<PAGE> 1
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
-------------------
Date of Report (Date of earliest event reported): June 28, 1996
AGCO CORPORATION
(Exact name of registrant as specified in charter)
DELAWARE 0-19898 58-1960019
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation) Identification No.)
4830 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30136
(Address of principal executive offices)
(770) 813-9200
(Registrant's telephone number, including area code)
------------------------------------------------
(Former name or former address, if changed since last report)
- -------------------------------------------------------------------------------
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1996, AGCO Corporation ("AGCO" or the "Company") acquired
certain assets and liabilities of the agricultural and industrial equipment
business (the "Acquired Business") of Iochpe-Maxion S.A. ("Iochpe-Maxion") for
consideration consisting of approximately $260.0 million (the "Maxion
Acquisition"). The Maxion Acquisition was financed primarily by borrowings
under the Company's revolving credit facility. The acquired assets and assumed
liabilities consist primarily of accounts receivable, inventories, property,
plant and equipment (including two manufacturing facilities), accounts payable
and accrued liabilities. The Acquired Business was utilized by Iochpe-Maxion
for the manufacture and distribution of agricultural tractors and combines and
industrial loader-backhoes, and it is the Company's intention to utilize these
assets in a similar manner in the future. The purchase price was determined
through arms-length negotiations between the Company and Iochpe-Maxion and was
based primarily on the estimated fair market value of the net assets acquired,
the results of past operations of the Acquired Business and the expected future
operations and related contribution that the Acquired Business is expected to
make to the Company.
As a result of the Maxion Acquisition, the Company's operations expand to
the design, manufacture and sale of tractors, combines and loader-backhoes in
Brazil. The Acquired Business and Massey Ferguson are the market leaders in
the Brazilian agricultural equipment market. The Acquired Business' average
annual sales volume for the last three fiscal years has been approximately $400
million.
DESCRIPTION OF THE ACQUIRED BUSINESS
Prior to the acquisition, the Acquired Business was AGCO's Massey Ferguson
licensee in Brazil, manufacturing and distributing agricultural tractors and
combines under the Massey Ferguson brand name, industrial loader-backhoes under
the Massey Ferguson and Maxion brand names and combines under the IDEAL brand
name. Through this licensee relationship, AGCO's participation was limited to
its receipt of royalty payments for the Acquired Business' use of the Massey
Ferguson brand name. At the time of the acquisition, the Acquired Business'
production and other operations were completely independent of AGCO.
Manufacturing
AGCO acquired Iochpe-Maxion's tractor and combine manufacturing
facilities. The agricultural tractor and industrial loader-backhoe production
facility, together with the spare parts warehouse, is located in Canoas, a
suburb of Porto Alegre, in the southern-most state of Rio Grande do Sul. The
Canoas facility produces tractors in the 50 to 173 horsepower range. The
combine manufacturing facility is located in Santa Rosa, Rio Grande do Sul.
Similar to the Company, the acquired facilities are primarily assembly
operations with all major components such as engines and transmissions being
outsourced. The current product line consists of quality products of a lower
specification and lower cost to meet the demands of the Brazilian market.
-2-
<PAGE> 3
Engines for the majority of the Acquired Business' products are currently
sourced from Iochpe-Maxion's engine division. In connection with the
acquisition, the Company has entered into an engine supply agreement with
Iochpe-Maxion to continue to source certain engines for use in AGCO's Brazilian
production.
Distribution
The Acquired Business distributes products through approximately 140
independent dealers with approximately 360 outlets under the Massey Ferguson
and IDEAL brand names. IDEAL also has independent distributor representation
in Argentina, Chile, Ecuador, Paraguay and Uruguay and the industrial line has
distributors in Argentina and Uruguay. The Maxion Acquisition enhances the
Company's presence in the agricultural equipment market in South America by
acquiring a market leadership position in Brazil, which is the largest market
in South America.
The independent dealers and distributors are responsible for retail sales
to end users and after-sales service and support. In Brazil, dealers are
prohibited from carrying competing brands of tractors or combines from other
manufacturers.
Retail Financing
A significant portion of retail sales of agricultural equipment in Brazil
are financed through government subsidized financing programs. The Company
believes the availability of government subsidized financing has and will
continue to be an important factor affecting market demand.
Employees
The Maxion Acquisition increased the Company's workforce by approximately
1,400. Of these employees, approximately 900 are employed at the Canoas
facility and approximately 500 are employed at the Santa Rosa facility. The
manufacturing employees are generally represented by unions. In Brazil, new
union contracts are negotiated each year and a number of employers in a
geographic region are often parties to the same union agreement.
Environmental Laws
The Company believes that the Acquired Business is in compliance in all
material respects with Brazilian environmental laws and the cost of compliance
with such laws will not have a material adverse effect on the Company's results
of operations or financial condition.
-3-
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The financial statements required by Item 7(a) relative to the Maxion
Acquisition described in Item 2 of this Form 8-K of AGCO Corporation are
attached hereto as an exhibit and incorporated herein by this reference.
(b) Pro Forma Financial Information
The unaudited pro forma financial information required by Item 7(b)
relative to the Maxion Acquisition described in Item 2 of this Form 8-K
of AGCO Corporation is attached hereto as an exhibit and incorporated
herein by this reference.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
23.1 Consent of Price Waterhouse Auditores Independentes,
independent public accountants.
99.1 Financial Statements required by Item 7(a).
99.2 Pro Forma Financial Information required by Item 7(b).
99.3 Agreement dated June 27, 1996 by and between Iochpe-Maxion
S.A. and AGCO Corporation.
99.4 Engine Supply Agreement dated June 27, 1996 by and
between Iochpe-Maxion S.A. and AGCO Corporation.
</TABLE>
-4-
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AGCO CORPORATION
Registrant
Date: July 12, 1996 By: Chris E. Perkins
------------------------------------------
Chris E. Perkins
Vice President and Chief Financial Officer
-5-
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No. Description Page
- ------- ----------------------------------------------------- ------------
<S> <C> <C>
23.1 Consent of Price Waterhouse Auditores Independentes,
independent public accountants
99.1 Financial Statements required by Item 7(a)
99.2 Pro Forma Financial Information required by Item 7(b)
99.3 Agreement dated June 27, 1996 by and between
Iochpe-Maxion S.A. and AGCO Corporation
99.4 Engine Supply Agreement dated June 27, 1996 by and
between Iochpe-Maxion S.A. and AGCO Corporation
</TABLE>
-6-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in AGCO Corporation's
Registration Statements on Form S-8 (File No. 33-63802, File No. 33-83104, File
No. 33-91686 and File No. 333-4707) of our report dated July 10, 1996 relating
to the financial statements of the Agricultural Division of Iochpe-Maxion S.A.,
which appears in the Current Report on Form 8-K of AGCO Corporation dated June
28, 1996.
/s/ Price Waterhouse
- --------------------
Price Waterhouse
Auditores Independentes
Sao Paulo, Brazil
July 15, 1996
<PAGE> 1
EXHIBIT 99.1
AGRICULTURAL DIVISION OF
IOCHPE-MAXION S.A.
Financial Statements at
December 31, 1995, 1994 and 1993
and Report of Independent Accountants
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
July 10, 1996
To the Boards of Directors of
Iochpe-Maxion S.A. and
AGCO Corporation
1 We have audited the accompanying balance sheets of the Agricultural
Division ("the Division"), a wholly-owned division of Iochpe-Maxion
S.A., as of December 31, 1995 and 1994 and the related statements of
operations and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the
responsibility of the management of Iochpe-Maxion S.A. Our
responsibility is to express an opinion on these financial statements
based on our audits.
2 We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
3 As discussed in Note 1 to the financial statements, on June 28, 1996,
certain assets and liabilities of the Agricultural Division, including
the manufacturing facilities, were sold to AGCO Corporation.
4 In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Division as of December 31, 1995 and 1994 and the results of its
operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Price Waterhouse /s/ Claudio Avelino Mac-Knight Filippi
-------------------- --------------------------------------
Price Waterhouse Claudio Avelino Mac-Knight Filippi
Auditores Independentes Partner
CRC-SP-160 Contador CRC-MG-16.843"S" SP-1.331
F-2
<PAGE> 3
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
BALANCE SHEET
In thousands of U.S. dollars
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
ASSETS 1995 1994
------- -------
<S> <C> <C>
Current assets
Cash and cash equivalents 2 947
Investments (Note 4) 1,058 1,892
Accounts and notes receivable,
net of allowances (Note 5) 25,572 78,052
Inventories, net (Note 6) 84,810 43,299
Taxes recoverable 4,717 5,804
Deferred income tax and social
contribution (Note 3) 9,611 5,522
Advances to suppliers 3,171 1,061
Other current assets 6,259 2,782
------- -------
135,200 139,359
------- -------
Property, plant and equipment, net (Note 7) 31,375 31,024
Non-current receivables, net (Note 5) 10,532 15,047
Deferred income tax and social contribution (Note 3) 5,502 7,466
Deposits 36 33
Investments (Note 4) 2,528 4,396
------- -------
185,173 197,325
======= =======
</TABLE>
F-3
<PAGE> 4
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
BALANCE SHEET
In thousands of U.S. dollars (continued)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
LIABILITIES AND DIVISION EQUITY 1995 1994
------- -------
<S> <C> <C>
Current liabilities
Trade accounts payable 22,484 44,403
Loans (Note 8) 16,119 46,975
Commissions payable 5,391 2,229
Payroll and related charges 5,849 9,606
Taxes payable 725 2,594
Other 2,062 4,782
------- -------
52,630 110,589
------- -------
Long-term liabilities
Loans (Note 8) 4,744 2,661
Payable to head office (Note 12) 121,119 4,981
------- -------
178,493 118,231
------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
Division equity
Equity at January 1, 1993 38,667 38,667
Retained earnings (deficit) (Note 13) (31,987) 40,427
------- -------
6,680 79,094
------- -------
185,173 197,325
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 5
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
STATEMENT OF OPERATIONS
In thousands of U.S. dollars
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
NET SALES 265,208 563,178 368,712
COST OF SALES 221,466 406,118 293,052
------- ------- -------
GROSS PROFIT 43,742 157,060 75,660
EXPENSES (INCOME)
Selling 31,577 41,441 23,411
General and administrative 29,326 21,860 14,451
Overhead allocated by head office 10,429 16,681 12,735
Research and development 4,869 1,345 2,482
Excess capacity costs (Note 14) 16,096
Interest and financial expenses 39,541 91,758 48,891
Interest and financial income (6,038) (87,580) (50,896)
Other, net 685 (35) (71)
Foreign exchange loss 9,952 18,533 9,297
------- ------- -------
INCOME (LOSS) BEFORE TAXES (92,695) 53,057 15,360
Income tax and social contribution expense (benefit) (Note 3) (20,281) 21,706 6,284
------- ------- -------
NET INCOME (LOSS) (72,414) 31,351 9,076
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 6
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
STATEMENT OF CASH FLOWS
In thousands of U.S. dollars
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (72,414) 31,351 9,076
Adjustments to reconcile net income (loss)
with cash provided by (used in) operating activities
Foreign exchange loss 9,952 18,533 9,297
Depreciation and amortization 4,313 3,950 3,733
Deferred tax charges (credits) (2,125) (5,535) (2,501)
Gain on sale of property, plant and equipment (276) (106) (124)
Other 12
Decrease (increase) in assets
Accounts and notes receivable 48,549 (101,311) (100,017)
Taxes recoverable 359 (6,185) (9,135)
Inventories (41,511) (22,875) (7,662)
Other (6,584) (4,236) (2,959)
Increase (decrease) in liabilities
Trade accounts payable (17,461) 48,210 50,007
Advances from dealers (504) 11,207
Commission payable 3,734 1,927 13,522
Payroll and related charges (2,713) 10,046 19,518
Income and other taxes (1,657) 2,816 2,819
Payable to head office 31,785 90,366 52,557
Other (2,270) 4,921 11,481
------- -------- --------
Net cash provided by (used in) operating activities (48,319) 71,368 60,831
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (4,690) (5,147) (2,101)
Additions to deposits (3) (25)
Decrease (increase) in investments in time deposits 2,039 (6,884) (5,610)
Proceeds from sale of property, plant and equipment 302 169 396
------- -------- --------
Net cash used in investing activities (2,352) (11,887) (7,315)
------- -------- --------
</TABLE>
F-6
<PAGE> 7
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
STATEMENT OF CASH FLOWS
In thousands of U.S. dollars (continued)
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term debt, net (26,766) 51,025 51,858
Long-term debt
Issuances 2,628 3,043 2,000
Repayments (72) (1,061)
Net amount received from (remitted to) head office 84,353 (83,220) (54,722)
------- ------- -------
Net cash provided by (used in) financing activities 60,215 (29,224) (1,925)
------- ------- -------
Effect of exchange rate changes on cash (10,489) (29,687) (52,099)
------- ------- -------
Increase (decrease) in cash and cash equivalents (945) 570 (508)
Cash and cash equivalents, beginning of year 947 377 885
------- ------- -------
Cash and cash equivalents, end of year 2 947 377
======= ======= =======
Cash paid during the year for:
Interest and financial charges 39,541 91,758 48,891
Income tax (Note 3) 0 0 0
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 8
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
1 BUSINESS
The Agricultural Division ("the Division"), a wholly-owned division of
Iochpe-Maxion S.A., is principally engaged in the production and sale
of tractors, harvesters, and replacement parts. The Division's plants
are located in Canoas and Santa Rosa (Rio Grande do Sul, Brazil). The
Division distributes its products through independent dealers in
Brazil. In addition, the Division sells its products directly to end
users in other South American countries.
On June 28, 1996, AGCO Corporation acquired certain assets and
liabilities of the Division, including the manufacturing facilities.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The financial statements of the Division have been derived from the
consolidated financial statements of Iochpe-Maxion S.A. and have been
prepared to present the financial position, results of operations and
cash flows of the Division on a stand-alone basis. The financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America, which differ in
certain respects from the Brazilian accounting principles applied by
Iochpe-Maxion S.A.
The head office of Iochpe-Maxion S.A. provides certain services to,
and incurs certain costs on behalf of, its subsidiaries and divisions.
These services include accounting, legal and computer services.
These costs are allocated to the subsidiaries and divisions on a pro
rata basis based on the relative net sales of the subsidiaries and
divisions. Management considers this allocation method to be
reasonable.
The income tax returns of Iochpe-Maxion S.A. include the operations of
the Division. For financial reporting purposes, the Division computes
a current provision (credit) for income taxes and social contribution
on a separate return basis based on statutory rates in effect, and a
credit or charge for the current provision (credit) is recorded in the
receivable from (payable to) head office account.
(B) REMEASUREMENT OF THE FINANCIAL STATEMENTS
The Division transacts the majority of its business in Brazilian
currency and has selected the United States dollar as its reporting
currency. Accordingly, the financial statements of the Division are
remeasured into United States currency in accordance with
Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation" (SFAS 52), as applicable to operations of an entity
denominated in the currency of a country with a highly-inflationary
economy.
F-8
<PAGE> 9
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
Monetary assets and liabilities are remeasured to United States
dollars at period-end exchange rates. Nonmonetary assets and
division equity are remeasured to United States dollars at historical
exchange rates. Income and expense items are remeasured at average
monthly rates of exchange prevailing during the period, except for
depreciation and cost of sales, which are remeasured at historical
exchange rates.
The foreign exchange gain or loss on remeasurement is charged to the
statement of operations currently.
Unless otherwise stated, all monetary assets and liabilities of the
Division are denominated in Brazilian currency.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The estimates made by
management primarily relate to selection of useful lives for property,
plant and equipment, receivable and inventory allowances and certain
accrued liabilities, principally relating to sales allowances and
warranty.
(D) TIME DEPOSITS
These investments are carried at cost plus accrued interest, which
approximates market value.
(E) INVENTORIES
Inventories are stated at the average cost of purchase or production.
These amounts do not exceed replacement or realizable values.
Allowances for slow-moving or obsolete inventory are recorded when
applicable.
(F) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Interest on
construction in progress during 1995, 1994 and 1993 was not
capitalized due to immateriality. Depreciation is computed on the
straight-line basis at rates which take into consideration the useful
lives of the items; principally 25 years for buildings and
improvements, 10 years for machinery and equipment and 5 years for
tooling. Expenditures for maintenance and repairs are charged to
operating costs and expenses as incurred.
F-9
<PAGE> 10
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
(G) REVENUES AND EXPENSES
Revenues are recognized when products are shipped or services are
rendered; expenses and costs are recognized on the accrual basis.
(H) PRODUCT WARRANTY COSTS
The Division's manufactured products are covered by warranties of
between eight and twelve months. Estimated warranty costs are accrued
at the time of sale based on past experience and current
circumstances.
(I) COMPENSATED ABSENCES
The Division fully accrues the liability for future compensation to
employees for vacations vested during the period.
(J) INTEREST AND FINANCIAL INCOME AND EXPENSE
Interest and financial income and expense include interest at stated
rates as well as indexation of receivables and payables to the
consumer price index or other inflation indices. Unearned financial
income on accounts receivable is recognized on a ratable basis over
the terms of the receivables.
(K) INCOME TAXES
Statement of Financial Accounting Standards No. 109 has been
applied for all periods presented. The current income tax charge
(credit) has been determined by applying the statutory rate for the
period to pre-tax income (loss) adjusted for temporary differences.
The deferred tax effects of temporary differences have been recognized
in the financial statements except that, in accordance with paragraph
9(f) of SFAS 109, deferred taxes have not been recorded for
differences relating to certain assets and liabilities that are
remeasured from Brazilian currency to U.S. dollars at historical
exchange rates and that result from changes in exchange rates or
indexing to inflation in local currency for tax purposes.
(L) STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, time deposits that have
an original maturity to the Division of 90 days or less are considered
cash equivalents.
F-10
<PAGE> 11
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
(M) DIVISION EQUITY
Division equity represents an amount equivalent to the net assets of
the Division at January 1, 1993, increased (decreased) by net income
(loss) in each period.
(N) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," which established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be
held and used, as well as for long-lived assets and certain
identifiable intangibles to be disposed. This standard will be
required to be adopted in 1996. The adoption of this standard will
not have a material effect on the Division's financial position.
3 INCOME TAXES
Income taxes in Brazil include federal income tax and social
contribution. The statutory rates applicable in each period were as
follows:
<TABLE>
<CAPTION>
%
--------------------------
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Federal income tax 43.00 35.00 35.00
Social contribution (*) 5.18 5.91 5.91
===== ===== =====
Composite tax rate 48.18 40.91 40.91
===== ===== =====
</TABLE>
(*) The social contribution is deductible for federal income tax
purposes.
In January 1995, the federal income tax rate was increased from 35% to
43% resulting in a composite tax rate of 48.18%. Based on legislation
enacted on December 26, 1995, the rates were subsequently changed to
25% for income tax and 5.56% for social contribution (a composite tax
rate of 30.56%) effective January 1, 1996.
F-11
<PAGE> 12
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
The components of the income tax expense (benefit) were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Current provision (benefit) (18,156) 27,241 8,785
Deferred provision (benefit) (2,125) (5,535) (2,501)
------- ------ ------
(20,281) 21,706 6,284
======= ====== ======
</TABLE>
The amount reported as income tax expense or benefit in these financial
statements is reconciled to the statutory rates as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
------- ------ ------
<S> <C> <C> <C>
Income (loss) before income taxes (92,695) 53,057 15,360
======= ====== ======
Tax expense (benefit) at statutory rate (44,660) 21,706 6,284
Effect of changes in tax rates 24,379
------- ------ ------
Tax expense (benefit) per statement
of operations (20,281) 21,706 6,284
======= ====== ======
</TABLE>
The major components of the deferred tax accounts in the balance sheet
are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
Temporary differences, mainly
non-deductible accrued expenses 13,479 8,165
Unearned financial income 1,634 4,823
------ ------
Deferred tax asset (liability) 15,113 12,988
====== ======
Current assets 9,611 5,522
====== ======
Non-current assets 5,502 7,466
====== ======
</TABLE>
The Division generated a tax loss of approximately US$ 102,000
in 1995. The benefit of the tax loss (US$ 31,000 at December 31,
1995) is recorded as an income tax benefit and a reduction of the
payable to head office, because the loss is available to all
unincorporated divisions of Iochpe-Maxion S.A. and may be carried
forward indefinitely.
F-12
<PAGE> 13
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
4 INVESTMENTS
Investments consist of time deposits denominated in Brazilian
currency.
The Division's non-current investments are subject to compensating
balance arrangements in connection with certain banks' machine
financing programs for the Division's customers.
