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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
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COMMISSION FILE NUMBER: 1-12930
AGCO CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 58-1960019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4205 RIVER GREEN PARKWAY, DULUTH, GEORGIA 30096
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (770) 813-9200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, ($0.01 par value) New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
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The aggregate market value of common stock held by non-affiliates of the
Registrant as of the close of business on March 6, 2000 was $617,257,236. As of
such date, there were 59,587,761 shares of the registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the AGCO Corporation Annual Report to Stockholders for the year
ended December 31, 1999 are incorporated by reference in Part II.
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on April 26, 2000 are incorporated by reference in Part
III.
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PART I
ITEM 1. BUSINESS
AGCO Corporation ("AGCO" or the "Company") was incorporated in Delaware in
April 1991. The Company's executive offices are located at 4205 River Green
Parkway, Duluth, Georgia 30096, and its telephone number is 770-813-9200. Unless
otherwise indicated, all references in this Form 10-K to the Company include the
Company's subsidiaries.
THE COMPANY
AGCO is a leading manufacturer and distributor of agricultural equipment
and related replacement parts throughout the world. The Company sells a full
range of agricultural equipment, including tractors, combines, hay tools,
sprayers, forage equipment and implements. The Company's products are widely
recognized in the agricultural equipment industry and are marketed under the
following brand names: AGCO(R) Allis, Massey Ferguson(R), Hesston(R), White,
GLEANER(R), New Idea(R), AGCOSTAR(R), Landini (North America), Tye(R),
Farmhand(R), Glencoe(R), Deutz (South America), Fendt, Spra-Coupe(R) and
Willmar(R). The Company distributes its products through a combination of
approximately 8,200 independent dealers and distributors, associates and
licensees. In addition, the Company provides retail financing in North America,
the United Kingdom, France, Germany, Spain and Brazil through its finance joint
ventures with Cooperateive Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank
Nederland" ("Rabobank").
AGCO was organized in June 1990 by an investment group formed by management
to acquire the successor to the agricultural equipment business of
Allis-Chalmers, a company which began manufacturing and distributing
agricultural equipment in the early 1900s. Since its formation in June 1990,
AGCO has grown substantially through a series of 17 acquisitions for
consideration aggregating approximately $1.4 billion. 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 duplicate administrative, sales and marketing functions,
rationalizing its dealer network, increasing manufacturing capacity utilization
and engineering common product platforms for certain products. In addition, the
Company is focusing its efforts on long-term growth and profit improvement
initiatives including developing new and innovative products, expanding and
strengthening its distribution network, reducing product costs, maintaining a
flexible horizontal production strategy, and utilizing efficient asset
management.
TRANSACTION HISTORY
Hesston Acquisition. In March 1991, the Company acquired Hesston
Corporation ("Hesston"), a leading manufacturer and distributor of hay tools,
forage equipment and related replacement parts (the "Hesston Acquisition"). The
assets acquired also included Hesston's 50% interest in a joint venture, Hay and
Forage Industries ("HFI"), between Hesston and CNH Global N.V. which
manufactures hay and forage equipment for both parties. Hesston's net sales in
its full fiscal year preceding the acquisition were approximately $91.0 million.
The Hesston Acquisition enabled the Company to provide its dealers with a more
complete line of farm equipment and to expand its dealer network.
White Tractor Acquisition. In May 1991, the Company acquired the White
Tractor Division ("White") of Allied Products Corporation (the "White
Acquisition"). White's net sales in its full fiscal year preceding the
acquisition were approximately $58.3 million. As a result of the White
Acquisition, the Company added a new line of tractors to its product offerings
and expanded its North America dealer network.
Massey Ferguson North American Acquisition. In January 1993, the Company
entered into an agreement with Varity Corporation ("Varity") to be the exclusive
distributor in the United States and Canada of the Massey Ferguson line of farm
equipment. Concurrently, the Company acquired the North American distribution
operation of Massey Ferguson Group Limited ("Massey") from Varity (the "Massey
North American Acquisition"). Net sales attributable to Massey's North American
distribution operation in the full
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fiscal year preceding the acquisition were approximately $215.0 million. The
Massey North American Acquisition provided AGCO access to another leading brand
name in the agricultural equipment industry and enabled the Company to expand
its dealer network.
White-New Idea Acquisition. In December 1993, the Company acquired the
White-New Idea Farm Equipment Division ("White-New Idea") of Allied Products
Corporation (the "White-New Idea Acquisition"). White-New Idea's net sales in
1993 were approximately $83.1 million. The White-New Idea Acquisition enabled
the Company to offer a more complete line of planters and spreaders and a
broader line of hay and tillage equipment.
Agricredit-North America Acquisition. The Company acquired Agricredit
Acceptance Company ("Agricredit-North America"), a retail finance company, from
Varity in two separate transactions (together, the "Agricredit-North America
Acquisition"). The Company acquired a 50% joint venture interest in
Agricredit-North America in January 1993 and acquired the remaining 50% interest
in February 1994. The Agricredit-North America Acquisition enabled the Company
to provide more competitive and flexible financing alternatives to end users.
Massey Ferguson Acquisition. In June 1994, the Company acquired Massey
from Varity, including Massey's network of independent dealers and distributors
and associate and licensee companies outside the United States and Canada (the
"Massey Acquisition"). Massey, with fiscal 1993 net sales of approximately
$898.4 million (including net sales to AGCO of approximately $124.6 million),
was one of the largest manufacturers and distributors of tractors in the world.
The Massey Acquisition significantly expanded AGCO's sales and distribution
outside North America.
AgEquipment Acquisition. 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"). The AgEquipment Acquisition added three brands of agricultural
implements to the Company's product line, including no-till and minimum tillage
products, distributed under the Tye, Farmhand and Glencoe brand names.
Maxion Acquisition. In June 1996, the Company acquired the agricultural
and industrial equipment business of Iochpe-Maxion S.A. (the "Maxion
Agricultural Equipment Business") (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 and combines under the Massey Ferguson brand
name, and industrial loader-backhoes under the Massey Ferguson and Maxion brand
names. The Maxion Acquisition expanded the Company's product offerings and
distribution network in South America, particularly in the significant Brazilian
agricultural equipment market.
Western Combine Acquisition. In July 1996, the Company acquired certain
assets of Western Combine Corporation and Portage Manufacturing, Inc., the
Company's suppliers of Massey Ferguson combines and other harvesting equipment
sold in North America (the "Western Combine Acquisition"). The Western Combine
Acquisition provided the Company with access to advanced technology and
increased the Company's profit margin on certain combines and harvesting
equipment sold in North America.
Agricredit-North America Joint Venture. In November 1996, the Company sold
a 51% interest in Agricredit-North America to a wholly-owned subsidiary of
Rabobank. The Company retained a 49% interest in Agricredit-North America and
now operates Agricredit-North America with Rabobank as a joint venture (the
"Agricredit-North America Joint Venture"). The Company has similar joint venture
arrangements with Rabobank with respect to its retail finance companies located
in the United Kingdom, France, Germany, Spain and Brazil.
Deutz Argentina Acquisition. In December 1996, the Company acquired the
operations of Deutz Argentina S.A. ("Deutz Argentina") (the "Deutz Argentina
Acquisition"). Deutz Argentina, with 1995 sales of approximately $109.0 million,
was a manufacturer and distributor of agricultural equipment, engines and light
duty trucks in Argentina and other markets in South America. The Deutz Argentina
Acquisition established AGCO as a leading supplier of agricultural equipment in
Argentina. In February 1999, the
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Company sold its manufacturing operations in Haedo, Argentina which will allow
the Company to consolidate the assembly of tractors into an existing facility in
Brazil.
Fendt Acquisition. In January 1997, the Company acquired the operations of
Xaver Fendt GmbH & Co. KG ("Fendt") (the "Fendt Acquisition"). Fendt, which had
1996 sales of approximately $650.0 million, manufactures and distributes
tractors through a network of independent agricultural cooperatives, dealers and
distributors in Germany and throughout Europe and Australia. With this
acquisition, AGCO has a leading market share in Germany and France, two of
Europe's largest agricultural equipment markets, with one of the most
technologically advanced line of tractors in the world. In December 1997, the
Company sold Fendt's caravan and motor home business in order to focus on its
core agricultural equipment business.
Dronningborg Acquisition. In December 1997, the Company acquired the
remaining 68% of Dronningborg Industries a/s (the "Dronningborg Acquisition"),
which was the Company's supplier of combine harvesters sold under the Massey
Ferguson brand name in Europe. The Company previously owned 32% of this combine
manufacturer which developed and manufactured combine harvesters exclusively for
AGCO. The Dronningborg Acquisition enabled the Company to achieve certain
synergies within its worldwide combine manufacturing.
Argentina Engine Joint Venture. In December 1997, the Company sold 50% of
Deutz Argentina's engine production and distribution business to Deutz AG, a
global supplier of diesel engines in Cologne, Germany. The Company retained a
50% interest in the engine business and now operates it with Deutz AG as a joint
venture (the "Argentina Engine Joint Venture"). The Argentina Engine Joint
Venture will allow the Company to share in research and development costs and
gain access to advanced technology.
MF Argentina Acquisition. In May 1998, the Company acquired the
distribution rights for the Massey Ferguson brand in Argentina (the "MF
Argentina Acquisition"). The MF Argentina Acquisition expanded the Company's
distribution network in the second largest market in South America.
Spra-Coupe and Willmar Acquisitions. In July 1998, the Company acquired
the Spra-Coupe product line, a brand of agricultural self-propelled sprayers
sold primarily in North America (the "Spra-Coupe Acquisition"). In October 1998,
the Company acquired the Willmar product line, a brand of agricultural self-
propelled sprayers, spreaders and loaders sold primarily in North America (the
"Willmar Acquisition"). Spra-Coupe and Willmar had combined net sales of
approximately $81.8 million in their respective full fiscal years preceding
these acquisitions. The Spra-Coupe and Willmar Acquisitions expanded the
Company's product offerings to include a full line of self-propelled sprayers.
PRODUCTS
Tractors
Tractors are vehicles used to pull farm implements, hay tools, forage
equipment, ground engaging equipment and other farm equipment. The Company
participates in three segments of the tractor market: the compact tractor
segment, which includes tractors in the less than 40 horsepower range; the
utility tractor segment, which includes tractors in the 40 to 100 horsepower
range; and the high horsepower tractor segment, which includes tractors in
excess of 100 horsepower.
All compact tractors are sold under the Massey Ferguson brand name and are
typically used on small farms and in specialty agricultural industries such as
dairies and used in landscaping and residential areas. The Company offers a full
range of tractors in the utility tractor category, including both two-wheel and
all-wheel drive versions. The Company sells utility tractors under the Massey
Ferguson, Fendt, AGCO Allis, White, Landini and Deutz brand names. The utility
tractors are typically used on small and medium-sized farms and in specialty
agricultural industries, such as orchards and vineyards. The Company also offers
a full range of tractors in the high horsepower segment ranging primarily from
100 to 425 horsepower. High horsepower tractors are typically used on larger
farms and on cattle ranches for hay production. The Company sells high
horsepower tractors under the Massey Ferguson, Fendt, AGCO Allis, White,
Landini, AGCOSTAR and Deutz brand names. Tractors accounted for approximately
64% of the Company's net sales in 1999 and 62% in both 1998 and 1997.
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Combines
Combines are large, self-propelled machines used for the harvesting of
crops, such as corn, wheat, soybeans and barley. The Company sells combines
under the GLEANER, Massey Ferguson, Deutz, Fendt and AGCO Allis brand names.
Depending on the market, GLEANER and Massey Ferguson combines are sold with
conventional or rotary technology while the Deutz, Fendt and AGCO Allis combines
utilize conventional technology. All combines are complemented by a variety of
crop-harvesting heads, available in different sizes, which are designed to
maximize harvesting speed and efficiency while minimizing crop loss. Combines
accounted for 7% of the Company's net sales in 1999 and 10% in both 1998 and
1997.
Hay Tools and Forage Equipment, Sprayers, Implements and Other Products
Hay tools are used to harvest and process hay crops for livestock feed. Hay
tools perform a variety of functions, including mowing and conditioning, raking,
tedding, baling and harvesting. Hay tools include self-propelled windrowers and
tractor-powered mowers, which cut and condition hay crops for faster drying
before baling; hay tedders and rakes, which are designed to reduce drying time
and place hay crops in windrows; round balers, which harvest and roll windrowed
hay into circular bales; square balers, which harvest and compress the windrowed
hay into solid bales; and forage harvesters, which are used to cut standing corn
crops or windrowed hay crops into silage. The Company sells hay and forage
equipment primarily under the Hesston brand name and, to a lesser extent, the
White-New Idea, Massey Ferguson and AGCO Allis brand names.
Sprayers are used to apply materials such as fertilizers and crop
protection chemicals to fields before or after crops have emerged. The Company
offers under 500-gallon self-propelled agricultural sprayers under the
Spra-Coupe brand name and 500 to 1,000 gallon self-propelled agricultural
sprayers under the Willmar brand name.
