Agent shall
notify the Borrower that any such payment has been made and the
Borrower shall on demand indemnify the Agent against those duties and
Taxes and against any costs and expenses incurred by the Agent in
discharging them.
17.5 VAT
All payments made by the Borrower under the Financing Documents are
calculated without regard to VAT. If any such payment constitutes the
whole or any part of the consideration for a taxable or deemed taxable
supply (whether that supply is taxable pursuant to the exercise of an
option or otherwise) by the Agent or a Bank, the amount of that
payment shall be increased by an amount equal to the amount of VAT
which is chargeable in respect of the taxable supply in question.
18. AMENDMENTS AND WAIVERS
18.1 MAJORITY BANKS
18.1.1 Subject to Clause 18.2, any term of this Agreement may be amended or
waived with the written agreement of the Obligors and the Majority
Banks. The Agent may effect, on behalf of the Majority Banks, an
amendment or waiver to which the Majority Banks have agreed.
18.1.2 The Agent shall promptly notify the Obligors and each Bank of any
amendment or waiver effected under Clause 18.1.1 and any such
amendment or waiver shall be binding on the Obligors and each Bank.
18.2 ALL BANKS
An amendment or waiver which relates to:
(a) the definition of "Majority Banks" in Clause 1.1;
(b) an extension of the date for, or a decrease in an amount or a
change in the currency of, any payment under this Agreement;
(c) an increase in a Bank's Commitment;
<PAGE> 38
(d) a term of this Agreement which expressly requires the consent of
each Bank; or
(e) Clause 6, 7, 11.1, 15 or 17.3 or this Clause 18,
may not be effected without the prior written consent of each Bank.
18.3 NO IMPLIED WAIVERS; REMEDIES CUMULATIVE
The rights of the Agent and each Bank under this Agreement:
(a) may be exercised as often as necessary;
(b) are cumulative and not exclusive of its rights under the general
law; and
(c) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver
of that right.
19. MISCELLANEOUS
19.1 SEVERANCE
If any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect:
(a) the legality, validity or enforceability in that jurisdiction of
any other provision of this Agreement; or
(b) the legality, validity or enforceability in any other
jurisdiction of that or any other provision of this Agreement.
19.2 COUNTERPARTS
This Agreement may be executed in any number of counterparts and this
shall have the same effect as if the signatures on the counterparts
were on a single copy of this Agreement.
20. NOTICES
20.1 METHOD
Each notice or other communication to be given under this Agreement
shall be given in writing in English and, unless otherwise provided,
shall be made by fax or letter.
20.2 DELIVERY
Any notice or other communication to be given by one Party to another
under this Agreement shall (unless one Party has by 15 days' notice to
the other Party specified another address) be given to that other
Party, in the case of the Borrower and the Agent, at the respective
addresses given in Clause 20.3, and in the case of the Banks, at the
respective
<PAGE> 39
addresses given in Schedule 1 or, as the case may be, the schedule to
its relevant Transfer Certificate.
20.3 ADDRESSES
The address and fax number of the Obligors and the Agent are:
(A) the Borrower:
c/o New Holland Limited
950 Great West Road
Brentford
Middlesex
TW8 9ES
Attention: The Treasurer
Fax: 0181 479 8810
(B) the Guarantor:
c/o Fiat Geva, S.p.A.
Via Nizza 250
10126 Turin
Italy
Attention: The Treasurer
Fax: 00 39 011 686 3721
(C) the Agent:
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Steve Clarke, Loans Agency
Fax: 0171 777 2360
20.4 DEEMED RECEIPT
Any notice or other communication given under this Agreement shall be
deemed to have been received:
(a) if sent by fax, with a confirmed receipt of transmission from
the receiving machine, on the day on which transmitted;
(b) in the case of a notice given by hand, on the day of actual
delivery; and
(c) if posted, on the tenth Business Day following the day on which
it was despatched by first class mail postage prepaid or, as the
case may be, airmail postage prepaid.
<PAGE> 40
provided that a notice given in accordance with the above but received
on a day which is not a Business Day or after normal business hours in
the place of receipt shall be deemed to have been received on the next
Business Day.
20.5 NOTICES THROUGH AGENT
Any notice or other communication from or to an Obligor under this
Agreement shall be sent through the Agent.
21. ASSIGNMENTS AND TRANSFERS
21.1 BENEFIT OF AGREEMENT
This Agreement shall be binding upon and enure to the benefit of each
Party and its successors and assigns.
21.2 ASSIGNMENTS AND TRANSFERS BY AN OBLIGOR
An Obligor shall not be entitled to assign or transfer any of its
rights or obligations under this Agreement.
21.3 ASSIGNMENTS BY BANKS
Any Bank may, subject to Clause 21.5, assign any of its rights and
benefits under this Agreement to another bank or other financial
institution provided that until the assignee has confirmed to the
Agent and the other Banks that it shall be under the same obligations
towards each of them as it would have been under if it had been a
party to this Agreement as a Bank, the Agent and the other Banks shall
not be obliged to recognise the assignee as having the rights against
each of them which it would have had if it had been such a party to
this Agreement.
21.4 TRANSFERS BY BANKS
21.4.1 Any Bank may, subject to Clause 21.5, transfer, in accordance with
this Clause 21.4, any of its rights and obligations under this
Agreement.
21.4.2 If any Bank (the "Existing Bank") wishes to transfer all or any part
of its Commitment or Participation in Advances to another bank or
other financial institution (the "Bank Transferee"), such transfer may
be effected by way of a novation by the delivery to, and the execution
by, the Agent of a duly completed Transfer Certificate.
21.4.3 On the date specified in the Transfer Certificate:
(a) to the extent that in the Transfer Certificate the Existing Bank
seeks to transfer its Commitment or Participation in Advances,
the Obligors and the Existing Bank shall each be released from
further obligations to each other under this Agreement and their
respective rights against each other shall be cancelled (such
rights and obligations being referred to in this Clause 21.4.3 as
"Discharged Rights and Obligations");
<PAGE> 41
(b) the Obligors and the Bank Transferee shall each assume obligations
towards each other and/or acquire rights against each other which
differ from the Discharged Rights and Obligations only insofar as
the Obligors and the Bank Transferee have assumed and/or acquired
the same in place of the Borrower and the Existing Bank; and
(c) each of the Parties and the Bank Transferee shall acquire the same
rights and assume the same obligations among themselves as they
would have acquired and assumed had the Bank Transferee been a
party under this Agreement as a Bank with the rights and/or the
obligations acquired or assumed by it as a result of the transfer.
21.4.4 The Agent shall promptly complete a Transfer Certificate on request
by an Existing Bank and upon payment by the Bank Transferee of a fee of
$1000 to the Agent provided that such fee shall not be payable in
respect of a transfer to an affiliate of the Existing Bank or another
Bank. Each Party irrevocably authorises the Agent to execute any duly
completed Transfer Certificate on its behalf provided that such
authorisation does not extend to the execution of a Transfer Certificate
on behalf of either the Existing Bank or the Bank Transferee named in
the Transfer Certificate.
21.4.5 The Agent shall promptly notify the Borrower of the receipt and
execution on its behalf by the Agent of any Transfer Certificate.
21.5 CONDITION TO ASSIGNMENTS AND TRANSFERS
21.5.1 An assignment or transfer by a Bank shall be in respect of a Commitment
of at least $15,000,000 and an integral of $5,000,000.
21.5.2 An assignment or transfer of any Commitment or Participation in the
Advances shall be subject to the prior approval of the Borrower
(such approval not to be unreasonably withheld or delayed).
21.6 CONSEQUENCES OF TRANSFER
An Obligor shall be under no obligation to pay any greater amount under
this Agreement following an assignment or transfer by a Bank of any of
its rights or obligations pursuant to this Clause 21 if, in the
circumstances existing at the time of such assignment or transfer, such
greater amount would not have been payable but for the assignment or
transfer.
21.7 DISCLOSURE OF INFORMATION
Each Finance Party may disclose to each other, to their professional
advisers and to any person with whom they are proposing to enter, or
have entered into, any kind of assignment, transfer, novation,
participation or other agreement in relation to this Agreement, a copy
of this Agreement and any information which that Finance Party has
acquired under or in connection with this Agreement, provided that any
such person shall first provide an undertaking in favour of the Borrower
to keep the same confidential.
<PAGE> 42
22. INDEMNITIES
22.1 BREAKAGE COSTS INDEMNITY
The Borrower shall indemnify each Bank on demand against any reasonable
loss or expense (including any loss or expense on account of funds
borrowed, contracted for or utilised to fund any amount payable under
this Agreement, any amount repaid or prepaid under this Agreement or
any Advance) which that Bank has sustained or incurred as a consequence
of:
(a) an Advance not being made following the service of a Drawdown
Notice (except as a result of the failure of that Bank to comply
with its obligations under this Agreement) or the service of a
Market Disruption Notice;
(b) the failure of the Borrower to make payment on the due date of any
sum due under this Agreement;
(c) the occurrence of any Default or the operation of Clause 14.2; or
(d) any prepayment or repayment of an Advance otherwise than on an
Interest Date relative to that Advance, such loss or expense being
equal to the amount (if any) by which (a) the additional interest
excluding the Margin which would have been payable on the amount so
received or recovered had it been received or recovered on the
related Interest Date exceeds (b) the amount of interest which in
the opinion of the Agent would have been payable to the Agent on
the Interest Date in respect of a deposit in the currency of the
amount so received or recovered equal to the amount so received or
recovered placed by it with a prime bank in London for a period
starting on the third or, in the case of a prepayment in accordance
with Clause 7.2, the second Business Day following the date of such
receipt or recovery and ending on the Interest Date.
22.2 CURRENCY INDEMNITY
22.2.1 Any payment made to or for the account of or received by any Finance
Party in respect of any moneys or liabilities due, arising or incurred
by an Obligor to any Finance Party in a currency (the "CURRENCY OF
PAYMENT") other than the currency in which the payment should have been
made under this Agreement (the "CURRENCY OF OBLIGATION") in whatever
circumstances (including as a result of a judgement against any Obligor)
and for whatever reason shall constitute a discharge to that Obligor
only to the extent of the Currency of Obligation amount which that
Finance Party is able on the date of receipt of such payment (or if such
date of receipt is not a Business Day, on the next succeeding Business
Day) to purchase with the Currency of Payment amount at its spot rate of
exchange (as reasonably determined by that Finance Party) in the London
foreign exchange market.
22.2.2 If the amount of the Currency of Obligation which that Finance Party is
so able to purchase falls short of the amount originally due to that
Finance Party under this Agreement, then the relevant Obligor shall
promptly on demand indemnify that Finance Party against any loss or
damage arising as a result of that shortfall by paying to that Finance
Party that amount in the Currency of Obligation certified by that
Finance Party as necessary so to indemnify it.
22.2.3 Each indemnity in this Clause 22.2 shall constitute a separate and
independent obligation from the other obligations contained in this
Agreement, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted from time to
<PAGE> 43
time and shall continue in full force and effect notwithstanding any
judgment or order for a liquidated sum or sums in respect of amounts
due under this Agreement or under any such judgment or order.
22.3 GENERAL
The certificate of the relevant Finance Party as to the amount of any
loss or damage sustained or incurred by it shall be prima facie
evidence to the Obligors in the absence of manifest error.
23. LAW AND JURISDICTION
23.1 LAW
This Agreement is governed by and shall be construed in accordance
with English law;
23.2 JURISDICTION
23.2.1 The Parties agree that the courts of England shall have jurisdiction
to settle any disputes which may arise in connection with this
Agreement and that any judgment or order of an English court in
connection with this Agreement is conclusive and binding on them and
may be enforced against them in the courts of any other jurisdiction.
This Clause 23.2.1 is for the benefit of each Finance Party only and
shall not limit the right of each Finance Party to bring proceedings
against an Obligor in connection with this Agreement in any other
court of competent jurisdiction or concurrently in more than one
jurisdiction.
23.2.2 Each Obligor:
(a) waives any objections which it may have to the English courts on
the grounds of venue or forum non conveniens or any similar
grounds as regards proceedings in connection with this Agreement;
and
(b) consents to service of process by mail or in any other manner
permitted by the relevant law.
23.3 AGENT FOR SERVICE
Each Obligor shall at all times maintain an agent for service of
process in England. That agent shall be Fiat UK Limited of Berkeley
Square House, Berkeley Square, London W1X 6AL. Any claim form, writ,
summons, judgment or other notice of legal process shall be
sufficiently served on an Obligor if delivered to that agent at its
address for the time being. An Obligor shall not revoke the authority
of that agent. If for any reason any such agent no longer serves as
agent of an Obligor to receive service of process, then that Obligor
shall promptly appoint another such agent and immediately advise the
Agent of that appointment.
IN WITNESS whereof the Parties have caused this Agreement to be duly executed on
the date set out above.
<PAGE> 44
SCHEDULE 1
THE BANKS
<TABLE>
<CAPTION>
BANK AND LENDING OFFICE ADDRESS FOR NOTICES COMMITMENT
<S> <C> <C>
A. C. Financial Services Dublin A. C. Financial Services Dublin $50,000,000
(Fortis Bank Group) 5th Floor - Plaza 2
5th Floor - Plaza 2 Custom House Plaza
Custom House Plaza IFSC - Dublin 1
IFSC - Dublin 1 Ireland
Ireland
Attention: James Hart
Fax: 00 353 1 670 0854
ABN AMRO Bank N.V. ABN AMRO Bank N.V. $25,000,000
Lending Department S F U Department
Via Meravigli, 7 Via Meravigli, 7
20123 Milano 20123 Milano
Italy Italy
Attention: Luigi Losi/Loredana
Giovannoni
Fax: 00 39 02 722 67265
Arab Banking Corporation (BSC) Arab Banking Corporation (BSC) $50,000,000
Milan Branch Milan Branch
Credit Department Credit Department
Via Santa Maria Fulcorina 8 Via Santa Maria Fulcorina 8
20123 Milano 20123 Milano
Italy Italy
Attention: Luca Gaiani/Loria Calgaro
Fax: 00 39 02 884 50117
Argentaria, Caja Postal Y Banco Argentaria, Caja Postal Y Banco $12,500,000
Hipotecario, S.A. Hipotecario, S.A.
Serrano, 37-28001 Madrid Serrano, 37-28001 Madrid
Spain Spain
Attention: Jaime Nunez
Fax: 00 34 91 537 7934
Argentaria, Caja Postal Y Banco Argentaria, Caja Postal Y Banco $12,500,000
Hipotecario, S.A. Hipotecario, S.A.
1 Great Tower Street 1 Great Tower Street
London London
EC3R 5HR EC3R 5HR
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C>
Attention: Maria J Nardini
Fax: 0171 204 6651
Banca Antoniana Popolare Veneta Banca Antoniana Popolare Veneta $25,000,000
S.C.A.R.L. Luxembourg Branch
Luxembourg Branch 62, Avenue Guillaume
62, Avenue Guillaume 1650 Luxembourg
1650 Luxembourg
Attention: Mr Vincent Corneau
Fax: 00 352 444 804
Banca Commerciale Italiana (Ireland) Banca Commerciale Italiana (Ireland) $75,000,000
plc plc
AIB International Centre AIB International Centre
IFSC IFSC
Dublin 1 Dublin 1
Ireland Ireland
Attention: Maureen Murphy/Derek
O'Connor
Fax: 00 353 1 679 5882
Banca di Roma Banca di Roma $50,000,000
87 Gresham Street 87 Gresham Street
London London
EC2V 7NQ EC2V 7NQ
Attention: Hugh Fagan, Head of Loan
Admin
Fax: 0171 454 7292
Banca Monte Dei Paschi Di Siena SpA Banca Monte Dei Paschi Di Siena SpA $50,000,000
Grandi Gruppi Department Turin Branch
Piazza dell' Abbadia 7 Via Mazzini 14/16
53100 Siena 10123 Turin
Italy Italy
Attention: Mr Fiore Luigi
Fax: 00 39 011 8155230
Banca Nazionale del Lavoro S.p.A Banca Nazionale del Lavoro S.p.A $50,000,000
London Branch London Branch
Fitzwilliam House Fitzwilliam House
10 St Mary Axe 10 St Mary Axe
London London
EC3A 8NA EC3A 8NA
Attention: Miss Anne Murray, Manager
Loans Department
Fax: 0171 929 7983
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C>
Banca Popolare Di Bergamo - Credito Banca Popolare Di Bergamo - Credito $50,000,000
Varesino s.c.r.l. Varesino s.c.r.l.
