<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997
REGISTRATION NO. 333-20125
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20125
---------------------
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
AGCO CORPORATION
(Exact Name of Registrant as Specified in Charter)
---------------------
<TABLE>
<C> <C>
DELAWARE 58-1960019
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
4830 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30136
(770) 813-9200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
J-P RICHARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AGCO CORPORATION
4830 RIVER GREEN PARKWAY
DULUTH, GEORGIA 30136
(770) 813-9200
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code of
Agent For Service)
---------------------
WITH A COPY TO:
<TABLE>
<C> <C>
JOHN J. KELLEY III, ESQ. VALERIE FORD JACOB, ESQ.
KING & SPALDING FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
191 PEACHTREE STREET ONE NEW YORK PLAZA
ATLANTA, GEORGIA 30303 NEW YORK, NEW YORK 10004
(404) 572-4600 (212) 859-8000
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. []
---------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. []
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE MAXIMUM AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share............................. 5,375,000 $26.875 $144,453,125 $43,774(3)
========================================================================================================================
</TABLE>
(1) Includes 675,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a).
(3) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of 3,760,000 shares of Common Stock (the "U.S. Offering"). The second
prospectus relates to a concurrent offering outside the United States and Canada
of an aggregate of 940,000 shares of Common Stock (the "International
Offering"). The prospectuses for the U.S. Offering and the International
Offering will be identical with the exception of the following alternate pages
for the International Offering: a front cover page, "Underwriting," "Legal
Matters," "Independent Auditors," "Available Information" and "Incorporation of
Certain Documents by Reference" sections and a back cover page. Such alternate
pages appear in this Registration Statement immediately following the complete
prospectus for the U.S. Offering.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 28, 1997
PROSPECTUS
4,700,000 SHARES
[AGCO LOGO]
AGCO CORPORATION
COMMON STOCK
------------------------
Of the 4,700,000 shares of Common Stock offered hereby, 4,500,000 shares
are being offered by AGCO Corporation ("AGCO" or the "Company") and 200,000
shares are being offered by a stockholder of the Company (the "Selling
Stockholder"). The Company will not receive any of the net proceeds from the
sale of shares by the Selling Stockholder.
Of the 4,700,000 shares being offered hereby, 3,760,000 are being offered
for sale initially in the United States and Canada by the U.S. Underwriters and
940,000 are being offered for sale initially in a concurrent offering outside
the United States and Canada by the International Managers. The initial offering
price and the underwriting discount per share will be identical for both
offerings. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "AG." On February 26, 1997, the last reported sale price of the
Common Stock on the NYSE was $28 7/8. See "Price Range of Common Stock and
Dividend History."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8, FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
==================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $450,000.
(3) The Company has granted the U.S. Underwriters and the International Managers
30-day options to purchase up to an additional 540,000 shares and 135,000
shares of Common Stock, respectively, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1997.
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and the financial information and statements appearing elsewhere or
incorporated by reference in this Prospectus. Unless otherwise indicated, (i)
the information contained in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised, (ii) all references in this Prospectus
to "AGCO" or the "Company" include the Company's subsidiaries and its
predecessors and (iii) all dollar ($) amounts are in U.S. dollars. The offering
of 3,760,000 shares of common stock of the Company, par value $.01 per share
(the "Common Stock")in the United States and Canada (the "U.S. Offering") and
the offering of 940,000 shares of Common Stock outside the United States and
Canada (the "International Offering") are collectively referred to herein as the
"Offering."
THE COMPANY
AGCO is a leading manufacturer and distributor of agricultural equipment
throughout the world. The Company sells a full range of agricultural equipment
and related replacement parts, including tractors, combines, hay tools and
forage equipment and implements. The Company's products are widely recognized in
the agricultural equipment industry and are marketed under the following brand
names: Massey Ferguson(R), AGCO(R) Allis, GLEANER(R), Hesston(R), White, SAME,
Landini, White-New(R) Idea, Black Machine, AGCOSTAR(TM), Glencoe(R), Tye(R),
Farmhand(R), Maxion, IDEAL, PMI, Deutz and Fendt. The Company distributes its
products through a combination of over 7,500 independent dealers, wholly-owned
distribution companies, associates and licensees. In addition, the Company
provides retail financing in North America, the United Kingdom, France and
Germany through its finance joint ventures with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank").
For the year ended December 31, 1996, the Company's revenues were
approximately $2.3 billion, of which $1.5 billion, or 63%, were outside of North
America. For the period from 1992 to 1996, the Company's revenues increased at a
compound annual growth rate of 65%. This growth in revenues has resulted
primarily from the Company's ability to increase penetration of its existing
markets and through acquisitions. The Company has increased penetration in its
existing markets primarily through expanding and strengthening its independent
dealer network, selling complementary non-tractor products, expanding its
replacement parts business and introducing new products to meet the growing
needs of its customers. For example, the Company has been able to increase
sales, as well as dealer focus on its products, by establishing crossover
contracts within its North American dealer network. In a crossover contract, an
existing dealer carrying one of the Company's brands contracts to sell an
additional AGCO brand. Since January 1992, the Company has signed over 2,200 new
dealer contracts, the majority of which represent crossover contracts.
Additionally, approximately 1,750 of the Company's approximately 2,800 dealers
in North America carry two or more AGCO brands. Furthermore, the Company has
introduced a number of product improvements including the redesigned Massey
Ferguson high horsepower 6100/8100 Series tractors, an 18-speed powershift
transmission for the higher horsepower AGCO Allis 9600 Series and the White 6100
Series tractors, and water-cooled engines for the GLEANER combine. The Company
continues to invest in new product technology and innovation in order to remain
competitive in the market.
The Company has also grown through a series of 14 acquisitions for
consideration aggregating approximately $1,222.7 million. These acquisitions
have allowed the Company to broaden its product line, expand its dealer network
and establish strong market positions in several new markets throughout North
America, South America, Western Europe and the rest of the world. The Company
has achieved significant cost savings and efficiencies from its acquisitions by
eliminating duplicative administrative, sales and marketing functions,
rationalizing its dealer network, increasing manufacturing capacity utilization
and expanding its ability to source certain products and components from third
party manufacturers.
The Company's primary business objective is to achieve profitable growth.
The Company's strategic plan is based on internal growth for its existing
business and strategic acquisitions which provide an opportunity to provide
returns in excess of the Company's cost of capital. Key elements of the
Company's business strategy are: (i) expanding and strengthening the Company's
worldwide organization of independent dealers and distributors; (ii) marketing
multiple brands through multiple dealer networks; (iii) selling complementary
non-tractor products through its international distribution channel; (iv)
introducing competitive new products
3
<PAGE> 6
in all markets which meet the needs of customers and provide reasonable margins;
(v) expanding the international replacement parts business; (vi) focusing on
increasing margins through controlling product costs and operating expenses; and
(vii) pursuing strategic acquisitions focusing on new products and distribution
in new markets.
The Company was incorporated in Delaware in April 1991. The Company's
executive offices are located at 4830 River Green Parkway, Duluth, Georgia
30136, and its telephone number is (770) 813-9200.
RECENT DEVELOPMENTS
Fendt Acquisition. On January 20, 1997, the Company acquired the
operations of Xaver Fendt GmbH & Co. KG ("Fendt") for approximately $283.5
million plus approximately $38.0 million of assumed working capital debt (the
"Fendt Acquisition"). Fendt, which had 1995 sales of approximately $580.0
million, manufactures and sells tractors ranging from 45 to 260 horsepower
through a network of independent agricultural cooperatives and dealers in
Germany and a network of 250 dealers throughout Europe. With this acquisition,
AGCO has the number one market share in Germany and the number two market share
in France, two of Europe's largest agricultural equipment markets.
Deutz Argentina Acquisition. On December 27, 1996, the Company acquired
the operations of Deutz Argentina S.A. ("Deutz Argentina") for approximately
$62.5 million (the "Deutz Argentina Acquisition"). Deutz Argentina, with 1995
sales of approximately $109.0 million, supplies agricultural equipment, engines
and trucks to Argentina and other markets in South America. Deutz Argentina
distributes a broad range of tractor models in Argentina under the Deutz brand
name ranging from 60 to 190 horsepower, combines under the Deutz Fahr brand
name, and light trucks and agricultural implements. In addition, Deutz Argentina
manufactures Deutz diesel engines for distribution to other equipment
manufacturers and for use in its own equipment. The Deutz Argentina Acquisition
establishes AGCO as the dominant supplier of agricultural equipment in
Argentina.
Maxion Acquisition. On June 28, 1996, the Company acquired the
agricultural and industrial equipment business of Iochpe-Maxion S.A. (the
"Maxion Agricultural Equipment Business") for approximately $260.0 million (the
"Maxion Acquisition"). The Maxion Agricultural Equipment Business, with 1995
sales of approximately $265.0 million, was AGCO's Massey Ferguson licensee in
Brazil, manufacturing and distributing agricultural tractors under the Massey
Ferguson brand name, combines under the Massey Ferguson and IDEAL brand names
and industrial loader-backhoes under the Massey Ferguson and Maxion brand names.
The Maxion Acquisition establishes AGCO with market leadership in the
significant Brazilian agricultural equipment market.
Agricredit Joint Venture. On November 1, 1996, the Company sold a 51%
interest in Agricredit Acceptance Company ("Agricredit"), the Company's
wholly-owned finance subsidiary, to a wholly-owned subsidiary of Rabobank (the
"Agricredit Sale"). The Company received total consideration of approximately
$44.3 million in the transaction. The Company retained a 49% interest in
Agricredit and now operates Agricredit with Rabobank as a joint venture (the
"Agricredit Joint Venture"). The Agricredit Joint Venture has continued the
business of Agricredit and seeks to build a broader asset-based finance business
through the addition of other lines of business. The Company has similar joint
venture arrangements with Rabobank with respect to its retail finance companies
located in the United Kingdom, France and Germany. See "Business -- Retail
Financing/Joint Ventures."
New Credit Facility. On January 14, 1997, the Company replaced its $650
million unsecured credit facility (the "March 1996 Credit Facility") with a new
credit facility with Rabobank as lead agent (the "January 1997 Credit
Facility"), which initially provided for borrowings of up to $1.0 billion. On
February 24, 1997, the Company amended the January 1997 Credit Facility to
increase available borrowings to $1.2 billion. The January 1997 Credit Facility
is the Company's primary source of financing. Borrowings under the January 1997
Credit Facility may not exceed the sum of 90% of eligible accounts receivable
and 60% of eligible inventory. Lending commitments under the January 1997 Credit
Facility reduce to $1.1 billion on January 1, 1998 and $1.0 billion on January
1, 1999. If the Company consummates offerings of debt or capital stock
(including the Offering) prior to such dates, the proceeds of such offerings
will be used to reduce the lending commitments, but not below $1.0 billion. The
Company used borrowings under the March 1996 Credit
4
<PAGE> 7
Facility to finance the Deutz Argentina Acquisition and borrowings under the
January 1997 Credit Facility to finance the Fendt Acquisition. Pro forma for the
January 1997 Credit Facility and the Fendt Acquisition, at December 31, 1996,
the Company would have had approximately $576.1 million available for borrowing
under the January 1997 Credit Facility. The Company will use the net proceeds
from the Offering to repay a portion of its borrowings under the January 1997
Credit Facility. Pro forma for such repayment the Company would have had
approximately $576.1 million available for borrowing under the January 1997
Credit Facility at December 31, 1996.
THE OFFERING
Shares of Common Stock offered by
the Company........................ 4,500,000
Shares of Common Stock offered by
the Selling Stockholder............ 200,000
-----------
Total.................... 4,700,000(1)
Shares of Common Stock outstanding
after the Offering(2).............. 61,774,586
Use of Proceeds.................... To repay outstanding indebtedness of the
Company. The Company will not receive any
proceeds from the sale of shares of
Common Stock by the Selling Stockholder.
NYSE Symbol........................ "AG"
- ---------------
(1) Consists of 3,760,000 shares for the U.S. Offering and 940,000 shares for
the International Offering.
(2) Excludes, as of February 28, 1997, (i) 786,832 shares of Common Stock
subject to outstanding options and (ii) 1,604,500 shares of Common Stock
subject to issuance pursuant to grants of restricted stock.
RISK FACTORS
For a discussion of certain factors to be considered in evaluating the
Company, its business and an investment in the shares of Common Stock, see "Risk
Factors" beginning on page 8.
5
<PAGE> 8
SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial data set forth below for the five years
ended December 31, 1996 are derived from the Company's Consolidated Financial
Statements which have been audited by Arthur Andersen LLP, independent public
accountants. For the periods presented, the Company's results of operations were
significantly affected by a series of acquisitions completed during such
periods. Primarily as a result of these acquisitions, net sales have increased
significantly since 1992. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1992 1993(1) 1994(1) 1995(1) 1996(1)
-------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Net sales............................................... $314,542 $595,736 $1,319,271 $2,068,427 $2,317,486
Finance income.......................................... -- -- 39,741 56,621 --
-------- -------- ---------- ---------- ----------
314,542 595,736 1,359,012 2,125,048 2,317,486
-------- -------- ---------- ---------- ----------
Costs and Expenses:
Cost of goods sold...................................... 256,475 470,452 1,042,930 1,627,716 1,847,166
Selling, general and administrative expenses............ 37,003 55,848 129,538(2) 200,588(2) 215,636
Engineering expenses.................................... 6,924 7,510 19,358 27,350 27,705
Interest expense, net................................... 9,270 13,624 42,836(3) 63,211(3) 32,684
Other (income) expense, net............................. (1,172) 4,166 3,141(4) 9,602(4) 7,639
Nonrecurring expenses................................... -- 14,000 19,500 6,000 15,027
-------- -------- ---------- ---------- ----------
308,500 565,600 1,257,303 1,934,467 2,145,857
-------- -------- ---------- ---------- ----------
Income before income taxes, equity in net earnings of
unconsolidated subsidiary and affiliates and
extraordinary loss...................................... 6,042 30,136 101,709 190,581 171,629
Provision (benefit) for income taxes...................... -- -- (10,610)(5) 65,897(5) 59,963
-------- -------- ---------- ---------- ----------
Income before equity in net earnings of unconsolidated
subsidiary and affiliates and extraordinary loss........ 6,042 30,136 112,319 124,684 111,666
Equity in net earnings of unconsolidated subsidiary and
affiliates.............................................. -- 3,953(6) 3,215(6) 4,458 17,724(6)
-------- -------- ---------- ---------- ----------
Income before extraordinary loss.......................... 6,042 34,089 115,534 129,142 129,390(7)
Preferred stock dividends............................... -- 3,705 5,421 2,012 --
-------- -------- ---------- ---------- ----------
Net income available for common stockholders before
extraordinary loss...................................... $ 6,042 $ 30,384 $ 110,113 $ 127,130 $ 129,390(7)
======== ======== ========== ========== ==========
Net Income Per Common Share Before Extraordinary Loss:
Primary................................................. $ 0.27 $ 1.11 $ 3.07 $ 2.76 $ 2.34(7)
Fully diluted........................................... $ 0.27 $ 0.93 $ 2.35 $ 2.30 $ 2.26(7)
Weighted Average Number of Common and Common Equivalent
Shares Outstanding:
Primary................................................. 22,516 27,366 35,920 46,126 55,186
Fully diluted........................................... 22,516 36,774 49,170 56,684 57,441
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
---------------------------
ACTUAL AS ADJUSTED(8)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 750,474 $ 750,474
Total assets................................................ 2,116,531 2,116,531
Long-term debt.............................................. 567,055 443,090
Stockholders' equity........................................ 774,665 898,630
</TABLE>
- ---------------
(1) AGCO acquired a 50% joint venture interest in Agricredit in 1993 and the
Agricredit operations were reflected in the Company's consolidated
financial statements using the equity method of accounting for the year
ended December 31, 1993. AGCO acquired the remaining 50% interest in
Agricredit in 1994 and accordingly reflected the Agricredit operations in
the Company's consolidated financial statements on a consolidated basis for
the period from February 11, 1994 to December 31, 1994 and the year ended
December 31, 1995. AGCO sold a 51% joint venture interest in Agricredit
effective November 1, 1996. Accordingly, the Company's consolidated
financial statements as of and for the year ended December 31, 1996 reflect
Agricredit on the equity method of accounting for the entire period
presented.
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<PAGE> 9
(2) Includes selling, general and administrative expenses attributable to
Agricredit in the amount of $11.9 million and $13.8 million for the years
ended December 31, 1994 and 1995, respectively.
(3) Includes interest expense, net attributable to Agricredit in the amount of
$18.7 million and $31.7 million for the years ended December 31, 1994 and
1995, respectively.
(4) Includes other expense (income), net attributable to Agricredit in the
amount of $1.2 million for the year ended December 31, 1994. Amounts
attributable to Agricredit were not significant for the year ended December
31, 1995.
(5) Includes provision for income taxes attributable to Agricredit in the amount
of $3.1 million and $4.3 million for the years ended December 31, 1994 and
1995, respectively.
(6) Includes $4.0 million for 1993 and $0.6 million for 1994 for the equity in
net earnings of Agricredit prior to February 11, 1994, the date the
remaining 50% interest in Agricredit was acquired by the Company. Includes
$10.4 million for 1996 for the equity in net earnings of Agricredit. (See
Note 1).
(7) Excludes extraordinary loss, net of taxes, of $3.5 million, or $0.06 per
share, for the write-off of unamortized debt costs related to the
refinancing in March 1996 of the Company's $550.0 million secured credit
facility (the "June 1994 Credit Facility") with the March 1996 Credit
Facility.
(8) As adjusted to give effect to the Offering and the application of the
estimated net proceeds therefrom.
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<PAGE> 10
RISK FACTORS
Prospective purchasers should consider carefully the following factors, as
well as the other information contained and incorporated by reference in this
Prospectus, in evaluating an investment in the Common Stock.
AGRICULTURAL INDUSTRY
Historically, the agricultural industry, including the agricultural
equipment business, has been cyclical. Sales of agricultural equipment generally
are related to the health of the agricultural industry, which is affected by
farm land values, farm cash receipts and farm profits, all of which reflect
levels of commodity prices, acreage planted, crop yields, demand, government
policies and government subsidies. Sales are also influenced by economic
conditions, interest rate and exchange rate levels and the availability of
financing. Weather conditions can also affect farmers' buying decisions. During
previous economic downturns in the farm sector, the agricultural equipment
business experienced a general decline in sales and profitability. The
agricultural equipment business is expected to be subject to such market
fluctuation in the future. Furthermore, the agricultural equipment business is
highly seasonal, with farmers traditionally purchasing agricultural equipment in
the spring and fall in conjunction with the major planting and harvesting
seasons. The Company's net sales and income from operations have historically
been the lowest in the first quarter and have increased in subsequent quarters
as dealers increase inventory in anticipation of increased settlements in the
third and fourth quarters.
During the agricultural industry's extended downturn during the 1980s,
sales of agricultural equipment decreased substantially. In Western Europe, farm
consolidations continue to affect the agricultural equipment market. Although
sales of North American agricultural equipment have increased somewhat since
1988, the Company does not believe that industry sales in North America will
return to the peak levels of the 1970s. Outside Western Europe and North
America, markets for agricultural equipment continue to develop, but may be
affected by certain factors such as the availability of financing, inflation,
slow economic growth, changes in currency relationships or price controls.
COMPETITION
The agricultural equipment business is highly competitive. The Company
competes with several large national and international companies which, like the
Company, offer a full line of agricultural equipment, as well as numerous
manufacturers and suppliers of a limited number of farm equipment products. Some
of the Company's competitors are substantially larger than the Company and have
greater financial and other resources at their disposal. There can be no
assurance that such competitors will not substantially increase the resources
devoted to the development and marketing, including discounting, of products
competitive with those of the Company.
REGULATION AND GOVERNMENT POLICY
Domestic and foreign political developments and government regulations and
policies directly affect the agricultural industry in the United States and
abroad and indirectly affect the agricultural equipment business. The
application or modification of existing laws, regulations or policies or the
adoption of new laws, regulations or policies could have an adverse effect on
the Company's business.
The North American Free Trade Agreement ("NAFTA") and the General Agreement
on Tariffs and Trade ("GATT"), in particular, may affect worldwide agricultural
markets. The United States, Canada and Mexico have implemented NAFTA which
reduces internal trade restrictions between the three countries. Import duties
were eliminated for some products on January 1, 1994, while duties for other
economically and politically sensitive commodities and products will be
gradually eliminated over a 15-year period. The Uruguay Round of GATT concluded
in 1994. This agreement reduces agricultural export subsidies over a period of
years beginning in 1995 and grants access for many products that were previously
restricted. The next round of GATT negotiations are scheduled to occur in 1999.
The Company cannot predict with certainty the effect which existing and future
trade agreements may have on the Company's operations.
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<PAGE> 11
EXPOSURE TO FOREIGN CURRENCY FLUCTUATIONS; INTERNATIONAL OPERATIONS
The Company currently purchases a portion of its tractors and other
equipment from foreign suppliers and derives a majority of its revenues in
foreign countries. In addition, the Company has significant manufacturing
operations in foreign countries. The production costs, profit margins and
competitive position of the Company are affected by the strength of the
currencies in countries where it manufactures or purchases goods relative to the
strength of the currencies in countries where its products are sold. The
Company's results of operations and financial position may be adversely affected
by fluctuations in foreign currencies and by translations of the financial
statements of the Company's foreign subsidiaries from local currencies into U.S.
dollars. As a result of the Company's recent acquisitions, the Company is
exposed to adverse effects of fluctuations in the relevant local currency and
translations of the financial statements of the Company's subsidiaries from the
local currency into U.S. dollars. Further, international operations are
generally subject to various risks that are not present in domestic operations,
including restrictions on dividends and restrictions on the repatriation of
funds. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Foreign Currency Risk Management."
ACQUISITIONS AND INTEGRATION OF ADDITIONAL BUSINESS
As part of its business strategy, the Company continues to pursue strategic
acquisitions (some of which may be material to the Company) focusing on new
products and distribution in new markets. While the Company has recently
acquired businesses and successfully integrated their operations into its
existing corporate structure, there can be no assurance that the Company will
find additional attractive acquisition candidates or succeed at effectively
managing the integration of any businesses previously acquired or acquired in
the future.
9
<PAGE> 12
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "AG." The following table sets forth for the periods indicated the
high and low sales prices for the Common Stock and the cash dividends declared
per share of Common Stock:
<TABLE>
<CAPTION>
SALES PRICE
------------------
HIGH LOW DIVIDENDS
---- ---- ---------
<S> <C> <C> <C>
1995:
First Quarter......................................... $16 5/8 $12 3/8 $0.005
Second Quarter........................................ 20 1/2 16 1/16 0.005
Third Quarter......................................... 27 5/16 181 3/16 0.005
Fourth Quarter........................................ 26 20 0.005
1996:
First Quarter......................................... 28 5/8 21 3/16 0.01
Second Quarter........................................ 31 5/8 22 0.01
Third Quarter......................................... 27 7/8 19 1/4 0.01
Fourth Quarter........................................ 29 3/8 23 3/4 0.01
1997:
First Quarter (through February 26, 1997)............. 30 5/8 26 5/8 0.01
</TABLE>
On February 26, 1997, the last reported sale price of the Common Stock on
the NYSE was $28 7/8 per share.
On January 29, 1997, the Board of Directors of the Company declared a
dividend of $0.01 per share for the first quarter of 1997. The dividend will be
paid on March 3, 1997 to stockholders of record on February 17, 1997. Purchasers
of shares of Common Stock in this Offering will not be entitled to the first
quarter dividend. The Company intends to continue to pay dividends on its Common
Stock, subject to review in each quarter by the Company's Board of Directors,
taking into account the Company's results of operations, financial condition,
capital needs, future prospects and other factors deemed relevant by the Board
of Directors. The Company's January 1997 Credit Facility and the Indenture
relating to the Company's 8 1/2% Senior Subordinated Notes due 2006 limit the
amount of cash dividends payable by the Company. However, the Company does not
believe that such limitations will have a material effect on the Company's
ability to pay cash dividends in the future.
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $124.0 million, after deduction of underwriting discounts and
commissions and estimated expenses. The Company intends to use these proceeds to
reduce a portion of the borrowings outstanding under the January 1997 Credit
Facility. Under the January 1997 Credit Facility, the Company's borrowings may
not exceed 90% of eligible accounts receivable and 60% of eligible inventory.
The January 1997 Credit Facility terminates on January 14, 2002 and borrowings
thereunder bear interest at the Company's option at (i) for base rate advances,
the administrative agent's base lending rate or the federal funds rate plus
0.5%, whichever is higher or (ii) for eurocurrency rate advances, the
eurocurrency rate for such period plus a margin ranging from 0.25% to 1.25%
depending on the credit rating of the Company's senior, unsecured, long-term
debt. As of February 26, 1997, aggregate borrowings under the January 1997
Credit Facility were $747.1 million and interest accrued on borrowings
outstanding under the January 1997 Credit Facility at a weighted average
interest rate of 6.1% per annum. The Company uses borrowings under the January
1997 Credit Facility for general working capital purposes and acquisitions,
including the Fendt Acquisition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholder in the Offering.
10
<PAGE> 13
CAPITALIZATION
The following unaudited table sets forth the consolidated capitalization of
the Company as of December 31, 1996 (i) on a historical basis; (ii) on a pro
forma basis giving effect to the Fendt Acquisition and the January 1997 Credit
Facility; and (iii) on a pro forma as adjusted basis to give effect to the
Offering and the application of the estimated net proceeds therefrom. The
following table should be read in conjunction with the Company's Consolidated
Financial Statements and the Notes thereto included and incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
-----------------------------------------------
ACTUAL PRO FORMA PRO FORMA AS ADJUSTED
---------- ---------- ---------------------
(IN THOUSANDS)
<S> <C> <C> <C>
LONG-TERM DEBT:
March 1996 Credit Facility(1)...................... $ 317,439 $ -- $ --
January 1997 Credit Facility(1).................... -- 623,907 499,942
8 1/2% Senior Subordinated Notes due 2006(2)....... 247,957 247,957 247,957
Other long-term debt............................... 1,659 21,945 21,945
---------- ---------- ----------
Total long-term debt..................... $ 567,055 $ 893,809 $ 769,844
---------- ---------- ----------
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par value; 150,000,000 shares
authorized; 57,260,151 shares issued and
outstanding, actual and pro forma; 61,760,151
shares issued and outstanding, pro forma as
adjusted......................................... $ 573 $ 573 $ 618
Additional paid-in capital......................... 360,119 360,119 484,039
Retained earnings.................................. 411,422 411,422 411,422
Unearned compensation.............................. (17,779) (17,779) (17,779)
Cumulative translation adjustment.................. 20,330 20,330 20,330
---------- ---------- ----------
Total stockholders' equity............... 774,665 774,665 898,630
---------- ---------- ----------
Total capitalization..................... $1,341,720 $1,668,474 $1,668,474
========== ========== ==========
</TABLE>
- ---------------
(1) In January 1997, the Company replaced its $650 million March 1996 Credit
Facility with the five-year January 1997 Credit Facility.
(2) Reflects reduction for de minimus original issue discount.
11
<PAGE> 14
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data set forth below as of and for the
five years ended December 31, 1996 are derived from the Company's Consolidated
Financial Statements which have been audited by Arthur Andersen LLP, independent
public accountants. The following data should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto included
elsewhere herein and incorporated by reference in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." For the periods presented, the Company's results of operations were
significantly affected by a series of acquisitions completed during such
periods. Primarily as a result of these acquisitions, net sales have increased
significantly since 1992.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1992 1993(1) 1994(1) 1995(1) 1996(1)
-------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Net sales....................... $314,542 $595,736 $1,319,271 $2,068,427 $2,317,486
Finance income.................. -- -- 39,741 56,621 --
-------- -------- ---------- ---------- ----------
314,542 595,736 1,359,012 2,125,048 2,317,486
-------- -------- ---------- ---------- ----------
Costs and Expenses:
Cost of goods sold.............. 256,475 470,452 1,042,930 1,627,716 1,847,166
Selling, general and
administrative expenses...... 37,003 55,848 129,538(2) 200,588(2) 215,636
Engineering expenses............ 6,924 7,510 19,358 27,350 27,705
Interest expense, net........... 9,270 13,624 42,836(3) 63,211(3) 32,684
Other (income) expense, net..... (1,172) 4,166 3,141(4) 9,602(4) 7,639
Nonrecurring expenses........... -- 14,000 19,500 6,000 15,027
-------- -------- ---------- ---------- ----------
308,500 565,600 1,257,303 1,934,467 2,145,857
-------- -------- ---------- ---------- ----------
Income before income taxes, equity
in net earnings of
unconsolidated subsidiary and
affiliates and extraordinary
loss............................ 6,042 30,136 101,709 190,581 171,629
Provision (benefit) for income
taxes........................... -- -- (10,610)(5) 65,897(5) 59,963
-------- -------- ---------- ---------- ----------
Income before equity in net
earnings of unconsolidated
subsidiary and affiliates and
extraordinary loss.............. 6,042 30,136 112,319 124,684 111,666
Equity in net earnings of
unconsolidated subsidiary and
affiliates...................... -- 3,953(6) 3,215(6) 4,458 17,724(6)
-------- -------- ---------- ---------- ----------
Income before extraordinary
loss............................ 6,042 34,089 115,534 129,142 129,390(7)
Preferred stock dividends....... -- 3,705 5,421 2,012 --
-------- -------- ---------- ---------- ----------
Net income available for common
stockholders before
extraordinary loss.............. $ 6,042 $ 30,384 $ 110,113 $ 127,130 $ 129,390(7)
======== ======== ========== ========== ==========
Net Income Per Common Share Before
Extraordinary Loss:
Primary......................... $ 0.27 $ 1.11 $ 3.07 $ 2.76 $ 2.34(7)
Fully diluted................... $ 0.27 $ 0.93 $ 2.35 $ 2.30 $ 2.26(7)
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding:
Primary......................... 22,516 27,366 35,920 46,126 55,186
Fully diluted................... 22,516 36,774 49,170 56,684 57,441
</TABLE>
(continued on following page)
12
<PAGE> 15
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............... $221,592 $339,987 $ 497,793 $ 485,521 $ 750,474
Total assets.................. 320,713 578,346 1,823,294 2,162,915 2,116,531
Long-term debt................ 121,047 173,892 589,833(8) 568,894(8)(9) 567,055
Stockholders' equity.......... 93,672 212,229 476,666 588,928 774,665
</TABLE>
- ---------------
(1) AGCO acquired a 50% joint venture interest in Agricredit in 1993 and the
Agricredit operations were reflected in the Company's consolidated
financial statements using the equity method of accounting for the year
ended December 31, 1993. AGCO acquired the remaining 50% interest in
Agricredit in 1994 and accordingly reflected the Agricredit operations in
the Company's consolidated financial statements on a consolidated basis for
the period from February 11, 1994 to December 31, 1994 and the year ended
December 31, 1995. AGCO sold a 51% joint venture interest in Agricredit
effective November 1, 1996. Accordingly, the Company's consolidated
financial statements as of and for the year ended December 31, 1996 reflect
Agricredit on the equity method of accounting for the entire period
presented.
(2) Includes selling, general and administrative expenses attributable to
Agricredit in the amount of $11.9 million and $13.8 million for the years
ended December 31, 1994 and 1995, respectively.
(3) Includes interest expense, net attributable to Agricredit in the amount of
$18.7 million and $31.7 million for the years ended December 31, 1994 and
1995, respectively.
(4) Includes other expense (income), net attributable to Agricredit in the
amount of $1.2 million for the year ended December 31, 1994. Amounts
attributable to Agricredit were not significant for the year ended December
31, 1995.
(5) Includes provision for income taxes attributable to Agricredit in the amount
of $3.1 million and $4.3 million for the years ended December 31, 1994 and
1995, respectively.
(6) Includes $4.0 million for 1993 and $0.6 million for 1994 for the equity in
net earnings of Agricredit prior to February 11, 1994, the date the
remaining 50% interest in Agricredit was acquired by the Company. Includes
$10.4 million for 1996 for the equity in net earnings of Agricredit. (See
Note 1).
(7) Excludes extraordinary loss, net of taxes, of $3.5 million, or $0.06 per
share, for the write-off of unamortized debt costs related to the
refinancing of the June 1994 Credit Facility with the March 1996 Credit
Facility.
(8) Includes long-term indebtedness of Agricredit in the amount of $223.0
million and $153.0 million as of December 31, 1994 and 1995, respectively.
(9) Includes $37.6 million of the 6.5% Convertible Subordinated Debentures due
2008 (the "Convertible Subordinated Debentures"), which were converted into
approximately 5,920,000 shares of Common Stock during 1996.
13
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
During the periods discussed below, the Company's results of operations
were significantly affected by a series of acquisitions that expanded the size
and geographic scope of its distribution network, enabled it to offer new
products and increased its manufacturing capacity. Primarily as a result of
these acquisitions, revenues increased from $1,359.0 million in 1994 to $2,317.5
million in 1996. The results of operations for the years ended December 31,
1994, 1995 and 1996 were affected by the following transactions completed by the
Company:
- In December 1993, the Company acquired the White-New Idea Farm Equipment
Division from Allied Products Corporation which added a line of farm
implements including planters, spreaders and tillage equipment to the
Company's wide range of products (the "White-New Idea Acquisition").
- The Company acquired Agricredit Acceptance Company ("Agricredit"), a
retail finance company, from Varity Corporation ("Varity") in two
separate transactions (together, the "Agricredit Acquisition"). The
Company acquired a 50% joint venture interest in Agricredit in January
1993 and acquired the remaining 50% interest in February 1994. The
Agricredit Acquisition enabled the Company to provide flexible financing
alternatives to end users in North America as well as to provide an
additional source of income to the Company.
- In June 1994, the Company acquired from Varity the outstanding stock of
Massey Ferguson Group Limited ("Massey"), a producer of one of the top
selling brands of tractors sold worldwide, and certain related assets
(the "Massey Acquisition"). The Massey Acquisition significantly expanded
the Company's sales and operations outside of North America.
- In March 1995, the Company further expanded its product offerings through
its acquisition of AgEquipment Group, a manufacturer and distributor of
farm implements and tillage equipment (the "AgEquipment Acquisition"),
and its agreement to become the exclusive distributor of Landini tractors
in the United States and Canada (the "Landini Distribution Agreement").
- In June 1996, the Company acquired the agricultural and industrial
equipment business of Iochpe-Maxion S.A. (the "Maxion Acquisition"),
which expanded its product offerings and its distribution network in
South America, particularly in Brazil.
- In July 1996, the Company acquired certain assets of Western Combine
Corporation and Portage Manufacturing, Inc., which were the Company's
suppliers of Massey Ferguson combines and certain other harvesting
equipment sold in North America (the "Western Combine Acquisition"). The
Western Combine Acquisition provided the Company with access to advanced
technology and will increase the Company's profit margin on certain
combines and harvesting equipment sold in North America.
- In November 1996, the Company sold a 51% interest in Agricredit to a
wholly-owned subsidiary of Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank") (the
"Agricredit Sale"). The Company retained a 49% interest in Agricredit and
now operates the finance company with Rabobank as a joint venture (the
"Agricredit Joint Venture").
As a result of these transactions, the historical results of the Company
are not comparable from year to year in the periods presented and may not be
indicative of future performance.
Recently, the Company has completed two additional acquisitions which will
affect the Company's future results of operations:
- In December 1996, the Company further enhanced its market presence in
Argentina and South America by acquiring the operations of Deutz Argentina
S.A. ("Deutz Argentina"), a manufacturer and distributor of agricultural
equipment, engines and trucks to Argentina and other markets in South
14
<PAGE> 17
America (the "Deutz Argentina Acquisition"). The Deutz Argentina
Acquisition had no effect on the results of operations for the year ended
December 31, 1996.
- In January 1997, the Company acquired the operations of Xaver Fendt GmbH
& Co. KG ("Fendt"), a manufacturer and distributor of tractors, primarily
in Germany and throughout Europe (the "Fendt Acquisition"). The Fendt
Acquisition added a new line of tractors to the Company's product
offerings and expanded the Company's market presence in Europe,
particularly in Germany.
RESULTS OF OPERATIONS
Sales are recorded by the Company when equipment and replacement parts are
shipped by the Company to its independent dealers, distributors or other
customers. To the extent possible, the Company attempts to ship products to its
dealers and distributors on a level basis throughout the year to reduce the
effect of seasonal demands on its manufacturing operations and to minimize its
investment in inventory. Retail sales by dealers to farmers are highly seasonal
and are a function of the timing of the planting and harvesting seasons. In
certain markets, particularly in North America, there is often a time lag,
generally from one to twelve months between the date the Company records a sale
(a "billing") and the date a dealer sells the equipment to a farmer (a
"settlement"). During this time lag between a billing and a settlement, dealers
may not return equipment to the Company unless the Company terminates a dealer's
contract or agrees to accept returned products. Commissions payable under the
Company's salesman incentive programs are paid at the time of settlement, as
opposed to when products are billed. Due to fluctuations in dealer inventory
levels, settlements are more indicative of retail demand than billings.
Effective November 1, 1996, the Company completed the Agricredit Sale.
Accordingly, the Company's consolidated financial statements as of and for the
year ended December 31, 1996 reflect Agricredit on the equity method of
accounting for the entire period presented. The consolidated financial
statements as of December 31, 1995 and 1994 and for the year ended December 31,
1995 and for the period from February 11, 1994 to December 31, 1994 reflect
Agricredit on a consolidated basis with the Company's other majority-owned
subsidiaries. As a result of the change in the basis of presentation, the
historical results of the Company are not comparable from year to year.
The consolidated financial statements include, on a separate, supplemental
basis, the Company's Equipment Operations, and for 1995 and for the period from
February 11, 1994 to December 31, 1994, its Finance Company. "Equipment
Operations" reflect the consolidation of all operations of the Company and its
majority-owned subsidiaries with the exception of Agricredit, which is included
using the equity method of accounting. For the year ended December 31, 1995 and
for the period from February 11, 1994 to December 31, 1994, the results of
operations of Agricredit are included under the caption "Finance Company."
15
<PAGE> 18
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items included in the Company's Consolidated
Statements of Income:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Revenues:
Net sales................................................. 97.1% 97.3% 100.0%
Finance income............................................ 2.9 2.7 --
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Costs and Expenses:
Cost of goods sold(1)..................................... 76.7 76.6 79.7
Selling, general and administrative expenses.............. 9.5 9.6 9.3
Engineering expenses...................................... 1.4 1.1 1.2
Interest expense, net..................................... 3.2 3.0 1.4
Other expense, net........................................ 0.3 0.4 0.3
Nonrecurring expenses..................................... 1.4 0.3 0.7
----- ----- -----
92.5 91.0 92.6
----- ----- -----
Income before income taxes, equity in net earnings of
unconsolidated affiliates and extraordinary loss.......... 7.5 9.0 7.4
Provision (benefit) for income taxes........................ (0.8) 3.1 2.6
----- ----- -----
Income before equity in net earnings of unconsolidated
affiliates and extraordinary loss......................... 8.3 5.9 4.8
Equity in net earnings of unconsolidated affiliates......... 0.2 0.2 0.8
----- ----- -----
Income before extraordinary loss............................ 8.5 6.1 5.6
Extraordinary loss, net of taxes............................ -- -- (0.2)
----- ----- -----
Net income.................................................. 8.5% 6.1% 5.4%
===== ===== =====
</TABLE>
- ---------------
(1) Cost of goods sold as a percent of net sales for the years ended December
31, 1994, 1995 and 1996 was 79.1%, 78.7%, and 79.7%, respectively. Gross
profit, which is defined as net sales less cost of goods sold, was 20.9%,
21.3% and 20.3% for the years ended December 31, 1994, 1995 and 1996,
respectively.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Income
The Company recorded net income for the year ended December 31, 1996 of
$125.9 million compared to $129.1 million for the year ended December 31, 1995.