The Company also distributes a wide range of implements, planters and other
equipment for its product lines. Tractor-pulled implements are used in field
preparation and crop management. Implements include disk harrows, which improve
field performance by cutting through crop residue, leveling seed beds and mixing
chemicals with the soil; heavy tillage, which breaks up soil and mixes crop
residue into topsoil, with or without prior disking; and field cultivators,
which prepare a smooth seed bed and destroy weeds. Tractor-pulled planters apply
fertilizer and place seeds in the field. Other equipment primarily includes
tractor-pulled manure spreaders, which fertilize fields with controlled
application of sludge or solid manure, and loaders, which are used for a variety
of tasks including lifting and transporting hay crops. The Company sells
implements, planters and other products under the Hesston, White-New Idea,
Massey Ferguson, AGCO Allis, Tye, Farmhand, Glencoe, Deutz, Fendt and Willmar
brand names. Hay tools and forage equipment, sprayers, implements and other
products accounted for 10%, 11% and 12% of the Company's net sales in 1999, 1998
and 1997, respectively.
Replacement Parts
In addition to sales of new equipment, the replacement parts business is an
important source of revenue and profitability for both the Company and its
dealers. The Company sells replacement parts for products sold under all of its
brand names, many of which are proprietary. These parts help keep farm equipment
in use, including products no longer in production. Since most of the Company's
products can be economically maintained with parts and service for a period of
10 to 20 years, each product which enters the marketplace provides the Company
with a potential long-term revenue stream. In addition, sales of replacement
parts typically generate higher gross margins and historically have been less
cyclical than new product sales. Replacement parts accounted for approximately
19%, 17% and 16% of the Company's net sales in 1999, 1998 and 1997,
respectively.
MARKETING AND DISTRIBUTION
The Company distributes products primarily through a network of independent
dealers and distributors. The Company's dealers are responsible for retail sales
to the equipment's end user in addition to after-sales service and support of
the equipment. The Company's distributors may sell the Company's products
through a
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network of dealers supported by the distributor. Through the Company's
acquisitions and dealer development activities, the Company has broadened its
product line, expanded its dealer network and strengthened its geographic
presence in Western Europe, North America, South America and the rest of the
world. The Company's sales are not dependent on any specific dealer, distributor
or group of dealers.
Western Europe
Fully assembled tractors and other equipment are marketed in most major
Western European markets directly through a network of approximately 2,400
independent Massey Ferguson and Fendt dealer outlets and agricultural
cooperatives in Western Europe. In addition, the Company sells through
independent distributors and associates in certain markets in Western Europe,
which distribute through approximately 800 Massey Ferguson and Fendt dealer
outlets. In most cases, dealers carry competing or complementary products from
other manufacturers. Sales in Western Europe accounted for 56% of the Company's
net sales in 1999 and 47% in both 1998 and 1997.
North America
The Company markets and distributes farm machinery equipment and
replacement parts to farmers in North America through a network of dealers
supporting approximately 6,200 dealer contracts. Each of the Company's
approximately 2,600 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. Sales in North
America accounted for 25%, 32% and 30% of the Company's net sales in 1999, 1998
and 1997, respectively.
South America
The Company markets and distributes farm machinery, equipment and
replacement parts to farmers in South America through several different
networks. In Brazil and Argentina, the Company distributes products directly to
approximately 350 independent dealers, primarily supporting either the Massey
Ferguson, Deutz or AGCO Allis brand names. Outside of Brazil and Argentina, the
Company sells its products in South America through independent distributors. In
Brazil, federal laws are extremely protective of dealers and prohibit a
manufacturer from selling any of its products in Brazil except through its
dealer network. Additionally, each dealer has the exclusive right to sell its
manufacturer's product in its designated territory and as a result, no dealer
may represent more than one manufacturer. Sales in South America accounted for
8%, 11% and 10% of the Company's net sales 1999, 1998 and 1997, respectively.
Rest of the World
Outside Western Europe, North America and South America, the Company
operates primarily through a network of approximately 2,100 independent Massey
Ferguson and Fendt distributors and dealer outlets, as well as associates and
licensees, marketing the Company's products and providing customer service
support in approximately 100 countries in Africa, the Middle East, Eastern and
Central Europe, Australia and Asia. With the exception of Australia, where the
Company directly supports its dealer network, the Company utilizes independent
distributors, associates and licensees to sell its products. 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 will continue to
actively support the local production and distribution of Massey-licensed
products by third party distributors, associates and licensees. Sales outside
Western Europe, North America and South America accounted for 11%, 10% and 13%
of the Company's net sales in 1999, 1998 and 1997, respectively.
In Western Europe and the rest of the world, associates and licensees
provide a significant distribution channel for the Company's products and a
source of low cost production for certain Massey Ferguson products. Associates
are entities in which the Company has an ownership interest, most notably in
India. Licensees are entities in which the Company has no direct ownership
interest, most notably in Pakistan and Turkey. The associate or licensee
generally has the exclusive right to produce and sell Massey Ferguson
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equipment in its home country, but may not sell these products in other
countries. The Company generally licenses to these associate companies certain
technology, as well as the right to use Massey Ferguson's trade names. The
Company sells products to associates and licensees in the form of components
used in local manufacturing operations, tractor sets supplied in completely
knocked down ("CKD") kits for local assembly and distribution and fully
assembled tractors for local distribution only. In certain countries, the
arrangements with licensees and associates have evolved to where the Company is
principally providing technology, technical assistance and quality control. In
these situations, licensee manufacturers sell certain tractor models under the
Massey Ferguson brand name in the licensed territory and may also become a
source of low cost production to the Company.
Parts Distribution
In Western Europe, the parts operation is supported by master distribution
facilities in Desford, England; Ennery, France; and Marktoberdorf, Germany and
regional parts facilities in Spain, Denmark, Germany and Italy. The Company
supports its sales of replacement parts in North America through its master
parts warehouse in Batavia, Illinois and regional warehouses throughout North
America. In the Asia/Pacific region, the Company's parts operation is supported
by a master distribution facility in Melbourne, Australia. In South America,
replacement parts are maintained and distributed primarily from its facilities
in Brazil and Argentina.
Dealer Support and Supervision
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 provides
significant support to its dealers in order to improve the quality of its dealer
network. The Company monitors each dealer's performance and profitability as
well as establishes programs which focus on the continual improvement of the
dealer. In North America, the Company also identifies open markets with the
greatest potential for each brand and selects 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 also focuses on the development of
its dealers. The Company analyzes, on an ongoing basis, the regions of each
country where market share is not acceptable. Based on this analysis, a dealer
may be added in that territory, or a nonperforming dealer may be replaced or
refocused on performance standards.
The Company believes that its ability to offer its dealers a full product
line of agricultural equipment and related replacement parts as well as its
ongoing dealer training and support programs, which focus on business and
inventory management, sales, marketing, warranty and servicing matters and
products, help ensure the vitality and increase the competitiveness of its
dealer network. In addition, the Company maintains dealer advisory groups to
obtain dealer feedback on its operations. The Company believes all of these
programs contribute to the good relations the Company generally enjoys with its
dealers.
The Company agrees to provide dealers with competitive products, terms and
pricing. Dealers are also given volume sales incentives, demonstration programs
and other advertising to assist sales. The Company's competitive sales programs,
including retail financing incentives, and its policy for maintaining parts and
service availability with extensive product warranties are designed to enhance
its dealers' competitive position. Finally, a limited amount of financial
assistance is provided as part of developing new dealers in key market
locations. In general, dealer contracts are cancelable by either party within
certain notice periods.
WHOLESALE FINANCING
Primarily in the United States and Canada, the Company engages in the
standard industry practice of providing dealers with inventories of farm
equipment for extended periods. The terms of the Company's wholesale finance
agreements with its dealers vary by region and product line. In the United
States and Canada, dealers are typically not required to make a down payment,
and the Company effectively provides the dealer with the equipment interest-free
for a period of one to twelve months, depending on the product.
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Thereafter, dealers are charged interest at varying spreads over the prime rate.
The Company also provides financing to dealers on used equipment accepted in
trade. The Company retains a security interest in all new and used equipment it
finances.
Typically, the sales terms outside the United States and Canada are of a
shorter duration. The sales terms range from 30 day terms to floorplan financing
similar to the arrangements provided to dealers in the United States and Canada.
In many cases, the Company retains a security interest in the equipment sold on
extended terms. In certain international markets, the Company's sales are backed
by letters of credit or credit insurance.
RETAIL FINANCING
Through its retail financing joint ventures located in North America, the
United Kingdom, France, Germany, Spain and Brazil, the Company provides a
competitive and dedicated financing source to the end users of the Company's
products as well as equipment produced by other manufacturers. These retail
finance companies are owned 49% by the Company and 51% by a wholly-owned
subsidiary of Rabobank. Retail finance programs can be tailored to prevailing
market conditions and can enhance the Company's sales efforts.
MANUFACTURING AND SUPPLIERS
Manufacturing and Assembly
The Company has consolidated the manufacture of its products in locations
where capacity, technology or local costs are optimized. Furthermore, the
Company continues to balance its manufacturing resources with externally sourced
machinery, components and replacement parts to enable the Company to better
control inventory and supply of components. The Company believes that its
manufacturing facilities are sufficient to meet its needs for the foreseeable
future.
Western Europe
The Company's manufacturing operations in Western Europe are performed in
tractor manufacturing facilities located in Coventry, England; Beauvais, France
and Marktoberdorf, Germany and a combine manufacturing facility in Randers,
Denmark. The Coventry facility produces tractors marketed under the Massey
Ferguson, AGCO Allis and White brand names ranging from 38 to 110 horsepower
that are sold worldwide in fully-assembled form or as CKD kits for final
assembly by licensees and associates. The Beauvais facility produces 70 to 225
horsepower tractors marketed under the Massey Ferguson, AGCO Allis and White
brand names. The Marktoberdorf facility produces 50 to 260 horsepower tractors
marketed under the Fendt brand name. The Randers facility produces conventional
combines under the Massey Ferguson and Fendt brand names. The Company also
assembles forklifts for sale to third parties and manufactures hydraulics for
its Fendt tractors and for sale to third parties in its Kempten, Germany
facility, and assembles cabs for its Fendt tractors in Baumenheim, Germany. The
Company also has a joint venture with Renault Agriculture S.A. ("Renault"), for
the manufacture of driveline assemblies for high horsepower AGCO and Renault
tractors at the Company's facility in Beauvais (the "GIMA Joint Venture"). By
sharing overhead and engineering costs, the GIMA Joint Venture has resulted in a
decrease in the cost of these components.
North America
The Company manufactures and assembles GLEANER and Massey Ferguson rotary
and conventional combines and combine heads at its Independence, Missouri
facility. In Willmar, Minnesota, the Company manufactures self-propelled
sprayers marketed under the Spra-Coupe and Willmar brand names, wheeled loaders
marketed under the Massey Ferguson and Willmar brand names and dry fertilizer
spreaders marketed under the Willmar brand name. As part of the HFI joint
venture, the Company produces Hesston, White-New Idea and Massey Ferguson hay
tools and forage equipment in Hesston, Kansas. The Company also maintains a
facility in Queretaro, Mexico where tractors are assembled for distribution in
the Mexican market.
In the fourth quarter of 1999, the Company announced the permanent closure
of its Coldwater, Ohio and Lockney, Texas manufacturing facilities. The majority
of the production in these facilities will be relocated to
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existing AGCO facilities or outsourced to third parties. Specifically, the
Company will move production of its White-New Idea line of planters, hay tools
and forage equipment and implements to the HFI facility. The Farmhand loader
production and the Glencoe tillage equipment production will be outsourced to
third party manufacturers. In addition the Company will integrate its AGCO
Allis, White and Massey Ferguson brands of high horsepower tractors, previously
produced in Coldwater, Ohio, into the common platform tractor production
currently in place at its Beauvais, France facility. The Company also will move
production of its drill planters and tillage equipment marketed under the Tye
brand name, previously manufactured in Lockney, Texas, to the HFI facility.
South America
The Company's manufacturing operations in South America are located in
Brazil and Argentina. In Brazil, the Company manufactures and assembles Massey
Ferguson tractors, ranging from 50 to 173 horsepower, and industrial
loader-backhoes at its facility in Canoas, Rio Grande do Sul. The Company also
manufactures conventional combines marketed under the Massey Ferguson, Deutz and
AGCO Allis brand names in Santa Rosa, Rio Grande do Sul. In February 1999, the
Company sold its Haedo, Argentina plant which manufactured Deutz branded
tractors, ranging from 60 to 190 horsepower, engine components and light duty
trucks. The Company plans to relocate its Deutz tractor production, currently in
Haedo under an outsourcing agreement, to its Canoas, Brazil facility in the
future. The Argentina Engine Joint Venture manufactures diesel engines, for the
Company's equipment and for sale to third parties, at a facility in San Luis,
Argentina, which is owned by the joint venture.
Third-Party Suppliers
The Company believes that managing the level of its company and dealer
inventory is critical to maintaining favorable pricing for its products. Unlike
many of its competitors, the Company externally sources many of its products,
components and replacement parts. This horizontal production strategy minimizes
the Company's capital investment requirements and allows greater flexibility to
respond to changes in market conditions.
