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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DEERE & COMPANY
---------------
(Name of Registrant as Specified In Its Charter)
----------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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DEERE & COMPANY
ONE JOHN DEERE PLACE
MOLINE, ILLINOIS 61265
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 25, 1998
The annual meeting of stockholders of Deere & Company will be held at the
principal office of the Company, at One John Deere Place, near Moline, Rock
Island County, Illinois, on Wednesday, February 25, 1998 at 10:00 A.M. to:
1. Elect directors.
2. Transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on December 31, 1997 are
entitled to vote at the meeting.
To be sure that your shares are represented at the meeting, please vote, sign,
date and promptly mail the enclosed proxy card in the envelope provided for
this purpose.
For the Board of Directors,
LOGO
Frank S. Cottrell
Secretary
Moline, Illinois
January 16, 1998
LOGO
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PROXY STATEMENT
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TO THE STOCKHOLDERS: The Board of Directors of Deere & Company solicits your
proxy, and asks that you vote, sign, date and promptly mail the enclosed proxy
card for use at the annual meeting of stockholders to be held February 25,
1998, and at any adjournment of such meeting. Whether you own few or many
shares, your proxy is important in helping to achieve good representation at
the meeting. If you wish, at any time before your proxy is voted, you may
revoke it by written notice to the Company, or by delivery of a later dated
proxy, or by voting in person at the meeting. The shares represented by all
properly executed proxies will be voted as specified by you. In the absence of
direction, properly executed proxies will be voted for the nominees to the
Board set forth below.
The holders of a majority of the Company's outstanding shares, present in
person or by proxy, are required for a quorum at the meeting. The Company had
249,668,012 shares of common stock outstanding on December 31, 1997. Each
share has one vote on each matter to be voted on at the meeting and one vote
for each directorship to be filled on the Board of Directors.
If any nominee is unable or declines to accept nomination or election for
any reason, the persons designated in your proxy may vote for a substitute.
A plurality of the votes cast at the meeting is required to elect directors.
Abstentions and broker non-votes are counted as present for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions and broker non-votes will have no effect on the outcome
of the election of directors.
It is the policy of the Company that shareholders be provided privacy in
voting. All proxy cards and ballots that identify votes of stockholders are
held confidential, except: (i) as may be necessary to meet applicable legal
requirements; (ii) to allow independent third-parties to solicit, receive,
tabulate, and certify the results of the vote; (iii) in cases where
shareholders write comments on their proxy cards; and (iv) in contested proxy
solicitations in which the opposing party does not also agree to comply with
this policy. The tabulator of the votes and at least one of the inspectors of
the election are independent of the Company, its officers and directors. The
tabulator, the Company's proxy solicitation agent and the inspectors of the
election, including those who are Company employees, are required to comply
with the Company's confidentiality guidelines which prohibit disclosure of
votes to the Company.
Stockholders of record at the close of business on December 31, 1997 are
entitled to vote. This notice of meeting, proxy statement and proxy card are
being mailed to stockholders on or about January 16, 1998.
ELECTION OF DIRECTORS
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Four directors are to be elected for terms expiring at the annual meeting in
2001. The persons named below were recommended by the Corporate Governance
Committee and nominated by the Board of Directors. The nominees' principal
occupations during the past five or more years, positions with the Company,
directorships in other companies, ages, and beneficial ownership of shares,
share units, and of exercisable options to purchase shares of the Company at
December 31, 1997 appear in that order after their names. As used below
"restricted stock" refers to non-transferable stock, issued pursuant to the
John Deere Restricted Stock Plan, the John Deere Equity Incentive Plan or the
Nonemployee Director Stock Ownership Plan, which is subject to risk of
forfeiture if certain conditions are not met. "Share units" represent director
compensation and earnings thereon deferred pursuant to the Nonemployee
Director Deferred Compensation Plan and valued as if invested in shares of the
Company. No nominee owned beneficially more than .1% of the shares outstanding
on December 31, 1997.
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Mr. Antonio Madero B. and Mr. John R. Stafford were appointed to the Board
during 1997. The terms of Mr. Agustin Santamarina V. and David H. Stowe, Jr.
expire at the annual meeting and they are retiring from the Board and not
standing for re-election.
NOMINEES FOR TERMS EXPIRING AT ANNUAL MEETING IN 2001
Mr. Hans W. Becherer Chairman and Chief Executive Officer of Deere & Company
since 1990; prior thereto, President. Director of Deere & Company since 1986;
Chair of Executive Committee. Director of AlliedSignal Inc. and Schering-
Plough Corporation. Age 62. Shares owned, 215,947 (includes 100,807 shares of
restricted stock); and shares under exercisable option, 75,000.
Mr. Antonio Madero B. Chairman, President and Chief Executive Officer of
SANLUIS Corporacion, S.A. de C.V. (automotive components manufacturing and
mining) since 1979. Director of Deere & Company since August 1997; member of
Pension Plan Oversight Committee. Director of Federal-Mogul Corporation, a
variety of corporations in Mexico and a member of the International Advisory
Council of The Chase Manhattan Corporation. Age 60. Shares owned 299 (includes
299 shares of restricted stock). Share units owned 175.
Mr. John R. Stafford Chairman, President and Chief Executive Officer of
American Home Products Corporation (pharmaceuticals, consumer health care and
agricultural products) since 1986. Director of Deere & Company since May 1997;
member of Corporate Governance Committee. Director of AlliedSignal Inc.,
American Home Products Corporation, Bell Atlantic Corporation and The Chase
Manhattan Corporation. Age 60. Shares owned 2,450 (includes 450 shares of
restricted stock). Share units owned 314.
Mr. John R. Walter President and Chief Operating Officer of AT&T Corp.