5 ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-------------------------
1995 1994
------- --------
<S> <C> <C>
Customers
Domestic 118,353 241,935
Less: Receivables sold with recourse under the
"vendor" program (75,234) (139,154)
------- --------
Outstanding domestic receivables 43,119 102,781
Export, all denominated in
U.S. dollars 2,229 2,385
------- --------
Subtotal 45,348 105,166
Unearned financial income (5,348) (11,790)
Allowance for doubtful accounts (3,896) (277)
------- --------
Total 36,104 93,099
======= ========
Current assets 25,572 78,052
Non-current assets 10,532 15,047
------- --------
36,104 93,099
======= ========
</TABLE>
The original collection terms of long-term accounts receivable vary
from 18 to 36 months, and most of these receivables are indexed to
the variation in agricultural commodity prices.
Outstanding domestic receivables include balances which are indexed to
the variation of certain agricultural commodity prices in Brazil:
F-13
<PAGE> 14
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
<TABLE>
<CAPTION>
As of December 31
-----------------
1995 1994
---- ----
<S> <C> <C>
Milk 4,062 7,952
Corn 3,890 5,983
Soybeans 712 451
Sugar cane 97 783
Beef 75 229
----- ------
8,836 15,398
===== ======
</TABLE>
Gains on indexed receivables amounted to US$ 1,111, US$ 29,164
and US$ 13,244 in 1995, 1994 and 1993, respectively.
The Division is currently executing property guarantees obtained on
certain overdue receivables, in the amount of approximately US$ 5,800
at December 31, 1995.
The Division has financed certain customer receivables under the
"vendor" program. Customer receivables in this program have been sold
with recourse to various banks, including Banco Iochpe S.A., a
subsidiary of Iochpe-Maxion S.A. Proceeds from sales of receivables
with recourse amounted to US$ 179,000, US$ 408,000 and US$ 142,000 in
1995, 1994 and 1993, respectively. Expected losses under the recourse
provisions of the program are included in the allowance for doubtful
accounts.
Domestic sales of agricultural machinery are dependent upon
government financing and assistance programs available to farmers for
the acquisition of capital goods, in addition to general market
conditions for agricultural produce.
F-14
<PAGE> 15
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
6 INVENTORIES, NET
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
1995 1994
------ ------
<S> <C> <C>
Finished products 24,446 6,415
Merchandise for resale (accessories) 4,277 6,184
Raw materials 52,866 29,901
Spare parts and maintenance supplies 3,221 799
------ ------
84,810 43,299
====== ======
</TABLE>
7 PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
1995 1994
------- -------
<S> <C> <C>
Land 9,293 9,293
Buildings and improvements 11,514 11,496
Equipment and installations 24,095 21,513
Tooling 11,339 11,992
Furniture and fixtures 811 756
Other 3,837 3,372
Construction in progress 2,225 1,988
------- -------
63,114 60,410
Accumulated depreciation (31,739) (29,386)
------- -------
Total 31,375 31,024
======= =======
</TABLE>
A substantial part of the Division's plant and equipment is pledged in
guarantee of borrowings.
F-15
<PAGE> 16
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
8 LOANS
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------------
1995 1994
------- -------
<S> <C> <C>
COMMERCIAL PAPER PAYABLE IN U.S. DOLLARS; ANNUAL INTEREST
RATE OF 12.5%; VARIOUS MATURITIES THROUGH DECEMBER 1995 34,438
SHORT-TERM AND MEDIUM-TERM FINANCING OF IMPORT TRANSACTIONS;
PAYABLE IN U.S. DOLLARS; AVERAGE ANNUAL INTEREST RATES OF
8.3% AND 9.0%, RESPECTIVELY; VARIOUS MATURITIES THROUGH JUNE
1997 AND JUNE 1995, RESPECTIVELY 12,664 3,047
LOCAL CURRENCY LOANS; AVERAGE ANNUAL INTEREST RATE OF 11%
PLUS THE REFERENCE INTEREST RATE (TR); VARIOUS MATURITIES
THROUGH 2000 8,199 12,151
------- -------
20,863 49,636
Current liabilities (16,119) (46,975)
------- -------
Long-term liabilities 4,744 2,661
======= =======
</TABLE>
The loans fall due as follows:
<TABLE>
<S> <C>
1996 16,119
1997 2,055
1998 1,132
1999 1,064
2000 493
------
20,863
======
</TABLE>
Loans are guaranteed by liens on machinery and equipment.
9 FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Division's financial instruments
approximates fair market value because of the short-term maturity or
frequent repricing of these instruments.
F-16
<PAGE> 17
\
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined
with precision. Changes in assumptions could significantly affect the
estimates.
In connection with the sale of machines to certain agricultural
producers, the Division enters into unsecured swap contracts with
these customers. Under the terms of these contracts, the Division
receives monthly interest payments based on the variation of certain
agricultural commodity prices (such as soybeans, corn, sugar cane,
beef etc.) and pays interest at the reference interest rate (TR) or
the consumer price index (IPC), plus 11% per annum semiannually. The
Division adjusts these swap contracts to estimated fair value and
records the fair value adjustment and the net difference between the
rates received and paid as components of interest and financial
income. The contracts are recorded as a component of accounts
receivable. The carrying value of these contracts was an asset of
US$ 5,200 at December 31, 1995 and a liability of US$ 400 at December
31, 1994.
The nominal value of these swap contracts is summarized below:
<TABLE>
<CAPTION>
As of December 31
-----------------
1995 1994
----- ------
<S> <C> <C>
Commodity
Milk 9,478 18,556
Corn 9,076 13,962
Soybeans 1,660 1,053
Sugar cane 227 1,828
Beef 175 536
------ ------
20,616 35,935
====== ======
</TABLE>
Losses on these swap contracts amounted to US$ 8,505, US$ 28,653
and US$ 7,378 in 1995, 1994 and 1993, respectively.
F-17
<PAGE> 18
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
10 COMMITMENTS AND CONTINGENCIES
EMPLOYEE BENEFITS
The Division maintains no private pension plans for its employees but
makes monthly contributions based on payroll to the government
pension, social security and severance indemnity plans and such
payments are expensed as incurred. In addition, certain payments are
due on dismissal of employees, being principally one month's salary
and a severance payment calculated at 40% of the accumulated
contributions made to the government severance indemnity plan on
behalf of the employee. Amounts paid on dismissal totalled US$ 2,723,
US$ 2,383 and US$ 756 in the years ended December 31, 1995, 1994 and
1993, respectively. Dismissals subsequent to December 31, 1995
amounted to an additional US$ 54.
OTHER
Iochpe-Maxion S.A. is a defendant in numerous lawsuits relating to the
Division in the ordinary course of business. Management does not
believe that an adverse outcome in any or all of these proceedings
would have a material adverse effect on the Division's financial
position or results of operations.
11 RELATED PARTY TRANSACTIONS
The Division purchases engines and other components from other
divisions of Iochpe-Maxion S.A. In addition, certain services provided
by Iochpe-Maxion S.A.'s head office and machinery maintenance division
are charged to the Division. These transactions are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Purchases of engines, at cost 34,714 44,712 31,037
Purchases of components 1,137 1,732
Purchases of maintenance services 3,661
Allocation of overhead from head office 10,429 16,681 12,735
</TABLE>
F-18
<PAGE> 19
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
Transfers of engines are recorded at cost. For management purposes
only, Iochpe-Maxion S.A. imputes a profit margin on these transfers,
which would have resulted in additional charges to cost of sales of
US$ 6,048, US$ 14,776 and US$ 3,570 in 1995, 1994 and 1993,
respectively.
12 RECEIVABLE FROM (PAYABLE TO) HEAD OFFICE
The amount receivable from (payable to) head office does not accrue
interest. The major movements in this account relate to the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
-------- ------- -------
<S> <C> <C> <C>
Balance at beginning of the year (4,981) 2,165
Income tax credit (provision) 18,156 (27,241) (8,785)
Overhead allocation (10,429) (16,681) (12,735)
Purchases of engines, components and maintenance services (39,512) (46,444) (31,037)
Cash remittances (receipts), net (84,353) 83,220 54,722
-------- ------- -------
Balance at end of the year (121,119) (4,981) 2,165
======== ======= =======
Average balance during the year (95,963) (6,358) 2,997
======== ======= =======
</TABLE>
13 RETAINED EARNINGS (DEFICIT)
Changes in retained earnings (deficit) are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1995 1994 1993
------- ------- -----
<S> <C> <C> <C>
Balance at beginning of the year 40,427 9,076
Net income (loss) (72,414) 31,351 9,076
------- ------- -----
Balance at the end of the year (31,987) 40,427 9,076
======= ======= =====
</TABLE>
F-19
<PAGE> 20
AGRICULTURAL DIVISION OF IOCHPE-MAXION S.A.
NOTES TO THE FINANCIAL STATEMENTS
AT DECEMBER 31, 1995, 1994 AND 1993
Expressed in thousands of U.S. dollars, unless otherwise indicated
-----------------------------------------------------------------------
14 EXCESS MANUFACTURING CAPACITY
During the third and fourth quarters of 1995, the Division temporarily
ceased most of its manufacturing operations in response to a decline
in demand for its products. The fixed costs attributable to the idle
capacity are included in net income (loss) for the periods affected.
* * *
F-20
<PAGE> 1
EXHIBIT 99.2
PRO FORMA FINANCIAL INFORMATION
The Pro Forma Consolidated Statements of Income are based on the
historical Consolidated Financial Statements of the Company, adjusted to give
effect to the following as if it had occurred on January 1, 1995: (i) the
Maxion Acquisition, (ii) the Company's issuance in March 1996 of $250.0 million
of its 8 1/2% Senior Subordinated Notes Due 2006 (the "March Offering") and the
application of the net proceeds therefrom and (iii) the Company's replacement
in March 1996 of its $550.0 million secured revolving credit facilities (the
"Old Credit Facility") with a new five year $650.0 million unsecured
multi-currency revolving credit facility (the "New Credit Facility"). The Pro
Forma Consolidated Balance Sheet as of March 31, 1996 is based on the
historical Consolidated Financial Statements of the Company, adjusted to give
effect to the Maxion Acquisition, as if it had occurred on March 31, 1996.
The Maxion Acquisition was accounted for under the purchase method of
accounting. The total purchase price for the Maxion Acquisition was allocated
to tangible and identifiable intangible assets and liabilities based upon the
Company's preliminary estimates of their fair values with the excess of cost
over net assets acquired allocated to goodwill. The allocation of the purchase
price for this acquisition is subject to revision when additional information
concerning asset and liability valuations is obtained. The Company does not
believe that the asset and liability valuation for this acquisition will be
materially different from the pro forma information presented herein. For
purposes of presenting pro forma results, no changes in revenues and expenses
have been made to reflect the results of any modification to operations that
might have been made had such transactions been consummated on the assumed
effective date of the transactions. The pro forma expenses include the
recurring costs which are directly attributable to these transactions, such as
interest expense, depreciation expense and amortization of the excess of cost
over net assets acquired.
The Pro Forma Financial Information does not purport to represent what the
Company's results of operations or financial position would actually have been
had such transactions actually occurred on any of the dates set forth above or
to project the Company's results of operations for any future period.
1
<PAGE> 2
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CONSOLIDATED
---------------------------------------------------------
MAXION
COMPANY ACQUISITION(2) ADJUSTMENTS PRO FORMA
---------- -------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Net sales............................ $2,068,427 $265,208 $(19,587)(3) $2,316,019
1,971 (4)
Finance income....................... 56,621 -- -- 56,621
---------- -------- -------- ----------
2,125,048 265,208 (17,616) 2,372,640
---------- -------- -------- ----------
Costs and Expenses:
Cost of goods sold................... 1,627,716 237,562 (19,587)(3) 1,853,066
6,048 (5)
1,327 (6)
Selling, general and administrative
expenses........................... 200,588 60,903 1,971 (4) 262,758
(704)(7)
Engineering expenses................. 27,350 4,869 -- 32,219
Interest expense, net................ 63,211 33,503 23,271 (8) 119,985
Other expense, net................... 9,602 685 704 (7) 13,834
2,843 (9)
Nonrecurring acquisition related
expenses........................... 6,000 -- -- 6,000
Corporate overhead allocated from
Iochpe-Maxion...................... -- 10,429 -- 10,429
Foreign exchange losses.............. -- 9,952 -- 9,952
---------- -------- -------- ----------
1,934,467 357,903 15,873 2,308,243
---------- -------- -------- ----------
Income (loss) before income taxes,
equity in net earnings of
unconsolidated subsidiary and
affiliates and extraordinary loss.... 190,581 (92,695) (33,489) 64,397
Provision (benefit) for income taxes... 65,897 (20,281) (10,248)(10) 35,368
---------- -------- -------- ----------
Income (loss) before equity in net
earnings of unconsolidated subsidiary
and affiliates and extraordinary
loss................................. 124,684 (72,414) (23,241) 29,029
Equity in net earnings of
unconsolidated subsidiary and
affiliates........................... 4,458 -- -- 4,458
---------- -------- -------- ----------
Net income (loss)...................... 129,142 (72,414) (23,241) 33,487
Preferred stock dividends.............. 2,012 -- -- 2,012
---------- -------- -------- ----------
Net income (loss) available for common
stockholders......................... $ 127,130 $(72,414) $(23,241) $ 31,475
========== ======== ======== ==========
Net Income per Common Share:
Primary.............................. $ 2.76 $ 0.68
========== ==========
Fully diluted........................ $ 2.30 $ 0.62
========== ==========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding:
Primary.............................. 46,126 46,126
========== ==========
Fully diluted........................ 56,684 56,684
========== ==========
</TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS (1)
---------------------------------------------------------
MAXION
COMPANY ACQUISITION(2) ADJUSTMENTS PRO FORMA
---------- -------------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Net sales............................ $2,068,427 $265,208 $(19,587)(3) $2,316,019
1,971 (4)
Finance income....................... -- -- -- --
---------- -------- -------- ----------
2,068,427 265,208 (17,616) 2,316,019
---------- -------- -------- ----------
Costs and Expenses:
Cost of goods sold................... 1,627,716 237,562 (19,587)(3) 1,853,066
6,048 (5)
1,327 (6)
Selling, general and administrative
expenses........................... 186,752 60,903 1,971 (4) 248,922
(704)(7)
Engineering expenses................. 27,350 4,869 -- 32,219
Interest expense, net................ 31,490 33,503 23,271 (8) 88,264
Other expense, net................... 9,654 685 704 (7) 13,886
2,843 (9)
Nonrecurring acquisition related
expenses........................... 6,000 -- -- 6,000
Corporate overhead allocated from
Iochpe-Maxion...................... -- 10,429 -- 10,429
Foreign exchange losses.............. -- 9,952 -- 9,952
---------- -------- -------- ----------
1,888,962 357,903 15,873 2,262,738
---------- -------- -------- ----------
Income (loss) before income taxes,
equity in net earnings of
unconsolidated subsidiary and
affiliates and extraordinary loss.... 179,465 (92,695) (33,489) 53,281
Provision (benefit) for income taxes... 61,563 (20,281) (10,248)(10) 31,034
---------- -------- -------- ----------
Income (loss) before equity in net
earnings of unconsolidated subsidiary
and affiliates and extraordinary
loss................................. 117,902 (72,414) (23,241) 22,247
Equity in net earnings of
unconsolidated subsidiary and
affiliates........................... 11,240 -- -- 11,240
---------- -------- -------- ----------
Net income (loss)...................... 129,142 (72,414) (23,241) 33,487
Preferred stock dividends.............. 2,012 -- -- 2,012
---------- -------- -------- ----------
Net income (loss) available for common
stockholders......................... $ 127,130 $(72,414) $(23,241) $ 31,475
========== ======== ======== ==========
</TABLE>
2
<PAGE> 3
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
CONSOLIDATED
------------------------------------------------------
MAXION
COMPANY ACQUISITION(2) ADJUSTMENTS PRO FORMA
-------- -------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Net sales.............................. $453,884 $ 48,172 $(1,212)(3) $501,122
278 (4)
Finance income......................... 16,808 -- -- 16,808
-------- -------- -------- --------
470,692 48,172 (934) 517,930
-------- -------- -------- --------
Costs and Expenses:
Cost of goods sold..................... 360,144 60,051 (1,212)(3) 419,481
166 (5)
332 (6)
Selling, general and administrative
expenses............................. 49,439 8,608 278 (4) 58,250
(75)(7)
Engineering expenses................... 6,979 1,022 -- 8,001
Interest expense (income), net......... 15,052 (5,485) 6,022 (8) 15,589
Other expense (income), net............ 2,466 (1,414) 75 (7) 1,838
711 (9)
Nonrecurring expenses.................. 5,923 -- -- 5,923
Corporate overhead allocated from
Iochpe-Maxion........................ -- 1,437 -- 1,437
Foreign exchange losses................ -- 1,977 -- 1,977
-------- -------- -------- --------
440,003 66,196 6,297 512,496
-------- -------- -------- --------
Income (loss) before income taxes, equity
in net earnings of unconsolidated
subsidiary and affiliates and
extraordinary loss..................... 30,689 (18,024) (7,231) 5,434
Provision (benefit) for income taxes..... 10,867 (5,508) (2,210)(10) 3,149
-------- -------- -------- --------
Income (loss) before equity in net
earnings of unconsolidated subsidiary
and affiliates and extraordinary
loss................................... 19,822 (12,516) (5,021) 2,285
Equity in net earnings of unconsolidated
subsidiary and affiliates.............. 773 -- -- 773
-------- -------- -------- --------
Income (loss) before extraordinary
loss................................... $ 20,595 $(12,516) $(5,021) $ 3,058
======== ======== ======= ========
Income (Loss) before Extraordinary Loss
per Common Share:
Primary................................ $ 0.40 $ 0.06
======== ========
Fully diluted.......................... $ 0.37 $ 0.06
======== ========
Weighted Average Number of Common and
Common Equivalent Shares Outstanding:
Primary................................ 51,292 51,292
======== ========
Fully diluted.......................... 57,071 57,071
======== ========
</TABLE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS(1)
------------------------------------------------------
MAXION
COMPANY ACQUISITION(2) ADJUSTMENTS PRO FORMA
-------- -------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Net sales.............................. $453,884 $ 48,172 $(1,212)(3) $501,122
278 (4)
Finance income......................... -- -- -- --
-------- -------- -------- --------
453,884 48,172 (934) 501,122
-------- -------- -------- --------
Costs and Expenses:
Cost of goods sold..................... 360,144 60,051 (1,212)(3) 419,481
166 (5)
332 (6)
Selling, general and administrative
expenses............................. 46,246 8,608 278 (4) 55,057
(75)(7)
Engineering expenses................... 6,979 1,022 -- 8,001
Interest expense (income), net......... 5,964 (5,485) 6,022 (8) 6,501
Other expense (income), net............ 2,443 (1,414) 75 (7) 1,815
711 (9)
Nonrecurring expenses.................. 5,923 -- -- 5,923
Corporate overhead allocated from
Iochpe-Maxion........................ -- 1,437 -- 1,437
Foreign exchange losses................ -- 1,977 -- 1,977
-------- -------- -------- --------
427,699 66,196 6,297 500,192
-------- -------- -------- --------
Income (loss) before income taxes, equity
in net earnings of unconsolidated
subsidiary and affiliates and
extraordinary loss..................... 26,185 (18,024) (7,231) 930
Provision (benefit) for income taxes..... 9,033 (5,508) (2,210)(10) 1,315
-------- -------- -------- --------
Income (loss) before equity in net
earnings of unconsolidated subsidiary
and affiliates and extraordinary
loss................................... 17,152 (12,516) (5,021) (385)
Equity in net earnings of unconsolidated
subsidiary and affiliates.............. 3,443 -- -- 3,443
-------- -------- -------- --------
Income (loss) before extraordinary
loss................................... $ 20,595 $(12,516) $(5,021) $ 3,058
======== ======== ======= ========
</TABLE>
3
<PAGE> 4
- ---------------
(1) The Pro Forma Income Statement Data under the caption "Equipment
Operations" reflects the consolidation of all operations of the Company and
its subsidiaries with the exception of Agricredit, which is included using
the equity method of accounting.
(2) Represents the actual results of operations of the Acquired Business for
fiscal 1995 and the three months ended March 31, 1996.
(3) To reflect the elimination of sales of machinery and equipment from the
Company to the Acquired Business of $5,032 and from the Acquired
Business to the Company of $14,555 for the year ended December 31, 1995
and from the Company to the Acquired Business of $290 and from the
Acquired Business to the Company of $922 for the three months ended
March 31, 1996.
(4) To reflect the elimination of sales commissions paid by the Acquired
Business to the Company which the Acquired Business recorded as a
reduction to net sales and the Company recorded as a reduction to selling,
general and administrative expenses.
(5) To reflect a write-up in the cost of engines purchased from the
Iochpe-Maxion engine division based on an imputed profit margin on the
interdivisional transfers. The Acquired Business' historical financial
statements under the heading "Maxion Acquisition" in the Pro Forma
Consolidated Statements of Income included herein reflect engine prices
at the cost to Iochpe-Maxion S.A. without such imputed profit margin.