Succursale de Lyon Succursale de Lyon
Rue Pierre Corneille, 115 Rue Pierre Corneille, 115
69003 Lyon 69003 Lyon
France France
Attention: Mr Luigi Forrini/Mirco
Iadarola
Fax: 00 33 472 844 640
Banca Popolare Di Milano Scarl (BPM) Banca Popolare Di Milano Scarl (BPM) $50,000,000
Sede Centrale Sede Centrale
Piazza F Meda 4 Piazza F Meda 4
20121 Milano 20121 Milano
Italy Italy
Attention: Pellegatta Giuseppe/Ceppi
Roberto/Dal Monte
Luisa/Tricarico Michelina
Fax: 00 39 02 7700 2360
Banca Popolare Di Novara S.C. a R.L., Banca Popolare Di Novara S.C.a R.L., $25,000,000
London Branch London Branch
Bucklersbury House Bucklersbury House
Walbrook Walbrook
London London
EC4N 8EL EC4N 8EL
Attention: Steve Wilkins, Manager,
Loans Administration
Department/Nino de Marchi,
Deputy General Manager
Fax: 0171 236 2033
Banco Bilbao Vizcaya S.A. - Milan Banco Bilbao Vizcaya S.A. - Milan $25,000,000
Branch Branch
Via Cino del Duca 8 Via Cino del Duca 8
1-20121 Milan 1-20121 Milan
Italy Italy
Attention: Mr Marino Corra
Fax: 00 39 02 762 96266
Banco Di Napoli Spa, Milano Branch Banco Di Napoli Spa, Milano Branch $25,000,000
Piazza Cordusio, 2 Piazza Cordusio, 2
Milano Milano
Italy Italy
Attention: Mr Mauro Gambella -
Gestore 13
Fax: 00 39 02 762 96266
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C>
Banco Espanol De Credito, S.A. Banco Espanol de Credito, S.A. $25,000,000
Avda. Gran Via de Hortaleza, 3 Paseo de la Castellana 103
28043 Madrid 28046, Madrid
Spain Spain
Attention: Marife Bennudo
Fax: 00 34 91 338 9213
Espirito Santo PLC. Espirito Santo PLC. $25,000,000
IFSC House IFSC House
Ground Floor Ground Floor
Custom House Quay Custom House Quay
Dublin 1 Dublin 1
Ireland Ireland
Attention: Luis Morals Sarmento
Fax: 00 353 1 670 2656
Bank of America, N.A. Bank of America, N.A. $75,000,000
Corso Matteotti, 10 Corso Matteotti, 10
20121 Milano 20121 Milano
Italy Italy
Attention: Patrizia Medvedich/Luca
Sala
Fax: 00 39 02 76 069 210
Bank Austria Creditanstalt Bank Austria Creditanstalt $25,000,000
International AG International AG
International Finance Department International Finance Department
Wasagasse 2 Wasagasse 2
A-1090 Vienna A-1090 Vienna
Austria Austria
Attention: Monika Hye
Fax: 00 443 1 53636
Bank One, NA Bank One, NA $50,000,000
1 Triton Square 1 Triton Square
London London
NW1 3FN NW1 3FN
Attention: Dot O'Flaherty
Fax: 0171 903 4148
Banque National de Paris Banque National de Paris $50,000,000
Via Ansperto, 5 Milan Branch
20123 Milano Via Ansperto, 5
Italy 20123 Milano
Italy
Attention: Mme E Braghe
Fax: 00 39 02 7212 4426
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C>
Barclays Bank Plc Barclays Capital $50,000,000
Via Della Moscova 18 Global Services Unit
20121 Milano 10, The South Colonnade
Italy Canary Wharf
London
E14 4BBB
Attention: Ian Stewart, Manager
Operations
Fax: 0171 516 9231
Bayerische Landesbank Girozentrale Bayerische Landesbank Girozentrale $50,000,000
Filiale di Milano Filiale di Milano
Via Cordusio, 2 Via Cordusio, 2
1-20123 Milano 1-20123 Milano
Italy Italy
Attention: Mr C Morgigno/Mr E Caruso
Fax: 00 39 02 864 216
Natexis Banques Populaires Natexis Banques Populaires $50,000,000
115, rue Mourmarue 10-12 avenue Winston Churchill
75002 Paris 94677 Charenton Le Pont
France France
Attention: Maria-Christine Olszewski
Fax: 00 33 01 40 39 44 34
CARIPLO - Cassa di Risparmio delle CARIPLO - Cassa di Risparmio delle $50,000,000
Provincie Lombarde S.p.A., London Provincie Lombarde S.p.A., London
6 Lombard Street 6 Lombard Street
London London
EC3V 9AA EC3V 9AA
Attention: The Manager, Loans
Administration
Fax: 0171 623 2519
CIBC World Markets Ireland Limited CIBC World Markets Ireland Limited $50,000,000
Ormonde House Ormonde House
12 Lower Leeson Street 12 Lower Leeson Street
Dublin 2 Dublin 2
Ireland Ireland
Attention: Ursula Baxter
Fax: 00 353 1 662 4371
Citibank, N.A. Citibank, N.A. $50,000,000
336 The Strand, 336 The Strand,
London, London,
WC2R 1HB WC2R 1HB
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
Attention: Gian Paolo Potsios
Fax: 0171 500 5550
Comerica Bank Comerica Bank $25,000,000
500 Woodward Avenue 500 Woodward Avenue
International Finance Department International Financial Department
One Detroit Center One Detroit Center
23 Floor 23 Floor
Detroit Detroit
Michigan 48226 Michigan 48226
USA USA
Attention: Patricia Grossman
Fax: 001 313 964 4765
Commerzbank Aktiengesellschaft Commerzbank Aktiengesellschaft $50,000,000
Filiale di Milano Filiale di Milano
Via Cordusio, 2 Via Cordusio, 2
20123 Milan 20123 Milan
Italy Italy
Attention: Roberto Mirri/Barbara
Marchioro
Fax: 00 39 02 72596-550
Commonwealth Bank of Australia Commonwealth Bank of Australia $25,000,000
Senator House Senator House
85 Queen Victoria Street 85 Queen Victoria Street
London London
EC4V 4HA EC4V 4HA
Attention: Mr Roy Nasse
Fax: 0171 710 3939
Credit Agricole Indosuez Credit Agricole Indosuez $50,000,000
9 Quai du President Paul Doumer 91-93 Boulevard Pasteur
92920-Paris La Defense cedex 75015 Paris
France France
Attention: Laurence Lebeau
Fax: 00 33 01 41 89 08 71
Credit Commercial de France, London Credit Commercial de France, London $50,000,000
Branch Branch
1 Paternoster Row 1 Paternoster Row
St Paul's St Paul's
London London
EC4M 7DH EC4M 7DH
Attention: John Blewert, Manager,
Banking Operations
Fax: 0171 246 2371
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C>
Credit Industrial et Commercial Credit Industrial et Commercial $50,000,000
60 rue de la Victoire CIC Centre Administratif
75009 Paris 3, Allee de L'Etoile
France 95091 Cergy Pontoise Cedex
France
Attention: Mme Dominique Procureur
/Mme Isabelle Paskeweiz
Fax: 00 33 01 45 96 49 44
Credit Lyonnais Credit Lyonnais $50,000,000
UAC Montgallet/UB Engagements 55 Avenue des Champs Elysees
76/78 rue de Reuilly 75012, Paris
75012, Paris France
France
Attention: Severine de Coincy
Fax: 00 33 1 49 53 14 68
Credit Suisse First Boston Credit Suisse First Boston $75,000,000
Five Cabot Square Loan Services
London Five Cabot Square
E14 4QR London
E14 4QR
Attention: Jeremy Padgham, Loan
Operations
Fax: 0171 888 8125
Den Danske Bank Akieselskab Den Danske Bank Akieselskab $50,000,000
75 King William Street Corporate Loans Administration
London 75 King William Street
EC4N 7DT London
EC4N 7DT
Attention: Alain Laviolette
Fax: 0171 410 8001
Deutsche Bank Spa - Milan Deutsche Bank Spa - Milan $75,000,000
Via S. Sofia, 10 c/o G.C.I.-Global Banking Division
1-20122 Milano Via S. Sofia, 10
Italy 1-20122 Milano
Italy
Attention: Mr C Mattia/Mr L Mariani
Fax 00 39 02 402 43951
First Union National Bank, London First Union National Bank, London $50,000,000
Branch Branch
3 Bishopsgate 3 Bishopsgate
London London
EC2N 3AB EC2N 3AB
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C>
Attention: Maureen Hart, Head of Loans
Administration
Fax: 0171 216 1642
HSBC Bank plc HSBC Bank plc $50,000,000
Via della Moscova 3 Milan Branch
20121 Milan Via della Moscova 3
Italy 20121 Milan
Italy
Attention: Sara Brugora
Fax: 00 39 02 62525 444
Hypo Vereinsbank Luxembourg Hypo Vereinsbank Luxembourg $25,000,000
Societe Anonyme Societe Anonyme
4 rue Alphonse Weicker 4 rue Alphonse Weicker
L-2721 Luxembourg L-2721 Luxembourg
Attention: Arnold Hermine
Fax: 00 352 4272 4547
ICCRI Istituto Di Credito Delle Casse ICCRI SPA $25,000,000
Di Risparmio Italiane SpA Direzione Operativa Impieghi Funzione
Via Boncompagni 71/h Filiale Interna
00187 Roma Via Boncompagni 71/h
Italia 00187 Roma
Italia
Attention: Franco Vecchi - Sig.Ra
Antonia De Santis
Fax: 00 39 647 153 178
ING Bank NV ING Bank NV $50,000,000
Filiale di Milano Filiale di Milano
Via Tortona, 33 Via Tortona, 33
20144 Milano 20144 Milano
Italy Italy
Attention: Donata Pirelli
Fax: 00 39 02 47780 246
KBC Bank N.V. Dublin Branch KBC Bank N.V. Dublin Branch $25,000,000
KBC House KBC House
4 George's Dock 4 George's Dock
IFSC IFSC
Dublin 1 Dublin 1
Ireland Ireland
Attention: Ms. Maureen Collins
Fax: 00 353 66 10 196
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C>
Mediocredito Centrale S.p.A. Mediocredito Centrale S.p.A. $25,000,000
Via Piemonte, 51 Servizio Amministrazione Ufficio
00187 Roma Erogazioni
Italy Via Piemonte, 51
00187 Roma
Italy
Attention: Roberto Marzocchi/Adriano
Felici
Fax: 00 39 06 4791 758
Morgan Guaranty Trust Company of Morgan Guaranty Trust Company of $50,000,000
New York New York
60 Victoria Embankment 60 Victoria Embankment
London London
EC4Y 0JP EC4Y 0JP
Attention: Loan Capital Markets -
Middle Office
Fax: 0171 325 8190
Raiffeisen Zentralbank Ostereich AG Raiffeisen Zentralbank Ostereich AG $25,000,000
AM Stadtpark 9 AM Stadtpark 9
A-1030 Vienna A-1030 Vienna
Austria Austria
Attention: Ms Karin Nyikos
Fax: 00 431 71707 2383
RBC Finance B.V. RBC Finance B.V. $25,000,000
Keizersgracht 604 Keizersgracht 604
1017 EP Amsterdam 1017 EP Amsterdam
The Netherlands The Netherlands
Attention: Mr M Palmer
Fax: 00 31 20 6 262 196
SANPAOLO IMI S.p.A., London SANPAOLO IMI S.p.A., London $75,000,000
Branch Branch
Wren House Wren House
15 Carter Lane 15 Carter Lane
London London
EC4V 3SP EC4V 3SP
Attention: Murray Crosby, Manager,
Loans Administration
Fax: 0171 236 2698
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C>
Societe Generale Finance (Ireland) Societe Generale Finance (Ireland) $50,000,000
Limited Limited
31/31 Morrison Chambers 31/31 Morrison Chambers
32 Nassau Street 32 Nassau Street
Dublin 2 Dublin 2
Ireland Ireland
Attention: Jacinra Conroy
Fax: 00 353 1 6704 262
The Chase Manhattan Bank The Chase Manhattan Bank $75,000,000
125 London Wall Eurocurrency / Global Money Market
London Division
EC2Y 5AJ 4 Chase Metrotech Centre
15th Floor
Brooklyn
New York 11245
USA
Attention: Edwin Grospe
Fax: 001 718 242 7021
The Industrial Bank of Japan, Limited - The Industrial Bank of Japan, Limited $50,000,000
Milan Branch London Branch
Via Senato 14/16 Operation Department
20121 Milano Bracken House
Italy One Friday Street
London
EC4M 9JA
Attention: Mark Brown/Mary Roe
Fax: 0171 329 0354
AND COPY TO
The Industrial Bank of Japan, Limited -
Milan Branch
Operation Department
Via Senato 14/16
20121 Milano
Italy
Attention: Ms. L Anastas
Fax: 00 39 02 783 373
The Sumitomo Bank, Limited The Sumitomo Bank, Limited $25,000,000
Temple Court Loans Administration Department
11 Queen Victoria Street Temple Court
London 11 Queen Victoria Street
EC4N 4TA London
EC4N 4TA
Attention: The Manager
Fax: 0207 786 1059
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C>
The Toronto-Dominion Bank The Toronto-Dominion Bank $50,000,000
Triton Court Triton Court
14/18 Finsbury Square 14/18 Finsbury Square
London London
EC2A 1DB EC2A 1DB
Attention: Denise Payne
Fax: 0171 638 2551
UniCredito Italiano S.p.A., London UniCredito Italiano S.p.A., London $50,000,000
Branch Branch
17 Moorgate 17 Moorgate
London London
EC2R 6AR EC2R 6AR
Attention: Mr I King
Fax: 0171 606 3920
Westdeutsche Landesbank Girozentrale, Westdeutsche Landesbank Girozentrale, $50,000,000
Brussels Branch Brussels Branch
Chaussee de La Hulpe, 166 Chaussee de La Hulpe, 166
B-1170 Brussels B-1170 Brussels
Belgium Belgium
Attention: Head of Loan Administration
Department
Fax: 00 322 663 6859
</TABLE>
<PAGE> 55
SCHEDULE 2
CONDITIONS PRECEDENT
1. A Certified Copy of the constitutional documents of each Obligor.
2. Certified Copies of documents evidencing that the officers of each Obligor
who act as signatories for that Obligor in relation to the Financing
Documents have the relevant corporate authority to bind that Obligor and
also setting our specimen signatures of such officers.
3. The Agency Fees Letter and the Arrangement Fees Letter duly executed by
each Obligor together with the fees payable under each of those letters on
the execution of this Agreement.
4. A letter addressed by Fiat UK Limited to the Agent in which it agrees to
act as each Obligor's agent for service of process in England for the
purposes of this Agreement.
5. Legal opinions from each of:
(i) Wilde Sapte;
(ii) Nauta Dutilh for New Holland N.V.; and
(iii) internal counsel for Fiat S.p.A.
<PAGE> 56
SCHEDULE 3
DRAWDOWN NOTICE
To: The Agent
From: New Holland N.V.