The Company purchases certain products it distributes from third party
suppliers. The Company purchases standard and specialty tractors from Landini
S.p.A. ("Landini") and distributes these tractors under the Landini brand name
in the United States and Canada and purchases specialty tractors under the
Massey Ferguson brand name for distribution in Western Europe and North America.
In addition, certain Massey Ferguson tractor models are purchased from a
licensee in Turkey and from Iseki & Company, Limited, a Japanese manufacturer.
The Company also purchases certain other tractors, implements and hay and forage
equipment from various third-party suppliers.
In addition to the purchase of machinery, significant components used in
the Company's manufacturing operations, such as engines, are supplied by
third-party companies. The Company selects third-party suppliers, which it
believes have the lowest cost, highest quality and most appropriate technology.
The Company also assists in the development of these products or component parts
based upon its own design requirements. The Company's past experience with
outside suppliers has been favorable. Although the Company is currently
dependent upon outside suppliers for several of its products, the Company
believes that, if necessary, alternative sources of supply could be identified.
SEASONALITY
Retail sales by dealers to farmers are highly seasonal and are a function
of the timing of the planting and harvesting seasons. To the extent practicable,
the Company attempts to ship products to its dealers and distributors on a level
basis throughout the year to reduce the effect of seasonal retail demands on its
manufacturing operations and to minimize its investment in inventory. The
Company's financing requirements are subject to variations due to seasonal
changes in working capital levels, which typically build in the first half of
the year and then reduce in the second half of the year.
8
<PAGE> 10
COMPETITION
The agricultural industry is highly competitive. During the 1980s, the
industry experienced significant consolidation and retrenchment. The Company
competes with several large national and international full-line suppliers, as
well as numerous short-line and specialty manufacturers with differing
manufacturing and marketing methods. The Company's principal competitors on a
worldwide basis are CNH Global N.V. and Deere & Company. In certain Western
European and South American countries, regional competitors exist, which have
significant market share in a single country or a group of countries.
The Company believes several key factors influence a buyer's choice of farm
equipment, including the strength and quality of a company's dealers, the
quality and pricing of products, dealer or brand loyalty, product availability,
the terms of financing and customer service. The Company has improved and
continually seeks to improve in each of these areas but focuses primarily on
increasing the farmers' loyalty to the Company's dealers and overall dealer
organizational quality in order to distinguish itself in the marketplace. See
"Marketing and Distribution."
ENGINEERING AND RESEARCH
The Company makes significant expenditures for engineering and applied
research to improve the quality and performance of its products and to develop
new products. The Company expended approximately $44.6 million (1.8% of net
sales), $56.1 million (1.9% of net sales) and $54.1 million (1.7% of net sales)
in 1999, 1998 and 1997, respectively, on engineering and research.
PATENTS AND TRADEMARKS, TRADE NAMES AND BRAND NAMES
The Company owns and has licenses to the rights under a number of domestic
and foreign patents, trademarks, trade names and brand names relating to its
products and businesses. The Company defends its patent, trademark and trade and
brand name rights primarily by monitoring competitors' machines, industry
publications and conducting other investigative work. The Company considers its
intellectual property rights, including its rights to use the AGCO, AGCO Allis,
Massey Ferguson, Fendt, GLEANER, White, Hesston, New Idea, Landini (North
America), AGCOSTAR, Tye, Farmhand, Glencoe, Willmar, Spra-Coupe and Deutz (South
America) trade and brand names, important in the operation of its businesses;
however, the Company does not believe it is dependent on any single patent,
trademark or trade name or group of patents or trademarks, trade names or brand
names. AGCO, GLEANER, Hesston, Massey Ferguson, AGCOSTAR, New Idea, Tye,
Farmhand, Glencoe, Spra-Coupe and Willmar are registered trademarks of the
Company. In addition, Fendt is a registered trademark in Germany, and the
Company has a pending trademark registration for the Fendt brand name in the
U.S. and Canada.
EMPLOYEES
As of December 31, 1999, the Company employed approximately 9,300
employees, including approximately 1,900 employees in the United States and
Canada. A majority of the Company's employees at its manufacturing facilities,
both domestic and international, are represented by collective bargaining
agreements with expiration dates ranging from 2000 to 2002. The contract with
the labor union at the Company's Independence production facility was extended
through May 12, 2001. The contract with the labor union at the Company's Willmar
production facility expires May 31, 2000 at which time it will be renegotiated.
The Company is currently in negotiations with labor unions in the UK relating to
the renewal of their collective bargaining agreements which are renegotiable
from April 1, 2000. German national negotiations are due for renewal from March
1, 2000. In addition, agreements effective for twelve months from January 1,
2000 have been signed in France, and the national agreement in Denmark is
effective until March 1, 2004.
ENVIRONMENTAL MATTERS AND OTHER GOVERNMENT REGULATION
The Company is subject to environmental laws and regulations concerning
emissions to the air, discharges of processed or other types of waste water and
the generation, handling, storage, transportation, treatment and disposal of
waste materials. These laws and regulations are constantly changing, and the
effects
9
<PAGE> 11
that they may have on the Company in the future are impossible to predict with
accuracy. The Company has been made aware of possible solvent contamination at
the HFI facility in Hesston, Kansas. The extent of any possible contamination is
being investigated in conjunction with the appropriate state authorities. It is
the Company's policy to comply with all applicable environmental, health and
safety laws and regulations, and the Company believes that any expense or
liability it may incur in connection with any noncompliance with any such law or
regulation or the cleanup of any of its properties will not have a material
adverse effect on the Company. The Company believes it is in compliance, in all
material respects, with all applicable laws and regulations.
The Environmental Protection Agency (the "EPA") has issued regulations
concerning permissible emissions from off-road engines. The Company does not
anticipate that the cost of compliance with the regulations will have a material
impact on the Company.
The Company is subject to various national, federal, state and local laws
affecting its business, as well as a variety of regulations relating to such
matters as working conditions and product safety. A variety of state laws
regulate the Company's contractual relationships with its dealers. These laws
impose substantive standards on the relationship between the Company and its
dealers, including events of default, grounds for termination, non-renewal of
dealer contracts and equipment repurchase requirements. Such state laws could
adversely affect the ability of the Company to rationalize its dealer network.
The Company's international operations are also subject to environmental
laws, as well as various other national and local laws, in the countries in
which it manufactures and sells it products. The Company believes that it is in
compliance with such laws in all material respects, and the cost of compliance
with such laws in the future will not have a material adverse effect on 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.
FINANCIAL INFORMATION ON GEOGRAPHICAL AREAS
For financial information on geographic areas, see pages 43 and 44 of the
Annual Report to Stockholders for the year ended December 31, 1999, which
information is incorporated herein by reference.
FORWARD LOOKING STATEMENTS
Certain statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this report are
forward looking, including certain statements set forth under the "Outlook,"
"Liquidity and Capital Resources," "Nonrecurring Expenses," "Year 2000," and
"Euro Currency" headings. Forward looking statements include the Company's
expectations with respect to future commodity prices, export demand for
commodities, farm income, demand for agricultural equipment, production levels,
the impact of cost reduction initiatives, operating margins, overall
profitability and the availability of capital. Although the Company believes
that the statements it has made are based on reasonable assumptions, they are
based on current information and beliefs and, accordingly, the Company can give
no assurance that its statements will be achieved. In addition, these statements
are subject to factors that could cause actual results to differ materially from
those suggested by the forward looking statements. These factors include, but
are not limited to, general economic and capital market conditions, the demand
for agricultural products, world grain stocks, crop production, commodity
prices, farm income, farm land values, government farm programs and legislation,
the levels of new and used field inventories, weather conditions, interest and
foreign currency exchange rates, the conversion to the Euro, pricing and product
actions taken by competitors, customer access to credit, production disruptions,
supply and capacity constraints, Company cost reduction and control initiatives,
Company research and development efforts, labor relations, dealer and
distributor actions, technological difficulties including the Year 2000
readiness, changes in environmental,
10
<PAGE> 12
international trade and other laws and political and economic uncertainty in
various areas of the world. Further information concerning factors that could
significantly affect the Company's results is included in the Company's filings
with the Securities and Exchange Commission. The Company disclaims any
responsibility to update any forward looking statements.
ITEM 2. PROPERTIES
The principal properties of the Company as of December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
LEASED OWNED
LOCATION DESCRIPTION PROPERTY (SQ. FT.) (SQ. FT.)
-------- ----------------------------------- --------- ---------
<S> <C> <C> <C>
North America:
Duluth, Georgia................... Corporate Headquarters 125,000
Coldwater, Ohio (A)............... Manufacturing 1,490,000
Hesston, Kansas (B)............... Manufacturing 1,115,000
Independence, Missouri............ Manufacturing 450,000
Lockney, Texas (A)................ Manufacturing 190,000
Queretaro, Mexico................. Manufacturing 13,500
Willmar, Minnesota................ Manufacturing 223,400
Kansas City, Missouri............. Warehouse 425,000
Batavia, Illinois................. Parts Distribution 310,200
International:
Coventry, United Kingdom.......... Regional Headquarters/Manufacturing 4,135,150
Beauvais, France (C).............. Manufacturing 3,740,000
Marktoberdorf, Germany............ Manufacturing 2,411,000
Baumenheim, Germany............... Manufacturing 1,890,000
Kempten, Germany.................. Manufacturing 582,000
Randers, Denmark.................. Manufacturing 683,000
Haedo, Argentina.................. Parts Distribution/Sales Office 32,366
Noetinger, Argentina (A).......... Manufacturing 152,820
San Luis, Argentina (D)........... Manufacturing 57,860
Canoas, Rio Grande do Sul,
Brazil......................... Regional Headquarters/Manufacturing 452,400
Santa Rosa, Rio Grande do Sul,
Brazil......................... Manufacturing 297,100
Ennery, France.................... Parts Distribution 269,100
Sunshine, Victoria, Australia..... Regional Headquarters 37,200
Tottenham, Victoria, Australia.... Parts Distribution 179,960
Stoneleigh, United Kingdom........ Training Facility/Office 44,000
</TABLE>
- ---------------
(A) In December 1999, the Company announced that it would close its production
facilities in Coldwater, Ohio, Lockney, Texas and Noetinger, Argentina.
(B) Owned by HFI, a joint venture in which the Company has a 50% interest.
(C) Includes the GIMA Joint Venture, in which the Company has a 50% interest.
(D) Owned by the Argentina Engine Joint Venture, in which the Company has a 50%
interest.
The Company considers each of its facilities to be in good condition and
adequate for its present use. The Company believes that it has sufficient
capacity to meet its current and anticipated manufacturing requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various legal claims and actions incidental to
its business. The Company believes that none of these claims or actions, either
individually or in the aggregate, is material to the business or financial
condition of the Company.
11
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The dividend and market price information under the heading "Trading and
Dividend Information" on page 18 of the Annual Report to Stockholders for the
year ended December 31, 1999 is incorporated herein by reference.
ITEM. 6. SELECTED FINANCIAL DATA
The information under the heading "Selected Financial Data" for the years
ended December 31, 1995 through 1999 on page 18 of the Annual Report to
Stockholders for the year ended December 31, 1999 is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 19 through 26 of the
Annual Report to Stockholders for the year ended December 31, 1999 is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the heading "Foreign Currency Risk Management" and
"Interest Rates" in "Management's Discussion and Analysis and Results of
Operations" on pages 25 and 26 of the Annual Report to Stockholders and in
Footnote 1 -- "Financial Instruments" of the Notes to Consolidated Financial
Statements on page 35 of the Annual Report to Stockholders for the year ended
December 31, 1999 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Registrant and its subsidiaries
included on pages 27 through 31 of the Annual Report to Stockholders for the
year ended December 31, 1999 are incorporated herein by reference:
Report of Independent Public Accountants.
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997.
Consolidated Balance Sheets as of December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
The information under the heading "Quarterly Results" on page 23 of the
Annual Report to Stockholders for the year ended December 31, 1999 is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
12
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information under the heading "Election of Directors" and the
information under the heading "Directors Continuing in Office" on pages 2 and 3
and page 3, respectively, of the Proxy Statement for the Annual Meeting of
Stockholders to be held April 26, 2000 is incorporated herein by reference for
information on the directors of the Registrant. The information under the
heading "Executive Officers" on pages 20 and 21 of the Proxy Statement for the
Annual Meeting of Stockholders to be held April 26, 2000 is incorporated herein
by reference for information on the executive officers of the Registrant. The
information under the heading "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 21 of the Proxy Statement for the Annual Meeting of
Stockholders to be held April 26, 2000 is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the heading "Board of Directors and Certain
Committees of the Board," the information under the heading "Compensation
Committee Interlocks and Insider Participation" and the information under the
heading "Executive Compensation" on pages 4 and 5, page 5, and pages 12 through
14, respectively, of the Proxy Statement for the Annual Meeting of Stockholders
to be held April 26, 2000 are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the heading "Principal Holders of Common Stock" on
pages 10 and 11 of the Proxy Statement for the Annual Meeting of Stockholders to
be held April 26, 2000 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the heading "Certain Relationships and Related
Transactions" on page 21 of the Proxy Statement for the Annual Meeting of
Stockholders to be held April 26, 2000 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. The following consolidated financial statements of AGCO Corporation
and its subsidiaries, included in the Annual Report of the registrant to its
stockholders for the year ended December 31, 1999, are incorporated by reference
in Part II, Item 8:
Report of Independent Public Accountants.