(telecommunications) from November 1996 to July 1997; prior thereto, Chairman
and Chief Executive Officer of R. R. Donnelley & Sons Company (print and
digital information management, reproduction and distribution). Director of
Deere & Company since 1991; Chair of Committee on Compensation and member of
Special Subcommittee of Committee on Compensation, Corporate Governance and
Executive Committees. Director of Abbott Laboratories, Dayton Hudson
Corporation and LaSalle Partners Incorporated. Age 50. Shares owned, 3,900
(includes 3,000 shares of restricted stock).
OTHER BUSINESS
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The Board of Directors is not aware of any other matters that will come
before the meeting. However, if any other proper business should come before
the meeting, your proxy, if signed and returned, will give to the persons
designated in it discretionary authority to vote according to their best
judgment.
DIRECTORS CONTINUING IN OFFICE
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The seven persons named below are now serving as directors of the Company
for terms expiring at the annual meetings in 1999 and 2000 as indicated. Their
principal occupations during the past five or more years, positions with the
Company, directorships in other companies, ages and beneficial ownership of
shares, including restricted shares, share units, and of exercisable options
to purchase shares of the Company at December 31, 1997 appear in that order
after their names. As used below "restricted stock" refers to non-transferable
stock issued pursuant to the Nonemployee Director Stock Ownership Plan, which
is subject to risk of forfeiture if certain conditions are not met. "Share
units" represent director compensation and earnings thereon deferred pursuant
to the Nonemployee Director Deferred Compensation Plan and valued as if
invested in shares of the Company. No director continuing in office owned
beneficially more than .1% of the shares outstanding on December 31, 1997.
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TERMS EXPIRING AT ANNUAL MEETING IN 1999
Mr. John R. Block President of Food Distributors International (formerly the
National-American Wholesale Grocers' Association) since 1986; prior thereto,
United States Secretary of Agriculture. Director of Deere & Company since
1986; Chair of Audit Review Committee and member of Executive and Pension Plan
Oversight Committees. Director of Archer-Daniels-Midland Company and Hormel
Foods Corporation. Age 62. Shares owned, 4,200 (includes 3,600 shares of
restricted stock). Share units owned 5,335.
Prof. Regina E. Herzlinger Nancy R. McPherson Professor of Business
Administration at the Harvard Business School since 1971. Director of Deere &
Company since 1993; member of Audit Review Committee. Director of Cardinal
Health, Inc., C. R. Bard, Inc., Schering-Plough Corporation and Total Renal
Care Holdings, Inc. Age 54. Shares owned, 3,600 (includes 3,600 shares of
restricted stock). Share units owned 3,600.
Dr. Arnold R. Weber Chancellor of Northwestern University, Evanston,
Illinois since 1995; prior thereto, President. Director of Deere & Company
since 1994; member of Committee on Compensation, Special Subcommittee of
Committee on Compensation and Pension Plan Oversight Committee. Director of
Aon Corporation, Burlington Northern Santa Fe Corporation, Inland Steel
Industries, Inc., Pepsico, Inc. and Tribune Company. Age 68. Shares owned,
3,300 (includes 2,700 shares of restricted stock). Share units owned 290.
TERMS EXPIRING AT ANNUAL MEETING IN 2000
Mr. Leonard A. Hadley Chairman and Chief Executive Officer of Maytag
Corporation (appliances) since 1992; prior thereto, President and Chief
Operating Officer. Director of Deere & Company since 1994; member of Audit
Review and Pension Plan Oversight Committees. Director of Maytag Corporation,
Norwest Bank Iowa, N.A. and Snap-on Incorporated. Age 63. Shares owned, 3,300
(includes 3,300 shares of restricted stock). Share units owned 6,150.
Mr. Samuel C. Johnson Chairman of S. C. Johnson & Son, Inc. (home care and
specialty products) since 1988. Director of Deere & Company since 1973; member
of Committee on Compensation and Corporate Governance Committee. Director of
H.J. Heinz Company, Johnson Worldwide Associates, Inc. and Mobil Corporation.
Age 69. Shares owned, 61,800 (includes 4,200 shares of restricted stock).
Mr. Arthur L. Kelly Managing Partner of KEL Enterprises L.P. (holding and
investment partnership) since 1983. Director of Deere & Company since 1993;
Chair of Pension Plan Oversight Committee and member of Audit Review and
Executive Committees. Director of Bayerische Motoren Werke (BMW) A.G., Nalco
Chemical Company, The Northern Trust Corporation, Snap-on Incorporated and
Tejas Gas Corporation. Age 60. Shares owned, 10,089 (includes 3,999 shares of
restricted stock). Share units owned 2,029.
Mr. William A. Schreyer Chairman Emeritus of Merrill Lynch & Co., Inc.
(securities and investment banking) since 1993; prior thereto, Chairman of
Merrill Lynch & Co., Inc. Director of Deere & Company since 1994; member of
Committee on Compensation, Special Subcommittee of Committee on Compensation
and Corporate Governance Committee. Director of Callaway Golf Company, Iridium
World Communications Ltd., Schering-Plough Corporation and Willis Corroon
Group, plc. Age 69. Shares owned, 6,600 (includes 3,600 shares of restricted
stock). Share units owned 6,713.
At December 31, 1997, directors and executive officers as a group (21
persons), had a beneficial interest in an aggregate of 1,198,858 shares (.48%)
of common stock of the Company. This total includes: 303,092 shares held with
sole power over voting and disposition; 94,226 shares held with shared power
over voting or disposition; 67,484 shares of restricted stock under the John
Deere Restricted Stock Plan; 229,039 shares of restricted stock under the John
Deere Equity Incentive Plan; 31,748 shares of restricted stock under the
Nonemployee Director Stock Ownership Plan; and 473,269 shares represented by
exercisable stock options.
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PRINCIPAL HOLDERS OF VOTING SECURITIES
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Listed below are certain persons who, to the knowledge of the Company, own
beneficially more than five percent of the Company's Common Stock. This
information is based on information supplied by such persons in reports of
institutional investment managers filed with the Securities and Exchange
Commission.