*[date]
Dear Sirs,
$2,400,000,000 Credit Agreement dated * 1999 (the "Credit Agreement")
Terms defined in the Credit Agreement have the same meaning in this notice.
We request an Advance to be drawn down under the Credit Agreement as follows:
1. Amount of Advance:
2. Drawdown Date:
3. Duration of first Interest Period:
4. Payment instructions:
(if applicable)
We confirm that today and on the Drawdown Date:
(a) the representations and warranties in Clauses 12.1(a) to (d) inclusive
to be repeated are and will be correct; and
(b) no Default or Potential Default has occurred and is continuing or will
occur on the making of the Advance.
SIGNED
For and on behalf of
NEW HOLLAND N.V.
<PAGE> 57
SCHEDULE 4
FORM OF TRANSFER CERTIFICATE
TRANSFER CERTIFICATE
To: The Agent
and the other parties to the Credit Agreement (as defined below)
This transfer certificate ("Transfer Certificate") relates to a credit agreement
dated * 1999 and made between (1) New Holland N.V., (2) Flat S.p.A., (3)
certain banks, (4) Chase Manhattan International Limited and (5) Chase
Manhattan Plc and Credit Suisse First Boston in respect of a dollar term loan
facility (the "Credit Agreement", which term shall include any amendments or
supplements to it).
Terms defined and references construed in the Credit Agreement shall have the
same meanings and construction in this Transfer Certificate.
1. *[insert full name of Existing Bank](the "Existing Bank"):
(a) confirms that to the extent that details appear in the schedule to
this Transfer Certificate under the headings "Existing Bank's
Commitment" and "Existing Bank's Participation in Advances", those
details accurately summarise its Commitment and its Participation in
Advances all or part of which is to be transferred; and
(b) requests *[insert full name of Bank Transferee](the "Bank
Transferee") to accept and procure, in accordance with Clause 21 of
the Credit Agreement, the substitution of the Existing Bank by the
Bank Transferee in respect of the amount of its Commitment and its
Participation in Advances to be transferred as specified in the
schedule to this Transfer Certificate by signing this Transfer
Certificate.
2. The Bank Transferee requests each of the Parties to accept this executed
Transfer Certificate as being delivered under and for the purposes of
Clause 21 of the Credit Agreement so as to take effect in accordance with
the provisions of that Clause on *[insert date of transfer].
3. The Bank Transferee:
(a) confirms that it has received a copy of the Credit Agreement together
with such other documents and information as it has requested in
connection with this transaction;
(b) confirms that it has not relied and will not rely on the Existing Bank
to check or enquire on its behalf into the legality, validity,
effectiveness, adequacy, accuracy or completeness of any such
documents or information; and
<PAGE> 58
(c) agrees that it has not relied and will not rely on the Finance
Parties to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or nature of
the Obligors.
4. The Bank Transferee undertakes with the Existing Bank and each of the
other Parties that it will perform, in accordance with its terms, all those
obligations which, by the terms of the Credit Agreement, will be assumed by
it upon delivery of the executed copy of this Transfer Certificate to the
Agent.
5. On execution of this Transfer Certificate by the Agent on their behalf,
the Parties accept the Bank Transferee as a party to the Credit Agreement
in substitution for the Existing Bank with respect to all those rights
and/or obligations which, by the terms of the Credit Agreement, will be
assumed by the Bank Transferee after delivery of the executed copy of this
Transfer Certificate to the Agent.
6. None of the Finance Parties:
(a) makes any representation or warranty or assumes any responsibility
with respect to the legality, validity, effectiveness, adequacy or
enforceability of the Credit Agreement; or
(b) assumes any responsibility for the financial condition of either
Obligor or any other party to the Credit Agreement or any other
document or for the performance and observance by either Obligor or
any other party to the Credit Agreement or any other document of its
or their obligations and any and all conditions and warranties,
whether express or implied by law or otherwise, are excluded.
7. The Bank Transferee confirms that its Lending Office and address for
notices for the purposes of the Credit Agreement are as set out in the
schedule to this Transfer Certificate.
8. The Existing Bank gives notice to the Bank Transferee (and the Bank
Transferee acknowledges and agrees with the Existing Bank) that the
Existing Bank is under no obligation to re-purchase (or in any other manner
to assume, undertake or discharge any obligation or liability in relation
to) the transferred Commitment and Participation at any time after this
Transfer Certificate shall have taken effect.
9. Following the date upon which this Transfer Certificate shall have
taken effect, without limiting the terms of this Transfer Certificate, each
of the Bank Transferee and the Existing Bank acknowledges and confirms to
the other that, in relation to the transferred Commitment and
Participation, variations, amendments or alterations to any of the terms of
the Credit Agreement arising in connection with any renegotiation or
rescheduling of the obligations under the Credit Agreement shall apply to
and be binding on the Bank Transferee alone.
10. This Transfer Certificate is governed by and shall be construed in
accordance with English law.
<PAGE> 59
THE SCHEDULE
Existing Bank's Commitment Amount of Commitment Transferred
Existing Bank's Participation in Amount of Participation Transferred
Advances
*[insert full name of Bank Transferee]
Lending Office Address for notices
* *
Attention:
Fax:
<PAGE> 60
*[Bank Transferee]
By:
--------------------------------
(Duly authorised)
*[Existing Bank]
By:
--------------------------------
(Duly authorised)
The Agent on behalf of itself and all other parties to the Credit Agreement
By:
--------------------------------
(Duly authorised)
Dated:
<PAGE> 61
The Borrower
SIGNED by )
) RICCARDO RADIC
for and on behalf of )
NEW HOLLAND N.V. )
The Guarantor
SIGNED by )
) ANDREA FAINA
for and on behalf of )
FIAT S.p.A. )
The Banks
SIGNED by )
) TOBY VARNEY
)
for and on behalf of )
A.C. FINANCIAL SERVICES ) EMMA BALAAM
DUBLIN (FORTIS BANK GROUP) )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ABN AMRO BANK N.V. ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ARAB BANKING CORPORATION ) EMMA BALAAM
(BSC) )
<PAGE> 62
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ARGENTARIA, CAJA POSTAL Y ) EMMA BALAAM
BANCO HIPOTECARIO, S.A. )
SIGNED by )
)
for and on behalf of ) DANIELE CUNEGO
BANCO ANTONIANA POPOLARE )
VENETA S.C.A.R.L. )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA COMMERCIALE ITALIANA ) EMMA BALAAM
(IRELAND) plc )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA DI ROMA, LONDON ) EMMA BALAAM
<PAGE> 63
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA MONTE DEI PASCHI DI ) EMMA BALAAM
SIENA SpA )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA NAZIONALE DEL LAVORO ) EMMA BALAAM
S.p.A
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA POPOLARE DI BERGAMO- ) EMMA BALAAM
CREDITO VARESINO s.c.r.l. )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA POPOLARE DI MILANO ) EMMA BALAAM
SCARL (BPM) )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCA POPOLARE DI NOVARA ) EMMA BALAAM
S.C.a R.L. )
<PAGE> 64
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANCO BILBAO VIZCAYA S.A. ) EMMA BALAAM
SIGNED by )
) JOHN SIDHOM
for and on behalf of )
BANCO DI NAPOLI Spa ) CHIRO PAONE
SIGNED by )
) RICARDO CASTRESANA
for and on behalf of )
BANCO ESPANOL DE CREDITO, ) ZUZKA HERRERO
S.A. )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ESPIRITO SANTO PLC ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANK OF AMERICA, N.A. ) EMMA BALAAM
<PAGE> 65
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANK AUSTRIA CREDITANSTALT ) EMMA BALAAM
INTERNATIONAL AG )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANK ONE, NA ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BANQUE NATIONAL DE PARIS ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BARCLAYS BANK PLC ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
BAYERISCHE LANDESBANK ) EMMA BALAAM
GIROZENTRALE
<PAGE> 66
SIGNED by )
) TOBY VARNEY
for and on behalf of )
NATEXIS BANQUES POPULAIRES ) EMMA BALAAM
SIGNED by )
) LESLEY BARNES
for and on behalf of )
CARIPLO-CASSA DI RISPARMIO ) GIUSEPPE MONTI
DELLE PROVINCIE LOMBARDE )
S.p.A.
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CIBC WORLD MARKETS IRELAND ) EMMA BALAAM
LIMITED )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CITIBANK, N.A. ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
COMERICA BANK ) EMMA BALAAM
<PAGE> 67
SIGNED by )
) TOBY VARNEY
for and on behalf of )
COMMERZBANK ) EMMA BALAAM
AKTIENSGESELLSCHAFT )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
COMMONWEALTH BANK OF ) EMMA BALAAM
AUSTRALIA )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CREDIT AGRICOLE INDOSUEZ ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CREDIT COMMERCIAL DE ) EMMA BALAAM
FRANCE
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CREDIT INDUSTRIAL ET ) EMMA BALAAM
COMMERCIAL )
<PAGE> 68
SIGNED by )
) TOBY VARNEY
for and on behalf of )
CREDIT LYONNAIS ) EMMA BALAAM
SIGNED by )
) RICHARD SMITH-MORGAN
for and on behalf of )
CREDIT SUISSE FIRST BOSTON ) SERGIO DI-LIETO
SIGNED by )
) TOBY VARNEY
for and on behalf of )
DEN DANSKE BANK ) EMMA BALAAM
AKTIESELSKAB )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
DEUTSCHE BANK SpA ) EMMA BALAAM
SIGNED by )
) KIRK VOGEL
for and on behalf of )
FIRST UNION NATIONAL BANK )
<PAGE> 69
SIGNED by )
) TOBY VARNEY
for and on behalf of )
HSBC BANK PLC ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
HYPOVEREINBANK ) EMMA BALAAM
LUXEMBOURG )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ICCRI ISTITUTO DI CREDITO ) EMMA BALAAM
DELLE CASSE DI RISPARMIO )
ITALIANE SpA )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
ING BANK NV ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
KBC BANK N.V. ) EMMA BALAAM
<PAGE> 70
SIGNED by )
) TOBY VARNEY
for and on behalf of )
MEDIOCREDITO CENTRALE S.p.A. ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
MORGAN GUARANTY TRUST ) EMMA BALAAM
COMPANY OF NEW YORK )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
RAIFFEISEN ZENTRALBANK ) EMMA BALAAM
OSTERREICH AG
SIGNED by )
) TOBY VARNEY
for and on behalf of )
RBC FINANCE B.V. ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
SANPAOLO IMI S.p.A. ) EMMA BALAAM
<PAGE> 71
SIGNED by )
) TOBY VARNEY
for and on behalf of )
SOCIETE GENERALE FINANCE ) EMMA BALAAM
(IRELAND) LIMITED )
SIGNED by )
) ROBERT E TILL
for and on behalf of )
THE CHASE MANHATTAN BANK )
SIGNED by )
) TOBY VARNEY
for and on behalf of )
THE INDUSTRIAL BANK OF JAPAN ) EMMA BALAAM
LIMITED
SIGNED by )
) TOBY VARNEY
for and on behalf of )
THE SUMITOMO BANK, LIMITED ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
THE TORONTO DOMINION BANK ) EMMA BALAAM
<PAGE> 72
SIGNED by )
) TOBY VARNEY
for and on behalf of )
UNICREDITO ITALIANO S.p.A. ) EMMA BALAAM
SIGNED by )
) TOBY VARNEY
for and on behalf of )
WESTDEUTSCHE LANDESBANK ) EMMA BALAAM
GIROZENTRALE )
<PAGE> 73
The Agent
SIGNED by )
) ROBERT E. TILL
for and on behalf of )
CHASE MANHATTAN )
INTERNATIONAL LIMITED )
The Lead Arrangers
SIGNED by )
) PAOLO MANCINI
for and on behalf of )
CHASE MANHATTAN Plc )
SIGNED by )
) RICHARD SMITH-MORGAN
for and on behalf of )
CREDIT SUISSE FIRST BOSTON ) SERGIO DI-LIETO
<PAGE> 1
EXHIBIT 4.3
CASE CORPORATION
TO
THE BANK OF NEW YORK
AS TRUSTEE
FIRST SUPPLEMENTAL INDENTURE
DATED AS OF MARCH 28, 2000
SUPPLEMENT TO INDENTURE
DATED AS OF JULY 31, 1995
DEBT SECURITIES
GUARANTEE BY CNH GLOBAL N.V.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
<S> <C> <C>
SECTION 1.1 Definitions........................................................... 2
SECTION 1.2 Effect of Headings.................................................... 2
SECTION 1.3 Successors and Assigns................................................ 2
SECTION 1.4 Separability Clause................................................... 3
SECTION 1.5 Benefits of First Supplemental Indenture.............................. 3
SECTION 1.6 Governing Law......................................................... 3
SECTION 1.7 Effectiveness......................................................... 3
SECTION 1.8 Counterparts.......................................................... 3
ARTICLE TWO
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 2.1 Amendment to Section 1.1 "Definitions."............................... 3
SECTION 2.2 Amendment to Section 1.2 "Compliance Certificate and Opinions."....... 5
SECTION 2.3 Amendment to Section 1.3 "Form of Documents Delivered to Trustee.".... 5
SECTION 2.4 Amendment to Section 1.4 "Acts of Holders; Record Dates."............. 5
SECTION 2.5 Amendment to Section 1.5 "Notices, etc., to Trustee and Company."..... 5
SECTION 2.6 Amendment to Section 1.9 "Successors and Assigns.".................... 5
SECTION 2.7 Section 1.14 "Appointment of Agent for Service."...................... 6
ARTICLE THREE
SECURITY FORMS
SECTION 3.1 Amendment to Section 2.1 "Forms Generally."............................ 7
SECTION 3.2 Addition of Section 2.6 entitled "Form of Guarantee.".................. 7
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE FOUR
THE SECURITIES
<S> <C> <C>
SECTION 4.1 Amendment to Section 3.1 "Amount Unlimited; Issuable in Series."...... 8
SECTION 4.2 Amendment to Section 3.3 "Execution, Authentication, Delivery
and Dating."................................................ 8
SECTION 4.3 Amendment to Section 3.4 "Temporary Securities."...................... 8
SECTION 4.4 Amendment to Section 3.5 "Registrations, Registration of Transfer
and Exchange.".............................................. 8
SECTION 4.5 Amendment to Section 3.6 "Mutilated, Destroyed, Lost and Stolen
Securities."................................................ 9
SECTION 4.6 Amendment to Section 3.7 "Payment of Interest; Interest Rights
Preserved."................................................. 9
SECTION 4.7 Amendment to Section 3.8 "Persons Deemed Owners."..................... 9
SECTION 4.8 Amendment to Section 3.9 "Cancellation................................ 9
ARTICLE FIVE
SATISFACTION AND DISCHARGE
SECTION 5.1 Amendment to Section 4.1 "Satisfaction and Discharge of Indenture."... 9
SECTION 5.2 Amendment to Section 4.2 "Application of Trust Money."................ 10
ARTICLE SIX
REMEDIES
SECTION 6.1 Amendment to Section 5.1 "Events of Default."......................... 10
SECTION 6.2 Amendment to Section 5.2 "Acceleration of Maturity; Rescission
and Annulment." ............................................ 10
SECTION 6.3 Amendment to Section 5.3 "Collection of Indebtedness and Suits
for Enforcement by Trustee."................................ 10
SECTION 6.4 Amendment to Section 5.4 "Trustee May File Proofs of Claim.".......... 10
SECTION 6.5 Amendment to Section 5.9 "Restoration of Rights and Remedies."........ 11
SECTION 6.6 Amendment to Section 5.15 "Waiver of Stay or Extension Laws."......... 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE SEVEN
THE TRUSTEE
<S> <C> <C>
SECTION 7.1 Amendment to Section 6.3 "Certain Rights of Trustee."................. 11
SECTION 7.2 Amendment to Section 6.4 "Not Responsible for Recitals
or Issuance of Securities."................................ 11
SECTION 7.3 Amendment to Section 6.5 "May Hold Securities."....................... 11
SECTION 7.4 Amendment to Section 6.6 "Money Held in Trust."....................... 11
SECTION 7.5 Amendment to Section 6.7 "Compensation and Reimbursement."............ 12
SECTION 7.6 Amendment to Section 6.10 "Resignation and Removal; Appointment of
Successor."................................................. 12
SECTION 7.8 Amendment to Section 6.11 "Acceptance of Appointment by Successor."... 12
SECTION 7.9 Amendment to Section 6.13 "Preferential Collection of Claims
Against Company."........................................... 12
SECTION 7.10 Amendment to Section 6.14 "Appointment of Authenticating Agent."...... 12
ARTICLE EIGHT
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 8.1 Amendment to Title of Article VII..................................... 13
SECTION 8.2 Amendment to Section 7.1 "Company to Furnish Trustee Names
and Addresses of Holders."................................. 13
SECTION 8.3 Amendment to Section 7.2 "Preservation of Information;
Communications to Holders."................................. 13
SECTION 8.4 Amendment to Section 7.3 "Reports by Trustee."........................ 13
SECTION 8.5 Amendment to Section 7.4 "Reports by Company."........................ 13
ARTICLE NINE
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 9.1 Amendment to Section 8.1 "Company May Consolidate, etc.,
Only on Certain Terms."..................................... 14
SECTION 9.2 Amendment to Section 8.2 "Successor Substituted."..................... 14
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE TEN
SUPPLEMENTAL INDENTURES
<S> <C> <C>
SECTION 10.1 Amendment to Section 9.1 "Supplemental Indentures Without
Consent of Holders."........................................ 15
SECTION 10.2 Amendment to Section 9.2 "Supplemental Indentures with Consent of
Holders."................................................... 15
SECTION 10.3 Amendment to Section 9.6 "Reference in Securities to Supplemental
Indentures."................................................ 15
ARTICLE ELEVEN
COVENANTS
SECTION 11.1 Amendment to Section 10.2 "Maintenance of Office or Agency.".......... 16
SECTION 11.2 Amendment to Section 10.3 "Money for Securities Payments to Be
Held in Trust."............................................. 16
SECTION 11.3 Amendment to Section 10.9 "Waiver of Certain Covenants.".............. 16
SECTION 11.4 Amendment to Section 10.11 "Appointments to Fill Vacancies in
Trustee's Office.".......................................... 16
ARTICLE TWELVE
REDEMPTION OF SECURITIES
SECTION 12.1 Amendment to Section 11.3 "Selection by Trustee of Securities to
be Redeemed................................................. 17
SECTION 12.2 Amendment to Section 11.5 "Deposit of Redemption Price.".............. 17
SECTION 12.3 Amendment to Section 11.6 "Debt Securities Payable on Redemption
Date."...................................................... 17
SECTION 12.4 Amendment to Section 11.7 "Securities Redeemed in Part.".............. 17
ARTICLE THIRTEEN
SINKING FUNDS
SECTION 13.1 Amendment to Section 12.2 "Satisfaction of Sinking Fund Payments
with Securities."........................................... 17
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
ARTICLE FOURTEEN
GUARANTEES
<S> <C> <C>
SECTION 14.1 New Article Fourteen.................................................. 18
</TABLE>
v
<PAGE> 7
FIRST SUPPLEMENTAL INDENTURE, dated as of March 28, 2000,
among CASE CORPORATION, a Delaware corporation (the "Company"), having its
principal place of business at 700 State Street, Racine, Wisconsin 53404, CNH
GLOBAL N.V., a corporation organized under the laws of the Kingdom of the
Netherlands, in its capacity as guarantor of the securities issued by the
Company (the "Guarantor"), and THE BANK OF NEW YORK, a New York banking
corporation, as trustee (the "Trustee"), as Trustee under the indenture of the
Company (the "Indenture") dated as of July 31, 1995.