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
13
<PAGE> 15
(a) 2. The following Report of Independent Public Accountants and the
Consolidated Financial Statement Schedule of AGCO Corporation and its
subsidiaries are included herein on pages F-1 through F-2.
<TABLE>
<S> <C>
Schedule Description
Report of Independent Public Accountants on Financial
Statement Schedule
Schedule II Valuation and Qualifying Accounts
Schedules other than that listed above have been omitted
because the required information is contained in the Notes
to the Consolidated Financial Statements or because such
schedules are not required or are not applicable.
</TABLE>
(a) 3. The following exhibits are filed or incorporated by reference as
part of this report.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
3.1 -- Certificate of Incorporation of the Registrant incorporated
by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996.
3.2 -- By-Laws of the Registrant incorporated by reference to the
Company's Annual Report on From 10-K for the year ended
December 31, 1997.
4.1 -- Rights Agreement, as amended, between and among AGCO
Corporation and SunTrust Bank, as rights agent, dated as of
April 27, 1994 incorporated by reference to the Company's
quarterly report on Form 10-Q for the quarter ended March
31, 1994 and the Company's Form 8-A/A dated August 8, 1999.
4.2 -- Indenture between AGCO Corporation and SunTrust Bank, as
Trustee, dated as of March 20, 1996, incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995.
10.1 -- 1991 Stock Option Plan, as amended, incorporated by
reference to the Company's annual report on 10-K for the
year ended December 31, 1998.
10.2 -- Form of Stock Option Agreements (Statutory and Nonstatutory)
Incorporated by reference to the Company's Registration
Statement on Form S-1 (No. 33-43437) dated April 16, 1992.*
10.3 -- Amended and Restated Long-Term Incentive Plan incorporated
by Reference to the Company's Annual Report on Form 10-K for
the Year ended December 31, 1997.*
10.4 -- Nonemployee Director Stock Incentive Plan, as amended
Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.*
10.5 -- Management Incentive Compensation Plan incorporated by
Reference to the Company's Annual Report on Form 10-K for
the Year ended December 31, 1995.*
10.6 -- Second Amended and Restated Credit Agreement dated as of
March 12, 1999 among AGCO Corporation and certain of its
affiliates and various lenders, incorporated by reference to
the Company's annual report for the year ended December 31,
1998.
10.7 -- Employment and Severance Agreement by and between AGCO
Corporation and Robert J. Ratliff incorporated by reference
to The Company's Annual Report on Form 10-K for the year
ended December 31, 1995.*
10.8 -- Employment and Severance Agreement by and between AGCO
Corporation and John M. Shumejda incorporated by reference
to The Company's Annual Report on Form 10-K for the year
ended December 31, 1995.*
10.9 -- Employment and Severance Agreement by and between AGCO
Corporation and James M. Seaver.*
10.10 -- Employment and Severance Agreement by and between AGCO
Corporation and Edward R. Swingle.*
10.11 -- Employment and Severance Agreement by and between AGCO
Corporation and Chris E. Perkins.*
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
10.12 -- Receivables Purchase Agreement dated as of January 27, 2000
among AGCO Corporation, AGCO Funding Corporation and
Cooperative Centrale Raiffeisen-Boerenleenbank B.A., as
administrative agent.
12.0 -- Statement re: Computation of Earnings to Combined Fixed
Charges.
13.0 -- Portions of the AGCO Corporation Annual Report to
Stockholders for the year ended December 31, 1999 expressly
incorporated herein by reference.
21.0 -- Subsidiaries of the Registrant.
23.0 -- Consent of Arthur Andersen LLP, independent public
accountants.
24.0 -- Power of Attorney
27.1 -- Financial Data Schedule -- December 31, 1999 (filed for SEC
reporting purposes only).
</TABLE>
- ---------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AGCO Corporation
By: /s/ JOHN M. SHUMEJDA
------------------------------------
John M. Shumejda
President and Chief Executive
Officer
Dated: March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
ROBERT J. RATLIFF* Chairman of the Board March 28, 2000
- -----------------------------------------------------
Robert J. Ratliff
/s/ JOHN M. SHUMEJDA President and Chief Executive March 28, 2000
- ----------------------------------------------------- Officer, Director
John M. Shumejda
/s/ PATRICK S. SHANNON Vice President and Chief March 28, 2000
- ----------------------------------------------------- Financial
Patrick S. Shannon Officer (Principal
Financial Officer and
Principal
Accounting Officer)
HENRY J. CLAYCAMP* Director March 28, 2000
- -----------------------------------------------------
Henry J. Claycamp
WOLFGANG DEML* Director March 28, 2000
- -----------------------------------------------------
Wolfgang Deml
WILLIAM H. FIKE* Director March 28, 2000
- -----------------------------------------------------
William H. Fike
GERALD B. JOHANNESON* Director March 28, 2000
- -----------------------------------------------------
Gerald B. Johanneson
ANTHONY D. LOEHNIS* Director March 28, 2000
- -----------------------------------------------------
Anthony D. Loehnis
HAMILTON ROBINSON, JR.* Director March 28, 2000
- -----------------------------------------------------
Hamilton Robinson, Jr.
WOLFGANG SAUER* Director March 28, 2000
- -----------------------------------------------------
Wolfgang Sauer
*By: /s/ PATRICK S. SHANNON
------------------------------------------------
Patrick S. Shannon
Attorney-in-Fact
</TABLE>
16
<PAGE> 18
ANNUAL REPORT ON FORM 10-K
ITEM 14(A)(2)
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 1999
F-1
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To 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, 1999 and 1998 and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999, and have issued our report thereon dated February 1,
2000. Our audit was made for the purpose of forming an opinion on the basic
financial 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.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 1, 2000
F-2
<PAGE> 20
SCHEDULE II
AGCO CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<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
- ----------- ---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Allowances for sales incentive
discounts and doubtful
receivables.................... $107.8 $ -- $ 84.1 $-- $ (95.3) $ 96.6
====== ==== ====== == ======= ======
Year ended December 31, 1998
Allowances for sales incentive
discounts and doubtful
receivables.................... $ 97.2 $2.0 $118.7 $-- $(110.1) $107.8
====== ==== ====== == ======= ======
Year ended December 31, 1997
Allowances for sales incentive
discounts and doubtful
receivables.................... $ 75.8 $4.1 $116.1 $-- $ (98.8) $ 97.2
====== ==== ====== == ======= ======
</TABLE>
<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
- ----------- ---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31, 1999
Accruals of severance, relocation
and other integration costs.... $ 35.0 $ -- $ 9.6(a) $-- $ (22.4) $ 22.2
====== ==== ====== == ======= ======
Year ended December 31, 1998
Accruals of severance, relocation
and other integration costs.... $ 12.4 $6.5 $ 32.8(b) $-- $ (16.7) $ 35.0
====== ==== ====== == ======= ======
Year ended December 31, 1997
Accruals of severance, relocation
and other integration costs.... $ 4.7 $6.5 $ 18.2 $-- $ (17.0) $ 12.4
====== ==== ====== == ======= ======
</TABLE>
- ---------------
(a) Excludes nonrecurring expenses related to the writedown of property, plant
and equipment of $14.9 million.
(b) Excludes nonrecurring expenses related to pension and postretirement benefit
expenses of $7.2 million.
F-3
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
<C> <C> <S> <C>
3.1 -- Certificate of Incorporation of Registrant. *
3.2 -- By-Laws of the Registrant. *
4.1 -- Rights Agreement between and among AGCO Corporation and *
Chemical Bank.
4.2 -- Indenture between AGCO Corporation and SunTrust Bank, as *
Trustee.
10.1 -- 1991 Stock Option Plan, as amended. *
10.2 -- Form of Stock Option Agreements (Statutory and *
Nonstatutory).
10.3 -- Amended and Restated Long-Term Incentive Plan. *
10.4 -- Nonemployee Director Stock Incentive Plan, as amended. *
10.5 -- Management Incentive Compensation Plan.
10.6 -- Second Amended and Restated Credit Agreement dated as of *
January 14, 1997, among AGCO Corporation and certain of its
affiliates and various lenders, incorporated by reference to
the Company's annual report for the year ended December 31,
1998.
10.7 -- Employment and Severance Agreement by and between AGCO *
Corporation and Robert J. Ratliff.
10.8 -- Employment and Severance Agreement by and between AGCO *
Corporation and John M. Shumejda.
10.9 -- Employment and Severance Agreement by and between AGCO --
Corporation and James M. Seaver.
10.10 -- Employment and Severance Agreement by and between AGCO --
Corporation and Edward R. Swingle
10.11 -- Employment and Severance Agreement by and between AGCO
Corporation and Chris E. Perkins.
10.12 -- Receivables Purchase Agreement dated as of January 27, 2000 --
among AGCO Corporation, AGCO Funding Corporation and
Cooperative Centrale Raiffeisen-Boerenleenbank B.A., as
administrative agent.
12.0 -- Statement re: Computation of Earnings to Combined Fixed --
Charges.
13.0 -- Portions of the AGCO Corporation Annual Report to --
Stockholders for the year ended December 31, 1999.
21.0 -- Subsidiaries of the Registrant. --
23.0 -- Consent of Arthur Andersen LLP, independent public --
accountants.
27.1 -- Financial Data Schedule -- December 31, 1999 (filed for SEC --
reporting purposes only)
</TABLE>
- ---------------
* Incorporated herein by reference
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (the "Agreement") entered into
this 1st day of July 1999, by and between AGCO CORPORATION, a Delaware
corporation (the "Company"), and James M. Seaver (the "Executive"),
WITNESSETH:
In consideration of the mutual covenants and agreements hereinafter
set forth, the Company and the Executive do hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein.
(b) The employment term shall commence on July 1, 1999
and shall continue in effect until terminated in accordance with Section 5 or
any other provision of the Agreement.
2. POSITION AND DUTIES.
The Executive shall serve as an Officer of the Company and shall
perform such duties and responsibilities as may from time to time be prescribed
by the Company's board of directors (the "Board"), provided that such duties
and responsibilities are consistent with the Executive's position. The
Executive shall perform and discharge faithfully, diligently and to the best of
his/her ability such duties and responsibilities and shall devote all of
his/her working time and efforts to the business and affairs of the Company and
its affiliates.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay to the Executive
an annual base salary ("Base Salary") of Three Hundred Three Thousand Six
Hundred Dollars ($303,600), payable in equal semi-monthly installments
throughout the term of such employment subject to Section 5 hereof and subject
to applicable tax and payroll deductions. The Company shall consider increases
in the Executive's Base Salary annually, and any such increase in salary
implemented by the Company shall become the Executive's Base Salary for
purposes of this Agreement.
(b) INCENTIVE COMPENSATION. Provided Executive has duly
performed his/her obligations pursuant to this Agreement, the Executive shall
be entitled to participate in or receive benefits under the Management
Incentive Compensation Plan implemented by the Company.
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(c) OTHER BENEFITS. During the term of this Agreement,
the Executive shall be entitled to participate in the long term incentive plan
implemented by the Company and any employee benefit plans and arrangements
which are available to senior executive officers of the Company, including,
without limitation, group health and life insurance, split dollar life
insurance, pension and savings and the Senior Management Employment Policy.
(d) FRINGE BENEFITS. The Company shall pay or reimburse
Executive for all reasonable and necessary expenses incurred by him/her in
connection with his/her duties hereunder, upon submission by Executive to the
Company of such written evidence of such expense as the Company may require.
Throughout the term of this Agreement, the Company will provide Executive with
the use of a vehicle for purposes within the scope of his/her employment and
shall pay all expenses for fuel, maintenance and insurance in connection with
such use of the automobile. The Company further agrees that Executive shall be
entitled to four (4) weeks of vacation in any year of the term of employment
hereunder. Nothing paid to the Executive under any such Company plans or
arrangements shall be deemed to be in lieu of compensation to the Executive
hereunder.
4. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION
COVENANTS.
(a) ACKNOWLEDGEMENTS. The Executive acknowledges that as
an Executive Officer of the Company (i) he/she frequently will be exposed to
certain "Trade Secrets" and "Confidential Information" of the Company (as those
terms are defined in Subsection 4(b)), (ii) his/her responsibilities on behalf
of the Company will extend to all geographical areas where the Company is doing
business, and (iii) any competitive activity on his/her part during the term of
his employment and for a reasonable period thereafter would necessarily involve
his/her use of the Company's Trade Secrets and Confidential Information and,
therefore, would unfairly threaten the Company's legitimate business interests,
including its substantial investment in the proprietary aspects of its business
and the goodwill associated with its customer base. Moreover, the Executive
acknowledges that, in the event of the termination of his/her employment with
the Company, he/she would have sufficient skills to find alternative,
commensurate work in his/her field of expertise that would not involve a
violation of any of the provisions of this Section 4. Therefore, the Executive
acknowledges and agrees that it is reasonable for the Company to require
him/her to abide by the covenants set forth in this Section 4. The parties
acknowledge and agree that if the nature of the Executive's responsibilities
for or on behalf of the Company and the geographical areas in which the
Executive must fulfill them materially change, the parties will execute
appropriate amendments to the scope of the covenants in this Section 4.