Net income per common share on a fully diluted basis was $2.20 for 1996 compared
to $2.30 for 1995. Net income for 1996 included nonrecurring expenses of $15.0
million, or $0.17 per share on a fully diluted basis, primarily related to the
further restructuring of the Company's European operations, acquired in the
Massey Acquisition in June 1994, and the integration and restructuring of the
Company's Brazilian operations, acquired in the Maxion Acquisition in June 1996
(see "Charges for Nonrecurring Expenses"). In addition, net income for 1996
included an extraordinary after-tax charge of $3.5 million, or $0.06 per share
on a fully diluted basis, for the write-off of unamortized debt costs related to
the refinancing of the Company's $550.0 million secured revolving credit
facility (see "Liquidity and Capital Resources"), a gain on the Agricredit Sale
of $4.7 million, or $0.05 per share on a fully diluted basis, and severance
costs including accelerated amortization of shares earned under the Company's
long-term incentive plan and related cash severance totaling $7.3 million, or
$0.08 per share on a fully diluted basis, related to the resignation of a
Company executive. Net income for 1995 included nonrecurring expenses of $6.0
million, or $0.07 per share on a fully diluted basis, associated with the
initial integration of the Massey Acquisition (see "Charges for Nonrecurring
Expenses"). The Company's results for the year ended December 31, 1996 were also
negatively impacted by losses, including the related financing costs, in the
newly
16
<PAGE> 19
acquired Brazilian operations as a result of the poor industry conditions
experienced in the region. Excluding the items discussed above, the Company's
results of operations were improved over 1995, primarily the result of sales
growth in existing markets.
Retail Sales
Conditions in the United States and Canadian agricultural markets were
favorable in 1996 compared to 1995. Industry unit retail sales of tractors,
combines and hay and forage equipment for 1996 increased approximately 7%, 6%
and 2%, respectively, over 1995. The Company believes general market conditions
were positive due to favorable economic conditions relating to high net cash
farm incomes, strong commodity prices and increased export demand. Company unit
retail sales of tractors in the United States and Canada were slightly above the
industry in 1996 compared to 1995. The increase in tractor settlements was
attributable to the favorable industry conditions and the impact of the
Company's expanded dealer network, which resulted primarily from dealers
entering into crossover contracts whereby an existing dealer carrying one of the
Company's brands contracts to sell an additional AGCO brand. In addition, the
Company has benefited from the successful acceptance of improved tractor product
offerings, including the new Massey Ferguson high horsepower tractors which were
introduced in the middle of 1995. Company unit retail sales of combines in the
United States and Canada for 1996 increased 24% compared to 1995 primarily due
to the Company's increased sales to contract harvesters and dealer development
activities which strengthened the Company's dealer network for combines. Company
hay and forage equipment retail sales increased in line with the industry.
Industry conditions in Western Europe were favorable in 1996 with retail
sales of tractors increasing approximately 12% compared to 1995 primarily due to
higher net cash farm incomes, improved economic conditions, strong commodity
prices and increased export demand. Retail sales of Massey Ferguson tractors in
Western Europe increased approximately 15% over 1995 with the most significant
market share increases in France, Spain and Scandinavia, primarily due to the
Company's focus on dealer development. Outside North America and Western Europe,
industry retail sales of tractors also showed gains in most markets where the
Company competes due to a general improvement in economic conditions. Retail
sales of Massey Ferguson tractors increased in these markets with significant
growth in the Middle East, Africa, East Asia/Pacific and Australia compared to
1995, primarily due to improved market conditions and the Company's strong
distribution channels in these regions. Company retail sales of tractors in
Brazil were affected by industry conditions in Brazil which remained depressed
throughout 1996 relative to historic volumes due to high farm debt levels and
the suspension and subsequent reinstatement of Brazilian Central Bank loan
programs.
Revenues
Net sales for the Company's Equipment Operations for 1996 increased 12.0%
to $2,317.5 million compared to $2,068.4 million for 1995. A portion of the
increase was the result of the Company's sales of $85.1 million in Brazil for
the six months ended December 31, 1996 resulting from the Maxion Acquisition.
The Company achieved net sales increases in 1996 in Western Europe of $63.8
million , or 7% over 1995. In the remaining international markets, the Company
achieved net sales increases of $63.2 million, or 19% over 1995. The increase in
Western Europe and other international markets primarily related to increased
sales of tractors due to the Company's favorable retail sales performance and
increased sales of combines and other non-tractor products resulting from the
Company's successful efforts to expand non-tractor sales in all international
markets. The Company also experienced increased net sales of $37.0 million, or
4% over 1995, in North America primarily due to a 17% increase in the Company's
North American retail dollar sales compared to 1995. Total revenues on a
consolidated basis for 1995 also included finance income of $56.6 million
associated with the operations of Agricredit.
Costs and Expenses
Cost of good sold for the Company's Equipment Operations was $1,847.2
million (79.7% of net sales) for 1996 compared to $1,627.7 million (78.7% of net
sales) for 1995. Gross profit, defined as net sales less cost of goods sold, was
$470.3 million (20.3% of net sales) for 1996 as compared to $440.7 million
(21.3% of net
17
<PAGE> 20
sales) for 1995. Gross margins in 1996 were negatively impacted by the
following: (i) lower margins related to the Brazilian operations acquired in the
Maxion Acquisition due to low volumes related to depressed industry conditions
and (ii) a change in the mix of products sold, particularly due to a lower mix
of high margin North American replacement parts, a shift in North American sales
from higher margin utility tractors (under 100 horsepower) to high horsepower
tractors (over 100 horsepower) and increased sales of combines in Europe, which
have lower than average margins.
Selling, general and administrative expenses for the Company's Equipment
Operations were $215.6 million (9.3% of net sales) for 1996 compared to $190.0
million (9.2% of net sales) for 1995. The increase in selling, general and
administrative expenses was primarily due to an increase in sales volume and an
increase in the amortization of stock-based compensation expense of $15.9
million compared to 1995 related to the Company's long-term incentive plan which
is tied to stock price appreciation. Included in the stock-based compensation
expense for 1996 was accelerated amortization of $5.8 million related to
severance costs associated with the resignation of a Company executive.
Excluding the amortization expense related to the long-term incentive plan, the
Company's Equipment Operations had selling, general and administrative expenses
of $189.8 million (8.2% of net sales) for 1996 and $180.0 million (8.7% of net
sales) for 1995. The decrease in selling, general and administrative expenses as
a percentage of net sales was primarily due to cost reduction initiatives in the
Company's European operations. In connection with the Massey Acquisition, the
Company implemented a restructuring plan which has eliminated duplicate costs by
centralizing certain sales, marketing and administrative functions. See "Charges
for Nonrecurring Expenses" for further discussion. On a consolidated basis for
1995, selling, general and administrative expenses were $203.9 million, which
included $13.8 million related to the operations of Agricredit.
Engineering expenses for the Company's Equipment Operations were $27.7
million (1.2% of net sales) for 1996 compared to $24.1 million (1.2% of net
sales) for 1995. The increase in engineering expenses compared to 1995 primarily
related to the development of new products including a new Massey Ferguson
utility tractor line to be introduced in 1997.
Interest expense, net for the Company's Equipment Operations was $32.7
million for 1996 compared to $31.5 million for 1995. The increase in interest
expense, net was primarily due to the additional borrowings associated with the
financing of the Maxion Acquisition and higher fixed interest rates associated
with the 8 1/2% Senior Subordinated Notes which were issued in March 1996 as
compared to the floating rates on the Company's revolving credit facility. The
Company financed the entire purchase price for the Maxion Acquisition with
additional indebtedness. On a consolidated basis, interest expense, net was
$63.2 million for 1995, which included $31.7 million relating to the operations
of Agricredit.
Other expense, net was $7.6 million for 1996 compared to $9.6 million for
1995. The decrease in other expense, net was primarily due to the gain recorded
on the Agricredit Sale in 1996 and foreign exchange gains recorded in 1996
compared to foreign exchange losses in 1995 related to the Company's
international operations. The decrease in other expense, net was partially
offset by increased amortization of intangible assets resulting from the Maxion
and Western Combine Acquisitions.
Nonrecurring expenses were $15.0 million in 1996 compared to $6.0 million
in 1995. The nonrecurring charge recorded in 1996 related to the further
restructuring of the Company's European operations, acquired in the Massey
Acquisition in June 1994 and the integration and restructuring of the Brazilian
operations, acquired in the Maxion Acquisition in June 1996. The 1995
nonrecurring charge primarily related to the initial integration and
restructuring of the Company's European operations. See "Charges for
Nonrecurring Expenses" for further discussion.
The Company recorded a net income tax provision for the Company's Equipment
Operations of $60.0 million for 1996 compared to $61.6 million for 1995. On a
consolidated basis, the Company recorded an income tax provision of $65.9
million for 1995, which included $4.3 million related to the operations of
Agricredit. In 1996 and 1995, the Company's income tax provision approximated
statutory rates, although actual income tax payments remained at rates below
statutory rates resulting from the utilization of net operating loss
carryforwards acquired in the Massey Acquisition. Primarily due to the
availability of acquired net operating loss carryforwards, the Company expects
to pay taxes in 1997 at effective rates substantially
18
<PAGE> 21
below statutory rates. At December 31, 1996, the Company had net operating loss
carryforwards totaling $171.3 million, primarily in France, Brazil and
Argentina.
Equity in net earnings of unconsolidated subsidiary and affiliates for the
Company's Equipment Operations was $17.7 million in 1996 compared to $11.2
million in 1995. The increase in equity in net earnings of unconsolidated
subsidiary and affiliates was primarily due to an increase in the Company's
pro-rata share in net earnings of Agricredit from $6.8 million in 1995 to $10.4
million in 1996 despite the Company recognizing only 49% of the equity in net
earnings of Agricredit from November 1, 1996 to December 31, 1996 as a result of
the Agricredit Sale. In addition, the increase in equity in net earnings of
unconsolidated subsidiary and affiliates related to the Company's pro-rata share
in net earnings of certain equity investments in the European operations,
including its 49% interest in Massey Ferguson Finance which provides retail
financing to end users in the United Kingdom, France and Germany. On a
consolidated basis, equity in net earnings of unconsolidated subsidiary and
affiliates for 1995 was $4.5 million due to Agricredit being presented on a
consolidated basis rather than the equity method of accounting.
Finance Company Operations
On November 1, 1996, the Company sold a 51% interest in Agricredit to
Rabobank. The Company received total consideration of approximately $44.3
million in the transaction, the proceeds of which were used to repay borrowings
under the Company's $650.0 million unsecured revolving credit facility. The
Company retained a 49% interest in Agricredit and now operates the finance
company with Rabobank as a joint venture. The Agricredit Joint Venture has
continued the business of Agricredit and seeks to build a broader asset-based
finance business through the addition of other lines of business. The Company's
benefits from the transaction also include deleveraging the consolidated balance
sheet by approximately $550.0 million and the redeployment of approximately
$44.3 million of capital. The Company has similar joint venture arrangements
with Rabobank and its affiliates with respect to its retail finance companies
located in the United Kingdom, France and Germany.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Income
The Company recorded net income for the year ended December 31, 1995 of
$129.1 million compared to $115.5 million for the year ended December 31, 1994.
Net income per common share on a fully diluted basis was $2.30 for 1995 compared
to $2.35 for 1994. Net income for 1995 included nonrecurring expenses of $6.0
million, or $0.07 per share on a fully diluted basis, primarily related to the
initial integration of the Massey Acquisition (see "Charges for Nonrecurring
Expenses"). Net income for 1994 included nonrecurring expenses of $19.5 million,
or $0.33 per share on a fully diluted basis, associated with the integration of
the Massey and White-New Idea Acquisitions and a deferred income tax benefit of
$29.9 million, or $0.61 per share on a fully diluted basis, relating to the
reduction of a portion of the deferred tax valuation allowance. Excluding the
nonrecurring expenses and deferred income tax benefit, the improved results in
1995 reflected the impact of the Company's acquisitions, sales growth in
existing product lines and improved operating efficiencies.
Retail Sales
Conditions in the United States and Canadian agricultural markets were
generally favorable in 1995 compared to 1994. Industry unit retail sales of
tractors and combines for 1995 increased 2% and 10%, respectively, over 1994.
Unit settlements of hay and forage equipment decreased 6% compared to 1994. The
Company believes the increases in the tractor and combine markets were primarily
due to high net cash farm incomes, strong commodity prices, high replacement
demand and aggressive marketing programs associated with competitors'
introduction of new products. The decrease in hay and forage equipment unit
settlements reflects the effects of a softening in cattle and dairy commodity
prices during 1995.
Company unit settlements of tractors in the United States and Canada
increased in line with the industry retail unit sales for 1995 compared to 1994.
The increase in tractor settlements was attributable to the
19
<PAGE> 22
favorable industry conditions as well as the impact of the Company's expanded
dealer network which resulted primarily from dealers entering into crossover
contracts whereby an existing dealer carrying one of the Company's brands
contracts to sell an additional AGCO brand. Company hay and forage equipment
settlements were level in comparison to the prior year. This improvement in
relation to the industry retail sales also reflected the benefit of an expanded
dealer network which resulted from the Company's crossover contract strategy.
Company unit settlements of combines in the United States and Canada for 1995
were approximately 8% below the prior year primarily due to aggressive marketing
programs to introduce new products by certain of the Company's competitors and
the discontinuance of certain retail incentive programs by the Company in the
first six months of 1994 to move older, discontinued models.
Industry conditions in Western Europe were favorable in 1995 with retail
sales of tractors increasing approximately 7% compared to 1994 primarily due to
improved economic conditions, strong commodity prices and high export demand.
Retail sales of Massey Ferguson tractors in Western Europe outperformed the
industry by increasing approximately 14% over 1994. The Company experienced the
most significant market share increases in France, Germany and Spain due to the
Company's focus on dealer development and expansion. Additionally, the Company's
successful introduction of the new Massey Ferguson high horsepower tractor line
contributed to the market share increases, particularly in France. Outside North
America and Western Europe, industry retail sales of tractors also showed gains
in many markets where the Company competes due to a general improvement in
economic conditions. Retail sales of Massey Ferguson tractors increased
significantly in the Middle East and Eastern Europe compared to 1994 primarily
due to favorable government incentive programs and improved funding sources in
these regions. These gains were partially offset by decreased retail sales in
Africa due to widespread drought conditions.
Revenues
Total revenues for 1995 were $2,125.0 million representing an increase of
$766.0 million, or 56.4%, over total revenues of $1,359.0 million for 1994. The
increase was primarily attributable to sales in the Company's international
markets as a result of the Massey Acquisition with increased net sales of $712.3
million for 1995. In addition to the full year impact of the Massey Acquisition,
the increase reflects year over year sales increases due to the strong
international retail sales achieved in the Company's Massey Ferguson products in
1995. The Company also experienced net sales increases of $36.8 million in 1995
in North America as a result of an expanded dealer network, the AgEquipment
Acquisition, the Landini Distribution Agreement and new product introductions.
The North American sales increase was partially offset by a decrease in
replacement parts sales compared to 1994 as a result of a late planting season
and smooth harvest which decreased demand on an industry-wide basis. Total
revenues also increased in 1995 due to an increase in finance income of $16.9
million associated with the operations of Agricredit. The increase in finance
income was primarily due to the growth in the Agricredit credit receivable
portfolio as a result of Agricredit's increased penetration into the Company's
North American dealer network and its expansion into the Canadian market. In
addition, prior to the acquisition of the remaining 50% interest in Agricredit
on February 10, 1994, the results of Agricredit were accounted for under the
equity method of accounting and, accordingly, were not consolidated with those
of the Company.
Costs and Expenses
Cost of goods sold for the Company's Equipment Operations in 1995 was
$1,627.7 million (78.7% of net sales) compared to $1,042.9 million (79.1% of net
sales) in 1994. Gross profit, defined as net sales less cost of goods sold, was
$440.7 million (21.3% of net sales) for 1995 as compared to $276.3 million
(20.9% of net sales) for 1994. The Company's gross profit margin increased in
1995 compared to 1994 despite a decrease in the proportion of higher margin part
sales to total net sales. The change in sales mix occurred because the majority
of the Company's sales growth in 1995 related to machinery sales. The negative
effect of this change in sales mix on the gross profit margin was primarily
offset by the Company's ability to record the entire gross profit on Massey
Ferguson equipment sold in North America as a result of the Massey Acquisition.
Prior to the Massey Acquisition, the gross profit margin on sales of Massey
Ferguson equipment in North America was recognized by both the Company and by
Varity. In addition, the Company's gross profit margin benefited from
20
<PAGE> 23
the introduction of the new high horsepower Massey Ferguson tractor line in
Western Europe and cost reduction efforts related to the integration of the
Company's European operations acquired in the Massey Acquisition.
Selling, general and administrative expenses for 1995 were $203.9 million
(9.6% of total revenues) compared to $129.5 million (9.5% of total revenues) for
1994. The decrease in selling, general and administrative expenses as a
percentage of total revenues was primarily due to cost reduction initiatives in
the Company's European operations and lower operating expenses as a percentage
of total revenues related to Agricredit. These improvements as a percentage of
total revenues were partially offset by increased amortization of long-term
incentive compensation related to restricted stock awards tied to stock price
appreciation. In connection with the Massey Acquisition, the Company implemented
a restructuring plan which has eliminated duplicate costs by centralizing
certain sales, marketing and administrative functions. See "Charges for
Nonrecurring Expenses" for further discussion. Excluding Agricredit, the
Company's Equipment Operations had selling, general and administrative expenses
of $190.0 million (9.2% of net sales) and $117.7 million (8.9% of net sales) for
1995 and 1994, respectively. The increase as a percentage of net sales was
primarily the result of the increased amortization of restricted stock awards
offset by cost reductions in the Company's European operations as discussed
above.
Engineering expenses for the Company's Equipment Operations were $24.1
million (1.2% of net sales) for 1995 compared to $19.4 million (1.5% of net
sales) for 1994. The higher engineering expenses as a percentage of net sales in
1994 primarily related to the redesign of the Massey Ferguson 6100/8100 series
high horsepower tractors introduced in early 1995.
Interest expense, net for 1995 was $63.2 million compared to $42.8 million
for 1994. The increase in interest expense, net was primarily due to the
additional borrowings associated with the Massey and the AgEquipment
Acquisitions. The Company financed the entire purchase price for the AgEquipment
Acquisition and a portion of the purchase price for the Massey Acquisition with
additional indebtedness. In addition, interest expense, net increased at
Agricredit due to the additional borrowings associated with the increase in the
credit receivable portfolio and an increase in the rates charged on outstanding
borrowings.
Other expense, net was $9.6 million for 1995 compared to $3.1 million for
1994. The increase in other expense, net was primarily due to increased
amortization of intangible assets as a result of the Massey Acquisition and
foreign exchange losses related to the Company's international operations.
Nonrecurring expenses were $6.0 million in 1995 and $19.5 million in 1994.
The nonrecurring charge recorded in 1995 primarily related to costs associated
with the initial integration of the Company's European operations, acquired in
the Massey Acquisition in June 1994. The 1994 nonrecurring charge related to the
initial integration in Europe and the integration in North America of White-New
Idea, which was acquired in December 1993. See "Charges for Nonrecurring
Expenses" for further discussion.
The Company recorded a net income tax provision of $65.9 million for 1995
and a net income tax benefit of $10.6 million in 1994. In 1995, the Company's
income tax provision approximated statutory rates. The 1994 net income tax
benefit included a $29.9 million United States deferred income tax benefit
related to a reduction of a portion of the deferred tax valuation allowance. The
reduction in the valuation allowance was supported by the Company's generation
of taxable income in recent years and expectations of taxable income in future
periods. The United States income tax benefit was partially offset by a foreign
income tax provision of $19.3 million consisting primarily of a deferred income
tax provision which resulted from the realization of deferred tax assets
relating to net operating loss carryforwards acquired in the Massey Acquisition.
Primarily due to the availability of acquired net operating loss carryforwards ,
the Company paid taxes in 1994 and 1995 at effective rates substantially below
statutory rates.
Equity in net earnings of unconsolidated subsidiary and affiliates on a
consolidated basis was $4.5 million in 1995 and $3.2 million in 1994. The
increase in equity in net earnings of unconsolidated subsidiary and affiliates
was primarily due to the inclusion in 1994 of the Company's pro-rata share in
net earnings of its 49% interest in Massey Ferguson Finance, acquired in the
Massey Acquisition in June 1994. The amount recognized for 1994 includes the
Company's pro-rata share of net earnings in Agricredit from January 1, 1994
21
<PAGE> 24
through February 10, 1994. From February 11, 1994 through December 31, 1994, the
results of operations of Agricredit were consolidated with the Company's
operations and were no longer accounted for under the equity method of
accounting.
Finance Company Operations
Agricredit recorded net income of $6.8 million for 1995 and $4.9 million
for the period from the acquisition date to December 31, 1994. Retail
acceptances were approximately $362.7 million for 1995 compared to $321.6
million for 1994. The increase was primarily the result of Agricredit's
increased penetration into the Company's North American dealer network and its
expansion into the Canadian market.
QUARTERLY RESULTS
To the extent possible, the Company attempts to ship products to its
dealers on a level basis throughout the year to reduce the effect of seasonal
demands on its manufacturing operations and to minimize its investment in
inventory. However, settlements of agricultural equipment are highly seasonal,
with farmers traditionally purchasing agricultural equipment in the spring and
fall in conjunction with the major planting and harvesting seasons. The
Company's net sales and income from operations have historically been the lowest
in the first quarter and have increased in subsequent quarters as dealers
increase inventory in anticipation of increased retail sales in the third and
fourth quarters.
The following table presents unaudited interim operating results of the
Company. The Company believes that the following information includes all
adjustments (consisting only of normal, recurring adjustments) that the Company
considers necessary for a fair presentation, in accordance with generally
accepted accounting principles. The operating results for any interim period are
not necessarily indicative of results for any future interim period or the
entire fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996:(1)
Net sales............................... $453,884 $584,681 $588,859 $690,062
Gross profit(2)......................... 93,740 115,794 123,540 137,246
Income from operations(2)............... 34,592(4) 59,617(4) 54,068(4) 63,675(4)(6)
Income before extraordinary loss........ 20,595(4) 37,508(4) 31,299(4) 39,988(4)(6)(7)
Net income.............................. 17,092(4)(5) 37,508(4) 31,299(4) 39,988(4)(6)(7)
Net income per common share before
extraordinary loss -- fully
diluted.............................. 0.37(4)(5) 0.66(4) 0.54(4) 0.69(4)(6)(7)
1995:
Revenues................................ $456,219 $571,718 $498,639 $598,472
Gross profit(2)......................... 93,198 117,444 112,793 117,276
Income from operations(2)............... 41,957(4) 61,973(4) 60,693(4) 55,986(4)
Net income.............................. 23,384(4) 35,888(4) 36,195(4) 33,675(4)
Net income per common share -- fully
diluted(3)........................... 0.42(4) 0.64(4) 0.64(4) 0.60(4)
</TABLE>
- ---------------
(1) As a result of the Agricredit Sale, the 1996 operating results are restated
for each quarter presented to reflect Agricredit on the equity method of
accounting.
(2) Gross profit is defined as net sales less cost of goods sold, and income
from operations is defined as net sales less cost of goods sold, selling,
general and administrative expenses for the Company's Equipment Operations,
engineering expenses and nonrecurring expenses.
(3) Net income per common share-fully diluted has been restated for 1995 to
reflect the two-for-one stock split, effected January 31, 1996.
(4) The 1996 operating results include nonrecurring expenses of $5.9 million, or
$0.07 per share, for the three months ended March 31, 1996, $0.8 million, or
$0.01 per share, for the three months ended June 30,
22
<PAGE> 25
1996, $6.2 million, or $0.07 per share, for the three months ended September
30, 1996 and $2.1 million, or $0.02 per share, for the three months ended
December 31, 1996. The 1995 operating results include nonrecurring expenses
of $2.0 million, or $0.02 per share, for the three months ended March 31,
1995, $1.7 million, or $0.02 per share, for the three months ended June 30,
1995, $0.9 million, or $0.01 per share, for the three months ended September
30, 1995 and $1.4 million, or $0.02 per share, for the three months ended
December 31, 1995.
(5) The 1996 operating results include an extraordinary after-tax charge of $3.5
million, or $0.06 per share, for the write-off of unamortized debt costs
related to the refinancing of the Company's $550.0 million revolving credit
facility for the three months ended March 31, 1996.
(6) The 1996 operating results include severance costs related to a Company
executive of $7.3 million, or $0.08 per share, for the three months ended
December 31, 1996 which includes accelerated amortization of shares earned
under the Company's long-term incentive plan and related cash severance.
(7) The 1996 operating results include a gain on the sale of a 51% interest in
Agricredit of $4.7 million, or $0.05 per share, for the three months ended
December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements for its Equipment Operations are
subject to variations due to seasonal changes in inventory and dealer receivable
levels. Internally generated funds are supplemented when necessary from external
sources primarily from the Company's revolving credit facility.
In March 1996, the Company replaced its $550.0 million secured revolving
credit facility (the "June 1994 Credit Facility"), obtained in conjunction with
the Massey Acquisition in June 1994, with a $650.0 million unsecured revolving
credit facility (the "March 1996 Credit Facility"). The March 1996 Credit
Facility provided the Company's Equipment Operations with increased borrowing
capacity over the June 1994 Credit Facility. As of December 31, 1996,
approximately $317.4 million was outstanding under the March 1996 Credit
Facility and available borrowings were approximately $310.6 million. The Company
used borrowings from the March 1996 Credit Facility to finance the Maxion and
Deutz Argentina Acquisitions. The Company's borrowings under revolving credit
facilities decreased $60.9 million from December 31, 1995 to December 31, 1996
primarily due to the repayment of outstanding borrowings with proceeds from the
Company's issuance of $250.0 million of 8 1/2% Senior Subordinated Notes in
March 1996 and from the sale of a 51% interest in Agricredit to Rabobank. Total
long-term debt for the Company's Equipment Operations increased from $378.3
million at December 31, 1995 to $567.1 million at December 31, 1996. The
increase in long-term debt was due to the financing of the Maxion, Western
Combine and Deutz Argentina Acquisitions, partially offset by the use of
operating cash flow to repay indebtedness.
On January 14, 1997, the Company replaced the March 1996 Credit Facility
with a new revolving credit facility (the "January 1997 Credit Facility"), which
initially provided for borrowings of up to $1.0 billion. In February 1997, the
January 1997 Credit Facility was amended to allow for borrowings of up to $1.2
billion. The January 1997 Credit Facility will be the Company's primary source
of financing for its Equipment Operations and will provide increased borrowing
capacity over the March 1996 Credit Facility. Borrowings under the January 1997
Credit Facility may not exceed the sum of 90% of eligible accounts receivable
and 60% of eligible inventory. Lending commitments under the January 1997 Credit
Facility reduce to $1.1 billion on January 1, 1998 and $1.0 billion on January
1, 1999. If the Company consummates offerings of debt or capital stock prior to
such dates, the proceeds of such offerings will be used to reduce the lending
commitments, but not below $1.0 billion. The Company used proceeds from the
January 1997 Credit Facility to finance the Fendt Acquisition.
In March 1996, the Company issued $250.0 million of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The net proceeds from the sale of the Notes were used to repay outstanding
indebtedness under the June 1994 Credit Facility. The sale of the Notes provided
the Company with subordinated capital and replaced a portion of its floating
rate debt with longer term fixed rate debt.
23
<PAGE> 26
Prior to the Agricredit Sale on November 1, 1996, Agricredit obtained funds
from a separate $630.0 million revolving credit facility (the "Agricredit
Revolving Credit Agreement") to finance its credit receivable portfolio.
Borrowings under the Agricredit Revolving Credit Agreement were based on the
amount and quality of outstanding credit receivables and were generally issued
for terms with maturities matching anticipated credit receivable liquidations.
On November 1, 1996, in connection with the Agricredit Joint Venture, the
Agricredit Revolving Credit Agreement was repaid and the Agricredit Joint
Venture entered into a new credit agreement.
The Company's working capital requirements for its Equipment Operations are
seasonal, with investments in working capital typically building in the first
half of the year and then reducing in the second half of the year. As of
December 31, 1996, the Company's Equipment Operations had $750.5 million of
working capital compared to $661.5 million as of December 31, 1995 and $513.9
million as of December 31, 1994. The increase in working capital in 1996
compared to 1995 was primarily due to working capital acquired in the Maxion and
Deutz Argentina Acquisitions. The increase in working capital in 1995 compared
to 1994 was primarily due to an increase in dealer receivables resulting from
the Company's sales growth in 1995, the AgEquipment Acquisition, the Landini
Distribution Agreement and the timing of international sales which were
significantly higher in late 1995 than in late 1994.
Cash flow provided by operating activities was $206.7 million for 1996
compared to $67.1 million for 1995. The increase in operating cash flow was
primarily due to (i) the collection of receivables in 1996 related to unusually
high international accounts receivable levels at December 31, 1995, which were
collected in 1996 and (ii) strong retail sales in North America during 1996
which resulted in lower levels of dealer inventories relative to billings in
1996 compared to 1995. The cash flow provided by operating activities was
primarily used to repay indebtedness and to fund capital expenditures. Cash flow
provided by operating activities was $67.1 million for 1995 compared to $96.4
million for 1994. The decrease in operating cash flow was primarily due to
increases in working capital as discussed above, partially offset by an increase
in net income. The cash flow provided by operating activities was primarily used
to fund the AgEquipment Acquisition and capital expenditures.
Capital expenditures were $45.2 million in 1996 compared to $45.3 million
in 1995 and $20.7 million in 1994. The increase in 1995 compared to 1994
primarily resulted from a full year's impact of capital expenditures recorded in
1995 by the Company's European operations related to its manufacturing
operations. For all years, the Company's capital expenditures related to the
development of new and existing products as well as the maintenance and
improvement of existing facilities. The Company currently estimates that
aggregate capital expenditures for 1997 will range from approximately $70.0
million to $80.0 million and will primarily be used to support the development
and enhancement of new and existing products. The increase in the expected
capital expenditures in 1997 is primarily the result of capital expenditures
required for the manufacturing operations acquired in the Deutz Argentina and
Fendt Acquisitions. The capital expenditures for 1997 are expected to be funded
with cash flows from operations.
The Company's debt to capitalization ratio for its Equipment Operations was
42.3% at December 31, 1996 compared to 37.7% at December 31, 1995, assuming
conversion of the Convertible Subordinated Debentures at December 31, 1995 (see
Note 8 to the Consolidated Financial Statements). The increase in the Company's
leverage was due to increased borrowing requirements to fund the Maxion, Western
Combine and Deutz Argentina Acquisitions.
The Company believes that available borrowings under the January 1997
Credit Facility, available cash and internally generated funds will be
sufficient to support its working capital, capital expenditures, and debt
service requirements for the foreseeable future.
The Company from time to time reviews and will continue to review
acquisition and joint venture opportunities as well as changes in the capital
markets. If the Company were to consummate a significant acquisition or elect to
take advantage of favorable opportunities in the capital markets, the Company
may supplement availability or revise the terms under its credit facilities or
complete public or private offerings of equity or debt securities.
24
<PAGE> 27
CHARGES FOR NONRECURRING EXPENSES
Maxion Acquisition
The Company identified $6.0 million of nonrecurring expenses related to the
integration and restructuring of the Company's Brazilian operations, acquired in
June 1996 as a result of the Maxion Acquisition. The Company recorded $4.7
million of nonrecurring expenses during 1996 to recognize a portion of these
costs. These costs are primarily related to the rationalization of
manufacturing, sales and administrative functions designed to resize the
operations to current sales and production volumes. Savings from the integration
and restructuring of the Brazilian operations are expected to result primarily
in reduced selling, general and administrative expenses and product cost
reductions. The Company expects to record the remaining $1.3 million of
nonrecurring expenses and complete the integration in 1997. While the Company
believes that cost savings from its restructuring plans can be attained, there
can be no assurance that all objectives of the restructuring will be achieved.
Massey Acquisition
The Company identified $19.5 million of nonrecurring expenses primarily
related to the initial integration and restructuring of the Company's European
operations, acquired in June 1994 as a result of the Massey Acquisition. The
Company recorded a charge of $13.5 million in the fourth quarter of 1994 to
recognize a portion of these costs and recorded the remaining $6.0 million in
1995. These costs primarily related to the centralization and rationalization of
the Company's European operations' administrative, sales and marketing
functions. Prior to the Massey Acquisition, Massey's operations were organized
in a decentralized business unit structure. The Company's restructuring plan has
centralized many functions duplicated under the previous organization. This
restructuring has resulted in a reduction in personnel and the elimination of
administrative offices, thereby eliminating excessive costs and redundancies in
future periods. The combined $19.5 million charge recorded through December 31,
1995 included estimates for employee severance, contractual obligations arising
from the acquisition and certain payroll expenses incurred through December 31,
1995 for employees that have been terminated or will be terminated in future
periods. All of the costs associated with the $19.5 million charge recorded
through December 31, 1995 have been incurred.
The Company's successful implementation of its restructuring plan has
resulted in significant savings in the Company's European operations. The
majority of these savings resulted from personnel reductions, facilities
rationalizations, and other savings which primarily resulted from the
centralization of the Company's European operations' administrative, sales and
marketing functions. In addition, the Company has achieved material cost savings
from the redesign of certain components, an increased use of common components
throughout the Massey product line and more effective purchasing from the
centralization of that function. In addition, material cost savings have been
achieved from the Company's strategic alliance with Renault Agriculture S.A.
(the "GIMA Joint Venture") to produce driveline assemblies for both companies.
By sharing overhead and engineering costs, the GIMA Joint Venture resulted in
decreased costs for these components.
In 1996, the Company recorded approximately $10.3 million of nonrecurring
expenses related to the further restructuring of the Company's European
operations, acquired in June 1994 as a result of the Massey Acquisition. These
costs primarily related to the centralization of certain parts warehousing,
administrative, sales and marketing functions. The Company expects to record an
additional $7.5 million of nonrecurring expenses and to complete the
restructuring in 1997. Savings from the further restructuring of the Company's
European operations are expected to result primarily from reduced selling,
general and administrative expenses primarily relating to the Company's parts
warehousing, finance, dealer communications, sales and marketing functions.
While the Company believes that cost savings from its restructuring plan can be
attained, there can be no assurance that all objectives of the restructuring
will be achieved.
White-New Idea Acquisition
In the first quarter of 1994, the Company recorded a $6.0 million charge
for nonrecurring expenses related to the integration of White-New Idea, which
was acquired in December 1993. The nonrecurring
25
<PAGE> 28
charge included employee severance and relocation expenses, costs associated
with operating duplicate parts distribution operations, costs for dealer signs
and other nonrecurring costs related to the integration.
Savings from the integration of White-New Idea resulted primarily from the
elimination of three of White-New Idea's four parts distribution facilities and
the consolidation of the Company's and White-New Idea's parts distribution
operations. In addition, certain efficiencies and cost savings were achieved in
sales, marketing and administrative functions resulting from the integration of
these operations in the first quarter of 1994.
OUTLOOK
The Company's operations are subject to the cyclical nature of the
agricultural industry. Sales of the Company's equipment have been and are
expected to continue to be affected by changes in net cash farm income, farm
land values, weather conditions, the demand for agricultural commodities and
general economic conditions.
The outlook for worldwide sales of agricultural equipment expenditures
remains positive. In North America, as a result of low worldwide grain stocks,
high commodity prices and government payments to farmers under the new U.S. Farm
Bill, net cash farm income has remained at high levels and farmer balance sheets
remain strong, which the Company believes will enable farmers to make necessary
purchases of equipment in 1997. These factors should increase farmers'
confidence and result in continued replacement demand for agricultural
equipment.
The Western European agricultural market continues to benefit from
increased export demand and high commodity prices. These items should continue
to support the farmers' replacement demand. Over the longer term, demand for
farm equipment in some parts of Europe is expected to exhibit a slow, modest
decline due to a shift to fewer but larger farms. This consolidation is expected
to be offset, to some extent, by increased sales of more expensive higher
horsepower equipment to support larger farms.
Beginning in the second half of 1995, the Brazilian agricultural equipment
market experienced a significant decline due to high farm debt levels and the
Brazilian Central Bank's suspension of all loans for agricultural purposes under
the FINAME loan program. Although the loan program has been reinstated, the high
farm debt levels have negatively impacted farm equipment sales in 1996 and may
impact results in 1997. In general, outside of North America and Western Europe,
continued general economic improvement, the increasing affluence of the
population in certain developing countries and the increased availability of
funding sources should positively support equipment demand. As a result of these
favorable market conditions, the Company's production levels in 1997 are
forecasted to be modestly higher than the prior year.
The information contained in this "Outlook" section includes
forward-looking statements. For a discussion of important factors that could
affect such matters, see "Risk Factors."
FOREIGN CURRENCY RISK MANAGEMENT
The Company has significant manufacturing operations in the United States,
the United Kingdom, France, Brazil, and, as a result of the Company's recent
acquisitions, Argentina and Germany, and it purchases a portion of its tractors,
combines and components from third party foreign suppliers primarily in various
European countries and in Japan. The Company also sells products in over 140
countries throughout the world. Fluctuations in the value of foreign currencies
create exposures which can adversely affect the Company's results of operations.
The Company attempts to manage its foreign exchange exposure by hedging
identifiable foreign currency commitments arising from receivables, payables,
and expected purchases and sales. Where naturally offsetting currency positions
do not occur, the Company hedges its exposures through the use of foreign
currency forward contracts. The Company's hedging policy prohibits foreign
currency forward contracts for speculative trading purposes.
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<PAGE> 29
ACCOUNTING CHANGES
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation", which requires companies to
estimate the value of all stock-based compensation using a recognized pricing
model. The Company has adopted the disclosure requirements of this statement and
has chosen to continue to apply the accounting provisions of Accounting
Principles Board Opinion No. 25 to stock-based employee compensation
arrangements as allowed by Statement No. 123. As a result, the adoption of this
new standard did not have an effect on the Company's financial position or
results of operations.
Effective January 1996, the Company adopted Statement of Financial
Accounting Standards 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. The adoption of this new standard did not have a material effect on
the Company's financial position.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual of postemployment benefits for former or
inactive employees after employment but before retirement. The adoption of this
new standard did not have a material effect on the Company's financial position
or results of operations.
FORWARD LOOKING STATEMENTS
Portions of this Prospectus include forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including the information set forth under
"-- Outlook". Although the Company believes that the expectations reflected in
such forward looking statements are based upon reasonable assumptions, it can
give no assurance that its expectations will be achieved. Additionally, the
Company's financial results are sensitive to movement in interest rates and
foreign currencies, as well as general economic conditions, pricing and product
actions taken by competitors, production disruptions and changes in
environmental, international trade and other laws which impact the way in which
it conducts its business. Important factors that could cause actual results to
differ materially from the Company's current expectations are disclosed in
conjunction with the forward looking statements included herein. See also "Risk
Factors" for a discussion of certain factors that could affect the information
contained in the forward looking statements.
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<PAGE> 30
BUSINESS
AGCO is a leading manufacturer and distributor of agricultural equipment
throughout the world. The Company sells a full range of agricultural equipment
and related replacement parts, including tractors, combines, hay tools and
forage equipment and implements. The Company's products are widely recognized in
the agricultural equipment industry and are marketed under the following brand
names: Massey Ferguson(R), AGCO(R) Allis, GLEANER(R), Hesston(R), White, SAME,
Landini, White-New(R) Idea, Black Machine, AGCOSTAR(TM), Glencoe(R), Tye(R),
Farmhand(R), Maxion, IDEAL, PMI, Deutz and Fendt. The Company distributes its
products through a combination of over 7,500 independent dealers, wholly-owned
distribution companies, associates and licensees. In addition, the Company
provides retail financing in North America, the United Kingdom, France and
Germany through its finance joint ventures with Rabobank.
For the year ended December 31, 1996, the Company's revenues were
approximately $2.3 billion, of which $1.5 billion, or 63%, were outside of North
America. For the period from 1992 to 1996, the Company's revenues increased at a
compound annual growth rate of 65%. This growth in revenues has resulted
primarily from the Company's ability to increase penetration of its existing
markets and through acquisitions. The Company has increased penetration in its
existing markets primarily through expanding and strengthening its independent
dealer network, selling complementary non-tractor products, expanding its
replacement parts business and introducing new products to meet the growing
needs of its customers. For example, the Company has been able to increase
sales, as well as dealer focus on its products, by establishing crossover
contracts within its North American dealer network. In a crossover contract, an
existing dealer carrying one of the Company's brands contracts to sell an
additional AGCO brand. Since January 1992, the Company has signed over 2,200 new
dealer contracts, the majority of which represent crossover contracts.
Additionally, approximately 1,750 of the Company's approximately 2,800 dealers
in North America carry two or more AGCO brands. Furthermore, the Company has
introduced a number of product improvements including the redesigned Massey
Ferguson high horsepower 6100/8100 Series tractors, an 18-speed powershift
transmission for the higher horsepower AGCO Allis 9600 Series and the White 6100
Series tractors, and water-cooled engines for the GLEANER combine. The Company
continues to invest in new product technology and innovation in order to remain
competitive in the market.