RECITALS
WHEREAS, Section 9.1 of the Indenture provides that the
Company and the Trustee may, without the consent of any Holders, at any time and
from time to time, enter into one or more supplemental indentures, in form
satisfactory to the Trustee, for the purpose of supplementing the provisions of
the Indenture.
WHEREAS, on November 12, 1999, the Company became an indirect,
wholly owned subsidiary of the Guarantor.
WHEREAS, the parties hereto have agreed to supplement the
Indenture to add the Guarantor as a party thereto and to add the Guarantee set
forth in this Supplemental Indenture pursuant to Article Nine of the Indenture,
and to add such other provisions as might reasonably be necessary to give effect
to the Guarantee. Such Guarantee is for the benefit, and will not adversely
affect the interests, of the Holders of Outstanding Securities.
WHEREAS, the Company and the Guarantor have each duly
authorized the execution and delivery of this Supplemental Indenture, and all
things necessary have been done to make this Supplemental Indenture a valid
agreement of the Company and the Guarantor, in accordance with its terms.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Company's Securities, as follows:
<PAGE> 8
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of the Indenture and this First Supplemental
Indenture, except as otherwise expressly provided or unless the context
otherwise requires:
1. The terms defined in this Supplemental Indenture have
the meanings assigned to them in this Supplemental
Indenture, and include the plural as well as the
singular;
2. All other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference
therein, have the meanings assigned to them therein;
3. All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with
generally accepted accounting principles, and, except
as otherwise herein expressly provided, the term
"generally accepted accounting principles" with
respect to any computation required or permitted
hereunder shall mean such accounting principles as
are generally accepted at the date of such
computation; and
4. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to the Indenture
and this Supplemental Indenture as a whole and not to
any particular Article, Section or other subdivision.
SECTION 1.2 Effect of Headings.
The Article and Section headings herein and in the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.3 Successors and Assigns.
All covenants and agreements in this Supplemental Indenture by
the Company and the Guarantor shall bind their successors and assigns, whether
expressed or not.
2
<PAGE> 9
SECTION 1.4 Separability Clause.
In case any provision in this First Supplemental Indenture or
in the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 1.5 Benefits of First Supplemental Indenture.
Nothing in this First Supplemental Indenture, express or
implied, shall give to any Person, other than the parties hereto, their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this First Supplemental Indenture.
SECTION 1.6 Governing Law.
THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PROVISIONS THEREOF.
SECTION 1.7 Effectiveness.
This Supplemental Indenture shall take effect on the date
hereof and shall amend the provisions of the Indenture with respect to each
series of Securities issued under the Indenture, including each series of
Securities issued under the Indenture prior to the date hereof.
SECTION 1.8 Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument.
ARTICLE TWO
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 2.1 Amendment to Section 1.1 "Definitions."
Section 1.1 of the Indenture is hereby amended as follows:
(a) The definition of "Board of Directors" is amended to add
"or the Guarantor, as the case may be," after "Company" in the first line
thereof.
3
<PAGE> 10
(b) The definition of "Board Resolution" amended to insert "or
the Guarantor, as the case may be," after "Company" in the second line thereof.
(c) A new definition "Guarantee" is added as follows:
""Guarantee" means any guarantee of the Guarantor with regard
to each Security issued by the Company pursuant to this Indenture and shall
include the Guarantee set forth in Article Fourteen of the Supplemental
Indenture and all other obligations and covenants of the Guarantor contained in
this Indenture and any Securities, whether issued previous to or after the date
of this Supplemental Indenture."
(d) A new definition "Guarantor" is added as follows:
""Guarantor" means the Person named as the "Guarantor" in the
first paragraph of this Supplemental Indenture until a successor shall have
become such pursuant to the applicable provisions of this Indenture, and
thereafter "Guarantor" shall mean such successor."
(e) A new definition "Guarantor Request" or "Guarantor Order"
is added as follows:
""Guarantor Request" or "Guarantor Order" mean a written
request or order signed in the name of the Guarantor by its Chairman of the
Board, President, a Vice President, director, managing director or other
authorized officer and by its Treasurer, Assistant Treasurer, its Secretary or
an Assistant Secretary or other authorized officer and delivered to the
Trustee."
(f) The definition of "Officers' Certificate" is amended to
insert "or the Guarantor, as the case may be" after "Company in the third line
thereof and is further amended to insert "or the Guarantor" after "Company" in
the last line thereof.
(g) The definition of "Opinion of Counsel" is amended to
insert "or the Guarantor, as the case may be," after "Company" in the second
line thereof.
(h) The definition of "Outstanding" is amended to insert "or
the Guarantor, as the case may be" after "Company" in the first, second and
third appearance of "Company" in the third line of clause (ii) and is further
amended to insert ", the Guarantor" after "Company" in the eleventh, twelfth,
eighteenth and nineteenth lines of the remainder of the definition.
(i) The definition of "Vice President" is amended to insert ",
the Guarantor" after "Company" in the first line thereof.
4
<PAGE> 11
SECTION 2.2 Amendment to Section 1.2 "Compliance Certificate
and Opinions."
Section 1.2 is amended to insert "or the Guarantor" after
"Company" in the first line of the first paragraph and is further amended to
insert "or the Guarantor, as the case may be," after "Company" in the second
line of the first paragraph.
SECTION 2.3 Amendment to Section 1.3 "Form of Documents
Delivered to Trustee."
Section 1.3 is amended to insert the phrase "or the Guarantor,
as the case may be," after "Company" in the first, seventh and eighth lines of
the second paragraph.
SECTION 2.4 Amendment to Section 1.4 "Acts of Holders; Record
Dates."
Section 1.4 is amended to insert "or the Guarantor or both of
them" after "Company" in the sixth line of paragraph (a), and is further amended
to insert "and the Guarantor" after "Company" in the eleventh line of paragraph
(a) and is further amended to insert "or the Guarantor" after "Company" in the
fifth line of paragraph (e).
SECTION 2.5 Amendment to Section 1.5 "Notices, etc., to
Trustee and Company."
Section 1.5 is amended to insert ", Guarantor" after "Trustee"
in the title of the Section, and is further amended to insert "or the Guarantor"
after "Company" in the first line of clause (1) and the first line of clause
(2), and is further amended to insert "or the Guarantor, as the case may be,"
after "Company" in the third line of clause (2), and is further amended to
insert "or the Guarantor, as the case may be" after "Company" in the fifth line
of clause (2), and is further amended to replace "instrument" in the fourth line
of clause (2) with "First Supplemental Indenture", and is further amended to add
a second paragraph as follows:
"Any request, demand, authorization, direction, notice, consent, waiver
or other action required or permitted under this Indenture shall be in
the English language, and any published notice may also be in an
official language of the country or province of publication."
SECTION 2.6 Amendment to Section 1.9 "Successors and Assigns."
Section 1.9 is amended to insert "or the Guarantor" after
"Company", and is further amended to delete "its" and replace it with "their
respective."
5
<PAGE> 12
SECTION 2.7 Section 1.14 "Appointment of Agent for Service."
A new Section 1.14 is added as follows:
"SECTION 1.14. Appointment of Agent for Service.
By the execution and delivery of this First Supplemental
Indenture, the Guarantor designates and appoints CT Corporation as its
authorized agent upon which process may be served in any suit or proceeding
arising out of or relating to the Securities, the Guarantee or this Indenture
which may be instituted in any Federal or New York State Court located in the
Borough of Manhattan, City and State of New York, but for that purpose only, and
agrees that service of process upon said CT Corporation, directed to the
attention of Treasurer, and written notice of said service given by the Person
serving the same to it, addressed to CT Corporation, shall be deemed in every
respect effective service of process upon it in any such suit or proceeding in
any Federal or State court in such Borough, City and State. The Guarantor hereby
submits (for the purposes of any such suit or proceeding) to the jurisdiction of
any such court in which any such suit or proceeding is so instituted, and
irrevocably waives, to the fullest extent it may effectively do so, any
objection it may have now or hereafter to the laying of the venue of any such
suit, action or proceeding in any such court and irrevocably waives, to the
fullest extent it may effectively do so, any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Such submission and waiver shall be irrevocable so long as any of the Securities
remain outstanding and such appointment shall be irrevocable until the
appointment of a successor by the Guarantor, with the consent of the Trustee and
such successor's acceptance of such appointment. Upon such acceptance, the
Guarantor shall notify the Trustee, in writing, of the name and address of such
successor. The Guarantor further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments, as may
be necessary to continue such designation and appointment of said CT Corporation
or its successor in full force and effect so long as any of the applicable
Securities shall be outstanding. The Trustee shall not be obligated and shall
have no responsibility with respect to any failure by the Guarantor to take any
such action above.
The Guarantor agrees to the fullest extent that it lawfully
may do so, that any judgment in any such suit, action or proceeding bought in
such a court shall be conclusive and binding upon the Guarantor and may be
enforced in the courts of the Netherlands (or any other courts to the
jurisdiction of which the Guarantor is subject) by a suit upon such judgment,
provided that service of process is effected upon the Guarantor in the manner
specified in the foregoing paragraph or as otherwise permitted by law; provided,
however, that the Guarantor does not waive, and the foregoing provisions of this
sentence shall not constitute or be deemed to constitute a waiver of, (1) any
right to appeal any such judgment, to seek any stay or otherwise to seek
reconsideration or review of any such judgment, (2) any stay of execution or
levy pending an appeal from, or a suit, action or proceeding for reconsideration
of, any such judgment, (3) any defense to a claim for punitive damages and the
like, (4) the defense of payment, or (5) any other
6
<PAGE> 13
right or remedy of the Guarantor to the extent not expressly waived in
accordance with this Section 1.14.
Nothing in this Section shall affect the right of the Trustee
or any Holder of any Security to serve process in any manner permitted by
applicable law or limit the right of the Trustee or any Holder of any Security
to bring proceedings against the Company and/or the Guarantor, in the courts of
any other jurisdiction or jurisdictions."
ARTICLE THREE
SECURITY FORMS
SECTION 3.1 Amendment to Section 2.1 "Forms Generally."
Section 2.1 is amended to insert the following paragraphs
after the first paragraph:
"For Securities issued after the date of the first
Supplemental Indenture, the Guarantee shall be endorsed on each Security and
such Guarantee for the Securities of a particular series shall be in such form
as is established pursuant to Section 2.6.
Outstanding Securities issued prior to the date of the first
supplemental indenture shall be Guaranteed pursuant to the terms of Article
Fourteen hereof and no endorsement, authentication or other evidence of such
Guarantee shall be necessary on any Outstanding Security and no separate
Guarantee need be executed and delivered by the Guarantor to the Holder of an
Outstanding Security."
SECTION 3.2 Addition of Section 2.6 entitled "Form of
Guarantee."
A new Section 2.6 is added as follows:
"Except for Outstanding Securities issued prior to the date
hereof, which shall be Guaranteed as set forth in Section 2.1 hereof, the
Guarantee of the Guarantor shall be endorsed on each Security and for each
particular series of Securities shall be in substantially such form or forms as
shall be established by or pursuant to a Board Resolution (including, without
limitation, in any Officers' Certificate of an officer authorized to act in
connection with such matter or pursuant to such Board Resolution) of the
Guarantor or an indenture supplemental hereto, with such appropriate insertions,
omissions, substitutions and other corrections as are required or permitted by
this Indenture or any indenture supplemental hereto, and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may, consistently herewith, be determined by the officers executing
such Guarantees. Such execution of such Guarantees shall be conclusive evidence
as regards the Guarantor as to any such determination made by the Guarantor."
7
<PAGE> 14
ARTICLE FOUR
THE SECURITIES
SECTION 4.1 Amendment to Section 3.1 "Amount Unlimited;
Issuable in Series."
Section 3.1 is amended to insert "and related Guarantees"
after "Securities" in the first line of the second paragraph.
SECTION 4.2 Amendment to Section 3.3 "Execution,
Authentication, Delivery and Dating."