(6) To reflect increased depreciation expense related to the write-up over book
value of the acquired fixed assets based on management's preliminary
estimates of the fair value.
(7) To reflect the elimination of royalties paid by the Acquired Business to
the Company which the Acquired Business recorded as selling, general and
administrative expenses and the Company recorded as other income.
(8) To reflect the increase in interest expense with respect to the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Interest and fees incurred on the Company's
revolving credit facility in connection with the
financing of the Maxion Acquisition in the
principal amount of $260 million at an interest
rate of 7.6% for the year ended December 31, 1995
and 6.7% for the three months ended March 31,
1996. ............................................ $19,760 $4,355
Increase in interest expense and fees on
borrowings incurred in connection with the March
Offering and the replacement of the Old Credit
Facility with the New Credit Facility. Excludes
the write-off of capitalized fees and expenses
associated with the refinancing of the Old Credit
Facility, which were $3.5 million, net of taxes,
and which were recorded as an extraordinary loss
in the first quarter of 1996. .................... 3,511 1,667
------- ------
$23,271 $6,022
======= ======
</TABLE>
(9) To reflect amortization of the preliminary estimate of the excess of cost
over net assets acquired related to the Maxion Acquisition.
(10) To reflect the additional tax benefit related to the net effect of the pro
forma adjustments recorded at the statutory rate of 30.6% in effect at
December 31, 1995 and March 31, 1996.
4
<PAGE> 5
Pro Forma Consolidated Balance Sheet
As of March 31, 1996
<TABLE>
<CAPTION>
Consolidated
---------------------------------------------------
Historical Adjustments Pro Forma
--------------- -------------- --------------
ASSETS (In thousands)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 27,207 $ - $ 27,207
Accounts and notes receivable, net of allowances. . . . . 753,653 27,000 (2) 780,653
Receivables from unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . . . . . 6,041 - 6,041
Credit receivables, net . . . . . . . . . . . . . . . . . 197,790 - 197,790
Inventories, net . . . . . . . . . . . . . . . . . . . . 429,704 40,000 (2) 469,704
Other current assets . . . . . . . . . . . . . . . . . . 57,625 14,221 (2) 71,846
---------- -------- ----------
Total current assets . . . . . . . . . . . . . . . . . . 1,472,020 81,221 1,553,241
Noncurrent credit receivables, net . . . . . . . . . . . . 390,549 - 390,549
Property, plant and equipment, net . . . . . . . . . . . . 143,696 96,265 (2) 239,961
Investments in unconsolidated subsidary and affiliates . . 45,975 - 45,975
Other assets . . . . . . . . . . . . . . . . . . . . . . . 49,822 - 49,822
Intangible assets, net . . . . . . . . . . . . . . . . . . 104,158 113,735 (2) 217,893
---------- -------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $2,206,220 $291,221 $2,497,441
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt. . . . . . . . . . . . . $ 365,193 $ - $ 365,193
Accounts payable . . . . . . . . . . . . . . . . . . . . . 277,749 17,000 (2) 294,749
Payables to unconsolidated subsidiary and affiliates . . . 26,561 - 26,561
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 218,353 14,221 (2) 232,574
Other current liabilities. . . . . . . . . . . . . . . . . 12,153 - 12,153
---------- -------- ----------
Total current liabilities . . . . . . . . . . . . . . . 900,009 31,221 931,230
---------- -------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 602,533 260,000 (3) 862,533
Convertible subordinated debentures . . . . . . . . . . . . . 29,926 - 29,926
Postretirement health care benefits . . . . . . . . . . . . . 23,799 - 23,799
Other noncurrent liabilities . . . . . . . . . . . . . . . . 39,296 - 39,296
---------- -------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 1,595,563 291,221 1,886,784
Stockholders' Equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . 519 - 519
Additional paid-in capital . . . . . . . . . . . . . . . . 315,264 - 315,264
Retained earnings. . . . . . . . . . . . . . . . . . . . . 304,292 - 304,292
Unearned compensation . . . . . . . . . . . . . . . . . . (19,418) - (19,418)
Additional minimum pension liability . . . . . . . . . . . (2,619) - (2,619)
Cumulative translation adjustment. . . . . . . . . . . . . 12,619 - 12,619
---------- -------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . 610,657 - 610,657
---------- -------- ----------
Total liabilities and stockholders' equity . . . . . . . $2,206,220 $291,221 $2,497,441
========== ======== ==========
<CAPTION>
Equipment Operations (1)
-------------------------------------------------
Historical Adjustments Pro Forma
ASSETS -------------- ------------- -------------
(In thousands)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 24,595 $ - $ 24,595
Accounts and notes receivable, net of allowances. . . . . 753,653 27,000 (2) 780,653
Receivables from unconsolidated subsidiary and
affiliates . . . . . . . . . . . . . . . . . . . . . . 9,690 - 9,690
Credit receivables, net . . . . . . . . . . . . . . . . . - - -
Inventories, net . . . . . . . . . . . . . . . . . . . . 429,704 40,000 (2) 469,704
Other current assets . . . . . . . . . . . . . . . . . . 54,266 14,221 (2) 68,487
---------- -------- ----------
Total current assets . . . . . . . . . . . . . . . . . . 1,271,908 81,221 1,353,129
Noncurrent credit receivables, net . . . . . . . . . . . . - - -
Property, plant and equipment, net . . . . . . . . . . . . 143,348 96,265 (2) 239,613
Investments in unconsolidated subsidary and affiliates . . 108,598 - 108,598
Other assets . . . . . . . . . . . . . . . . . . . . . . . 49,822 - 49,822
Intangible assets, net . . . . . . . . . . . . . . . . . . 104,158 113,735 (2) 217,893
---------- -------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . $1,677,834 $291,221 $1,969,055
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt. . . . . . . . . . . . . $ - $ - $ -
Accounts payable . . . . . . . . . . . . . . . . . . . . 273,708 17,000 (2) 290,708
Payables to unconsolidated subsidiary and affiliates . . . 26,561 - 26,561
Accrued expenses . . . . . . . . . . . . . . . . . . . . . 208,231 14,221 (2) 222,452
Other current liabilities. . . . . . . . . . . . . . . . . 12,153 - 12,153
---------- -------- ----------
Total current liabilities . . . . . . . . . . . . . . . 520,653 31,221 551,874
---------- -------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 462,533 260,000 (3) 722,533
Convertible subordinated debentures . . . . . . . . . . . . . 29,926 - 29,926
Postretirement health care benefits . . . . . . . . . . . . . 23,799 - 23,799
Other noncurrent liabilities . . . . . . . . . . . . . . . . 30,266 - 30,266
---------- -------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 1,067,177 291,221 1,358,398
Stockholders' Equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . 519 - 519
Additional paid-in capital . . . . . . . . . . . . . . . . 315,264 - 315,264
Retained earnings. . . . . . . . . . . . . . . . . . . . . 304,292 - 304,292
Unearned compensation . . . . . . . . . . . . . . . . . . (19,418) - (19,418)
Additional minimum pension liability . . . . . . . . . . . (2,619) - (2,619)
Cumulative translation adjustment. . . . . . . . . . . . . 12,619 - 12,619
---------- -------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . 610,657 - 610,657
---------- -------- ----------
Total liabilities and stockholders' equity . . . . . . . . $1,677,834 $291,221 $1,969,055
========== ======== ==========
</TABLE>
5
<PAGE> 6
(1) The Balance Sheet Data captioned "Equipment Operations" reflects the
consolidation of all operations of the Company and its subsidiaries with the
exception of Agricredit, which is included using the equity method of
accounting.
(2) To reflect the preliminary purchase price allocation of the net assets
acquired related to the Maxion Acquisition.
(3) To reflect the increase in outstanding borrowings as a result of the Maxion
Acquisition.
6
<PAGE> 1
EXHIBIT 99.3
AGREEMENT
BETWEEN
AGCO CORPORATION
AND
IOCHPE-MAXION S.A.
JUNE 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
FORMATION AND CAPITALIZATION OF NEWCO
1.1 Formation of Newco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumption of Liabilities by Newco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Working Capital Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Post-Closing Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
PURCHASE OF SHARES IN NEWCO BY MAXION AND AGCO AND CLOSING
2.1 Issuance of Newco Shares to Maxion and AGCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Split of Newco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Deliveries at Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAXION
3.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Power and Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 No Violation; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Corporate Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.9 Division Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.10 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Notes and Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.13 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14 Contracts and Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.15 Dealers and Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.16 Products and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.17 Ordinary Course of the Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.18 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.19 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.20 Permits and Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.21 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.23 Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.24 Compensation Structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.25 Labor-Related Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.26 Transactions With Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.27 Propriety of Past Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.28 Insolvency Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.29 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AGCO
4.1 Organization and Good Standing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Power and Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 No Violation; Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
COVENANTS OF MAXION PENDING CLOSING
5.1 Conduct of the Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 Access to the Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.4 Approvals and Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Further Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF AGCO
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Consents and Approvals of Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 No Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Trademark License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.9 Engine Supply Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Shared Services Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.14 Permits and Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.15 Ordinary Course of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.16 Real Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.17 Pay-Off Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.18 Evidence Regarding Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.19 Other Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF MAXION
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Performance of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Board Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 No Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
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<TABLE>
<S> <C> <C>
7.6 Trademark License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 Engine Supply Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.8 Shared Services Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.9 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.10 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.11 Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VIII
OTHER AGREEMENTS OF THE PARTIES
8.1 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 Restrictive Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Environmental. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Brokers; Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.5 Best Efforts; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.7 Transition Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.8 Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.9 United States GAAP Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Maxion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 Indemnification by AGCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3 Administration of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.4 Limitation on Indemnification Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE X
TERMINATION
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.2 Cut-Off Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI
MISCELLANEOUS
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.2 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.4 Waiver; Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.8 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.9 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.11 Reference with Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
<S> <C> <C>
11.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.13 Definition of Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.14 Multiple Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SCHEDULES
Schedule 1.2-1 Changes to March 31, 1996 Balance Sheet
Schedule 1.2-2 Permitted Liens
Schedule 1.2(d) Real Property
Schedule 1.3(b) Excluded Contracts
Schedule 1.4 Certain Assumed Liabilities
Schedule 1.6 Closing Adjustment Schedule Accounts
Schedule 2.1 Funding Timetable
Schedule 3.4(d) Required Consents
Schedule 3.7 Financial Statements
Schedule 3.9 Division Assets
Schedule 3.11 Intellectual Property
Schedule 3.14 Contracts
Schedule 3.15 Dealers and Suppliers
Schedule 3.16 Products and Services; Warranty
Schedule 3.17 Exceptions to Ordinary Course of Business
Schedule 3.18 Litigation
Schedule 3.20 Permits and Licenses
Schedule 3.22 Insurance
Schedule 3.23 Environmental
Schedule 3.24 Key Employees
Schedule 3.25 Labor Matters
Schedule 8.1 Excluded Employees
Schedule 8.3(c) Wastewater Treatment Facilities
Schedule 8.8 Easements
EXHIBITS
Exhibit A Working Capital Adjustments
Exhibit B Trademark License Agreement
Exhibit C Engine Supply Agreement
Exhibit D Shared Services Agreement
Exhibit E Opinion of Maxion Counsel
Exhibit F Opinion of AGCO Counsel
</TABLE>
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<PAGE> 6
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 27th
day of June, 1996 (the "Effective Date"), by and between IOCHPE-MAXION S.A., a
Brazilian company ("Maxion"), and AGCO CORPORATION, a Delaware corporation
("AGCO"). For purposes of this Agreement, the term "AGCO" shall include any
person or entity controlled, directly or indirectly, by AGCO.
W I T N E S S E T H:
WHEREAS, Maxion is engaged, through its agricultural equipment and
industrial tractor division (the "Division"), in the business of developing,
manufacturing, distributing and selling agricultural equipment, industrial
tractors, and related products and parts (the "Business"); and
WHEREAS, pursuant to the terms and conditions set forth herein, Maxion
desires to sell to AGCO, and AGCO desires to purchase from Maxion,
substantially all of the assets used or employed by Maxion in connection with
the operation of the Business and to assume certain specific liabilities
related to the Business;
NOW, THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual
promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
FORMATION AND CAPITALIZATION OF NEWCO
1.1 FORMATION OF NEWCO. Prior to the "Closing" (as hereinafter
defined), Maxion shall form a wholly owned (except for a nominal amount of
shares which shall be owned by a nominee of Maxion), direct Brazilian
subsidiary ("Newco"), with issued capital stock of 10,000 shares. For purposes
of this Agreement, the term "Newco" shall include any successor to Newco.
Maxion shall not permit Newco to issue any shares of its capital stock except
as expressly provided in this Agreement.
1.2 TRANSFER OF ASSETS. At the Closing, and subject to Section
2.1 hereof, Maxion shall transfer, assign, convey and deliver to Newco, all of
the assets, properties and rights of Maxion (other than the "Excluded Assets"
as defined in Section 1.3 hereof) which are used or employed in the operation
of the Business (collectively, the "Division Assets"), including, without
limitation, all assets, properties and rights reflected on the balance sheet of
the Division as of March 31, 1996 (the "March 31, 1996 Balance Sheet") included
in the "Financial Statements" (as defined in Section 3.7 hereof), with only
such changes since the date thereof: (i) as shall have occurred in the
ordinary course of the Business consistent with past practices; or (ii) as
listed on Schedule 1.2-1. Maxion shall transfer, assign, convey and deliver
the Division Assets to Newco free and clear of all liens, claims, security
interests and other encumbrances, except for only the liens more particularly
described on Schedule 1.2-2 hereto (collectively, the "Permitted Liens"). For
Brazilian tax law purposes, Maxion shall transfer the Division Assets to Newco
(and record the Division Assets on the books and records of Newco) at their
book values as of the Closing (which values shall reflect the April 25, 1996
reappraised value of fixed assets at approximately R$98,000,000) and shall
<PAGE> 7
pay all taxes associated therewith in a timely manner. Without limiting the
generality of the foregoing, the Division Assets shall include the following
assets, properties and rights used or employed in the operation of the
Business:
(a) all machinery, equipment, tooling, office equipment,
vehicles, furniture, fixtures and other tangible
personal property;
(b) all accounts receivable (other than any accounts
receivable originating from Cuba or Iraq), notes
receivable and prepaid expenses;
(c) all inventories, including all finished goods,
work-in-process, raw materials, spare parts and
supplies;
(d) the real property, including all buildings,
improvements, structures and fixtures located
thereon and all easements and other rights relating
thereto, used by the Division located in Canoas and
Santa Rosa, Rio Grande do Sul, Brazil, as more
particularly described on Schedule 1.2(d);
(e) all patents, copyrights, know how, technical
documentation, trade secrets, trademarks, service
marks, trade names and other intellectual property
(together with all applications therefor,
collectively, "Intellectual Property"), whether
owned or licensed;
(f) all contracts, agreements and other instruments,
including all dealer contracts and distribution
agreements, relating to the Business, except any
such contracts, agreements and other instruments
which are required to be listed on Schedule 3.14 to
make the representations and warranties contained in
Section 3.14 hereof true and correct and which are
not listed thereon;
(g) all licenses, permits and authorizations relating to
the Business;
(h) Maxion's ownership interest in Consorcio Massey
Ferguson;
(i) all books, records and documents relating to Newco
or the Division Assets, except to the extent Maxion
is required to retain any such books, records or
documents pursuant to applicable law (in which case
Newco shall be afforded access to and copies of such
retained books, records and documents in connection
with the operation of the Business); and
(j) to the extent transferable, all tax credits relating
to the Business.
Maxion shall be solely responsible for all liabilities and costs associated
with the transfer and assignment of the Division Assets to Newco.
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<PAGE> 8
1.3 EXCLUDED ASSETS. Notwithstanding the provisions of Section
1.2 hereof, the term "Division Assets" shall not include any of the following
assets, properties and rights (collectively, the "Excluded Assets"):
(a) all cash and cash equivalents;
(b) all contracts, agreements and other instruments
listed on Schedule 1.3(b);
(c) all insurance policies maintained by Maxion (other
than insurance proceeds relating to any losses to
Division Assets occurring prior to the Closing);
(d) all tax credits allocable to the raw materials and
component parts contained in any products sold by
the Division prior to the Closing; and
(e) any assets used or employed primarily in connection
with Maxion's engine production division and
retrofitting division, provided that such assets are
not reflected on the Financial Statements and,
subject to Section 8.7 hereof, such assets are not
located on any of the real property described in
Section 1.2(d) hereof.
1.4 ASSUMPTION OF LIABILITIES BY NEWCO. Subject to Sections 1.5
and 1.6 hereof, at the Closing Newco shall only assume the liabilities and
obligations of Maxion (i) which arise with respect to any period of time after
the Closing under the contracts being assigned to Newco pursuant to Section
1.2(f) hereof or (ii) which were incurred in the ordinary course of the
Business consistent with past practices and are reflected on Schedule 1.4
hereto (all of such liabilities being assumed by Newco are hereinafter referred
to collectively as the "Assumed Liabilities"). Notwithstanding the foregoing,
the term "Assumed Liabilities" shall not include (and Newco shall not assume or
agree to pay) any of the following "Excluded Liabilities":
(a) any indebtedness of Maxion or the Division for
borrowed money, including all amounts outstanding
under any bank or other lending institution loan
agreements;
(b) any liabilities of Maxion or the Division related to
(i) any former employee of the Business, (ii) any
existing employee of the Business that is not
performing services for or on behalf of the Business
as of the Closing, except to the extent otherwise
required by Brazilian law, or (iii) any existing
employee of the Business to the extent that such
liability relates to events or acts occurring prior
to the Closing, except to the extent otherwise
required by Brazilian law;
(c) any liabilities of Maxion or the Division relating
to or arising from any violation of or noncompliance
with any federal, state or local law, statute, rule
or regulation applicable to Maxion, the Division or
the Business to the extent that such liability
exists prior to, or relates to
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<PAGE> 9
events or acts occurring prior to, the Closing,
including any such laws, statutes, rules and
regulations related to environmental, employment,
and health and safety matters;
(d) any liabilities of Maxion or the Division with
respect to any taxes (provided the tax credits
described in Section 1.3(d) hereof may be applied
thereto), levies, license fees or withholdings of
any kind related to any date or period of time prior
to the Closing;
(e) any liability of Maxion or the Division arising
under any agreement, contract or other document to
the extent such liability relates to events
occurring prior to the Closing, except to the extent
any such amounts are reflected on the March 31, 1996
Balance Sheet, with only such changes since the date
thereof as shall have occurred in the ordinary
course of the Business consistent with past
practices or as otherwise agreed by AGCO and Maxion;
(f) any liability of Maxion or the Division under any
tort or similar claim to the extent such liability
relates to events occurring prior to the Closing;
(g) any liability of Maxion or the Division that has not
been incurred in the ordinary course of the Business
or does not relate to the Business; and
(h) any liability (other than product warranty claims of
the Division) relating to any products manufactured
or sold by Maxion or the Division prior to the
Closing, including, without limitation, any product
liability claims.
Notwithstanding anything else herein to the contrary, Maxion shall be
responsible for, and shall timely pay and discharge when due, all of the
Excluded Liabilities.
1.5 WORKING CAPITAL ADJUSTMENTS. Maxion and AGCO hereby agree
that the value of inventory and accounts receivable of the Business being
transferred to Newco pursuant to Section 1.2 hereof may be in excess of the
value intended to be contributed to Newco by Maxion. In addition, the value of
the accounts payable of the Business being assumed by Newco pursuant to Section
1.4 hereof may be in excess of the value intended in connection with such
contribution. Accordingly, Maxion and AGCO hereby agree that such items shall
be adjusted after the Closing in accordance with the provisions of Exhibit A
attached hereto.
1.6 POST-CLOSING ADJUSTMENTS.
(a) AGCO and Maxion agree that the amount of the
"Contributed Consideration" (as defined in Section 2.1(b) hereof) shall be
adjusted subsequent to the Closing in the manner set forth in this Section 1.6.
(b) Within 90 days following the Closing, Newco shall
prepare and submit to Maxion a financial schedule (the "Closing Adjustment
Schedule") setting forth the amount
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<PAGE> 10
as of the Closing of the types of assets and liabilities of the Division
described on Schedule 1.6 hereto. The Closing Adjustment Schedule shall be
prepared in accordance with Brazilian generally accepted accounting principles
applied consistently with past practices. Upon receipt of the Closing
Adjustment Schedule, Maxion shall have a period of fifteen (15) days to notify
Newco of any objections it has with respect to any of the information set forth
on the Closing Adjustment Schedule; and thereafter Newco and Maxion shall
attempt in good faith to resolve any such objections. In the event that the
parties are unable to resolve any such objections, the dispute shall be
submitted to a mutually agreeable independent nationally recognized accounting
firm, which shall resolve such dispute. The parties shall equally share the
expense of any such accounting firm.