The Company has also grown through a series of 14 acquisitions for
consideration aggregating approximately $1,222.7 million. These acquisitions
have allowed the Company to broaden its product line, expand its dealer network
and establish strong market positions in several new markets throughout North
America, South America, Western Europe and the rest of the world. The Company
has achieved significant cost savings and efficiencies from its acquisitions by
eliminating duplicative administrative, sales and marketing functions,
rationalizing its dealer network, increasing manufacturing capacity utilization
and expanding its ability to source certain products and components from third
party manufacturers.
The Company's primary business objective is to achieve profitable growth.
The Company's strategic plan is based on internal growth for its existing
business and strategic acquisitions which provide an opportunity to provide
returns in excess of the Company's cost of capital. Key elements of the
Company's business strategy are: (i) expanding and strengthening the Company's
worldwide organization of independent dealers and distributors; (ii) marketing
multiple brands through multiple dealer networks; (iii) selling complementary
non-tractor products through its international distribution channel; (iv)
introducing competitive new products in all markets which meet the needs of
customers and provide reasonable margins; (v) expanding the international
replacement parts business; (vi) focusing on increasing margins through
controlling product costs and operating expenses; and (vii) pursuing strategic
acquisitions focusing on new products and distribution in new markets.
RECENT DEVELOPMENTS
Fendt Acquisition.
On January 20, 1997, the Company acquired the operations of Fendt for
approximately $283.5 million plus approximately $38.0 million of assumed working
capital debt. Fendt, which had 1995 sales of approximately $580.0 million,
manufactures and sells tractors ranging from 45 to 260 horsepower through a
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<PAGE> 31
network of independent agricultural cooperatives and dealers in Germany and a
network of approximately 250 dealers throughout Europe. With this acquisition,
AGCO has the number one market share in Germany and the number two market share
in France, two of Europe's largest agricultural equipment markets. In connection
with the Fendt Acquisition, the Company also acquired a caravan business which
assembles and sells a line of travel trailers and sells a line of motor homes
which are manufactured on behalf of Fendt by a third party supplier.
Fendt owns and operates three manufacturing facilities in Germany.
Approximately 80% to 85% of Fendt's sales in Germany are effected through
agricultural cooperatives. The remainder are through dealers mainly in North and
East Germany. Sales outside of Germany are carried out through company sales
organizations in France, Italy and Australia, and through independent
distributors in other European countries.
Deutz Argentina Acquisition.
On December 27, 1996, the Company acquired the operations of Deutz
Argentina for approximately $62.5 million. Deutz Argentina, with 1995 sales of
approximately $109.0 million, supplies agricultural equipment, engines and
trucks to Argentina and other markets in South America. Deutz Argentina
distributes a broad range of tractor models in Argentina under the Deutz brand
name ranging from 60 to 190 horsepower, combines under the Deutz Fahr brand
name, and light trucks and agricultural implements. In addition, Deutz Argentina
manufactures Deutz diesel engines for distribution to other equipment
manufacturers and for use in its own equipment.
AGCO acquired Deutz Argentina's three manufacturing and assembly
facilities. Deutz Argentina distributes products through approximately 85
independent dealers in Argentina with approximately 225 outlets. In addition,
Deutz Argentina produces 70 to 140 horsepower transaxles in Argentina and
exports them to Agrale's Brazilian production facility for assembly and
marketing under the Deutz-Agrale brand name. Deutz Argentina's engines are
produced in Argentina and are included in the vehicles which are sold in the
Argentina market. The Deutz Argentina Acquisition enhanced the Company's
presence in the agricultural equipment market in South America by acquiring a
market leadership position in Argentina, which is the second largest market in
South America.
Maxion Acquisition.
On June 28, 1996, the Company acquired the Maxion Agricultural Equipment
Business for approximately $260.0 million. The Maxion Agricultural Equipment
Business, with 1995 sales of approximately $265.0 million, was AGCO's Massey
Ferguson licensee in Brazil, manufacturing and distributing agricultural
tractors under the Massey Ferguson brand name, combines under the Massey
Ferguson and IDEAL brand names, and industrial loader-backhoes under the Massey
Ferguson and Maxion brand names.
AGCO acquired Iochpe-Maxion's tractor and combine manufacturing facilities.
The acquired facilities, like the Company's other facilities, are primarily
assembly operations with all major components such as engines and transmissions
being outsourced. The Company's current product line consists of quality
products of a lower specification and lower cost to meet the demands of the
Brazilian market. In connection with the acquisition, the Company entered into
an engine supply agreement with Iochpe-Maxion to continue to source certain
engines for use in AGCO's Brazilian production.
The Maxion Agricultural Equipment Business distributes products under the
Massey Ferguson and IDEAL brand names through approximately 175 independent
dealers with approximately 360 outlets. 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 enhanced 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.
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Agricredit Joint Venture.
On November 1, 1996, the Company sold a 51% interest in Agricredit, the
Company's wholly owned finance subsidiary, to a wholly owned subsidiary of
Rabobank. The Company received total consideration of approximately $44.3
million in the transaction. Under the Agricredit Joint Venture, Rabobank has a
51% interest in Agricredit and the Company retained a 49% interest in
Agricredit. The Agricredit Joint Venture has continued the business of
Agricredit and seeks to build a broader asset-based finance business through the
addition of other lines of business. The Company has established similar joint
venture arrangements with Rabobank with respect to its retail finance companies
located in the United Kingdom, France and Germany. See "-- Retail
Financing/Joint Ventures."
New Credit Facility.
On January 14, 1997, the Company replaced its $650 million March 1996
Credit Facility with the January 1997 Credit Facility, which initially provided
for borrowings of up to $1.0 billion. On February 24, 1997, the Company amended
the January 1997 Credit Facility to increase available borrowings to $1.2
billion. The January 1997 Credit Facility is the Company's primary source of
financing. Borrowings under the January 1997 Credit Facility may not exceed the
sum of 90% of eligible accounts receivable and 60% of eligible inventory.
Lending commitments under the January 1997 Credit Facility reduce to $1.1
billion on January 1, 1998 and $1.0 billion on January 1, 1999. If the Company
consummates offerings of debt or capital stock (including the Offering) prior to
such dates, the proceeds of such offerings will be used to reduce the lending
commitments, but not below $1.0 billion. The Company used borrowings under the
March 1996 Credit Facility to finance the Deutz Argentina Acquisition and
borrowings under the January 1997 Credit Facility to finance the Fendt
Acquisition. Pro forma for the January 1997 Credit Facility and the Fendt
Acquisition, at December 31, 1996, the Company would have had approximately
$576.1 million available for borrowing under the January 1997 Credit Facility.
The Company will use the net proceeds from the Offering to repay a portion of
its borrowings under the January 1997 Credit Facility. Pro forma for such
repayment the Company would have had approximately $576.1 million available for
borrowing under the January 1997 Credit Facility at December 31, 1996.
STRATEGY
The Company's primary business objective is to achieve profitable growth.
The Company's strategic plan is based on internal growth for its existing
business and strategic acquisitions which provide an opportunity to provide
returns in excess of its cost of capital.
Key elements of the Company's business strategy are: (i) expanding and
strengthening the Company's worldwide organization of independent dealers and
distributors; (ii) marketing multiple brands through multiple dealer networks;
(iii) selling complementary non-tractor products through its international
distribution channel; (iv) introducing competitive new products in all markets
which meet the needs of customers and provide reasonable margins; (v) expanding
the international replacement parts business; (vi) focusing on increasing
margins through controlling product costs and operating expenses; and (vii)
pursuing strategic acquisitions focusing on new products and distribution in new
markets.
Expanding and Strengthening the Company's Worldwide Organization of
Independent Dealers and Distributors. The Company believes that one of the most
important criteria affecting a farmer's decision to purchase a particular brand
of equipment is the quality of the dealer who sells and services the equipment.
The Company's Dealer Development Organization in North America is responsible
for monitoring each dealer's performance and profitability as well as
establishing programs which focus on the continual improvement of the dealer.
The Dealer Development Organization is also responsible for identifying open
markets with the greatest potential for each brand and selecting an existing
AGCO dealer, or a new dealer, who would best represent the brand in that
territory. AGCO protects each existing dealer's territory and will not place the
same brand within that protected area.
Internationally, the Company has established a central Dealer Development
Organization which is modeled on the one in North America. Currently, this
organization is focusing on the development of the
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<PAGE> 33
Massey Ferguson dealers. For example, the Company believes that it increased its
market share in Germany and Spain in 1995 in part as a result of dealer
development activities, including the recruitment of new dealers.
Marketing Multiple Brands Through Multiple Dealer Networks. The Company
has individual dealer contracts in North America for each of its fourteen brands
marketed in North America. Within these multiple dealer-brand networks, AGCO
maintains distinct brand identities through product differentiation and separate
marketing programs. Although certain of the Company's products may compete at
the retail level, the Company believes this strategy enables the Company to
maintain a large distribution network and position each of its products to
target particular market niches and maximize the sales and profitability of its
products.
The Company has been able to increase sales, as well as dealer focus on its
products, by establishing crossover contracts within its North American dealer
network. In a crossover contract, an existing dealer carrying one of the
Company's brands contracts to sell an additional AGCO brand. This strategy was
developed in conjunction with the Company's acquisitions of Hesston Corporation
and the White Tractor Division of Allied Products Corporation, and since January
1992, the Company has signed over 2,200 new dealer contracts, the majority of
which represent crossover contracts. Additionally, approximately 1,750 of the
Company's approximately 2,800 dealers in North America carry two or more AGCO
brands. Due to existing contractual arrangements, not all the Company's dealers
can contract to carry additional Company product lines. However, the Company
believes that significant opportunities remain for incremental sales through
additional crossover contracts within its existing North American network of
Massey Ferguson, AGCO Allis, GLEANER, Hesston, White, SAME, Landini, White-New
Idea, Black Machine, AGCOSTAR, Glencoe, Tye, Farmhand and PMI dealers. The Fendt
Acquisition will enable AGCO to expand its multiple brand strategy outside North
America by adding another brand to complement Massey Ferguson.
Selling Complementary Non-Tractor Products Internationally. Massey
Ferguson is the most widely sold tractor brand in the world. Prior to the Massey
Acquisition, Massey Ferguson generated approximately 89% of its sales from
tractors and parts. Comparatively, AGCO generated approximately 55% of its sales
from hay tools and forage equipment, planters, spreaders, combine harvesters and
other non-tractor agricultural equipment and parts. Since the Massey
Acquisition, AGCO has increased its sales of non-tractor agricultural equipment
and parts by cross-selling these products under the Massey Ferguson brand name
through its established international distribution channels. The acquisitions of
Maxion, Deutz Argentina and Fendt provide AGCO with additional opportunities to
distribute non-tractor products in South America and Europe.
Introducing Competitive New Products. Since 1991 the Company has increased
the scope and competitiveness of its product line through acquisitions and new
product introductions. The Company has completed acquisitions which expanded the
Company's product offerings into segments of the agricultural equipment market
in which the Company did not previously compete and enhanced the competitiveness
of the Company's products within existing segments. Since late 1991, the Company
has introduced the Series 2 GLEANER combine, a number of product improvements
including the redesigned Massey Ferguson high horsepower 6100/8100 Series
tractors, an 18-speed powershift transmission for the higher horsepower AGCO
Allis 9600 Series and the White 6100 Series tractors, and water-cooled engines
for the GLEANER combine. In addition, through the Company's acquisition of Black
Machine, AGCO added a unique patented technology for the "2-in-1" planter frame.
Similarly, the AGCOSTAR articulated tractors were added to AGCO's product
offering as the result of the acquisition of McConnell Tractor. Through the
acquisition of AgEquipment, the Company added no-till and minimum tillage
implements to its product lines. The acquisition of Fendt gives AGCO additional
product lines which could be sold through the AGCO distribution network
including a high specification vineyard tractor and a tool carrier.
The Company, in conjunction with a European affiliate, is one of the
leading innovators in precision farming techniques, such as yield mapping.
Through precision farming, farmers can customize applications and planting rates
to each section of the field for maximum growth potential. Most recently, AGCO
introduced FIELDSTAR(TM), a system that uses satellite technology to give
farmers the most accurate data to boost their productivity. The Company
continues to invest in new product technology and innovation in order to remain
competitive in the market.
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Expanding the International Replacement Parts Business. Sales of
replacement parts (i) typically generate higher gross margins than new product
sales, (ii) provide a potentially large and recurring revenue stream due to
average product lives of 10 to 20 years and (iii) historically have been less
cyclical than new product sales. Replacement parts sales generated approximately
$203.2 million, or 34% of the Company's net sales in 1993, $359.5 million, or
20% of the Company's pro forma net sales in 1994 (assuming the acquisition of
Massey Ferguson was completed at the beginning of the year), $369.9 million, or
18% of the Company's net sales in 1995 and $403.5 million, or 17% of the
Company's net sales in 1996. Even though the Massey Acquisition added a
significant dollar volume of parts sales, the percentage of parts sales to total
sales for Massey for 1993 (the last full year prior to the acquisition by the
Company) was only 14%, much below the industry average of 20%. Prior to the
acquisition, Massey did not maximize parts support for older field equipment in
use. With over two million Massey Ferguson tractors sold internationally since
1972, there is significant opportunity to capture a larger portion of these
high-margin replacement parts sales in international markets. Similar
opportunities for expansion of international replacement parts sales exist as a
result of the Fendt acquisition where Fendt tractor parts accounted for
approximately 10% of Fendt's total net tractor sales in 1995.
Focusing on Increasing Margins through Controlling Product Costs and
Operating Expenses. AGCO balances manufacturing and distribution in order to
control manufacturing costs and increase its operating flexibility. The Company
has consolidated the manufacture of its products in certain locations to take
advantage of capacity, technology or local costs. Furthermore, AGCO continues to
balance its manufacturing resources with externally sourced machinery,
components and replacement parts to enable the Company to better control
inventory.
AGCO also has two strategic alliances which enable the Company to share
overhead and product development costs, thereby reducing product costs for all
parties. Hay & Forage Industries is a joint venture with Case Corporation to
produce hay and forage equipment for both companies under the Hesston (for AGCO)
and Case brand names. AGCO also formed a joint venture with Renault Agriculture
S.A. to produce driveline assemblies for higher horsepower AGCO and Renault
tractors at AGCO's facility in Beauvais, France.
AGCO has one corporate structure supporting its multiple brands and
independent dealer organizations. Accordingly, the Company has significantly
lowered the costs of acquired company operations by eliminating duplicate
functions and operations. The Fendt Acquisition provides the opportunity to
eliminate manufacturing costs and other expenses by combining the Fendt and AGCO
international operations. Additionally, AGCO will have the opportunity to reduce
manufacturing costs through purchasing and sourcing synergies.
Strategic Acquisitions. AGCO has been the principal consolidator in the
agricultural equipment industry and continues to review acquisition and joint
venture opportunities that will further broaden its product line, distribution
network or geographic presence. The Company has historically been successful in
integrating the operations of acquired companies. Massey Ferguson's
international machinery sales have increased 45% since 1993, the year prior to
acquisition. Additionally, the Company has reduced Massey's international
operating expense margin from its 1993 level of 14.1% to 7.4% in 1996.
MARKETING AND DISTRIBUTION
Western European Distribution. In Western Europe, fully assembled tractors
and other Massey Ferguson-branded equipment are marketed by wholly owned
distribution companies in the United Kingdom, France, Germany, Norway, Spain,
Denmark and Sweden. In addition, the Company utilizes an associated company to
distribute Massey Ferguson-branded products in Italy. These distribution
companies support a combined network of approximately 1,500 independent dealers
in Western Europe. In addition, the Company sells through independent
distributors in Western Europe, which distribute through approximately 530
Massey Ferguson dealers. Dealers are responsible for retail sales to the
equipment end users and in most cases carry competing or complementary products
from other manufacturers. As a result of the Fendt Acquisition, the Company also
manufactures and sells tractors ranging from 45 to 260 horsepower through a
network of
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<PAGE> 35
independent agricultural cooperatives and dealers in Germany and a network of
250 dealers throughout Europe.
North American Distribution. In North America, the Company markets and
distributes its farm machinery, equipment and replacement parts to farmers
through a network of approximately 7,000 dealer contracts, with dealers in 49
states and all ten Canadian provinces. Each of the Company's approximately 2,800
independent dealers represents one or more of the Company's distribution lines
or brand names. Dealers may also handle competitive and dissimilar lines of
products. The Company intends to maintain the separate strengths and identities
of its brand names and product lines. The Company has been able to increase
sales, as well as dealer focus on its products, by establishing crossover
contracts.
South American Distribution. The Company markets and distributes its farm
machinery, equipment and replacement parts to farmers in South America through
several different networks. In Brazil, the Company distributes products under
the Massey Ferguson and IDEAL brand names through the Maxion network, which
consists of approximately 140 independent dealers with approximately 360
outlets, and under the Deutz-Agrale brand name through 89 dealers. In Argentina,
the Company distributes its products under the IDEAL brand name through
independent distributors and under the Deutz brand name through approximately 85
independent dealers with approximately 225 outlets. The Company also distributes
products in Chile, Ecuador, Paraguay and Uruguay under the IDEAL brand name.
International Distribution. Outside North America, South America and
Western Europe, the Company operates primarily through the Company's network of
approximately 2,600 independent distributors and dealers, as well as associates
and licensees, marketing Massey products and providing customer service support
in approximately 100 countries in Africa, the Middle East, Eastern Europe and
Asia. These arrangements allow AGCO to benefit from local market expertise to
establish strong market positions with limited investment. In some cases, AGCO
also sells agricultural equipment directly to governmental agencies. The Company
believes there is significant potential long-term demand for agricultural
equipment in developing countries where the agricultural equipment markets are
less developed. The Company also believes that the Massey Ferguson brand name is
the most widely recognized brand name in these markets. The Company will
continue to actively support the local production and distribution of Massey
Ferguson-licensed products by third party distributors, associates and
licensees.
RETAIL FINANCING/JOINT VENTURES
Through the Agricredit Joint Venture in the United States and Canada, the
Company provides a competitive and dedicated financing source for AGCO dealers'
sales of the Company's products as well as equipment produced by other
manufacturers. Agricredit has experienced significant growth since the beginning
of 1993 from two primary sources. First, growth has been generated through
Agricredit's penetration into the AGCO dealer organization. Agricredit began
providing financing in Canada in September 1993. In addition, the Agricredit
Joint Venture will seek to build a broader asset-based finance business through
the addition of other lines of business.
The Company also owns minority interests in three retail finance companies
located in the United Kingdom, France and Germany. These companies are owned 49%
by AGCO and 51% by a wholly owned subsidiary of Rabobank.
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MANAGEMENT
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert J. Ratliff(1)(5)................ 65 Chairman of the Board of Directors
J-P Richard(1)(2)(5)................... 54 President, Chief Executive Officer and
Director
John M. Shumejda....................... 51 Executive Vice President, Technology
and Manufacturing
James M. Seaver........................ 50 Executive Vice President, Sales and
Marketing
Norman L. Boyd......................... 53 Vice President, General Manager --
Europe/Middle East/Africa
Distribution
Judith A. Czelusniak................... 39 Vice President -- Corporate Relations
Larry W. Gutekunst..................... 59 Vice President -- Global Engineering
Daniel H. Hazelton..................... 58 Vice President -- Sales, North America
Dan Ioschpe............................ 34 Vice President, General
Manager -- South America Supply
Aaron D. Jones......................... 51 Vice President -- Global
Manufacturing/Purchasing
Stephen D. Lupton...................... 52 Vice President -- Legal Services,
International
John G. Murdoch........................ 51 Vice President, General
Manager -- North America Distribution
William A. Nix III..................... 45 Vice President -- Treasurer
Chris E. Perkins....................... 34 Vice President and Chief Financial
Officer
Bruce W. Plagman....................... 45 Vice President, General
Manager -- North America Supply
Dexter E. Schaible..................... 47 Vice President -- Global Product
Development
Patrick S. Shannon..................... 34 Vice President -- Director of Finance,
International
Michael F. Swick....................... 50 Vice President and General Counsel
Edward R. Swingle...................... 55 Vice President -- Parts, North America
Henry J. Claycamp(1)(3)(4)............. 65 Director
William H. Fike(3)(5)(6)............... 60 Director
Gerald B. Johanneson(1)(4)(5).......... 62 Director
Richard P. Johnston(1)(4)(6)........... 66 Director
J. Patrick Kaine....................... 71 Director
Alan S. McDowell(6)(7)................. 48 Director
Charles S. Mechem, Jr.(3)(7)........... 66 Director
Hamilton Robinson, Jr.(1)(4)(7)........ 62 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee of the Board of Directors of the Company.
(2) J-P Richard, who has been a Director of the Company since January 1993, was
appointed President and Chief Executive Officer of the Company in November
1996. From November 1993 to November 1996, Mr. Richard was President and
Chief Executive Officer of Insituform Technologies Incorporated. From
October 1991 to November 1993, Mr. Richard was President of Massey
Ferguson, a subsidiary of Varity.
(3) Member of the Nominating Committee of the Board of Directors of the Company.
(4) Member of the Succession Planning Committee of the Board of Directors of the
Company.
(5) Member of the Strategic Planning Committee of the Board of Directors of the
Company.
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<PAGE> 37
(6) Member of the Compensation Committee of the Board of Directors of the
Company.
(7) Member of the Audit Committee of the Board of Directors of the Company.
SELLING STOCKHOLDER
Mr. Robert J. Ratliff is offering to sell 200,000 shares of Common Stock in
the Offering. The Company has agreed to pay all of Mr. Ratliff's expenses
incurred in connection with the Offering, including the underwriting discount.
Mr. Ratliff owned 1,090,202 shares of Common Stock, or 1.9% of the shares of
Common Stock outstanding, as of December 31, 1996 and will own 890,202 shares of
Common Stock, or 1.4% of the shares of Common Stock outstanding, upon completion
of the Offering. The shares owned by Mr. Ratliff prior to the Offering include
9,000 shares which may be purchased upon exercise of options which are currently
exercisable, 2,742 shares of Common Stock owned by Mr. Ratliff's wife, 200,000
shares of Common Stock beneficially owned by Mr. Ratliff as trustee of the
Robert J. Ratliff Charitable Remainder Unitrust and 778,360 shares owned by a
family limited partnership of which Mr. Ratliff controls the general partner.
Mr. Ratliff has been a Director of the Company since June 1990 and Chairman of
the Board of Directors since August 1993. He was Chief Executive Officer of the
Company from June 1990 to November 1996 and President from June 1990 to December
1995.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $0.01 per share, and 1,000,000 shares of preferred
stock, par value $0.01 per share. In January 1994, the Company established a
series of preferred stock designated "Junior Cumulative Preferred Stock" (the
"Junior Preferred Stock") in connection with the adoption of a Stockholder
Rights Plan. As of February 26, 1997, 57,274,586 shares of Common Stock were
issued and outstanding. No shares of Junior Preferred Stock have been issued.
COMMON STOCK
Holders of Common Stock are entitled to receive such dividends as may from
time to time be declared by the Board of Directors of the Company out of funds
legally available therefor. Holders of Common Stock are entitled to one vote per
share on all matters on which the holders of Common Stock are entitled to vote
and do not have any cumulative voting rights. Holders of Common Stock have no
preemptive, conversion, redemption or sinking fund rights. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company and the
liquidation preference of any outstanding class or series of preferred stock.
The outstanding shares of Common Stock are duly and validly issued, fully paid
and nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to the rights of the Junior Cumulative Preferred Stock and any
other series of preferred stock which the Company may issue in the future as
described below.
The Common Stock trades on the New York Stock Exchange under the symbol
"AG."
PREFERRED STOCK
The Company has designated 300,000 shares of preferred stock as Junior
Preferred Stock, which may be issued upon the exercise of any of the preferred
stock purchase rights that are associated with the Common Stock. See
"-- Stockholder Rights Plan."
The Company has 700,000 shares of authorized but undesignated preferred
stock. The Board of Directors is authorized to provide for the issuance of
additional classes and series of preferred stock out of these undesignated
shares, and the Board of Directors may establish the voting powers,
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions of any such
additional class or series of preferred stock, including the dividend rights,
dividend
35
<PAGE> 38
rate, terms of redemption, redemption price or prices, conversion rights and
liquidation preferences of the shares constituting any series, without any
further vote or action by the stockholders of the Company.
STOCKHOLDER RIGHTS PLAN
On January 26, 1994, the Board of Directors approved a rights agreement
setting forth the terms of a stockholder rights plan (the "Rights Plan"), and
pursuant thereto declared a dividend of one preferred stock purchase right (a
"Right") for each share of Common Stock held of record at the close of business
on April 27, 1994. At the 1994 Annual Stockholder Meeting, the Company's
stockholders approved the Rights Plan. Each Right entitles the registered holder
to purchase from the Company a unit consisting of one one-hundredth of a share
(a "Unit") of Junior Cumulative Preferred Stock, par value $.01 per share, at a
purchase price of $200 per Unit (the "Purchase Price"), subject to adjustment.
The Rights contain provisions that are designed to protect the stockholders in
the event of certain unsolicited attempts to acquire the Company, including a
gradual accumulation of shares in the open market, a partial or two-tier tender
offer that does not treat all stockholders equally, and other takeover tactics
which the Board of Directors believes may be abusive and not in the best
interests of stockholders. Distribution of Rights will not alter the financial
strength of the Company or interfere with its business plans. The distribution
of the Rights is not dilutive, does not affect reported earnings per share, is
not taxable either to the recipient or to the Company and will not change the
way in which stockholders can currently trade shares of the Company's Common
Stock.
CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock applicable to Non-U.S. Holders. In general, a "Non-U.S. Holder" is any
holder other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state, (iii) an estate, the income of
which is includable in gross income for United States federal income tax
purposes regardless of its source, or (iv) a trust if (a) a court within the
United States is able to exercise primary supervision over the administration of
the trust, and (b) one or more United States fiduciaries have the authority to
control all substantial decisions of the trust. This discussion is based on
current law and is for general information only. This discussion does not
address aspects of United States federal taxation other than income and estate
taxation and does not address all aspects of income and estate taxation, nor
does it consider any specific facts or circumstances that may apply to a
particular Non-U.S. Holder (including certain U.S. expatriates). ACCORDINGLY,
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE
UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX
CONSEQUENCES OF HOLDING AND DISPOSING OF SHARES OF COMMON STOCK.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). In addition to the
"substantial presence test" described in the immediately preceding sentence, an
alien may be treated as a resident alien if he (i) meets a lawful permanent
residence test (a so-called "green card" test) or (ii) elects to be treated as a
U.S. resident and meets the "substantial presence test" in the immediately
following year. Resident aliens are subject to U.S. federal tax as if they were
U.S. citizens.
DIVIDENDS
In general, dividends paid to a Non-U.S. Holder will be subject to United
States withholding tax at a 30% rate (or a lower rate prescribed by an
applicable tax treaty) unless the dividends are either (i) effectively connected
with a trade or business carried on by the Non-U.S. Holder within the United
States, or (ii) if
36
<PAGE> 39
certain income tax treaties apply, attributable to a permanent establishment in
the United States maintained by the Non-U.S. Holder. Dividends effectively
connected with such a United States trade or business or attributable to such a
United States permanent establishment generally will not be subject to United
States withholding tax (if the Non-U.S. Holder files certain forms, including
Internal Revenue Service Form 4224, with the payor of the dividend) and
generally will be subject to United States federal income tax on a net income
basis, in the same manner as if the Non-U.S. Holder were a resident of the
United States. A Non-U.S. Holder that is a corporation may be subject to an
additional branch profits tax at a rate of 30% (or such lower rate as may be
specified by an applicable treaty) on the repatriation from the United States of
its "effectively connected earnings and profits," subject to certain
adjustments. To determine the applicability of a tax treaty providing for a
lower rate of withholding, dividends paid to an address in a foreign country are
presumed under current Treasury regulations to be paid to a resident of that
country absent knowledge to the contrary. Proposed Treasury regulations, which
are proposed to be effective for payments made after December 31, 1997, however,
generally would require Non-U.S. Holders to file an I.R.S. Form W-8 to obtain
the benefit of any applicable tax treaty providing for a lower rate of
withholding tax on dividends. A Non-U.S. Holder that is eligible for a reduced
rate of U.S. withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service.
SALE OF COMMON STOCK
In general, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the disposition of such holder's shares of
Common Stock unless (i) the gain either is effectively connected with a trade or
business carried on by the Non-U.S. Holder within the United States or,
alternatively, if certain tax treaties apply, is attributable to a permanent
establishment in the United States maintained by the Non-U.S. Holder (and in
either case, the branch profits tax discussed above may also apply if the
Non-U.S. Holder is a corporation); (ii) the Non-U.S. Holder is an individual who
holds shares of Common Stock as a capital asset and is present in the United
States for 183 days or more in the taxable year of disposition, and either (a)
such individual has a "tax home" (as defined for United States federal income
tax purposes) in the United States (unless the gain from the disposition is
attributable to an office or other fixed place of business maintained by such
Non-U.S. Holder in a foreign country and such gain has been subject to a foreign
income tax equal to at least 10% of the gain derived from such disposition), or
(b) the gain is attributable to an office or other fixed place of business
maintained by such individual in the United States; or (iii) the Company is or
has been a United States real property holding corporation (a "USRPHC") for
United States federal income tax purposes (which the Company does not believe
that it is or is likely to become) at any time within the shorter of the five
year period preceding such disposition or such Non-U.S. Holder's holding period.
If the Company were or were to become a USRPHC at any time during this period,
gains realized upon a disposition of Common Stock by a Non-U.S. Holder which did
not directly or indirectly own more than 5% of the Common Stock during this
period generally would not be subject to United States federal income tax,
provided that the Common Stock is regularly traded on an established securities
market.
ESTATE TAX
Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States federal estate tax purposes)
of the United States at the time of death will be includable in the individual's
gross estate for United States federal estate tax purposes (unless an applicable
estate tax treaty provides otherwise), and therefore may be subject to United
States federal estate tax.
BACKUP WITHHOLDING, INFORMATION REPORTING AND OTHER REPORTING REQUIREMENTS
The Company must report annually to the Internal Revenue Service and to
each Non-U.S. Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of this information also may be made available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the Non-U.S. Holder resides or is established.
37
<PAGE> 40
United States backup withholding tax (which generally is imposed at the
rate of 31% on certain payments to persons that fail to furnish the information
required under the United States information reporting requirements) and
information reporting requirements (other than those discussed above under
"Dividends") generally will not apply to dividends paid on Common Stock to a
Non-U.S. Holder at an address outside the United States. Backup withholding and
information reporting generally will apply, however, to dividends paid on shares
of Common Stock to a Non-U.S. Holder at an address in the United States, if such
holder fails to establish an exemption or to provide certain other information
to the payor.
The payment of proceeds from the disposition of Common Stock to or through
a United States office of a broker will be subject to information reporting and
backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder or otherwise establishes an
exemption. The payment of proceeds from the disposition of Common Stock to or
through a non-U.S. office of a non-U.S. broker generally will not be subject to
backup withholding and information reporting, except as noted below. In the case
of proceeds from a disposition of Common Stock paid to or through a non-U.S.
office of a broker that is (i) a United States person, (ii) a "controlled
foreign corporation" for United States federal income tax purposes or (iii) a
foreign person 50% or more of whose gross income from certain periods is
effectively connected with a United States trade or business, information
reporting (but not backup withholding) will apply unless the broker has
documentary evidence in its files that the owner is a Non-U.S. Holder (and the
broker has no actual knowledge to the contrary). Proposed regulations state that
backup withholding will not apply to such payments unless the broker has actual
knowledge that the payee is a U.S. person.
Backup withholding is not an individual tax. Any amounts withheld under the
backup withholding rules from a payment to a Non-U.S. Holder will be refunded or
credited against the Non-U.S. Holder's United States federal income tax
liability, if any, provided that the required information is furnished to the
Internal Revenue Service.
38
<PAGE> 41
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
Donaldson, Lufkin & Jenrette Securities Corporation and Morgan Stanley & Co.
Incorporated are acting as representatives (the "U.S. Representatives") of each
of the Underwriters named below (the U.S. "Underwriters"). Subject to the terms
and conditions set forth in a purchase agreement (the "U.S. Purchase Agreement")
among the Company, the Selling Stockholder and the U.S. Underwriters, the
Company for its own account and the Selling Stockholder severally have agreed to
sell to the U.S. Underwriters, and each of the U.S. Underwriters severally has
agreed to purchase from the Company and the Selling Stockholder, the number of
shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Morgan Stanley & Co. Incorporated...........................
---------
Total......................................... 3,760,000
=========
</TABLE>
The Company and the Selling Stockholder have also entered into an
international purchase agreement (the "International Purchase Agreement" and
together with the U.S Purchase Agreement, the "Purchase Agreements") with
certain underwriters outside the United States and Canada (the "International
Managers" and together with the U.S. Underwriters, the "Underwriters") for whom
Merrill Lynch International, Donaldson, Lufkin & Jenrette Securities Corporation
and Morgan Stanley & Co. International are acting as lead managers (the "Lead
Managers"). Subject to the terms and conditions set forth in the International
Purchase Agreement, and concurrently with the sale of 3,760,000 shares of Common
Stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the
Company for its own account and the Selling Stockholder severally have agreed to
sell to the International Managers, and each of the International Managers
severally have agreed to purchase from the Company and the Selling Stockholder,
an aggregate of 940,000 shares of Common Stock. The initial public offering
price per share of Common Stock and the total underwriting discount per share of
Common Stock are identical under the Purchase Agreements.
In the respective Purchase Agreements, the several U.S. Underwriters and
the several International Managers have agreed, subject to the terms and
conditions set forth therein, to purchase all of the shares of Common Stock
being sold pursuant to each such agreement if any of the shares of Common Stock
being sold pursuant to such agreement are purchased. The respective Purchase
Agreements provide that in the event of a default by a U.S. Underwriter or
International Manager, as the case may be, the commitments of non-defaulting
U.S. Underwriters or International Managers (as the case may be) may in certain
circumstances be increased. The closings with respect to the sale of shares of
Common Stock to be purchased by the U.S. Underwriters and the International
Managers are conditioned upon one another.
The U.S. Representatives have advised the Company and the Selling
Stockholder that the U.S. Underwriters propose initially to offer the shares of
Common Stock to the public at the public offering price set forth on the cover
page of this Prospectus, and to certain dealers at such price less a concession
not in excess of $ per share of Common Stock. The U.S. Underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per
share of Common Stock on sales to certain other dealers. After the Offering, the
public offering price, concession and discount may be changed.
39
<PAGE> 42
The Company has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
540,000 additional shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discount. The U.S.
Underwriters may exercise this option only to cover over-allotments, if any,
made on the sale of the Common Stock offered hereby. To the extent that the U.S.
Underwriters exercise this option, each U.S. Underwriter will be obligated,
subject to certain conditions, to purchase a number of additional shares of
Common Stock proportionate to such U.S. Underwriter's initial amount reflected
in the foregoing table. The Company also has granted an option to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an aggregate of 135,000 additional shares of
Common Stock to cover over-allotments, if any, on terms similar to those granted
to the U.S. Underwriters.
The Company, the Selling Stockholder and certain other officers and
directors of the Company have agreed, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing or (ii) enter
into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch on behalf
of the Underwriters for a period of 90 days after the date of this Prospectus.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are non-U.S. or non-Canadian persons or to persons they
believe intend to resell to persons who are non-U.S. or non-Canadian persons,
and the International Managers and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to U.S. persons or
to Canadian persons or to persons they believe intend to resell to United States
or Canadian persons, except in the case of transactions pursuant to the
Intersyndicate Agreement which among other things permits the Underwriters to
purchase from each other and to offer for resale such number of shares as the
selling Underwriter or Underwriters and the purchasing Underwriter may agree.
The Company and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters and International Managers against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholder by King & Spalding, Atlanta,
Georgia. Certain legal matters in connection with the sale of the shares of
Common Stock offered hereby will be passed upon for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York .
INDEPENDENT AUDITORS
The consolidated balance sheets of AGCO Corporation and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 and the related schedule included in this Prospectus and
incorporated by reference in this Prospectus from the Company's Current Report
on Form 8-K dated
40
<PAGE> 43
February 28, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto.
The consolidated balance sheets of AGCO Corporation and subsidiaries as of
December 31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995 and the related schedule incorporated by reference in
this Prospectus from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto.
The balance sheets of the Maxion Agricultural Equipment Business 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
incorporated by reference in this Prospectus from the Company's Current Report
on Form 8-K dated June 28, 1996 have been audited by Price Waterhouse Auditores
Independentes, independent public accountants, as indicated in their report with
respect thereto.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C., and at the regional offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such information can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, Inc. at 20 Broad Street, New York, New York 10005. The
Registration Statement may also be obtained through the Commission's Internet
address at "http://www.sec.gov".
The Company has filed with the Commission a registration statement on form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the offering
made hereby. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulation of the Commission. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. as set forth above. For further information, reference is
hereby made to the Registration Statement, including the exhibits filed as a
part thereof or otherwise incorporated herein. Statements made in this
Prospectus as to the contents of any documents filed as an exhibit are not
necessarily complete, and in each instance reference is made to such exhibit for
a more complete description and each such statement is modified in its entirety
by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
(b) Quarterly Report on Form 10-Q for the quarters ended March 30,
1996, June 30, 1996 and September 30, 1996; and
(c) Current Reports on Form 8-K dated March 4, 1996, March 21, 1996,
June 28, 1996, November 1, 1996 and February 28, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares of
41
<PAGE> 44
Common Stock hereunder shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of the filing of such reports and
documents. The Company will provide a copy of any or all of such documents
(exclusive of exhibits unless such exhibits are specifically incorporated by
reference therein), without charge, to each person to whom this Prospectus is
delivered, upon written or oral request to: AGCO Corporation, 4830 River Green
Parkway, Duluth, Georgia 30136 (telephone (770) 813-9200) Attention: Michael F.