Section 3.3 is amended to add "and the related Guarantees"
after "Securities" in the fifth line of the third paragraph and is further
amended to add "and the Guarantor" after "Company" in the third line of clause
(c) and in the second line of clause (d), and is further amended to insert "with
the related Guarantees endorsed thereon" after "Securities" in the first line of
clause (c), and is further amended to insert ", the Guarantor Order" after
"Company Order" in the fourth line of the fourth paragraph and is further
amended to insert a new paragraph at the end of the Section as follows:
"Reference is made to Section 14.2 concerning the execution and delivery of the
Guarantees."
SECTION 4.3 Amendment to Section 3.4 "Temporary Securities."
Section 3.4 is amended to insert "and each having endorsed
thereon the Guarantee executed by the Guarantor, substantially of the tenor of
the definitive Guarantee" after "issued" in the fifth line of the first
paragraph, and is further amended to insert "and such Guarantees" after
"Securities" in the sixth and seventh lines of the first paragraph, and is
further amended to insert "having endorsed thereon Guarantees executed by the
Guarantor" after "denominations" in the ninth line of the second paragraph.
SECTION 4.4 Amendment to Section 3.5 "Registrations,
Registration of Transfer and Exchange."
Section 3.5 is amended to insert ", the Guarantor shall
guarantee" after "execute" in the third line of the second paragraph, and in the
fourth line of the third paragraph, and is further amended to insert ", having
endorsed thereon the Guarantee executed by the Guarantor" after "amount" in the
last line of the second paragraph and after "receive" in the last line of the
third paragraph, and is further amended to insert "and the Guarantor," after
"Company" in the second line of the fourth paragraph.
8
<PAGE> 15
SECTION 4.5 Amendment to Section 3.6 "Mutilated, Destroyed,
Lost and Stolen Securities."
Section 3.6 is amended to insert ", the Guarantor" after
"Company" in the first and fourth line of the second paragraph, and is further
amended to insert ", having endorsed thereon the Guarantee executed by the
Guarantor" after "principal amount" in the third line of the first paragraph and
in the seventh line of the second paragraph, and is further amended to delete
"in its discretion" in the second line of the third paragraph and replace it
with "and the Guarantor in their discretion," and is further amended to insert
", and the Guarantee endorsed thereon" after "series" in the first line of the
fifth paragraph, and is further amended to insert "and the Guarantor
respectively" after "Company" in the third line of the fifth paragraph, and is
further amended to insert "and the Guarantees endorsed thereon, if any," after
"series" in the last line of the fifth paragraph.
SECTION 4.6 Amendment to Section 3.7 "Payment of Interest;
Interest Rights Preserved."
Section 3.7 is amended to insert "or the Guarantor, as the
case may be," after "Company" in the first, fifth, seventh and fifteenth lines
of clause (1) and in the first and fourth lines of clause (2), and is further
amended to insert "or the Guarantor, as the case may be" after "Company" in the
fourth line of the second paragraph and in the sixteenth line of clause (1).
SECTION 4.7 Amendment to Section 3.8 "Persons Deemed Owners."
Section 3.8 is amended to insert ", the Guarantor" after
"Company" in the first, second and seventh (both places) lines of the first
paragraph.
SECTION 4.8 Amendment to Section 3.9 "Cancellation."
Section 3.9 is amended to insert "or the Guarantor" after
"Company" in the fourth and fifth lines of the first paragraph.
ARTICLE FIVE
SATISFACTION AND DISCHARGE
SECTION 5.1 Amendment to Section 4.1 "Satisfaction and
Discharge of Indenture."
Section 4.1 is amended to insert "or the Guarantor" after
"Company" in the fourth and fifth lines of clause (1)(A) and in the third line
of clause (1)(B)(iii), in the first and second lines in clause (2), in the first
line of clause (3) and in the second sentence of the last paragraph.
9
<PAGE> 16
SECTION 5.2 Amendment to Section 4.2 "Application of Trust
Money."
Section 4.2 is amended to insert "or the Guarantor" after
"Company" in the fourth line of the first paragraph.
ARTICLE SIX
REMEDIES
SECTION 6.1 Amendment to Section 5.1 "Events of Default."
Section 5.1 is amended to insert "or the Guarantor" after
"Company" in the second line of clause (4), in the second, fourth, sixth and
eighth lines of clause (5), and in the first, fourth, eleventh and fourteenth
lines of clause (6), and is further amended to insert "and the Guarantor" after
"Company" in the ninth line, first appearance of clause (4), and is further
amended to insert ", the Guarantor" after "Company" in the ninth line, second
appearance of clause (4), and is further amended to replace "by it" in the
fourth, seventh, ninth lines of clause (6) and in both appearances in the
twelfth line of clause (6) with "by the Company or the Guarantor,".
SECTION 6.2 Amendment to Section 5.2 "Acceleration of
Maturity; Rescission and Annulment."
Section 5.2 is amended to insert "and the Guarantor" after
"Company" in the seventh line of the first paragraph and the fifth line of the
second paragraph, and is further amended to insert "or the Guarantor" after
"Company" in the first line of clause (1).
SECTION 6.3 Amendment to Section 5.3 "Collection of
Indebtedness and Suits for Enforcement by Trustee."
Section 5.3 is amended to insert "and the Guarantor each,"
after each reference to "Company" in the first paragraph, and is further amended
to insert "or the Guarantor" after "Company" in the sixth line of the first
paragraph.
SECTION 6.4 Amendment to Section 5.4 "Trustee May File Proofs
of Claim."
Section 5.4 is amended to insert ", the Guarantor" after
"Company" in the first line of the first paragraph, and is further amended to
insert "or the Guarantor" after "Company" in the ninth line of the first
paragraph.
10
<PAGE> 17
SECTION 6.5 Amendment to Section 5.9 "Restoration of Rights
and Remedies."
Section 5.9 is amended to insert ", the Guarantor" after
"Company" in the fourth line of the first paragraph.
SECTION 6.6 Amendment to Section 5.15 "Waiver of Stay or
Extension Laws."
Section 5.15 is amended to insert "and the Guarantor each"
after "Company" in the first and fourth lines of the first paragraph.
ARTICLE SEVEN
THE TRUSTEE
SECTION 7.1 Amendment to Section 6.3 "Certain Rights of
Trustee."
Section 6.3 is amended to insert "or the Guarantor" after
"Company" in the first sentence of clause (b), and is further amended by
inserting "or a Guarantor Request or Guarantor Order" after "Order" in the
second sentence of clause (b), and is further amended by inserting "of the
Company or the Guarantor" after "Directors" in the third line of clause (b), and
is further amended to insert "or the Guarantor or both of them" after "Company"
in the seventh line of clause (f).
SECTION 7.2 Amendment to Section 6.4 "Not Responsible for
Recitals or Issuance of Securities."
Section 6.4 is amended to insert "or the Guarantor," after
"Company" in the second line of the first paragraph, and is further amended to
insert "or of the Guarantees" after "Securities" in the fourth line of the first
paragraph.
SECTION 7.3 Amendment to Section 6.5 "May Hold Securities."
Section 6.5 is amended to insert "or the Guarantor" after
"Company" in the second line of the first paragraph, and is further amended to
insert "or the Guarantor, as the case may be," after "Company" in the fourth
line of the first paragraph.
SECTION 7.4 Amendment to Section 6.6 "Money Held in Trust."
Section 6.6 is amended to insert "or the Guarantor, as the
case may be," after "Company" in the last line of the first paragraph.
11
<PAGE> 18
SECTION 7.5 Amendment to Section 6.7 "Compensation and
Reimbursement."
Section 6.7 is amended to insert "and the Guarantor each,
jointly and severally," after "Company" in the first line of the first
paragraph.
SECTION 7.6 Amendment to Section 6.10 "Resignation and
Removal; Appointment of Successor."
Section 6.10 is amended to insert "and the Guarantor" after
"Company" in the second line of paragraph (b), and is further amended to insert
", the Guarantor" after "Trustee" in the third line of paragraph (c), and is
further amended to insert "or the Guarantor," after "Company" in the second line
of paragraph (d)(1) and in the second line of paragraph (d)(2), and is further
amended to insert ", the Guarantor," after "Company" in the eleventh line of
paragraph (e).
SECTION 7.8 Amendment to Section 6.11 "Acceptance of
Appointment by Successor."
Section 6.11 is amended to insert ", the Guarantor" after
"Company" in the third and sixth lines of paragraph (a), and the second and
twenty-second lines of paragraph (b), and is further amended to insert "and the
Guarantor" after the word "Company" in the first line of paragraph (c).
SECTION 7.9 Amendment to Section 6.13 "Preferential
Collection of Claims Against Company."
Section 6.13 is amended to insert "or the Guarantor" after
"Company" in the first and third lines of the first paragraph.
SECTION 7.10 Amendment to Section 6.14 "Appointment of
Authenticating Agent."
Section 6.14 is amended to insert "and the Guarantor" after
"Company" in the eleventh line of the first paragraph, in the seventh line of
the third paragraph and in the first line of the fourth paragraph.
12
<PAGE> 19
ARTICLE EIGHT
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 8.1 Amendment to Title of Article VII.
The title of Article VII is amended to insert ", GUARANTOR"
after "TRUSTEE."
SECTION 8.2 Amendment to Section 7.1 "Company to Furnish
Trustee Names and Addresses of Holders."
Section 7.1 is amended to insert "or the Guarantor, as the
case may be" after "Company" in the first line of the first paragraph, and is
further amended to insert "or the Guarantor" after "Company" in the second line
of paragraph (b).
SECTION 8.3 Amendment to Section 7.2 "Preservation of
Information; Communications to Holders."
Section 7.2 is amended to insert ", the Guarantor" after
"Company" in both places in the second line of paragraph (c).
SECTION 8.4 Amendment to Section 7.3 "Reports by Trustee."
Section 7.3 is amended to insert "and the Guarantor" after the
first use of "Company" in the third line of paragraph (b).
SECTION 8.5 Amendment to Section 7.4 "Reports by Company."
Section 7.4 is amended to insert "and the Guarantor" after
"Company" in the title of the Section and in the first line of clause (a),
clause (b) and clause (c) and is further amended to insert "or the Guarantor"
after "Company" in the second, fifth and sixth lines of clause (a), and is
further amended to insert the following after the word "regulations;" in the
last line of clause (a): "provided that no such supplementary and periodic
information, documents and reports need to be filed by the Company if, pursuant
to the rules and regulations of the Commission, it is exempt from such filing
requirements by virtue of the existence of the Guarantees;" and is further
amended to insert "or the Guarantor, or both," after "Company" in the fourth
line of clause (b), and is further amended to insert "or the Guarantor, as the
case may be," after "Company" in the fourth line of clause (c).
13
<PAGE> 20
ARTICLE NINE
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 9.1 Amendment to Section 8.1 "Company May
Consolidate, etc., Only on Certain Terms."
Section 8.1 is amended to insert "and Guarantor" after
"Company" in the title of the Section, and is further amended to add a new final
paragraph as follows:
"(5) The Guarantor may merge with or into any corporation or
sell, transfer, lease or convey all or substantially all of
its assets substantially as an entirety to any corporation;
provided that (a) the corporation formed by such merger or
consolidation or the corporation which acquired such assets
expressly assumes all of the obligations of the Guarantor
hereunder (including additional amounts, if any, as set forth
in Article Fourteen hereof), and (b) immediately after giving
effect to such transaction, no Event of Default with respect
to such Securities and no event which, after notice or lapse
of time or both, would become an Event of Default with respect
to such Securities, shall have occurred and be continuing (c)
the Guarantor and the successor Person have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel
each stating that such consolidation, merger conveyance,
transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental
indenture comply with this Article and that all conditions
precedent herein provided for relating to such transaction
have been complied with."
SECTION 9.2 Amendment to Section 8.2 "Successor Substituted."
Section 8.2 is amended to insert "or the Guarantor, as the
case may be," after "Company" in the first line of the first paragraph, both
appearances and in the third, fourth, sixth, seventh, eighth and ninth lines of
the first paragraph.
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ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.1 Amendment to Section 9.1 "Supplemental
Indentures Without Consent of Holders."
Section 9.1 is amended to insert "and the Guarantor" after
"Company" in the first line of the first paragraph, and is further amended to
insert "or the Guarantor" after "Company" in the first and second lines of
clause (1) and the first and last lines of clause (2), and is further amended to
insert "or the Guarantees" after "Securities" in the last line of clause (1),
and is further amended to insert "or related Guarantee, if any" after
"Securities" in the second and third lines of clause (2), and is further amended
to insert "and related Guarantee, if any" after "Securities" in the second and
fourth lines of clause (4), and is further amended to insert "and related
Guarantee, if any," after "Securities" in the second line of clause (5), the
first line of clause (6), the first line of clause (7), in the second line of
clause (8) and in the fifth line of clause (9), and is further amended to insert
"(and related Guarantee)" after "Security" in the third line of clause (5).
SECTION 10.2 Amendment to Section 9.2 "Supplemental
Indentures with Consent of Holders."
Section 9.2 is amended to insert ", the Guarantor" after
"Company" in the first appearance in the third line of the first paragraph, and
is further amended to insert "and the Guarantor" after "Company" in the second
appearance in the third line of the first paragraph, and is further amended to
add "or" at the end of clause (3) and is further amended to add a new clause (4)
as follows:
"(4) change in any manner adverse to the interests of the Holders of
any Outstanding Securities the terms and conditions of the obligations of the
Guarantor in respect of the due and punctual payment of principal thereof (and
premium, if any) and interest, if any, thereon or any additional amounts or any
sinking fund payments provided in respect thereof."
SECTION 10.3 Amendment to Section 9.6 "Reference in Securities
to Supplemental Indentures."
Section 9.6 is amended to insert "and the Guarantor" after
"Company" in the fourth line of the first paragraph, and is further amended to
insert ", the Guarantor" after "Trustee" in the fifth line of the first
paragraph, and is further amended to insert "along with the related Guarantees
executed by the Guarantor" after "Company" in the sixth line of the first
paragraph.
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ARTICLE ELEVEN
COVENANTS
SECTION 11.1 Amendment to Section 10.2 "Maintenance of Office
or Agency."
Section 10.2 is amended to insert "and the Guarantor" after
"Company" in the first and ninth lines in the first paragraph, and is further
amended to insert "or the Guarantor" after "Company" in the fourth, fifth and
seventh lines of the first paragraph, and the first, fourth and sixth lines of
the second paragraph.
SECTION 11.2 Amendment to Section 10.3 "Money for Securities
Payments to Be Held in Trust."
Section 10.3 is amended to insert "or the Guarantor" after
"Company" in the first line of the first paragraph and in the second, fifth and
eighth lines of the last paragraph, and is further amended to insert "and the
Guarantor" after "Company" in the first line of the second paragraph and is
further amended to delete "it will" from the second line of the second paragraph
and replace it with "the Company will", and is further amended to delete "shall
be paid to the Company on Company Request" in the fourth line of the last
paragraph and to replace it with "shall be paid to the Company or the Guarantor,
as the case may be, on a Company Request or a Guarantor Request, as the case may
be," and is further amended to insert the letter "s" at the end of "trust" in
the fifth line of the last paragraph, and is further amended to insert "(or to
the Guarantor pursuant to its Guarantee)" after "Company" in the sixth line of
the last paragraph, and is further amended to insert "or the Guarantor, as the
case may be" after "Company" in the last line of the last paragraph.
SECTION 11.3 Amendment to Section 10.9 "Waiver of Certain
Covenants."
Section 10.9 is amended to insert "or the Guarantor, as the
case may be," after "Company" in the first line of the first paragraph, and is
further amended to insert "and the Guarantor, as the case may be," after
"Company" in the eighth line of the first paragraph.
SECTION 11.4 Amendment to Section 10.11 "Appointments to Fill
Vacancies in Trustee's Office."
Section 10.11 is amended to insert "and the Guarantor" after
"Company" in the first line of the first paragraph.