(c) Within five (5) days following the later of (i) the
expiration of the fifteen (15) day period during which Maxion may object to the
Closing Adjustment Schedule, or (ii) the resolution of any objections filed by
Maxion with respect to the Closing Adjustment Schedule:
(x) Maxion shall pay to Newco the amount of
any excess of liabilities over the
amount of assets, as reflected on the
Closing Adjustment Schedule, or
(y) Newco shall pay to Maxion the amount of
any excess of assets over the amount of
liabilities, as reflected on the Closing
Adjustment Schedule.
(d) Nothing contained in the Closing Adjustment Schedule
is intended to limit or restrict the amount, type or class of assets being
transferred by Maxion to Newco pursuant to Section 1.2 hereof.
ARTICLE II
PURCHASE OF SHARES IN NEWCO BY MAXION AND AGCO AND CLOSING
2.1 ISSUANCE OF NEWCO SHARES TO MAXION AND AGCO.
(a) Subject to the terms and conditions contained
herein, Maxion shall contribute to Newco an amount equal to R$147,685,340.14
in exchange for 100,000,000 shares of the capital stock of Newco, being
represented by (i) the real estate transferred to Newco pursuant to Section 1.2
hereof and more particularly described on Schedule 1.2(d) hereto and (ii) the
receivable held by Maxion against Newco in an amount, subject to Exhibit A
hereto, equal to the assets transferred to Newco pursuant to Section 1.2 hereof
other than the real estate referenced in subsection (i) above (such receivable
being created upon the transfer of such assets to Newco pursuant to Section 1.2
hereof).
(b) Subject to the terms and conditions contained
herein, and in accordance with Schedule 2.1 hereto, at the Closing AGCO shall
cause an indirect, wholly owned Brazilian subsidiary ("AGCO Brazil") to
contribute to Newco the "Contributed Consideration" (as hereinafter defined) in
exchange for 56,811,581 shares (to be adjusted for currency fluctuations to the
time of funding) of the capital stock of Newco, and Newco shall register such
shares in the name of AGCO Brazil in the Book of Registry of Nominative Shares
of Newco. For purposes of this Agreement, "Contributed Consideration" shall
mean
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<PAGE> 11
an amount in reais equal to U.S. $260,000,000 (to be calculated in accordance
with the rate of exchange for which such amount will be converted into reais on
the date of such contribution by AGCO Brazil).
2.2 SPLIT OF NEWCO. At the Closing, Maxion and AGCO Brazil shall
effect a split of Newco pursuant to Brazilian Law No. 6.404/76 such that: (a)
Maxion receives the Contributed Consideration: (i) of which the total amount
(the "Debt Repayment Amount") necessary to repay in full the obligations of
Maxion more particularly described on Schedule 1.2-2 hereto shall be paid
directly to the appropriate lenders of Maxion (the "Lenders") on behalf of
Maxion, all in accordance with Schedule 1.2-2 hereto, and (ii) R$1,509,759.31
of which shall be paid directly to AGCO (or retained by Newco for the account
of AGCO) on behalf of Maxion for certain commission and royalty obligations
owed by Maxion to AGCO; (b) the shares of Newco owned by Maxion and Maxion's
nominee shall be cancelled; (c) AGCO Brazil and one (1) nominee of AGCO remain
the sole owners of all the issued and outstanding shares of capital stock of
Newco; and (d) Newco retains sole ownership of all of the Division Assets, free
and clear of all liens, claims, security interests and other encumbrances
(other than the Permitted Liens, which will be released upon the Lenders'
compliance with the terms of their respective pay-off letters delivered
pursuant to Section 6.18 hereof).
2.3 TRANSFER TAXES. Any and all transfer, sales, stamp,
documentation, income or other taxes, assessments or fees which may arise or
result from the transfer of the Division Assets to Newco, the split of Newco or
any other transaction contemplated herein shall be the responsibility of, and
shall be promptly and timely paid by, Maxion.
2.4 CLOSING. Provided that all of the conditions contained in
Articles VI and VII hereof have been satisfied or waived in accordance
therewith, the closing of the transactions provided for in this Agreement (the
"Closing") shall occur at the offices of Maxion located at Av. das Nacoes
Unidas, 17.891 - 10# andar, 04795-100 - Seo Paulo - SP, Federative Republic of
Brazil, at 10:00 a.m. local time on June 28, 1996, or on such other date or at
such other place as the parties hereto shall mutually agree.
2.5 DELIVERIES AT CLOSING. At the Closing, each of Maxion and
AGCO shall deliver to the other all of the documents, instruments, certificates
and opinions required to be delivered by it pursuant to Article VI and Article
VII hereof, respectively.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MAXION
Notwithstanding any independent investigation or verification
undertaken by AGCO or its representatives (including, without limitation, any
environmental audits or reports), Maxion hereby represents and warrants to AGCO
as follows:
3.1 ORGANIZATION AND GOOD STANDING. Maxion is a corporation duly
organized, validly existing and in good standing under the laws of Brazil.
Maxion is duly qualified to conduct business as a corporation and is in good
standing in each jurisdiction in which such qualification is required as a
result of the conduct of its businesses or the ownership of its properties. As
of the Closing, Newco shall be a corporation duly organized, validly existing
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<PAGE> 12
and in good standing under the laws of Brazil, and, subject to Section 3.20,
Newco shall be duly qualified to conduct business as a corporation and in good
standing in each jurisdiction in which such qualification is required as a
result of the conduct of the Business and the ownership of the Division Assets.
3.2 POWER AND AUTHORIZATION. Maxion has full power and authority
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Maxion and Maxion's performance of its obligations hereunder
have been duly authorized by all necessary corporate action on the part of
Maxion. No other action is necessary to authorize the execution, delivery and
performance of this Agreement by Maxion.
3.3 BINDING EFFECT. This Agreement constitutes the legal, valid
and binding obligation of Maxion enforceable in accordance with its terms.
3.4 NO VIOLATION; CONSENTS. Neither the execution and delivery of
this Agreement by Maxion nor the performance by Maxion of all of its
obligations hereunder will:
(a) violate or conflict with any provision of the Bylaws
of Maxion;
(b) violate, breach or otherwise constitute or give rise
to a default under any material contract, commitment
or other obligation to or by which Maxion or the
Division is a party or is bound;
(c) violate or conflict with any statute, ordinance,
law, rule, regulation, judgment, order or decree of
any court or other governmental or regulatory
authority to which Maxion or the Division is
subject; or
(d) except as set forth on Schedule 3.4(d), require any
consent, approval or authorization of, notice to, or
filing, recording, registration or qualification
with any person, entity, court or governmental or
regulatory authority.
3.5 CAPITALIZATION. As of the Closing, only 10,000 shares of the
capital stock of Newco shall be issued and outstanding, all of which shall be
owned by Maxion (except for a nominal amount of shares which shall be owned by
a nominee of Maxion), and all of such shares shall have been duly authorized
and validly issued, and shall be fully paid and non-assessable. Except for the
shares to be issued to Maxion and AGCO Brazil pursuant to this Agreement, as of
the Closing there shall be no outstanding options, warrants, calls, rights,
commitments or agreement obligating Maxion or Newco to issue, deliver or sell
additional shares of Newco's capital stock. Upon the issuance of such shares
to Maxion and AGCO Brazil pursuant to this Agreement, 100,010,000 of the issued
and outstanding shares of the capital stock of Newco shall be owned by Maxion
(except for a nominal amount of such shares which shall be owned by a nominee
of Maxion) and 56,811,581 (to be adjusted for currency fluctuations to the time
of funding) of such issued and outstanding shares shall be owned by AGCO Brazil
(except for a nominal amount of shares which shall be owned by a nominee of
AGCO).
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<PAGE> 13
3.6 CORPORATE RECORDS. The books and records of the Division
heretofore furnished to AGCO by Maxion are true, correct and complete in all
material respects, and the books and records of Newco to be furnished to AGCO
by Maxion prior to or at the Closing shall be true, correct and complete in all
material respects.
3.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.7 are
true, correct and complete copies of: (a) audited financial statements
(including a balance sheet, income statement and statement of cash flow) with
respect to the Division for the years ended December 31, 1995, and December 31,
1994; and (b) reviewed financial statements (including a balance sheet, income
statement and statement of cash flow) with respect to the Division for the
fiscal quarters ended March 31, 1996, and March 31, 1995 (such audited and
reviewed financial statements being referred to collectively as the "Financial
Statements"). The Financial Statements were prepared in accordance with
Brazilian generally accepted accounting principles consistently applied
("GAAP"), can be reconciled with the books and records of the Division, and
present fairly the financial position, results of operations and cash flow of
the Division as of the dates thereof and the periods covered thereby.
3.8 LIABILITIES. To the best of Maxion's knowledge, the Division
does not have as of the date hereof any debt, liability, or obligation of any
kind (whether accrued, absolute, known or unknown, contingent or otherwise),
other than (a) the Excluded Liabilities, and (b) those reflected on the March
31, 1996 Balance Sheet with only such changes thereto as have been incurred
since the date thereof in the ordinary course of the Business consistent with
past practices. Subject to Exhibit A, as of the Closing, Newco shall have no
debt, liability or obligation of any kind (whether accrued, absolute, known or
unknown, contingent or otherwise) other than the Assumed Liabilities.
3.9 DIVISION ASSETS. Schedule 3.9 describes all of the Division
Assets in a manner sufficient to permit AGCO to identify and locate such
Division Assets. The Division Assets constitute and include all of the assets,
properties and rights, other than the Excluded Assets, which are used or
employed in connection with the operation of, and which are required by AGCO to
operate, the Business (including, without limitation, the manufacturing of the
Division's products) in a manner consistent with past operations. As of the
date hereof Maxion has, and as of the Closing Newco shall have, good, valid and
marketable title to all of the Division Assets (other than the "Leased Assets"
as hereinafter defined), free and clear of all liens, charges, security
interests and other encumbrances, other than the Permitted Liens which will be
released in accordance with Section 2.2 hereof. Schedule 3.9 also identifies
all of the Division Assets which are leased from any person or entity
(collectively, the "Leased Assets"). As of the date hereof Maxion has, and as
of the Closing Newco shall have, the right to use all of the Leased Assets in
connection with the operation of the Business pursuant to valid and enforceable
lease agreements. As of the Closing, Newco shall own no assets other than the
Division Assets. All of the Division Assets are in good operating condition
and repair (normal wear and tear excepted).
3.10 REAL PROPERTY. Schedule 1.2(d) sets forth a complete and
correct list of all real property used in connection with the operation of the
Business and the fair market value of each such parcel of real property.
Maxion has (and Newco shall have as of the Closing) good, valid and marketable
title to all of such real property, free and clear of all liens, claims,
security interests and other encumbrances, other than the Permitted Liens which
will
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<PAGE> 14
be released at the Closing in accordance with Section 2.1 hereof. None of such
real property is subject to any easement, right of way, license, grant,
building or use restriction, exception, reservation, limitation or other
impediment which adversely interferes with or impairs the present and continued
use thereof in the operation of the Business in a manner consistent with past
practices.
3.11 INTELLECTUAL PROPERTY. Schedule 3.11 contains a complete list
of all Intellectual Property used by the Division in, or necessary to, the
operation of the Business. As of the date hereof, Maxion owns or holds a valid
license to use (and as of the Closing Newco shall own or hold a valid license
to use) all right, title and interest in and to, and has (and Newco shall have
as of the Closing) all rights to protect and use, all such Intellectual
Property. Schedule 3.11 identifies any such Intellectual Property which is
owned as of the date hereof by any person or entity other than Maxion (or will
be owned as of the Closing by any person or entity other than Newco) and any
Intellectual Property in or to which Maxion has granted any rights to any other
person or entity, and Schedule 3.11 briefly describes the terms of all such
arrangements. Maxion has not, in the operation of the Business, violated or
infringed any Brazilian patent, copyright, trade secret, trademark, service
mark or other intellectual property rights of any other person or entity, and
there are no claims pending or threatened against Maxion asserting that its use
of any Intellectual Property infringes the rights of any other person or
entity. Maxion has not made or asserted any claim of violation or infringement
of any Intellectual Property against any other person or entity, and Maxion is
not aware of any such violation or infringement.
3.12 NOTES AND ACCOUNTS RECEIVABLE. All notes receivable, accounts
receivable and other receivables of the Business reflected on the March 31,
1996 Balance Sheet, and all such receivables arising since the date thereof,
represent bona fide claims against debtors for sales made, services performed
or other charges arising on or before the date hereof, and all of the goods
delivered and services performed that gave rise to such receivables were
delivered or performed in accordance with the applicable orders, contracts, or
dealer or customer requirements. None of such receivables are subject to any
defenses, counterclaims or rights of offset, and the accounts receivable
included in the Division Assets shall be fully collectible in the ordinary
course of the Business. All such receivables are evidenced by written
agreements, invoices or other instruments, true and correct copies of which
will be made available to AGCO for examination prior to the Closing. The
Division has not written off any such receivables since March 31, 1996, except
in the ordinary course of the Business consistent with past practices.
3.13 INVENTORIES. The inventory included in the Division Assets
consists of items of a quality and quantity usable and salable in the ordinary
course of the Business, and the values of obsolete materials, excess materials
and materials below standard quality have been written down on the Division's
books and records on a consistent basis to realizable market value, or adequate
reserves have been provided therefor.
3.14 CONTRACTS AND COMMITMENTS. Schedule 3.14 contains a list
which identifies and briefly describes all written and oral contracts,
agreements, leases, guaranties or commitments relating to the Business to which
Maxion or the Division is a party or by which Maxion or the Division may be
bound (including, without limitation, distributorship agreements, dealer
agreements, and open purchase orders): (a) involving the payment by or to the
Business of more than $25,000 in any twelve (12) month period; (b) which may
not be
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<PAGE> 15
terminated by the Business on less than ninety (90) days' notice; or (c) which
is otherwise material to the operation of the Business. Each such contract,
agreement, guaranty or commitment was entered into in the ordinary course of
the Business, is in full force and effect, is valid and enforceable in
accordance with its terms, constitutes a legal and binding obligation of the
respective parties thereto, and is not the subject of any notice of default,
termination or partial termination. Maxion and the Division have complied in
all material respects with the provisions of each such contract, agreement,
guaranty and commitment and have submitted a true and complete copy of each
such document to AGCO for its review.
3.15 DEALERS AND SUPPLIERS. Schedule 3.15 contains a complete and
accurate list of all dealers and suppliers of the Business for the years 1994
and 1995, showing sales by dealer, by geography and by year with respect to
each product manufactured or sold in connection with the operation of the
Business. Maxion has not received any notice from any such dealer or supplier
that it intends to terminate, decrease or otherwise adversely alter its
relationship with the Division or its successor which would materially and
adversely affect the Business (individually or in the aggregate), and Maxion
knows of no reason why any such dealer or supplier would not continue to do
business with Newco under substantially similar terms as it does business with
the Division. As of the Closing, Newco shall be the proper and vested assignee
to Maxion's interest in each contract between Maxion and any dealer or supplier
of the Business.
3.16 PRODUCTS AND SERVICES. Schedule 3.16 lists all of the
products manufactured or sold, and all of the services performed, as part of
the Business during the past two (2) years. Schedule 3.16 also contains a
true, correct and complete copy of all warranties given by Maxion with respect
to any of such products or services, and the amounts reserved on the March 31,
1996 Balance Sheet (with only such changes since the date thereof as shall have
occurred in the ordinary course of the Business consistent with past practices
or as otherwise agreed by AGCO and Maxion) for warranty obligations and
returned goods are adequate therefor.
3.17 ORDINARY COURSE OF THE BUSINESS. Except as set forth on
Schedule 3.17, the Business has been operated in the ordinary course consistent
with past practices since December 31, 1995. Without limiting the generality
of the foregoing, since December 31, 1995:
(a) there has been no material adverse change in the
business, assets, liabilities, results of operation
or financial condition of the Business;
(b) there has been no destruction or loss of or to any
of the assets or properties used in connection with
the operation of the Business;
(c) except for the sale of inventory in the ordinary
course of the Business, there has been no sale,
transfer or other disposition of any asset of the
Business;
(d) the books, accounts and records of the Business have
been maintained in the usual, regular and ordinary
manner on a basis consistent with prior years;
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<PAGE> 16
(e) except as otherwise set forth on Schedule 3.18,
there has been no labor dispute, unfair labor
practice charge or employment discrimination charge,
nor institution or threatened institution of any
effort, complaint or other proceeding in connection
therewith, involving the Business or affecting the
operation of the Business;
(f) there has been no amendment, termination or waiver
of any right of Maxion or the Division with respect
to the Business under any contract or agreement or
governmental license, permit or authorization; and
(g) all obligations, liabilities and expenses of the
Business, including customary discretionary
expenses, have been paid, satisfied or discharged on
a basis consistent with past payment practices, it
being recognized that any delay in payment practices
will result in adverse consequences to Newco.
3.18 LITIGATION. Except as set forth on Schedule 3.18, there is no
litigation, action, suit, arbitration, mediation, hearing, other legal or
regulatory proceeding or governmental investigation pending or, to Maxion's
knowledge, threatened by or against Maxion (or Newco as of the Closing) which
may result in any liability to AGCO, Newco or the Division, or which otherwise
affects the Division Assets, the Business, or Maxion's ability to perform its
obligations under this Agreement. No judgment, award, order or decree has been
rendered against Maxion (or Newco as of the Closing) which affects the
Division, the Division Assets, the Business or Maxion's ability to perform its
obligations under this Agreement and which has not been paid or discharged
prior to the date hereof.
3.19 COMPLIANCE WITH LAWS. Maxion has complied (and Newco shall
have complied as of the Closing) with all statutes, laws, rules, regulations,
orders, decrees and ordinances applicable to it or the operation of the
Business, including, without limitation, all statutes, laws, rules,
regulations, orders, decrees and ordinances relating to environmental, trade
regulation, labor, benefits and employee matters.
3.20 PERMITS AND LICENSES. Maxion holds (and Newco shall hold as
of the Closing as the successor to the Division, subject only to certain
post-closing administrative filings) all required permits, licenses, approvals
and authorizations from all governmental or regulatory authorities which are
necessary to conduct the Business in a manner consistent with past practices,
except to the extent that the failure to hold such permit, license, approval or
authorization does not result in a loss of any material amount or have a
material adverse effect on the Business. As of the date hereof, all of such
permits, licenses, approvals and authorizations are in full force and effect
(and no suspension of any of them is pending or threatened). All of such
permits, licenses, approvals and authorizations are listed on Schedule 3.20 and
shall be assigned to Newco prior to or at the Closing.
3.21 TAXES. Maxion has filed (and Newco shall have filed as of the
Closing) all "Tax" (as hereinafter defined) reports and returns of every kind
and nature required to be filed by it with respect to the Division Assets and
the operation of the Business and all of such reports and returns are true,
correct and complete in all respects. Maxion has paid (and Newco shall have
paid as of the Closing) all Taxes required to be paid by it under such reports
and returns, and no such amounts are past due or delinquent as of the date
hereof.
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Without limiting the generality of the foregoing, Maxion has withheld proper
and accurate amounts from the employees of the Business for all periods prior
to the date hereof and will withhold proper and accurate amounts from the date
hereof until Closing, all in compliance with the Tax withholding provisions of
applicable federal, state and local tax laws. In addition, Maxion will timely
pay all Taxes required to be paid by it after the Closing relating to any date
or period of time occurring prior to the Closing. Except as set forth on
Schedule 3.18, Maxion is not a party or subject to any levy, assessment,
collection or pending action, proceeding or claim, and no notice of the
possible institution of any levy, assessment or collection action, proceeding
or claim has been given to or received by Maxion, which in any way may result
in any liability to AGCO, Newco or the Division, or which otherwise affects the
Business, the Division Assets or the transactions contemplated herein. For
purposes of this Agreement, "Taxes" shall mean any taxes, fees, levies, duties,
charges or similar assessments (including interest, penalties and additions)
imposed by or payable to any governmental or other taxing authority, whether
foreign, federal, state, local or otherwise, including, without limitation,
income, franchise, withholding, excise, ad valorem, value added, real and
personal property, sales, use, employment, net worth, services and other taxes
of any kind or nature.
3.22 INSURANCE. Schedule 3.22 contains a complete list and
description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, Maxion or the Division or any of its officers and
directors relating to the Business, all of which are and will be maintained in
full force and effect through the date of the Closing, together with a complete
list of all claims made within the last three (3) years and all pending claims
under any of such policies or bonds. All material terms, obligations and
provisions of each of such policies and bonds have been complied with, all
premiums due thereon have been paid, and no notice of cancellation with respect
thereto has been received. Such policies and bonds provide adequate coverage
to insure the Division Assets and the Business and the activities of its
officers and directors against such risks and in such amounts as are prudent
and customary. Maxion has heretofore delivered to AGCO a true, correct and
complete copy of each such insurance policy and bond (or a summary thereof).