As of September 30, 1997, American Express Financial Advisors, Inc., IDS
Tower 10, Minneapolis, Minnesota 55440 ("American Express"), held 15,099,924
shares (or approximately 5.9%) of the Company. American Express and its
subsidiary, American Express Financial Corporation, a registered investment
advisor, are not the ultimate owners of these shares, but hold them on behalf
of other investors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's common stock, to file reports of securities ownership and changes
in such ownership with the Securities and Exchange Commission and the New York
Stock Exchange. Such persons are required to furnish the Company with copies of
all beneficial ownership reports they file although the Company has undertaken
the preparation and filing of such reports on behalf of its officers and
directors.
The Company has established procedures in which executive officers and
directors, and others on their behalf, provide relevant information regarding
transactions in Company shares to a Company representative and the Company
prepares and files the required ownership reports. Based on a review of those
reports and other written representations, the Company believes that, with the
following exceptions, there was full compliance with the reporting requirements
under Section 16(a). Although information was provided or available to the
Company on a timely basis, reports on Form 5 for 1993 through 1996 for the
acquisition of 12 shares under the dividend reinvestment program and on Form 4
for one sale of 333 shares by Professor Regina E. Herzlinger were not filed on
time. Arthur L. Kelly inadvertently failed to timely report on Form 4 the
acquisition of an indirect beneficial ownership in shares held by a family
trust upon his becoming successor trustee. All such transactions were
subsequently reported.
COMMITTEES
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The Board of Directors of the Company, which met five times during the 1997
fiscal year, has delegated some of its authority to six committees of the
Board. These are the Executive Committee, the Committee on Compensation, the
Special Subcommittee of the Committee on Compensation, the Corporate Governance
Committee, the Audit Review Committee and the Pension Plan Oversight Committee.
During the 1997 fiscal year, all of the directors attended 75% or more of the
meetings of the Board of Directors and Committees on which they served.
The Committee on Compensation, which met four times during the 1997 fiscal
year, currently consists of John R. Walter (Chair), Samuel C. Johnson, William
A. Schreyer and Dr. Arnold R. Weber. The Committee has responsibility with
respect to compensation matters involving officers of the Company.
The Special Subcommittee of the Committee on Compensation, which met three
times during the 1997 fiscal year, currently consists of William A. Schreyer,
John R. Walter and Dr. Arnold R. Weber. The Subcommittee has responsibility for
reviewing and approving compensation plans, grants, and awards involving
officers of the Company. The Subcommittee also may consider such other matters
as are referred to it by the Committee on Compensation.
4
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The Corporate Governance Committee, which met twice during the 1997 fiscal
year, currently consists of Agustin Santamarina V. (Chair), Samuel C. Johnson,
William A. Schreyer, John R. Stafford and John R. Walter. The responsibilities
of the Corporate Governance Committee are to recommend and monitor policies
and procedures relating to corporate governance, to recommend to the Board
individuals for nomination or election to the Board, to ensure that the Chair
periodically reviews the Company's plans regarding succession of senior
management with the Committee and with all other independent directors, and to
make recommendations concerning the size, composition, committee structure and
fees for the Board and criteria relating to tenure and retention of directors.
The Committee will consider individuals recommended for nomination by
stockholders in accordance with the procedures described under "Stockholder
Proposals And Nominations."
The Pension Plan Oversight Committee, which met once during the 1997 fiscal
year, currently consists of Arthur L. Kelly (Chair), John R. Block, Leonard A.
Hadley, Antonio Madero B. and Dr. Arnold R. Weber. The Committee reviews asset
allocation, funding policies, and the performance of trustees, investment
managers and actuaries, for the Company's pension and retirement plans. The
Committee also has authority to make substantive amendments and modifications
to the pension and retirement plans. The Committee reports to the Board on its
activities.
The Audit Review Committee, which met twice during the 1997 fiscal year,
currently consists of John R. Block (Chair), Leonard A. Hadley, Regina E.
Herzlinger, Arthur L. Kelly and Agustin Santamarina V. The Committee
recommends to the Board a firm of independent certified public accountants to
audit the annual financial statements, approves in advance the scope of the
audit, reviews with the independent auditors the financial statements and
their audit report, consults with the internal audit staff and reviews
management's administration of the system of internal accounting controls, and
reviews the Company's procedures relating to business ethics. The Committee
reports to the Board on its activities and findings.
In accordance with the recommendation of the Audit Review Committee, the
firm of Deloitte & Touche llp has been appointed by the Board of Directors as
independent certified public accountants to examine the financial statements
of the Company for the 1998 fiscal year. A representative of Deloitte & Touche
llp is expected to be present at the stockholders' meeting; this individual
will have an opportunity to make a statement and will be available to respond
to appropriate questions.
COMPENSATION OF DIRECTORS
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Directors who are not employees of the Company receive a single annual
retainer of $60,000 for serving as directors. There are no additional
committee retainers or meeting fees. Directors may elect to defer a part or
all of their annual retainers pursuant to the Company's Nonemployee Director
Deferred Compensation Plan. Deferrals are invested in an interest-bearing
account or in a Company stock equivalent investment alternative.
At the 1993 annual meeting, stockholders approved the adoption of the
Nonemployee Director Stock Ownership Plan. Pursuant to such plan, upon
election and each re-election to the Board, non-employee directors are awarded
1,800 restricted shares of common stock of the Company for each three-year
term. A person who becomes a non-employee director between annual meetings or
who serves a partial term will receive a prorated grant. The restricted shares
may not be sold, pledged, assigned, gifted, or otherwise alienated or
hypothecated and are subject to forfeiture until the expiration of the
restriction period, which ends upon the nonemployee directors' retirement from
the Board, permanent and total disability, death or a change in control of the
Company. While the restrictions are in effect, the nonemployee directors are
entitled to vote the shares and receive dividends.