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ARTICLE TWELVE
REDEMPTION OF SECURITIES
SECTION 12.1 Amendment to Section 11.3 "Selection by Trustee
of Securities to be Redeemed."
Section 11.3 is amended to insert "and the Guarantor" after
"Company" in the first line of the second paragraph.
SECTION 12.2 Amendment to Section 11.5 "Deposit of Redemption
Price."
Section 11.5 is amended to insert "or the Guarantor" after
"Company" in the first and second lines of the first paragraph.
SECTION 12.3 Amendment to Section 11.6 "Debt Securities
Payable on Redemption Date."
Section 11.6 is amended to insert "and the Guarantor" after
"Company" in the third line of the first paragraph and is further amended to
insert "or the Guarantor" after "Company" in the sixth line of the first
paragraph.
SECTION 12.4 Amendment to Section 11.7 "Securities Redeemed in
Part."
Section 11.7 is amended to insert ", each having endorsed
thereon the Guarantee executed by the Guarantor" after the first use of the word
"surrendered" in the ninth line of the first paragraph.
ARTICLE THIRTEEN
SINKING FUNDS
SECTION 13.1 Amendment to Section 12.2 "Satisfaction of
Sinking Fund Payments with Securities."
Section 12.2 is amended to insert "or the Guarantor" after
"Company" in the first line of the first paragraph.
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<PAGE> 24
ARTICLE FOURTEEN
GUARANTEES
SECTION 14.1 New Article Fourteen.
The Indenture is amended to add the following new Article XIV:
"ARTICLE XIV
GUARANTEES
The provisions of this Article shall be applicable to all
Securities whether issued previous to or after the date of this First
Supplemental Indenture.
SECTION 14.1 Guarantees.
The Guarantor hereby irrevocably and unconditionally
guarantees to each Holder of any Security issued under this Indenture by the
Company and to the Trustee on behalf of each such Holder, the due and punctual
payment of the principal of (and premium, if any, on) and interest, if any, on
each such Security (including any additional amounts payable in accordance with
the terms of any such Security and this Indenture) and the due and punctual
payment of any sinking fund payments provided for pursuant to the terms of any
such Security when and as the same shall become due and payable, whether at the
Stated Maturity, if any, by declaration of acceleration, call for redemption,
request for redemption, repayment at the option of the Holder or otherwise, in
accordance with the terms of such Security and of this Indenture. In case of the
failure of the Company punctually to make any such payment of principal (or
premium, if any) or interest, if any, (including any additional amounts as
referred to above) or sinking fund payment, the Guarantor hereby agrees to cause
any such payment to be made punctually when and as the same shall become due and
payable, whether at the Stated Maturity, if any, by declaration of acceleration,
call for redemption, request for redemption, repayment at the option of the
Holder or otherwise, and as if such payment were made by the Company.
The Guarantor will pay to the Holder of such Security such
additional amounts as may be necessary in order that every net payment of the
principal of (and premium, if any, on) and interest, if any, on such Security
after deduction or other withholding for or on account of any present or future
tax, assessment, duty or other governmental charge of any nature whatsoever
imposed, levied or collected by or on behalf of the country in which the
Guarantor is organized or any political subdivision or taxing authority thereof
or therein having power to tax, will not be less than the amount provided for in
such Security to be then due and payable; provided, however, that the foregoing
obligation to pay additional amounts will not apply on account of any tax,
assessment, duty or other governmental charge which is payable (a) otherwise
than by deduction or withholding from payments of principal of (or premium, if
18
<PAGE> 25
any, on) or interest, if any, on such Security; or (b) by reason of the Holder
having, or having had, some personal or business connection with the country in
which the Guarantor is organized and not merely by reason of the fact that
payments are, or for the purposes of taxation are deemed to be, from sources in,
or secured in, the country in which the Guarantor is organized; or (c) by reason
of a change in law or official practice of any relevant taxing authority that
becomes effective on or after the date hereof for payment of principal (or
premium, if any), or interest, if any, in respect of such Security; or (d) by
reason of any estate, excise, inheritance, gift, sales, transfer, wealth,
personal property tax or any similar assessment or governmental charge; or (e)
as a result of the failure of the Holder to satisfy any statutory requirements
or make a declaration of nonresidence or other similar claim for exemption to
the relevant tax authority; or (f) owing to any combination of clauses (a)
through (e) above.
The Guarantor hereby agrees that its obligations hereunder
shall be as if it were principal debtor and not merely surety, and shall be
absolute and unconditional, irrespective of the validity, regularity or
enforceability of any such Security, this Indenture or this guarantee, the
absence of any action to enforce the same, any waiver or consent by the Holder
of any such Security or by the Trustee or the Paying Agent with respect to any
provisions thereof or of this Indenture or this guarantee, the existence of any
judgment against the Company, as the Company, or any action to enforce the same
or any other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to such Security or the
indebtedness evidenced thereby or with respect to any sinking fund payment
required pursuant to the terms of any such Security and all demands whatsoever,
and covenants that this Guarantee will not be discharged except by complete
performance of all of the obligations of the Guarantor contained in this
Indenture and any such Securities and in the Guarantees. If the Trustee or the
Holder of any such Security is required by any court or otherwise to return (and
does so return) to the Company or the Guarantor, or any custodian, receiver,
liquidator, trustee, sequestrator or other similar official acting in relation
to the Company or the Guarantor, any amount paid to the Trustee or such Holder
in respect of any such Security, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. The Guarantor further
agrees, to the fullest extent that it lawfully may do so, that, as between the
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
the Maturity of the obligations guaranteed hereby may be accelerated as provided
in Section 5.2 hereof for the purposes of this Guarantee, notwithstanding any
stay, injunction or other prohibition extant under any applicable bankruptcy,
insolvency, reorganization or other similar law of the United States or the
Netherlands or any other applicable country or jurisdiction preventing such
acceleration in respect of the obligations guaranteed hereby.
The Guarantor shall be subrogated to all rights of the Holders
of such Securities of a particular series against the Company in respect of any
amounts paid to such Holders by the Guarantor pursuant to the provisions of the
Guarantees under this Indenture; provided, however,
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<PAGE> 26
that the Guarantor shall not be entitled to receive any payments arising out of
the subrogation from the Company (i) while any Event of Default shall have
occurred and be continuing with respect to any Securities issued by the Company
under Sections 5.1(1), 5.1(2), 5.1(3), 5.1(5), 5.1(6), or 5.1(4) (but only to
the extent such Event of Default under Section 5.1(4) arises out of a default by
the Company under the covenants set forth in Section 10.1), or (ii) any default
(which with the passage of time would become an Event of Default) with respect
to any Securities issued by the Company, under Section 5.1(1) or 5.1(2) shall
have occurred and be continuing.
SECTION 14.2 Execution and Delivery of Guarantees.
Outstanding Securities issued prior to the date hereof shall
be guaranteed pursuant to the terms of Section 14.1 hereof and no endorsement,
authentication or other evidence of such Guarantee shall be necessary on any
such Outstanding Security and no separate Guarantee need be executed and
delivered by the Guarantor to the Holder of a Security Outstanding on the date
hereof.
To evidence its Guarantee provided in Section 14.1 for
Securities issued after the date hereof, the Guarantor hereby agrees to execute
the Guarantee, in a form established pursuant to Section 2.6, to be endorsed on
each Security issued hereunder by the Company. Each such Guarantee shall be
executed on behalf of the Guarantor by any two of its authorized
representatives. The signature of any authorized representative on each
Guarantee may be manual or facsimile.
Any Guarantee bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Guarantor shall bind
the Guarantor, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of the Securities
upon which any such Guarantee is endorsed or did not hold such offices at the
date of such Securities.
The delivery of any such Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Guarantee. The Guarantor hereby agrees that its Guarantee set forth in Section
14.1 shall remain in full force and effect notwithstanding any failure to
endorse on each such Security a notation of such Guarantee."
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereby have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
CASE CORPORATION
By: /s/ Theodore R. French
--------------------------------
Name: Theodore R. French
Title: President, Financial Services, and
Chief Financial Officer
CNH GLOBAL N.V.,
as Guarantor
By: /s/ Theodore R. French
--------------------------------
Name: Theodore R. French
Title: President, Financial Services, and
Chief Financial
THE BANK OF NEW YORK,
as Trustee
By: /s/ Mary La Gumina
Name: Mary La Gumina
Title: Assistant Vice President
21
<PAGE> 1
EXHIBIT 10.1
CNH GLOBAL N.V.
OUTSIDE DIRECTORS' COMPENSATION PLAN
This Outside Directors' Compensation Plan (the "Plan") has been
established by action of the CNH Global N.V. of Amsterdam, the Netherlands (the
"Company") Board of Directors (the "Board") effective as of the date the Plan is
approved by the Board.
1. INTRODUCTION. The purpose of the Plan is to provide for (i) the
payment of the annual retainer fee and committee chair fee (collectively, the
"Annual Fees") to independent outside members of the Board ("Outside Directors")
in the form of common shares of the Company ("Common Shares"); (ii) an annual
grant of options to purchase Common Shares; (iii) an opportunity to defer all or
a portion of their Annual Fees otherwise payable in Common Shares; and (iv) an
opportunity to convert all or a portion of their Annual Fees into stock options.
2. ELIGIBILITY. Subject to the terms and conditions of the Plan, each
Outside Director shall be a participant in the Plan. Each Outside Director shall
be entitled to receive Annual Fees and meeting fees as determined by the
Chairman of the Board in accordance with Article 12 of the Company's Articles of
Association, which Annual Fees and meeting fees, as in effect from time to time,
shall be reflected on Appendix A, attached hereto.
3. STOCK GRANTS. Subject to the terms and conditions of the Plan,
including Sections 4 and 5 hereof, the Annual Fees payable to an Outside
Director shall be paid in accordance with this Section 3. As of (i) February 29,
2000, (ii) the day immediately preceding the date of the 2000 Annual General
Meeting of the Company's shareholders, and (iii) the last day of each Plan Year
Quarter (as described below) thereafter, each Outside Director shall be granted
automatically a number of Common Shares equal in value to 25% of the annual
retainer fee, and if he or she is a committee chair 25% of the annual committee
chair fee, each as listed in Appendix A, attached hereto, as amended from time
to time in accordance with the amendment procedures of the Plan.
(a) FAIR MARKET VALUE. The value of each Common Share (the "Fair
Market Value") shall be determined as of the last business day
of the Plan Year Quarter for which it is granted and shall be
equal to the average of the highest and lowest sales price a
Common Share on the Composite Tape for such date as reported
by the National Quotations Bureau Incorporated; provided that,
if no sales of Common Shares are included on the Composite
Tape for such date, the Fair Market Value of a share of Common
Shares on such date shall be deemed to be the average of the
highest and lowest
<PAGE> 2
prices of a Common Share as reported on said Composite Tape
for the next preceding day on which sales of Common Shares are
included.
(b) PRORATION FOR PARTIAL SERVICES. If the Outside Director is not
a member of the Board or a committee chair during an entire
Plan Year Quarter, the retainer and committee chair fees to
which he or she is entitled as well as his or her award of
Shares for that Quarter shall be reduced, pro rata, to reflect
the portion of the Quarter in which he or she was not an
Outside Director or committee chair, as the case may be.
(c) FRACTIONAL SHARES. An Outside Director shall be entitled to a
whole Share for any fractional Share to which he or she would
otherwise be entitled for any Plan Year Quarter under the
foregoing provisions of this Section 3.
(d) PLAN YEAR. For purposes of the Plan, the term "Plan Year"
means the period beginning on the date of the Company's Annual
General Meeting of shareholders and ending on the day
immediately prior to the first day of the following Plan Year.
For any Plan Year, the first Plan Year Quarter shall begin on
the first day of the Plan Year, and shall end on the 90th day
of the Plan Year; the second Plan Year Quarter shall begin on
the 91st day of the Plan Year, and shall end on the 180th day
of the Plan Year; the third Plan Year Quarter shall begin on
the 181st day of the Plan Year, and shall end on the 270th day
of the Plan Year; and the fourth Plan Year Quarter shall begin
on the 271st day of the Plan Year, and shall end on the last
day of the Plan Year.
4. CASH ELECTION. Subject to the terms and conditions of the Plan, an
Outside Director may irrevocably elect, by filing a form with the Secretary of
the Company (the "Secretary") in such form as the Secretary may from time to
time require, to receive a portion of his or her Annual Fees for any Plan Year
in cash, provided that an Outside Director may not elect to receive more than
50% of the Annual Fees in cash. For the Plan Year ending in 2000, any such
election must be filed prior to February 29, 2000. For any Plan Year thereafter,
such election must be filed prior to the first day of such Plan Year.
Notwithstanding the foregoing provisions of this Section 4, an individual who
becomes an Outside Director after the first day of a Plan Year may irrevocably
elect, by filing a form with the Secretary in such form as the Secretary may
from time to time require prior to the date on which he or she first becomes an
Outside Director, to receive a portion of his or her Annual Fees for the
remainder of the Plan Year in which he or she first becomes an Outside Director
in cash, up to a maximum of 50% of such Annual Fees for the remainder of the
Plan Year.
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<PAGE> 3
5. OPTIONS. Subject to the terms and conditions of the Plan, each
Outside Director will be awarded stock options under the Plan in accordance with
the following:
(a) AUTOMATIC OPTION GRANTS. Each individual who is an Outside
Director on the date the Plan is approved by the Board shall
be granted automatically as of that date an option to acquire
3,750 Common Shares. Thereafter, each individual who is an
Outside Director on the date of the Annual General Meeting of
the Company's shareholders shall be granted automatically as
of that date an option to purchase that number of Common
Shares listed in Appendix A (the "Automatic Option Grant"),
attached hereto as amended from time to time in accordance
with the amendment procedures of the Plan. Each individual who
becomes an Outside Director other than on the date of an
Annual General Meeting of the Company's shareholders shall
receive an Automatic Option Grant reduced pro rata to reflect
the portion of the Plan Year elapsed prior to the date on
which the individual first became an Outside Director,
provided that any fractional share resulting from such
reduction shall be rounded up to a whole share.
(b) ELECTIVE OPTION GRANTS. For the period beginning on the date
the Plan is approved by the Board and ending on the last day
of the Plan Year ending in the year 2000 and for any Plan Year
beginning thereafter, each Outside Director, by filing a
written "Option Election" with the Secretary in such form as
the Secretary may from time to time require, may elect to
forego payment of all or any portion of the Annual Fees
otherwise payable to him or her during such period or for any
such Plan Year, as applicable, and to instead receive, as of
each date on which such Annual Fees would otherwise have been
paid to him or her (each an "Elective Grant Date"), an option
to purchase that number of Common Shares equal to the quotient
(rounded to the nearest whole number of shares) of (1) divided
by (2) where:
(1) is the product of the amount of the Annual Fees that
would otherwise have been paid to the Outside
Director on the applicable Elective Grant Date which
are subject to his or her Option Election, multiplied
by four; and
(2) is the Fair Market Value of a Common Share on the
applicable Elective Grant Date.
Each option granted pursuant to this paragraph (b) shall be referred to
herein as an "Elective Option Grant" and, where appropriate, will be
3
<PAGE> 4
referred to collectively with an Automatic Option Grant as an "Option
Grant". An Outside Director's Option Election shall be effective with
respect to Annual Fees otherwise payable to him or her for services
rendered after the last day of the Plan Year in which such election is
filed with the Secretary; provided, however, that:
(A) each Outside Director may make an Option Election
prior to February 29, 2000 with respect to Annual
Fees payable during the period beginning on the date
the Plan is approved by the Board and ending on the
last day of the Plan Year ending in the year 2000;
(B) if an individual becomes an Outside Director on or
after the first day of a Plan Year and files an
Option Election with the Secretary prior to the date
on which he or she first becomes an Outside Director,
his or her Option Election shall be effective with
respect to Annual Fees otherwise payable to him or
her for services rendered on and after the day on
which he or she first becomes an Outside Director;
and
(C) by notice filed with the Secretary, an Outside
Director may terminate or modify any Option Election
as to Annual Fees payable for services rendered after
the last day of the Plan Year in which such notice is
filed with the Secretary.