3.23 ENVIRONMENTAL.
(a) For purposes of this Agreement, the following terms
shall have the following respective meanings:
(i) "Environment" shall mean natural
resources, surface water, groundwater,
drinking water supply, soils, subsurface
strata, and ambient air.
(ii) "Environmental Requirements" shall mean
all federal, state, municipal and local
laws, statutes, orders, regulations,
decrees, resolutions, proclamations,
permits, licenses, approvals,
authorizations, consents, judgments,
judicial decisions, and other
governmental requirements, limitations
and standards relating to the
Environment, health and safety issues,
including, without limitation, the
manufacture, generation, use,
processing, treatment, recycling,
storage, handling, "Release" (as
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hereinafter defined), investigation,
removal, remediation, and cleanup of or
other corrective action for "Hazardous
Substances" (as hereinafter defined),
exposure to Hazardous Substances, and
personal injury, natural resource
damage, property damage, and
interference with the use of property
caused by or resulting from Hazardous
Substances.
(iii) "Environmental Authorizations" shall
mean all permits, licenses, approvals,
authorizations, consents, waivers,
exemptions, variances, and permissions
granted or issued under Environmental
Requirements and all filings, plans,
reports, notifications, disclosures, and
agreements prepared, made, or submitted
pursuant to Environmental Requirements.
(iv) "Environmental Claims" shall mean all
civil, criminal and administrative
actions, suits, litigation, demands,
accusations, allegations, claims,
hearings, notices of violation, liens,
investigations and proceedings, and
including all judgments, awards, orders,
penalties and fines which have not been
paid, discharged, or satisfied in full,
which arise as a result of or otherwise
in connection with (A) a violation or
alleged violation of any Environmental
Requirement applicable to the Business
or the Division Assets as operated, used
or maintained prior to or at the time of
the Closing, (B) any Release prior to or
at the time of the Closing of a
Hazardous Substance at, on, under or
from any of the Division Assets, any
properties adjacent thereto, or any
other property or facility at which
waste generated through the operation of
the Business has come to be located, or
(C) Environmental Conditions associated
with the Division Assets, properties
adjacent thereto, or any other property
or facility at which waste generated
through the operation of the Business
has come to be located.
(v) "Environmental Conditions" shall mean
(A) the state of the Environment
relating to or arising out of the use,
handling, storage, treatment, recycling,
generation, transportation, processing,
or Release or threatened Release of
Hazardous Substances prior to or at the
time of the Closing, or (B) the exposure
of persons to Hazardous Substances in
the workplace or in the Environment.
(vi) "Hazardous Substances" shall mean all
hazardous, toxic, explosive, corrosive,
flammable, infectious, radioactive,
carcinogenic, mutagenic, and volatile
substances, materials, compounds,
chemicals, and waste, and all other
industrial waste, sanitary waste,
pollutants and contaminants, and all
constituents thereof, including, without
limitation, all substances, materials,
wastes, chemicals, compounds,
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contaminants and pollutants regulated
or addressed by Environmental
Requirements.
(vii) "Release" shall mean any spilling,
leaking, pumping, pouring, emitting,
emptying, discharging, injecting,
escaping, leaching, dumping,
abandonment, or disposing into or
migration within the Environment.
(b) Except as set forth on Schedule 3.23, to the best
knowledge of Maxion:
(i) Maxion, the Division and Newco are and
have been in full compliance with all
Environmental Requirements applicable to
the Business and the Division Assets.
(ii) Throughout the conduct of the Business
and ownership and operation of the
Division Assets, Maxion has held and
maintained full compliance with
Environmental Authorizations required
for the Division Assets and the
operation of the Business, including,
without limitation, the management,
storage, treatment, emission, discharge
and disposal of waste generated through
the operation of the Business, and all
such presently required Environmental
Authorizations are listed on Schedule
3.20. Such Environmental Authorizations
are not subject to any pending or
threatened suspension, termination or
modification by any governmental
authority under any Environmental
Requirement. Such Environmental
Authorizations have been or will be
assigned or reissued on substantially
the same terms to Newco in accordance
with all applicable Environmental
Requirement, including, without
limitation, the terms of the
Environmental Authorizations, and each
assignment or reissuance is final,
complete and not subject to appeal and
has not and will not necessitate or
result in any new, additional or
different terms in the Environmental
Authorizations. Newco is in full
compliance with all such Environmental
Authorizations.
(iii) There is no Environmental Claim pending
or threatened against Maxion, Newco or
the Division, or which otherwise affects
the Division Assets or the Business.
(iv) There has been no Release into the
Environment of any Hazardous Substance
at, on, under, or from any of the
Division Assets or otherwise in
connection with the Business which,
alone or in combination with any other
Release of a Hazardous Substance, has
damaged natural resources, may pose a
substantial threat to human health or
the Environment, or for which
investigation, removal, remediation,
cleanup or other corrective action is or
may be required under applicable
Environmental Requirements. There is no
Environmental
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Condition associated with the Division
Assets or the Business for which
investigation, removal, remediation,
cleanup or other corrective action is or
may be required under applicable
Environmental Requirements.
(v) With regard to any property or facility
other than the Division Assets at which
waste generated through the operation of
the Business has been stored, treated,
recycled, disposed of, or otherwise come
to be located, there is no Environmental
Condition at such property or facility
which may give rise to any liability of
Newco under Environmental Requirements
or to any Environmental Claim against
Newco.
(vi) Maxion and Newco have timely prepared,
submitted and made all filings, reports,
plans, agreements, disclosures and
notifications and have maintained all
records and data required under
Environmental Requirements in connection
with the Business and the Division
Assets.
(vii) There are no active, inactive or
abandoned underground storage tanks at
the real property listed on Schedule
1.2(d). There are no polychlorinated
biphenyls in any equipment or machinery
included within the Division Assets.
There are no asbestos containing
materials in any of the equipment,
buildings, structures or fixtures
included within the Division Assets,
other than asbestos containing materials
which are in good condition and exposure
to which could not pose a substantial
threat to human health.
(viii) Industrial wastes (including, without
limitation, process-related wastes) have
not been disposed of, discharged,
emitted or otherwise Released at or from
the real property listed on Schedule
1.2(d), including, without limitation,
in surface impoundments, lagoons, pits,
landfills, sprayfields, wells, or
surface water bodies at, on, under or
adjacent to such property.
(ix) Maxion has implemented adequate
pollution control technology for the
Business and Division Assets.
(x) Neither Maxion, Newco nor the Division
has received any notice that any aspect
of the Business or the Division Assets
is in violation of any Environmental
Requirements, including without
limitation Environmental Authorizations
thereunder, or that Maxion, Newco or the
Division is responsible for the
investigation, removal, remediation, or
cleanup of or other corrective action
for any Hazardous Substance Released at,
on, under or from the Division Assets or
any other property or facility at which
waste generated through the operation of
the Business has come to be located.
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(xi) There is no aspect of the Business or
the Division Assets that could, with the
passage of time or giving of notice or
both, give rise to a violation of
applicable Environmental Requirements,
including, without limitation,
Environmental Authorizations issued
thereunder, or to an Environmental Claim
against Newco. There is no
Environmental Condition with respect to
the Division Assets or the Business that
could, with the passage of time or
giving of notice or both, give rise to
any liability or obligation of Newco or
any Environmental Claim against Newco.
3.24 COMPENSATION STRUCTURE. Schedule 3.24 contains a true and
complete list of the names, titles, and compensation arrangements of each
employee of the Business (including, without limitation, all salary, wages,
bonuses, accrued vacation, and other fringe benefits) who is paid in excess of
$100,000.00 per year. No such employee has informed or advised Maxion or the
Division (nor are Maxion or the Division otherwise aware) that he does not
intend to continue his employment with the Business after the date hereof.
Each employee of the Business is regularly registered as such in the proper
registry books, together with his corresponding salary, all in compliance with
applicable laws and regulations. Maxion has obtained all registrations and
filings and has taken all necessary actions required under all applicable
social security, labor and social contribution laws and regulations with
respect to such employees. Neither the Division nor Maxion (on behalf of the
Division) is a party to any employment agreement which cannot be cancelled or
terminated on less than ninety (90) days' notice, and Maxion has heretofore
provided AGCO with copies of all written agreements, correspondence, memoranda
and other written materials currently in effect which have been provided to
such employees relating to their current compensation. A list of such
agreements is set forth on Schedule 3.24.
3.25 LABOR-RELATED MATTERS. Except as set forth on Schedule 3.25,
neither Maxion nor the Division is a party to any collective bargaining
agreement or agreement of any kind with any union or labor organization
relating to the Business. Neither Maxion nor the Division is in violation of
or default under any such collective bargaining or other agreement. Except for
those which do not have a material adverse effect on the Business (individually
or in the aggregate), and other than as set forth on Schedule 3.25, there are
no unfair labor practice charges pending or threatened against the Business and
there are no charges, complaints, claims or proceedings pending or, to Maxion's
knowledge, threatened against Maxion or the Division with respect to any
alleged violation of any legal duty (including but not limited to any wage and
hour claims, employment discrimination claims or claims arising out of any
employment relationship) as to any of the Business' employees or as to any
person seeking employment therefrom, and no such violations exist.
3.26 TRANSACTIONS WITH MANAGEMENT. Neither Maxion (in connection
with the Business), Newco nor the Division is a party to or has any contracts
with or commitments to present or former shareholders, directors, officers,
employees or agents, including any business directly or indirectly controlled
by any such person (other than employment agreements with current officers,
directors, and employees of the Business.)
3.27 PROPRIETY OF PAST PAYMENTS. No funds or assets of the
Business have been used for illegal purposes. No unrecorded fund or asset of
the Business has been established
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for any purpose which would violate any law or which would have a material
adverse effect on the Business; no accumulation or use of the Business' funds
which would violate any law or which would have a material adverse effect on
the Business has been made without being accounted for in the books and records
of the Business; all material payments by or on behalf of the Business have
been duly and properly recorded and accounted for in its books and records in
accordance with its policies with respect thereto; no false or artificial entry
has been made in the books and records of the Business for any reason; no
payment has been made by or on behalf of the Business with the advance
knowledge and understanding that any part of such payment would be used for any
unlawful purpose; and neither Maxion nor the Division has made, directly or
indirectly, any illegal contributions to any political party, official or
candidate.
3.28 INSOLVENCY PROCEEDINGS. No insolvency proceedings of any kind
or nature, including, without limitation, bankruptcy, receivership,
reorganization, or other arrangement with creditors, whether voluntary or
involuntary, with respect to Maxion, the Division, the Division Assets or the
Business are pending or, to Maxion's knowledge, threatened.
3.29 REPRESENTATIONS AND WARRANTIES. No representation or warranty
made by Maxion in this Agreement or pursuant hereto contains any untrue
statement, and such representations and warranties do not omit any statement
necessary in order to make any statement contained herein not misleading. All
of the representations and warranties contained herein shall be true and
correct as of the Closing, as if made and given again as of the date thereof.
All of the representations and warranties made by Maxion in this Agreement
shall survive the closing of the transactions contemplated hereby for a period
of forty-two (42) months.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AGCO
Notwithstanding any independent investigation or verification
undertaken by Maxion or its representatives, AGCO hereby represents and
warrants to Maxion as follows:
4.1 ORGANIZATION AND GOOD STANDING. AGCO is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, United States of America.
4.2 POWER AND AUTHORIZATION. AGCO has full corporate power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by AGCO and AGCO's performance of its obligations
hereunder have been duly authorized by all necessary corporate action on the
part of AGCO. No other action is necessary to authorize the execution,
delivery and performance of this Agreement by AGCO.
4.3 BINDING EFFECT. This Agreement constitutes the legal, valid
and binding obligation of AGCO enforceable in accordance with its terms.
4.4 NO VIOLATION; CONSENTS. Neither the execution and delivery of
this Agreement by AGCO nor the performance by AGCO of its obligations hereunder
will:
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(a) violate or conflict with any provision of the
Certificate of Incorporation or Bylaws of AGCO;
(b) violate, breach or otherwise constitute or give rise
to a default under any material contract, commitment
or other obligation to or by which AGCO is a party
or is bound;
(c) violate or conflict with any statute, ordinance,
law, rule, regulation, judgment, order or decree of
any court or other governmental or regulatory
authority to which AGCO is subject; or
(d) require any consent, approval or authorization of,
notice to, or filing, recording, registration or
qualification with any third party, court or
governmental or regulatory authority.
4.5 REPRESENTATIONS AND WARRANTIES. No representation or warranty
made by AGCO in this Agreement or pursuant hereto contains any untrue
statement, and such representations and warranties do not omit any statement
necessary in order to make any statement contained therein not misleading. All
of the representations and warranties contained herein shall be true and
correct as of the Closing, as if made and given again as of the date thereof.
All of the representations and warranties made by AGCO in this Agreement shall
survive the closing of the transactions contemplated hereby for a period of
forty-two (42) months.
ARTICLE V
COVENANTS OF MAXION PENDING CLOSING
Maxion agrees that from the date hereof until the Closing, without the
prior written approval of AGCO in each instance, Maxion shall comply with the
following:
5.1 CONDUCT OF THE BUSINESS PENDING CLOSING.
(a) CONDUCT OF THE BUSINESS. Maxion shall carry on the
Business in the usual, regular and ordinary course in accordance with past
practices and operations, will preserve intact the present organization of the
Business, and will use its best efforts to keep available the services of the
present officers and employees of the Business and to preserve the Business'
goodwill and the Business' relationships with dealers, customers, suppliers and
others having business dealings with it.
(b) MAINTENANCE OF PROPERTIES. Maxion will maintain the
Division Assets in good operating condition (ordinary wear and tear excepted).
(c) INSURANCE. Maxion will maintain and keep in full
force and effect all of the insurance currently maintained by it with respect
to the Business.
(d) DISPOSITION OF ASSETS. Maxion will not sell,
mortgage, pledge, lease, or otherwise transfer or dispose of any tangible or
intangible asset used in the operation of the Business or enter into any
agreement with respect to the foregoing, other than sales of
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inventory in the ordinary course of the Business consistent with past practices
and sales of other assets which are not material to the operation of the
Business, individually or in the aggregate.
(e) COMPENSATION. Maxion will not increase the benefits
or other compensation payable or to become payable to any director, officer or
employee of the Business (other than general increases in compensation to
employees of the Business in the ordinary course of the Business consistent
with past practices), increase any payment of or commitment to pay any bonus,
profit sharing or other extraordinary compensation to any employee of the
Business, or enter into any agreement with respect to the foregoing.
(f) CONTRACTS. Except in the ordinary course of the
Business on a basis consistent with past practices, Maxion will not enter into
any contract or agreement of the kind described in Section 3.14 hereof.
(g) BOOKS AND RECORDS. Maxion will maintain its books
and records related to the Business in the usual, regular and ordinary course
of the Business on a basis consistent with past practices.
(h) PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE
SECRETS. Maxion will continue to protect all confidential information and
trade secrets of the Business.
(i) LIABILITIES. Neither Maxion (on behalf of the
Division), Newco nor the Division will incur any indebtedness for borrowed
money or any other liabilities other than in the ordinary course of the
Business consistent with past practices.
(j) OTHER ACTIONS. Maxion will not take any action that
would, or could reasonably be expected to, result in any representation or
warranty contained in this Agreement concerning Maxion, the Division, the
Division Assets or the Business becoming untrue in any respect.
(k) NOTIFICATION OF CHANGES. Maxion shall promptly
notify AGCO in writing of any change or event having, or which can reasonably
be foreseen to have, a material adverse effect on the Division Assets or the
Business; provided, however, that nothing contained in this Section 5.1(k)
shall relieve Maxion of any liability with respect to any breach of
representation or warranty contained in this Agreement.
5.2 ACCESS TO THE BUSINESS.
(a) Maxion shall permit AGCO and its representatives,
agents, counsel and accountants, to have full access at all reasonable times to
the premises, business, properties, assets, financial statements, contracts,
books, records and working papers of, and other relevant information pertaining
to, the Business and to cause its officers and employees to furnish to AGCO and
its representatives, agents, counsel and accountants, such financial and
operating data and other information with respect to the business, properties
and assets of the Business as AGCO may request.
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(b) Maxion shall permit AGCO and its representatives,
agents, counsel and accountants to talk to and meet with the dealers,
distributors, suppliers, customers and employees of the Business.
(c) Maxion shall permit AGCO and its representatives,
agents, counsel and accountants to talk to and meet with the independent public
accountants of the Business to obtain access to all of such accountants'
workpapers prepared in connection with their audits of the Division as of
December 31, 1995, and December 31, 1994, and their reviews of the Division as
of March 31, 1996, and March 31, 1995.
5.3 ACQUISITION PROPOSALS. Maxion shall not, directly or
indirectly: (a) solicit, initiate or encourage (or authorize any person to
solicit, initiate or encourage) any inquiries, proposals or offers from any
person or entity relating to any acquisition or purchase of all or a material
amount of the assets of, or any equity interest in, or any merger,
consolidation or business combination with the Division or the Business; or (b)
participate in any discussions or negotiations regarding, or furnish to any
other person or entity any information with respect to, any effort or attempt
by any other person or entity to do or seek any of the foregoing. Maxion will
promptly notify AGCO if any such proposal or offer, or any inquiry or contact
with any person or entity with respect thereto, is made.
5.4 APPROVALS AND CONSENTS. Maxion and AGCO shall cooperate to
give all notices and obtain as soon as is reasonably practicable all approvals,
consents and waivers of federal, state and local government departments or
agencies or of any other parties required or deemed necessary or beneficial for
consummation of the transactions contemplated by this Agreement.
5.5 FURTHER ACTION. Upon the terms and subject to the conditions
of this Agreement, Maxion and AGCO shall use all reasonable efforts to take or
cause to be taken all actions and to do or cause to be done all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
and neither Maxion nor AGCO shall take any action inconsistent with its
obligations under this Section 5.5.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF AGCO
All of the obligations of AGCO under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions, any
of which may be waived in writing by AGCO in its sole discretion:
6.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Maxion contained in this Agreement or made pursuant hereto shall
be true and correct as of the Closing as if made at and as of such time.
6.2 PERFORMANCE OF AGREEMENTS. Maxion shall have fully performed
and complied with all agreements and conditions required by this Agreement to
be performed or complied with by it prior to or at the Closing.
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6.3 REGULATORY APPROVALS. Maxion and AGCO shall have received
from any and all governmental authorities, bodies or agencies having
jurisdiction over the transactions contemplated by this Agreement such
consents, authorizations and approvals as are necessary for the consummation
thereof, all applicable waiting or similar periods required by law shall have
expired, and such regulatory consents, authorizations and approvals shall not
contain conditions or restrictions unduly burdensome on the operation of the
Business following the Closing.
6.4 BOARD APPROVAL. The board of directors of AGCO shall have
approved the transactions contemplated by this Agreement.
6.5 CONSENTS AND APPROVALS OF THIRD PARTIES. All consents,
authorizations and approvals to the transactions contemplated by this Agreement
that are required pursuant to the terms of any material agreement or
arrangement relating to the Business to which Maxion or the Division is a party
or by which Maxion or the Division is bound or in order to preserve any right,
license or franchise held or owned by Maxion or the Division relating to the
Business shall have been duly obtained, and all such consents, authorizations
and approvals shall be in form and substance satisfactory to AGCO.
6.6 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal, state or local court which prevents the
consummation of the transactions contemplated by this Agreement shall have been
issued and remain in effect, and no action to obtain any such injunction or
order shall have been filed and remain pending.
6.7 NO MATERIAL ADVERSE CHANGE. There shall not have occurred
between December 31, 1995, and the Closing any material adverse change in the
Business or any material loss or damage to any of the Division Assets,
including, without limitation, the loss or removal of any key management
employees of the Business which would have a material adverse effect on the
Business.
6.8 TRADEMARK LICENSE AGREEMENT. Maxion shall have executed and
delivered to AGCO a Trademark License Agreement substantially in the form of
Exhibit B attached hereto (the "Trademark License Agreement").
6.9 ENGINE SUPPLY AGREEMENT. Maxion shall have executed and
delivered to AGCO an Engine Supply Agreement substantially in the form of
Exhibit C attached hereto (the "Engine Supply Agreement").
6.10 SHARED SERVICES AGREEMENT. Maxion shall have executed and
delivered to AGCO a Shared Services Agreement substantially in the form of
Exhibit D attached hereto (the "Shared Services Agreement").