(b) DEFINITIONS. For purposes of this Section 4, the
following terms shall have the following meanings:
(i) "COMPETITIVE POSITION" shall mean (i) the
Executive's
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direct or indirect equity ownership (excluding equity ownership of less than
one percent (1%) or control of all or any portion of a Competitor, or (ii) any
employment, consulting partnership, advisory, directorship, agency, promotional
or independent contractor arrangement between the Executive and any Competitor
whereby the Executive is required to perform executive level services
substantially similar to those that he will perform for the Company as an
Executive Officer.
(ii) "COMPETITOR" of the Company shall refer to
any person or entity engaged, wholly or partly, in the business of
manufacturing and distributing farm equipment machinery and replacement parts.
(iii) "CONFIDENTIAL INFORMATION" shall mean the
proprietary and confidential data or information of the Company, other than
"Trade Secrets" (as defined below), which is of tangible or intangible value to
the Company and is not public information or is not generally known or
available to the Company's competitors.
(iv) "TRADE SECRETS" shall mean information of
the Company, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, products plans, or lists
of actual or potential customers or suppliers, which: (a) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(v) "WORK PRODUCT" shall mean all work product,
property, data, documentation, "know-how", concepts or plans, inventions,
improvements, techniques, processes or information of any kind, relating to the
Company and its business prepared, conceived, discovered, developed or created
by the Executive for the Company or any of the Company's customers.
(c) NONDISCLOSURE; OWNERSHIP OR PROPRIETARY PROPERTY.
(i) The Executive hereby covenants and agrees
that: (i) with regard to information constituting a Trade Secret, at all times
during the Executive's employment with the Company and all times thereafter
during which such information continues to constitute a Trade Secret; and (ii)
with regard to any Confidential Information, at all times during the
Executive's employment with the Company and for three (3) years after the
termination of the Executive's employment with the Company, the Executive shall
regard and treat all information constituting a Trade Secret or Confidential
Information as strictly confidential and wholly owned by the Company and will
not, for any reason in any fashion, either directly or indirectly, use, sell,
lend, lease, distribute, license, give, transfer, assign, show, disclose,
disseminate, reproduce, copy, appropriate or otherwise communicate any such
information to any party for any purpose other than strictly in accordance with
the express terms of this Agreement and other than as may be required by law.
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(ii) To the greatest extent possible, any Work
Product shall be deemed to be "work made for hire" (as defined in the Copyright
Act, 17 U.S.C.A, ss. 101 et seq., as amended) and owned exclusively by the
Company. The Executive hereby unconditionally and irrevocably transfers and
assigns to the Company all rights, title and interest the Executive may
currently have or in the future may have by operation of law or otherwise in or
to any Work Product, including, without limitation, all patents, copyrights,
trademarks, service marks and other intellectual property rights. The Executive
agrees to execute and deliver to the Company any transfers, assignments,
documents or other instruments which the Company may deem necessary or
appropriate to vest complete title and ownership of any Work Product, and all
rights therein, exclusively in the Company.
(iii) The Executive shall immediately notify the
Company of any intended or unintended, unauthorized disclosure or use of any
Trade Secrets or Confidential Information by the Executive or any other person
of which the Executive becomes aware. In addition to complying with the
provisions of section 4(c) (i) and 4 (c) (ii), the Executive shall exercise his
best efforts to assist the Company, to the extent the Company deems reasonably
necessary, in the procurement of any protection of the Company's rights to or
in any of the Trade Secrets or Confidential Information.
(iv) Immediately upon termination of the
Executive's employment with the Company, or at any point prior to or after that
time upon the specific request of the Company, the Executive shall return to
the Company all written or descriptive materials of any kind in the Executive's
possession or to which the Executive has access that constitute or contain any
Confidential Information or Trade Secrets, and the confidentiality obligations
of this Agreement shall continue until their expiration under the terms of this
Agreement.
(d) NON-COMPETITION. The Executive agrees that during
his/her employment, he/she will not, either directly or indirectly, alone or in
conjunction with any other party, (i) accept or enter into a Competitive
Position with a Competitor of the company, or (ii) take any action in
furtherance of or in conjunction with a Competitive Position with a Competitor
of the Company. The Executive agrees that for two (2) years after any
termination of his employment with the Company, he/she will not, in the
"Restricted Territory" (as defined in the next sentence), either directly or
indirectly, alone or in conjunction with any other party, (A) accept or enter
into a Competitive Position with a Competitor of the Company, or (B) take any
action in furtherance of or in conjunction with a Competitive Position with a
Competitor of the Company. For purposes of this Section 4, "Restricted
Territory" shall refer to all geographical areas comprised within the fifty
United States of America, Western Europe, Brazil and Canada. The Executive and
the Company each acknowledge that the scope of the Restricted Territory is
reasonable because (1) the Company is conducting substantial business in all
fifty states (as well as several foreign countries), (2) the Executive occupies
one of the top executive positions with the Company, and (3) the Executive will
be carrying out his employment responsibilities in all locations where the
Company is doing business.
(e) NON-SOLICITATION OF CUSTOMERS. The Executive agrees
that during the term of his/her employment, he/she will not, either directly or
indirectly, along or in
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conjunction with any other party, solicit, divert or appropriate or attempt to
solicit, divert or appropriate any customer or actively sought prospective
customer of the Company for or on behalf of any Competitor of the Company. The
Executive agrees that for two (2) years after any termination of his employment
with the Company, he/she will not, in the Restricted Territory, either directly
or indirectly, alone or in conjunction with any other party, for or on behalf
of a Competitor of the Company, solicit, divert or appropriate or attempt to
solicit, divert or appropriate any customer or actively sought prospective
customer of the Company with whom he had substantial contact during a period of
time up to, but no longer than, eighteen (18) months prior to any termination
of his/her employment with the Company.
(f) NON-SOLICITATION OF COMPANY PERSONNEL. The Executive
agrees that, except to the extent that he/she is required to do so in
connection with his/her express employment responsibilities on behalf of the
Company, during the term of his/her employment he/she will not, either directly
or indirectly, alone on in conjunction with any other party, solicit or attempt
to solicit any employee, consultant, contractor or other personnel of the
Company to terminate, alter or lessen that party's affiliation with the Company
or to violate the terms of any agreement or understanding between such
employee, consultant, contractor or other person and the Company. The Executive
agrees that for two (2) years after any termination of his/her employment with
the Company, and in the Restricted Territory, he/she will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any "material" or "key" (as those terms are defined in the next
sentence) employee, consultant, contractor or other personnel of the Company to
terminate, alter or lessen that party's affiliation with the Company or to
violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and the company. For purposes of the
preceding sentence, "material" or "key" employees, consultants, contractors or
other personnel of the Company are those who have access to the Company's Trade
Secrets and Confidential Information and whose position or affiliation with the
Company is significant.
(g) REMEDIES. Executive agrees that damages at law for
the Executive's violation of any of the covenants in this Section 4 would not
be an adequate or proper remedy and that should the Executive violate or
threaten to violate any of the provisions of such covenants, the Company or its
successors or assigns shall be entitled to obtain a temporary or permanent
injunction against Executive in any court having jurisdiction prohibiting any
further violation of any such covenants, in addition to any award or damages,
compensatory, exemplary or otherwise, for such violation, if any.
(h) PARTIAL ENFORCEMENT. The Company has attempted to
limit the rights of the Executive to compete only to the extent necessary to
protect the Company from unfair competition. The Company, however, agrees that,
if the scope of enforceability of these restrictive covenants is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the
circumstances existing at the time.
5. TERMINATION.
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(a) DEATH. The Executive's employment hereunder shall
terminate upon the death of the Executive, provided, however, that for purposes
of the payment of compensation and benefits to the Executive under this
Agreement the death of the Executive shall be deemed to have occurred ninety
(90) days from the last day of the month in which the death of the Executive
shall have occurred.
(b) INCAPACITY. The Company may terminate the
Executive's employment hereunder at the end of any calendar month by giving
written Notice of Termination to the Executive in the event of the Executive's
incapacity due to physical or mental illness which prevents the proper
performance of the duties of the Executive set forth herein or established
pursuant hereto for a substantial portion of any six (6) month period of the
Executive's term of employment hereunder. Any question as to the existence,
extent or potentiality of illness or incapacity of Executive upon which Company
and Executive cannot agree shall be determined by a qualified independent
physician selected by the Company and approved by Executive (or, if Executive
is unable to give such approval, by any adult member of the immediate family or
the duly appointed guardian of the Executive). The determination of such
physician shall be certified in writing to the Company and to the Executive and
shall be final and conclusive for all purposes of this Agreement.
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice of Termination to the
Executive. For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder upon: (i) the Executive's
habitual drunkenness or chronic substance abuse; (ii) a willful failure by the
Executive to materially perform and discharge the duties and responsibilities
of the Executive hereunder; (iii) any breach by the Executive of the provisions
of Section 4 hereof; (iv) any misconduct by the Executive that is materially
injurious to the Company; or (v) a conviction of a felony involving the
personal dishonesty or moral turpitude of the Executive.
(d) WITHOUT CAUSE; GOOD REASON.
(i) The Company may terminate the Executive's
employment hereunder without Cause, by giving written Notice of termination to
the Executive.
(ii) The Executive may terminate his employment
hereunder, by giving written Notice of Termination to the Company. For the
purposes of this Agreement, the Executive shall have "Good Reason" to terminate
his employment hereunder upon (and without the written consent of the
Executive) (a) a reduction in the Executive's base salary or benefits received
from the Company, other than in connection with an across-the-board reduction
in salaries and/or benefits for similarly situated employees of the Company or
pursuant to the Company's standard retirement policy; or (b) the relocation of
the Executive's full-time office to a location greater than fifty (50) miles
from the Company's current corporate office; or (c) a material breach by the
Company of this Agreement.
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(e) NOTICE OF TERMINATION. Any termination by the
Company pursuant to the Subsections (b), (c) or (d)(i) above or by the
Executive pursuant to Subsection (d)(ii) above, shall be communicated by
written Notice of Termination from the party issuing such notice to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision of this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. A date of
termination specified in the Notice of Termination shall not be dated earlier
than ninety (90) days from the date such Notice is delivered or mailed to the
applicable party.
(f) OBLIGATION TO PAY. Except upon voluntary termination
by the Executive without Good Reason and subject to Section 6 below, the
Company shall pay the compensation specified in this Subsection 5(f) to the
Executive for the period specified in this Subsection 5(f). The company also
will continue insurance benefits during the remainder of the applicable period,
including the Severance Period set forth in this Subsection 5(f). If the
Executive's employment shall be terminated by reason of death, the estate of
the Executive shall be paid all sums otherwise payable to the Executive through
the end of the third month after the month in which the death of the Executive
occurred and all bonus or other incentive benefits accrued or accruable to the
Executive through the end of the month in which the death of the Executive
occurred and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment is terminated by reason of
incapacity, the Executive or the person charged with legal responsibility for
the Executive's estate shall be paid all sums otherwise payable to the
Executive, including the bonus and other benefits accrued or accruable to the
Executive, through the date of termination specified in the Notice of
Termination, and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive his Base Salary through the date of
termination specified in the Notice of Termination and the Company shall have
no further obligations to the Executive under this Agreement. If the
Executive's employment shall be terminated by the Company, without cause or by
the Executive for Good Reason, the Company shall (x) continue to pay the
Executive the Base Salary (at the rate in effect on the date of such
termination) for a period of two (2) years beginning as of the date of such
termination (such two (2) year period being referred to hereinafter as the
"Severance Period") at such intervals as the same would have been paid had the
Executive remained in the active service of the Company, and (y) pay the
Executive a pro rata portion of the bonus or other incentive benefits to which
the Executive would have been entitled for the year of termination, had the
Executive remained employed for the entire year, which incentive compensation
shall be payable at the time incentive compensation is payable generally under
the applicable incentive plans. The executive shall have no further right to
receive any other compensation benefits or perquisites after the date of
termination of employment except as determined under the terms of the employee
benefit plans or programs of the Company or under applicable law.
6. CONDITIONS APPLICABLE TO SEVERANCE PERIOD; MITIGATION OF
DAMAGES.
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(a) If during the Severance Period, the Executive
breaches his obligations under Section 4 above, the Company may, upon written
notice to the Executive, terminate the Severance Period and cease to make any
further payments or provide any benefits described in Subsection 5(f).
(b) Although the Executive shall not be required to
mitigate the amount of any payment provided for in Subsection 5(f) by seeking
other employment, any such payments shall be reduced by any amounts which the
Executive receives or is entitled to receive from another employer with respect
to the Severance Period. The Executive shall promptly notify the Company in
writing in the event that other employment is obtained during the Severance
Period.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications to either party hereunder provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or mailed by certified first- class mail, postage prepaid, addressed:
in the case of the Company to:
AGCO Corporation
4205 River Green Parkway
Duluth, Georgia 30036
Attention: R. J. Ratliff
in the case of the Executive to:
James M. Seaver
503 Butler National Drive
Duluth, GA 30097
or to such other address as either party shall designate by giving written
notice of such change to the other party.