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The report of the Committee on Compensation and the performance graph that
follow shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates the information by
reference, and shall not otherwise be deemed filed under such Acts.
-------------------------
COMMITTEE ON COMPENSATION
REPORT ON EXECUTIVE COMPENSATION
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COMPENSATION PHILOSOPHY
The Committee on Compensation of the Board (the "Committee") is committed to
providing a total compensation program that supports the Company's business
strategy and culture, and creates a commonality of interest with the Company's
shareholders. The Committee is responsible for the oversight of executive
compensation and reviews the Company's compensation program on an ongoing
basis. No member of the Committee is a former or current officer of the
Company or any of its subsidiaries.
The overall philosophy of the Committee regarding executive compensation can
be summarized as follows:
. Provide a target total reward opportunity that is sufficiently
competitive to attract and retain high caliber executives. In general,
this involves a target total pay structure that is at or moderately
above the median pay levels available at a comparable group of large,
diversified companies;
. Link a meaningful portion of the total compensation opportunity to
performance-based incentives consistent with the creation of shareholder
value and the Company's long-term strategic goals;
. Provide for meaningful risk as well as reward in order to penalize
substandard performance while encouraging superior performance and
recognizing the cyclical nature of the Company's core businesses; and
. Structure the program to be positively regarded by the Company's
shareholders, employees, the financial community and the public in
general, as well as by the eligible executive management.
The Revenue Reconciliation Act of 1993 placed certain limits on the tax
deductibility of non-performance-based executive compensation. The Committee
intends that, to the extent practicable, executive compensation be deductible
for federal income tax purposes provided doing so would be consistent with the
other compensation objectives. One of the requirements for tax deductibility
is shareholder approval. For this reason, at the 1995 annual meeting
shareholders approved the John Deere Performance Bonus Plan (the "Bonus Plan")
and the John Deere Equity Incentive Plan (the "Equity Incentive Plan") and at
the 1996 annual meeting shareholders approved amendments to the 1991 John
Deere Stock Option Plan (the "Option Plan") and the John Deere Restricted
Stock Plan (the "Restricted Stock Plan"). Each of these plans were designed to
meet the compensation objectives and, in the case of the Bonus Plan, Equity
Incentive Plan and Option Plan, to comply with the requirements for tax
deductibility.
The specific practices surrounding each component of the Company's executive
compensation program are described in the following paragraphs.
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BASE SALARY
It is the Committee's policy to position the base salaries of the Company's
executives at approximately the median level of base salaries provided to
comparable positions within a peer group of companies which share some
combination of the following characteristics with the Company: comparable
sales volumes; similar products and services; a similar commitment to
manufacturing as a core activity; and a comparable global presence. Currently,
this peer group consists of 32 companies, three of which are also included
among the ten companies that comprise the S&P Diversified Machinery Group
Index used in the performance graph following this report. The size of the
peer group was increased during the year in order to improve the availability
of reliable information for comparison purposes. The companies in the revised
group, are on average, larger in size and more diverse with respect to the
other selection characteristics. It is the Committee's view that this larger
peer group provides a more appropriate and reliable benchmark for assessing
competitive levels of compensation than the limited number of companies within
the S&P Diversified Machinery Group Index.
The Committee annually reviews the base salary of each executive officer of
the Company, including Mr. Becherer, the Chief Executive Officer (CEO). In
determining salary adjustments for the Company's executives (including Mr.
Becherer and the other executive officers named in the Summary Compensation
Table), the Committee takes into consideration various factors, including
individual performance; the financial and operational performance of the
activities directed by the executive (including profitability under prevailing
business conditions, performance against budget, customer satisfaction, and
innovation); experience; time in position; future potential; responsibility;
and the executive's current salary in relation to the executives' salary range
and the median salary practices of the peer group. These factors are
considered subjectively in the aggregate and none of the factors is accorded a
specific weight. In selected cases, other factors may also be considered. Peer
group salary data for comparable-level positions are provided annually to the
Committee by an outside compensation consultant.
For 1997, the base salaries of Mr. Becherer and the other executive officers
named in the Summary Compensation Table were slightly below the peer group
median, but generally consistent with the base salary philosophy established
by the Committee. Mr. Becherer received a base salary of $864,091 for fiscal
1996 and $921,558 for fiscal 1997.
SHORT-TERM INCENTIVES
A substantial portion of the Company's executive compensation package is
contingent upon the Company attaining preestablished financial goals under the
Bonus Plan. Each year in which these goals are achieved, the compensation of
all salaried employees (including Mr. Becherer and the other executive
officers named in the Summary Compensation Table) is supplemented by fiscal
year-end payments under the Bonus Plan. The amount of these payments (if any)
depends upon the Company's pre-bonus and pre-extraordinary item return on
average assets for the year and the position and salary of the employee. In
addition, the Committee can decrease or eliminate awards to designated senior
officers of the Company, and can increase or decrease awards to other salaried
employees.
When added to base salary, target awards under the Bonus Plan for the
Company's executives are structured to provide median annual cash compensation
relative to the peer group companies. The target award for the CEO is 75% of
base salary. The maximum annual performance bonus for executive officers under
the Bonus Plan is available when the return on assets is 11.5% or more; no
bonus payment is available when the return on assets is below 5%. For 1997,
the Company's return on average assets calculated in accordance with the Bonus
Plan was 12.88%. Accordingly, for 1997, Mr. Becherer received a maximum annual
performance bonus payment of $1,342,500, or approximately 150% of his base
salary.
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In addition to the above performance Bonus Plan payments, the CEO is
authorized to grant discretionary bonuses to selected employees in recognition
of outstanding achievement. Such bonuses may not exceed 20% of annual base
salary except in highly unusual circumstances. No such discretionary bonuses
were granted in fiscal 1997.