Swick, Vice President -- General Counsel.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
42
<PAGE> 45
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Arthur Andersen LLP............................... F-2
Consolidated Statements of Income -- Years Ended December
31, 1996, 1995 and 1994................................... F-4
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-6
Consolidated Statements of Stockholders' Equity -- Years
Ended December 31, 1996, 1995 and 1994.................... F-8
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1996, 1995 and 1994.......................... F-10
Notes to Consolidated Financial Statements.................. F-12
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
AGCO Corporation:
We have audited the accompanying consolidated balance sheets of AGCO
CORPORATION AND SUBSIDIARIES as of December 31, 1996 and 1995 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AGCO Corporation and
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 5, 1997
F-2
<PAGE> 47
(This page intentionally left blank)
F-3
<PAGE> 48
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONSOLIDATED
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Net sales...................................... $2,317,486 $2,068,427 $1,319,271
Finance income................................. -- 56,621 39,741
---------- ---------- ----------
2,317,486 2,125,048 1,359,012
---------- ---------- ----------
Costs and Expenses:
Cost of goods sold............................. 1,847,166 1,627,716 1,042,930
Selling, general and administrative expenses... 215,636 203,861 129,538
Engineering expenses........................... 27,705 24,077 19,358
Interest expense, net.......................... 32,684 63,211 42,836
Other expense (income), net.................... 7,639 9,602 3,141
Nonrecurring expenses.......................... 15,027 6,000 19,500
---------- ---------- ----------
2,145,857 1,934,467 1,257,303
---------- ---------- ----------
Income before income taxes, equity in net
earnings of unconsolidated subsidiary and
affiliates and extraordinary loss.............. 171,629 190,581 101,709
Provision (benefit) for income taxes............. 59,963 65,897 (10,610)
---------- ---------- ----------
Income before equity in net earnings of
unconsolidated
subsidiary and affiliates and extraordinary
loss........................................... 111,666 124,684 112,319
Equity in net earnings of unconsolidated
subsidiary and affiliates...................... 17,724 4,458 3,215
---------- ---------- ----------
Income before extraordinary loss................. 129,390 129,142 115,534
Extraordinary loss, net of taxes................. (3,503) -- --
---------- ---------- ----------
Net income....................................... 125,887 129,142 115,534
Preferred stock dividends...................... -- 2,012 5,421
---------- ---------- ----------
Net income available for common stockholders..... $ 125,887 $ 127,130 $ 110,113
========== ========== ==========
Net income per common share:
Primary:
Income before extraordinary loss............ $ 2.34 $ 2.76 $ 3.07
Extraordinary loss.......................... (0.06) -- --
---------- ---------- ----------
Net income.................................. $ 2.28 $ 2.76 $ 3.07
========== ========== ==========
Fully diluted:
Income before extraordinary loss............ $ 2.26 $ 2.30 $ 2.35
Extraordinary loss.......................... (0.06) -- --
---------- ---------- ----------
Net income.................................. $ 2.20 $ 2.30 $ 2.35
========== ========== ==========
Weighted average number of common and common
equivalent shares outstanding:
Primary........................................ 55,186 46,126 35,920
========== ========== ==========
Fully diluted.................................. 57,441 56,684 49,170
========== ========== ==========
</TABLE>
F-4
<PAGE> 49
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS FINANCE COMPANY
------------------------------------ ----------------------------------------
YEAR ENDED DECEMBER 31, FOR THE PERIOD FROM
------------------------------------ YEAR ENDED FEBRUARY 11, 1994
1996 1995 1994 DECEMBER 31, 1995 TO DECEMBER 31, 1994
---------- ---------- ---------- ----------------- --------------------
<S> <C> <C> <C> <C>
$2,317,486 $2,068,427 $1,319,271 $ -- $ --
-- -- -- 56,621 39,741
---------- ---------- ---------- ------- -------
2,317,486 2,068,427 1,319,271 56,621 39,741
---------- ---------- ---------- ------- -------
1,847,166 1,627,716 1,042,930 -- --
215,636 190,025 117,683 13,836 11,855
27,705 24,077 19,358 -- --
32,684 31,490 24,104 31,721 18,732
7,639 9,654 1,978 (52) 1,163
15,027 6,000 19,500 -- --
---------- ---------- ---------- ------- -------
2,145,857 1,888,962 1,225,553 45,505 31,750
---------- ---------- ---------- ------- -------
171,629 179,465 93,718 11,116 7,991
59,963 61,563 (13,733) 4,334 3,123
---------- ---------- ---------- ------- -------
111,666 117,902 107,451 6,782 4,868
17,724 11,240 8,083 -- --
---------- ---------- ---------- ------- -------
129,390 129,142 115,534 6,782 4,868
(3,503) -- -- -- --
---------- ---------- ---------- ------- -------
125,887 129,142 115,534 6,782 4,868
-- 2,012 5,421 -- --
---------- ---------- ---------- ------- -------
$ 125,887 $ 127,130 $ 110,113 $ 6,782 $ 4,868
========== ========== ========== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 50
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONSOLIDATED
-------------------------------
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 41,707 $ 27,858
Accounts and notes receivable, net of allowances.......... 856,985 785,801
Receivables from unconsolidated subsidiary and
affiliates............................................. 12,486 4,029
Credit receivables, net................................... -- 185,401
Inventories, net.......................................... 473,844 360,969
Other current assets...................................... 81,440 60,442
---------- ----------
Total current assets.............................. 1,466,462 1,424,500
Noncurrent credit receivables, net.......................... -- 397,177
Property, plant and equipment, net.......................... 292,437 146,521
Investments in unconsolidated subsidiary and affiliates..... 80,501 45,963
Other assets................................................ 71,488 44,510
Intangible assets, net...................................... 205,643 104,244
---------- ----------
Total assets...................................... $2,116,531 $2,162,915
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt......................... $ -- $ 361,376
Accounts payable.......................................... 361,512 325,701
Payables to unconsolidated subsidiary and affiliates...... 14,567 4,837
Accrued expenses.......................................... 316,958 233,848
Other current liabilities................................. 22,951 13,217
---------- ----------
Total current liabilities......................... 715,988 938,979
---------- ----------
Long-term debt.............................................. 567,055 531,336
Convertible subordinated debentures......................... -- 37,558
Postretirement health care benefits......................... 24,445 23,561
Other noncurrent liabilities................................ 34,378 42,553
---------- ----------
Total liabilities................................. 1,341,866 1,573,987
Commitments and Contingencies (Note 14)
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares
authorized, 57,260,151 and 50,557,040 shares issued
and outstanding in 1996 and 1995, respectively........ 573 506
Additional paid-in capital............................. 360,119 307,189
Retained earnings...................................... 411,422 287,706
Unearned compensation.................................. (17,779) (22,587)
Additional minimum pension liability................... -- (2,619)
Cumulative translation adjustment...................... 20,330 18,733
---------- ----------
Total stockholders' equity........................ 774,665 588,928
---------- ----------
Total liabilities and stockholders' equity........ $2,116,531 $2,162,915
========== ==========
</TABLE>
F-6
<PAGE> 51
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS FINANCE COMPANY
------------------------------- ----------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995
------------ ------------ ----------------
<S> <C> <C>
$ 41,707 $ 20,023 $ 7,835
856,985 785,801 --
12,486 4,029 4,686
-- -- 185,401
473,844 360,969 --
81,440 56,950 3,492
---------- ---------- --------
1,466,462 1,227,772 201,414
-- -- 397,177
292,437 146,172 349
80,501 105,913 --
71,488 44,510 --
205,643 104,244 --
---------- ---------- --------
$2,116,531 $1,628,611 $598,940
========== ========== ========
$ -- $ -- $361,376
361,512 319,711 5,990
14,567 9,523 --
316,958 223,839 10,009
22,951 13,217 --
---------- ---------- --------
715,988 566,290 377,375
---------- ---------- --------
567,055 378,336 153,000
-- 37,558 --
24,445 23,561 --
34,378 33,938 8,615
---------- ---------- --------
1,341,866 1,039,683 538,990
573 506 1
360,119 307,189 48,834
411,422 287,706 11,150
(17,779) (22,587) --
-- (2,619) --
20,330 18,733 (35)
---------- ---------- --------
774,665 588,928 59,950
---------- ---------- --------
$2,116,531 $1,628,611 $598,940
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 52
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
Balance, December 31, 1993..................................
Net income................................................
Issuance of common stock, net of offering expenses........
Issuance of restricted stock..............................
Three-for-two common stock split..........................
Conversions of preferred stock into common stock..........
Stock options granted.....................................
Stock options exercised...................................
Common stock dividends....................................
Preferred stock dividends.................................
Amortization of unearned compensation.....................
Additional minimum pension liability......................
Change in cumulative translation adjustment...............
Balance, December 31, 1994..................................
Net income................................................
Issuance of restricted stock..............................
Two-for-one common stock split............................
Conversions of subordinated debentures into common
stock..................................................
Conversions of preferred stock into subordinated
debentures.............................................
Conversions of preferred stock into common stock..........
Stock options exercised...................................
Common stock dividends....................................
Preferred stock dividends.................................
Amortization of unearned compensation.....................
Additional minimum pension liability......................
Change in cumulative translation adjustment...............
Balance, December 31, 1995..................................
Net income................................................
Issuance of restricted stock..............................
Conversions of subordinated debentures into common
stock..................................................
Stock options exercised...................................
Common stock dividends....................................
Amortization of unearned compensation.....................
Additional minimum pension liability......................
Change in cumulative translation adjustment...............
Balance, December 31, 1996..................................
F-8
<PAGE> 53
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED STOCK COMMON STOCK ADDITIONAL MINIMUM CUMULATIVE
--------------- ------------ PAID-IN RETAINED UNEARNED PENSION TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS COMPENSATION LIABILITY ADJUSTMENT TOTAL
--------- ------ ---------- ------ ---------- -------- ------------ ---------- ----------- --------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 368,000 $ 4 8,989,779 $ 90 $160,447 $ 51,837 $ (292) $ (155) $ 298 $212,229
-- -- -- -- -- 115,534 -- -- -- 115,534
-- -- 4,237,500 42 151,562 -- -- -- -- 151,604
-- -- 243,000 3 11,542 -- (11,545) -- -- --
-- -- 7,227,398 72 (72) -- -- -- -- --
(66,442) (1) 876,641 9 (8) -- -- -- -- --
-- -- -- -- 352 -- (352) -- -- --
-- -- 115,291 1 741 -- -- -- -- 742
-- -- -- -- -- (467) -- -- -- (467)
-- -- -- -- -- (5,421) -- -- -- (5,421)
-- -- -- -- -- -- 1,595 -- -- 1,595
-- -- -- -- -- -- -- (183) -- (183)
-- -- -- -- -- -- -- -- 1,033 1,033
--------- ---- ---------- ---- -------- -------- -------- ------- ------- --------
301,558 3 21,689,609 217 324,564 161,483 (10,594) (338) 1,331 476,666
-- -- -- -- -- 129,142 -- -- -- 129,142
-- -- 454,000 5 19,165 -- (19,170) -- -- --
-- -- 25,278,520 253 (253) -- -- -- -- --
-- -- 2,315,661 23 29,267 -- -- -- -- 29,290
(267,453) (3) -- -- (66,845) -- -- -- -- (66,848)
(34,105) -- 673,094 7 (7) -- -- -- -- --
-- -- 146,156 1 1,298 -- -- -- -- 1,299
-- -- -- -- -- (907) -- -- -- (907)
-- -- -- -- -- (2,012) -- -- -- (2,012)
-- -- -- -- -- -- 7,177 -- -- 7,177
-- -- -- -- -- -- -- (2,281) -- (2,281)
-- -- -- -- -- -- -- -- 17,402 17,402
--------- ---- ---------- ---- -------- -------- -------- ------- ------- --------
-- -- 50,557,040 506 307,189 287,706 (22,587) (2,619) 18,733 588,928
-- -- -- -- -- 125,887 -- -- -- 125,887
-- -- 474,500 5 13,690 -- (13,695) -- -- --
-- -- 5,916,319 59 37,499 -- -- -- -- 37,558
-- -- 312,292 3 1,741 -- -- -- -- 1,744
-- -- -- -- -- (2,171) -- -- -- (2,171)
-- -- -- -- -- -- 18,503 -- -- 18,503
-- -- -- -- -- -- -- 2,619 -- 2,619
-- -- -- -- -- -- -- -- 1,597 1,597
--------- ---- ---------- ---- -------- -------- -------- ------- ------- --------
-- $ -- 57,260,151 $573 $360,119 $411,422 $(17,779) $ -- $20,330 $774,665
========= ==== ========== ==== ======== ======== ======== ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 54
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONSOLIDATED
-------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 125,887 $ 129,142 $ 115,534
--------- ----------- -----------
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary loss, net of taxes..................... 3,503 -- --
Gain on sale of Agricredit........................... (4,745) -- --
Depreciation and amortization........................ 29,199 24,288 15,713
Equity in net earnings of unconsolidated subsidiary
and affiliates, net of cash received............... (17,724) (4,458) (3,031)
Deferred income tax provision (benefit).............. 20,097 32,915 (40,958)
Amortization of intangibles.......................... 5,761 4,007 2,044
Amortization of unearned compensation................ 18,503 7,177 1,595
Provision for losses on credit receivables........... -- 4,279 4,691
Changes in operating assets and liabilities, net of
effects from purchase of businesses:
Accounts and notes receivable, net................. 3,743 (131,341) (84,458)
Inventories, net................................... (22,646) (32,273) 30,683
Other current and noncurrent assets................ (14,099) 2,794 247
Accounts payable................................... (9,384) 8,076 32,498
Accrued expenses................................... 54,306 16,624 19,039
Other current and noncurrent liabilities........... 14,259 5,898 2,767
--------- ----------- -----------
Total adjustments............................... 80,773 (62,014) (19,170)
--------- ----------- -----------
Net cash provided by operating activities....... 206,660 67,128 96,364
--------- ----------- -----------
Cash flows from investing activities:
Purchase of businesses, net of cash acquired............ (347,075) (27,044) (324,249)
Purchase of property, plant and equipment............... (45,180) (45,259) (20,661)
Credit receivables originated........................... -- (393,510) (327,636)
Principal collected on credit receivables............... -- 286,009 224,289
Proceeds from disposition of (investments in)
unconsolidated subsidiary and affiliates............. 45,216 1,070 --
--------- ----------- -----------
Net cash used for investing activities.......... (347,039) (178,734) (448,257)
--------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt............................ 977,737 1,467,499 1,619,507
Payment on long-term debt............................... (803,196) (1,352,620) (1,367,368)
Payment of debt issuance costs.......................... (12,473) -- --
Proceeds from issuance of common stock.................. 1,744 1,299 133,721
Dividends received (paid) from finance company.......... -- -- --
Dividends paid on common stock.......................... (2,171) (907) (467)
Dividends paid on preferred stock....................... -- (2,420) (5,511)
(Payments) proceeds on short-term borrowings from
unconsolidated subsidiary............................ -- -- (3,440)
--------- ----------- -----------
Net cash provided by financing activities....... 161,641 112,851 376,442
--------- ----------- -----------
Effect of exchange rate changes on cash and cash
equivalents.......................................... 422 787 1,063
Increase (decrease) in cash and cash equivalents........ 21,684 2,032 25,612
Cash and cash equivalents, beginning of period.......... 20,023 25,826 214
--------- ----------- -----------
Cash and cash equivalents, end of period................ $ 41,707 $ 27,858 $ 25,826
========= =========== ===========
</TABLE>
F-10
<PAGE> 55
AGCO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
EQUIPMENT OPERATIONS FINANCE COMPANY
----------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED FOR THE PERIOD FROM
----------------------------------------- DECEMBER 31, FEBRUARY 11, 1994
1996 1995 1994 1995 TO DECEMBER 31, 1994
--------- --------- --------- ----------------- --------------------
<S> <C> <C> <C> <C>
$ 125,887 $ 129,142 $ 115,534 $ 6,782 $ 4,868
--------- --------- --------- ---------- ---------
3,503 -- -- -- --
(4,745) -- -- -- --
29,199 24,166 15,659 122 54
(17,724) (11,240) (7,899) -- --
20,097 33,920 (38,961) (1,005) (1,997)
5,761 4,007 2,044 -- --
18,503 7,177 1,595 -- --
-- -- -- 4,279 4,691
3,743 (144,469) (92,063) -- --
(22,646) (32,273) 30,683 -- --
(14,099) 3,048 306 (254) (59)
(9,384) 32,812 30,711 (11,608) 9,392
54,306 14,349 17,108 2,275 1,931
14,259 5,162 1,862 736 905
--------- --------- --------- ---------- ---------
80,773 (63,341) (38,955) (5,455) 14,917
--------- --------- --------- ---------- ---------
206,660 65,801 76,579 1,327 19,785
--------- --------- --------- ---------- ---------
(347,075) (27,044) (311,448) -- --
(45,180 (45,161) (20,525) (98) (136)
-- -- -- (393,510) (327,636)
-- -- -- 286,009 224,289
45,216 1,070 (23,226) -- --
--------- --------- --------- ---------- ---------
(347,039) (71,135) (355,199) (107,599) (103,483)
--------- --------- --------- ---------- ---------
977,737 366,143 790,007 1,101,356 829,500
(803,196) (354,640) (593,468) (997,980) (773,900)
(12,473) -- -- -- --
1,744 1,299 133,721 -- --
-- 500 -- (500) --
(2,171) (907) (467) -- --
-- (2,420) (5,511) -- --
-- (7,249) (25,095) 7,249 21,655
--------- --------- --------- ---------- ---------
161,641 2,726 299,187 110,125 77,255
--------- --------- --------- ---------- ---------
422 787 1,063 -- --
21,684 (1,821) 21,630 3,853 (6,443)
20,023 21,844 214 3,982 10,425
--------- --------- --------- ---------- ---------
$ 41,707 $ 20,023 $ 21,844 $ 7,835 $ 3,982
========= ========= ========= ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE> 56
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
AGCO Corporation (the "Company") is a leading manufacturer and distributor
of agricultural equipment throughout the world. The Company sells a full range
of agricultural equipment and related replacement parts, including tractors,
combines, hay tools and forage equipment and implements. The Company's products
are widely recognized in the agricultural equipment industry and are marketed
under the following brand names: Massey Ferguson, AGCO Allis, GLEANER, Hesston,
White, SAME, White-New Idea, Black Machine, AGCOSTAR, Landini, Tye, Farmhand,
Glencoe, Maxion, IDEAL, Western Combine, PMI, Deutz and Fendt. The Company
distributes its products through a combination of over 7,500 independent
dealers, wholly-owned distribution companies, associates and licensees. In
addition, the Company provides retail financing in North America, the United
Kingdom, France and Germany through its finance joint ventures with Cooperatieve
Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" ("Rabobank").
Basis of Presentation
Effective November 1, 1996, the Company sold a 51% interest in Agricredit
Acceptance Company ("Agricredit"), the Company's wholly-owned retail finance
subsidiary in North America (Note 2). Accordingly, the Company's consolidated
financial statements as of and for the year ended December 31, 1996 reflect
Agricredit on the equity method of accounting for the entire period presented.
As of and for the year ended December 31, 1995 and for the period after February
11, 1994, the date the Company acquired the remaining 50% interest in Agricredit
(Note 2), the consolidated financial statements reflect Agricredit on a
consolidated basis with the Company's other majority-owned subsidiaries.
The consolidated financial statements include, on a separate, supplemental
basis, the Company's Equipment Operations, and for 1995 and for the period from
February 11, 1994 to December 31, 1994, its Finance Company. "Equipment
Operations" reflect the consolidation of all operations of the Company and its
majority-owned subsidiaries with the exception of Agricredit, which is included
using the equity method of accounting. For the year ended December 31, 1995 and
for the period from February 11, 1994 to December 31, 1994, the results of
operations of Agricredit are included under the caption "Finance Company." All
significant intercompany transactions for the year ended December 31, 1995 and
for the period from February 11, 1994 to December 31, 1994, including activity
within and between the Equipment Operations and Finance Company, have been
eliminated to arrive at the "Consolidated" financial statements. Certain prior
period amounts have been reclassified to conform with the current period
presentation.
Revenue Recognition
Sales of equipment and replacement parts are recorded by the Company when
shipped to independent dealers, distributors or other customers. Provisions for
sales incentives and returns and allowances are made at the time of sale to the
dealer for existing incentive programs or at the inception of new incentive
programs. Provisions are revised in the event of subsequent modification to the
incentive programs. In certain markets, particularly in North America, there is
a time lag, which varies based on the timing and level of retail demand, between
the date the Company records a sale and when the dealer sells the equipment to a
retail customer.
Foreign Currency Translation
The financial statements of the Company's foreign subsidiaries are
translated into United States currency in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation." Assets and
liabilities are translated to United States dollars at period-end exchange
rates. Income and expense items are translated at average rates of exchange
prevailing during the period. Translation adjustments are
F-12
<PAGE> 57
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accumulated as a separate component of stockholders' equity. Gains and losses
which result from foreign currency transactions are included in the accompanying
consolidated statements of income. For subsidiaries operating in highly
inflationary economies, financial statements are remeasured into the United
States dollar with adjustments resulting from the translation of monetary assets
and liabilities reflected in the accompanying consolidated statements of income.
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 receivable and
inventory allowances and certain accrued liabilities, principally relating to
reserves for volume discounts and sales incentives, warranty and insurance.
Transactions with Affiliates
The Company enters into transactions with certain affiliates relating
primarily to the purchase and sale of inventory. All transactions were in the
ordinary course of business and are not considered material to the financial
statements.
Cash and Cash Equivalents
The Company considers all investments with an original maturity of three
months or less to be cash equivalents.
Accounts and Notes Receivable
Accounts and notes receivable arise from the sale of parts and finished
goods inventory to independent dealers, distributors or other customers. Terms
vary by market, generally ranging from 30 day terms to requiring payment when
the equipment is sold to retail customers. Interest is charged on the balance
outstanding after certain interest-free periods, which generally range from 1 to
12 months.
Accounts and notes receivable are shown net of allowances for sales
incentive discounts available to dealers and for doubtful accounts. Accounts and
notes receivable allowances at December 31, 1996 and 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Sales incentive discounts................................... $45,809 $39,433
Doubtful accounts........................................... 30,017 23,114
------- -------
$75,826 $62,547
======= =======
</TABLE>
Inventories
Inventories consist primarily of tractors, combines, implements, hay and
forage equipment and service parts and are valued at the lower of cost or
market. Cost is determined on a first-in, first-out basis. Market is net
realizable value for finished goods and repair and replacement parts. For work
in process, production parts and raw materials, market is replacement cost.
F-13
<PAGE> 58
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventory balances at December 31, 1996 and 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Finished goods.............................................. $171,105 $121,034
Repair and replacement parts................................ 222,601 196,863
Work in process, production parts and raw materials......... 134,734 84,505
-------- --------
Gross inventories........................................... 528,440 402,402
Allowance for surplus and obsolete inventories.............. (54,596) (41,433)
-------- --------
Inventories, net............................................ $473,844 $360,969
======== ========
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated
depreciation and amortization. Depreciation is provided on a straight-line basis
over the estimated useful lives of 10 to 40 years for buildings and
improvements, 3 to 15 years for machinery and equipment, and 3 to 10 years for
furniture and fixtures. Expenditures for maintenance and repairs are charged to
expense as incurred.
The property, plant and equipment balances at December 31, 1996 and 1995
were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land........................................................ $ 32,537 $ 13,260
Buildings and improvements.................................. 93,203 42,877
Machinery and equipment..................................... 206,098 110,726
Furniture and fixtures...................................... 31,218 23,572
-------- --------
Gross property, plant and equipment......................... 363,056 190,435
Accumulated depreciation and amortization................... (70,619) (43,914)
-------- --------
Property, plant and equipment, net.......................... $292,437 $146,521
======== ========
</TABLE>
Intangible Assets
Intangible assets at December 31, 1996 and 1995 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Excess of cost over net assets acquired..................... $162,485 $ 52,001
Trademarks.................................................. 66,042 70,000
Other....................................................... 5,232 4,598
Accumulated amortization.................................... (20,835) (12,750)
-------- --------
212,924 113,849
-------- --------
Excess of net assets acquired over cost..................... (23,235) (23,235)
Accumulated amortization.................................... 15,954 13,630
-------- --------
(7,281) (9,605)
-------- --------
Intangible assets, net...................................... $205,643 $104,244
======== ========
</TABLE>
The excess of cost over net assets acquired ("goodwill") is being amortized
to income on a straight-line basis over periods ranging from 10 to 40 years. The
Company also assigned values to certain trademarks which were acquired in
connection with the Massey Acquisition (Note 2). The trademarks are being
amortized to income on a straight-line basis over 40 years. The excess of net
assets acquired over cost is being amortized on a straight-line basis over 10
years and has been reflected along with the related accumulated amortization as
a
F-14
<PAGE> 59
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
reduction to intangible assets. The net amortization expense, included in other
expense, net in the accompanying consolidated statements of income was
$5,761,000, $4,007,000 and $2,044,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
The Company periodically reviews the carrying values assigned to goodwill
and other intangible assets based upon expectations of future cash flows and
operating income generated by the underlying tangible assets.
Accrued Expenses
Accrued expenses at December 31, 1996 and 1995 consisted of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Reserve for volume discounts and sales incentives........... $ 69,099 $ 62,557
Warranty reserves........................................... 47,147 39,883
Accrued employee compensation and benefits.................. 46,985 28,940
Accrued taxes............................................... 51,484 23,041
Other....................................................... 102,243 79,427
-------- --------
$316,958 $233,848
======== ========
</TABLE>
Warranty Reserves
The Company's agricultural equipment products are generally under warranty
against defects in material and workmanship for a period of one to four years.
The Company provides for future warranty costs based upon the relationship of
sales in prior periods to actual warranty costs.
Insurance Reserves
Under the Company's insurance programs, coverage is obtained for
significant liability limits as well as those risks required to be insured by
law or contract. It is the policy of the Company to self-insure a portion of
certain expected losses related primarily to workers' compensation and
comprehensive general, product and vehicle liability. Provisions for losses
expected under these programs are recorded based on the Company's estimates of
the aggregate liabilities for the claims incurred.
Extraordinary Loss
In March 1996, as part of the refinancing of the Company's $550,000,000
secured revolving credit facility with a five-year $650,000,000 unsecured
revolving credit facility (Note 7), the Company recorded an extraordinary loss
of $3,503,000, net of taxes of $2,239,000, for the write-off of unamortized debt
costs related to the $550,000,000 revolving credit facility.
Net Income Per Common Share
Primary net income per common share is computed by dividing net income
available for common stockholders (net income less preferred stock dividend
requirements) by the weighted average number of common and common equivalent
shares outstanding during each period. Common equivalent shares include shares
issuable upon the assumed exercise of outstanding stock options (Note 13). Fully
diluted net income per common share assumes (i) conversion of the Convertible
Subordinated Debentures (Note 8) into common stock after the Exchange (Note 8)
and the elimination of interest expense related to the Convertible Subordinated
Debentures, net of applicable income taxes and (ii) conversion of the Preferred
Stock
F-15
<PAGE> 60
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Note 11) into common stock and the elimination of the preferred stock dividend
requirements prior to the Exchange.
All references in the financial statements and the accompanying notes to
the financial statements to the weighted average number of common shares
outstanding and net income per common share have been restated to reflect all
stock splits (Note 12).
Financial Instruments
The carrying amounts reported in the Company's consolidated balance sheets
for cash and cash equivalents, accounts and notes receivable, receivables from
unconsolidated subsidiary and affiliates, accounts payable and payables to
unconsolidated subsidiary and affiliates approximate fair value due to the
immediate or short-term maturity of these financial instruments. The carrying
amount of long-term debt under the Company's revolving credit facility (Note 7)
approximates fair value based on the borrowing rates currently available to the
Company for loans with similar terms and average maturities. At December 31,
1996, the estimated fair value of the Company's 8 1/2% Senior Subordinated Notes
(Note 7), based on its listed market value, was $252,600,000 compared to the
carrying value of $247,957,000.
The Company enters into foreign exchange forward contracts to hedge the
foreign currency exposure of certain receivables, payables and expected
purchases and sales. These contracts are for periods consistent with the
exposure being hedged and generally have maturities of one year or less. Gains
and losses on foreign exchange forward contracts are deferred and recognized in
income in the same period as the hedged transaction. The Company's foreign
exchange forward contracts do not subject the Company's results of operations to
risk due to exchange rate fluctuations because gains and losses on these
contracts generally offset gains and losses on the exposure being hedged. The
Company does not enter into any foreign exchange forward contracts for
speculative trading purposes. At December 31, 1996 and 1995, the Company had
foreign exchange forward contracts with notional amounts of $218,127,000 and
$179,072,000, respectively. The deferred gains or losses from these contracts
were not material at December 31, 1996 and 1995.
The notional amounts of foreign exchange forward contracts do not represent
amounts exchanged by the parties and therefore, are not a measure of the
Company's risk. The amounts exchanged are calculated on the basis of the
notional amounts and other terms of the foreign exchange hedging contracts. The
credit and market risk under these contracts are not considered to be
significant since the Company deals with counterparties that have high credit
ratings.
Accounting Changes
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation", which requires companies to
estimate the value of all stock-based compensation using a recognized pricing
model. The Company has adopted the disclosure requirements of this statement and
has chosen to continue to apply the accounting provisions of Accounting
Principles Board Opinion No. 25 to stock-based employee compensation
arrangements as allowed by Statement No. 123 (Note 13). As a result, the
adoption of this new standard did not have an effect on the Company's financial
position or results of operations for the year ended December 31, 1996.
Effective January 1996, the Company adopted Statement of Financial
Accounting Standards 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. The adoption of this standard did not have a material effect on the
Company's financial position.
F-16
<PAGE> 61
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS AND DISPOSITIONS
On December 27, 1996, the Company acquired the operations of Deutz
Argentina S.A. ("Deutz Argentina") for approximately $62,500,000 (the "Deutz
Argentina Acquisition"). The purchase price was financed primarily by borrowings
under the Company's $650,000,000 revolving credit facility (the "March 1996
Credit Facility" -- Note 7). The acquired assets and assumed liabilities
consisted primarily of accounts receivable, inventories, property, plant and
equipment (including three manufacturing and assembly facilities), accounts
payable and accrued liabilities. Deutz Argentina is a manufacturer and
distributor of a broad range of agricultural equipment, engines and light trucks
in Argentina and other South American markets.
Effective November 1, 1996, the Company entered into an agreement with De
Lage Landen International, B.V., a wholly-owned subsidiary of Rabobank, to be
its joint venture partner in Agricredit, the Company's wholly-owned retail
finance subsidiary in North America (the "Agricredit Joint Venture"). As a
result of the agreement, the Company sold a 51% interest in Agricredit to
Rabobank. The Company received total consideration of approximately $44,300,000
in the transaction and recorded a gain, before taxes, of approximately
$4,745,000. Under the Agricredit Joint Venture, Rabobank has a 51% interest in
Agricredit and the Company retained a 49% interest in the finance company.
Substantially all of the net assets of Agricredit were transferred to the
Agricredit Joint Venture. Proceeds from the transaction were used to repay
outstanding borrowings under the Company's March 1996 Credit Facility.
Effective July 8, 1996, the Company acquired certain assets of Western
Combine Corporation and Portage Manufacturing, Inc., the Company's suppliers of
Massey Ferguson combines and certain other harvesting equipment sold in North
America (the "Western Combine Acquisition"). The acquired assets consisted
primarily of inventories, manufacturing equipment and technology. The purchase
price of approximately $19,443,000 was financed primarily by borrowings under
the Company's March 1996 Credit Facility.
Effective June 28, 1996, the Company acquired certain assets and
liabilities of the agricultural and industrial equipment business of
Iochpe-Maxion S.A. (the "Maxion Agricultural Equipment Business") for
approximately $260,000,000 (the "Maxion Acquisition"). The purchase price, which
is subject to adjustment, was financed primarily by borrowings under the
Company's March 1996 Credit Facility. The acquired assets and assumed
liabilities consisted primarily of accounts receivable, inventories, property,
plant and equipment (including two manufacturing facilities), accounts payable
and accrued liabilities. Prior to the acquisition, the Maxion Agricultural
Equipment Business was AGCO's Massey Ferguson licensee in Brazil, manufacturing
and distributing agricultural and industrial equipment in Brazil and other South
American markets.
Effective March 31, 1995, the Company acquired substantially all the net
assets of AgEquipment Group, a manufacturer and distributor of agricultural
implements and tillage equipment (the "AgEquipment Acquisition"). The acquired
assets and assumed liabilities consisted primarily of dealer accounts
receivable, inventories, machinery and equipment, trademarks and trade names,
accounts payable and accrued liabilities. The purchase price was approximately
$25,100,000 and was financed through borrowings under the Company's $550,000,000
revolving credit facility (the "June 1994 Credit Facility" -- Note 7).
On June 29, 1994, the Company acquired from Varity Corporation ("Varity")
the outstanding stock of Massey Ferguson Group Limited, certain assets of MF
GmbH, a German operating subsidiary, the Massey Ferguson trademarks and certain
other related assets for aggregate consideration consisting of $310,000,000 in
cash and 500,000 shares of common stock of the Company (the "Massey
Acquisition"). The acquired assets and assumed liabilities consisted primarily
of accounts receivable, inventories, property, plant and equipment (including
two manufacturing facilities), trademarks, stock in associated companies,
accounts payable and accrued liabilities. The total purchase price was
approximately $328,625,000. The cash portion of the purchase price for the
Massey Acquisition and the related transaction costs were financed through the
public offering of 3,737,500 shares of common stock at $37.50 per share
resulting in proceeds of $132,980,000, net of underwriters' discount and
offering expenses (the "1994 Offering"), and incremental borrowings of
F-17
<PAGE> 62
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$177,020,000 under the June 1994 Credit Facility. The 1994 Offering and the
execution of the June 1994 Credit Facility were completed concurrently with the
Massey Acquisition.
Effective February 10, 1994, the Company acquired the remaining 50%
interest in Agricredit from Varity. Prior to that date, the Company owned a 50%
interest in Agricredit through a joint venture with Varity which was accounted
for using the equity method of accounting since the original date of investment
in 1993. The acquired assets and assumed liabilities consisted primarily of
credit receivables, accounts payable, accrued liabilities and borrowings under a
revolving credit agreement. The purchase price for the remaining 50% interest
was $23,226,000 and was financed through borrowings under the Company's
revolving credit facility in place at that time.
The above acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16, and accordingly, each purchase price
has been allocated to the assets acquired and the liabilities assumed based on
the estimated fair values as of the acquisition dates. The purchase price
allocations for the Maxion and the Deutz Argentina Acquisitions are preliminary
and subject to adjustment. In 1995, the purchase price allocation for the Massey
Acquisition was completed, with the exception of the recognition of acquired
deferred income tax assets. The total purchase price allocation for the Massey
Acquisition, excluding the recognition of deferred income tax assets, resulted
in an increase in goodwill of $6,733,000. In addition, the Company has
recognized $79,753,000 of deferred income tax assets resulting in a decrease in
goodwill and values assigned to certain trademarks acquired in the Massey
Acquisition. These adjustments were a result of the completion of certain asset
and liability valuations related primarily to property, plant and equipment and
certain allowance and reserve accounts. The purchase price allocations for the
Maxion and Deutz Argentina Acquisitions will be completed in 1997. The results
of operations for these acquisitions are included in the Company's consolidated
financial statements as of and from the respective dates of acquisition. The
Deutz Argentina Acquisition had no effect on the Company's results of operations
for the year ended December 31, 1996.
The following unaudited pro forma data summarizes the results of operations
for the year ended December 31, 1996 and 1995 as if the Maxion Acquisition and
the Agricredit Joint Venture, including the related financings, had occurred at
the beginning of 1995. The unaudited pro forma information has been prepared for
comparative purposes only and does not purport to represent what the results of
operations of the Company would actually have been had the transactions occurred
on the dates indicated or what the results of operations may be in any future
period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net sales................................................... $2,410,621 $2,316,019
Net income.................................................. 86,109 35,131
Net income per common share -- fully diluted (1)............ $ 1.51 $ 0.64
</TABLE>
- ---------------
(1) Net income per common share-fully diluted for the year ended December 31,
1996 excludes an extraordinary loss, net of taxes, of $3,503,000, or $0.06
per share on a fully diluted basis.
3. CHARGES FOR NONRECURRING EXPENSES
The results of operations for 1996 included a charge for nonrecurring
expenses of $15,027,000, or $0.17 per common share on a fully diluted basis.
This nonrecurring charge related to the further restructuring of the Company's
European operations, acquired in the Massey Acquisition (Note 2) in June 1994,
and the integration and restructuring of the Company's Brazilian operations,
acquired in the Maxion Acquisition (Note 2) in June 1996.
F-18
<PAGE> 63
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The nonrecurring charge for the further restructuring of the Company's
European operations included costs associated with the centralization of certain
parts warehousing, administrative, sales and marketing functions. The
$10,357,000 nonrecurring charge recorded through December 31, 1996 included
$6,385,000 for employee related costs consisting primarily of severance costs
and $3,972,000 for other nonrecurring costs. Of the total $10,357,000 charge,
$6,702,000 has been incurred at December 31, 1996. The remaining accrual of
$3,655,000 primarily consists of employee severance costs which relate to the
planned reduction of 118 employees, of which 96 employees have been terminated
at December 31, 1996.
The nonrecurring charge for the integration and restructuring of the
Company's Brazilian operations included costs associated with the
rationalization of manufacturing, sales, and administrative functions. The
$4,670,000 recorded through December 31, 1996 included $2,656,000 for employee
related costs, including severance costs, and $2,014,000 for other nonrecurring
costs. Included in the $2,656,000 of employee related costs was $1,315,000 of
payroll costs incurred through December 31, 1996 for personnel that have been
terminated. Of the total $4,670,000 charge, $3,635,000 has been incurred through
December 31, 1996. The employee severance costs relate to the reduction of
approximately 220 employees at December 31, 1996.
The results of operations for the years ended December 31, 1995 and 1994
included charges for nonrecurring expenses primarily related to the integration
and restructuring of the Company's European operations, acquired in the Massey
Acquisition. The Company recorded nonrecurring expenses of $13,500,000, or $0.21
per common share on a fully diluted basis, in the fourth quarter of 1994 and
recorded an additional $6,000,000, or $0.07 per common share on a fully diluted
basis, in 1995. The nonrecurring charge included costs primarily associated with
the centralization and rationalization of the Company's European operations'
administrative, sales and marketing functions and other nonrecurring costs. The
combined $19,500,000 charge recorded through December 31, 1995 included
$10,148,000 for employee related costs which primarily were severance costs,
$3,300,000 for fees associated with the termination of the credit facility
existing at that time which was replaced by the June 1994 Credit Facility, in
conjunction with the Massey Acquisition, and $6,052,000 for other nonrecurring
costs. All of the costs associated with the $19,500,000 charge recorded through
December 31, 1995 have been incurred.
The results of operations for the year ended December 31, 1994 also
included charges for nonrecurring expenses of $6,000,000, or $0.12 per common
share on a fully diluted basis, relating to the integration of the White-New
Idea Farm Equipment Division ("White-New Idea"), acquired from Allied Products
Corporation in December 1993. The nonrecurring charge included $2,700,000 for
employee severance and relocation expenses, $1,000,000 for costs associated with
operating duplicate parts distribution facilities, $800,000 for certain data
processing expenses, $700,000 for dealer signs, and $800,000 for other
nonrecurring costs. All of the costs associated with the integration of
White-New Idea were incurred in 1994 and 1995.
4. AGRICREDIT
The Company acquired a 50% joint venture interest in Agricredit from Varity
in 1993 (Note 2) and the operations for the finance company were reflected in
the Company's consolidated financial statements using the equity method of
accounting for the period ended December 31, 1993. The Company acquired the
remaining 50% interest in Agricredit from Varity on February 10, 1994 and
accordingly, the Company's consolidated financial statements reflect Agricredit
on a consolidated basis with the Company's other majority-owned subsidiaries as
of December 31, 1994 and 1995 and for the period from February 11, 1994 through
December 31, 1994 and for the year ended December 31, 1995. Effective November
1, 1996, the Company sold a 51% joint venture interest in Agricredit.
Accordingly, the Company's consolidated financial statements as of and for the
year ended December 31,1996 reflect the operations of Agricredit on the equity
method of accounting for the entire period presented. The following is certain
information related to Agricredit for the periods that the Agricredit operations
were accounted for on a consolidated basis. See
F-19
<PAGE> 64
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Note 5 for information related to Agricredit for the periods in which it was
accounted for under the equity method of accounting.
Revenue Recognition
Agricredit recognizes finance income on credit receivables utilizing the
effective interest method. Accrual of interest and finance fees is suspended
when collection is deemed doubtful. Direct costs incurred in origination of the
credit receivables are amortized to income over the expected term of the credit
receivables using methods that approximate the effective interest method.
Financial Instruments
At December 31, 1995, the estimated fair value of Agricredit's credit
receivables was $573,851,000 compared to the carrying value of $582,578,000. The
fair value of credit receivables was based on the discounted values of their
related cash flows at current market interest rates. Long-term debt associated
with Agricredit approximated fair value at December 31, 1995 based on borrowing
rates available to Agricredit for loans with similar terms and average
maturities.
In 1995, Agricredit entered into interest rate swap agreements in order to
reduce its exposure to portions of its revolving credit agreement which carried
floating rates of interest and in order to more closely match the interest rates
of the borrowings to those of the credit receivables being funded. The
differential to be paid or received on the swap agreements was recognized as an
adjustment to interest expense. At December 31, 1995, the total notional
principal amount of the interest rate swap agreements was $25,652,000, having
fixed rates ranging from 8.03% to 8.22% and terminating in 1998. The notional
amount of the swap agreements do not represent amounts exchanged by the parties
and therefore, are not representative of the Company's risk. The credit and
market risk under the swap agreements is not considered significant and the fair
values and carrying values were not material at December 31, 1995.
Credit Receivables
Agricredit's credit receivables consisted of the following at December 31,
1995 (in thousands):
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Retail notes................................................ $ 498,732
Sales finance contracts..................................... 199,087
Wholesale notes............................................. 16,588
---------
Gross credit receivables.................................. 714,407
Less:
Unearned finance income................................... (119,015)
Allowance for credit losses............................... (12,814)
---------
Net credit receivables................................. 582,578
Less: current portion....................................... (185,401)
---------
Noncurrent credit receivables, net..................... $ 397,177
=========
</TABLE>
F-20
<PAGE> 65
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1995, contractual maturities of gross credit receivables
were as follows (in thousands):
<TABLE>
<CAPTION>
1995
--------
<S> <C>
1996........................................................ $243,873
1997........................................................ 191,572
1998........................................................ 139,462
1999........................................................ 91,191
2000........................................................ 40,713
Thereafter.................................................. 7,596
--------
$714,407
========
</TABLE>
The maximum maturities for retail notes and sales finance contracts is 7
years, while the maximum maturity for wholesale notes is 1 year. Interest rates
on the credit receivables vary depending on prevailing market interest rates and
certain sales incentive programs offered by the Company. Although the Company
has a diversified receivable portfolio, credit receivables have significant
concentrations of credit risk in the agricultural business sector. At December
31, 1995, approximately 78% of the net credit receivables related to the
financing of products sold by the Company's dealers and distributors to end
users. Agricredit retains as collateral a security interest in the equipment
financed.