8. ARBITRATION. Any claim, controversy, or dispute arising
between the parties with respect to this Agreement, to the maximum extent
allowed by applicable law, shall be submitted to and resolved by binding
arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and (except as otherwise specified herein) the
Commercial Arbitration Rules of the American Arbitration Association in effect
at the time the arbitration is commenced. The venue for the arbitration shall
be the Atlanta, Georgia offices of the American Arbitration Association. Either
party may notify the other party at any time of the existence of an arbitrable
controversy by delivery in person or by certified mail of a Notice of
Arbitrable Controversy. Upon receipt of such a Notice, the parties shall
attempt in good faith to resolve their differences within fifteen (15) days
after the receipt of such Notice. Notice to the Company and the Executive shall
be sent to the addresses specified in Section 7 above. If the dispute cannot be
resolved within the fifteen (15) day period, either party may file a written
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Demand for Arbitration with the American Arbitration Association's Atlanta,
Georgia Regional Office, and shall send a copy of the Demand for Arbitration to
the other party. The arbitration shall be conducted before a panel of three (3)
arbitrators. The arbitrators shall be selected as follows: (a) The party filing
the Demand for Arbitration shall simultaneously specify his or its arbitrator,
giving the name, address and telephone number of said arbitrator; (b) The party
receiving such notice shall notify the party demanding the arbitration of his
or its arbitrator, giving the name, address and telephone number of the
arbitrator within five (5) days of the receipt of such Demand for Arbitration;
(c) A neutral person shall he selected through the American Arbitration
Association's arbitrator selection procedures to serve as the third arbitrator.
The arbitrator designated by any party need not be neutral. In the event that
any person fails or refuses timely to name his arbitrator within the time
specified in this Section 8, the American Arbitration Association shall
(immediately upon notice from the other party) appoint an arbitrator. The
arbitrators thus constituted shall promptly meet, select a chairperson, fix the
time, date(s), and place of the hearing, and notify the parties. To the extent
practical, the arbitrators shall schedule the hearing to commence within sixty
(60) days after the arbitrators have been impaneled. A majority of the panel
shall render an award within ten (10) days of the completion of the hearing,
which award may include an award of interest, legal fees and costs of
arbitration. The panel of arbitrators shall promptly transmit an executed copy
of the award to the respective parties. The award of the arbitrators shall be
final, binding and conclusive upon the parties hereto. Each party shall have
the right to have the award enforced by any court of competent jurisdiction.
Executive initials:_________ Company initials:___________
9. NO WAIVER. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is approved
by the Board and agreed to in a writing signed by the Executive and such
officer as may be specifically authorized by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of any other provisions or
conditions of this Agreement at the same or at any prior or subsequent time.
10. SUCCESSORS AND ASSIGNS. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Company and the Executive's rights under this
Agreement shall inure to the benefit of and be binding upon his heirs and
executors. Neither this Agreement or any rights or obligations of the Executive
herein shall be transferable or assignable by the Executive.
11. VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect. The parties intend for each of the covenants contained in Section 4 to
be severable from one another.
12. SURVIVAL. The provisions of Section 4 hereof shall survive
the termination of Executive's employment and shall be binding upon the
Executive's personal or legal
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representative, executors, administrators, successors, heirs, distributee,
devisees and legatees and the provisions of Sections 5 hereof relating to
payments and termination of the Executive's employment hereunder shall survive
such termination and shall be binding upon the Company.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. ENTIRE AGREEMENT. This Agreement constitutes the full
agreement and understanding of the parties hereto with respect to the subject
matter hereof and all prior or contemporaneous agreements or understandings are
merged herein. The parties to this Agreement each acknowledge that both of them
and their respective agents and advisors were active in the negotiation and
drafting of the terms of this Agreement.
15. GOVERNING LAW. The validity, construction and enforcement of
this Agreement, and the determination of the rights and duties of the parties
hereto, shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
AGCO CORPORATION
By: /s/ Robert J. Ratliff
----------------------------------------
Name: Robert J. Ratliff
--------------------------------------
Title: Chairman
-------------------------------------
EXECUTIVE OFFICER
/s/ James M. Seaver
-------------------------------------------
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EXHIBIT 10.10
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (the "Agreement") entered into
this 1st day of September 1999 by and between AGCO CORPORATION, a Delaware
corporation (the "Company"), and Edward R. Swingle (the "Executive"),
WITNESSETH:
In consideration of the mutual covenants and agreements hereinafter
set forth, the Company and the Executive do hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein.
(b) The employment term shall commence on September 1,
1999 and shall continue in effect until terminated in accordance with Section 5
or any other provision of the Agreement.
2. POSITION AND DUTIES.
The Executive shall serve as an Executive Officer of the Company and
shall perform such duties and responsibilities as may from time to time be
prescribed by the Company's board of directors (the "Board"), provided that
such duties and responsibilities are consistent with the Executive's position.
The Executive shall perform and discharge faithfully, diligently and to the
best of his/her ability such duties and responsibilities and shall devote all
of his/her working time and efforts to the business and affairs of the Company
and its affiliates.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay to the Executive
an annual base salary ("Base Salary") of Two Hundred Seventy-Two Thousand, Six
Hundred Seven Dollars and Fifty Cents ($272,607.50), payable in equal
semi-monthly installments throughout the term of such employment subject to
Section 5 hereof and subject to applicable tax and payroll deductions. The
Company shall consider increases in the Executive's Base Salary annually, and
any such increase in salary implemented by the Company shall become the
Executive's Base Salary for purposes of this Agreement.
(b) INCENTIVE COMPENSATION. Provided Executive has duly
performed his/her obligations pursuant to this Agreement, the Executive shall
be entitled to participate in or receive benefits under the Management
Incentive Compensation Plan implemented by the Company.
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(c) OTHER BENEFITS. During the term of this Agreement,
the Executive shall be entitled to participate in the long term incentive plan
implemented by the Company and any employee benefit plans and arrangements
which are available to senior executive officers of the Company, including,
without limitation, group health and life insurance, pension and savings and
the Senior Management Employment Policy.
(d) FRINGE BENEFITS. The Company shall pay or reimburse
Executive for all reasonable and necessary expenses incurred by him/her in
connection with his/her duties hereunder, upon submission by Executive to the
Company of such written evidence of such expense as the Company may require.
Throughout the term of this Agreement, the Company will provide Executive with
the use of a vehicle for purposes within the scope of his/her employment and
shall pay all expenses for fuel, maintenance and insurance in connection with
such use of the automobile. The Company further agrees that Executive shall be
entitled to four (4) weeks of vacation in any year of the term of employment
hereunder. Nothing paid to the Executive under any such Company plans or
arrangements shall be deemed to be in lieu of compensation to the Executive
hereunder.
4. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION
COVENANTS.
(a) ACKNOWLEDGEMENTS. The Executive acknowledges that as
an Executive Officer of the Company (i) he/she frequently will be exposed to
certain "Trade Secrets" and "Confidential Information" of the Company (as those
terms are defined in Subsection 4(b)), (ii) his/her responsibilities on behalf
of the Company will extend to all geographical areas where the Company is doing
business, and (iii) any competitive activity on his/her part during the term of
his employment and for a reasonable period thereafter would necessarily involve
his/her use of the Company's Trade Secrets and Confidential Information and,
therefore, would unfairly threaten the Company's legitimate business interests,
including its substantial investment in the proprietary aspects of its business
and the goodwill associated with its customer base. Moreover, the Executive
acknowledges that, in the event of the termination of his/her employment with
the Company, he/she would have sufficient skills to find alternative,
commensurate work in his/her field of expertise that would not involve a
violation of any of the provisions of this Section 4. Therefore, the Executive
acknowledges and agrees that it is reasonable for the Company to require
him/her to abide by the covenants set forth in this Section 4. The parties
acknowledge and agree that if the nature of the Executive's responsibilities
for or on behalf of the Company and the geographical areas in which the
Executive must fulfill them materially change, the parties will execute
appropriate amendments to the scope of the covenants in this Section 4.
(b) DEFINITIONS. For purposes of this Section 4, the
following terms shall have the following meanings:
(i) "COMPETITIVE POSITION" shall mean (i) the
Executive's direct or indirect equity ownership (excluding equity ownership of
less than one percent (1%) or control of all or any portion of a Competitor, or
(ii) any employment, consulting, partnership,
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advisory, directorship, agency, promotional or independent contractor
arrangement between the Executive and any Competitor whereby the Executive is
required to perform executive level services substantially similar to those
that he will perform for the Company as an Executive Officer.
(ii) "COMPETITOR" of the Company shall refer to
any person or entity engaged, wholly or partly, in the business of
manufacturing and distributing farm equipment machinery and replacement parts.
(iii) "CONFIDENTIAL INFORMATION" shall mean the
proprietary and confidential data or information of the Company, other than
"Trade Secrets" (as defined below), which is of tangible or intangible value to
the Company and is not public information or is not generally known or
available to the Company's competitors.
(iv) "TRADE SECRETS" shall mean information of
the Company, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, products plans, or lists
of actual or potential customers or suppliers, which: (a) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(v) "WORK PRODUCT" shall mean all work product,
property, data, documentation, "know-how", concepts or plans, inventions,
improvements, techniques, processes or information of any kind, relating to the
Company and its business prepared, conceived, discovered, developed or created
by the Executive for the Company or any of the Company's customers.
(c) NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY.
(i) The Executive hereby covenants and agrees
that: (i) with regard to information constituting a Trade Secret, at all times
during the Executive's employment with the Company and all times thereafter
during which such information continues to constitute a Trade Secret; and (ii)
with regard to any Confidential Information, at all times during the
Executive's employment with the Company and for three (3) years after the
termination of the Executive's employment with the Company, the Executive shall
regard and treat all information constituting a Trade Secret or Confidential
Information as strictly confidential and wholly owned by the Company and will
not, for any reason in any fashion, either directly or indirectly, use, sell,
lend, lease, distribute, license, give, transfer, assign, show, disclose,
disseminate, reproduce, copy, appropriate or otherwise communicate any such
information to any party for any purpose other than strictly in accordance with
the express terms of this Agreement and other than as may be required by law.
(ii) To the greatest extent possible, any Work
Product shall be deemed to be "work made for hire" (as defined in the Copyright
Act, 17 U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the
Company. The Executive hereby unconditionally and
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irrevocably transfers and assigns to the Company all rights, title and interest
the Executive may currently have or in the future may have by operation of law
or otherwise in or to any Work Product, including, without limitation, all
patents, copyrights, trademarks, service marks and other intellectual property
rights. The Executive agrees to execute and deliver to the Company any
transfers, assignments, documents or other instruments which the Company may
deem necessary or appropriate to vest complete title and ownership of any Work
Product, and all rights therein, exclusively in the Company.
(iii) The Executive shall immediately notify the
Company of any intended or unintended, unauthorized disclosure or use of any
Trade Secrets or Confidential Information by the Executive or any other person
of which the Executive becomes aware. In addition to complying with the
provisions of Section 4(c)(i) and 4(c)(ii), the Executive shall exercise his
best efforts to assist the Company, to the extent the Company deems reasonably
necessary, in the procurement of any protection of the Company's rights to or
in any of the Trade Secrets or Confidential Information.
(iv) Immediately upon termination of the
Executive's employment with the Company, or at any point prior to or after that
time upon the specific request of the Company, the Executive shall return to
the Company all written or descriptive materials of any kind in the Executive's
possession or to which the Executive has access that constitute or contain any
Confidential Information or Trade Secrets, and the confidentiality obligations
of this Agreement shall continue until their expiration under the terms of this
Agreement.
(d) NON-COMPETITION. The Executive agrees that during
his/her employment, he/she will not, either directly or indirectly, alone or in
conjunction with any other party, (i) accept or enter into a Competitive
Position with a Competitor of the Company, or (ii) take any action in
furtherance of or in conjunction with a Competitive Position with a Competitor
of the Company. The Executive agrees that for two (2) years after any
termination of his employment with the Company, he/she will not, in the
"Restricted Territory" (as defined in the next sentence), either directly or
indirectly, alone or in conjunction with any other party, (A) accept or enter
into a Competitive Position with a Competitor of the Company, or (B) take any
action in furtherance of or in conjunction with a Competitive Position with a
Competitor of the Company. For purposes of this Section 4, "Restricted
Territory" shall refer to all geographical areas comprised within the fifty
United States of America, Western Europe, Brazil and Canada. The Executive and
the Company each acknowledge that the scope of the Restricted Territory is
reasonable because (1) the Company is conducting substantial business in all
fifty states (as well as several foreign countries), (2) the Executive occupies
one of the top executive positions with the Company, and (3) the Executive will
be carrying out his employment responsibilities in all locations where the
Company is doing business.