LONG-TERM INCENTIVES
During 1997, the Company's long-term incentives for executive officers were
comprised of grants of market-priced stock options under the Option Plan and
equity incentive restricted shares under the Equity Incentive Plan. Grants
under these plans were intended to promote the creation of sustained
shareholder value, encourage ownership of Company stock, foster teamwork and
retain high caliber executives.
Under the Equity Incentive Plan, approved by shareholders in 1995,
executives receive periodic grants of Company stock subject to vesting and
forfeiture provisions based on Company achievement of long-term performance
goals established by the Committee. It is the Committee's view that the
addition of performance features to the executive stock grants in the Equity
Incentive Plan will serve to promote greater focus on actions that enhance
shareholder value.
Under each plan, grants to executives are based on criteria established by
the Committee, including responsibility level, base salary, current market
practice and the market price of the Company's stock at the time of grant.
Grant guidelines for market-priced options and equity incentive shares are
established for all participants (including Mr. Becherer) with the objective
of providing a target total compensation opportunity, including base salary
and the target annual profit sharing bonus, equal to the median of the peer
group. Depending on stock price performance and Company performance, actual
total compensation for any given year could be at, above or below the median
of the peer group. The number of options or restricted shares previously
granted to or held by an executive is not a factor in determining individual
grants.
Market-priced stock options granted under the Option Plan are not
exercisable until one year after grant and have a ten-year term. During fiscal
1997, Mr. Becherer was awarded options for 75,000 shares of Company common
stock.
The Committee made the initial award of equity incentive shares to executive
officers early in fiscal 1995. Vesting of these shares was conditioned on the
Company satisfying performance goals based on revenue growth and return on
assets over the four fiscal years commencing November 1, 1994 and any
additional performance periods established by the Committee. The second award
of equity incentive shares was made to executives in fiscal 1997. During
fiscal 1997, Mr. Becherer was awarded 29,515 shares of equity incentive stock.
Vesting of these shares was also conditioned on satisfying performance goals
based on revenue growth and return on assets, over a four-year performance
period commencing November 1, 1996. If any of the 1997 incentive shares are
not vested within four years of the grant, such shares are automatically
forfeited. The incentive shares are also subject to possible forfeiture in the
event of termination or resignation from the Company prior to vesting.
In fiscal 1995, to further sharpen the focus on strengthening the
commonality of interest between senior management and the Company
shareholders, the "core" compensation program for the Company's senior
officers was supplemented with grants by the Committee of premium-priced stock
options with exercise prices in excess of the market price of the Company's
stock on the date of grant. Grants of premium-priced options were structured
to provide a target total compensation opportunity for participants
approximately equal to the 60th to 70th percentile of the peer group when
added to the median peer group level of the other components of compensation.
It is the Committee's view that this above-market positioning is justified by
the nature of the premium-priced grants under which no
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value is generated unless the stock appreciates meaningfully above its price on
the date of grant. Moreover, exercise of the premium-priced options granted in
1995 prior to an extended future date depends on the Company's achievement of a
sustained median total shareholder return exceeding the median of companies
traded on the New York Stock Exchange. At the time of the 1995 grant, it was
anticipated that there would be no additional grants of premium-priced options
prior to fiscal 1998.
During fiscal 1998, grants of stock options to senior officers were comprised
of approximately one-fourth market-priced stock options and three-fourths
premium-priced stock options. The premium exercise price will be 150% of the 90
day average price for the Company's shares prior to the grant. The premium-
priced options have a ten year term and their exercise prior to an extended
future date depends on the Company's shares achieving a market price equal to
or greater than the premium exercise price for ten consecutive trading days
within five years from grant. If any of the premium-priced options granted in
fiscal 1998 are not exercisable within five years of the grant, such options
become exercisable for three months after such period and then they terminate.
Finally, during fiscal 1995, the Committee introduced stock ownership
guidelines for members of the Company's senior management team to encourage the
retention of stock acquired through the Company's various equity incentive
plans. These guidelines are based on a multiple of each officer's base salary.
CEO COMPENSATION
Mr. Becherer has been Chairman and CEO of the Company since May 1990. Mr.
Becherer's base salary, annual performance bonus and option and equity
incentive stock grants have been targeted to provide total compensation,
assuming achievement of targeted levels of Company performance, approximately
equal to the median CEO compensation of the peer group companies. In fiscal
1997, Mr. Becherer's compensation exceeded this level due to the continued
record performance of the Company. As explained above, the fiscal 1997 profit
sharing payments were based exclusively on return on assets and payout levels
established by the Committee at the beginning of the year, as determined by
actual 1997 results. It is the Committee's view that this relationship between
pay and performance is appropriate and serves shareholders' interests.
COMMITTEE ON COMPENSATION
John R. Walter (Chair)
Samuel C. Johnson
William A. Schreyer
Dr. Arnold R. Weber
9
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG DEERE & COMPANY, THE S&P 500 INDEX
AND THE S&P DIVERSIFIED MACHINERY GROUP INDEX
- -------------------------------------------------------------------------------
The following performance graph compares cumulative total return for Company
stockholders over the past five fiscal years against the cumulative total
return of the Standard & Poor's 500 Stock Index, and against the Standard &
Poor's Diversified Machinery Group Index. The graph assumes $100 is invested
in Company stock and each of the other two indices at the closing market
quotation on October 31, 1992 and that dividends are reinvested. The stock
price performance shown on the graph is not necessarily indicative of future
price performance.