6.11 CERTIFICATES. Maxion shall have delivered to AGCO:
(a) a certificate, dated as of the Closing, certifying
in such detail as AGCO may reasonably request to the
fulfillment of the conditions set forth in Sections
6.1 and 6.2;
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(b) a certificate, dated as of the Closing and certified
by an officer of Maxion, that the resolutions
attached to such certificate approving the
transactions contemplated by this Agreement are true
and complete in all respects and are in full force
and effect as of the Closing;
(c) a certificate, dated as of the Closing and certified
by an officer of Newco, that: (i) the Bylaws of
Newco attached to such certificate are true and
complete in all respects, and (ii) the resolutions
attached to such certificate approving the
transactions contemplated by this Agreement are true
and complete in all respects and are in full force
and effect as of the Closing; and
(d) an incumbency certificate reasonably acceptable to
AGCO.
6.12 OPINION OF COUNSEL. Maxion shall have delivered to AGCO an
opinion of Cendido Jose Mendes Prunes or other or additional counsel to Maxion,
dated as of the Closing in substantially the form of Exhibit E attached hereto.
6.13 BOOKS AND RECORDS. Maxion shall have delivered to AGCO all
minute books, stock record books, books of account, bank accounts, corporate
seals, leases, contracts, agreements, customer lists, files and other
documents, instruments and papers of the Division and Newco relating to the
Business, except to the extent Maxion is required to retain any such books,
records or other documents pursuant to applicable law (in which case Newco
shall be afforded access to and copies of such retained books, records and
other documents in connection with the operation of the business).
6.14 PERMITS AND LICENSES. Newco shall have obtained all required
permits, licenses, approvals, authorizations and registrations from all
governmental or regulatory authorities which are necessary to conduct the
Business in accordance with past practices, including, without limitation, the
proper registration with the Federative Revenue Secretariat and the Rio Grande
do Sul Revenue Department.
6.15 ORDINARY COURSE OF BUSINESS. Maxion shall have operated the
Business in the ordinary course consistent with past practices and consistent
with financial information previously furnished to AGCO from December 31, 1995,
through the Closing, including, without limitation, continuing to: (a)
manufacture all appropriate levels of inventory; (b) satisfy all dealer and
customer requests and order all appropriate raw materials; (c) retain the
services of its key employees; and (d) properly maintain, insure and protect
all of the Division Assets.
6.16 REAL ESTATE. Maxion shall have transferred and assigned the
title to the real property listed on Schedule 1.2(d) to Newco, and Newco shall
have all right and authority to operate the Business on such property as the
successor to the Division.
6.17 PAY-OFF LETTERS. AGCO shall have received a pay-off letter
from each of the Lenders with respect to its portion of the Debt Repayment
Amount.
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6.18 EVIDENCE REGARDING REPRESENTATIONS AND WARRANTIES. AGCO shall
have received such evidence as AGCO may reasonably request that the
representations and warranties of Maxion contained in this Agreement are true
and correct.
6.19 OTHER DOCUMENTS. At or prior to the Closing, Maxion shall
have delivered such other documents, agreements and certificates as may have
been reasonably requested by AGCO.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF MAXION
All of the obligations of Maxion under this Agreement are subject to
the fulfillment prior to or at the Closing of each of the following conditions,
any of which may be waived in writing by Maxion:
7.1 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of AGCO contained in this Agreement or made pursuant hereto shall be
true and correct as of the Closing as if made at and as of such time.
7.2 PERFORMANCE OF AGREEMENTS. AGCO shall have fully performed
and complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by it prior to or
at the Closing.
7.3 APPROVALS. Any and all governmental authorities, bodies or
agencies having jurisdiction over the transactions contemplated by this
Agreement shall have granted such consents, authorizations and approvals as are
necessary for the consummation thereof, and all applicable waiting or similar
periods required by law shall have expired.
7.4 BOARD APPROVAL. The board of directors of Maxion shall have
approved the transactions contemplated by this Agreement.
7.5 NO INJUNCTIONS. No preliminary or permanent injunction or
other order by any federal, state or local court which prevents the
consummation of the transactions contemplated by this Agreement shall have been
issued and remain in effect, and no action to obtain any such injunction or
order shall have been filed and remain pending.
7.6 TRADEMARK LICENSE AGREEMENT. AGCO shall have executed and
delivered to Maxion the Trademark License Agreement.
7.7 ENGINE SUPPLY AGREEMENT. AGCO shall have executed and
delivered to Maxion the Engine Supply Agreement.
7.8 SHARED SERVICES AGREEMENT. AGCO shall have executed and
delivered to Maxion the Shared Services Agreement.
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7.9 CERTIFICATES. AGCO shall have executed and delivered to
Maxion:
(a) a certificate, dated as of the Closing, certifying
in such detail as Maxion may reasonably request to
the fulfillment of the conditions set forth in
Sections 7.1 and 7.2; and
(b) an incumbency certificate reasonably acceptable to
Maxion.
7.10 OPINION OF COUNSEL. AGCO shall have delivered to Maxion an
opinion of Michael F. Swick or other or additional counsel to AGCO, dated as of
the Closing in substantially the form of Exhibit F attached hereto.
7.11 OTHER DOCUMENTS. At or prior to the Closing, AGCO shall have
delivered such other documents, agreements and certificates as may have been
reasonably requested by Maxion.
ARTICLE VIII
OTHER AGREEMENTS OF THE PARTIES
8.1 EMPLOYEES. Maxion shall cause Newco to offer employment to
all of the employees of the Business immediately prior to the Closing, and who
reside in Brazil, other than the individuals listed on Schedule 8.1 hereto, on
substantially the same terms and conditions as such employees are employed by
Maxion or the Division prior to the Closing.
8.2 RESTRICTIVE COVENANTS.
(a) For purposes of this Agreement, the following terms
shall have the following respective meanings:
(i) "Confidential Information" shall mean
all valuable, proprietary and confidential information in any
way relating to the Business or belonging to or pertaining to
Newco or AGCO (including, without limitation, all such
information acquired from Maxion pursuant to this Agreement)
that does not constitute a "Trade Secret" (as hereinafter
defined) and that is not generally known by or available to
AGCO's competitors.
(ii) "Trade Secrets" shall mean all "trade
secrets" in any way relating to the Business or belonging to
or pertaining to Newco or AGCO (including, without limitation,
all such trade secrets acquired from Maxion pursuant to this
Agreement) as defined under applicable law.
(iii) "Competing Business" shall mean any
business that, directly or indirectly, engages in the
development, manufacture, distribution or sale of agricultural
equipment, industrial tractors or related products or parts.
(iv) "Restricted Territory" shall mean
Brazil, Argentina, Uruguay and Paraguay.
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(b) In recognition of AGCO's need to protect its
legitimate business interests, and as covenants ancillary to the sale of a
business, Maxion hereby covenants and agrees as follows:
(i) It shall not, without the prior written
consent of AGCO in each instance, use, disclose, transfer,
assign, disseminate, reproduce, copy or otherwise communicate,
directly or indirectly, in any way for itself or for any other
person or entity: (A) any Confidential Information for a
period of five (5) years after the Closing; or (B) any Trade
Secret at any time during which such information shall
constitute a trade secret under applicable law.
(ii) It shall not, without the prior written
consent of AGCO in each instance, directly or indirectly,
engage in (whether as an owner, investor, manager, operator,
partner, consultant, creditor, advisor, independent contractor
or otherwise), or assist any other person or entity in
engaging in a Competing Business in the Restricted Territory
for a period of five (5) years after the Closing.
(iii) It shall not, either directly or
indirectly by itself or through any subsidiary or affiliate,
without the prior written consent of AGCO in each instance,
for a period of five (5) years after the Closing: (A) hire
any employee of the Business; or (B) solicit or attempt to
solicit any employee, supplier, consultant contractor or other
personnel of the Business to terminate, alter or lessen such
party's affiliation or relationship with AGCO or Newco or to
violate the terms of any agreement or understanding between
such employee, supplier, consultant, contractor or other
personnel and AGCO or Newco.
(c) AGCO and Maxion acknowledge and agree that the
covenants of Maxion set forth in this Section are reasonable as to time, scope,
territory and otherwise given AGCO's need to protect its legitimate business
interests and given the substantial consideration which Maxion is receiving
hereunder. The parties further acknowledge and agree that monetary damages may
not be an adequate remedy for any breach of the provisions of this Section by
Maxion and that AGCO may (in its sole discretion) apply to any court of law or
equity of competent jurisdiction for specific performance and/or injunctive
relieve in order to enforce or prevent any violation (or threatened violation)
of this Section. In the event any covenant or agreement contained in this
Section shall be determined by a court of competent jurisdiction to be
unenforceable by reason of its extending for too great a period of time or over
too great a geographical area or by reason of its being too extensive in any
other respect, it is the intention of AGCO and Maxion that this Section be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
8.3 ENVIRONMENTAL.
(a) Prior to the date hereof, AGCO has performed (i) a
preliminary assessment of Environmental Conditions and Hazardous Substances at
or associated with the
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Division Assets and the Business, and (ii) an audit to assess the compliance of
the Division Assets and Business with Environmental Requirements. After the
Closing, AGCO shall, in its sole discretion, be entitled to cause additional
investigation and assessment of the Environment (including the collection of
soil, groundwater and surface water samples), to be conducted in order to fully
evaluate any potential Environmental Conditions and Hazardous Substances at or
associated with the property listed in Schedule 1.2(d). AGCO shall deliver to
Maxion a copy of each such environmental audit obtained by it with respect to
the property listed on Schedule 1.2(d).
(b) Notwithstanding anything else herein to the
contrary, Maxion shall be solely responsible for all costs associated with any
work, including, without limitation, investigative, assessment, removal,
remediation and other corrective action, which is required by any federal,
state or local governmental or regulatory agency, department or other authority
under Environmental Requirements to address Hazardous Substances released at,
on, under or from any of the Division Assets prior to the date of the Closing.
(c) Notwithstanding anything else herein to the
contrary, Maxion shall be solely responsible for constructing and installing
wastewater treatment facilities on the real property described on Schedule
1.2(d), each as more particularly described on Schedule 8.3(c), which comply
with all applicable Environmental Requirements and Environmental
Authorizations, including, without limitation, the operating licenses for the
Business and Division Assets, and all instructions, specifications and other
requirements of federal, state or local governmental or regulatory agencies,
departments or other authorities. Maxion shall be solely responsible for all
costs associated therewith. Maxion shall construct and install the facilities
pursuant to the schedule prescribed by the environmental agency for the State
of Rio Grande do Sul, the State Foundation for Environmental Protection
(FEPAM), and, notwithstanding such schedule, shall complete the construction
and installation of the facility on the Canoas property in accordance herewith
on or before July 15, 1996, and shall complete the construction and
installation of the facility on the Santa Rosa property in accordance herewith
on or before February 15, 1997. Maxion has informed FEPAM of all chemical
constituents in the wastewater generated in the operation of the Business.
(d) In the event that an Environmental Claim is asserted
against Newco or AGCO, including, without limitation, Environmental Claims
associated with violations and Environmental Conditions which exist at the time
of and continue after the Closing, Maxion shall be solely responsible for all
costs associated with work necessary to remedy, abate, or otherwise respond to
the underlying violation, Hazardous Substance or Environmental Condition which
gives rise to such Environmental Claim
(e) Upon completion of the wastewater treatment facility
at the Canoas property described on Schedule 1.2(d), Maxion shall promptly move
all waste, other than waste containing PCB, from the waste storage area on such
property to the new waste storage area at such wastewater treatment facility.
In addition, Maxion shall promptly move all waste containing PCB, including,
without limitation, all PCB waste oils and PCB-containing equipment, to the
portion of the Canoas property retained by it. Maxion, at its own expense,
shall be solely responsible for the proper disposal or recycling of all
hazardous waste present at the time of Closing at the Canoas property described
on Schedule 1.2(d), including, without limitation, PCB waste oils,
PCB-containing equipment and wastewater treatment sludges.
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8.4 BROKERS; EXPENSES. Each party hereto hereby represents and
warrants to the other parties hereto that it has not incurred any liability for
brokerage fees, finder's fees, agent's commissions or other similar forms of
compensation in connection with or in any way related to the transactions
contemplated by this Agreement, except that Maxion has engaged Banco de
Investimentos Garantia S.A. to represent it in connection with the transactions
contemplated by this Agreement, and AGCO may be obligated to Dillon, Read & Co.
Inc. in connection with the transactions contemplated by this Agreement. Each
party hereto shall pay its own fees and expenses (including the fees and
expenses of its attorneys, accountants, investment bankers, brokers, financial
advisors and other professionals) incurred in connection with this Agreement
and all transactions contemplated hereby.
8.5 BEST EFFORTS; FURTHER ASSURANCES. Subject to the terms and
conditions contained herein, each of the parties hereto agrees to use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things reasonably necessary, proper or advisable under applicable
laws to consummate and make effective the transactions contemplated by this
Agreement. In the event that at any time after the Closing any further action
is necessary to carry out the purposes of this Agreement, the appropriate party
shall take all such actions without any further consideration therefor.
8.6 PUBLICITY. From and after the date of this Agreement and
until the Closing, each party hereto agrees to obtain the approval of the other
party prior to issuing any press release, written public statement or
announcement with respect to the transactions contemplated by this Agreement;
provided, however, that the provisions of this Section 8.6 shall not prohibit
either party hereto from making any such release, statement or announcement if,
upon advice of counsel, such party believes that it is required to do so under
any applicable law, rule or regulation, and such party shall use reasonable
efforts to notify the other party thereof prior to making such release,
statement or announcement.
8.7 TRANSITION PERIOD. With respect to the Canoas real property
more particularly described on Schedule 1.2(d), Maxion and AGCO shall cooperate
in good faith to move any of the Division Assets currently located on the
portion of such property to be retained by Maxion to the portion thereof
transferred to Newco, and to move any of the Excluded Assets currently located
on the portion thereof transferred to Newco to the portion thereof retained by
Maxion, as promptly as reasonably possible after the Closing (but in any event
prior to December 31, 1996). Each of Maxion and AGCO shall be responsible for
any costs of moving any of its assets to its property.
8.8 EASEMENTS. At the Closing, Maxion and Newco shall each grant
to the other an easement with respect to a portion of the Canoas real property
described on Schedule 1.2(d) hereto owned by it, all as more particularly
described on Schedule 8.8 hereto.
8.9 UNITED STATES GAAP FINANCIAL STATEMENTS. Maxion shall cause
Price Waterhouse LLP to prepare after the Closing in accordance with United
States GAAP: (a) audited financial statements (including a balance sheet,
income statement and statement of cash flow) with respect to the Division for
the years ended December 31, 1995, December 31, 1994, and December 31, 1993;
and (b) reviewed financial statements (including a balance sheet, income
statement and statement of cash flow) with respect to the Division for the
fiscal quarter ended March 31, 1996. Maxion shall deliver a true, correct and
complete copy
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of such United States GAAP audited and reviewed financial statements to AGCO as
soon as they are available, which shall not be later than July 5, 1996.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY MAXION. Subject to Section 9.4(a) hereof,
Maxion hereby indemnifies and agrees to promptly defend and hold harmless AGCO,
Newco and their respective officers, directors, shareholders, employees, agents
and affiliates from and against any and all claims, costs, expenses (including,
without limitation, attorneys' fees and court costs), judgments, penalties,
fines, damages, losses and liabilities of any kind or nature (collectively,
"Losses") incurred by any of them resulting from, arising out of, or related to
any of the following:
(a) any inaccuracy in, or the breach of, any
representation or warranty made by Maxion herein or
in any Exhibit, Schedule, document or agreement
executed by Maxion and delivered to AGCO pursuant
hereto, provided that Maxion shall have no liability
hereunder with respect to any breach of any
representation or warranty contained in Article III
hereof unless notice of such claim is delivered to
Maxion within the time limitation set forth in
Section 3.29 hereof;
(b) any breach of any covenant or agreement of Maxion
contained herein or in any Exhibit, Schedule,
document or agreement executed by Maxion and
delivered to AGCO pursuant hereto;
(c) notwithstanding anything else contained in Article
III hereof to the contrary, the operation of the
Business or use of the Division Assets for all
periods prior to the Closing, including, without
limitation, any product liability or other claims
arising from products manufactured, sold or
distributed by Maxion prior to the Closing (other
than product warranty claims);
(d) notwithstanding anything else contained herein to
the contrary, any liabilities arising in connection
with any Environmental Claims or Environmental
Conditions, including, without limitation,
liabilities associated with violations or
Environmental Conditions which exist at the time of
and continue after the Closing;
(e) notwithstanding anything else contained in Article
III hereof to the contrary, any debts, liabilities,
penalties, fines, Taxes, judgments or other
obligations of any kind or nature of Maxion, other
than the Assumed Liabilities;
(f) notwithstanding anything else contained in Article I
or III hereof to the contrary, any liabilities of
Maxion or the Division related to (i) any former
employee of the Business, (ii) any existing employee
of the Business that is not performing services for
or on behalf of the
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Business as of the Closing, or (iii) any existing
employee of the Business to the extent that such
liability relates to events or acts occurring prior
to the Closing;
(g) notwithstanding anything else contained in Article
III hereof to the contrary, any liabilities of
Maxion or the Division relating to or arising from
any violation of or noncompliance with any federal,
state or local law, statute, rule or regulation
applicable to Maxion, the Division or the Business
to the extent that such liability exists prior to,
or relates to events or acts occurring prior to, the
Closing, including any such laws, statutes, rules
and regulations related to environmental,
employment, and health and safety matters; and
(h) notwithstanding anything else contained in Article
III hereof to the contrary, any other Excluded
Liabilities or liabilities of Maxion, Newco or the
Division not specifically assumed by Newco
hereunder.
9.2 INDEMNIFICATION BY AGCO. Subject to Section 9.4(b) hereof,
AGCO hereby indemnifies and agrees to promptly defend and hold harmless Maxion
and its officers, directors, shareholders, employees, agents and affiliates
from and against any and all Losses incurred by any of them resulting from,
arising out of, or related to any of the following:
(a) any inaccuracy in, or breach of, any representation
or warranty made by AGCO herein or in any Exhibit,
Schedule, document or agreement executed by AGCO and
delivered to Maxion pursuant hereto; provided, that
AGCO shall have no liability hereunder with respect
to any breach of any representation or warranty
contained in Article III hereof unless notice of
such claim is delivered to AGCO within the time
limitation set forth in Section 4.5 hereof;
(b) any breach of any covenant or agreement of AGCO
contained herein or in any Exhibit, Schedule,
document or agreement executed by AGCO and delivered
to Maxion pursuant hereto; and
(c) the Assumed Liabilities.
9.3 ADMINISTRATION OF CLAIMS.
(a) Whenever any claim shall arise for indemnification
under this Article IX, the party entitled to indemnification (the "Indemnified
Party") shall promptly notify the appropriate other party (the "Indemnifying
Party") of the claim and, when known, the facts constituting the basis for such
claim. In the event of any claim for indemnification hereunder resulting from
or in connection with any claim or legal proceeding by a person who is not a
party to this Agreement (a "Third Party Claim"), such notice shall also
specify, if known, the amount or a good faith estimate of the amount of the
liability arising therefrom.
(b) The Indemnified Party shall not settle or compromise
or voluntarily enter into any binding agreement to settle or compromise, or
consent to entry of any judgment arising from, any such claim or proceeding
except in accordance with this Section.
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With respect to any Third Party Claim, the Indemnifying Party shall undertake
the defense thereof by representatives of its own choosing reasonably
satisfactory to the Indemnified Party. The Indemnified Party or any other
party shall have the right to participate in any such defense of a Third Party
Claim with advisory counsel of its own choosing at its own expense. In the
event the Indemnifying Party, after half of the period for the presentation of
a defense against any such Third Party Claim, fails to begin to diligently
defend it (or at any time thereafter ceases to diligently defend it), the
Indemnified Party will have the right to undertake the defense, compromise or
settlement of such Third Party Claim on behalf of, and for the account of, the
Indemnifying Party, at the expense and risk of the Indemnifying Party.
(c) Notwithstanding anything else contained herein to
the contrary, and in addition to its obligations pursuant to Section 9.1
hereof, Maxion agrees that, in the event any Tax assessment or other claim is
made against AGCO, Newco or the Business relating to the operation of the
Business prior to the Closing, it will agree to be substituted as the defendant
in any action arising in connection with such Tax assessment or claim.
9.4 LIMITATION ON INDEMNIFICATION OBLIGATION.
(a) Notwithstanding the provisions of Section 9.1
hereof, and subject to Section 3.29 hereof:
(i) Maxion shall not have any liability
pursuant to Section 9.1(a) hereof unless the aggregate amount
of all claims payable pursuant to Section 9.1(a) hereof is at
least $200,000, and then only to the extent such claims exceed
$200,000; provided, however, that Maxion shall be responsible
hereunder without regard to the limitation contained in this
Section 9.4(a)(i) for any claims exceeding $25,000
individually.