(e) NON-SOLICITATION OF CUSTOMERS. The Executive agrees
that during the term of his/her employment, he/she will not, either directly or
indirectly, along or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate any customer or
actively sought prospective customer of the Company for or on behalf of any
Competitor of the Company. The Executive agrees that for two (2) years after
any termination of his employment with the Company, he/she will not, in the
Restricted Territory,
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either directly or indirectly, alone or in conjunction with any other party,
for or on behalf of a Competitor of the Company, solicit, divert or appropriate
or attempt to solicit, divert or appropriate any customer or actively sought
prospective customer of the Company with whom he had substantial contact during
a period of time of up to, but no longer than, eighteen (18) months prior to
any termination of his/her employment with the Company.
(f) NON-SOLICITATION OF COMPANY PERSONNEL. The Executive
agrees that, except to the extent that he/she is required to do so in
connection with his/her express employment responsibilities on behalf of the
Company, during the term of his/her employment he/she will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any employee, consultant, contractor or other personnel of the
Company to terminate, alter or lessen that party's affiliation with the Company
or to violate the terms of any agreement or understanding between such
employee, consultant, contractor or other person and the Company. The Executive
agrees that for two (2) years after any termination of his/her employment with
the Company, and in the Restricted Territory, he/she will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any "material" or "key" (as those terms are defined in the next
sentence) employee, consultant, contractor or other personnel of the Company to
terminate, alter or lessen that party's affiliation with the Company or to
violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and the Company. For purposes of the
preceding sentence, "material" or "key" employees, consultants, contractors or
other personnel of the Company are those who have access to the Company's Trade
Secrets and Confidential Information and whose position or affiliation with the
Company is significant.
(g) REMEDIES. Executive agrees that damages at law for
the Executive's violation of any of the covenants in this Section 4 would not
be an adequate or proper remedy and that should the Executive violate or
threaten to violate any of the provisions of such covenants, the Company or its
successors or assigns shall be entitled to obtain a temporary or permanent
injunction against Executive in any court having jurisdiction prohibiting any
further violation of any such covenants, in addition to any award or damages,
compensatory, exemplary or otherwise, for such violation, if any.
(h) PARTIAL ENFORCEMENT. The Company has attempted to
limit the rights of the Executive to compete only to the extent necessary to
protect the Company from unfair competition. The Company, however, agrees that,
if the scope of enforceability of these restrictive covenants is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the
circumstances existing at the time.
5. TERMINATION.
(a) DEATH. The Executive's employment hereunder shall
terminate upon the death of the Executive, provided, however, that for purposes
of the payment of compensation and benefits to the Executive under this
Agreement the death of the Executive shall be deemed to have occurred ninety
(90) days from the last day of the month in which the death of the Executive
shall have occurred.
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(b) INCAPACITY. The Company may terminate the
Executive's employment hereunder at the end of any calendar month by giving
written Notice of Termination to the Executive in the event of the Executive's
incapacity due to physical or mental illness which prevents the proper
performance of the duties of the Executive set forth herein or established
pursuant hereto for a substantial portion of any six (6) month period of the
Executive's term of employment hereunder. Any question as to the existence,
extent or potentiality of illness or incapacity of Executive upon which Company
and Executive cannot agree shall be determined by a qualified independent
physician selected by the Company and approved by Executive (or, if Executive
is unable to give such approval, by any adult member of the immediate family or
the duly appointed guardian of the Executive). The determination of such
physician shall be certified in writing to the Company and to the Executive and
shall be final and conclusive for all purposes of this Agreement.
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice of Termination to the
Executive. For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder upon: (i) the Executive's
habitual drunkenness or chronic substance abuse; (ii) a willful failure by the
Executive to materially perform and discharge the duties and responsibilities
of the Executive hereunder; (iii) any breach by the Executive of the provisions
of Section 4 hereof; (iv) any misconduct by the Executive that is materially
injurious to the Company; or (v) a conviction of a felony involving the
personal dishonesty or moral turpitude of the Executive.
(d) WITHOUT CAUSE; GOOD REASON.
(i) The Company may terminate the Executive's
employment hereunder without Cause, by giving written Notice of termination to
the Executive.
(ii) The Executive may terminate his employment
hereunder, by giving written Notice of Termination to the Company. For the
purposes of this Agreement, the Executive shall have "Good Reason" to terminate
his employment hereunder upon (and without the written consent of the
Executive) (a) a reduction in the Executive's base salary or benefits received
from the Company, other than in connection with an across-the-board reduction
in salaries and/or benefits for similarly situated employees of the Company or
pursuant to the Company's standard retirement policy; or (b) the relocation of
the Executive's full-time office to a location greater than fifty (50) miles
from the Company's current corporate office; or (c) a material breach by the
Company of this Agreement.
(e) NOTICE OF TERMINATION. Any termination by the
Company pursuant to the Subsections (b), (c) or (d)(i) above or by the
Executive pursuant to Subsection (d)(ii) above, shall be communicated by
written Notice of Termination from the party issuing such notice to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision of this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. A date of
termination specified in the Notice of Termination shall
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not be dated earlier than ninety (90) days from the date such Notice is
delivered or mailed to the applicable party.
(f) OBLIGATION TO PAY. Except upon voluntary termination
by the Executive without Good Reason and subject to Section 6 below, the
Company shall pay the compensation specified in this Subsection 5(f) to the
Executive for the period specified in this Subsection 5(f). The Company also
will continue insurance benefits during the remainder of the applicable period,
including the Severance Period set forth in this Subsection 5(f). If the
Executive's employment shall be terminated by reason of death, the estate of
the Executive shall be paid all sums otherwise payable to the Executive through
the end of the third month after the month in which the death of the Executive
occurred and all bonus or other incentive benefits accrued or accruable to the
Executive through the end of the month in which the death of the Executive
occurred and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment is terminated by reason of
incapacity, the Executive or the person charged with legal responsibility for
the Executive's estate shall be paid all sums otherwise payable to the
Executive, including the bonus and other benefits accrued or accruable to the
Executive, through the date of termination specified in the Notice of
Termination, and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive his Base Salary through the date of
termination specified in the Notice of Termination and the Company shall have
no further obligations to the Executive under this Agreement. If the
Executive's employment shall be terminated by the Company, without cause, or by
the Executive for Good Reason, the Company shall (x) continue to pay the
Executive the Base Salary (at the rate in effect on the date of such
termination) for a period of two (2) years beginning as of the date of such
termination (such two (2) year period being referred to hereinafter as the
"Severance Period") at such intervals as the same would have been paid had the
Executive remained in the active service of the Company, and (y) pay the
Executive a pro rata portion of the bonus or other incentive benefits to which
the Executive would have been entitled for the year of termination, had the
Executive remained employed for the entire year, which incentive compensation
shall be payable at the time incentive compensation is payable generally under
the applicable incentive plans. The executive shall have no further right to
receive any other compensation benefits or perquisites after the date of
termination of employment except as determined under the terms of the employee
benefit plans or programs of the Company or under applicable law.
6. CONDITIONS APPLICABLE TO SEVERANCE PERIOD; MITIGATION OF
DAMAGES
(a) If during the Severance Period, the Executive
breaches his obligations under Section 4 above, the Company may, upon written
notice to the Executive, terminate the Severance Period and cease to make any
further payments or provide any benefits described in Subsection 5(f).
(b) Although the Executive shall not be required to
mitigate the amount of any payment provided for in Subsection 5(f) by seeking
other employment, any such payments shall be reduced by any amounts which the
Executive receives or is entitled to receive from another
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employer with respect to the Severance Period. The Executive shall promptly
notify the Company in writing in the event that other employment is obtained
during the Severance Period.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications to either party hereunder provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or mailed by certified first-class mail, postage prepaid, addressed:
in the case of the Company to:
AGCO Corporation
4205 River Green Parkway
Duluth, Georgia 30096
Attention: R. J. Ratliff
in the case of the Executive to:
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or to such other address as either party shall designate by giving written
notice of such change to the other party.
8. ARBITRATION. Any claim, controversy, or dispute arising
between the parties with respect to this Agreement, to the maximum extent
allowed by applicable law, shall be submitted to and resolved by binding
arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and (except as otherwise specified herein) the
Commercial Arbitration Rules of the American Arbitration Association in effect
at the time the arbitration is commenced. The venue for the arbitration shall
be the Atlanta, Georgia offices of the American Arbitration Association. Either
party may notify the other party at any time of the existence of an arbitrable
controversy by delivery in person or by certified mail of a Notice of
Arbitrable Controversy. Upon receipt of such a Notice, the parties shall
attempt in good faith to resolve their differences within fifteen (15) days
after the receipt of such Notice. Notice to the Company and the Executive shall
be sent to the addresses specified in Section 7 above. If the dispute cannot be
resolved within the fifteen (15) day period, either party may file a written
Demand for Arbitration with the American Arbitration Association's Atlanta,
Georgia Regional Office, and shall send a copy of the Demand for Arbitration to
the other party. The arbitration shall be conducted before a panel of three (3)
arbitrators. The arbitrators shall be selected as follows: (a) The party filing
the Demand for Arbitration shall simultaneously specify his or its arbitrator,
giving the name, address and telephone number of said arbitrator; (b) The party
receiving such notice shall notify the party demanding the arbitration of his
or its arbitrator, giving the name, address and telephone number of the
arbitrator within five (5) days of the receipt of such Demand for Arbitration;
(c) A neutral person shall be selected through the American Arbitration
Association's arbitrator selection procedures to serve as the third arbitrator.
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The arbitrator designated by any party need not be neutral. In the event that
any person fails or refuses timely to name his arbitrator within the time
specified in this Section 8, the American Arbitration Association shall
(immediately upon notice from the other party) appoint an arbitrator. The
arbitrators thus constituted shall promptly meet, select a chairperson, fix the
time, date(s), and place of the hearing, and notify the parties. To the extent
practical, the arbitrators shall schedule the hearing to commence within sixty
(60) days after the arbitrators have been impaneled. A majority of the panel
shall render an award within ten (10) days of the completion of the hearing,
which award may include an award of interest, legal fees and costs of
arbitration. The panel of arbitrators shall promptly transmit an executed copy
of the award to the respective parties. The award of the arbitrators shall be
final, binding and conclusive upon the parties hereto. Each party shall have
the right to have the award enforced by any court of competent jurisdiction.
Executive initials:_________ Company initials:___________
9. NO WAIVER. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is approved
by the Board and agreed to in a writing signed by the Executive and such
officer as may be specifically authorized by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of any other provisions or
conditions of this Agreement at the same or at any prior or subsequent time.
10. SUCCESSORS AND ASSIGNS. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Company and the Executive's rights under this
Agreement shall inure to the benefit of and be binding upon his heirs and
executors. Neither this Agreement or any rights or obligations of the Executive
herein shall be transferable or assignable by the Executive.
11. VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect. The parties intend for each of the covenants contained in Section 4 to
be severable from one another.
12. SURVIVAL. The provisions of Section 4 hereof shall survive
the termination of Executive's employment and shall be binding upon the
Executive's personal or legal representative, executors, administrators,
successors, heirs, distributee, devisees and legatees and the provisions of
Section 5 hereof relating to payments and termination of the Executive's
employment hereunder shall survive such termination and shall be binding upon
the Company.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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14. ENTIRE AGREEMENT. This Agreement constitutes the full
agreement and understanding of the parties hereto with respect to the subject
matter hereof and all prior or contemporaneous agreements or understandings are
merged herein. The parties to this Agreement each acknowledge that both of them
and their respective agents and advisors were active in the negotiation and
drafting of the terms of this Agreement.
15. GOVERNING LAW. The validity, construction and enforcement of
this Agreement, and the determination of the rights and duties of the parties
hereto, shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
AGCO CORPORATION
By: /s/ Robert J. Ratliff
----------------------------------------
Name: Robert J. Ratliff
--------------------------------------
Title: Chairman
-------------------------------------
EXECUTIVE OFFICER
/s/ Edward R. Swingle
-------------------------------------------
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EXHIBIT 10.11
EMPLOYMENT AND SEVERANCE AGREEMENT
This Employment and Severance Agreement (the "Agreement") entered into
this 1st day of September 1999 by and between AGCO CORPORATION, a Delaware
corporation (the "Company"), and Chris E. Perkins (the "Executive"),
WITNESSETH:
In consideration of the mutual covenants and agreements hereinafter
set forth, the Company and the Executive do hereby agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein.
(b) The employment term shall commence on September 1,
1999 and shall continue in effect until terminated in accordance with Section 5
or any other provision of the Agreement.
2. POSITION AND DUTIES.
The Executive shall serve as an Executive Officer of the Company and
shall perform such duties and responsibilities as may from time to time be
prescribed by the Company's board of directors (the "Board"), provided that
such duties and responsibilities are consistent with the Executive's position.
The Executive shall perform and discharge faithfully, diligently and to the
best of his/her ability such duties and responsibilities and shall devote all
of his/her working time and efforts to the business and affairs of the Company
and its affiliates.
3. COMPENSATION.
(a) BASE SALARY. The Company shall pay to the Executive
an annual base salary ("Base Salary") of Two Hundred Twenty-Four Thousand
Dollars ($224,000), payable in equal semi-monthly installments throughout the
term of such employment subject to Section 5 hereof and subject to applicable
tax and payroll deductions. The Company shall consider increases in the
Executive's Base Salary annually, and any such increase in salary implemented
by the Company shall become the Executive's Base Salary for purposes of this
Agreement.