LOGO
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deere & Co. 100 202.73 193.31 248.29 356.52 457.20
- -----------------------------------------------------------------------------------------
S&P Mach. 100 156.61 163.00 172.22 218.57 301.81
- -----------------------------------------------------------------------------------------
S&P 500 100 114.95 119.40 150.97 187.35 247.52
</TABLE>
LOGO
10
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the remuneration from the Company and its
subsidiaries during the past three fiscal years to the Company's Chief
Executive Officer (the "CEO") and each of the five most highly compensated
executive officers of the Company other than the CEO:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
-------------------- -----------------------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL FISCAL SALARY(1) BONUS(2) AWARDS(3) OPTIONS/SARS(4) COMPENSATION(5)
POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hans W.
Becherer, 1997 $921,558 $1,342,500 $1,254,388 75,000 $42,637
Chairman &
Chief 1996 $864,091 $1,255,001 $ 0 56,255 $14,628
Executive
Officer 1995 $817,086 $ 996,081 $1,132,840 505,632 $11,456
Bernard L.
Hardiek, 1997 $416,583 $ 429,878 $ 409,912 20,000 $11,083
President,
Worldwide 1996 $376,164 $ 399,880 $ 0 20,100 $ 9,457
Agricultural
Division 1995 $331,230 $ 334,191 $ 360,426 201,600 $ 8,395
Michael S.
Plunkett, 1997 $392,909 $ 383,155 $ 406,300 18,500 $13,455
Senior Vice
President
(6) 1996 $370,045 $ 370,465 $ 0 21,130 $12,108
1995 $363,130 $ 345,730 $ 385,826 175,647 $ 9,594
Joseph W.
England, 1997 $373,812 $ 370,260 $ 397,502 18,000 $18,637
Senior Vice
President 1996 $363,373 $ 363,495 $ 0 20,688 $13,901
1995 $354,656 $ 337,530 $ 377,825 174,954 $ 9,569
Pierre E.
Leroy, 1997 $355,300 $ 348,381 $ 361,378 19,000 $18,667
President,
Worldwide 1996 $325,690 $ 328,950 $ 0 20,100 $11,857
Construction
Division 1995 $300,490 $ 288,162 $ 313,436 173,100 $ 8,672
John K.
Lawson, 1997 $350,057 $ 344,594 $ 361,378 17,000 $19,675
Senior Vice
President 1996 $335,102 $ 335,070 $ 0 18,634 $12,062
1995 $324,363 $ 308,365 $ 352,171 172,755 $ 9,150
- ------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown include cash and non-cash compensation earned and received
by the executive officer as well as amounts earned but deferred at the
election of the officer.
(2) Each year in which earnings goals are reached, the compensation of
salaried employees is supplemented by fiscal year-end cash bonus payments. The
amount of the bonus (if any) depends upon the pre-bonus and pre-extraordinary
item return on average assets for the year, the position and salary of the
employee and any other performance goals established by the employee's
division.
(3) The 1997 and 1995 grants reported in the table represent grants under the
John Deere Equity Incentive Plan approved by shareholders at the 1995 annual
meeting. The vesting of such shares is conditioned on satisfying performance
goals based on growth of the Company's revenues and return on the Company's
assets over the performance periods established by the Committee. No
restricted stock awards were made to the named executive officers during
fiscal 1996. The amounts in the table represent the closing market value of
the shares granted, without giving effect to the diminution in value
attributable to the restrictions and performance conditions on such stock.
Dividends are paid on
11
<PAGE>
the restricted shares at the same time and rate as dividends paid to
shareholders of unrestricted shares. At October 31, 1997, the total number and
market value (based on the closing market price on October 31, 1997) of shares
of restricted stock, including the Equity Incentive shares reported above, held
by each of the named executive officers were as follows: Mr. Becherer (100,807;
$5,323,870); Mr. Hardiek (32,013; $1,690,687); Mr. Plunkett (33,791;
$1,784,587); Mr. England (33,080; $1,747,038); Mr. Leroy (28,186; $1,488,573);
and Mr. Lawson (30,619; $1,617,066).
(4) The amounts for 1997 and 1996 represent market-priced options granted in
December 1996 and December 1995 respectively. The amounts for 1995 represent
the total of market-priced options and premium-priced options granted in
December 1994. Additional details on the fiscal 1997 grant are included in the
"Option/SAR Grants In Last Fiscal Year" table that follows.
(5) Amounts shown for 1997 consist of: (i) vested Company contributions to the
Company 401(k) Savings and Investment Plan during the fiscal year for each of
the named executive officers of $11,083; and (ii) above-market earnings on
deferred compensation for Mr. Becherer $31,554, Mr. Plunkett $2,372, Mr.
England $7,554, Mr. Leroy $7,584 and Mr. Lawson $8,592. The contribution to the
Company's 401(k) Savings and Investment Plan for all employees during the past
fiscal year was $39,566,539.
(6) Mr. Plunkett retired as Senior Vice President of the Company in October
1997.
The following table shows information concerning individual grants of stock
options made during fiscal 1997 to each of the named executive officers of the
Company and the potential realizable values of the grants assuming annually
compounded stock price appreciation rates of five and ten percent per annum
respectively, over the option term. The five and ten percent rates of
appreciation are set by the rules of the Securities and Exchange Commission and
are not intended to forecast possible future appreciation, if any, of the
Company's stock price.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(3)
---------------------------------------------- --------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(1)(#) FISCAL YEAR ($/SH) DATE(2) ($) ($)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hans W.
Becherer. 75,000 5.10% $42.69 12/11/06 $2,013,563 $5,102,765
Bernard L.
Hardiek.. 20,000 1.36% $42.69 12/11/06 $ 536,950 $1,360,737
Michael S.
Plunkett. 18,500 1.26% $42.69 12/11/06 $ 496,679 $1,258,682
Joseph W.
England.. 18,000 1.22% $42.69 12/11/06 $ 483,255 $1,224,664
Pierre E.
Leroy.... 19,000 1.29% $42.69 12/11/06 $ 510,103 $1,292,700
John K.