(ii) Maxion's maximum aggregate liability
pursuant to Section 9.1(a) hereof shall not exceed One Hundred
Sixty Million Dollars ($160,000,000), provided that the
limitation contained in this Section 9.4(a)(ii) shall not
apply with respect to any breach of representation or warranty
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5 or 3.28 hereof;
and
(iii) Maxion shall not be responsible
hereunder for any indirect or consequential damages.
(b) Notwithstanding the provisions of Section 9.2
hereof, and subject to Section 4.5 hereof:
(i) AGCO shall not have any liability
pursuant to Section 9.2(a) hereof unless the aggregate amount
of all claims payable pursuant to Section 9.2(a) hereof is at
least $200,000, and then only to the extent such claims exceed
$200,000; provided, however, that AGCO shall be responsible
hereunder without regard to the limitation contained in this
Section 9.4(b)(i) for any claims exceeding $25,000
individually.
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(ii) AGCO shall not be responsible hereunder
for any indirect or consequential damages.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement and the transactions contemplated
hereby may be terminated at any time prior to the Closing, as follows:
(a) MUTUAL CONSENT. By mutual consent in writing of
both AGCO and Maxion hereto;
(b) MATERIAL INFORMATION. By AGCO, if Maxion fails to
disclose any material information about the Business, the Division Assets or
Newco or provides AGCO with materially inaccurate or misleading information
regarding the same;
(c) MAXION'S FAILURE TO CLOSE. By AGCO, if AGCO is
prepared to close and all conditions to Maxion's obligations to close pursuant
to Article VII have been satisfied and Maxion fails to close in accordance with
Article II;
(d) AGCO'S FAILURE TO CLOSE. By Maxion, if Maxion is
prepared to close and all conditions to AGCO's obligations to close pursuant to
Article VI have been satisfied and AGCO fails to close in accordance with
Article II; and
(e) MATERIAL ADVERSE CHANGE. By AGCO, if a material
adverse change occurs in the Business or the Division Assets.
10.2 CUT-OFF DATE. If the Closing shall not have occurred on or
before June 30, 1996, either party hereto may terminate this Agreement by
delivering written notice thereof to the other party hereto.
10.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1(a), 10.1(e) or 10.2, all rights and obligations of
Maxion and AGCO hereunder shall terminate, and no party hereto shall have any
further liability or obligation hereunder to any other party hereto. If this
Agreement is terminated pursuant to Section 10.1(b), 10.1(c) or 10.1(d), the
non-breaching party shall be entitled to exercise and pursue all rights and
remedies available to it hereunder, at law, in equity or otherwise, and shall
be entitled to recover from the other party all of its out-of-pocket expenses
incurred in connection with or relating to the negotiation, preparation,
execution and delivery of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 NOTICES.
(a) All notices, consents, requests and other
communications hereunder shall be in writing and shall be sent by hand
delivery, by certified or registered mail (return-receipt requested), or by a
recognized national overnight courier service as set forth below:
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If to AGCO: AGCO Corporation
4830 River Green Parkway
Duluth, Georgia 30136
U.S.A.
Attention: Michael F. Swick, Esq.
Vice President and
General Counsel
If to Maxion Iochpe-Maxion S.A.
Av. das Nacoes Unidas
17.891 - 10# andar
04795-100 - Seo Paulo - SP
Federative Republic of Brazil
Attention: Fernando Griebeler,
Comptroller
(b) Notices delivered pursuant to Section 11(a) shall be
deemed given: (i) at the time delivered, if personally delivered; (ii) at the
time received, if mailed; and (iii) two (2) business day after timely delivery
to the courier, if by overnight courier service.
(c) Any party hereto may change the address to which
notice is to be sent by written notice to the other parties hereto in
accordance with this Section 11.1.
11.2 DISPUTE RESOLUTION. All disputes arising out of or in
connection with the interpretation, application or enforcement of this
Agreement shall be settled by final and binding arbitration. Such arbitration
shall be conducted in Seo Paulo, Federative Republic of Brazil, pursuant to the
commercial arbitration rules of the International Chamber of Commerce in effect
at the time the arbitration is commenced, before a panel of three (3)
arbitrators. The language to be used in the arbitration shall be English. The
decision of the arbitrators, which may include interest, shall be final and
binding on Maxion and AGCO and may be entered and enforced in any court of
competent jurisdiction by either party. The arbitration shall be pursued and
brought to conclusion as rapidly as possible. The prevailing party in the
arbitration proceeding shall be awarded reasonable attorneys' fees, expert
witness costs and expenses, and all other costs and expenses incurred in
connection with such proceeding, unless the arbitrators shall for good cause
determine otherwise.
11.3 ENTIRE AGREEMENT. This Agreement, including all Exhibits and
Schedules hereto (all of which are incorporated herein by this reference),
contains the entire agreement and understanding concerning the subject matter
hereof between the parties hereto and specifically supersedes that certain
letter of intent, dated April 30, 1996, between AGCO and Maxion.
11.4 WAIVER; AMENDMENT. No waiver, termination or discharge of
this Agreement, or any of the terms or provisions hereof, shall be binding upon
either party hereto unless confirmed in writing. No waiver by either party
hereto of any term or provision of this Agreement or of any default hereunder
shall affect such party's rights thereafter to enforce such term or provision
or to exercise any right or remedy in the event of any other default, whether
or not similar. This Agreement may not be modified or amended except by a
writing executed by both parties hereto.
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11.5 SEVERABILITY. If any provision of this Agreement shall be
held void, voidable, invalid or inoperative, no other provision of this
Agreement shall be affected as a result thereof, and, accordingly, the
remaining provisions of this Agreement shall remain in full force and effect as
though such void, voidable, invalid or inoperative provision had not been
contained herein.
11.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of Brazil.
11.7 ASSIGNMENT. Neither party hereto may assign this Agreement,
in whole or in part, without the prior written consent of the other party, and
any attempted assignment not in accordance herewith shall be null and void and
of no force or effect; provided, however, that AGCO may assign this Agreement
to a wholly owned subsidiary of AGCO, but such assignment shall not relieve
AGCO of responsibility for its obligations hereunder; provided further, that
Maxion shall assign its shares of the capital stock of Newco (and all rights
related thereto) to Iochpe-Maxion Trading S.A., a wholly owned subsidiary of
Maxion, immediately prior to effecting the split of Newco pursuant to Section
2.2 hereof, but such assignment shall not relieve Maxion of responsibility for
its obligations hereunder.
11.8 BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.9 CUMULATIVE REMEDIES. All rights and remedies of each party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
11.10 HEADINGS. The titles, captions and headings contained in this
Agreement are inserted for convenience of reference only and are not intended
to be a part of or to affect in any way the meaning or interpretation of this
Agreement.
11.11 REFERENCE WITH AGREEMENT. Numbered or lettered articles,
sections, paragraphs, subsections, schedules and exhibits herein contained
refer to articles, sections, paragraphs, subsections, schedules and exhibits of
this Agreement unless otherwise expressly stated. The words "herein,"
"hereof," "hereunder," "hereby," "this Agreement" and other similar references
shall be construed to mean and include this Agreement and all Exhibits and
Schedules and all amendments to any of them unless the context shall clearly
indicate or require otherwise.
11.12 INTERPRETATION. This Agreement shall not be construed more
strongly against either party hereto regardless of which party is responsible
for its preparation, it being agreed that this Agreement was fully negotiated
by both parties hereto.
11.13 DEFINITION OF KNOWLEDGE. Any reference in this Agreement or
in any certificate delivered pursuant hereto to a party's "knowledge" (whether
to "the best of" such party's knowledge or other similar expressions relating
to the knowledge or awareness of any party) shall include all matters which
such party or any of its officers or directors actually knew or should have
known after diligent inquiry.
-33-
<PAGE> 39
11.14 MULTIPLE COPIES. This Agreement may be executed by the
parties hereto in one or more copies.
IN WITNESS WHEREOF, the undersigned have caused their respective duly
authorized representatives to execute this Agreement as of the day and year
first above written.
"AGCO"
AGCO CORPORATION
By: /s/ Michael F. Swick
-----------------------------------
Michael F. Swick, Vice President
and General Counsel
"Maxion"
IOCHPE-MAXION S.A.
By: /s/ Ivoncy Brochmann Ioschpe
-----------------------------------
Ivoncy Brochmann Ioschpe, President
-34-
<PAGE> 40
EXHIBIT A
As soon as possible after the Closing (but in no event later than August 31,
1996), AGCO shall cause Newco to prepare and deliver to Maxion a schedule of
the items of inventory ("the Existing Inventory") and accounts receivable (the
"Existing Accounts Receivable") actually transferred to, and accounts payable
(the Existing Payables") actually assumed by, Newco at the Closing (the
"Working Capital Schedule"). The Existing Inventory shall be valued on the
Working Capital Schedule at the values determined therefore in accordance with
paragraph A.2 below. Maxion shall have ten (10) days after its receipt thereof
to notify AGCO of any objections it has to the Working Capital Schedule. AGCO
and Maxion shall thereafter in good faith attempt to resolve any disputes
regarding the Working Capital Schedule as quickly as possible; provided,
however, that if any such dispute has not been resolved within ten (10) days,
either party may engage a mutually acceptable independent public accounting
firm to review such Working Capital Schedule and resolve such dispute. The
cost of such review shall be borne by the party requesting the review. The
Working Capital Schedule shall then be used to make the following adjustments:
A. Inventory
1. At the Closing, Newco's book value for the Existing Inventory
shall be equal to Maxion's book value therefor immediately
prior to the Closing, and Newco shall have an obligation to
Maxion (the "Excess Inventory Amount") equal to such book
value of Existing Inventory less $40,000,000.
2. The value of the Existing Inventory to be included on the
Working Capital Schedule (the "Adjusted Value Existing
Inventory") shall be determined by Newco as follows:
a. Newco shall identify any defective, excess or
obsolete items in the Existing Inventory and shall
reduce the book value of the Existing Inventory (and
the Existing Inventory Amount) by the book value of
such defective, excess and obsolete items (for
purposes hereof, "excess" inventory shall include any
item which Newco determined in good faith not to be
usable in production during the ninety (90) day
period following the Closing).
b. Newco shall then redetermine the values of all items
of remaining Existing Inventory (excluding such
defective, excess and obsolete items) at the lower of
book value or replacement value (for purposes hereof,
"replacement value" shall be determined in good faith
by Newco, taking into account an item's condition,
usability, salability and age).
c. Such redetermined value shall be the Adjusted Value
Existing Inventory.
3. Newco shall have a period of thirty (30) days after the
Working Capital Schedule is finalized to select the items of
Adjusted Value Existing Inventory which will comprise the
$40,000,000, and all of such items shall be valued at the
values therefor redetermined by Newco pursuant to paragraph
A.2.b. above. In determining the specific items of Adjusted
Value Existing Inventory
<PAGE> 41
to be included in such $40,000,000, priority shall be
given first to finished goods (provided such finished goods
are new and are current models) and work-in-progress and then
to an adequate level of replacement parts.
4. Newco may satisfy its obligation to Maxion for the Excess
Inventory Amount by paying to Maxion in cash the lowest
available market price for any Existing Inventory not included
in the $40,000,000 (including any defective, excess or
obsolete items) if, as and when Newco uses any of such
inventory in the operation of the Business, and the Excess
Inventory Amount shall be reduced by an amount equal to the
book value of such items (Newco will commit to use any items
of excess inventory in accordance herewith if, as and when
such items are needed in production prior to any purchase of
such items from a third party supplier). In addition, the
Excess Inventory Amount shall be reduced by an amount equal to
the book value of any such inventory written down or written
off by Newco; provided, however, that Newco shall not, without
the prior written consent of Maxion (which shall not be
unreasonably withheld), write down or write off any such items
within three (3) years after the Closing.
5. In addition, after the Closing, Maxion and AGCO shall in good
faith negotiate in an attempt to agree upon a mutually
acceptable amount which AGCO may pay to Maxion in full
satisfaction of its obligation to Maxion for the Excess
Inventory Amount.
6. At any time after Newco determines the items of Adjusted Value
Existing Inventory to be included in the $40,000,000, Maxion
may require Newco to reconvey to Maxion all or any portion of
the defective, excess or obsolete inventory identified by
Newco pursuant to paragraph A.2.a. above, and Newco shall
receive in exchange therefor a corresponding reduction in the
Excess Inventory Amount equal to the book value of such
reconveyed items. Notwithstanding the foregoing, Maxion shall
not, directly or indirectly, sell or attempt to sell any of
such reconveyed items to any of Newco's dealers or
distributors. In addition, Maxion shall offer in writing to
Newco the right to purchase any of such reconveyed excess
inventory items prior to selling them to any other person or
entity on the same terms as such items would be sold to such
other person or entity.
7. In the event the Adjusted Value Existing Inventory is less
than $40,000,000, Maxion will promptly pay to Newco in cash an
amount equal to such difference.
B. Accounts Receivable
1. Newco shall have an obligation to Maxion equal to the amount
of the Existing Receivables less $27,000,000 (the "Excess
Receivable Amount").
2. Newco shall have a period of ninety (90) days after the
Closing to select which accounts shall comprise the
$27,000,000.
-2-
<PAGE> 42
3. Newco may satisfy its obligation to Maxion for the Excess
Receivable Amount by:
a. paying such amount to Maxion in cash as and when
Newco collects such amounts in the ordinary course of
the Business within the ninety (90) days after the
Closing; and
b. returning any such uncollected accounts to Maxion
within ninety (90) days after the Closing for full
credit at the face amount of such receivables.
In addition, Maxion and AGCO shall in good faith negotiate in
an attempt to agree upon a mutually acceptable amount which
AGCO may pay to Maxion in full satisfaction of its obligation
to Maxion for the Excess Receivable Amount.
4. In the event the Existing Receivables are less than
$27,000,000, Maxion will promptly pay to Newco in cash an
amount equal to such difference. Furthermore, in the event
that proceeds received by Newco from the collection of the
Existing Receivables during the period ending ninety (90) days
after the Closing do not aggregate $27,000,000, Maxion shall
promptly pay to Newco the amount of such deficit.
5. Within thirty (30) days after the Closing, Maxion shall
repurchase from its third party lenders all other receivables
generated in the operation of the Business. Maxion shall then
transfer and assign all of such receivables to Newco, and the
amount of such receivables shall be added to the Excess
Receivable Amount.
6. Newco shall collect all receivables which arose as a result of
a customer sale financed by FINAME (i.e. commodity-indexed
receivables) on behalf of Maxion and remit such collections
directly to Maxion. Maxion shall reimburse Newco for any
expenses incurred by Newco in connection therewith.
Notwithstanding anything else contained herein to the
contrary, Newco shall have no obligation under any commodity
pricing arrangements entered into by Maxion with its
customers.
7. In the event Newco returns any of the Existing Receivables to
Maxion pursuant to Section 3.b. above, upon the request of and
at the sole expense of Maxion, Newco shall continue to process
such receivables on the Business' computer system in
accordance with past practices.
8. In the event Newco returns any of the Existing Receivables to
Maxion pursuant to Section 3.b. above, Newco shall attempt to
collect such receivables only in accordance with the
collection procedures used in the normal course of the
operation of the Business prior to the date of the Closing.
-3-
<PAGE> 43
C. Accounts Payable
1. In the event the Existing Payables assumed by Newco exceed
$17,000,000, Maxion shall promptly pay to Newco an amount
equal to such difference as such excess payables become due.
2. In the event the Existing Payables assumed by Newco are less
than $17,000,000, Newco shall promptly pay to Maxion an amount
equal to such difference.
D. Access to Books and Records
Maxion shall have access to all books and records of the Business
relating to the Existing Inventory and the Existing Receivables until
Newco satisfies its obligations to Maxion for the Excess Receivable
Amount and the Excess Inventory Amount.
-4-
<PAGE> 1
EXHIBIT 99.4
BRAZIL
(ENGINE SUPPLY)
ENGINE SUPPLY AGREEMENT
BETWEEN
AGCO CORPORATION
AND
IOCHPE-MAXION S.A.
<PAGE> 2
THIS SUPPLY AGREEMENT is made the 27th day of June 1996 BETWEEN AGCO CORPORATION
of 4830 River Green Parkway, Duluth, GA 30136, U.S.A. ("AGCO")
and IOCHPE-MAXION S.A. of Seo Paula, Federative Republic of Brazil ("MAXION")
WHEREAS
(A) AGCO has agreed to acquire the assets and business of the Agricultural
Equipment and Industrial Tractor Division of MAXION ("the Division") from
MAXION with effect from June 1996 as a going concern with the intent,
inter alia, of maintaining and expanding that business.
(B) MAXION has for many years supplied the Division with a range of Perkins
branded diesel engines, related components and spare parts for
incorporation into Massey Ferguson, Ideal and Maxion branded products.
(C) AGCO wishes to continue the relationship that currently exists between
the Division and MAXION, and for its part MAXION wishes to establish a
relationship with AGCO that builds upon and expands the currently existing
relationship.
(D) Therefore MAXION and AGCO wish to enter into this Supply Agreement under
which AGCO's Brazilian subsidiary ("NEWCO") will commit to purchase and
MAXION will commit to supply 100% of its requirements for engines, related
components and engine spare parts for incorporation into present and
future products, provided that this commitment will apply only insofar as
such engines, related components and engine spare parts are manufactured
by Maxion or for
<PAGE> 3
MAXION (by suppliers where Maxion has made a substantial capital
investment) in Brazil.
(E) AGCO will assign this Agreement to NEWCO immediately upon incorporation.
THEREFORE, the Parties agree as follows:
(1) DEFINITIONS:
"MAXION" means IOCHPE-MAXION S.A. and its subsidiaries and their respective
legal successors and assigns.
"AGCO" means AGCO Corporation and its subsidiaries and their respective
legal successors and assigns
"NEWCO" means the to be formed Brazilian subsidiary of AGCO and its
respective legal successors and assigns.
"Maxion Engine" means any Perkins branded diesel engine identified in
Exhibit A manufactured by MAXION in accordance with the agreed
specification.
"Massey Ferguson Product" means any Massey Ferguson or Maxion branded
product manufactured by NEWCO.
"Supply Agreement" means this document and all Exhibits attached hereto.
"Party" and "Parties" means individually either MAXION or AGCO, or
collectively both MAXION and AGCO.
<PAGE> 4
(2) EFFECTIVE DATE:
This Supply Agreement shall become effective as of 27th June 1996.
(3) SCOPE OF AGREEMENT AND TRANSITION ARRANGEMENTS
3.1. As from the Effective Date:
(a) NEWCO commits to continue to power those current Massey Ferguson
Products manufactured in Brazil which incorporate Maxion Engines with
Maxion Engines.
(b) NEWCO commits to purchase from MAXION 100% of NEWCO's requirements for
MAXION Engines and Parts for installation into the Massey Ferguson
Products, provided such Engines and Parts are or will be manufactured
by Maxion or for MAXION (by suppliers where Maxion has made a
substantial capital investment) in Brazil.
(c) In consideration of the NEWCO commitment set out in Clause 3.1(a) and
(b) MAXION undertakes not to sell diesel engines to any competitor of
NEWCO in the agricultural machinery sector, except those current
customers listed on the attached Exhibit E.
(d) MAXION further undertakes that it will sell parts for MAXION engines
to NEWCO, but that it will not solicit NEWCO's dealers, or other
agricultural dealers, (except those current customers listed on the
attached Exhibit E) and that it will never undercut NEWCO on price or
on any other condition of sale.
3.2.1 With respect to NEWCO's future diesel engine requirements, the
Parties recognise the potential mutual
<PAGE> 5
benefits of NEWCO selecting MAXION as an exclusive supplier of
such diesel engines. The Parties therefore agree to work
jointly towards this goal in the following manner : subject to
MAXION demonstrating its ability to
(a) meet the required Massey Ferguson Product specification,
and
(b) being able to offer the relevant engine at a price
consistent with the globally competitive price for
comparable Maxion Engines manufactured by MAXION's key
competitors in the agricultural sector (i.e. Perkins,
Cummins, Deere and Detroit Diesel). The Parties
acknowledge that when reviewing the pricing offered by
MAXION, they will take due account of all relevant
surrounding factors such as product quality, performance,
terms of payment, environmental compliance, technical
support delivery, taxes, duties and logistics costs.
then NEWCO commits to specify the Maxion Engine in the
particular Massey Ferguson Product within a mutually agreed
timescale.
3.2.2 If MAXION during the term hereof develops a replacement model
for any Maxion Engine then being currently supplied to NEWCO,
NEWCO will, subject only to MAXION demonstrating its ability to
meet the required specification and being able to offer the
item at a price consistent with the other Maxion Engines then
being supplied, purchase it
<PAGE> 6
under the terms hereof.