The allowance for credit losses was $12,814,000 at December 31, 1995. In
addition, the Company had deposits withheld from dealers and manufacturers
available for potential credit losses of $8,615,000 at December 31, 1995. An
analysis of the allowance for credit losses is as follows (in thousands):
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Balance, beginning of year.................................. $10,042
Provision for credit losses............................... 4,279
Charge-offs............................................... (3,425)
Recoveries................................................ 1,918
-------
Balance, end of year........................................ $12,814
=======
</TABLE>
Long-Term Debt
Prior to the Agricredit Joint Venture on November 1, 1996, Agricredit
obtained funds from a separate $630,000,000 revolving credit facility (the
"Agricredit Revolving Credit Agreement") to finance its credit receivable
portfolio. In 1996, the terms of the Agricredit Revolving Credit Agreement were
amended and restated to increase Agricredit's available borrowings from
$545,000,000 to $630,000,000. Borrowings under the Agricredit Revolving Credit
Agreement were based on the amount and quality of outstanding credit receivables
and were generally issued with maturities matching anticipated credit receivable
liquidations, and at December 31, 1995, the terms ranged from 1 to 31 months.
Interest rates on the notes outstanding at December 31, 1995 ranged from 5.1% to
9.1%, with a weighted average interest rate of 6.8%. The Agricredit Revolving
Credit Agreement contained certain financial covenants which Agricredit and the
Company were required to maintain including a minimum specified net worth and,
specifically for the Company, a ratio of debt to net worth, as defined. At
December 31, 1995, $514,376,000 was outstanding under the Agricredit Revolving
Credit Agreement and available borrowings were $24,986,000. On November 1, 1996,
the Agricredit Revolving Credit Agreement was repaid and the Agricredit Joint
Venture entered into a new credit agreement.
F-21
<PAGE> 66
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
At December 31, 1996 and 1995, the Company's investments in unconsolidated
affiliates primarily consisted of (i) a 49% investment in Massey Ferguson
Finance, consisting of retail finance subsidiaries in the United Kingdom, France
and Germany, which are owned by the Company and Rabobank, (ii) its 50%
investment in Hay and Forage Industries ("HFI"), a joint venture with Case
Corporation ("Case"), which designs and manufactures hay and forage equipment
for distribution by the Company and Case, (iii) its 50% investment in a joint
venture with Renault Agriculture S.A. ("GIMA"), which manufactures driveline
assemblies for Massey Ferguson and Renault tractors, and (iv) certain other
minority investments in farm equipment manufacturers and licensees. In addition,
as a result of the Agricredit Joint Venture, investments in unconsolidated
affiliates at December 31, 1996 included the Company's 49% equity investment in
Agricredit.
Investments in unconsolidated affiliates, accounted for under the equity
method, as of December 31, 1996 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Agricredit.................................................. $28,032 $ --
Massey Ferguson Finance..................................... 20,390 13,523
HFI......................................................... 12,029 12,029
GIMA........................................................ 5,346 5,651
Other....................................................... 14,704 14,760
------- -------
$80,501 $45,963
======= =======
</TABLE>
The Company's equity in net earnings of unconsolidated affiliates for 1996,
1995, and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Agricredit.................................................. $10,384 $ -- $ 566
Massey Ferguson Finance..................................... 4,400 3,459 1,370
Other....................................................... 2,940 999 1,279
------- ------ ------
$17,724 $4,458 $3,215
======= ====== ======
</TABLE>
Both HFI and GIMA sell their products to the joint venture partners at
prices which result in them operating at or near breakeven on an annual basis.
Equity in net earnings of unconsolidated affiliates for 1994 included the equity
in net earnings of Agricredit prior to February 10, 1994, the date the remaining
50% interest was acquired by the Company (Note 2). The Company also has various
minority interest investments which are accounted for under the cost method.
Summarized financial information of Agricredit as of and for the year ended
December 31,1996 is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Current assets.............................................. $ 220,699
Noncurrent assets........................................... 453,018
---------
Total assets...................................... $ 673,717
=========
Current liabilities......................................... $ 533,362
Noncurrent liabilities...................................... 83,147
Partners' equity............................................ 57,208
---------
Total liabilities and partners' equity............ $ 673,717
=========
</TABLE>
F-22
<PAGE> 67
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
1996
------------
<S> <C>
Interest and finance fees................................... $69,507
Expenses.................................................... 58,107
-------
Net income.................................................. $11,400
=======
</TABLE>
The Company's equity in net earnings of Agricredit for the year ended
December 31, 1996 of $10,384,000 represents 100% of the net earnings of
Agricredit prior to the completion of the Agricredit Joint Venture on November
1, 1996 and 49% of Agricredit's net earnings thereafter.
6. INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse.
The sources of income before income taxes, equity in net earnings of
unconsolidated subsidiary and affiliates and extraordinary loss were as follows
for the years ended December 31, 1996, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
United States.......................................... $ 31,904 $ 41,893 $ 50,404
Foreign................................................ 139,725 148,688 51,305
-------- -------- --------
Income before income taxes, equity in net earnings of
unconsolidated subsidiary and affiliates and
extraordinary loss................................... $171,629 $190,581 $101,709
======== ======== ========
</TABLE>
The provision (benefit) for income taxes by location of the taxing
jurisdiction for the years ended December 31, 1996, 1995 and 1994 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Current:
United States:
Federal............................................. $ 9,715 $15,769 $ 23,123
State............................................... 461 1,521 3,300
Foreign................................................ 29,690 15,692 3,925
------- ------- --------
39,866 32,982 30,348
------- ------- --------
Deferred:
United States:
Federal............................................. (1,096) (2,485) (51,872)
State............................................... 63 297 (4,498)
Foreign................................................ 21,130 35,103 15,412
------- ------- --------
20,097 32,915 (40,958)
------- ------- --------
Provision (benefit) for income taxes................... $59,963 $65,897 $(10,610)
======= ======= ========
</TABLE>
F-23
<PAGE> 68
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain foreign operations of the Company are subject to United States as
well as foreign income tax regulations. Therefore, the preceding sources of
income before income taxes by location and the provision (benefit) for income
taxes by taxing jurisdiction are not directly related.
A reconciliation of income taxes computed at the United States federal
statutory income tax rate (35% in 1996, 1995 and 1994) to the provision
(benefit) for income taxes reflected in the consolidated statements of income
for the years ended December 31, 1996, 1995 and 1994 is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Provision for income taxes at United States federal
statutory rate......................................... $60,070 $66,703 $ 35,598
State and local income taxes, net of federal income tax
benefit................................................ 341 1,182 2,145
Taxes on foreign income which differ from the United
States statutory rate.................................. (818) (1,246) 572
Reduction in valuation allowance......................... -- (234) (49,734)
Other.................................................... 370 (508) 809
------- ------- --------
$59,963 $65,897 $(10,610)
======= ======= ========
</TABLE>
For the years ended December 31, 1996 and 1995, the Company's provision for
income taxes approximated statutory rates. For the year ended December 31, 1994,
the Company's United States current income tax provision was offset by the
recognition of deferred income tax benefits through a reduction of a portion of
the valuation allowance. In 1994, the reduction in the valuation allowance
resulted in a United States net income tax benefit of $29,947,000, or $0.61 per
common share on a fully diluted basis. The reduction in the valuation allowance
was supported by the generation of taxable income in recent years and
expectations for taxable income in future periods.
For the years ended December 31, 1996 and 1995, the Company's foreign
income tax provision primarily related to the Company's European operations
acquired in the Massey Acquisition. The deferred income tax provision resulted
from the realization of deferred tax assets acquired in the Massey Acquisition
primarily consisting of net operating loss carryforwards.
F-24
<PAGE> 69
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The significant components of the net deferred tax assets at December 31,
1996 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards.......................... $ 63,199 $ 51,260
Sales incentive discounts................................. 18,262 15,727
Inventory valuation reserves.............................. 11,093 11,327
Postretirement benefits................................... 9,534 8,256
Other..................................................... 48,600 41,488
Valuation allowance....................................... (63,664) (42,109)
-------- --------
Total deferred tax assets......................... 87,024 85,949
-------- --------
Deferred Tax Liabilities:
Tax over book depreciation................................ 2,857 145
Tax over book amortization of goodwill.................... 6,592 5,805
Other..................................................... 5,391 5,590
-------- --------
Total deferred tax liabilities.................... 14,840 11,540
-------- --------
Net deferred tax assets..................................... 72,184 74,409
Less: current portion..................................... (48,084) (51,214)
-------- --------
Noncurrent net deferred tax assets.......................... $ 24,100 $ 23,195
======== ========
</TABLE>
As reflected in the preceding table, the Company established a valuation
allowance of $63,664,000 and $42,109,000 for the years ended December 31, 1996
and 1995, respectively, due to the uncertainty regarding the realizability of
certain deferred tax assets. Included in the valuation allowance at December 31,
1996 and 1995 was $12,702,000 and $27,778,000, respectively, of deferred tax
assets primarily related to net operating loss carryforwards acquired in the
Massey Acquisition which will reduce goodwill and values assigned to trademarks
if realized. The increase in the valuation allowance in 1996 is primarily the
result of the Company's valuation allowance for net operating loss carryforwards
acquired in the Deutz Argentina Acquisition.
The Company had United States net operating loss carryforwards of
approximately $11,400,000 at December 31, 1996 which expire in years 2004 and
2005. The Company's United States net operating loss carryforwards are subject
to an annual limitation of $1,280,000 to reduce income taxes in future years.
The Company has foreign net operating loss carryforwards of $159,856,000, which
are principally in France, Brazil and Argentina. The foreign net operating loss
carryforwards have expiration dates as follows: 1997 -- $12,848,000, 1998 --
$3,692,000, 1999 -- $13,087,000, 2000 -- $30,834,000, 2001 -- $35,122,000,
thereafter and unlimited -- $64,273,000.
The Company paid income taxes of $23,120,000, $22,558,000 and $24,861,000
for the years ended December 31, 1996, 1995, and 1994, respectively.
F-25
<PAGE> 70
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1996 and 1995 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revolving Credit Facility-Equipment Operations.............. $317,439 $378,336
Senior Subordinated Notes................................... 247,957 --
Other Long-Term Debt........................................ 1,659 --
-------- --------
Total Long-Term Debt-Equipment Operations................. 567,055 378,336
Total Long-Term Debt-Agricredit (Note 4).................. -- 514,376
-------- --------
Total Long-Term Debt-Consolidated................. 567,055 892,712
Less: current portion............................. -- (361,376)
-------- --------
$567,055 $531,336
======== ========
</TABLE>
In March 1996, the Company replaced its $550,000,000 secured revolving
credit facility (the "June 1994 Credit Facility"), obtained in conjunction with
the Massey Acquisition, with a five-year $650,000,000 unsecured revolving credit
facility (the "March 1996 Credit Facility"). Aggregate borrowings outstanding
under the March 1996 Credit Facility are subject to a borrowing base limitation
and may not at any time exceed the sum of 90% of eligible accounts receivable
and 60% of eligible inventory. Interest accrues on borrowings outstanding under
the March 1996 Credit Facility primarily at LIBOR plus an applicable margin, as
defined. At December 31, 1996, interest rates on the outstanding borrowings
ranged from 6.2% to 8.3%, with a weighted average interest rate during 1996 of
6.3%. The March 1996 Credit Facility contains certain covenants, including
covenants restricting the incurrence of indebtedness and the making of certain
restrictive payments, including dividends. In addition, the Company must
maintain certain financial covenants including, among others, a debt to
capitalization ratio, an interest coverage ratio and a ratio of debt to cash
flow, as defined. At December 31, 1996, $317,439,000 was outstanding under the
March 1996 Credit Facility and available borrowings were $327,740,000.
In March 1996, the Company issued $250,000,000 of 8 1/2% Senior
Subordinated Notes due 2006 (the "Notes") at 99.139% of their principal amount.
The Notes are unsecured obligations of the Company and are redeemable at the
option of the Company, in whole or in part, at any time on or after March 15,
2001 initially at 104.25% of their principal amount, plus accrued interest,
declining ratably to 100% of their principal amount plus accrued interest, on or
after March 15, 2003. The Notes include certain covenants, including covenants
restricting the incurrence of indebtedness and the making of certain restrictive
payments, including dividends. The net proceeds from the sale of the Notes were
used to repay outstanding indebtedness under the Company's June 1994 Credit
Facility.
Prior to November 1, 1996, Agricredit obtained funds from the Agricredit
Revolving Credit Agreement to finance its credit receivable portfolio (Note 4).
In connection with the Agricredit Joint Venture, the Agricredit Revolving Credit
Agreement was repaid and the Agricredit Joint Venture entered into a new credit
agreement.
At December 31, 1996, the aggregate scheduled maturities of long-term debt
is primarily in year 2001 and thereafter. The scheduled maturities in years 1997
through 2000 are not material.
Cash payments for interest were $54,066,000, $77,281,000 and $56,868,000
for the years ended December 31, 1996, 1995 and 1994, respectively.
The Company has arrangements with various banks to issue letters of credit
or similar instruments which guarantee the Company's obligations for the
purchase or sale of certain inventories and for potential claims exposure for
insurance coverage. At December 31, 1996, outstanding letters of credit totaled
$35,080,000, of
F-26
<PAGE> 71
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
which $4,821,000 was issued under the March 1996 Credit Facility. At December
31, 1995, outstanding letters of credit totaled $19,945,000, of which $9,525,000
was issued under the June 1994 Credit Facility.
8. CONVERTIBLE SUBORDINATED DEBENTURES
In June 1995, the Company exchanged all of its outstanding 2,674,534
depositary shares (the "Exchange"), each representing 1/10 of a share of
Convertible Preferred Stock (Note 11), into $66,848,000 of 6.5% Convertible
Subordinated Debentures due 2008 (the "Convertible Subordinated Debentures").
The effect of this transaction resulted in a reduction to stockholders' equity
and an increase to liabilities in the amount of $66,848,000. The Convertible
Subordinated Debentures were convertible at any time at the option of the holder
into shares of the Company's common stock at a conversion rate of 157.85 shares
of common stock for each $1,000 principal amount of the debentures. In addition,
on or after June 1, 1996, the Convertible Subordinated Debentures were
redeemable at the option of the Company initially at an amount equivalent to
$1,045.50 per $1,000 principal amount of the debentures and thereafter, at
prices declining to an amount equivalent to the face amount of the debentures on
or after June 1, 2003, plus all accrued and unpaid interest.
In April 1996, the Company announced its election, effective June 1, 1996,
to redeem all of its outstanding Convertible Subordinated Debentures. Prior to
the execution of redemption, all of the outstanding Convertible Subordinated
Debentures were converted into common stock.
9. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering certain hourly and
salaried employees in the United States and certain foreign countries. Under the
United States plans, benefits under the salaried employees' plan are generally
based upon participant earnings, while the hourly employees' benefits are
determined by stated monthly benefit amounts for each year of credited service.
The United States salaried employees' retirement plan was amended to freeze all
future benefit accruals and participation after December 31, 1988, but to
continue the plan provisions with respect to service accumulations toward
achieving eligibility for, and vesting in, plan benefits. The Company also
sponsors certain foreign defined benefit plans. These plans are principally in
the United Kingdom (the "U.K. Plans") and provide pension benefits that are
based on the employees' highest average eligible compensation. The Company's
policy is to fund amounts to the defined benefit plans necessary to comply with
the funding requirements as prescribed by the laws and regulations in each
country where the plans are located.
Net periodic pension cost for the United States plans for the years ended
December 31, 1996, 1995 and 1994 included the following components (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost.............................................. $ 571 $ 480 $ 590
Interest cost............................................. 2,732 2,633 2,482
Actual (return) loss on plan assets....................... (4,592) (4,629) 787
Net amortization and deferral............................. 2,439 2,941 (2,588)
------- ------- -------
$ 1,150 $ 1,425 $ 1,271
======= ======= =======
</TABLE>
The following assumptions were used to measure the projected benefit
obligation for the United States plans at December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate to determine the projected benefit
obligation................................................ 7.50% 7.25% 8.75%
Expected long-term rate of return on plan assets used to
determine net periodic pension cost....................... 8.00% 8.00% 8.00%
</TABLE>
F-27
<PAGE> 72
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the United States defined benefit plans'
funded status at December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
HOURLY SALARY HOURLY SALARY
------- ------ ------- ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation......................... $30,764 $7,725 $28,997 $7,598
======= ====== ======= ======
Accumulated benefit obligation.................... $31,559 $7,875 $29,336 $7,764
======= ====== ======= ======
Projected benefit obligation........................ $32,742 $7,875 $29,336 $7,833
Plan assets at fair value, primarily listed stock
and U.S. bonds.................................... 26,632 8,958 21,961 7,922
------- ------ ------- ------
Projected benefit obligation (in excess of) less
than plan assets.................................. (6,110) 1,083 (7,375) 89
Unrecognized net loss (gain)........................ 334 (431) 2,619 487
Unrecognized prior service cost..................... 3,140 -- 1,666 --
Adjustment required to recognize minimum
liability......................................... (2,291) -- (4,285) --
------- ------ ------- ------
(Accrued) prepaid pension cost...................... $(4,927) $ 652 $(7,375) $ 576
======= ====== ======= ======
</TABLE>
Net periodic pension cost for the U.K. Plans for the years ended December
31, 1996, 1995 and the period from the Massey Acquisition date (June 29,1994) to
December 31, 1994 included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Service cost............................................ $ 4,665 $ 3,319 $ 1,690
Interest cost........................................... 19,613 16,944 8,478
Actual return on plan assets............................ (33,353) (29,752) (5,127)
Net amortization and deferral........................... 10,418 10,110 (4,598)
-------- -------- -------
$ 1,343 $ 621 $ 443
======== ======== =======
</TABLE>
The following assumptions were used to measure the projected benefit
obligation for the U.K. Plans:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- -----
<S> <C> <C> <C>
Discount rate to determine the projected benefit
obligation................................................ 8.50% 8.75% 9.25%
Rate of increase in future compensation levels used to
determine the projected benefit obligation................ 5.00% 5.00% 5.50%
Expected long-term rate of return on plan assets used to
determine net periodic pension cost....................... 9.75% 10.00% 10.50%
</TABLE>
F-28
<PAGE> 73
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the U.K. Plans' funded status at December
31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation................................. $245,057 $203,292
======== ========
Accumulated benefit obligation............................ $249,387 $206,890
======== ========
Projected benefit obligation................................ $258,847 $214,753
Plan assets at fair value, primarily listed stock and
bonds..................................................... 268,279 217,426
-------- --------
Projected benefit obligation less than plan assets.......... 9,432 2,673
Unrecognized net loss....................................... 2,386 3,647
-------- --------
Prepaid pension cost................................... $ 11,818 $ 6,320
======== ========
</TABLE>
In addition to the U.K. Plans, the Company accrues pension costs relating
to various pension plans in other foreign countries all of which are
substantially funded.
The Company maintains a separate defined contribution 401(k) savings plan
covering certain salaried employees. Under the plan, the Company contributes a
specified percentage of each eligible employee's compensation. The Company
contributed $1,570,000 ,$1,301,000 and $1,272,000 for the years ended December
31, 1996, 1995 and 1994, respectively.
10. POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
The Company provides certain postretirement health care and life insurance
benefits for United States salaried and hourly employees and their eligible
dependents who retire after attaining specified age and service requirements.
Net periodic postretirement benefit cost for the years ended December 31,
1996, 1995 and 1994 included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ 909 $ 890 $1,008
Interest cost on accumulated postretirement benefit
obligation................................................ 1,263 1,287 1,178
Net amortization of transition obligation and prior service
cost...................................................... (688) (688) (688)
Net amortization of unrecognized net gain................... (403) (495) (482)
------ ------ ------
$1,081 $ 994 $1,016
====== ====== ======
</TABLE>
F-29
<PAGE> 74
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the postretirement benefit plans' funded
status at December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
HOURLY SALARY HOURLY SALARY
------- ------ ------- ------
<S> <C> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retiree........................................... $ 3,600 $1,328 $ 3,191 $ 985
Fully eligible active plan participants........... 2,224 1,262 1,521 1,213
Other active participants......................... 8,434 1,786 9,552 2,058
------- ------ ------- ------
14,258 4,376 14,264 4,256
Plan assets at fair value........................... -- -- -- --
------- ------ ------- ------
Accumulated postretirement benefit obligation in
excess of plan assets............................. 14,258 4,376 14,264 4,256
Unrecognized prior service cost..................... 1,487 -- 2,723 --
Unrecognized transition obligation.................. -- (429) -- (456)
Unrecognized net gain............................... 4,015 738 2,541 233
------- ------ ------- ------
$19,760 $4,685 $19,528 $4,033
======= ====== ======= ======
</TABLE>
For measuring the expected postretirement benefit obligation, a 10.5%
health care cost trend rate was assumed for 1996, decreasing 0.75% per year to
6% and remaining at that level thereafter. The weighted average discount rate
used to determine the accumulated postretirement benefit obligation was 7.5% at
December 31, 1996.
Increasing the assumed health care cost trend rates by one percentage point
each year and holding all other assumptions constant would increase the
accumulated postretirement benefit obligation at December 31, 1996 by $1,736,000
and increase the aggregate of the service and interest cost components of the
net periodic postretirement benefit cost by $229,000.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires accrual of postemployment benefits for former or
inactive employees after employment but before retirement. Adoption of this new
standard did not have a material effect on the Company's financial position or
operating results.
11. PREFERRED STOCK
At December 31, 1996, the Company had 1,000,000 authorized shares of
preferred stock with a par value of $0.01 per share. In May 1993, the Company
completed an offering of 3,680,000 depositary shares, each representing 1/10 of
a share of $16.25 Cumulative Convertible Exchangeable Preferred Stock (the
"Convertible Preferred Stock") at $25.00 per depositary share (the "Convertible
Preferred Stock Offering"). The net proceeds to the Company from the Convertible
Preferred Stock Offering, after deducting the underwriters' discount and
offering expenses, were $87,967,000. Dividends on the Convertible Preferred
Stock were cumulative from the date of original issue and were payable quarterly
at $1.625 per annum per depositary share. Shares of the Convertible Preferred
Stock were convertible at any time at the option of the holder into shares of
the Company's common stock at a conversion price of $6.33. In June 1995, the
Company exchanged all of its outstanding 2,674,534 depositary shares of
Convertible Preferred Stock into $66,848,000 of Convertible Subordinated
Debentures (Note 8).
In April 1994, the Company designated 300,000 shares as Junior Cumulative
Preferred Stock (the "Junior Preferred Stock") in connection with the adoption
of a Stockholders' Rights Plan (the "Rights Plan" -- Note 12). No shares of
Junior Preferred Stock have been issued.
F-30
<PAGE> 75
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMON STOCK
At December 31, 1996, the Company had 150,000,000 authorized shares of
common stock with a par value of $0.01, with 57,260,151 shares of common stock
outstanding, 1,228,728 shares reserved for issuance under the Company's 1991
Stock Option Plan (Note 13), 81,000 shares reserved for issuance under the
Company's Nonemployee Director Stock Incentive Plan (Note 13) and 1,657,500
shares reserved for issuance under the Company's Long-Term Incentive Plan (Note
13).
In April 1994, the Company adopted the Rights Plan. Under the terms of the
Rights Plan, one-third of a preferred stock purchase right (a "Right") is
attached to each outstanding share of the Company's common stock. The Rights
Plan contains provisions that are designed to protect stockholders in the event
of certain unsolicited attempts to acquire the Company. Under the terms of the
Rights Plan, each Right entitles the holder to purchase one one-hundredth of a
share of Junior Preferred Stock, par value of $0.01 per share, at an exercise
price of $200 per share. The Rights are exercisable a specified number of days
following (i) the acquisition by a person or group of persons of 20% or more of
the Company's common stock or (ii) the commencement of a tender or exchange
offer for 20% or more of the Company's common stock. In the event the Company is
the surviving company in a merger with a person or group of persons that owns
20% or more of the Company's outstanding stock each Right will entitle the
holder (other than such 20% stockholder) to receive, upon exercise, common stock
of the Company having a value equal to two times the Right's exercise price. In
addition, in the event the Company sells or transfers 50% or more of its assets
or earning power, each Right will entitle the holder to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
Right's exercise price. The Rights may be redeemed by the Company at $0.01 per
Right prior to their expiration on April 27, 2004.
On January 31, 1996, the Company effected a two-for-one stock split of the
Company's outstanding common stock in the form of a stock dividend payable to
stockholders of record on January 15, 1996. On December 15, 1994, the Company
effected a three-for-two split of the Company's outstanding common stock in the
form of a 50% stock dividend payable to stockholders of record on December 1,
1994. All references to common share and per share information and the weighted
average number of common and common equivalent shares outstanding, with the
exception of stock offering information, have been restated to reflect both
stock splits.
13. STOCK PLANS
In April 1995, the Company adopted a nonemployee director stock incentive
plan (the "Director Plan"), and reserved 100,000 common shares for issuance
under the Director Plan. At December 31, 1996, 19,000 shares have been awarded
to plan participants. The awarded shares are earned in specified increments for
each 15% increase in the average market value of the Company's common stock over
the initial base price established under the plan. When an increment of the
awarded shares is earned, the shares are issued to the participant in the form
of restricted stock which vests at the earlier of 12 months after the specified
performance period or upon departure from the board of directors. When the
restricted shares are earned, a cash bonus equal to 40% of the value of the
shares on the date the restricted stock award is earned is paid by the Company
to satisfy a portion of the estimated income tax liability to be incurred by the
participant. At December 31, 1996, 19,000 shares awarded under the Director Plan
had been earned and 1,000 shares have vested.
In April 1994 and subsequently amended in April 1996, the Company adopted a
long-term incentive plan for executive officers (the "LTIP") and reserved
3,750,000 common shares for issuance under the LTIP. The awarded shares are
earned in specified increments for each 20% increase in the average market value
of the Company's common stock over the initial base price established under the
plan. When an increment of the awarded shares is earned, the shares are issued
to the participant in the form of restricted stock which generally carries a
five year vesting period with one-third of each award vesting on the last day of
the 36th,
F-31
<PAGE> 76
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
48th and 60th month, respectively, after each award is earned. When the
restricted shares are vested, a cash bonus equal to 40% of the value of the
vested shares on the date the restricted stock award is earned is paid by the
Company to satisfy a portion of the estimated income tax liability to be
incurred by the participant.
At the time the awarded shares are earned, the market value of the stock is
added to common stock and additional paid-in capital and an equal amount is
deducted from stockholders' equity as unearned compensation. The LTIP unearned
compensation and the amount of cash bonus to be paid when the awarded shares
become vested are amortized to expense ratably over the vesting period. The
Company recognized compensation expense associated with the LTIP of $25,757,000,
$9,763,000 and $1,508,000 for the years ended December 31, 1996, 1995 and 1994,
respectively, consisting of amortization of the stock award and the related cash
bonus.
Additional information regarding the LTIP for the years ended December 31,
1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Shares awarded but not earned at January 1............ -- 891,000 1,620,000
Shares awarded, net of forfeitures ................... 2,070,000 -- --
Shares earned......................................... (472,500) (891,000) (729,000)
--------- -------- ---------
Shares awarded but not earned at December 31.......... 1,597,500 -- 891,000
Shares available for grant............................ 60,000 180,000 180,000
--------- -------- ---------
Total shares reserved................................. 1,657,500 180,000 1,071,000
========= ======== =========
Shares vested......................................... 792,500 -- --
========= ======== =========
</TABLE>
In September 1991 and subsequently amended in May 1993, the Company adopted
a stock option plan (the "Option Plan") for officers, employees, directors and
others and reserved 2,400,000 shares of common stock for distribution under the
Option Plan. Options granted under the Option Plan may be either nonqualified or
incentive stock options as determined by the board of directors. The stock
option exercise price is determined by the board of directors except in the case
of an incentive stock option for which the purchase price shall not be less than
100% of the fair market value at the date of grant. Each recipient of stock
options is entitled to immediately exercise up to 20% of the options issued to
such person, and an additional 20% of such options vest ratably over a four-year
period and expire not later than ten years from the date of grant.
Stock option transactions during the three years ended December 31, 1996
were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Options outstanding at January 1.............. 899,190 1,198,400 1,043,722
Options granted............................... 229,720 20,000 508,650
Options exercised............................. (312,292) (292,312) (345,872)
Options canceled.............................. (29,368) (26,898) (8,100)
----------- ------------ ------------
Options outstanding at December 31............ 787,250 899,190 1,198,400
=========== ============ ============
Options available for grant at December 31.... 441,478 641,830 634,938
=========== ============ ============
Option price ranges per share:
Granted..................................... $25.50 $14.69-18.25 $11.75-16.96
Exercised................................... 1.52-25.50 1.52-18.25 1.52-14.63
Canceled.................................... 14.63-25.50 1.52-14.63 2.50-3.75
Weighted average option prices per share:
Granted..................................... $25.50 $16.47 $14.41
Exercised................................... 5.58 4.43 2.14
Canceled.................................... 18.94 10.00 3.19
Outstanding at December 31.................. 14.14 8.43 7.35
</TABLE>
At December 31, 1996, the outstanding options had a weighted average
remaining contractual life of approximately 7.9 years and there were 426,292
options currently exercisable with option prices ranging from $1.52 to $25.50
and with a weighted average exercise price of $9.67.
F-32
<PAGE> 77
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company accounts for the Director Plan, the LTIP, and the Option Plan
under the provisions of APB No. 25. The following pro forma information is based
on estimating the fair value of grants under the above plans based upon the
provisions of SFAS No. 123. For the Option Plan, the fair value of each option
granted in 1995 and 1996 has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rate of 5.7%, expected life for the option plan
of 7 years, expected dividend yield of 2.0%, and expected volatility of 35.0%.
For the Director Plan and LTIP, the fair value of each award in 1995 and 1996
has been estimated using the Black-Scholes option pricing model with the same
assumptions above for the risk free interest rate, expected dividend yield, and
expected volatility. Under these assumptions for the Option Plan, the weighted
average fair value of options granted in 1996 and 1995 was $12.22 and $8.52,
respectively. Under these assumptions for the Director Plan and the LTIP, the
weighted average fair value of awards granted in 1995 under the Director Plan,
including the related cash bonus, was $22.22, and the weighted average fair
value of awards granted in 1996 under the LTIP, including the related cash
bonus, was $31.36. There were no awards under the Director Plan in 1996 or under
the LTIP in 1995. The fair value of the grants and awards would be amortized
over the vesting period for stock options and earned awards under the Director
Plan and LTIP and over the performance period for unearned awards under the
Director Plan and LTIP. Accordingly, the Company's pro forma net income and net
income per common share assuming compensation cost was determined under SFAS No.
123 would have been the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income.................................................. $123,928 $129,130
Net income per common share -- fully diluted................ $ 2.17 $ 2.30
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to
grants and awards prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that expected in future years.
14. COMMITMENTS AND CONTINGENCIES
The Company leases land, buildings, machinery, equipment and furniture
under various noncancelable operating lease agreements. At December 31, 1996,
future minimum lease payments under noncancelable operating leases were as
follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $12,262
1998........................................................ 9,023
1999........................................................ 7,041
2000........................................................ 4,784
2001........................................................ 3,498
Thereafter.................................................. 15,655
-------
$52,263
=======
</TABLE>
Total lease expense under noncancelable operating leases was $16,181,000,
$15,069,000, and $7,250,000 for the years ended December 31, 1996, 1995 and
1994, respectively.
The Company is party to various claims and lawsuits arising in the normal
course of business. It is the opinion of management, after consultation with
legal counsel, that those claims and lawsuits, when resolved, will not have a
material adverse effect on the financial position or results of operations of
the Company.
F-33
<PAGE> 78
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SEGMENT REPORTING
The Company's operations consist of the following geographic segments as
set forth below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
WESTERN
UNITED EUROPE AND
STATES AND SOUTH OTHER
CANADA AMERICA INTERNATIONAL CONSOLIDATED(1)
---------- -------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers... $850,015 $ 85,151 $1,382,320 $2,317,486
Net sales between geographic
segments........................... 38,548 2,898 149,331 --
-------- -------- ---------- ----------
Total revenues................ $888,563 $ 88,049 $1,531,651 $2,317,486
======== ======== ========== ==========
Income from operations(2)............... $ 46,777 $ (6,784) $ 166,256 $ 206,191
======== ======== ========== ==========
Identifiable assets..................... $867,934 $404,291 $1,258,015 $2,116,531
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------
WESTERN
UNITED EUROPE AND
STATES AND OTHER
CANADA INTERNATIONAL CONSOLIDATED(1)
---------- ------------- ---------------
<S> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers......... $ 807,499 $1,260,928 $2,068,427
Net sales between geographic segments....... 20,218 203,882 --
---------- ---------- ----------
827,717 1,464,810 2,068,427
Finance income.............................. 56,621 -- 56,621
---------- ---------- ----------
Total revenues...................... $ 884,338 $1,464,810 $2,125,048
========== ========== ==========
Income from operations(2)................... $ 65,175 $ 163,948 $ 227,666
========== ========== ==========
Identifiable assets......................... $1,406,778 $ 943,588 $2,162,915
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------
WESTERN
UNITED EUROPE AND
STATES AND OTHER
CANADA INTERNATIONAL CONSOLIDATED(1)
---------- ------------- ---------------
<S> <C> <C> <C>
Revenues:
Net sales to unaffiliated customers......... $ 770,661 $548,610 $1,319,271
Net sales between geographic segments....... 1,276 61,930 --
---------- -------- ----------
771,937 610,540 1,319,271
Finance income.............................. 39,741 -- 39,741
---------- -------- ----------
Total revenues...................... $ 811,678 $610,540 $1,359,012
========== ======== ==========
Income from operations(2)................... $ 81,736 $ 47,484 $ 126,910
========== ======== ==========
Identifiable assets......................... $1,192,788 $738,268 $1,823,294
========== ======== ==========
</TABLE>
- ---------------
(1) Consolidated information reflects the elimination of intersegment
transactions. Intersegment sales are made at selling prices that are
intended to reflect the market value of the products.
(2) Income from operations represents revenues less cost of goods sold, selling,
general and administrative expenses, engineering expenses, nonrecurring
expenses, interest expense for Agricredit for the years ended December 31,
1995 and 1994, and intangible asset amortization.
F-34
<PAGE> 79
AGCO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net sales by customer location for the years ended December 31, 1996, 1995
and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Sales:
United States.................................... $ 681,064 $ 660,879 $ 626,205
Canada........................................... 153,773 134,458 130,316
Europe........................................... 1,021,016 947,628 389,687
Australia........................................ 67,000 39,477 23,132
Africa........................................... 80,643 71,672 44,053
Asia............................................. 122,519 135,031 42,907
Middle East...................................... 72,473 41,203 34,846
Mexico, Central America and Caribbean............ 18,782 18,068 13,219
South America.................................... 100,216 20,011 14,906
---------- ---------- ----------
$2,317,486 $2,068,427 $1,319,271
========== ========== ==========
</TABLE>
Total export sales from the United States were $194,472,000 in 1996,
$157,663,000 in 1995 and $138,540,000 in 1994 with the large majority of
products sold in Canada. In 1996, the remaining sales to customers outside the
United States were sourced from the Company's operations in Europe and Brazil.
In 1995 and 1994, the remaining sales to customers outside the United States
were sourced solely from the Company's operations in Europe.
16. SUBSEQUENT EVENTS
On January 14, 1997, the Company replaced the March 1996 Credit Facility
with a new revolving credit facility (the "January 1997 Credit Facility"), which
initially provides for borrowings of up to $1.0 billion. In February 1997, the
January 1997 Credit Facility was amended to allow for borrowings of up to $1.2
billion. Borrowings under the January 1997 Credit Facility may not exceed the
sum of 90% of eligible accounts receivable and 60% of eligible inventory.
Lending commitments under the January 1997 Credit Facility reduce to $1.1
billion on January 1, 1998 and $1.0 billion on January 1, 1999. If the Company
consummates offerings of debt or capital stock prior to such dates, the proceeds
of such offerings will be used to reduce the lending commitments, but not below
$1.0 billion.
On January 20, 1997, the Company acquired the operations of Xaver Fendt
GmbH & Co. KG ("Fendt") for approximately $283,500,000 plus approximately
$38,304,000 of assumed working capital debt (the "Fendt Acquisition"). The Fendt
Acquisition was financed by borrowings under the Company's January 1997 Credit
Facility. The transaction consists of the purchase of the outstanding stock of
Fendt and its interests in other subsidiaries. Fendt's primary business is the
manufacture and sale of tractors through a network of independent agricultural
cooperatives, dealers and distributors in Germany and throughout Europe and
Australia.
On January 22, 1997, the Company filed a registration statement with the
Securities and Exchange Commission for the sale of 4,500,000 shares of its
common stock (the "Offering"). The Company intends to use the proceeds from the
Offering to reduce a portion of the borrowings outstanding under the January
1997 Credit Facility and expects the transaction to be completed in March 1997.
F-35
<PAGE> 80
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Prospectus Summary.................... 3
Risk Factors.......................... 8
Price Range of Common Stock and
Dividends........................... 10
Use of Proceeds....................... 10
Capitalization........................ 11
Selected Historical Financial Data.... 12
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 31
Management............................ 37
Selling Stockholder................... 38
Description of Capital Stock.......... 38
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 39
Underwriting.......................... 42
Legal Matters......................... 43
Independent Auditors.................. 43
Available Information................. 44
Incorporation of Certain Documents by
Reference........................... 44
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
4,700,000 SHARES
[AGCO LOGO]
AGCO CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
I N C O R P O R A T E D
, 1997
======================================================
<PAGE> 81
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED FEBRUARY 28, 1997
PROSPECTUS
4,700,000 SHARES
[AGCO LOGO]
AGCO CORPORATION
COMMON STOCK
------------------------
Of the 4,700,000 shares of Common Stock offered hereby, 4,500,000 shares
are being offered by AGCO Corporation ("AGCO" or the "Company") and 200,000
shares are being offered by a stockholder of the Company (the "Selling
Stockholder"). The Company will not receive any of the net proceeds from the
sale of shares by the Selling Stockholder.
Of the 4,700,000 shares being offered hereby, 940,000 are being offered for
sale initially outside of the United States and Canada by the International
Managers and 3,760,000 are being offered for sale initially in a concurrent
offering in the United States and Canada by the U.S. Underwriters. The initial
offering price and the underwriting discount per share will be identical for
both offerings. See "Underwriting."
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "AG." On February 26, 1997, the last reported sale price of the
Common Stock on the NYSE was $28 7/8. See "Price Range of Common Stock and
Dividend History."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8, FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDER
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
==================================================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
to be $450,000.
(3) The Company has granted the International Managers and the U.S. Underwriters
30-day options to purchase up to an additional 135,000 shares and 540,000
shares of Common Stock, respectively, solely to cover over-allotments, if
any. If such options are exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1997.
------------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INTERNATIONAL
------------------------
The date of this Prospectus is , 1997.
<PAGE> 82
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Merrill Lynch International ("Merrill Lynch"), Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley & Co. International are acting as
representatives (the "International Representatives") of each of the
International Managers named below (the "International Managers"). Subject to
the terms and conditions set forth in an international purchase agreement (the
"International Purchase Agreement") among the Company, the Selling Stockholder
and the International Managers, the Company for its own account and the Selling
Stockholder severally have agreed to sell to the International Managers, and
each of the International Managers severally has agreed to purchase from the
Company and the Selling Stockholder, the number of shares of Common Stock set
forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
---------------------- ---------
<S> <C>
Merrill Lynch International.................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Morgan Stanley & Co. International..........................