Lawson... 17,000 1.16% $42.69 12/11/06 $ 456,408 $1,156,627
- --------------------------------------------------------------------------------
</TABLE>
(1) The market-priced options are exercisable between one and ten years after
the date of grant. Subject to plan restrictions, the exercise price and tax
withholding obligations related to exercises of options granted in the period
may be paid by delivery of already owned shares or by offset of the underlying
shares. No stock appreciation rights (SARs) were granted during the fiscal
year.
(2) The options expire if employment by the Company of the option holder
terminates during the term of the option for any reason other than for death,
disability, or retirement pursuant to disability or retirement plans of the
Company.
12
<PAGE>
(3) The total potential realizable value for all shareholders as a group based
on 250,293,139 outstanding shares as of October 31, 1997 would be
$6,719,747,957 and $17,029,160,664 at the 5% and 10% assumed annual rate of
appreciation, respectively. Mr. Becherer's total potential realizable value is
0.03% of the potential realizable value of all shareholders at the assumed
annual rates of appreciation. The total potential realizable value of all the
named executives to that of all shareholders is 0.07%.
The following table shows information for the named executives concerning
exercises of options and SARs during fiscal 1997 and the number and value of
unexercised options (and tandem SARs) held at October 31, 1997:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-
SHARES OPTIONS/SARS AT MONEY OPTIONS/SARS AT
ACQUIRED ON VALUE FISCAL YEAR-END(1) (#) FISCAL YEAR-END(2) ($)
EXERCISE REALIZED ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hans W. Becherer....... 56,255 $1,075,596 0 495,000 $ 0 $9,823,838
Bernard L. Hardiek..... 0 $ 0 56,700 185,000 $1,539,124 $3,763,398
Michael S. Plunkett.... 21,130 $ 379,706 0 161,000 $ 0 $3,262,772
Joseph W. England...... 0 $ 0 20,688 160,500 $ 386,504 $3,257,711
Pierre E. Leroy........ 43,251 $1,310,378 20,100 161,500 $ 375,518 $3,267,691
John K. Lawson......... 27,096 $ 866,505 47,909 159,500 $1,255,727 $3,247,446
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Market-priced options and SARs awarded by the Company are not exercisable
until one year after grant and have a ten-year term. Premium-priced options
included in the table may not be exercised until four or more years after the
date of grant depending on the Company's total shareholder return from the date
of grant relative to that of the group composed of New York Stock Exchange
listed companies. If such conditions are not met, the premium-priced options
will automatically vest and be exercisable nine years and six months after the
date of grant and expire ten years after the date of grant.
(2) Represents the difference between the option exercise price and the closing
market price for the Company's stock on October 31, 1997. The in-the-money
options at October 31, 1997 pertain to the market-priced option grants in
December of 1993, 1994, 1995 and 1996 with exercise prices of $23.56, $21.02,
$34.13 and $42.69, respectively and the premium-priced option grant in December
of 1994 with exercise prices of $28.39, $31.23 and $34.07. The closing market
price for the Company's stock at the end of the 1997 fiscal year was $52.8125.
PENSION BENEFITS
Under the Company's pension program, employees in executive salary grades
("executives") are entitled to receive an annual pension determined by adding
the amount obtained by multiplying 1.5% times the employee's number of years of
non-executive service times average pensionable pay to the amount obtained by
multiplying 2.0% times the number of years served as an executive times average
pensionable pay, with a maximum annual pension of 66 2/3% of average
pensionable pay. Average pensionable pay for employees participating in the
executive program prior to 1997 is based on one of the following two options,
as elected by the executive: (1) the executive's compensation for the five
highest years, not necessarily consecutive, during the 10 years immediately
prior to the date of
13
<PAGE>
retirement where compensation is calculated by adding the executive's salary
to the larger of (a) the sum of short-term bonuses, or (b) any payments under
the Company's long-term incentive plan or awards under the restricted stock
plan; or (2) the executive's compensation over his entire career with the
Company where compensation is calculated by adding the executive's salary to
any short-term bonuses. In addition, for salaried employees hired prior to
1997, career average compensation under the executive pension program
generally will include the average of compensation from the five anniversary
years prior to 1997 plus all future compensation until retirement with bonuses
paid in 1992 through 1996 phased into the computation over five years.
Effective January 1, 1997, for new participants in the executive program,
average pensionable pay is based exclusively on the career average
compensation formula described above. All amounts used in calculating average
pensionable pay are determined before giving effect to any salary or bonus
deferral under any plan sponsored by the Company.
Salaried employees not entitled to the executive pension receive annual
pension benefits determined by multiplying 1.5% times the employee's number of
years of service times average pensionable pay. Average pensionable pay for
employees hired prior to 1997 is based on one of the following two options, as
elected by the employee: (1) the employee's salary for the five highest years
during the 10 years immediately prior to the date of retirement; or (2) the
employee's compensation over his entire career with the Company where
compensation is calculated by adding the employee's salary to any bonus
awarded under the Company's performance bonus plan. In addition, for employees
hired prior to 1997, career average compensation generally will include the
average of compensation from the five anniversary years prior to 1997 plus all
future compensation until retirement with bonuses paid in 1992 through 1996
phased into the computation over five years. Effective January 1, 1997,
average pensionable pay for new salaried employees not entitled to the
executive pension is based exclusively on career average salary and
performance bonuses. For salaried employees participating in the career
average earning option, enhanced Company contributions to the employee's
401(k) retirement savings account will be made and, depending on the
employee's years of service as of January 1, 1997, the minimum age to
retirement with full benefits may be increased.