(c) RELOAD STOCK OPTIONS. "Reload Stock Options" shall be awarded
to an Outside Director when and if he or she pays the Option
Price under an Option Grant, described above, by delivery of
Common Shares on the settlement date for such exercise. A
Reload Stock Option entitles its holder to purchase the number
of Common Shares so delivered for an Option Price equal to the
Fair Market Value of a share of Common Stock on such
settlement date. No more than one Reload Stock Option shall be
granted to an Outside Director in any twelve-month period, the
maximum number of Reload Stock Options that may be granted to
an Outside Director with respect to any Option Grant is five,
and no Reload Stock Options will be issued within six months
prior to the scheduled expiration date of the Option Grant to
which it relates. Notwithstanding the above, no Reload Stock
Option shall be granted unless the recipient is an Outside
Director of the Company at the time of delivery of Common
Shares. Notwithstanding any other provision hereof, a Reload
Stock Option shall not become exercisable until six months
after its award date and its maximum term will terminate at
the time specified hereunder for the Option Grant to which it
relates.
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<PAGE> 5
For purposes of the Plan, Automatic Option Grants, Elective Option Grants and
Reload Stock Options are sometimes referred to herein collectively as "Stock
Options".
6. TERMS OF OPTION GRANTS.
(a) OPTION AGREEMENT. Each Stock Option shall be evidenced by a
written stock option agreement which shall be executed by the
Outside Director and the Company and which shall contain such
terms and conditions as are consistent with this Plan.
(b) EXERCISE PRICE. The exercise price for a Common Share under an
Option Grant shall be 100% of the Fair Market Value of Common
Share on the date the Option Grant is made.
(c) COMMENCEMENT OF EXERCISABILITY. Each Automatic Option Grant
made under the Plan shall become exercisable on the third
anniversary of the grant date or, if earlier, with respect to
Automatic Option Grants that have been outstanding at least
six months, the date the individual ceases to be an Outside
Director for any reason other than removal for cause by the
Company's shareholders. Each Elective Option Grant shall be
immediately exercisable upon grant but Common Shares purchased
upon exercise of an Elective Option Grant may not be sold
until the date which is at least six months after the date
such Elective Option Grant is made.
(d) TERM. Each Option Grant shall terminate upon the earlier of
(i) ten years after the date of grant or (ii) six months after
the date an individual ceases to be an Outside Director.
(e) DEATH OF OUTSIDE DIRECTOR. Notwithstanding paragraph 6(c)
above, the Automatic Option Grants and Reload Stock Options
that have been awarded to an Outside Director whose Board
membership is terminated due to death shall be immediately
exercisable. Notwithstanding paragraph (d) above, the Outside
Director's designated beneficiary or estate if no beneficiary
has been designated may exercise any Stock Options within the
six-month period following the death of the Outside Director.
(f) TOTAL DISABILITY OF OUTSIDE DIRECTOR. Notwithstanding
paragraphs 6(c) or 6(d) above, the Automatic Option Grants and
Reload Stock Options that have been awarded to an Outside
Director whose Board membership is terminated due to Total
Disability shall be immediately exercisable and all Stock
Options shall remain exercisable within the six-month period
following the
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<PAGE> 6
Outside Director's termination for Total Disability. For
purposes of this provision, "Total Disability" means the
permanent inability (as determined by the Outside Director's
medical doctor) of the Outside Director which is a result of
accident or sickness, to perform the duties of a director of
the Company.
(g) CHANGE OF CONTROL. Notwithstanding paragraphs 6(c) or 6(d)
above, the Automatic Option Grants and Reload Stock Options
that have been awarded to an Outside Director shall be
immediately exercisable and all Stock Options shall remain
exercisable for a six-month period if a change of control (as
determined by the Board of Directors) of the Company or of the
majority shareholder of the Company occurs. Notwithstanding
the above, Stock Options that are awarded within six months of
the date the change of control occurs shall not be subject to
this provision.
7. MANNER OF PAYMENT OF OPTION PRICE. The Option Price shall be paid in
full at the time of the exercise of any Stock Option and may be paid in any of
the following methods or combinations thereof:
(a) in United States dollars, in cash, check, bank draft or money
order payable to the order of the Company;
(b) by the tendering, either by actual delivery or by attestation,
Common Shares acceptable to the Board (but excluding any
shares acquired from the Company unless such shares were
acquired and vested more than six months prior to the date
tendered under this clause (b)) having an aggregate Fair
Market Value on the date of such exercise equal to the Option
Price; or
(c) in any other manner that the Board shall approve, including
without limitation any arrangement that the Board may
establish to enable Outside Directors to simultaneously
exercise Stock Options and sell the Common Shares acquired
thereby and apply the proceeds to the payment of the Option
Price therefor.
8. DEFERRED COMPENSATION.
(a) DEFERRAL OF COMPENSATION. Subject to the terms and conditions
of the Plan, each Outside Director, by filing a written
"Deferral Election" with the Secretary in such form as the
Secretary may from time to time require, may elect to defer
until the Distribution Date (as defined below) the receipt of
all or any portion of the Annual Fees that are otherwise
payable to him or her in the form of Common Shares ("Eligible
Deferral Amounts"). For purposes of
6
<PAGE> 7
the Plan, an Outside Director's "Distribution Date" shall be
the date on which the Outside Director ceases to be a director
of the Company for any reason. For the Plan Year ending in the
year 2000, an Outside Director's Deferral Election shall be
effective with respect to Eligible Deferral Amounts otherwise
payable to him or her for services rendered during such Plan
Year, provided that it is filed prior to February 29, 2000.
Thereafter, an Outside Director's Deferral Election shall be
effective with respect to Eligible Deferral Amounts otherwise
payable to him or her for services rendered after the last day
of the Plan Year in which such election is filed with the
Secretary; provided, however, that:
(1) if an individual becomes an Outside Director on or
after the first day of a Plan Year and files a
Deferral Election with the Secretary prior to the
date on which he or she first becomes an Outside
Director, his or her Deferral Election shall be
effective with respect to Eligible Deferral Amounts
otherwise payable to him or her for services rendered
on and after the day on which he or she first becomes
an Outside Director; and
(2) by notice filed with the Secretary, an Outside
Director may terminate or modify any Deferral
Election as to Eligible Deferral Amounts payable for
services rendered after the last day of the Plan Year
in which such notice is filed with the Secretary.
(b) CREDITING AND ADJUSTMENT OF DEFERRED AMOUNTS. The amount of
any Eligible Deferral Amounts deferred pursuant to an Outside
Director's Deferral Election in accordance with paragraph 8(a)
("Deferred Compensation") shall be credited to a bookkeeping
account maintained by the Company in the name of the Outside
Director (the "Deferred Compensation Account"). An Outside
Director's Deferred Compensation Account shall be adjusted as
follows:
(1) as of any date on which Eligible Deferral Amounts
would have been payable to the Outside Director in
Common Shares but for his or her Deferral Election,
the Outside Director's Deferred Compensation Account
shall be credited with that number of stock units
("Stock Units") equal to the number of Common Shares
to which he or she would have been entitled as of the
applicable date;
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<PAGE> 8
(2) as of the date on which Common Shares are distributed
in accordance with paragraph 8(c) or 8(d) below, the
Outside Director's Deferred Compensation Account
shall be charged with an equal number of Stock Units;
(3) as of the record date for any dividend paid on Common
Shares, the Outside Director's Deferred Compensation
Account shall be credited with that number of
additional Stock Units which is equal to the number
obtained by (i) multiplying the number of Stock Units
then credited to the Outside Director's Deferred
Compensation Account by (ii) the amount of the cash
dividend or the fair market value (as determined by
the Committee) of any dividend in kind payable on a
Common Share, and (iii) dividing that product by the
then Fair Market Value of a Common Share.
(c) PAYMENT OF DEFERRED COMPENSATION ACCOUNT. Except as otherwise
provided in paragraph 8(d), as soon as practicable after an
Outside Director's Distribution Date, the balance then
credited to his or her Deferred Compensation Account shall be
distributed to the Outside Director in a single sum in whole
Common Shares, with the number of Common Shares to be
distributed equal to the number of Stock Units credited to the
Outside Director's Deferred Compensation Account as of the
Distribution Date.
(d) PAYMENTS IN THE EVENT OF DEATH. If an Outside Director's
Distribution Date occurs on account of his or her death, the
balance then credited to his or her Deferred Compensation
Account shall be distributed to the Outside Director's
Beneficiary (as described below), as soon as practicable after
his or her death, in a single sum in whole Common Shares, with
the number of Common Shares to be distributed equal to the
number of Stock Units credited to the Outside Director's
Deferred Compensation Account as of the date of his or her
death. For purposes of this Section 8, an Outside Director's
"Beneficiary" is the person or persons the Outside Director
designates, which designation shall be in writing, signed by
the Outside Director and filed with the Secretary prior to the
Outside Director's death. A Beneficiary designation shall be
effective when filed with the Secretary in accordance with the
preceding sentence. If more than one Beneficiary has been
designated, the balance in the Outside Director's Deferred
Compensation Account shall be distributed to each such
Beneficiary per capita unless the Outside Director specifies
otherwise. In the absence of a Beneficiary designation or if
no Beneficiary survives the Outside Director, the Beneficiary
shall be the Outside Director's estate.
8
<PAGE> 9
9. PLAN ADMINISTRATION. The Plan shall be administered by the
Nominating and Compensation Committee of the Board (the "Committee").
10. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 11,
the number of Common Shares which may be subject to awards under the Plan shall
not exceed 1,000,000 shares. Common Shares issued under the Plan may be
authorized but unissued shares or treasury shares. If any Shares are subject to
an award under the Plan that expires, is cancelled or is forfeited, such Common
Shares shall again become available for issuance under the Plan.
11. ADJUSTMENTS AND REORGANIZATIONS. In the event of any merger,
reorganization, consolidation, recapitalization, separation. liquidation, stock
dividend, extraordinary dividend, spin-off, split-up, share combination, or
other change in the corporate structure of the Company affecting the Common
Shares, the number and kind of shares that may be delivered under the Plan shall
be subject to such equitable adjustment as the Committee, in its sole
discretion, may deem appropriate in order to preserve the benefits or potential
benefits to be made available under the Plan, and the number and kind and price
of shares subject to outstanding Stock Options, the option price and any other
terms of outstanding Stock Options or Stock Grants and the number of Stock Units
held under any Deferred Compensation Account shall be subject to such equitable
adjustment as the Committee, in its sole discretion, may deem appropriate in
order to prevent dilution or enlargement of outstanding Stock Options or Stock
Grants or the balance of any Deferred Compensation Account.
12. TRANSFERABILITY OF AWARDS. No awards under the Plan shall be
assignable, alienable, saleable or otherwise transferable other than by will or
the laws of descent.
13. NO RIGHT OF CONTINUED SERVICE. Participation in the Plan does not
give any director the right to be retained as a director of the Company or any
right or claim to any benefit under the Plan unless such right or claim has
specifically accrued under the terms of the Plan.
14. GOVERNING LAW. The validity, construction and effect of the Plan,
and any actions taken or relating to the Plan, shall be determined in accordance
with the laws of the State of Delaware, U.S.A.
15. SUCCESSORS AND ASSIGNS. The Plan shall be binding on all successors
and assigns of an Outside Director, including, without limitation, the estate of
such director and the executor, administrator or trustee of such estate, or any
receiver or trustee in bankruptcy or representative of the director's creditors.
9
<PAGE> 10
16. RIGHTS AS A SHAREHOLDER. A director shall have no rights as a
shareholder of the Company with respect to shares awarded under the Plan or
subject to options awarded under the Plan until he or she becomes the holder of
record of Common Shares.
17. AMENDMENT. The Plan and any attachments thereto may be amended by
action of the Board.
18. GENERAL RESTRICTIONS. Notwithstanding any other provision of the
Plan, the Company shall have no liability to deliver any Common Shares under the
Plan unless such delivery or distribution would comply with all applicable laws
(including, without limitation, the requirements of the United States Securities
Act of 1933), and are authorized for listing on any securities exchange on which
the Common Shares of the Company are listed. To the extent that the Plan
provides for the issuance of Common Shares, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange on which the Common Shares of the Company
are listed.
10
<PAGE> 11
APPENDIX A
(Effective as of the date the Plan is approved by the Board)
Annual Retainer fee: $35,000
Annual Committee Chair fee: $ 5,000
Board or Committee meeting fee: $ 1,250*
Automatic Option Grant: 7,500 Shares
For the Plan Year ending in the year 2000, eligible directors will be
entitled to 50% of the Annual Retainer Fee and Annual Committee Chair Fee. The
fees are payable in two equal installments, one as of February 29, 2000 and the
other as of the day immediately preceding the date of the 2000 Annual General
Meeting of the Company's shareholders.
* Payable only in cash for each meeting attended.
11
<PAGE> 1
EXHIBIT 10.2
CNH GLOBAL N.V.
EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of the Plan is to promote the long-term success of CNH Global
N.V. (the "Company") for the benefit of the Company's shareholders by
encouraging officers and employees to have meaningful investments in the
Company so that, as shareholders themselves, those individuals will be more
likely to represent the views and interests of other shareholders and by
providing incentives to such officers and employees for continued service. The
Company believes that the possibility of participation under the Plan will
provide this group of officers and employees an incentive to perform more
effectively and will assist the Company and the CNH Companies in attracting and
retaining people of outstanding training, experience and ability.
2. DEFINITIONS
"Award" means an award or grant made to a Participant under Section 8.
"Award Agreement" means the agreement provided in connection with an Award
under Section 11.
"Award Date" means the date that an Award is made, as specified in an Award
Agreement.
"Award Price" means the price specified in the Award Agreement with respect
to an SAR pursuant to Section 8B.
"CNH Company" means the Company, any stock company of which a majority of
the capital stock generally entitled to vote for directors is owned directly or
indirectly by the Company, and any other company designated as such by the
Committee, but only during the period of such ownership or designation.
"Code" means the United States Internal Revenue Code of 1986, as amended,
or any successor legislation.
<PAGE> 2
"Committee" means the Nominating and Compensation Committee of the
Company's Board of Directors, or any sub-committee thereof, or any successor
committee thereto.
"Common Shares" means the Company's common shares
"Company" means CNH Global N.V. of Amsterdam, the Netherlands.
"Covered Employees" shall have the meaning specified in Section 162(m)(3)
of the Code.
"Dividend Equivalent" means an amount equal to the amount of the cash
dividends that are declared and become payable with respect to Common Shares
after the Award Date for the Award to which the Dividend Equivalent relates and
on or before the Settlement Date for such Award.
"Fair Market Value" on any date means the average of the highest and the
lowest sales prices of a Common Share on the Composite Tape for such date, as
reported by the National Quotation Bureau Incorporated; provided that, if no
sales of Common Shares are included on the Composite Tape for such date, the
Fair Market Value of a share of Common Shares on such date shall be deemed to be
the average of the highest and lowest prices of a share of Common Shares as
reported on said Composite Tape for the next preceding day on which sales of
Common Shares are included.
"ISO" means any Stock Option designated in an Award Agreement as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an ISO.
"Option Price" means the purchase price of one share of Common Shares under
a Stock Option.
"Participant" means an employee or officer of a CNH Company who has been
selected by the Committee to receive an Award under the Plan.
"Performance Unit" means an Award denominated in cash, the amount of which
may be based on performance of the Participant or of CNH Global N.V. or of any
subsidiary or division thereof.
"Plan" means this CNH Global N.V. Equity Incentive Plan, as amended from
time to time.