-------
Total......................................... 940,000
=======
</TABLE>
The Company and the Selling Stockholder have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement, and together with the
International Purchase Agreement, the "Purchase Agreements") with certain
underwriters in the United States and Canada (the "U.S. Underwriters" and
together with the International Managers, the "Underwriters") for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley & Co. Incorporated are acting as
representatives (the "U.S. Representatives"). Subject to the terms and
conditions set forth in the U.S. Purchase Agreement, and concurrently with the
sale of 940,000 shares of Common Stock to the International Managers pursuant to
the International Purchase Agreement, the Company for its own account and the
Selling Stockholder have agreed to sell to the U.S. Underwriters, and each of
the U.S. Underwriters severally have agreed to purchase from the Company and the
Selling Stockholder, an aggregate of 3,760,000 shares of Common Stock. The
initial public offering price per share of Common Stock and the total
underwriting discount per share of Common Stock are identical under the Purchase
Agreements.
In the respective Purchase Agreements, the several International Managers
and the several U.S. Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all of the shares of Common Stock
being sold pursuant to each such agreement if any of the shares of Common Stock
being sold pursuant to such agreement are purchased. The respective Purchase
Agreements provide that in the event of a default by an International Manager or
U.S. Underwriter, as the case may be, the commitments of non-defaulting
International Managers or U.S. Underwriters (as the case may be) may in certain
circumstances be increased. The closings with respect to the sale of shares of
Common Stock to be purchased by the International Managers and the U.S.
Underwriters are conditioned upon one another.
The International Representatives have advised the Company and the Selling
Stockholder that the International Managers propose initially to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of $ per share of Common Stock. The International
Managers may allow, and such dealers may reallow, a discount not in excess of
$ per share of Common Stock on sales to certain other dealers. After the
Offering, the public offering price, concession and discount may be changed.
The Company has granted an option to the International Managers,
exercisable for 30 days after the date of this Prospectus, to purchase up to an
aggregate of 135,000 additional shares of Common Stock at the public
42
<PAGE> 83
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The International Managers may exercise this option only
to cover over-allotments, if any, made on the sale of the Common Stock offered
hereby. To the extent that the International Managers exercise this option, each
International Manager will be obligated, subject to certain conditions, to
purchase a number of additional shares of Common Stock proportionate to such
International Manager's initial amount reflected in the foregoing table. The
Company also has granted an option to the U.S. Underwriters, exercisable for 30
days after the date of this Prospectus, to purchase up to an aggregate of
540,000 additional shares of Common Stock to cover over-allotments, if any, on
terms similar to those granted to the International Managers.
The Company, the Selling Stockholder and certain other officers and
directors of the Company have agreed, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing or (ii) enter
into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch on behalf
of the Underwriters for a period of 90 days after the date of this Prospectus.
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
International Managers and the U.S. Underwriters are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom
they sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are non-U.S. or non-Canadian persons or to persons they
believe intend to resell to persons who are non-U.S. or non-Canadian persons,
and the International Managers and any dealer to whom they sell shares of Common
Stock will not offer to sell or sell shares of Common Stock to U.S. persons or
to Canadian persons or to persons they believe intend to resell to United States
or Canadian persons, except in the case of transactions pursuant to the
Intersyndicate Agreement which among other things permits the Underwriters to
purchase from each other and to offer for resale such number of shares as the
selling Underwriter or Underwriters and the purchasing Underwriter may agree.
The Company and the Selling Stockholder have agreed to indemnify the
International Managers and the U.S. Underwriters against certain liabilities,
including liabilities under the Securities Act.
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common
Stock, or the possession, circulation or distribution of this Prospectus or any
other material relating to the Company, the Selling Stockholder or shares of
Common Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of Common Stock may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the shares of Common Stock may be distributed
or published, in or from any country or jurisdiction except in compliance with
any applicable rules and regulations of any such country or jurisdiction.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase in addition to the offering price set forth on the cover page hereof.
Each International Manager has agreed that (i) it has not offered or sold
and, prior to the expiration of the period of six months from the Closing Date,
will not offer or sell any shares of Common Stock to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom within the meaning of
43
<PAGE> 84
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
the Public Offers of Securities Regulations 1995; (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Common Stock in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issuance of Common Stock to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on.
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholder by King & Spalding, Atlanta,
Georgia. Certain legal matters in connection with the sale of the shares of
Common Stock offered hereby will be passed upon for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations), New York, New York .
INDEPENDENT AUDITORS
The consolidated balance sheets of AGCO Corporation and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1996 included and incorporated by reference in this
Prospectus from the Company's Current Report on Form 8-K dated February 28, 1997
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto.
The consolidated balance sheets of AGCO Corporation and subsidiaries as of
December 31, 1995 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995 and the related schedule incorporated by reference in
this Prospectus from the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto.
The balance sheets of the Maxion Agricultural Equipment Business 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
incorporated by reference in this Prospectus from the Company's Current Report
on Form 8-K dated June 28, 1996 have been audited by Price Waterhouse Auditores
Independentes, independent public accountants, as indicated in their report with
respect thereto.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C., and at the regional offices of the Commission at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such information can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports and other information
concerning the Company can also be inspected at the offices of the New York
Stock Exchange, Inc. at 20 Broad Street, New York, New York 10005. The
Registration Statement may also be obtained through the Commission's Internet
address at "http://www.sec.gov".
The Company has filed with the Commission a registration statement on form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the offering
made hereby. This Prospectus does not contain all of the information set forth
in the Registration Statement, certain portions of which are omitted in
accordance with the rules and regulation of
44
<PAGE> 85
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
the Commission. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. as set forth above. For
further information, reference is hereby made to the Registration Statement,
including the exhibits filed as a part thereof or otherwise incorporated herein.
Statements made in this Prospectus as to the contents of any documents filed as
an exhibit are not necessarily complete, and in each instance reference is made
to such exhibit for a more complete description and each such statement is
modified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1995;
(b) Quarterly Report on Form 10-Q for the quarters ended March 30,
1996, June 30, 1996 and September 30, 1996; and
(c) Current Reports on Form 8-K dated March 4, 1996, March 21, 1996,
June 28, 1996, November 1, 1996 and February 28, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares of Common Stock hereunder shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents. The Company will provide a
copy of any or all of such documents (exclusive of exhibits unless such exhibits
are specifically incorporated by reference therein), without charge, to each
person to whom this Prospectus is delivered, upon written or oral request to:
AGCO Corporation, 4830 River Green Parkway, Duluth, Georgia 30136 (telephone
(770) 813-9200) Attention: Michael F. Swick, Vice President -- General Counsel.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
45
<PAGE> 86
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THE SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
IN THE PROSPECTUS, REFERENCES TO "DOLLARS" AND "$" ARE TO UNITED STATES
DOLLARS.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Prospectus Summary.................... 3
Risk Factors.......................... 9
Price Range of Common Stock and
Dividends........................... 11
Use of Proceeds....................... 11
Capitalization........................ 12
Selected Historical Financial Data.... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 31
Management............................ 37
Selling Stockholder................... 38
Description of Capital Stock.......... 38
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 39
Underwriting.......................... 42
Legal Matters......................... 44
Independent Auditors.................. 44
Available Information................. 44
Incorporation of Certain Documents by
Reference........................... 45
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
4,700,000 SHARES
(AGCO LOGO)
AGCO CORPORATION
COMMON STOCK
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
I N T E R N A T I O N A L
, 1997
======================================================
<PAGE> 87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. All of
such fees are being paid by the Company. Except for the SEC registration fee,
the NYSE listing fee and the NASD filing fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 43,774
NASD filing fee............................................. 14,946
NYSE listing fee............................................ 18,112
Accounting fees and expenses................................ 50,000
Legal fees and expenses..................................... 150,000
Blue Sky fees and expenses (including counsel fees)......... 10,000
Printing and engraving expenses............................. 150,000
Transfer agent and registrar fees and expenses.............. 2,000
Miscellaneous expenses...................................... 11,168
--------
Total............................................. $450,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended, provides
in regard to indemnification of directors and officers as follows:
SECTION 145. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND
AGENTS; INSURANCE
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent or another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
II-1
<PAGE> 88
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final deposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
II-2
<PAGE> 89
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under the Section or under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorney's fees).
Article XI of the Company's Bylaws provides in regard to indemnification of
directors and officer as follows:
1. Definitions. As used in this article, the term "person" means any
past, present or future director or officer of the corporation or a
designated officer of any operating division of the corporation.
2. Indemnification Granted. The Corporation shall indemnify, to the
full extent and under the circumstances permitted by the Delaware General
Corporation Law of the State of Delaware in effect from time to time, any
person as defined above, made or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative by reason of the fact that he is
or was a director, officer of the corporation or designated officer of an
operating division of the corporation, or is or was an employee or agent of
the corporation as a director, officer, employee or agent of another
company or other enterprise in which the corporation should own, directly
or indirectly, an equity interest or of which it may be a creditor.
This right of indemnification shall not be deemed exclusive of any
other rights to which a person indemnified herein may be entitled by Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise,
and shall continue as to a person who has ceased to be a director, officer,
designated officer, employee or agent and shall inure to the benefit of the
heirs, executors, administrators and other legal representatives of such
person. It is not intended that the provisions of this article be
applicable to, and they are not to be construed as granting indemnity with
respect to, matters as to which indemnification would be in contravention
of the laws of Delaware or of the United States of America whether as a
matter of public policy or pursuant to statutory provisions.
3. Miscellaneous. The board of directors may also on behalf of the
corporation grant indemnification to any individual other than a person
defined herein to such extent and in such manner as the board in its sole
discretion may from time to time and at any time determine.
Article 7 of the Company's Certificate of Incorporation provides in regard
to the limitation of liability of directors and officers as follows:
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (iii) under section 174 of the
Delaware General Corporation Law as the same exists or hereafter may be
amended or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law
hereafter is amended to authorize the further elimination or limitation of
the liability or directors, then, in addition to the limitation or personal
liability provided herein the liability of a director of the corporation
shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this paragraph by
the stockholders of the corporation shall be prospective only, and shall
not adversely affect any limitation on the personal liability of a director
of the corporation existing at the time of such repeal or modification.
The Company's directors and officer are also insured against claims arising
out of the performance of their duties in such capacities.
II-3
<PAGE> 90
Section 6 of the U.S. and International Purchase Agreements filed as
Exhibits 1.1 and 1.2 hereto also contains certain provisions pursuant to which
certain officers, directors and controlling persons of the Company may be
entitled to be indemnified by the underwriters named therein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NUMBER DESCRIPTION
- ------- ------------------
<C> <C> <S>
1.1 -- Form of U.S. Purchase Agreement
1.2 -- Form of International Purchase Agreement
5.1* -- Opinion of King and Spalding as to the legality of the
Common Stock being registered
23.1* -- Consent of King and Spalding (included as part of its
opinion filed as Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP, independent public
accountants.
23.3 -- Consent of Price Waterhouse Auditores Independentes,
independent public accountants.
24.1* -- Powers of Attorney.
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS.
The undersigned restraint hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Securities
Act"), each filing of the registrant's annual report pursuant to Section 13 (a)
or 15 (d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15 (d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 91
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Duluth, State of Georgia, on the 28th day of February, 1997.
AGCO CORPORATION
By: /s/ CHRIS E. PERKINS
------------------------------------
Chris E. Perkins
Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on February 28, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board
- -----------------------------------------------------
Robert J. Ratliff
* President and Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
J-P Richard
/s/ CHRIS E. PERKINS Vice President and Chief Financial Officer
- ----------------------------------------------------- (Principal Financial Officer and Principal
Chris E. Perkins Accounting Officer)
Director
- -----------------------------------------------------
Henry J. Claycamp
Director
- -----------------------------------------------------
William H. Fike
* Director
- -----------------------------------------------------
Gerald B. Johanneson
* Director
- -----------------------------------------------------
Richard P. Johnston
* Director
- -----------------------------------------------------
J. Patrick Kaine
* Director
- -----------------------------------------------------
Alan S. McDowell
</TABLE>
II-5
<PAGE> 92
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
Director
*
- -----------------------------------------------------
Charles S. Mechem, Jr.
* Director
- -----------------------------------------------------
Hamilton Robinson, Jr.
</TABLE>
*By: /s/ CHRIS E. PERKINS
-------------------------------
Chris E. Perkins
Attorney-in-Fact
II-6
<PAGE> 93
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
AGCO Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated balance sheets of AGCO CORPORATION AND SUBSIDIARIES as of
December 31, 1996 and 1995 and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1996, and have issued our report thereon dated February 5,
1997. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The accompanying Schedule II -- Valuation and
Qualifying Accounts is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 5, 1997
<PAGE> 94
SCHEDULE II
AGCO CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------
CHARGED CHARGED
BALANCE AT TO COSTS (CREDITED) BALANCE
BEGINNING ACQUIRED AND TO OTHER AT END
DESCRIPTION OF PERIOD BUSINESSES EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- ---------- -------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful receivables:
Equipment Operations............... $62,547 $ 3,325 $91,459 $ -- $(81,505) $75,826
======= ======= ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1995
Allowances for doubtful receivables:
Equipment Operations............... $60,064 $ 2,244 $83,970 $ -- $(83,731) $62,547
------- ------- ------- ------- -------- -------
Finance Company.................... 10,042 -- 4,279 -- (1,507) 12,814
------- ------- ------- ------- -------- -------
Consolidated receivable
allowances.................... $70,106 $ 2,244 $88,249 $ -- $(85,238) $75,361
======= ======= ======= ======= ======== =======
YEAR ENDED DECEMBER 31, 1994
Allowances for doubtful receivables:
Equipment Operations............... $41,327 $18,102 $66,863 $ -- $(66,228) $60,064
------- ------- ------- ------- -------- -------
Finance Company.................... -- 8,709 4,691 -- (3,358) 10,042
------- ------- ------- ------- -------- -------
Consolidated receivable
allowances.................... $41,327 $26,811 $71,554 $ -- $(69,586) $70,106
======= ======= ======= ======= ======== =======
</TABLE>
<PAGE> 1
EXHIBIT 1.1
==============================================================================
AGCO CORPORATION
A Delaware corporation
3,760,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
Dated: March __, 1997
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. Representations and Warranties...............................................................4
(a) Representations and Warranties by the Company...............................................4
(i) Compliance with Registration Requirements.......................................4
(ii) Incorporated Documents..........................................................5
(iii) Independent Accountants.........................................................5
(iv) Financial Statements............................................................5
(v) No Material Adverse Change in Business..........................................5
(vi) Good Standing of the Company....................................................6
(vii) Good Standing of Subsidiaries...................................................6
(viii) Capitalization..................................................................6
(ix) Authorization of Agreement......................................................7
(x) Authorization and Description of Securities.....................................7
(xi) Absence of Defaults and Conflicts...............................................7
(xii) Absence of Labor Dispute........................................................8
(xiii) Absence of Proceedings..........................................................8
(xiv) Accuracy of Exhibits............................................................8
(xv) Rights .......................................................................8
(xvi) Possession of Intellectual Property.............................................8
(xvii) Absence of Further Requirements.................................................9
(xviii) Possession of Licenses and Permits..............................................9
(xix) Title to Property...............................................................9
(xx) Compliance with Cuba Act........................................................10
(xxi) Investment Company Act..........................................................10
(xxii) Environmental Laws..............................................................10
(b) Representations and Warranties by the Selling Stockholder...................................10
(i) Authorization of Agreements.....................................................10
(ii) Good and Marketable Title.......................................................11
(iii) Due Execution of Custody Agreement..............................................11
(iv) Absence of Manipulation.........................................................11
(v) Absence of Further Requirements.................................................11
(vi) Restriction on Sale of Securities...............................................12
(vii) Certificates Suitable for Transfer..............................................12
(viii) No Association with NASD........................................................12
(c) Officer's Certificates......................................................................12
SECTION 2. Sale and Delivery to Underwriters; Closing...................................................13
(a) Initial Securities..........................................................................13
(b) Option Securities...........................................................................13
(c) Payment.....................................................................................13
(d) Denominations; Registration.................................................................14
SECTION 3. Covenants of the Company.....................................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(a) Compliance with Securities Regulations and Commission Requests..............................14
(b) Filing of Amendments........................................................................15
(c) Delivery of Registration Statements.........................................................15
(d) Delivery of Prospectuses....................................................................15
(e) Continued Compliance with Securities Laws...................................................16
(f) Blue Sky Qualifications.....................................................................16
(g) Rule 158....................................................................................16
(h) Use of Proceeds.............................................................................16
(i) Listing.....................................................................................17
(j) Restriction on Sale of Securities...........................................................17
(k) Reporting Requirements......................................................................17
SECTION 4. Payment of Expenses................................................................................17
(a) Expenses....................................................................................17
(b) Expenses of the Selling Stockholder.........................................................18
(c) Termination of Agreement....................................................................18
(d) Allocation of Expenses......................................................................18
SECTION 5. Conditions of U.S. Underwriters' Obligations.................................................18
(a) Effectiveness of Registration Statement.....................................................18
(b) Opinion of Counsel for Company..............................................................18
(c) Opinion of Counsel for the Selling Stockholder..............................................19
(d) Opinion of Counsel for U.S. Underwriters....................................................19
(e) Officers' Certificate.......................................................................19
(f) Certificate of Selling Stockholder..........................................................19
(g) Accountants' Comfort Letter.................................................................20
(h) Bring-down Comfort Letters..................................................................20
(i) Approval of Listing.........................................................................20
(j) Lock-up Agreements..........................................................................20
(k) Consummation of Sale of International Securities............................................20
(l) Conditions to Purchase of U.S. Option Securities............................................20
(i) Officer's Certificate...........................................................20
(ii) Opinions of Counsel for Company.................................................21
(iii) Opinions of Counsel for U.S. Underwriters.......................................21
(iv) Bring-down Comfort Letter.......................................................21
(m) Additional Documents........................................................................21
(n) Termination of Agreement....................................................................21
SECTION 6. Indemnification....................................................................................21
(a) Indemnification of U.S. Underwriters by the Company.........................................21
(b) Indemnification of U.S. Underwriters by Selling Stockholder.................................23
(c) Indemnification of Company, Directors and Officers and Selling Stockholder..................24
(d) Indemnification of Selling Stockholder by the Company......................................24
(e) Indemnification of the Company by the Selling Stockholder...................................25
(f) Actions against Parties; Notification.......................................................26
(g) Settlement without Consent if Failure to Reimburse..........................................27
(h) Other Agreements with Respect to Indemnification............................................27
SECTION 7. Contribution.......................................................................................27
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.....................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 9. Termination of Agreement......................................................................29
(a) Termination; General....................................................................29
(b) Liabilities.............................................................................30
SECTION 10. Default by One or More of the Underwriters....................................................30
SECTION 11. Default by the Company or the Selling Stockholder.............................................31
SECTION 12. Notices.......................................................................................31
SECTION 13. Parties.......................................................................................31
SECTION 14. GOVERNING LAW AND TIME........................................................................31
SECTION 15. Effect of Headings............................................................................32
SCHEDULE A .............................................................................................Sch A-1
SCHEDULE B .............................................................................................Sch B-1
SCHEDULE C .............................................................................................Sch C-1
SCHEDULE D .............................................................................................Sch D-1
SCHEDULE E .............................................................................................Sch E-1
Exhibit A-1 .............................................................................................A-1
Exhibit A-2 .............................................................................................A-3
Exhibit B .............................................................................................B-1
Exhibit C .............................................................................................C-1
SCHEDULES
Schedule A - List of Underwriters...............................................................Sch A-1
Schedule B - List of Selling Stockholder........................................................Sch B-1
Schedule C - Pricing Information................................................................Sch C-1
Schedule D - List of Subsidiaries................................................................Sch D-1
Schedule E - List of Persons Subject to Lock-up..................................................Sch E-1
EXHIBITS
Exhibit A-1 - Form of Opinion of Company's Counsel....................................................A-1
Exhibit A-2 - Form of Opinion of Company's Counsel....................................................A-3
Exhibit B - Form of Opinion for the Selling Stockholder...............................................B-1
Exhibit C - Form of Lock-up Letter....................................................................C-1
</TABLE>
iii
<PAGE> 5
AGCO Corporation
(a Delaware corporation)
3,760,000 Shares of Common Stock
(Par Value $.01 Per Share)
U.S. PURCHASE AGREEMENT
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Morgan Stanley & Co. Incorporated
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
AGCO Corporation, a Delaware corporation (the "Company"), and
Robert J. Ratliff (the "Selling Stockholder"), confirm their respective
agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Donaldson, Lufkin & Jenrette Securities
Corporation and Morgan Stanley & Co. Incorporated are acting as representatives
(in such capacity, the "Representatives"), with respect to (i) the issue and
sale by the Company and the sale by Selling Stockholder, acting severally and
not jointly, and the purchase by the U.S. Underwriters, acting severally and not
jointly, of the respective numbers of shares of Common Stock, par value $.01 per
share, of the Company ("Common Stock") set forth in Schedules A and B hereto and
(ii) the grant by the Company to the U.S. Underwriters, acting severally and not
jointly, of the option described in Section 2(b) hereof to purchase all or any
part of 540,000 additional shares of Common Stock to cover over-allotments, if
any. The aforesaid shares of Common Stock (the "Initial U.S. Securities") to be
purchased by the U.S. Underwriters and all or any part of the 540,000 shares of
<PAGE> 6
Common Stock subject to the option described in Section 2(b) hereof (the "U.S.
Option Securities") are hereinafter called, collectively, the "U.S. Securities."
It is understood that the Company is concurrently entering into an
agreement dated the date hereof ( the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of 940,000 shares of
Common Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the Unites States and Canada (the "International
Managers") for whom Merrill Lynch International, Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley & Co. International are acting as lead
managers (the "Lead Managers") and the grant by the Company to the International
Mangers, acting severally and not jointly, of an option to purchase all or any
part of the pro rata portion of up to 135,000 additional shares of Common Stock
solely to cover over allotments, if any (the "International Option Securities"
and, together with the U.S. Option Securities, the "Option Securities"). The
Initial International Securities and the International Option Securities are
hereinafter called the "International Securities." It is understood that the
Company is not obligated to sell and the U.S. Underwriters are not obligated to
purchase, any Initial U.S. Securities unless all of the Initial International
Securities are contemporaneously purchased by the International Managers.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters;" the Initial International Securities and
the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities;" and the International Securities and the U.S. Securities are
hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the U.S. Underwriters and the
International Managers under the direction of Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global
Coordinator").
The Company and the Selling Stockholder understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities as soon as
the Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-20125) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424 (b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424 (b).
Two forms of prospectus are to be used in connection with the offering and sale
of the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S.
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<PAGE> 7
Prospectus"). The Form of International Prospectus is identical to the Form of
U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting." The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto,
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462 (b) of the 1933 Act Regulations is herein
referred to as the "Rule 462 (b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462 (b) Registration
Statement. The final Form of International Prospectus and the final Form of U.S.
Prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the
Underwriters for use in connection with the offering of the Securities are
herein called the "International Prospectus" and the "U.S. Prospectus,"
respectively, and collectively, the "Prospectuses." If Rule 434 is relied on,
the terms "International Prospectus" and "U.S. Prospectus" shall refer to the
preliminary International Prospectus dated February 7, 1997 and preliminary U.S.
Prospectus dated February 7, 1997, respectively, each together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the International Prospectus, the U.S. Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained", "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which are incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectuses or the Prospectuses, as the case may be.
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<PAGE> 8
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each U.S.
Underwriter, as follows:
(i) Compliance with Registration Requirements. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither of the
Prospectuses nor any amendments or supplements thereto, at the time the
Prospectuses or any such amendments or supplements were issued and at
the Closing Time (and, if any U.S. Option Securities are purchased, at
the Date of Delivery), included or will include an untrue statement of
a material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the U.S.
Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement or either of the
Prospectuses.
Each preliminary prospectus and the Prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
were identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
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<PAGE> 9
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectuses, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectuses, at the time
the Registration Statement became effective, at the time the
Prospectuses were issued and at the Closing Time (and, if any U.S.
Option Securities are purchased, at the Date of Delivery), did not and
will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(iii) Independent Accountants. Each of Arthur Andersen LLP and
Price Waterhouse Auditores Independentes, the accounting firms that
certified the financial statements and supporting schedules included in
the Registration Statement is an independent public accountant as
required by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements of the
Company included in the Registration Statement and the Prospectuses,
together with the related schedule and notes, present fairly, in all
material respects, the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the results of
their operations and their cash flows of the Company for the periods
specified; said financial statements have been prepared in conformity
with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The
financial statements of the Agriculture Division of Iochpe- Maxion S.A.
("Maxion") included in the Registration Statement and the Prospectus,
present fairly, in all material respects, the financial position of
Maxion at the dates indicated and results of its operations and its
cash flows for the periods presented; such financial statements have
been prepared in conformity with GAAP applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly, in all material
respects, in accordance with GAAP the information required to be stated
therein. The selected financial data and the summary financial
information included in the Prospectuses present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement. The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectuses
present fairly in all material respects the information shown therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition,
5
<PAGE> 10
financial or otherwise, earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the
Common Stock in amounts per share that are consistent with past
practice, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "subsidiary" of the
Company listed on Schedule D hereto (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly incorporated and is
validly existing as a corporation in good standing (to the extent that
good standing is a concept recognized by such jurisdiction) under the
laws of the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign corporation to transact business and is in good standing (to
the extent that good standing is a concept recognized by such
jurisdiction) in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of the
issued and outstanding capital stock of each such Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable
and is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; and none of the outstanding shares of capital stock of
any Subsidiary was issued in violation of the preemptive or similar
rights of any securityholder of such Subsidiary. The total assets and
revenues of the Company's subsidiaries other than the Subsidiaries
listed on Schedule D hereto, in the aggregate comprised less than 10%
of the total consolidated assets and revenue respectively, of the
Company, at and for the year ended December 31, 1995.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this
6
<PAGE> 11
Agreement, pursuant to reservations, agreements or employee benefit
plans referred to in the Prospectuses or pursuant to the exercise of
convertible securities or options referred to in the Prospectuses). The
shares of issued and outstanding capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Stockholder, have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock, including the Securities to be purchased by the Underwriters
from the Selling Stockholder, was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement and the
International Purchase Agreement have been duly authorized, executed
and delivered by the Company.
(x) Authorization and Description of Securities. The
Securities to be purchased by the U.S. Underwriters and International
Managers from the Company have been duly authorized for issuance and
sale to the U.S. Underwriters pursuant to this Agreement and the
International Managers pursuant to the International Purchase
Agreement, respectively, and, when issued and delivered by the Company
pursuant to this Agreement and the International Purchase Agreement,
respectively, against payment of the consideration set forth herein and
in the International Purchase Agreement, respectively, will be validly
issued and fully paid and non-assessable. The Common Stock conforms to
all statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments
defining the same; no holder of the Securities will be subject to
personal liability under the Delaware General Corporation Law by reason
of being such a holder; and the issuance of the Securities is not
subject to the preemptive or other similar rights of any securityholder
of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its Subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any Subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the International
Purchase Agreement and the consummation of the transactions
contemplated herein, in the International Purchase Agreement and in the
Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities
as described in the Prospectuses under the caption "Use of Proceeds")
and compliance by the Company with its obligations hereunder and under
the International Purchase Agreement have been duly authorized by all
necessary corporate action and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
Subsidiary pursuant to, the Agreements and
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<PAGE> 12
Instruments (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not result in a Material Adverse
Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any Subsidiary or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any Subsidiary or
any of their assets, properties or operations. As used herein, a
"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any Subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, which, in any case, may reasonably be
expected to result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the performance by the Company of its obligations hereunder or under
the International Purchase Agreement; the aggregate of all pending
legal or governmental proceedings to which the Company or any
Subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect if determined adversely to the Company or such
Subsidiary.
(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectuses or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Rights. The Rights under the Company's Stockholders
Rights Plan to which holders of the Securities will be entitled have
been duly authorized and will be validly issued at the time of the sale
of the Securities pursuant to this Agreement and the International
Purchase Agreement.
(xvi) Possession of Intellectual Property. The Company and its
Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them except where the
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<PAGE> 13
failure to own or possess such Intellectual Property would not have a
Material Adverse Effect, and neither the Company nor any of its
Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect
to any Intellectual Property or of any facts or circumstances which
would render any Intellectual Property invalid or inadequate to protect
the interest of the Company or any of its Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement and the International
Purchase Agreement or the consummation of the transactions contemplated
by this Agreement and the International Purchase Agreement, except such
as have been already obtained or as may be required under the 1933 Act
or the 1933 Act Regulations or state securities laws.
(xviii) Possession of Licenses and Permits. The Company and
its Subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them except
where the failure to possess such Governmental Licenses would not have
a Material Adverse Effect; the Company and its Subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and its Subsidiaries have
good and marketable title to all real property owned by the Company and
its Subsidiaries and the Company owns all of its other properties, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectuses or (b) would not, singly or in
the aggregate, materially affect the value or use of the Company's
properties on a consolidated basis; and all of the leases and subleases
material to the business of the Company and its Subsidiaries,
considered as one enterprise, and under which the Company or any of its
Subsidiaries holds properties described in the Prospectuses, are in
full force and effect, and neither the Company nor any Subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any
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<PAGE> 14
Subsidiary under any of the leases or subleases mentioned above, or
affecting or questioning the rights of the Company or such Subsidiary
to the continued possession of the leased or subleased premises under
any such lease or sublease.
(xx) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxii) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its Subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its Subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements
and (C) there are no pending or, to the knowledge of the Company,
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its Subsidiaries.
(b) Representations and Warranties by the Selling Stockholder. The
Selling Stockholder represents and warrants to each U.S. Underwriter as of the
date hereof and as of the Closing Time, and agrees with each U.S. Underwriter,
as follows:
(i) Authorization of Agreements. The Selling Stockholder has
the full right, power and authority to enter into this Agreement, the
International Purchase Agreement and a Custody Agreement (the "Custody
Agreement") and to sell, transfer and deliver the Securities to be sold
by the Selling Stockholder hereunder and under the International
Purchase Agreement. The execution and delivery of this Agreement, the
International
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<PAGE> 15
Purchase Agreement and the Custody Agreement and the sale and delivery
of the Securities to be sold by the Selling Stockholder and the
consummation of the transactions contemplated in this Agreement, the
International Purchase Agreement and the Custody Agreement and
compliance by the Selling Stockholder with his obligations hereunder,
under the International Purchase Agreement and under the Custody
Agreement do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any
tax, lien, charge or encumbrance upon the Securities to be sold by the
Selling Stockholder or any property or assets of the Selling
Stockholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which the Selling Stockholder is a party or
by which the Selling Stockholder may be bound, or to which any of the
property or assets of the Selling Stockholder is subject, nor will such
action result in any violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Selling Stockholder or any of his properties.
(ii) Good and Marketable Title. The Selling Stockholder has
and will at the Closing Time have good and marketable title to the
Securities to be sold by the Selling Stockholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement and the International Purchase Agreement; and upon delivery
of such Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any
adverse claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from the Selling
Stockholder, free and clear of any security interest, mortgage, pledge,
lien, charge, claim, equity or encumbrance of any kind.
(iii) Due Execution of Custody Agreement. The Selling
Stockholder has duly executed and delivered, in the form heretofore
furnished to the Representatives, the Custody Agreement with SunTrust
Bank, Atlanta, as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by the Selling
Stockholder hereunder and to accept payment therefor.
(iv) Absence of Manipulation. The Selling Stockholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(v) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by the Selling
Stockholder of his obligations under this Agreement, the International
Purchase Agreement or the Custody Agreement, or in connection with the
sale and
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delivery of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, the International Purchase
Agreement and the Custody Agreement, except such as may have previously
been made or obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws.
(vi) Restriction on Sale of Securities. During a period of 90
days from the date of the Prospectuses, the Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with
respect to which the Selling Stockholder has or hereafter acquires the
power of disposition or file any registration statement under the 1933
Act with respect to any of the foregoing or (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of
the Common Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to the Securities to be sold hereunder or under the
International Purchase Agreement.
(vii) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by the Selling Stockholder pursuant to
this Agreement and the International Purchase Agreement, in suitable
form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank with signatures
guaranteed, have been placed in custody with the Custodian with
irrevocable conditional instructions to deliver such Securities to the
Underwriters pursuant to this Agreement and the International Purchase
Agreement.
(viii) No Association with NASD. Neither the Selling
Stockholder nor any of his affiliates directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within the
meaning of Article I, Section 1(m) of the By-laws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.
(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its Subsidiaries delivered to the Representatives or to
counsel for the U.S. Underwriters shall be deemed a representation and warranty
by the Company to each U.S. Underwriter as to the matters covered thereby; and
any certificate signed by or on behalf of the Selling Stockholder as such and
delivered to the Representatives or to counsel for the U.S. Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Selling Stockholder to each U.S. Underwriter as to the matters
covered thereby.
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SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and the Selling Stockholder, severally and not jointly, agree
to sell to each U.S. Underwriter, severally and not jointly, and each U.S.
Underwriter, severally and not jointly, agrees to purchase from the Company and
the Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial U.S. Securities set forth in Schedule B
opposite the name of the Company or the Selling Stockholder, as the case may be,
which the number of Initial U.S. Securities set forth in Schedule A opposite the
name of such U.S. Underwriter, plus any additional number of Initial U.S.
Securities which such U.S. Underwriter may become obligated to purchase pursuant
to the provisions of Section 10 hereof, bears to the total number of Initial
U.S. Securities, subject, in each case, to such adjustments among the U.S.
Underwriters as the Representatives in their sole discretion shall make to
eliminate any sales or purchases of fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 540,000 shares of
Common Stock, as set forth in Schedule B, at the price per share set forth in
Schedule C, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial U.S. Securities but not
payable on the U.S. Option Securities. The option hereby granted will expire 30
days after the date hereof and may be exercised in whole or in part from time to
time only for the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial U.S. Securities
upon notice by the Representatives to the Company setting forth the number of
U.S. Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for such U.S. Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the U.S. Option Securities, each of the U.S. Underwriters, acting
severally and not jointly, will purchase that proportion of the total number of
U.S. Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such U.S. Underwriter
bears to the total number of Initial U.S. Securities, subject in each case to
such adjustments as the Representatives in their discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004,
or at such other place as shall be agreed upon by the Representatives and the
Company and the Selling Stockholder, at 9:00 A.M. on the third (fourth, if the
pricing occurs after 4:30 P.M. on any given day) business day after the date
hereof (unless postponed in accordance with the provisions of Section 10), or
such other time not
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<PAGE> 18
later than ten business days after such date as shall be agreed upon by the
Representatives and the Company and the Selling Stockholder (such time and date
of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities
are purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Representatives and the Company, on each Date of Delivery as specified in the
notice from the Representatives to the Company.
Payment shall be made to the Company and the Selling Stockholder by
wire transfer of immediately available funds to a bank account designated by the
Company and the Selling Stockholder, as the case may be, against delivery to the
Representatives for the respective accounts of the U.S. Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each U.S. Underwriter has authorized the Representatives, for its account, to
accept delivery of, receipt for, and make payment of the purchase price for, the
Initial U.S. Securities and the U.S. Option Securities, if any, which it has
agreed to purchase. Merrill Lynch, individually and not as representative of the
U.S. Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial U.S. Securities or the U.S. Option Securities, if
any, to be purchased by any U.S. Underwriter whose funds have not been received
by the Closing Time or the relevant Date of Delivery, as the case may be, but
such payment shall not relieve such U.S. Underwriter from its obligations
hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the Representatives may request in
writing at least one full business day before the Closing Time or the relevant
Date of Delivery, as the case may be. The certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, will be made available for
examination and packaging by the Representatives in The City of New York not
later than 10:00 A.M. on the business day prior to the Closing Time or the
relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
U.S. Underwriter as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Representatives immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification
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<PAGE> 19
of the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes.
The Company will promptly effect the filings necessary pursuant to Rule
424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under
Rule 424(b) was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus. The Company
will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof
at the earliest possible moment.
(b) Filing of Amendments. The Company will give the
Representatives notice of its intention to file or prepare any
amendment to the Registration Statement (including any filing under
Rule 462(b)), any Term Sheet or any amendment, supplement or revision
to either the prospectus included in the Registration Statement at the
time it became effective or to the Prospectuses, whether pursuant to
the 1933 Act, the 1934 Act or otherwise, will furnish the
Representatives with copies of any such documents a reasonable amount
of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or
counsel for the Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Representatives and counsel for the
U.S. Underwriters, without charge, signed copies of the Registration
Statement in the form of the Registration Statement as originally filed
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated or deemed
to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the U.S. Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
each U.S. Underwriter, without charge, as many copies of each
preliminary prospectus as such U.S. Underwriter reasonably requested,
and the Company hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Company will furnish to each U.S.
Underwriter, without charge, during the period when the U.S. Prospectus
is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the U.S. Prospectus (as amended or supplemented) as
such U.S. Underwriter may reasonably request. The U.S. Prospectus and
any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
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<PAGE> 20
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and the Prospectuses. If at any time
when a prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities, any event shall occur or
condition shall exist as a result of which it is necessary, in the
opinion of counsel for the U.S. Underwriters or for the Company, to
amend the Registration Statement or amend or supplement the
Prospectuses in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, in the opinion of such counsel,
at any such time to amend the Registration Statement or amend or
supplement the Prospectuses in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(b), such
amendment or supplement as may be necessary to correct such statement
or omission or to make the Registration Statement or the Prospectuses
comply with such requirements, and the Company will furnish to the U.S.
Underwriters such number of copies of such amendment or supplement as
the U.S. Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the U.S. Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions as the Representatives may
designate and to maintain such qualifications in effect for a period of
not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectuses under "Use of Proceeds."
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(i) Listing. The Company will use its best efforts to effect
the listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 90
days from the date of the Prospectuses, the Company will not, without
the prior written consent of Merrill Lynch, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the International Purchase Agreement, (B) any shares
of Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof
and referred to in the Prospectuses, (C) any shares of Common Stock
issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectuses
or (D) any shares of Common Stock issued pursuant to any non-employee
director stock plan or dividend reinvestment plan.
(k) Reporting Requirements. The Company, during the period
when the Prospectuses are required to be delivered under the 1933 Act
or the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods
required by the 1934 Act and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay or
cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, issuance
and delivery of the certificates for the Securities to the Underwriters,
including any stock or other transfer taxes and any stamp or other duties
payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iii) the fees and disbursements of the Company's counsel,
accountants and other advisors, (iv) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (v) the printing and delivery
to the Underwriters of copies of each preliminary prospectus, any Term Sheets
and of the Prospectuses and any amendments or supplements thereto, (vi) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (vii) the fees and expenses of any transfer
agent or registrar for the Securities, (viii) the filing fees incident to, and
the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National
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<PAGE> 22
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Securities and (ix) the fees and expenses incurred in connection with the
listing of the Securities on the New York Stock Exchange.
(b) Expenses of the Selling Stockholder. The Selling Stockholder will
pay all expenses incident to the performance of his obligations under, and the
consummation of the transactions contemplated by this Agreement, including (i)
any stamp duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and (ii) the fees and disbursements of its
counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company shall reimburse the U.S. Underwriters for all
of their out-of-pocket expenses, including the reasonable fees and disbursements
of counsel for the Underwriters.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholder may make for
the sharing of such costs and expenses.
SECTION 5. Conditions of U.S. Underwriters' Obligations. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholder contained in Section 1 hereof or in certificates of any officer of
the Company or any Subsidiary of the Company or on behalf of the Selling
Stockholder delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing
such information shall have been filed and declared effective in
accordance with the requirements of Rule 430A) or, if the Company has
elected to rely upon Rule 434, a Term Sheet shall have been filed with
the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the
Representatives shall have received the opinions, dated as of Closing
Time, of Michael F. Swick, General Counsel for the Company and King &
Spalding, counsel for the Company, in each case, in form and substance
satisfactory to counsel for the U.S. Underwriters, together with signed
or reproduced copies of such letter for each of the
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<PAGE> 23
other U.S. Underwriters to the effect set forth in Exhibits A-1 and A-2
hereto and to such further effect as counsel to the U.S. Underwriters
may reasonably request.
(c) Opinion of Counsel for the Selling Stockholder. At Closing
Time, the Representatives shall have received the opinion, dated as of
Closing Time, of King & Spalding, counsel for the Selling Stockholder,
in form and substance satisfactory to counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter
for each of the other U.S. Underwriters to the effect set forth in
Exhibit B hereto.