The estimated annual pensions payable upon retirement at normal retirement
age for each of the named executive officers of the Company is: Mr. Becherer,
$1,205,760; Mr. Hardiek, $346,038; Mr. Plunkett, $456,941; Mr. England,
$410,844; Mr. Leroy $421,133; and Mr. Lawson, $377,765. The estimated annual
pensions shown are on a straight-life annuity basis and have been computed
assuming (i) that the Company's pension plans are continued without further
amendment; (ii) that each of the named officers continues as an executive of
the Company until retirement at age 65; (iii) that salaries continue at 1997
levels; and (iv) that bonuses are paid at target earnings goals. Pension
benefits are not subject to deductions for social security benefits or other
offset amounts.
CHANGE IN CONTROL ARRANGEMENTS
The Company's Bonus Plan provides that employees as of the date of a change
in control will be entitled to the greater of a bonus based on actual
performance results to such date or their target bonus. The Equity Incentive
Plan and Restricted Stock Plan provide that in the event of a change in
control, unless otherwise determined by the Board, the value of restricted
shares will be cashed out in an amount determined under the plans. The
Supplemental Pension Benefit Plan provides that, in the event of a change in
control, participants who cease being Company employees will be eligible for
benefits under such plan notwithstanding their age at termination of
employment. In the event of certain changes in control, amounts deferred under
the Company's Deferred Compensation Plan may become payable immediately or
such plan may be modified to reflect the impact of the change in control.
14
<PAGE>
STOCKHOLDER PROPOSALS AND NOMINATIONS
- --------------------------------------------------------------------------------
Proposals of stockholders submitted pursuant to Rule 14a-8 of the Securities
and Exchange Commission ("Rule 14a-8") for inclusion in the proxy statement for
the annual meeting of stockholders to be held February 24, 1999 must be
received by the Company at its principal executive offices not later than
September 18, 1998. This notice of the annual meeting date also serves as the
notice by the Company under the advance notice Bylaw described below.
Under the Company's Bylaws, a stockholder must give timely written notice to
the Secretary of the Company of a nomination or before bringing any business
before any annual or special meeting of stockholders. Notice must be received
by the Secretary not less than 90 days nor more than 120 days prior to the
stockholders' meeting. The notice shall set forth for each matter a brief
description of the business to be brought before the meeting, the reasons
therefore, the name, address, class and number of shares beneficially owned by,
and any material interest of the shareholder making the proposal. Notice of a
nomination shall set forth the name, address and the class and number of shares
owned by the shareholder making the nomination; the name, age, business and
residence addresses and principal occupation of the nominee and the number of
shares beneficially owned by, and such other information concerning, the
nominee as would be required to be disclosed in the solicitation of proxies for
election of directors under Regulation 14A under the Securities Exchange Act of
1934, as amended. The recommendation must also be accompanied by the consent of
the individual to be nominated, to be elected and to serve. The Company may
require any nominee to furnish such other information as may reasonably be
required to determine the eligibility of the nominee. Persons 70 or older are
not eligible for election to the Board.
Stockholder proposals and recommendations for nomination as a director should
be submitted in writing to the Secretary of the Company, Deere & Company, One
John Deere Place, Moline, Illinois 61265, who will submit them to the Board or
the Corporate Governance Committee, as applicable, for its consideration.
COST OF SOLICITATION
- --------------------------------------------------------------------------------
The cost of soliciting proxies in the form enclosed is being borne by the
Company. In addition to solicitation by mail, arrangements have been made with
brokerage houses, nominees and other custodians and fiduciaries to send proxy
material to their principals and the Company will reimburse them for their
expenses in doing so. The Company has engaged Georgeson & Co., Inc. to solicit
proxies held by brokers and nominees at a cost of $9,000 plus out-of-pocket
expenses. Proxies also may be solicited personally or by telephone or telegraph
by directors, officers, and a few regular employees of the Company in addition
to their usual duties. They will not be specially compensated for these
services.
For the Board of Directors,
LOGO
Frank S. Cottrell
Secretary
Moline, Illinois
January 16, 1998
15
<PAGE>
LOGO
LOGO
Printed on
Recycled Paper
<PAGE>
[LOGO OF DEERE & COMPANY]
DEERE & COMPANY
PROXY -- ANNUAL MEETING / 25 FEBRUARY 1998
- --------------------------------------------------------------------------------
Solicited by the Board of Directors for use at the Annual Meeting of
Stockholders of Deere & Company on February 25, 1998.
The undersigned appoints each of Hans W. Becherer and Frank S. Cottrell attorney
and proxy, with full power of substitution, on behalf of the undersigned and
with all powers the undersigned would possess if personally present, to vote all
shares of Common Stock of Deere & Company that the undersigned would be entitled
to vote at the above Annual Meeting and any adjournment thereof. The shares
represented by this proxy will be voted as specified and in the discretion of
the proxies on all other matters. If not otherwise specified, shares will be
voted in accordance with the recommendations of the Directors.
Please mark, date and sign your name exactly as it appears on this proxy and
return this proxy in the enclosed envelope. When signing as attorney, executor,
administrator, trustee, guardian or officer of a corporation, please give your
full title as such. For joint accounts, each joint owner should sign.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY.
Deere & Company
P.O. Box 11012
New York, N.Y. 10203-0012
<PAGE>
PLEASE MARK YOUR CHOICE
LIKE THIS IN BLUE OR BLACK INK [X]
- --------------------------------------------------------------------------------
The Directors Recommend a Vote FOR all Nominees.
- --------------------------------------------------------------------------------
Election as Directors of Hans W. Becherer, Antonio Madero B., John R. Stafford,
and John R. Walter.
VOTE FOR ALL WITHHOLD VOTE FOR EXCEPTIONS VOTE FOR ALL EXCEPT WITHHOLD
NOMINEES ALL NOMINEES VOTE FROM THE FOLLOWING
NOMINEE(S):
[_] [_] [_] -----------------------------
- --------------------------------------------------------------------------------
Change of Address
And or Comments
Mark Here [_]
Date
-------------------------
-----------------------------
Signature
-----------------------------
Signature
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)