3.3 NEWCO will provide MAXION with detailed functional
specifications for each specific engine configuration. MAXION
will review the specifications and discuss with NEWCO any
difficulties it foresees in meeting the specifications and if
necessary the Parties will mutually agree upon any changes.
3.4 Specific changes to the specifications of any Maxion Engine can
be suggested by either Party at any time. No changes which
affect fit or interchangeability will be made by MAXION without
NEWCO's prior consent, which consent shall not be unreasonably
withheld or delayed. If the Parties agree upon a specification
change, they will also agree upon any appropriate changes to
price, delivery, warranty and any other applicable terms and
conditions.
3.5 MAXION will provide and update as required various types of
data used to support the sales, servicing and spare parts
support of the MAXION Engines. This shall include product
design drawings, training materials, technical data sheets,
service manuals and spare parts books. MAXION shall provide to
NEWCO free of charge one master set of that data and material
agreed with NEWCO as being necessary for their activities
hereunder. NEWCO will only disclose information to third
parties as agreed with MAXION.
3.6 MAXION will use all reasonable endeavours to maintain the
ability to supply spare parts of a particular specification for
the Maxion Engines for a period of at least 10 years after the
date
<PAGE> 7
of last supply by MAXION of the relevant Maxion Engines to
NEWCO. During the subsequent 5 years' service life of a Maxion
Engine (years 10 - 15 for agricultural applications), the
Parties will use all reasonable endeavours to agree a managed
phase out plan for that period.
3.7 During any phaseout period referenced in Clause 3.6 above, the
Parties may agree from time to time categories of slow moving
and obsolete spare parts which may be bought by NEWCO on a
one-off and one-time buy basis.
3.8 The Parties acknowledge that as at the Effective Date there are
a variety of outstanding uncompleted purchase orders and
related delivery schedules ('Orders') covering agreed
commitments for the supply of Maxion Engines by MAXION to
NEWCO.
3.9 The Parties expressly agree that NEWCO shall not be under any
obligation to complete such Orders, although any such Orders
which are completed shall be paid for by NEWCO under the terms
originally agreed.
3.10 The Parties expressly agree that apart from the Orders all
NEWCO's requirements for Maxion Engines that are ordered by
them as from the Effective Date shall be ordered strictly under
the terms of this Supply Agreement. They acknowledge however
that given the nature and complexity of the new relationship,
there will arise during the initial phase of the new Supply
Agreement operational issues and differences. They therefore
undertake to use all reasonable endeavours in good
<PAGE> 8
faith to resolve these in a mutually acceptable and expeditious
way as and when these issues or differences arise.
3.11 In order to ensure a smooth transition into the new Supply
Agreement, the Parties will establish and fully support a joint
working team embracing the engine and parts supply operations
as well as the technical support services of each organisation.
4. TERM:
4.1 This Supply Agreement shall, subject in particular to Clause
4.2, continue in effect until terminated by NEWCO or MAXION
upon 36 months prior written notice to the other Party,
provided, however, that such notice may not be given until 5
years have elapsed from the Effective Date of this Supply
Agreement.
4.2 Notwithstanding the above referenced term of this Supply
Agreement, if at any time during that term NEWCO considers in
good faith that with respect to either pricing or product
quality of the then supplied range of Maxion Engines, MAXION
cannot reasonably be considered to be competitive across the
range then the following shall apply:-
[ ] NEWCO will notify MAXION in writing giving full supporting
data and information
[ ] A formal meeting at an operational level will be convened
within 30 days of MAXION's receipt of NEWCO's notice. This
meeting will consider firstly NEWCO's concerns and secondly
a mutually acceptable action plan where this is
<PAGE> 9
agreed as being necessary.
[ ] The Parties will use all reasonable endeavours and acting
in good faith to resolve NEWCO's concerns, agree an action
plan and a timetable for implementation within 30 days.
[ ] If the Parties fail to agree at an operational level, the
issues will be referred for final resolution to an
executive level meeting to be convened without delay.
[ ] Where an action plan is agreed, the Parties will take all
necessary steps to action this forthwith and to ensure the
desired outcome. If the outcome is not achieved within the
target timescale then NEWCO may, with respect to the
affected Maxion Engine(s), automatically amend its Clause
3.1.(b) commitment accordingly.
5. ENGINE, PRICING, SHIPPING AND TERMS OF PAYMENT:
5.1 The prices applicable to Maxion Engines from the Effective Date
until 31 December 1997 shall be those set out in Exhibit B.
Commencing no later than 30 June 1997 the Parties will, for the
purposes of agreeing pricing and a pricing adjustment formula
for Maxion Engines for the period post 31 December 1997
initiate pricing review discussions. The Parties agree to act
in good faith within this process and to use their best
endeavours to conclude their discussions no later than 30
November 1997.
<PAGE> 10
5.2 Shipping Terms
The prices quoted in Exhibit B represent delivery "Ex Works"
Canoas as per INCOTERMS 1990.
5.3 MAXION and NEWCO shall as far as is possible try to ensure that
the former working procedures for the shipping of Maxion
Engines are carried over into the new relationship unless
mutually agreed alternative procedure(s) can be instituted at
no disadvantage to either Party.
5.4 For all sales of Maxion Engines, MAXION shall be entitled to
invoice NEWCO upon dispatch Ex Works as per INCOTERMS 1990.
5.5 Payment Terms
MAXION shall be entitled to invoice NEWCO upon dispatch Ex
Works Canoas as per INCOTERMS 1990.
Exhibit B sets out the payment terms.
6. ORDERS AND SCHEDULES:
6.1 NEWCO will provide MAXION with its 2 year strategic planning
forecast, updated annually and covering its requirements for
Maxion Engines. Such forecast is for planning purposes only so
as to inform MAXION of the production capacity it may need to
meet NEWCO's projected needs. It does not represent a
commitment to purchase.
<PAGE> 11
6.2 NEWCO will provide a 12 month, monthly updated detailed
forecast of its requirements by type of Maxion Engine. The
detailed ordering/scheduling procedures are set out in Exhibit
C. The basic principle will be that MAXION is given at any one
time an 8 week fixed and firm order period. Nothwithstanding
the above, the Parties will work together throughout the term
hereof to achieve progressively shorter fixed and firm order
periods.
6.3 For stock orders for spare parts NEWCO will place purchase
orders on MAXION incorporating a schedule with specific weekly
delivery time slots. The schedule will incorporate a 12 week
lead time. Special orders (not being "Vehicle off Road") or
variations to the above schedule can be agreed between the
Parties subject to a minimum of 5 working days' lead time.
6.4 MAXION will achieve a 95% "Vehicle off Road" order fill rate
performance and subject to receiving a 12 week lead time
schedule a 98% stock order fill rate performance throughout
the term hereof. Detailed working procedures covering the
interpretation, management and measurement of this will be
established within 2 months of the Effective Date.
7. RISK AND TITLE:
Notwithstanding any other provision herein or in any NEWCO issued
purchase order, risk in Maxion Engines will pass to NEWCO upon their
delivery and title in any Maxion Engines will pass to NEWCO upon
NEWCO's payment in full of the relevant MAXION invoice.
<PAGE> 12
8. ENGINE WARRANTY AND POLICY:
8.1 All Maxion Engines supplied hereunder shall benefit from a
warranty from MAXION. For a period of 12 months or 1500 hours
of usage from delivery of any such items to the first user or
24 months from delivery as per Clause 5 (whichever is shorter),
MAXION will by repair or (at its option) replacement rectify
any failure therein due to a defect in workmanship or
materials. MAXION will accept responsibility for labour and
material costs incurred during such activities. With respect
to the cylinder block casting, cylinder head casting,
crankshaft (excluding bearings), camshaft and connecting rods,
these major Components will be warranted for a further 12
months or 1500 hours of usage (whichever is the shorter) over
and above the standard warranty period.
8.2 The standard MAXION warranty is set out in Exhibit D.
9. RIGHT TO REJECT:
NEWCO reserves the right to reject any and all Maxion Engines not in
accordance with the agreed upon specifications. NEWCO shall notify
MAXION of any such non-conformity or deficiency, or any shortage in
shipment, as soon as reasonably practicable after arrival at the
intended destination. The Parties will agree upon a method for
correcting the non-conformity or deficiency. If NEWCO performs the
agreed correction, MAXION shall reimburse or credit, at its election,
the direct and reasonably incurred expenses of NEWCO for any repairs
performed by NEWCO or its nominee in correcting the non-conformity or
deficiency.
<PAGE> 13
10. EMISSIONS CONTROLS: FUTURE MAXION ENGINES:
MAXION undertakes to meet future emissions regulations in the world as
they may relate to the Maxion Engines. The Parties will meet
regularly so that MAXION may keep NEWCO informed of its progress
toward compliance with future regulations. Both Parties will exchange
technical information and data to minimise the development costs and
product costs associated with these programmes. MAXION will supply
NEWCO with calculations and test data reasonably required to satisfy
the relevant regulations. The Parties agree to establish and maintain
a close technical and product planning relationship so as to maximise
the mutual benefits arising from such activities. They agree to share
their respective product plans during the term hereof as far as they
relate to this Supply Agreement.
In so much as MAXION is unable at any time to meet the particular
emissions regulations of a specific market as they may apply to a
Maxion Engine, then the NEWCO commitment in Clause 3.1(b) shall be
deemed waived for that Maxion Engine in the specific market for as
long as MAXION's inability may continue. Once MAXION achieves
compliance, the waiver shall be automatically removed.
11. COST REDUCTION: SAFETY:
11.1 MAXION and NEWCO agree to establish and fully support joint
cost reduction and "Total Quality" related activities with the
intent of achieving continuous improvements for their mutual
benefit. They agree to share equally between themselves any
benefits that may arise from such activities.
<PAGE> 14
11.2 The Parties agree that product safety is a goal to which each
Party is committed.
11.3 The Parties shall inform each other periodically concerning the
performance of the Maxion Engines. As part of such discussions
the Parties will update one another on the accident history of
Maxion Engines. It is intended that MAXION and NEWCO shall
co-operate closely in undertaking any investigations of any
accidents.
12. INDEMNIFICATION:
12.1 MAXION shall indemnify and hold NEWCO and its dealers,
employees, officers and directors, harmless against and from
all claims, demands, penalties, liabilities, loss, damage,
costs, attorneys' fees and expenses of whatsoever nature which
are a consequence of or attributable to, the operation, use or
possession of Maxion Engines and resulting from any defect of
material or workmanship of Maxion Engines or failure to
adequately instruct or warn concerning the operation, use or
possession of such Maxion Engines, excluding, however, any such
claims and demands to the extent attributable to any
modification or alteration of Maxion Engines performed by NEWCO
without the written approval of MAXION.
12.2 NEWCO shall indemnify and hold MAXION and its employees,
officers and directors harmless against and from all claims,
demands, penalties, liabilities, loss, damage, costs,
attorneys' fees, and expenses, of whatsoever nature, which are
a consequence of or attributable to the operation, use or
<PAGE> 15
possession of Maxion Engines and resulting from any
modification to or alteration of the Product by NEWCO performed
without the written approval of MAXION.
12.3 MAXION shall indemnify and hold NEWCO and its dealers,
employees, officers and directors, harmless against and from
all claims, demands, penalties, liabilities, loss, damage,
costs, attorneys' fees and expenses, of whatsoever nature,
which are a consequence of or attributable to the operation,
use or possession of Maxion Engines and resulting from any
representation or misrepresentation made by MAXION including,
but not limited to, representations or misrepresentations
relating to the capability, use, application, function,
durability, reliability, quality, serviceability, safety or any
other characteristic or feathre of Maxion Engines, and
including representations as required for government
certification, homologation, approval and for any other purpose
whatsoever, except as may have been made in reasonable reliance
upon information furnished by NEWCO.
12.4 NEWCO shall indemnify and hold MAXION and its employees,
officers and directors, harmless against and from all claims,
demands, penalties, liabilities, loss, damage, costs,
attorneys' fees and expenses, of whatsoever nature, which are a
consequence of or attributable to the operation, use or
possession of Maxion Engines and resulting from any
representation or misrepresentation made by NEWCO including,
but not limited to, representations or misrepresentations
relating to the capability, use, application, function,
durability, reliability, quality, serviceability, safety or any
other characteristic or
<PAGE> 16
feature of Maxion Engines, and including representations as
required for government certification, homologation, approval
and for any other purpose whatsoever, except as may have been
made in reasonable reliance upon information furnished by
MAXION.
12.5 Each of NEWCO and MAXION shall indemnify and hold harmless the
other and the directors, officers and employees of the other,
from and against any and all claims, demands, penalties,
liabilities, loss, damage, costs, attorneys' fees and expenses,
of whatsoever nature, arising out of injury to or death of or
property damage sustained by the indemnifying Party's
employees, agents and contractors while such employees, agents
or contractors are on the property of the other.
12.6 MAXION and NEWCO shall not be responsible hereunder for any
indirect or consequential damages.
13. DISCONTINUANCE:
13.1 If MAXION for any reason determines that it desires to cease
manufacturing any Maxion Engine, MAXION shall immediately
notify NEWCO of such decision. Such notification shall be made
at least 12 months prior to the actual discontinuance.
13.2 Where Clause 13.1 applies, MAXION shall use all reasonable
endeavours to offer in an agreed timescale to NEWCO an
alternative engine product to replace the to be discontinued
Maxion Engine.
<PAGE> 17
13.3 If NEWCO decides to cease the manufacture of any product that
uses Maxion engines, it shall immediately notify MAXION in
writing and shall ensure that such notice is given at least 12
months prior to the actual discontinuance. MAXION and NEWCO
will use their best endeavours to resolve any remaining
inventory issues at their plants or at MAXION's suppliers.
14. TERMINATION:
14.1 Either Party may terminate this Supply Agreement forthwith by
notice in writing to the other Party if:
(i) the other Party fails for reasons other than Force
Majeure to comply with any of the terms of this Supply
Agreement and does not remedy such breach within 180 days
after written notice of such breach is given to it by the
terminating Party; or
(ii) the other Party becomes a party to a voluntary or
involuntary bankruptcy, receivership or liquidation filed
by or against it (except in the case of either Party
where if it goes into bankruptcy or voluntary liquidation
for the purpose of reconstruction, this shall not be
considered as an event permitting the other Party to
terminate this Supply Agreement), or makes an assignment
for the benefit of creditors.
14.2 This Supply Agreement shall not be assignable (other than the
right to receive monies) or otherwise transferable by any Party
(except to an Affiliate of a Party) without the prior written
<PAGE> 18
consent of the other Party, which consent shall not be
unreasonably withheld or delayed. During the term hereof, if
there is a transfer of the ownership and control of either
MAXION, NEWCO or the parent company of either Party to a
competitor, the other Party shall have the option of
terminating the Supply Agreement immediately by giving written
notice thereof. For purposes of this Clause, a change in the
ownership and control of either Party or a parent company shall
be deemed to have occurred if and when any one or more persons
acting individually or jointly is or becomes a beneficial
owner, directly or indirectly, of securities representing 51%
or more of the combined voting power of the then outstanding
securities of the Party or the parent company of either Party.
14.3 In addition if in NEWCO's reasonable opinion:
(a) Products do not consistently meet over time the technical,
quality, reliability and other specifications which the
Parties will mutually agree upon from time to time; or
(b) MAXION does not consistently meet over time for reasons
other than Force Majeure the delivery schedules agreed upon
between the Parties:
then NEWCO may thereafter notify MAXION in writing of the event
complained of and require MAXION to rectify the particular
situation within 180 days. Should MAXION fail for reasons
other than Force Majeure to rectify within the said period,
NEWCO shall be free to terminate this Supply Agreement in whole
or in part forthwith by written notice.
<PAGE> 19
14.4 For any termination by either Party under Clauses 14.1, 14.2 or
14.3 or any other provision hereof, the following provisions
shall apply:
(a) All sums then outstanding from NEWCO to MAXION under any
purchase orders or schedule for Maxion Engines shall become
immediately due and payable,
(b) The Parties shall, within 30 days after the effective date
of any termination, meet to agree upon a programme for the
cessation of supply of Maxion Engines and the settlement by
way of mutual agreement (wherever possible) of any
outstanding issues.
Apart from the above any termination of this Supply Agreement
howsoever caused shall be without prejudice to either Party's
rights existing as at the date of termination.
15. FORCE MAJEURE:
15.1 No failure or omission by either Party in the performance of
any of its obligations under this Supply Agreement shall be
deemed a breach of this Supply Agreement, nor create any
liability or give rise to any right to terminate this Supply
Agreement, if the same shall arise from or as a consequence of
a general strike, extended labour dispute, lockout, fire,
flood, severe weather or other act of God, delays in
transportation or delivery of materials, war, insurrection,
civil disturbance, embargoes of goods by any government, or
any other cause beyond the reasonable control of such party,
whether similar to or different
<PAGE> 20
from the causes above enumerated, and any such cause shall
absolve the affected Party from responsibility for such failure
to perform said obligation.
15.2 Each Party shall notify the other of any material change in
conditions or the occurrence of any event which interferes or
threatens to interfere with the performance of any of its
obligations under this Supply Agreement.
15.3 Upon such notice, the Parties shall consult and co-operate as
to measures which may be taken to overcome the interference or
as to any alternative measures to be undertaken by the Parties
with a view to the continue performance of this Supply
Agreement. Such measures may include the suspension of any
condition or obligation, the modification of this Supply
Agreement or of any orders placed pursuant hereto, and the
assumption by any Party of any costs incurred or to be incurred
as a result of the interference which has arisen or in giving
effect to said measures.
16. NOTICES:
All notices hereunder shall be sent by certified or registered mail,
return receipt requested, with postage prepaid, to the addresses of
the Parties noted above or such other address as notified as between
the Parties.
<PAGE> 21
17. MISCELLANEOUS:
17.1 Nothing herein contained shall be deemed to create an agency,
joint venture, partnership, or fiduciary relationship between
the Parties hereto.
17.2 The headings in this Supply Agreement are for reference only
and shall not affect its construction or interpretation. Words
signifying the singular shall include the plural and vice versa
where the context so admits. All delivery-related terminology
shall wherever relevant be interpreted by reference to
Incoterms 1990.
17.3 Any failure of any party to enforce, at any time, any of the
provisions of this Supply Agreement or any rights or remedies
with respect hereto or to exercise any election herein provided
shall not constitute a waiver of any such provision, right,
remedy, or election or in any way affect the validity thereof
or of this Supply Agreement. The exercise by any Party of any
of its rights, remedies or elections under the terms of this
Supply Agreement shall not preclude or prejudice such Party's
right to exercise at any other time the same or any other
right, remedy or election it may have under this Supply
Agreement. The rights of termination provided herein are in
addition to any other right, remedy or election a Party may
have hereunder.
17.4 Subject to any contrary reference herein this Supply Agreement
embodies the entire understanding between the Parties and
supersedes all prior agreements, representations or warranties,
<PAGE> 22
oral or written, concerning the subject matter between the
Parties relating hereto. No modification, renewal, extension
or waiver of this Supply Agreement or any of its provisions
shall be binding unless in writing and duly executed by an
authorised representative of each Party hereto.
17.5 Except to the extent necessary to engage in the transactions
contemplated herein or as required by law, no Party may advise
third parties (other than Affiliates and/or professional
advisors retained by the Parties) of the existence or terms of
this Supply Agreement without the consent of the other Parties:
provided, however that NEWCO or MAXION may after the Effective
Date freely disclose the existence of this Agreement to their
distribution networks.
17.6 The provisions of Clauses 8 and 12 shall survive any
termination or expiration of this Agreement.
17.7 This Supply Agreement shall be governed and construed in
accordance with the Laws of Brazil.
17.8 Any and every dispute or difference between the Parties
concerning the validity, meaning or effect of this Supply
Agreement that cannot be amicably settled, shall be finally
settled under the rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators
appointed in accordance with such Rules. Arbitrators shall be
fluent in spoken and written English. The place of arbitration
shall be in Brazil. The decision of the arbitration (including
any award of costs) shall be final and binding on the Parties.
<PAGE> 23
17.9 The Parties shall continue to perform their respective
obligations under this Supply Agreement during the period of
any arbitration proceedings except insofar as such obligations
are the subject matter of the said arbitration proceedings.
17.10 Nothing contained in this Supply Agreement shall prevent either
MAXION or NEWCO from applying to an appropriate court in any
jurisdiction for any injunction or other like remedy to
restrain the other from committing any breach or any
anticipated breach hereof and for consequential relief.
IN WITNESS whereof the Parties have caused this Supply Agreement to be executed
the day and year first above written.
MAXION
SIGNED: /s/ Ivoncy Bedchmann Ioschpe
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TITLE: President
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AGCO
SIGNED: /s/ Michael F. Swick
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TITLE: Vice President and General Counsel
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