(d) Opinion of Counsel for U.S. Underwriters. At Closing Time,
the Representatives shall have received the opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for
the U.S. Underwriters, together with signed or reproduced copies of
such letter for each of the other U.S. Underwriters with respect to the
matters set forth in clauses (i), (ii), (iv), (v), (solely as to
preemptive or other similar rights arising by operation of law or under
the charter or by-laws of the Company), (vii) through (ix), inclusive,
and, (xii) (solely as to the information in the Prospectus under
"Description of Capital Stock--Common Stock") and the penultimate
paragraph of Exhibit A-2 hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Representatives. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its Subsidiaries and
certificates of public officials.
(e) Officers' Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectuses, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Representatives shall have
received a certificate of the Chairman of the Board of Directors and
President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of Closing Time,
to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or are contemplated by the Commission.
(f) Certificate of Selling Stockholder. At Closing Time, the
Representatives shall have received a certificate of the Selling
Stockholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of the Selling Stockholder contained in
Section 1(b) hereof are true and correct in all respects with the
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<PAGE> 24
same force and effect as though expressly made at and as of Closing
Time and (ii) the Selling Stockholder has complied in all material
respects with all agreements and all conditions on its part to be
performed under this Agreement at or prior to Closing Time.
(g) Accountants' Comfort Letter. At the time of the execution
of this Agreement, the Representatives shall have received from each of
(a) Arthur Andersen LLP and (b) Price Waterhouse Auditores
Independentes a letter dated such date, in form and substance
satisfactory to the Representatives, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses.
(h) Bring-down Comfort Letters. At Closing Time, the
Representatives shall have received from each of (a) Arthur Andersen
LLP and (b) Price Waterhouse Auditores Independentes a letter, dated as
of Closing Time, to the effect that they reaffirm the statements made
in the letter furnished pursuant to subsection (g) of this Section,
except that the specified date referred to shall be a date not more
than three business days prior to Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the New York Stock Exchange, subject
only to official notice of issuance.
(j) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the
form of Exhibit C hereto signed by the persons listed on Schedule E
hereto.
(k) Consummation of Sale of International Securities. The sale
of the International Securities pursuant to the International Purchase
Agreement shall have been consummated simultaneously with the sale of
the U.S. Securities contemplated hereby.
(l) Conditions to Purchase of U.S. Option Securities. In the
event that the U.S. Underwriters exercise their option provided in
Section 2(b) hereof to purchase all or any portion of the U.S. Option
Securities, the representations and warranties of the Company contained
herein and the statements in any certificates furnished by the Company,
any Subsidiary of the Company hereunder shall be true and correct as of
each Date of Delivery and, at the relevant Date of Delivery, the
Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(e) hereof remains true and
correct as of such Date of Delivery.
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(ii) Opinions of Counsel for Company. The opinions of Michael F.
Swick, General Counsel for the Company and King & Spalding,
counsel for the Company, in form and substance satisfactory to
counsel for the U.S. Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for U.S. Underwriters. The opinion of
Fried, Frank, Harris, Shriver & Jacobson, counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the
U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion
required by Section 5(d) hereof.
(iv) Bring-down Comfort Letter. A letter from each of (a) Arthur
Andersen LLP and (b) Price Waterhouse Auditores Independentes,
in form and substance satisfactory to the Representatives and
dated such Date of Delivery, substantially in the same form
and substance as the letter furnished to the Representatives
pursuant to Section 5(g) hereof, except that the "specified
date" in the letter furnished pursuant to this paragraph shall
be a date not more than five days prior to such Date of
Delivery.
(m) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the U.S. Underwriters shall have been furnished
with such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the Company
and the Selling Stockholder in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Representatives and counsel for the U.S. Underwriters.
(n) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of U.S. Option Securities on a Date of Delivery which is after
the Closing Time, the obligations of the several U.S. Underwriters to
purchase the relevant U.S. Option Securities, may be terminated by the
Representatives by notice to the Company at any time at or prior to
Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of U.S. Underwriters by the Company. The
Company agrees to indemnify and hold harmless each U.S. Underwriter and each
person, if any, who
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controls any U.S. Underwriter within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act to the extent and in the manner
set forth in clauses (i), (ii) and (iii) below.
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged
untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment
or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject
to Section 6(g) below) any such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written
information furnished to the Company by any U.S. Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule
434 Information, if applicable, or any preliminary prospectus or the
U.S. Prospectus (or any amendment or supplement thereto); provided,
further, that the Company will not be liable to any U.S. Underwriter or
any person controlling such U.S. Underwriter with respect to any such
untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus to the extent that the
Company shall sustain the burden of proving that any such loss,
liability, claim, damage or expense resulted from the fact that such
U.S. Underwriter, in contravention of a requirement of this Agreement
or applicable law, sold securities to a person to whom such U.S.
Underwriter failed to send or give, at or prior to the written
confirmation of the sale of such Securities, a copy of the U.S.
Prospectus (as amended or
22
<PAGE> 27
supplemented) if (i) the Company has previously furnished copies
thereof (sufficiently in advance of the Closing Date to allow for
distribution of the U.S. Prospectus in a timely manner) to the U.S.
Underwriter and the loss, liability, claim, damage or expense of such
U.S. Underwriter resulted from an untrue statement or omission or
alleged untrue statement or omission of a material fact contained in or
omitted from such preliminary prospectus which was corrected in the
U.S. Prospectus and (ii) such failure to give or send such U.S.
Prospectus by the Closing Date to the party or parties asserting such
loss, liability, claim or damage or expense would have constituted the
sole defense to the claim asserted by such person.
(b) Indemnification of U.S. Underwriters by Selling
Stockholder. The Selling Stockholder agrees to indemnify and hold
harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act to the extent and in the manner set forth
in clauses (i), (ii) and (iii) below.
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged
untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment
or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or
any investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject
to Section 6(g) below) any such settlement is effected with
the written consent of the Selling Stockholder; and
(iii) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel
chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity shall only apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement
23
<PAGE> 28
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); provided, further, that the aggregate liability of the
Selling Stockholder pursuant to this paragraph (b) shall be limited to the gross
proceeds received by the Selling Stockholder from the Common Stock purchased by
the U.S. Underwriters from the Selling Stockholder pursuant to this Agreement;
provided, further, that the Selling Stockholder will not be liable to any U.S.
Underwriter or any person controlling such U.S. Underwriter with respect to any
such untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus to the extent that the Selling
Stockholder shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that such U.S. Underwriter, in
contravention of a requirement of this Agreement or applicable law, sold
securities to a person to whom such U.S. Underwriter failed to send or give, at
or prior to the written confirmation of the sale of such Securities, a copy of
the U.S. Prospectus (as amended or supplemented) if (i) the Company has
previously furnished copies thereof (sufficiently in advance of the Closing Date
to allow for distribution of the U.S. Prospectus in a timely manner) to the U.S.
Underwriter and the loss, liability, claim, damage or expense of such U.S.
Underwriter resulted from an untrue statement or omission or alleged untrue
statement or omission of a material fact contained in or omitted from such
preliminary prospectus which was corrected in the U.S. Prospectus and (ii) such
failure to give or send such U.S. Prospectus by the Closing Date to the party or
parties asserting such loss, liability, claim or damage or expense would have
constituted the sole defense to the claim asserted by such person.
(c) Indemnification of Company, Directors and Officers and Selling
Stockholder. Each U.S. Underwriter severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the
Selling Stockholder against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsections (a) and (b) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S. Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such U.S. Underwriter through
Merrill Lynch expressly for use in the Registration Statement (or any amendment
thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment
or supplement thereto).
(d) Indemnification of Selling Stockholder by the Company. The Company
agrees to indemnify and hold harmless the Selling Stockholder to the extent and
in the manner set forth in clauses (i), (ii) and (iii) below.
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement
24
<PAGE> 29
of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule
434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(g) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Selling
Stockholder), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S.
Prospectus (or any amendment or supplement thereto).
(e) Indemnification of the Company by the Selling Stockholder. The
Selling Stockholder agrees to indemnify and hold harmless the Company to the
extent and in the manner set forth in clauses (i), (ii) and (iii) below,
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectuses (or any
25
<PAGE> 30
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(g) below) any such
settlement is effected with the written consent of the Selling Stockholder; and
(iii) against any and all expense, whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Company),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall only apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S.
Prospectus (or any amendment or supplement thereto).
(f) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Sections 6(a) and 6(b)
above, counsel to the indemnified parties shall be selected by Merrill Lynch; in
the case of parties indemnified pursuant to Sections 6(c) and 6(e) above,
counsel to the indemnified parties shall be selected by the Company; and in the
case of indemnification pursuant to Section 6(d) above, counsel to the
indemnified party shall be selected by the Selling Stockholder. An indemnifying
party may participate at its own expense in the defense of any such action. If
it so elects within a reasonable time after receipt of such notice, the
indemnifying party may assume the defense of such action with counsel chosen by
it and approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to the indemnifying party. If the indemnifying party
assumes the defense of such action, the indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the
26
<PAGE> 31
indemnifying party be liable for the fees and expenses of more than one counsel
(in addition to local counsel) for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(g) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) or 6(b)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
or 6(b)(ii) effected without its consent if such indemnifying party (i)
reimburses such indemnified party in accordance with such request to the extent
it considers such request to be reasonable and (ii) provides written notice to
the indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(h) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the U.S. Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Stockholder on the one hand and of the U.S. Underwriters on the other
hand in connection with
27
<PAGE> 32
the statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling
Stockholder on the one hand and the U.S. Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholder and the total
underwriting discount received by the U.S. Underwriters, in each case as set
forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet bear to the aggregate initial public offering price
of the Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholder on the
one hand and the U.S. Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Selling Stockholder
or by the U.S. Underwriters and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholder and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section (i) the Selling
Stockholder (A) shall be required to make any contribution pursuant to this
Section 7 only if the loss, liability, claim, damage or expenses for which an
indemnified party seeks contribution arises out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished to the Company by the Selling Stockholder
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) and (B) shall not be required to contribute any amount in excess of the
amount of the total gross proceeds received by the Selling Stockholder from the
Common Stock purchased from the Selling Stockholder pursuant to this Agreement
and (ii) no U.S. Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages
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<PAGE> 33
which such U.S. Underwriter has otherwise been required to pay by reason of any
such untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company or the
Selling Stockholder, as the case may be. The U.S. Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the number of Initial U.S. Securities set forth opposite their respective
names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholder with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
Subsidiaries or the Selling Stockholder submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any U.S. Underwriter or controlling person, or by or on behalf
of the Company or the Selling Stockholder, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholder, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectuses, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have
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<PAGE> 34
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of U.S. Securities to be purchased on such date, each of
the non-defaulting U.S. Underwriters shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing
Time, the obligation of the U.S. Underwriters to purchase and of the
Company to sell the Option Securities to be purchased and sold on such
Date of Delivery shall terminate without liability on the part of any
non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
U.S. Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either (i) the Representatives or (ii) the
Company and the Selling Stockholder shall have the right to postpone Closing
Time or the relevant Date of Delivery, as the case may be, for a period not
exceeding seven days in order to effect any required changes in the Registration
Statement or Prospectuses or in any other documents or arrangements. As used
herein, the term "U.S. Underwriter" includes any person substituted for an U.S.
Underwriter under this Section 10.
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<PAGE> 35
SECTION 11. Default by the Company or the Selling Stockholder. (a) If
the Company shall fail at Closing Time or at the Date of Delivery to sell the
number of Securities that it is obligated to sell hereunder, then this Agreement
shall terminate without any liability on the part of any non-defaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
(b) If the Selling Stockholder shall fail at Closing Time to sell the
number of securities which the Selling Stockholder is obligated to sell
hereunder, each of the Representatives and the Company shall have the right to
postpone the Closing Time for a period not exceeding seven days in order to
effect any required change in the Registration Statement or Prospectus or in any
other documents or arrangements. No action taken pursuant to this Section 11
shall relieve the Selling Stockholder so defaulting from liability, if any, in
respect of such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of James Hislop with
a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004; notices to the Company shall be directed to it at 4830
River Green Parkway, Duluth, Georgia 30136, attention of Michael F. Swick with a
copy to King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303,
attention: John J. Kelley III; and notices to the Selling Stockholder shall be
directed to Robert Ratliff, c/o AGCO Corporation 4830 River Green Parkway,
Duluth, Georgia 30136 with a copy to King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303, attention: John J. Kelley III.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the U.S. Underwriters, the Company and the Selling
Stockholder and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any U.S. Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
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SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Stockholder a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the U.S. Underwriters, the Company and the
Selling Stockholder in accordance with its terms.
Very truly yours,
AGCO CORPORATION
By
--------------------------------------
J. P. Richard
President and Chief Executive Officer
ROBERT J. RATLIFF
-----------------------------------------
CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO. INCORPORATED
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other U.S. Underwriters named
in Schedule A hereto.
33
<PAGE> 38
SCHEDULE A
<TABLE>
<CAPTION>
Name of Underwriter
-------------------
Number of
Initial
Securities
----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................
Donaldson Lufkin & Jenrette Securities Corporation.....
Morgan Stanley & Co. Incorporated......................
Total 3,760,000
----- ---------
</TABLE>
Sch A - 1
<PAGE> 39
SCHEDULE B
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- -------------------------
<S> <C> <C>
AGCO Corporation 3,600,000 540,000
Robert J. Ratliff 160,000 0
----------------------------------------------------------------------------
TOTAL 3,760,000 540,000
</TABLE>
Sch B - 1
<PAGE> 40
SCHEDULE C
AGCO CORPORATION
3,760,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the U.S. Securities,
determined as provided in said Section 2, shall be $-.
2. The purchase price per share for the U.S. Securities to be paid by
the several Underwriters shall be $-, being an amount equal to the initial
public offering price set forth above less $- per share; provided that the
purchase price per share for any U.S. Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall be reduced
by an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial U.S. Securities but not payable on the U.S.
Option Securities.
Sch C - 1
<PAGE> 41
SCHEDULE D
<TABLE>
<CAPTION>
Name of Subsidiary State or Country of Jurisdiction
- ------------------ --------------------------------
<S> <C>
Massey Ferguson Corp. Delaware
Hesston Ventures Corporation Kansas
AGCO Finance Corporation Delaware
Deutz Argentina SA Argentina
AGCO Australia Ltd. Australia
AGCO do Brazil Brazil
AGCO Canada, Ltd. Canada
Massey Ferguson Danmark AS Denmark
Massey Ferguson SA France
Massey Ferguson GmbH Germany
AGCO Holding BV Netherlands
Eikmaskin AS Norway
Massey Ferguson Iberia SA Spain
Massey Ferguson Ltd. United Kingdom
</TABLE>
Sch D - 1
<PAGE> 42
SCHEDULE E
Robert J. Ratliff
J. P. Richard
John M. Shumejda
James M. Seaver
Daniel H. Hazelton
John G. Murdoch
Michael F. Swick
Edward R. Swingle
Richard P. Johnston
Alan S. McDowell
Charles S. Mechem, Jr.
Hamilton Robinson, Jr.
Sch E - 1
<PAGE> 43
Exhibit A-1
FORM OF OPINION OF
MICHAEL F. SWICK
TO BE DELIVERED PURSUANT
TO SECTION 5(b)(1)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the Purchase
Agreements.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) Each Subsidiary has been duly incorporated and is validly existing as
a corporation in good standing (to the extent that good standing is a concept
recognized by such jurisdiction) under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses and is
duly qualified as a foreign corporation to transact business and is in good
standing (to the extent that good standing is a concept recognized by such
jurisdiction) in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of my knowledge, is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
(v) To the best of my knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to
- -------------------------------
(1) Certain opinions relating to foreign subsidiaries may be delivered by the
Company's in-house counsel in Europe.
A - 1
<PAGE> 44
which the property of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or foreign, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the performance
by the Company of its obligations under the Purchase Agreements.
A - 2
<PAGE> 45
Exhibit A-2
FORM OF OPINION OF
KING & SPALDING
TO BE DELIVERED PURSUANT
TO SECTION 5(b)
(i) The Company is validly existing as a corporation in good standing under
the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the Purchase
Agreements.
(iii) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreements or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectuses or pursuant to the exercise of
convertible securities or options referred to in the Prospectuses); the shares
of issued and outstanding capital stock of the Company, including the Securities
to be purchased by the U.S. Underwriters and the International Managers from the
Selling Stockholder, have been duly authorized and validly issued and are fully
paid and non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the statutory preemptive rights of any
securityholder of the Company.
(iv) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the U.S. Underwriters pursuant to the U.S. Purchase Agreement and to
the International Managers pursuant to the International Purchase Agreement and,
when issued and delivered by the Company pursuant to the Purchase Agreements
against payment of the consideration set forth in the Purchase Agreements, will
be validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability under the Delaware
General Corporation Law by reason of being such a holder.
(v) The issuance and sale of the Securities by the Company and the sale of
the Securities by the Selling Stockholder is not subject to the statutory
preemptive rights of any securityholder of the Company.
(vi) The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company.
A - 3
<PAGE> 46
(vii) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectuses pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of our
knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(viii) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectuses, excluding the documents incorporated by
reference therein, and each amendment or supplement to the Registration
Statement and Prospectuses, excluding the documents incorporated by reference
therein, as of their respective effective or issue dates (other than the
financial statements and supporting schedules included therein or omitted
therefrom, as to which we need express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(ix) The documents incorporated by reference in the Prospectuses (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion), when they were filed
with the Commission, complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder.
[(x) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.]
(xi) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the New York Stock Exchange.
(xii) The information in the Prospectuses under "Description of Capital
Stock--Common Stock," "Certain Federal Income Tax Considerations" and in the
Registration Statement under Item 15 and in Item 3 - Legal Proceedings of the
Company's most recent annual report on Form 10-K, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.
(xiii) To the best of our knowledge, there are no franchises, contracts,
indentures, mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration Statement or to be
filed as exhibits thereto other than those described or referred to therein or
filed or incorporated by reference as exhibits thereto.
(xiv) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as
A - 4
<PAGE> 47
may be required under the securities or blue sky laws of the various states, as
to which we need express no opinion) is necessary or required to be obtained by
the Company for the performance by the Company of its obligations under the
Purchase Agreements or in connection with the offer, issuance, sale or delivery
of the Securities.
(xv) The execution, delivery and performance of the Purchase Agreements and
the consummation of the transactions contemplated in the Purchase Agreements and
in the Registration Statement (including the issuance and sale of the Securities
and the use of the proceeds from the sale of the Securities as described in the
Prospectuses under the caption "Use Of Proceeds") and compliance by the Company
with its obligations under the U.S. Purchase Agreement and the International
Purchase Agreement do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined in Section 1(a)(xi) of both the U.S.
Purchase Agreement and the International Purchase Agreement) under or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any Subsidiary pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any other
agreement or instrument, filed or incorporated by reference as an exhibit to the
Registration Statement, to which the Company or any Subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or any Subsidiary is subject (except for such conflicts, breaches
or defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the provisions
of the charter or by-laws of the Company or any Subsidiary, or any applicable
law, statute, rule, regulation, judgment, order, writ or decree, known to us, of
any government, government instrumentality or court having jurisdiction over the
Company or any Subsidiary or any of their respective properties, assets or
operations.
(xvi) The Company is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in the 1940 Act.
(xvii) The Rights under the Company's Shareholder Rights Plan to which
holders of the Securities will be entitled have been duly authorized and validly
issued.
Nothing has come to our attention that would cause us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no statement),
at the time such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectuses or any amendment or supplement thereto
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which we need
make no statement), at the time the Prospectuses were issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make
A - 5
<PAGE> 48
the statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but not
as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
A - 6
<PAGE> 49
Exhibit B
FORM OF OPINION OF
KING & SPALDING
TO BE DELIVERED
PURSUANT TO SECTION 5(c)
(i) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than under the 1933
Act and the 1933 Act Regulations, which have been obtained, or as may
be necessary under the securities or blue sky laws of the various
states laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Stockholder for the performance
by the Selling Stockholder of its obligations under the U.S. Purchase
Agreement or the International Purchase Agreement or in the Custody
Agreement, or in connection with the offer, sale or delivery of the
Securities.
(ii) The Custody Agreement has been duly executed and delivered by the
Selling Stockholder.
(iii) The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by or on behalf of
the Selling Stockholder.
(iv) The execution, delivery and performance of the U.S. Purchase Agreement
and the Custody Agreement and the sale and delivery of the Securities
and the consummation of the transactions contemplated in the U.S.
Purchase Agreement, in the International Purchase Agreement, the
Custody Agreement and in the Registration Statement and compliance by
the Selling Stockholder with its obligations under the U.S. Purchase
Agreement, the International Purchase Agreement and the Custody
Agreement have been duly authorized by all necessary action on the part
of the Selling Stockholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default under or result in the creation
or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Stockholder
pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other instrument or agreement
known to us to which the Selling Stockholder is a party or by which he
may be bound, or to which any of the property or assets of the Selling
Stockholder may be subject nor will such action result in any violation
of any law, administrative regulation, judgment or order of any
governmental agency or body or any administrative or court decree
having jurisdiction over the Selling Stockholder or any of his
properties.
(v) To the best of our knowledge, the Selling Stockholder has valid and
marketable title to the Securities to be sold by the Selling
Stockholder pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind,
and has full right, power and authority to sell, transfer and deliver
such Securities pursuant to the U.S. Purchase
B - 1
<PAGE> 50
Agreement and the International Purchase Agreement. By delivery of a
certificate or certificates therefor pursuant to the U.S. Purchase
Agreement and the International Purchase Agreement and assuming the
U.S. Underwriters and the International Managers have purchased the
Securities in good faith and without notice of any adverse claims, the
U.S. Underwriters and the International Managers will have acquired
valid title to such securities, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind.
B - 2
<PAGE> 51
Exhibit C
MERRILL LYNCH & CO.
MERRILL LYNCH INTERNATIONAL
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Donaldson Lufkin & Jenrette
Securities Corporation
Morgan Stanley & Co. Incorporated
Morgan Stanley & Co. International
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by AGCO Corporation
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of AGCO
Corporation, a Delaware corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Donaldson Lufkin & Jenrette Securities Corporation and Morgan Stanley &
Co. Incorporated propose to enter into a purchase agreement (the "U.S. Purchase
Agreement") with the Company and the Selling Stockholder providing for the
public offering of shares (the "Securities") of the Company's common stock, par
value $.01 per share (the "Common Stock") in the U.S. and Canada, and Merrill
Lynch International Donaldson, Lufkin & Jenrette Securities Corporation and
Morgan Stanley & Co. International propose to enter into a Purchase Agreement
(the "International Purchase Agreement" and, collectively with the U.S. Purchase
Agreement, the "Purchase Agreements") with the Company and the Selling
Stockholder providing for the public offering of the Company's Common Stock
outside the U.S. and Canada. In recognition of the benefit that such an offering
will confer upon the undersigned as a stockholder [and an officer and/or
director] of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees
with each underwriter to be named in the Purchase Agreements that, during a
period of 90 days from the date of the Purchase Agreements, the undersigned will
not, without the prior written consent of Merrill Lynch, directly or indirectly,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of the
Company's Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect
C - 1
<PAGE> 52
to which the undersigned has or hereafter acquires the power of disposition, or
file any registration statement under the Securities Act of 1933, as amended,
with respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.
Very truly yours,
Signature:
-------------------------
Print Name:
-------------------------
C - 2
<PAGE> 1
================================================================================
EXHIBIT 1.2
AGCO Corporation
(a Delaware corporation)
940,000 Shares of Common Stock
INTERNATIONAL PURCHASE AGREEMENT
Dated: March __, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C> <C> <C>
INTERNATIONAL PURCHASE AGREEMENT..............................................................1
SECTION 1. Representations and Warranties................................................4
(a) Representations and Warranties by the Company....................................4
(i) Compliance with Registration Requirements..........................4
(ii) Incorporated Documents.............................................5
(iii) Independent Accountants............................................5
(iv) Financial Statements...............................................5
(v) No Material Adverse Change in Business.............................5
(vi) Good Standing of the Company.......................................6
(vii) Good Standing of Subsidiaries......................................6
(viii) Capitalization.....................................................6
(ix) Authorization of Agreement.........................................7
(x) Authorization and Description of Securities........................7
(xi) Absence of Defaults and Conflicts..................................7
(xii) Absence of Labor Dispute...........................................8
(xiii) Absence of Proceedings.............................................8
(xiv) Accuracy of Exhibits...............................................8
(xv) Rights.............................................................8
(xvi) Possession of Intellectual Property................................8
(xvii) Absence of Further Requirements....................................9
(xviii) Possession of Licenses and Permits.................................9
(xix) Title to Property..................................................9
(xx) Compliance with Cuba Act..........................................10
(xxi) Investment Company Act............................................10
(xxii) Environmental Laws................................................10
(b) Representations and Warranties by the Selling Stockholder.......................10
(i) Authorization of Agreements.......................................10
(ii) Good and Marketable Title.........................................11
(iii) Due Execution of Custody Agreement................................11
(iv) Absence of Manipulation...........................................11
(v) Absence of Further Requirements...................................11
(vi) Restriction on Sale of Securities.................................12
(vii) Certificates Suitable for Transfer................................12
(viii) No Association with NASD..........................................12
(c) Officer's Certificates..........................................................12
SECTION 2. Sale and Delivery to International Managers; Closing.........................13
(a) Initial Securities..............................................................13
(b) Option Securities...............................................................13
(c) Payment.........................................................................13
(d) Denominations; Registration.....................................................14
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
SECTION 3. Covenants of the Company.....................................................14
(a) Compliance with Securities Regulations and Commission Requests..................14
(b) Filing of Amendments............................................................15
(c) Delivery of Registration Statements.............................................15
(d) Delivery of Prospectuses........................................................15
(e) Continued Compliance with Securities Laws.......................................16
(f) Blue Sky Qualifications.........................................................16
(g) Rule 158........................................................................16
(h) Use of Proceeds.................................................................16
(i) Listing.........................................................................17
(j) Restriction on Sale of Securities...............................................17
(k) Reporting Requirements..........................................................17
SECTION 4. Payment of Expenses..........................................................17
(a) Expenses........................................................................17
(b) Expenses of the Selling Stockholder.............................................18
(c) Termination of Agreement........................................................18
(d) Allocation of Expenses..........................................................18
SECTION 5. Conditions of International Managers' Obligations............................18
(a) Effectiveness of Registration Statement.........................................18
(b) Opinion of Counsel for Company..................................................18
(c) Opinion of Counsel for the Selling Stockholder..................................19
(d) Opinion of Counsel for International Managers...................................19
(e) Officers' Certificate...........................................................19
(f) Certificate of Selling Stockholder..............................................19
(g) Accountants' Comfort Letter.....................................................20
(h) Bring-down Comfort Letters......................................................20
(i) Approval of Listing.............................................................20
(j) Lock-up Agreements..............................................................20
(k) Consummation of Sale of U.S. Securities.........................................20
(l) Conditions to Purchase of International Option Securities.......................20
(m) Additional Documents............................................................21
(n) Termination of Agreement........................................................21
SECTION 6. Indemnification..............................................................21
(a) Indemnification of International Managers by the Company........................21
(b) Indemnification of International Managers by Selling Stockholder................23
(c) Indemnification of Company, Directors and Officers and Selling Stockholder......24
(d) Indemnification of Selling Stockholder by the Company..........................24
(e) Indemnification of the Company by the Selling Stockholder.......................25
(f) Actions against Parties; Notification...........................................26
(g) Settlement without Consent if Failure to Reimburse..............................27
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
(h) Other Agreements with Respect to Indemnification................................27
SECTION 7. Contribution.................................................................27
SECTION 8. Representations, Warranties and Agreements to Survive Delivery...............29
SECTION 9. Termination of Agreement.....................................................29
(a) Termination; General............................................................29
(b) Liabilities.....................................................................30
SECTION 10. Default by One or More of the International Managers........................30
SECTION 11. Default by the Company or the Selling Stockholder...........................31
SECTION 12. Notices.....................................................................31
SECTION 13. Parties.....................................................................31
SECTION 14. Governing Law and Time......................................................31
SECTION 15. Effect of Headings..........................................................32
</TABLE>
<TABLE>
<S> <C> <C> <C>
SCHEDULES
Schedule A List of Underwriters................................Sch A-1
Schedule B List of Selling Stockholders........................Sch B-1
Schedule C Pricing Information.................................Sch C-1
Schedule D List of Subsidiaries................................Sch D-1
Schedule E List of Persons subject to Lock-up..................Sch E-1
EXHIBITS
Exhibit A-1 Form of Opinion of Company's General Counsel............A-1
Exhibit A-2 Form of Opinion of Company's Counsel....................A-2
Exhibit B Form of Opinion for the Selling Stockholder.............B-1
Exhibit C Form of Lock-up Letter..................................C-1
</TABLE>
4
<PAGE> 5
AGCO Corporation
(a Delaware corporation)
940,000 Shares of Common Stock
(Par Value $.01 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
MERRILL LYNCH INTERNATIONAL
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. International
as Lead Managers of the several International Managers
c/o Merrill Lynch International
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
AGCO Corporation, a Delaware corporation (the "Company"), and Robert J.
Ratliff (the "Selling Stockholder") confirm their respective agreements with
Merrill Lynch International ("Merrill Lynch") and each of the other
international underwriters named in Schedule A hereto (collectively, the
"International Managers," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch, Donaldson, Lufkin & Jenrette Securities Corporation and Morgan Stanley &
Co. International are acting as representatives (in such capacity, the "Lead
Managers"), with respect to the issue and sale by the Company and the sale by
the Selling Stockholder, acting severally and not jointly, and the purchase by
the International Managers, acting severally and not jointly, of the respective
numbers of shares of Common Stock, par value $.01 per share, of the Company
("Common Stock") set forth in Schedules A and B hereto, and the grant by the
Company to the International Managers, acting severally and not jointly, of the
option described in Section 2(b) hereof to purchase all or any part of 135,000
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 940,000 shares of Common Stock (the "Initial International
Securities") to be purchased by the International Managers and all or any part
of the 135,000 shares of Common
1
<PAGE> 6
Stock subject to the option described in Section 2(b) hereof (the "International
Option Securities") are hereinafter called, collectively, the "International
Securities."
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of 3,760,000 shares of Common Stock
(the "Initial U.S. Securities") through arrangements with certain underwriters
in the United States and Canada (the "U.S. Underwriters") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and Morgan Stanley & Co. Incorporated are acting as
representatives (the "U.S. Representatives") and the grant by the Company to the
U.S. Underwriters, acting severally and not jointly, of an option to purchase
all or any part of the U.S. Underwriters' pro rata portion of up to 540,000
additional shares of Common Stock solely to cover over-allotments, if any (the
"U.S. Option Securities" and, together with the International Option Securities,
the "Option Securities"). The Initial U.S. Securities and the U.S. Option
Securities are hereinafter called the "U.S. Securities." It is understood that
the Company is not obligated to sell and the International Managers are not
obligated to purchase, any Initial International Securities unless all of the
Initial U.S. Securities are contemporaneously purchased by the U.S.
Underwriters. The International Managers and the U.S. Underwriters are
hereinafter collectively called the "Underwriters," the Initial International
Securities and the Initial U.S. Securities are hereinafter collectively called
the "Initial Securities," and the International Securities and the U.S.
Securities are hereinafter collectively called the "Securities."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the U.S. Underwriters and the
International Managers under the direction of Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (in such capacity, the "Global
Coordinator").
The Company and the Selling Stockholder understand that the
International Managers propose to make a public offering of the International
Securities as soon as the Lead Managers deem advisable after this Agreement has
been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-20125) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S.
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Prospectus"). The Form of International Prospectus is identical to the Form of
U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting". The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of International Prospectus and Form of U.S.
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto,
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final Form of International Prospectus and the final Form of U.S.
Prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the
Underwriters for use in connection with the offering of the Securities are
herein called the "International Prospectus" and the "U.S. Prospectus,"
respectively, and collectively, the "Prospectuses." If Rule 434 is relied on,
the terms "International Prospectus" and "U.S. Prospectus" shall refer to the
preliminary International Prospectus dated February 7, 1997 and preliminary U.S.
Prospectus dated February 7, 1997, respectively, each together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the International Prospectus, the U.S. Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which are incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectuses or the Prospectuses, as the case may be.
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<PAGE> 8
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each International Manager as of the date hereof, as
of the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
International Manager, as follows:
(i) Compliance with Registration Requirements. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any International
Option Securities are purchased, at the Date of Delivery), the
Registration Statement, the Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and did not and will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
Neither of the Prospectuses nor any amendments or supplements thereto,
at the time the Prospectuses or such amendments or supplements thereto
were issued and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), included or will
include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If Rule 434 is used, the Company will comply with the
requirements of Rule 434. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the International Prospectus made in reliance
upon and in conformity with information furnished to the Company in
writing by any Underwriter through Merrill Lynch expressly for use in
the Registration Statement or either of the Prospectuses.
Each preliminary prospectus and the Prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
were identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
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<PAGE> 9
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectuses, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectuses, at the time
the Registration Statement became effective, at the time the
Prospectuses were issued and at the Closing Time (and, if any
International Option Securities are purchased, at the Date of
Delivery), did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(iii) Independent Accountants. Each of Arthur Andersen LLP and
Price Waterhouse Auditores Independentes, the accounting firms that
certified the financial statements and supporting schedules included in
the Registration Statement is an independent public accountant as
required by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements of the
Company included in the Registration Statement and the Prospectuses,
together with the related schedule and notes, present fairly, in all
material respects, the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the results of
their operations and their cash flows for the periods specified; said
financial statements have been prepared in conformity with United
States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved. The financial
statements of the Agriculture Division of Iochpe-Maxion S.A. ("Maxion")
included in the Registration Statement and the Prospectuses, present
fairly, in all material respects, the financial position of Maxion at
the dates indicated and the results of its operations and its cash
flows for the periods presented; such financial statements have been
prepared in conformity with GAAP applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present, in all material
respects, fairly in accordance with GAAP the information required to be
stated therein. The selected financial data and the summary financial
information included in the Prospectuses present fairly the information
shown therein and have been compiled on a basis consistent with that of
the audited financial statements included in the Registration
Statement. The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectuses
present fairly in all material respects the information shown therein,
have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been
properly compiled on the bases described therein, and the assumptions
used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition,
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<PAGE> 10
financial or otherwise, earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the
Common Stock in amounts per share that are consistent with past
practice, there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital
stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and to enter into and perform
its obligations under this Agreement; and the Company is duly qualified
as a foreign corporation to transact business and is in good standing
in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each "subsidiary" of the
Company listed on Schedule D hereto (each a "Subsidiary" and,
collectively, the "Subsidiaries") has been duly incorporated and is
validly existing as a corporation in good standing (to the extent that
good standing is a concept recognized by such jurisdiction) under the
laws of the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign corporation to transact business and is in good standing (to
the extent that good standing is a concept recognized by such
jurisdiction) in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of the
issued and outstanding capital stock of each such Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable
and is owned by the Company, directly or through subsidiaries, free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity; and none of the outstanding shares of capital stock of
any Subsidiary was issued in violation of the preemptive or similar
rights of any securityholder of such Subsidiary. The total assets and
revenues of the Company's subsidiaries other than the Subsidiaries
listed on Schedule D hereto, in the aggregate comprised less than 10%
of the total consolidated assets and revenue, respectively, of the
Company, at and for the year ended December 31, 1995.
(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectuses in the
column entitled "Actual" under the
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<PAGE> 11
caption "Capitalization" (except for subsequent issuances, if any,
pursuant to this Agreement, pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectuses or pursuant to
the exercise of convertible securities or options referred to in the
Prospectuses). The shares of issued and outstanding capital stock,
including the Securities to be purchased by the International Managers
from the Selling Stockholder, have been duly authorized and validly
issued and are fully paid and non-assessable; none of the outstanding
shares of capital stock, including the Securities to be purchased by
the International Managers from the Selling Stockholder, was issued in
violation of the preemptive or other similar rights of any
securityholder of the Company.
(ix) Authorization of Agreement. This Agreement and the U.S.
Purchase Agreement have been duly authorized, executed and delivered by
the Company.
(x) Authorization and Description of Securities. The
Securities to be purchased by the International Managers and the U.S.
Underwriters from the Company have been duly authorized for issuance
and sale to the International Managers pursuant to this Agreement and
the U.S. Underwriters pursuant to the U.S. Purchase Agreement,
respectively, and, when issued and delivered by the Company pursuant to
this Agreement and the U.S. Purchase Agreement against payment of the
consideration set forth herein and in the U.S. Purchase Agreement,
respectively, will be validly issued and fully paid and non-assessable.
The Common Stock conforms to all statements relating thereto contained
in the Prospectuses and such description conforms to the rights set
forth in the instruments defining the same; no holder of the Securities
will be subject to personal liability under the Delaware General
Corporation Law by reason of being such a holder; and the issuance of
the Securities is not subject to the preemptive or other similar rights
of any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its Subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any Subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the U.S. Purchase
Agreement and the consummation of the transactions contemplated herein,
in the U.S. Purchase Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the
Prospectuses under the caption "Use of Proceeds") and compliance by the
Company with its obligations hereunder and under the U.S. Purchase
Agreement have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
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<PAGE> 12
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any Subsidiary pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any
Subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
Subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives
the holder of any note, debenture or other evidence of indebtedness (or
any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any Subsidiary.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any Subsidiary exists or, to the knowledge
of the Company, is imminent, which, in any case, may reasonably be
expected to result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any Subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the performance by the Company of its obligations hereunder or under
the U.S. Purchase Agreement the aggregate of all pending legal or
governmental proceedings to which the Company or any Subsidiary is a
party or of which any of their respective property or assets is the
subject which are not described in the Registration Statement,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect if
determined adversely to the Company or such Subsidiary.
(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectuses or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Rights. The Rights under the Company's Stockholders
Rights Plan to which holders of the Securities will be entitled have
been duly authorized and will be validly issued at the time of the sale
of the Securities pursuant to this Agreement and the U.S. Purchase
Agreement.
(xvi) Possession of Intellectual Property. The Company and its
Subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures),
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<PAGE> 13
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
business now operated by them except where the failure to own or
possess such Intellectual Property would not have a Material Adverse
Effect, and neither the Company nor any of its Subsidiaries has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its Subsidiaries therein, and which
infringement or conflict (if the subject of any unfavorable decision,
ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a Material Adverse Effect.
(xvii) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities under this Agreement and the U.S. Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the U.S. Purchase Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.
(xviii) Possession of Licenses and Permits. The Company and
its Subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them except
where the failure to possess such Governmental Licenses would not have
a Material Adverse Effect; the Company and its Subsidiaries are in
compliance with the terms and conditions of all such Governmental
Licenses, except where the failure so to comply would not, singly or in
the aggregate, have a Material Adverse Effect; all of the Governmental
Licenses are valid and in full force and effect, except when the
invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a Material Adverse Effect.
(xix) Title to Property. The Company and its Subsidiaries have
good and marketable title to all real property owned by the Company and
its Subsidiaries and the Company owns all of its other properties, in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such
as (a) are described in the Prospectuses or (b) would not, singly or in
the aggregate, materially affect the value or use of the Company's
properties on a consolidated basis; and all of the leases and subleases
material to the business of the Company and its Subsidiaries,
considered as one enterprise, and under which the Company or any of its
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<PAGE> 14
Subsidiaries holds properties described in the Prospectuses, are in
full force and effect, and neither the Company nor any Subsidiary has
any notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any Subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such Subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.
(xx) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.
(xxi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xxii) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its Subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its Subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements
and (C) there are no pending or, to the knowledge of the Company,
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its Subsidiaries.
(b) Representations and Warranties by the Selling Stockholder. The
Selling Stockholder represents and warrants to each International Manager as of
the date hereof and as of the Closing Time, and agrees with each International
Manager, as follows:
(i) Authorization of Agreements. The Selling Stockholder has
the full right, power and authority to enter into this Agreement, the
U.S. Purchase Agreement and a Custody Agreement (the "Custody
Agreement") and to sell, transfer and deliver the
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Securities to be sold by the Selling Stockholder hereunder and under
the U.S. Purchase Agreement. The execution and delivery of this
Agreement, the U.S. Purchase Agreement and the Custody Agreement and
the sale and delivery of the Securities to be sold by the Selling
Stockholder and the consummation of the transactions contemplated in
this Agreement, the U.S. Purchase Agreement and the Custody Agreement
and compliance by the Selling Stockholder with his obligations
hereunder, under the U.S. Purchase Agreement and under the Custody
Agreement do not and will not, whether with or without the giving of
notice or passage of time or both, conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any
tax, lien, charge or encumbrance upon the Securities to be sold by the
Selling Stockholder or any property or assets of the Selling
Stockholder pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, license, lease or other
agreement or instrument to which the Selling Stockholder is a party or
by which the Selling Stockholder may be bound, or to which any of the
property or assets of the Selling Stockholder is subject, nor will such
action result in any violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Selling Stockholder or any of his properties.