2
<PAGE> 3
"Reload Stock Option" means a Stock Option (i) that is awarded, either
automatically in accordance with the terms of an Award Agreement in which one or
more other Awards are made or by separate Award, upon the exercise of a Stock
Option granted under this Plan or otherwise where the Option Price is paid by
the option holder by delivery of shares of Common Shares on the Settlement Date
for such exercise and (ii) that entitles such holder to purchase the number of
shares so delivered for an Option Price equal to the Fair Market Value of a
share of Common Shares on such Settlement Date.
"Restricted Stock" means Common Shares subject to restrictions and
conditions awarded pursuant to Section 8.C.
"Settlement Date" means, (i) with respect to any Stock Option that has been
exercised in whole or in part, the date or dates upon which shares of Common
Shares are to be delivered to the Participant and the Option Price therefor
paid, (ii) with respect to any SARs that have been exercised, the date or dates
upon which a cash payment is to be made to the Participant, or in the case of
SARs that are to be settled in shares of Common shares, the date or dates upon
which such shares are to be delivered to the Participant, (iii) with respect to
Performance Units, the date or dates upon which cash or shares of Common Shares
are to be delivered to the Participant, (iv) with respect to the Dividend
Equivalents, the date upon which payment thereof is to be made, and (v) with
respect to Stock Equivalent Units, the date upon which payment thereof is to be
made, in each case determined in accordance wit the terms of the Award Agreement
under which any such Award was made.
"Stock Appreciation Right" or "SAR" means an Award that entitles the
Participant to receive on the Settlement Date an amount equal to the excess of:
(i) the Fair market value of a share of Common Shares on the date of
exercise of the SAR over
(ii) the Award Price specified in the Award Agreement.
"Stock Equivalent Unit" means an Award that entitles the Participant to
receive on the Settlement Date an amount equal to the Fair Market Value of one
share of Common Shares on such date.
"Stock Option" or "Option" means any right to purchase shares of Common
Shares (including a Reload Stock Option) awarded pursuant to Section 8.A.
3
<PAGE> 4
3. TERM
The Plan shall be effective as of the date the Plan is approved by the
Board, and shall remain in effect until terminated in accordance with Section
12. After termination of the Plan, no further Awards may be granted other than
Reload Stock Options granted in accordance with Award Agreements existing as of
the date Of termination, but outstanding Awards shall remain effective in
accordance with their terms and the terms of the Plan.
4. PLAN ADMINISTRATION
A. The Committee shall be responsible for administering the Plan.
(i) Powers. The Committee shall have full and exclusive
discretionary power to interpret the Plan and to determine eligibility
for benefits and to adopt such rules, regulations and guidelines for
administering the Plan as the Committee may deem necessary or proper.
Such power shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions, including
terms and conditions relating to a change in control of the Company,
the majority shareholder of the Company, or any CNH Company and
adopting modifications and amendments to the Plan or any Award
Agreement, including without limitation, any that are necessary to
comply with the laws of the countries in which the Company or its
affiliates operate; provided, however, that subject to Section 7 and
except as otherwise specifically provided in the Award Agreement, no
such modification or amendment shall impair the rights of any
Participant, without his consent, in any Award previously granted
under the Plan.
(ii) Delegation. Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, (i) the Chairman and
Chief Executive Officer of the Company shall have the authority to
select Award recipients and establish the terms and conditions of such
Awards within the limits of the Plan to officers and employees who are
not executive officers of the Company and who do not report directly
to either the Chairman and Chief Executive Officer or the President
and Chief Operating Officer of the Company, and (ii) the Committee may
allocate all or any portion of its responsibilities and powers to any
one or more of its members and may delegate all or any part of its
responsibilities
4
<PAGE> 5
and powers to any person or persons selected by it. To the extent that
the Committee has allocated or delegated any portion of its
responsibilities or powers, references herein to the Committee shall
include, with respect to such responsibilities or powers, the person
or persons to whom they have been allocated or delegated.
B. The Committee may employ attorneys, consultants, accountants and
other persons, and the Committee, the Company and its officers and
directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and
binding upon the Participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any
action, determination, or interpretation made in good faith with respect to
the Plan or Awards, and all members of the Committee shall be fully
protected by the Company, to the fullest extent permitted by applicable
law, in respect of any such action, determination or interpretation.
5. ELIGIBILITY
Awards will be limited to persons who are officers or employees of the
CNH Companies. In determining the persons to whom Awards shall be made, the
Committee shall, in its discretion, take into account the nature of the person's
duties, past and potential contributions to the success of the CNH Companies
and such other factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan. A director of the Company or a CNH
Company who is not also an officer or employee shall not be eligible to receive
an Award. A person who has received an Award or Awards may receive an additional
Award or Awards.
6. SHARES SUBJECT TO PLAN
A. Subject to adjustment pursuant to Section 7:
(i) the maximum number of Common Shares that shall be
available for issuance under the Plan shall be 28,000,000;
(ii) in no event shall the aggregate number of shares of
Common Shares underlying Options and SARs awarded to any one
Participant during any calendar year exceed 2,000,000 shares.
5
<PAGE> 6
B. Common Shares that may be issued under the Plan may be either
authorized and unissued shares or issued shares that have been reacquired by the
Company and that are being held as treasury shares. No fractional shares shall
be issued under the Plan; provided, however, that cash, in an amount equal to
the Fair Market Value of a fractional share as of the Settlement Date of the
Award, shall be paid in lieu of any fractional shares in the settlement of
Awards payable in Common Shares.
7. ADJUSTMENTS AND REORGANIZATION
In the event of any merger, reorganization, consolidation, recapitaliza-
tion, separation, liquidation, stock dividend, extraordinary dividend, spin-off,
split-up, rights offering, share combination, or other change in the corporate
structure of the Company affecting the Common Shares, the number and kind of
shares that may be delivered under the Plan shall be subject to such equitable
adjustment as the Committee, in its sole discretion, may deem appropriate in
order to preserve the benefits or potential benefits to be made available under
the Plan, and the number and kind and price of shares subject to outstanding
Awards and any other terms of outstanding Awards shall be subject to such
equitable adjustment as the Committee, in its sole discretion, may deem
appropriate in order to prevent dilution or enlargement of outstanding Awards.
8. AWARDS
The Committee shall determine the type and amount of any Award to be made
to any Participant; provided, however, that no Awards granted pursuant to this
Plan shall vest in less than six months after the date the Award is granted.
Awards may be granted singly, in combination, or in tandem. Awards may also be
made in combination or in tandem with, in replacement of, as alternatives to, or
as the payment form for, grants or rights under any other employee benefit or
compensation plan of the CNH Companies, including any such employee benefit or
compensation plan of any acquired entity.
A. Stock Options
(i) Grants. The Committee may grant any Participant one or
more ISOs, Non-Qualified Stock Options, or both, in each case with or
without SARs or Reload Stock Options or any other form of Award. Stock
Options granted pursuant to this Plan shall be subject to such
additional terms, conditions, or restrictions as may be provided in
the Award Agreement relating to such Stock Option.
6
<PAGE> 7
(ii) Option Price. The Option Price of a Stock Option shall be
not less than 100% of the Fair Market Value of a Common Share on the
Award Date; provided, however, that in the case of a Non-Qualified
Stock Option granted retroactively in tandem with or as substitution
for another Award, the Option Price shall not be less than the price
that the Committee determines necessary to preserve the value of such
other Award on the date of substitution; and provided further that,
to the extent provided in a written offer of employment, the Option
Price of a Stock Option shall not be less than 100% of the Fair
Market Value of a Common Share on such other date specified in the
offer letter but not earlier than the date of offer.
(iii) ISOs. In no event shall an ISO be awarded on or after the
tenth anniversary of the date the Plan is adopted or the date the
Plan is approved by the Company's shareholders, whichever is earlier,
and in no event shall the number of Common Shares which may be
subject to ISOs exceed the number of Common Shares available under
Section 6A prior to such tenth anniversary. Anything in this Plan to
the contrary notwithstanding, no term of this Plan relating to ISOs
shall be interpreted, amended, or altered, nor shall any discretion
or authority awarded under the Plan be exercised, so as to disqualify
this Plan under Section 422 of the Code, or, without the consent of
the Participants affected, to disqualify any ISO under Section 422 of
the Code.
(iv) Manner of Payment of Option Price. The Option Price shall
be paid in full at the time of the exercise of the Stock Option
(except that, in the case of an exercise arrangement approved by the
Committee in accordance with clause (c) below, payment may be made as
soon as practicable after the exercise) and may be paid in any of the
following methods or combinations thereof:
(a) in United States dollars in cash, check, bank draft or
money order payable to the order of the Company;
(b) by the tendering, either by actual delivery or by
attestation, Common Shares acceptable to the Committee (but
excluding any shares acquired from the Company unless such
shares were acquired and vested more than six months prior to
the date tendered under this clause
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<PAGE> 8
(b)) having an aggregate Fair Market Value on the date of such
exercise equal to the Option Price; or
(c) in any other manner that the Committee shall approve,
including without limitation, any arrangement that the Committee
may establish to enable Participants to simultaneously exercise
Stock Options and sell the shares of Common Shares acquired
thereby and apply the proceeds to the payment of the Option Price
therefor.
(v) Reload Stock Options. The Committee may award Reload Stock
Options to any Participant either in combination with other Awards or
in separate Award Agreements that grant Reload Stock Options upon
exercise of outstanding stock options granted under this Plan or
otherwise.
B. Stock Appreciation Rights.
(i) Grants. The Committee may award any Participant SARs, which
shall be subject to such additional terms, conditions, or restrictions
as may be provided in the Award Agreement relating to such SAR Award,
including any limits on aggregate appreciation. SARs may be settled in
Common Shares or cash or both.
(ii) Award Price. The Award Price per share of Common Shares of a
SAR shall be fixed in the Award Agreement and shall be not less than
100% of the Fair Market Value of a share of Common Shares on the date
of the Award; provided, however, that in the case of a SAR awarded
retroactively in tandem with or as a substitution for another Award,
the Award Price per share of a SAR shall be not less than 100% of the
Fair Market Value of a share of Common Shares on the date of such
other Award.
(iii) Distribution of SARs. SARs shall be exercisable in
accordance with the conditions and procedures set out in the Award
Agreement relating to such SAR Award.
C. Common Shares and Restricted Stock. The Committee may award Common
Shares or Restricted Stock to any Participant. Awards of Restricted Stock
shall be subject to such conditions and restrictions as are established by
the Committee and set forth in the Award Agreement, which may include, but
are not limited to, continued service with the
8
<PAGE> 9
Company, achievement of specific business objectives, and other
measurements of individual or business unit or Company performance.
D. STOCK EQUIVALENT UNITS. The Committee may award Stock Equivalent
Units to any Participant. All or part of any Stock Equivalent Units Award
may be subject to conditions and restrictions established by the Committee,
and set forth in the Award Agreement, which may include, but are not
limited to, continued service with the Company, achievement of specific
business objectives, and other measurements of individual or business unit
or Company performance that may include but shall not be limited to,
earnings per share, net profits, total shareholder return, cash flow,
return on shareholders' equity, and cumulative return on net assets
employed.
E. DIVIDENDS AND DIVIDEND EQUIVALENTS. An Award (including without
limitation a Stock Option or SAR Award) may provide the Participant with
the right to receive dividend payments or Dividend Equivalent payments with
respect to Common Shares subject to the Award (both before and after the
Common Shares subject to the Award are earned, vested, or acquired), which
payments may be either made currently or credited to an account for the
Participant, and may be settled in cash or Common Shares, as determined by
the Committee. In lieu of awarding Dividend Equivalents, the Committee may
provide for automatic awards of Stock Equivalent Units on each date that
cash dividends or Dividend Equivalent will be paid in an amount equal to
(i) the amount of such dividends or Dividend Equivalents, divided by (ii)
the Fair Market Value of the Common Shares on the dividend payment date.
F. PERFORMANCE UNITS. Performance Units shall be based on attainment
over a specified period of individual performance targets or on other
parameters that may include, but shall not be limited to, earnings per
share, total shareholder return, cash flow, return on shareholders' equity,
and cumulative return on net assets employed. Performance Units may be
settled in Common Shares or cash or both.
9. DEFERRALS AND SETTLEMENTS
Settlement of Awards may be in the form of cash, Common Shares, other
Awards, or in combinations thereof as the Committee shall determine, and with
such other restrictions as it may impose. Subject to paragraph 4A.(i), the
Committee may also require or permit Participants to defer the issuance or
vesting of shares or the settlement of Awards under such rules and procedures as
it may establish under the Plan. The Committee may also provide that
9
<PAGE> 10
deferred settlements include the payment of, or crediting of interest on, the
deferral amounts or the payment or crediting of Dividend Equivalents on
deferred settlements denominated in shares.
10. TRANSFERABILITY
Except as otherwise provided by an Award Agreement, no Awards under the
Plan shall be assignable, alienable, saleable or otherwise transferable other
than by will or the laws of descent and distribution.
11. AWARD AGREEMENTS
Awards under the Plan shall be evidenced by Award Agreements that set forth
the details, conditions and limitations for each Award, which may include the
term of an Award, the provisions applicable in the event the Participant's
employment terminates, and the Company's authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind any Award, subject to the
terms of the Plan.
12. TERMINATION
The Committee may terminate the Plan at any time provided, however, that
no termination shall impair the rights of any Participant, without his consent,
in any Award previously granted under the Plan.
13. TAX WITHHOLDING
The Company shall have the right to (i) make deductions from any
settlement of an Award made under the Plan, including the delivery or vesting
of shares, or require shares or cash or both be withheld from any Award, in
each case in an amount sufficient to satisfy withholding of any applicable
federal, state or local taxes required by law, or (ii) take such other action
as may be necessary or appropriate to satisfy any such withholding obligations.
The Committee may determine the manner in which such tax withholding may be
satisfied, and may permit Common Shares (rounded up to the next whole number)
to be used to satisfy required tax withholding based on the Fair Market Value
of any such shares of Common Shares, as of the Settlement Date of the
applicable Award.
14. OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements of
Awards received by a Participant under the Plan shall not be deemed a part
10
<PAGE> 11
of the Participant's regular, recurring compensation for purposes of
calculating payments or benefits from any Company benefit plan, severance
program or severance pay law of any country. Further, the Company may adopt
other compensation programs, plans or arrangements as it deems appropriate or
necessary.
15. UNFUNDED PLAN
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Company and any Participant or other person. To the extent any person holds any
rights by virtue of a grant awarded under the Plan, such right (unless otherwise
determined by the Committee) shall not be greater than the right of an unsecured
general creditor of the Company.
16. FUTURE RIGHTS
No person shall have any claim or right to be granted an Award under the
Plan, and no Participant shall have any right under the Plan to be retained in
the employment of the Company or its affiliates.
17. GOVERNING LAW
The validity, construction and effect of the Plan, and any actions taken or
relating to the Plan, shall be determined in accordance with the laws of the
State of Delaware, U.S.A.
18. SUCCESSORS AND ASSIGNS
The Plan shall be binding on all successors and assigns of a Participant,
including, without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
19. GENERAL RESTRICTIONS
A. Notwithstanding any other provision of the Plan, the Company shall
have no liability to deliver any Common Shares under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the United States Securities Act of 1933), and
11
<PAGE> 12
are authorized for listing on any securities exchange on which the Common
Shares of the Company are listed.
B. To the extent that the Plan provides for the issuance of Common
Shares, the issuance may be effected on a non-certificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange
on which the Common Shares of the Company are listed.
C. Except as otherwise provided in any Award Agreement, a Participant
shall have no rights as a shareholder of the Company until he or she becomes the
holder of record of Common Shares.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 20-F AND IS QUALIFIED IN ITS ENTIRETY BY RFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
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0
0
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</TABLE>