(ii) Good and Marketable Title. The Selling Stockholder has
and will at the Closing Time have good and marketable title to the
Securities to be sold by the Selling Stockholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement and the U.S. Purchase Agreement; and upon delivery of such
Securities and payment of the purchase price therefor as herein
contemplated, assuming each such Underwriter has no notice of any
adverse claim, each of the Underwriters will receive good and
marketable title to the Securities purchased by it from the Selling
Stockholder, free and clear of any security interest, mortgage, pledge,
lien, charge, claim, equity or encumbrance of any kind.
(iii) Due Execution of Power of Attorney and Custody
Agreement. The Selling Stockholder has duly executed and delivered, in
the form heretofore furnished to the Representatives, the Custody
Agreement with SunTrust Bank, Atlanta, as custodian (the "Custodian");
the Custodian is authorized to deliver the Securities to be sold by the
Selling Stockholder hereunder and to accept payment therefor.
(iv) Absence of Manipulation. The Selling Stockholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.
(v) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental
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authority or agency, domestic or foreign, is necessary or required for
the performance by the Selling Stockholder of his obligations under
this Agreement, the U.S. Purchase Agreement or the Custody Agreement,
or in connection with the sale and delivery of the Securities hereunder
or the consummation of the transactions contemplated by this Agreement,
the U.S. Purchase Agreement and the Custody Agreement, except such as
may have previously been made or obtained or as may be required under
the 1933 Act or the 1933 Act Regulations or state securities laws.
(vi) Restriction on Sale of Securities. During a period of 90
days from the date of the Prospectuses, the Selling Stockholder will
not, without the prior written consent of Merrill Lynch, (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with
respect to which the Selling Stockholder has or hereafter acquires the
power of disposition or file any registration statement under the 1933
Act with respect to any of the foregoing or (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of
the Common Stock, whether any such swap or transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock
or such other securities, in cash or otherwise. The foregoing sentence
shall not apply to the Securities to be sold hereunder or under the
U.S. Purchase Agreement.
(vii) Certificates Suitable for Transfer. Certificates for all
of the Securities to be sold by the Selling Stockholder pursuant to
this Agreement and the U.S. Purchase Agreement, in suitable form for
transfer by delivery or accompanied by duly executed instruments of
transfer or assignment in blank with signatures guaranteed, have been
placed in custody with the Custodian with irrevocable conditional
instructions to deliver such Securities to the Underwriters pursuant to
this Agreement and the U.S. Purchase Agreement.
(viii) No Association with NASD. Neither the Selling
Stockholder nor any of his affiliates directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, or has any other association with (within the
meaning of Article I, Section 1(m) of the By-laws of the National
Association of Securities Dealers, Inc.), any member firm of the
National Association of Securities Dealers, Inc.
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(c) Officers Certificates. Any certificate signed by any officer of the
Company or any of its Subsidiaries delivered to the Lead Managers or to counsel
for the International Managers shall be deemed a representation and warranty by
the Company to each International Manager as to the matters covered thereby, and
any certificate signed by or on behalf of the Selling Stockholder as such and
delivered to the Lead Managers or to counsel for the International Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Selling Stockholder to each International Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to International Managers; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and the Selling Stockholder agree to sell to each
International Manager, severally and not jointly, and each International
Manager, severally and not jointly, agrees to purchase from the Company and the
Selling Stockholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial International Securities opposite the name
of the Company or the Selling Stockholder, as the case may be, which the number
of Initial International Securities set forth in Schedule A opposite the name of
such International Manager, plus any additional number of Initial International
Securities which such International Manager may become obligated to purchase
pursuant to the provisions of Section 10 hereof bears to the total number of
Initial International Securities, subject, in each case, to such adjustments
among the International Managers as the Lead Managers] in their sole discretion
shall make to eliminate any sales or purchases of fractional securities.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the International Managers,
severally and not jointly, to purchase up to an additional 135,000 shares of
Common Stock as set forth in Schedule B, at the price per share set forth in
Schedule C, less an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial International Securities but
not payable on the International Option Securities. The option hereby granted
will expire 30 days after the date hereof and may be exercised in whole or in
part from time to time only for the purpose of covering over-allotments which
may be made in connection with the offering and distribution of the Initial
International Securities upon notice by the Lead Managers to the Company setting
forth the number of International Option Securities as to which the several
International Managers are then exercising the option and the time and date of
payment and delivery for such International Option Securities. Any such time and
date of delivery for the International Option Securities (a "Date of Delivery")
shall be determined by the Lead Managers, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time, as hereinafter defined. If the option is exercised as to all or
any portion of the International Option Securities, each of the International
Managers, acting severally and not jointly, will purchase that proportion of the
total number of International Option Securities then being purchased which the
number of Initial International Securities set forth in Schedule A
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<PAGE> 18
opposite the name of such International Manager bears to the total number of
Initial International Securities, subject in each case to such adjustments as
the Lead Managers in their discretion shall make to eliminate any sales or
purchases of fractional shares.
(c) Payment Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Fried,
Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004,
or at such other place as shall be agreed upon by the Lead Managers, the Company
and the Selling Stockholder, at 9:00 A.M. (Eastern time) on the third (fourth,
if the pricing occurs after 4:30 P.M. on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the Lead Managers and the Company and the Selling Stockholder
(such time and date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the purchase
price for, and delivery of certificates for, such International Option
Securities shall be made at the above-mentioned offices, or at such other place
as shall be agreed upon by the Lead Managers and the Company, on each Date of
Delivery as specified in the notice from the Lead Managers to the Company.
Payment shall be made to the Company and the Selling Stockholder by
wire transfer of immediately available funds to a bank account designated by the
Company and the Selling Stockholder, as the case may be, against delivery to the
Lead Managers for the respective accounts of the International Managers of
certificates for the International Securities to be purchased by them. It is
understood that each International Manager has authorized the Lead Managers, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Initial International Securities and the International
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the International Managers, may (but
shall not be obligated to) make payment of the purchase price for the Initial
International Securities or the International Option Securities, if any, to be
purchased by any International Manager whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such International Manager from its obligations
hereunder.
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(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Managers may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Managers in The City
of New York not later than 10:00 A.M. on the business day prior to the Closing
Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
International Manager as follows:
(a) Compliance with Securities Regulations and Commission
Requests. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A or Rule 434, as applicable, and will notify
the Lead Managers immediately, and confirm the notice in writing, (i)
when any post-effective amendment to the Registration Statement shall
become effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement
to the Prospectuses or for additional information, and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale
in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect
the filings necessary pursuant to Rule 424(b) and will take such steps
as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for
filing by the Commission and, in the event that it was not, it will
promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order
is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) Filing of Amendments. The Company will give the Lead
Managers notice of its intention to file or prepare any amendment to
the Registration Statement (including any filing under Rule 462(b)),
any Term Sheet or any amendment, supplement or revision to either the
prospectus included in the Registration Statement at the time it became
effective or to the Prospectuses, whether pursuant to the 1933 Act, the
1934 Act or otherwise, will furnish the Lead Managers with copies of
any such documents a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file or use any such
document to which the Lead Managers or counsel for the International
Managers shall reasonably object.
(c) Delivery of Registration Statements. The Company has
furnished or will deliver to the Lead Managers and counsel for the
International Managers, without charge,
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<PAGE> 20
signed copies of the Registration Statement in the form of the
Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be
incorporated by reference therein) and signed copies of all consents
and certificates of experts, and will also deliver to the Lead
Managers, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the International Managers. The copies of the
Registration Statement and each amendment thereto furnished to the
International Managers will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to
each International Manager, without charge, as many copies of each
preliminary prospectus as such International Manager reasonably
requested, and the Company hereby consents to the use of such copies
for purposes permitted by the 1933 Act. The Company will furnish to
each International Manager, without charge, during the period when the
International Prospectus is required to be delivered under the 1933 Act
or the 1934 Act, such number of copies of the International Prospectus
(as amended or supplemented) as such International Manager may
reasonably request. The International Prospectus and any amendments or
supplements thereto furnished to the International Managers will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company
will comply with the 1933 Act and the 1933 Act Regulations and the 1934
Act and the 1934 Act Regulations so as to permit the completion of the
distribution of the Securities as contemplated in this Agreement, the
U.S. Purchase Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, any event shall occur or condition shall
exist as a result of which it is necessary, in the opinion of counsel
for the International Managers or for the Company, to amend the
Registration Statement or amend or supplement the Prospectuses in order
that the Prospectuses will not include any untrue statements of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the opinion of such counsel, at any such
time to amend the Registration Statement or amend or supplement the
Prospectuses in order to comply with the requirements of the 1933 Act
or the 1933 Act Regulations, the Company will promptly prepare and file
with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or
to make the Registration Statement or the Prospectuses comply with such
requirements, and the Company will furnish to the International
Managers such number of copies of such amendment or supplement as the
International Managers may reasonably request.
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<PAGE> 21
(f) Blue Sky Qualifications. The Company will use its best
efforts, in cooperation with the International Managers, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions as the Lead Managers may
designate and to maintain such qualifications in effect for a period of
not less than one year from the later of the effective date of the
Registration Statement and any Rule 462(b) Registration Statement;
provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which
it is not so qualified or to subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so
qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the
effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Rule 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally
available to its securityholders as soon as practicable an earnings
statement for the purposes of, and to provide the benefits contemplated
by, the last paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified
in the Prospectuses under "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect
the listing of the Securities on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During a period of 90
days from the date of the Prospectuses, the Company will not, without
the prior written consent of Merrill Lynch, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence
of ownership of the Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the U.S. Purchase Agreement, (B) any shares of
Common Stock issued by the Company upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof
and referred to in the Prospectuses, (C) any shares of Common Stock
issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectuses
or (D) any shares of
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Common Stock issued pursuant to any non-employee director stock plan
or dividend reinvestment plan.
(k) Reporting Requirements. The Company, during the period
when the Prospectuses are required to be delivered under the 1933 Act
or the 1934 Act, will file all documents required to be filed with the
Commission pursuant to the 1934 Act within the time periods required by
the 1934 Act and the 1934 Act Regulations.
SECTION 4. Payment of Expenses. (a) Expenses(a)Expenses. The Company
will pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including (i) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes and any stamp or other
duties payable upon the sale, issuance or delivery of the Securities to the
Underwriters, (iii) the fees and disbursements of the Company's counsel,
accountants and other advisors, (iv) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the preparation
of the Blue Sky Survey and any supplement thereto, (v) the printing and delivery
to the Underwriters of copies of each preliminary prospectus, any Term Sheets
and of the Prospectuses and any amendments or supplements thereto, (vi) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (vii) the fees and expenses of any transfer
agent or registrar for the Securities, (viii) the filing fees incident to, and
the reasonable fees and disbursements of counsel to the Underwriters in
connection with, the review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities and (ix) the fees
and expenses incurred in connection with the listing of the Securities on the
New York Stock Exchange.
(b) Expenses of the Selling Stockholder. The Selling Stockholder will
pay all expenses incident to the performance of his obligations under, and the
consummation of the transactions contemplated by this Agreement, including (i)
any stamp duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the International Managers, and (ii) the fees and disbursements of
its counsel and accountants.
(c) Termination of Agreement. If this Agreement is terminated by the
Lead Managers in accordance with the provisions of Section 5, Section 9(a)(i) or
Section 11 hereof, the Company shall reimburse the International Managers for
all of their out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the International Managers.
(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Stockholder may make for
the sharing of such costs and expenses.
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SECTION 5. Conditions of International Managers' Obligations. The
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Stockholder contained in Section 1 hereof or in certificates of any officer of
the Company or any Subsidiary of the Company or on behalf of the Selling
Stockholder delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued
under the 1933 Act or proceedings therefor initiated or threatened by
the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the International Managers. A prospectus
containing the Rule 430A Information shall have been filed with the
Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the
Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Counsel for Company. At Closing Time, the Lead
Managers shall have received the opinions, dated as of Closing Time, of
Michael F. Swick, General Counsel for the Company and King & Spalding,
counsel for the Company, in each case, in form and substance
satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other
International Managers to the effect set forth in Exhibits A-1 and A-2
hereto and to such further effect as counsel to the International
Managers may reasonably request.
(c) Opinion of Counsel for the Selling Stockholder. At Closing
Time, the Lead Managers shall have received the opinion, dated as of
Closing Time, of King & Spalding, counsel for the Selling Stockholder,
in form and substance satisfactory to counsel for the International
Managers, together with signed or reproduced copies of such letter for
each of the other International Managers to the effect set forth in
Exhibit B hereto.
(d) Opinion of Counsel for International Managers. At Closing
Time, the Lead Manager(s) shall have received the opinion, dated as of
Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for
the International Managers, together with signed or reproduced copies
of such letter for each of the other International Managers with
respect to the matters set forth in clauses (i), (ii), (iv), (v)
(solely as to preemptive or other similar rights arising by operation
of law or under the charter or by-laws of the Company), (vii) through
(ix), inclusive, and (xv) (solely as to the information in the
Prospectus under "Description of Capital Stock--Common Stock") and the
penultimate
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paragraph of Exhibit A-2 hereto. In giving such opinion such counsel
may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to the Lead Managers. Such counsel
may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of
officers of the Company and its Subsidiaries and certificates of public
officials.
(e) Officers Certificate. At Closing Time, there shall not
have been, since the date hereof or since the respective dates as of
which information is given in the Prospectuses, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
Subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Lead Managers shall have
received a certificate of the Chairman of the Board of Directors and
President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of Closing Time,
to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or are contemplated by the Commission.
(f) Certificate of Selling Stockholder. At Closing Time, the
Lead Managers shall have received a certificate of the Selling
Stockholder, dated as of Closing Time, to the effect that (i) the
representations and warranties of the Selling Stockholder contained in
Section 1(b) hereof are true and correct in all respects with the same
force and effect as though expressly made at and as of Closing Time and
(ii) the Selling Stockholder has complied in all material respects with
all agreements and all conditions on its part to be performed under
this Agreement at or prior to Closing Time.
(g) Accountants' Comfort Letter. At the time of the execution
of this Agreement, the Lead Managers shall have received from each of
(a) Arthur Andersen LPL and (b) Price Waterhouse Auditores
Independentes a letter dated such date, in form and substance
satisfactory to the Lead Managers, together with signed or reproduced
copies of such letter for each of the other International Managers
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses.
(h) Bringdown Comfort Letters. At Closing Time, the Lead
Managers shall have received from each of (a) Arthur Andersen LPL and
(b) Price Waterhouse Auditores Independentes a letter, dated as of
Closing Time, to the effect that they reaffirm the
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<PAGE> 25
statements made in the letter furnished pursuant to subsection (g) of
this Section, except that the specified date referred to shall be a
date not more than three business days prior to Closing Time.
(i) Approval of Listing. At Closing Time, the Securities shall
have been approved for listing on the New York Stock Exchange, subject
only to official notice of issuance.
(j) Lockup Agreements. At the date of this Agreement, the Lead
Managers shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule E hereto.
(k) Consummation of Sale of U.S. Securities. The sale of the
U.S. Securities pursuant to the U.S. Purchase Agreement shall have been
consummated simultaneously with the sale of the International
Securities contemplated hereby.
(l) Conditions to Purchase of International Option Securities.
In the event that the International Managers exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the
International Option Securities, the representations and warranties of
the Company contained herein and the statements in any certificates
furnished by the Company or any Subsidiary of the Company hereunder
shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Lead Managers shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(e) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinions of Counsel for Company. The opinions of Michael
F. Swick, General Counsel for the Company and King & Spalding,
counsel for the Company, in form and substance satisfactory to
counsel for the International Managers, dated such Date of
Delivery, relating to the International Option Securities to
be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for International Managers. The
opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
for the International Managers, dated such Date of Delivery,
relating to the International Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinion required by Section 5(d) hereof.
(iv) Bring-down Comfort Letter. A letter from each of (a)
Arthur Andersen LPL and (b) Price Waterhouse Auditores
Independentes, in form and substance
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<PAGE> 26
satisfactory to the Lead Managers and dated such Date of
Delivery, substantially in the same form and substance as the
letter furnished to the Lead Managers pursuant to Section 5(g)
hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more
than five days prior to such Date of Delivery.
(m) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the International Managers shall have been
furnished with such documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated, or in order to evidence the accuracy
of any of the representations or warranties, or the fulfillment of any
of the conditions, herein contained; and all proceedings taken by the
Company and the Selling Stockholder in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in
form and substance to the Lead Managers and counsel for the
International Managers.
(n) Termination of Agreement. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the
purchase of International Option Securities on a Date of Delivery which
is after the Closing Time, the obligations of the several International
Managers to purchase the relevant Option Securities may be terminated
by the Lead Managers by notice to the Company at any time at or prior
to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8
shall survive any such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of International Managers by the Company The
Company agrees to indemnify and hold harmless each International Manager and
each person, if any, who controls any International Manager within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the extent and in
the manner set forth in clauses (i), (ii) and (iii) below:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
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(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(g) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto); provided, further, that the Company will not be liable to any
International Manager or any person controlling such International Manager with
respect to any such untrue statement or alleged untrue statement or omission or
alleged omission made in any preliminary prospectus to the extent that the
Company shall sustain the burden of proving that any such loss, liability,
claim, damage or expense resulted from the fact that such International Manager,
in contravention of a requirement of this Agreement or applicable law, sold
securities to a person to whom such International Manager failed to send or
give, at or prior to the written confirmation of the sale of such Securities, a
copy of the International Prospectus (as amended or supplemented) if (i) the
Company has previously furnished copies thereof (sufficiently in advance of the
Closing Date to allow for distribution of the International Prospectus in a
timely manner) to the International Manager and the loss, liability, claim,
damage or expense of such International Manager resulted from an untrue
statement or omission or alleged untrue statement or omission of a material fact
contained in or omitted from such preliminary prospectus which was corrected in
the International Prospectus and (ii) such failure to give or send such
International Prospectus by the Closing Date to the party or parties asserting
such loss, liability, claim or damage or expense would have constituted the sole
defense to the claim asserted by such person.
(b) Indemnification of International Managers by Selling Stockholder.
The Selling Stockholder agrees to indemnify and hold harmless each International
Manager and each person, if any, who controls any International Manager within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the
extent and in the manner set forth in clauses (i), (ii) and (iii) below.
23
<PAGE> 28
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(g) below) any such settlement is effected
with the written consent of the Selling Stockholder; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity shall only apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Selling
Stockholder expressly for use in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434 Information, if
applicable, or any preliminary prospectus or the International Prospectus (or
any amendment or supplement thereto); provided, further, that the aggregate
liability of the Selling Stockholder pursuant to this paragraph (b) shall be
limited to the gross proceeds received by the Selling Stockholder from the
Common Stock purchased by the International Managers from the Selling
Stockholder pursuant to this Agreement; provided, further, that the Selling
Stockholder will not be liable to any International Manager or any person
controlling such International Manager with respect to any such untrue statement
or alleged untrue statement or omission or alleged omission made in any
preliminary prospectus to the extent that the Selling Stockholder shall sustain
the burden of proving that any such loss, liability, claim, damage or expense
resulted from the fact that such International Manager, in
24
<PAGE> 29
contravention of a requirement of this Agreement or applicable law, sold
securities to a person to whom such International Manager failed to send or
give, at or prior to the written confirmation of the sale of such Securities, a
copy of the International Prospectus (as amended or supplemented) if (i) the
Company has previously furnished copies thereof (sufficiently in advance of the
Closing Date to allow for distribution of the International Prospectus in a
timely manner) to the International Manager and the loss, liability, claim,
damage or expense of such International Manager resulted from an untrue
statement or omission or alleged untrue statement or omission of a material fact
contained in or omitted from such preliminary prospectus which was corrected in
the International Prospectus and (ii) such failure to give or send such
International Prospectus by the Closing Date to the party or parties asserting
such loss, liability, claim or damage or expense would have constituted the sole
defense to the claim asserted by such person.
(c) Indemnification of Company, Directors and Officers and Selling
Stockholder. Each International Manager severally agrees to indemnify and hold
harmless the Company, its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and the
Selling Stockholder against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsections (a) and (b) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such
International Manager through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the International Prospectus (or any amendment or supplement thereto).
(d) Indemnification of Selling Stockholder by the Company. The Company
agrees to indemnify and hold harmless the Selling Stockholder to the extent and
in the manner set forth in clauses (i), (ii) and (iii) below.
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
25
<PAGE> 30
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(g) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Selling
Stockholder), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto).
(e) Indemnification of the Company by the Selling Stockholder The
Selling Stockholder agrees to indemnify and hold harmless the Company to the
extent and in the manner set forth in clauses (i), (ii) and (iii) below,
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or the
Prospectuses (or any amendment or supplement thereto), or the omission or
alleged omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section
26
<PAGE> 31
6(g) below) any such settlement is effected with the written consent of the
Selling Stockholder; and
(iii) against any and all expense, whatsoever, as incurred
(including the fees and disbursements of counsel chosen by the Company),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall only apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Selling Stockholder expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the International
Prospectus (or any amendment or supplement thereto).
(f) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Sections 6(a) and 6(b)
above, counsel to the indemnified parties shall be selected by Merrill Lynch; in
the case of parties indemnified pursuant to Sections 6(c) and 6(e) above,
counsel to the indemnified parties shall be selected by the Company; and in the
case of indemnification pursuant to Section 6(d) above, counsel to the
indemnified party shall be selected by the Selling Stockholder. An indemnifying
party may participate at its own expense in the defense of any such action. If
it so elects within a reasonable time after receipt of such notice, the
indemnifying party may assume the defense of such action with counsel chosen by
it and approved by the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the ground that
there may be legal defenses available to them which are different from or in
addition to those available to the indemnifying party. If the indemnifying party
assumes the defense of such action, the indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action. In no event shall the indemnifying
party be liable for the fees and expenses of more than one counsel (in addition
to local counsel) for all indemnified parties in connection with any one action
or separate but similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this
27
<PAGE> 32
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(g) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) or 6(b)(ii) effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement. Notwithstanding the immediately preceding sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 6(a)(ii)
or 6(b)(ii) effected without its consent if such indemnifying party (i)
reimburses such indemnified party in accordance with such request to the extent
it considers such request to be reasonable and (ii) provides written notice to
the indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(h) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholder with respect to indemnification.
SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Stockholder on the one hand and the International Managers on the other
hand from the offering of the Securities pursuant to this Agreement or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Selling Stockholder on the one hand and of the International Managers on the
other hand in connection with the statements or omissions which resulted in such
losses, liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company and the Selling
Stockholder on the one hand and the International Managers on the other hand in
connection with the offering of the International Securities pursuant to this
Agreement shall be deemed to be in the same respective
28
<PAGE> 33
proportions as the total net proceeds from the offering of the International
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the Selling Stockholder and the total underwriting discount
received by the International Managers, in each case as set forth on the cover
of the International Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public offering price
of the International Securities as set forth on such cover.
The relative fault of the Company and the Selling Stockholder on the
one hand and the International Managers on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company or the Selling Stockholder
or by the International Managers and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Stockholder and the International Managers
agree that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the International
Managers were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this Section 7. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 7 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section (i) the Selling
Stockholder (A) shall be required to make any contribution pursuant to this
Section 7 only if the loss, liability, claim, damage or expenses for which an
indemnified party seeks contribution arises out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished to the Company by the Selling Stockholder
expressly for use in the Registration Statement (or any amendment thereto),
including the Rule 430A Information and the Rule 434 Information, if applicable,
or any preliminary prospectus or the International Prospectus (or any amendment
or supplement thereto) and (B) shall not be required to contribute any amount in
excess of the amount of the total gross proceeds received by the Selling
Stockholder from the Common Stock purchased from the Selling Stockholder
pursuant to this Agreement and (ii) no International Manager shall be required
to contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such International
Manager has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
29
<PAGE> 34
For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company or
the Selling Stockholder as the case may be. The International Manager's
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial International Securities set forth opposite
their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholder with respect to contribution.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
Subsidiaries or the Selling Stockholder submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any International Manager or controlling person, or by or on
behalf of the Company or the Selling Stockholder, and shall survive delivery of
the Securities to the International Managers.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Lead Managers may terminate this
Agreement, by notice to the Company and the Selling Stockholder, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectuses, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its Subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Lead Managers,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the New York Stock
Exchange, or if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the NASDAQ National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Commission, the National Association of Securities Dealers,
Inc. or any other governmental authority, or (iv) if a banking moratorium has
been declared by either Federal or New York authorities.
(b) Liabilities If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in
30
<PAGE> 35
Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive
such termination and remain in full force and effect.
SECTION 10. Default by One or More of the International Managers. If
one or more of the International Managers shall fail at Closing Time or a Date
of Delivery to purchase the Securities which it or they are obligated to
purchase under this Agreement (the "Defaulted Securities"), the Lead Managers
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting International Managers, or any other underwriters,
to purchase all, but not less than all, of the Defaulted Securities in such
amounts as may be agreed upon and upon the terms herein set forth; if, however,
the Lead Managers shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the number of International Securities to be purchased on such date,
each of the non-defaulting International Managers shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder
bear to the underwriting obligations of all non-defaulting
International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of International Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the International Managers to
purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without
liability on the part of any non-defaulting International Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either (i) the Lead
Managers or (ii) the Company and the Selling Stockholder shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may be, for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or the Prospectuses or in any other documents or
arrangements. As used herein, the term "International Manager" includes any
person substituted for an International Manager under this Section 10.
SECTION 11. Default by the Company or the Selling Stockholder (a) If
the Company shall fail at Closing Time or at the Date of Delivery to sell the
number of Securities that it is obligated to sell hereunder, then this Agreement
shall terminate without any liability on the part of any non-defaulting party;
provided, however, that the provisions of Sections 1, 4, 6, 7 and 8 shall remain
in full force and effect. No action taken pursuant to this Section shall relieve
the Company from liability, if any, in respect of such default.
31
<PAGE> 36
(b) If the Selling Stockholder shall fail at Closing Time to
sell the number of securities which the Selling Stockholder is obligated to sell
hereunder, each of the Representatives and the Company shall have the right to
postpone the Closing Time for a period not exceeding seven days in order to
effect any required change in the Registration Statement or Prospectus or in any
other documents or arrangements. No action taken pursuant to this Section 11
shall relieve the Selling Stockholder so defaulting from liability, if any, in
respect of such default.
SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Managers c/o Merrill Lynch
International, Ropemaker Place, 25 Ropemaker Street, London EC24 9LY, England
with a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004; notices to the Company shall be directed to it at 4830
River Green Parkway, Duluth, Georgia 30136, attention of Michael F. Swick with a
copy to King & Spalding, 191 Peachtree Street, Atlanta, Georgia 30303,
attention: John J. Kelley III; and notices to the Selling Stockholder shall be
directed to Robert Ratliff, c/o AGCO Corporation 4830 River Green Parkway,
Duluth, Georgia 30136 with a copy to King & Spalding, 191 Peachtree Street,
Atlanta, Georgia 30303, attention: John J. Kelley III.
SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the International Managers and the Company and the Selling
Stockholder and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the International Managers and the Company and the
Selling Stockholder and their respective successors and the controlling persons
and officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the International Managers and the Company and the Selling
Stockholder and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any International Manager shall be deemed to be a successor by reason merely of
such purchase.
SECTION 14. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
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<PAGE> 37
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Selling Stockholder a
counterpart hereof, whereupon this instrument, along with all counterparts, will
become a binding agreement among the International Managers and the Company and
the Selling Stockholder in accordance with its terms.
Very truly yours,
AGCO CORPORATION
By:
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
ROBERT J. RATLIFF
--------------------------------------------
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
DONALDSON LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO. INTERNATIONAL
By: MERRILL LYNCH INTERNATIONAL
By
----------------------------------
Authorized Signatory
For themselves and as Lead Managers of the other International Managers named in
Schedule A hereto.
33
<PAGE> 38
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
International
Name of International Manager Securities
----------------------------- ----------
<S> <C>
Merrill Lynch International.................................
Donaldson Lufkin & Jenrette Securities Corporation..........
Morgan Stanley & Co. International..........................
Total....................................................... 940,000
=======
</TABLE>
Sch A-1
<PAGE> 39
SCHEDULE B
<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- ---------------------
<S> <C> <C>
AGCO Corporation 900,000 135,000
Robert J. Ratliff 40,000 0
-----------------------------------------------------
TOTAL 940,000 135,000
</TABLE>
Sch B-1
<PAGE> 40
SCHEDULE C
AGCO Corporation
940,000 Shares of Common Stock
(Par Value $.01 Per Share)
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall be $-.
2. The purchase price per share for the International
Securities to be paid by the several International Managers shall be
$-, being an amount equal to the initial public offering price set
forth above less $- per share; provided that the purchase price per
share for any International Option Securities purchased upon the
exercise of the over-allotment option described in Section 2(b) shall
be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial
International Securities but not payable on the International Option
Securities.
Sch C-1
<PAGE> 41
SCHEDULE D
<TABLE>
<CAPTION>
<S> <C>
Name of Subsidiary State or Country of Jurisdiction
- ------------------ --------------------------------
Massey Ferguson Corp. Delaware
Hesston Ventures Corporation Kansas
AGCO Finance Corporation Delaware
Deutz Argentina SA Argentina
AGCO Australia Ltd. Australia
AGCO do Brazil Brazil
AGCO Canada, Ltd. Canada
Massey Ferguson Danmark AS Denmark
Massey Ferguson SA France
Massey Ferguson GmbH Germany
AGCO Holding BV Netherlands
Eikmaskin AS Norway
Massey Ferguson Iberia SA Spain
Massey Ferguson Ltd. United Kingdom
</TABLE>
Sch D-1
<PAGE> 42
SCHEDULE E
Robert J. Ratliff
J. P. Richard
John M. Shumejda
James M. Seaver
Daniel H. Hazelton
John G. Murdoch
Michael F. Swick
Edward R. Swingle
Richard P. Johnston
Alan S. McDowell
Charles S. Mechem, Jr.
Hamilton Robinson, Jr.
Sch E-1
<PAGE> 43
Exhibit A-1
FORM OF OPINION OF
MICHAEL F. SWICK
TO BE DELIVERED PURSUANT
TO SECTION 5(b)*
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the Purchase
Agreements.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a Material Adverse Effect.
(iv) Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing (to the extent that good standing is a concept
recognized by such jurisdiction) under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectuses and is
duly qualified as a foreign corporation to transact business and is in good
standing (to the extent that good standing is a concept recognized by such
jurisdiction) in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and
non-assessable and, to the best of my knowledge, is owned by the Company,
directly or through Subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Subsidiary.
(v) To the best of my knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation, to which the Company or any
Subsidiary is a party, or to
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* Certain opinions relating to foreign subsidiaries may be delivered by
the Company's in-house counsel in Europe.
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<PAGE> 44
which the property of the Company or any Subsidiary is subject, before or
brought by any court or governmental agency or body, domestic or foreign, which
might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the performance
by the Company of its obligations under the Purchase Agreements.
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<PAGE> 45
Exhibit A-2
FORM OF OPINION OF
KING & SPALDING
TO BE DELIVERED PURSUANT
TO SECTION 5(b)
(i) The Company is validly existing as a corporation in good standing
under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the Purchase
Agreements.
(iii) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the Purchase Agreements or pursuant to reservations, agreements or
employee benefit plans referred to in the Prospectuses or pursuant to the
exercise of convertible securities or options referred to in the Prospectuses);
the shares of issued and outstanding capital stock of the Company, including the
Securities to be purchased by the U.S. Underwriters and the International
Managers from the Selling Stockholder, have been duly authorized and validly
issued and are fully paid and non-assessable; and none of the outstanding shares
of capital stock of the Company was issued in violation of the statutory
preemptive rights of any securityholder of the Company.
(iv) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the U.S. Underwriters pursuant to the U.S. Purchase Agreement and to
the International Managers pursuant to the International Purchase Agreement and,
when issued and delivered by the Company pursuant to the Purchase Agreements
against payment of the consideration set forth in the Purchase Agreements, will
be validly issued and fully paid and non-assessable and no holder of the
Securities is or will be subject to personal liability under the Delaware
General Corporation Law by reason of being such a holder.
(v) The issuance and sale of the Securities by the Company and the sale
of the Securities by the Selling Stockholder is not subject to the statutory
preemptive rights of any securityholder of the Company.
(vi) The U.S. Purchase Agreement and International Purchase Agreement
have been duly authorized, executed and delivered by the Company.
A-3
<PAGE> 46
(vii) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectuses pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best of
our knowledge, no stop order suspending the effectiveness of the Registration
Statement or any Rule 462(b) Registration Statement has been issued under the
1933 Act and no proceedings for that purpose have been instituted or are pending
or threatened by the Commission.
(viii) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434 Information,
as applicable, the Prospectuses, excluding the documents incorporated by
reference therein, and each amendment or supplement to the Registration
Statement and Prospectuses, excluding the documents incorporated by reference
therein, as of their respective effective or issue dates (other than the
financial statements and supporting schedules included therein or omitted
therefrom, as to which we need express no opinion) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(ix) The documents incorporated by reference in the Prospectuses (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion), when they were filed
with the Commission, complied as to form in all material respects with the
requirements of the 1934 Act and the rules and regulations of the Commission
thereunder.
[(x) If Rule 434 has been relied upon, the Prospectuses were not
"materially different," as such term is used in Rule 434, from the prospectus
included in the Registration Statement at the time it became effective.]
(xi) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company and the
requirements of the New York Stock Exchange.
(xii) The information in the Prospectuses under "Description of Capital
Stock--Common Stock," "Certain Federal Income Tax Considerations" and in the
Registration Statement under Item 15 and in Item 3 - Legal Proceedings of the
Company's most recent annual report on Form 10-K, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by us
and is correct in all material respects.
(xiii) To the best of our knowledge, there are no franchises,
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto.
(xiv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign
A-4
<PAGE> 47
(other than under the 1933 Act and the 1933 Act Regulations, which have been
obtained, or as may be required under the securities or blue sky laws of the
various states, as to which we need express no opinion) is necessary or required
to be obtained by the Company for the performance by the Company of its
obligations under the Purchase Agreements or in connection with the offer,
issuance, sale or delivery of the Securities.
(xv) The execution, delivery and performance of the Purchase Agreements
and the consummation of the transactions contemplated in the Purchase Agreements
and in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectuses under the caption "Use Of Proceeds") and
compliance by the Company with its obligations under the U.S. Purchase Agreement
and the International Purchase Agreement do not and will not, whether with or
without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined in Section
1(a)(xi) of both the U.S. Purchase Agreement and the International Purchase
Agreement) under or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any Subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, filed or
incorporated by reference as an exhibit to the Registration Statement, to which
the Company or any Subsidiary is a party or by which it or any of them may be
bound, or to which any of the property or assets of the Company or any
Subsidiary is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or by-laws
of the Company or any Subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court having jurisdiction over the Company or any
Subsidiary or any of their respective properties, assets or operations.
(xvi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the 1940
Act.
(xvii) The Rights under the Company's Shareholder Rights Plan to which
holders of the Securities will be entitled have been duly authorized and validly
issued.
Nothing has come to our attention that would cause us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no statement),
at the time such Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading or that the Prospectuses or any amendment or supplement thereto
(except for financial statements and schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which we need
make no statement), at the time the Prospectuses were issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a
A-5
<PAGE> 48
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of fact (but not
as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. Such opinion shall not
state that it is to be governed or qualified by, or that it is otherwise subject
to, any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).
A-6
<PAGE> 49
Exhibit B
FORM OF OPINION OF
KING & SPALDING
TO BE DELIVERED
PURSUANT TO SECTION 5(c)
(i) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than under the 1933
Act and the 1933 Act Regulations, which have been obtained, or as may
be necessary under the securities or blue sky laws of the various
states laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Stockholder for the performance
by the Selling Stockholder of its obligations under the U.S. Purchase
Agreement or International Purchase Agreement or in the Custody
Agreement, or in connection with the offer, sale or delivery of the
Securities.
(ii) The Custody Agreement has been duly executed and delivered by the
Selling Stockholder.
(iii) The U.S. Purchase Agreement and International Purchase Agreement have
been duly authorized, executed and delivered by or on behalf of the
Selling Stockholder.
(iv) The execution, delivery and performance of the U.S. Purchase Agreement
and the Custody Agreement and the sale and delivery of the Securities
and the consummation of the transactions contemplated in the U.S.
Purchase Agreement, (ii) the International Purchase Agreement, the
Custody Agreement and in the Registration Statement and compliance by
the Selling Stockholder with its obligations under the U.S. Purchase
Agreement, the International Purchase Agreement and the Custody
Agreement have been duly authorized by all necessary action on the part
of the Selling Stockholder and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default under or result in the creation
or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Stockholder
pursuant to, any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other instrument or agreement
known to us to which the Selling Stockholder is a party or by which he
may be bound, or to which any of the property or assets of the Selling
Stockholder may be subject nor will such action result in any violation
of any law, administrative regulation, judgment or order of any
governmental agency or body or any administrative or court decree
having jurisdiction over the Selling Stockholder or any of his
properties.
(vi) To the best of our knowledge, the Selling Stockholder has valid and
marketable title to the Securities to be sold by the Selling
Stockholder pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, free and clear of any pledge, lien,
B-1
<PAGE> 50
security interest, charge, claim, equity or encumbrance of any kind,
and has full right, power and authority to sell, transfer and deliver
such Securities pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement. By delivery of a certificate or
certificates therefor pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement and assuming the U.S. Underwriters and
the International Managers have purchased the Securities in good faith
and without notice of any adverse claims, the U.S. Underwriters and the
International Managers will have acquired valid title to such
securities, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind.
B-2
<PAGE> 51
Exhibit C
MERRILL LYNCH & CO.
MERRILL LYNCH INTERNATIONAL
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Donaldson Lufkin & Jenrette
Securities Corporation
Morgan Stanley & Co. Incorporated
Morgan Stanley & Co. International
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by AGCO Corporation
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of AGCO
Corporation, a Delaware corporation (the "Company"), understands that Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), Donaldson, Lufkin & Jenrette Securities Corporation and Morgan Stanley
& Co. Incorporated propose to enter into a purchase agreement (the "U.S.
Purchase Agreement") with the Company and the Selling Stockholder providing for
the offering of shares (the "Securities") of the Company's common stock, par
value $.01 per share (the "Common Stock") in the U.S. and Canada, and Merrill
Lynch International, Donaldson Lufkin & Jenrette Securities Corporation and
Morgan Stanley & Co. International propose to enter into a Purchase Agreement
(the "International Purchase Agreement" and collectively with the U.S. Purchase
Agreement, the "Purchase Agreements") with the Company and the Selling
Stockholder providing for the public offering of the Company's Common Stock
outside the U.S. and Canada. In recognition of the benefit that such an offering
will confer upon the undersigned as a stockholder [and an officer and/or
director] of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned agrees
with each underwriter to be named in the Purchase Agreements that, during a
period of 90 days from the date of the Purchase Agreements, the undersigned will
not, without the prior written consent of Merrill Lynch, directly or indirectly,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of the
Company's Common Stock or any securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or hereafter acquired by the
undersigned or with respect to which the undersigned has
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<PAGE> 52
or hereafter acquires the power of disposition, or file any registration
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
Very truly yours,
Signature:
------------------------------
Print Name:
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<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports on the consolidated financial statements and schedule of AGCO
Corporation and Subsidiaries (and to all references to our Firm) included (or
incorporated by reference) in this Registration Statement covering the sale of
AGCO Corporation common stock.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 26, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of AGCO Corporation
of our audit report dated July 10, 1996 relating to the financial statements of
the Agricultural Division of Iochpe-Maxion S.A. as of December 31, 1995 and
1994, and for each of the three years ended December 31, 1995, which appears in
the Current Report on Form 8-K of AGCO Corporation dated June 28, 1996. We also
consent to the reference to us under the heading "Independent Auditors" in such
Prospectus.
PRICE WATERHOUSE
Auditores Independentes
Sao Paulo, Brazil
February 28, 1997