(b) INCENTIVE COMPENSATION. Provided Executive has duly
performed his/her obligations pursuant to this Agreement, the Executive shall
be entitled to participate in or receive benefits under the Management
Incentive Compensation Plan implemented by the Company.
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(c) OTHER BENEFITS. During the term of this Agreement,
the Executive shall be entitled to participate in the long term incentive plan
implemented by the Company and any employee benefit plans and arrangements
which are available to senior executive officers of the Company, including,
without limitation, group health and life insurance, pension and savings and
the Senior Management Employment Policy.
(d) FRINGE BENEFITS. The Company shall pay or reimburse
Executive for all reasonable and necessary expenses incurred by him/her in
connection with his/her duties hereunder, upon submission by Executive to the
Company of such written evidence of such expense as the Company may require.
Throughout the term of this Agreement, the Company will provide Executive with
the use of a vehicle for purposes within the scope of his/her employment and
shall pay all expenses for fuel, maintenance and insurance in connection with
such use of the automobile. The Company further agrees that Executive shall be
entitled to four (4) weeks of vacation in any year of the term of employment
hereunder. Nothing paid to the Executive under any such Company plans or
arrangements shall be deemed to be in lieu of compensation to the Executive
hereunder.
4. NON-DISCLOSURE, NON-COMPETITION AND NON-SOLICITATION
COVENANTS.
(a) ACKNOWLEDGEMENTS. The Executive acknowledges that as
an Executive Officer of the Company (i) he/she frequently will be exposed to
certain "Trade Secrets" and "Confidential Information" of the Company (as those
terms are defined in Subsection 4(b)), (ii) his/her responsibilities on behalf
of the Company will extend to all geographical areas where the Company is doing
business, and (iii) any competitive activity on his/her part during the term of
his employment and for a reasonable period thereafter would necessarily involve
his/her use of the Company's Trade Secrets and Confidential Information and,
therefore, would unfairly threaten the Company's legitimate business interests,
including its substantial investment in the proprietary aspects of its business
and the goodwill associated with its customer base. Moreover, the Executive
acknowledges that, in the event of the termination of his/her employment with
the Company, he/she would have sufficient skills to find alternative,
commensurate work in his/her field of expertise that would not involve a
violation of any of the provisions of this Section 4. Therefore, the Executive
acknowledges and agrees that it is reasonable for the Company to require
him/her to abide by the covenants set forth in this Section 4. The parties
acknowledge and agree that if the nature of the Executive's responsibilities
for or on behalf of the Company and the geographical areas in which the
Executive must fulfill them materially change, the parties will execute
appropriate amendments to the scope of the covenants in this Section 4.
(b) DEFINITIONS. For purposes of this Section 4, the
following terms shall have the following meanings:
(i) "COMPETITIVE POSITION" shall mean (i) the
Executive's direct or indirect equity ownership (excluding equity ownership of
less than one percent (1%) or control of all or any portion of a Competitor, or
(ii) any employment, consulting, partnership,
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advisory, directorship, agency, promotional or independent contractor
arrangement between the Executive and any Competitor whereby the Executive is
required to perform executive level services substantially similar to those
that he will perform for the Company as an Executive Officer.
(ii) "COMPETITOR" of the Company shall refer to
any person or entity engaged, wholly or partly, in the business of
manufacturing and distributing farm equipment machinery and replacement parts.
(iii) "CONFIDENTIAL INFORMATION" shall mean the
proprietary and confidential data or information of the Company, other than
"Trade Secrets" (as defined below), which is of tangible or intangible value to
the Company and is not public information or is not generally known or
available to the Company's competitors.
(iv) "TRADE SECRETS" shall mean information of
the Company, including, but not limited to, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, products plans, or lists
of actual or potential customers or suppliers, which: (a) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use; and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(v) "WORK PRODUCT" shall mean all work product,
property, data, documentation, "know-how", concepts or plans, inventions,
improvements, techniques, processes or information of any kind, relating to the
Company and its business prepared, conceived, discovered, developed or created
by the Executive for the Company or any of the Company's customers.
(c) NONDISCLOSURE; OWNERSHIP OF PROPRIETARY PROPERTY.
(i) The Executive hereby covenants and agrees
that: (i) with regard to information constituting a Trade Secret, at all times
during the Executive's employment with the Company and all times thereafter
during which such information continues to constitute a Trade Secret; and (ii)
with regard to any Confidential Information, at all times during the
Executive's employment with the Company and for three (3) years after the
termination of the Executive's employment with the Company, the Executive shall
regard and treat all information constituting a Trade Secret or Confidential
Information as strictly confidential and wholly owned by the Company and will
not, for any reason in any fashion, either directly or indirectly, use, sell,
lend, lease, distribute, license, give, transfer, assign, show, disclose,
disseminate, reproduce, copy, appropriate or otherwise communicate any such
information to any party for any purpose other than strictly in accordance with
the express terms of this Agreement and other than as may be required by law.
(ii) To the greatest extent possible, any Work
Product shall be deemed to be "work made for hire" (as defined in the Copyright
Act, 17 U.S.C.A. ss. 101 et seq., as amended) and owned exclusively by the
Company. The Executive hereby unconditionally and
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irrevocably transfers and assigns to the Company all rights, title and interest
the Executive may currently have or in the future may have by operation of law
or otherwise in or to any Work Product, including, without limitation, all
patents, copyrights, trademarks, service marks and other intellectual property
rights. The Executive agrees to execute and deliver to the Company any
transfers, assignments, documents or other instruments which the Company may
deem necessary or appropriate to vest complete title and ownership of any Work
Product, and all rights therein, exclusively in the Company.
(iii) The Executive shall immediately notify the
Company of any intended or unintended, unauthorized disclosure or use of any
Trade Secrets or Confidential Information by the Executive or any other person
of which the Executive becomes aware. In addition to complying with the
provisions of Section 4(c) (i) and 4 (c) (ii), the Executive shall exercise his
best efforts to assist the Company, to the extent the Company deems reasonably
necessary, in the procurement of any protection of the Company's rights to or
in any of the Trade Secrets or Confidential Information.
(iv) Immediately upon termination of the
Executive's employment with the Company, or at any point prior to or after that
time upon the specific request of the Company, the Executive shall return to
the Company all written or descriptive materials of any kind in the Executive's
possession or to which the Executive has access that constitute or contain any
Confidential Information or Trade Secrets, and the confidentiality obligations
of this Agreement shall continue until their expiration under the terms of this
Agreement.
(d) NON-COMPETITION. The Executive agrees that during
his/her employment, he/she will not, either directly or indirectly, alone or in
conjunction with any other party, (i) accept or enter into a Competitive
Position with a Competitor of the Company, or (ii) take any action in
furtherance of or in conjunction with a Competitive Position with a Competitor
of the Company. The Executive agrees that for two (2) years after any
termination of his employment with the Company, he/she will not, in the
"Restricted Territory" (as defined in the next sentence), either directly or
indirectly, alone or in conjunction with any other party, (A) accept or enter
into a Competitive Position with a Competitor of the Company, or (B) take any
action in furtherance of or in conjunction with a Competitive Position with a
Competitor of the Company. For purposes of this Section 4, "Restricted
Territory" shall refer to all geographical areas comprised within the fifty
United States of America, Western Europe, Brazil and Canada. The Executive and
the Company each acknowledge that the scope of the Restricted Territory is
reasonable because (1) the Company is conducting substantial business in all
fifty states (as well as several foreign countries), (2) the Executive occupies
one of the top executive positions with the Company, and (3) the Executive will
be carrying out his employment responsibilities in all locations where the
Company is doing business.
(e) NON-SOLICITATION OF CUSTOMERS. The Executive agrees
that during the term of his/her employment, he/she will not, either directly or
indirectly, along or in conjunction with any other party, solicit, divert or
appropriate or attempt to solicit, divert or appropriate any customer or
actively sought prospective customer of the Company for or on behalf of any
Competitor of the Company. The Executive agrees that for two (2) years after
any termination of his employment with the Company, he/she will not, in the
Restricted Territory,
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<PAGE> 5
either directly or indirectly, alone or in conjunction with any other party,
for or on behalf of a Competitor of the Company, solicit, divert or appropriate
or attempt to solicit, divert or appropriate any customer or actively sought
prospective customer of the Company with whom he had substantial contact during
a period of time of up to, but no longer than, eighteen (18) months prior to
any termination of his/her employment with the Company.
(f) NON-SOLICITATION OF COMPANY PERSONNEL. The Executive
agrees that, except to the extent that he/she is required to do so in
connection with his/her express employment responsibilities on behalf of the
Company, during the term of his/her employment he/she will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any employee, consultant, contractor or other personnel of the
Company to terminate, alter or lessen that party's affiliation with the Company
or to violate the terms of any agreement or understanding between such
employee, consultant, contractor or other person and the Company. The Executive
agrees that for two (2) years after any termination of his/her employment with
the Company, and in the Restricted Territory, he/she will not, either directly
or indirectly, alone or in conjunction with any other party, solicit or attempt
to solicit any "material" or "key" (as those terms are defined in the next
sentence) employee, consultant, contractor or other personnel of the Company to
terminate, alter or lessen that party's affiliation with the Company or to
violate the terms of any agreement or understanding between such employee,
consultant, contractor or other person and the Company. For purposes of the
preceding sentence, "material" or "key" employees, consultants, contractors or
other personnel of the Company are those who have access to the Company's Trade
Secrets and Confidential Information and whose position or affiliation with the
Company is significant.
(g) REMEDIES. Executive agrees that damages at law for
the Executive's violation of any of the covenants in this Section 4 would not
be an adequate or proper remedy and that should the Executive violate or
threaten to violate any of the provisions of such covenants, the Company or its
successors or assigns shall be entitled to obtain a temporary or permanent
injunction against Executive in any court having jurisdiction prohibiting any
further violation of any such covenants, in addition to any award or damages,
compensatory, exemplary or otherwise, for such violation, if any.
(h) PARTIAL ENFORCEMENT. The Company has attempted to
limit the rights of the Executive to compete only to the extent necessary to
protect the Company from unfair competition. The Company, however, agrees that,
if the scope of enforceability of these restrictive covenants is in any way
disputed at any time, a court or other trier of fact may modify and enforce the
covenant to the extent that it believes to be reasonable under the
circumstances existing at the time.
5. TERMINATION.
(a) DEATH. The Executive's employment hereunder shall
terminate upon the death of the Executive, provided, however, that for purposes
of the payment of compensation and benefits to the Executive under this
Agreement the death of the Executive shall be deemed to have occurred ninety
(90) days from the last day of the month in which the death of the Executive
shall have occurred.
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<PAGE> 6
(b) INCAPACITY. The Company may terminate the
Executive's employment hereunder at the end of any calendar month by giving
written Notice of Termination to the Executive in the event of the Executive's
incapacity due to physical or mental illness which prevents the proper
performance of the duties of the Executive set forth herein or established
pursuant hereto for a substantial portion of any six (6) month period of the
Executive's term of employment hereunder. Any question as to the existence,
extent or potentiality of illness or incapacity of Executive upon which Company
and Executive cannot agree shall be determined by a qualified independent
physician selected by the Company and approved by Executive (or, if Executive
is unable to give such approval, by any adult member of the immediate family or
the duly appointed guardian of the Executive). The determination of such
physician shall be certified in writing to the Company and to the Executive and
shall be final and conclusive for all purposes of this Agreement.
(c) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause by giving written Notice of Termination to the
Executive. For the purposes of this Agreement, the Company shall have "Cause"
to terminate the Executive's employment hereunder upon: (i) the Executive's
habitual drunkenness or chronic substance abuse; (ii) a willful failure by the
Executive to materially perform and discharge the duties and responsibilities
of the Executive hereunder; (iii) any breach by the Executive of the provisions
of Section 4 hereof; (iv) any misconduct by the Executive that is materially
injurious to the Company; or (v) a conviction of a felony involving the
personal dishonesty or moral turpitude of the Executive.
(d) WITHOUT CAUSE; GOOD REASON.
(i) The Company may terminate the Executive's
employment hereunder without Cause, by giving written Notice of termination to
the Executive.
(ii) The Executive may terminate his employment
hereunder, by giving written Notice of Termination to the Company. For the
purposes of this Agreement, the Executive shall have "Good Reason" to terminate
his employment hereunder upon (and without the written consent of the
Executive) (a) a reduction in the Executive's base salary or benefits received
from the Company, other than in connection with an across-the-board reduction
in salaries and/or benefits for similarly situated employees of the Company or
pursuant to the Company's standard retirement policy; or (b) the relocation of
the Executive's full-time office to a location greater than fifty (50) miles
from the Company's current corporate office; or (c) a material breach by the
Company of this Agreement.
(e) NOTICE OF TERMINATION. Any termination by the
Company pursuant to the Subsections (b), (c) or (d)(i) above or by the
Executive pursuant to Subsection (d)(ii) above, shall be communicated by
written Notice of Termination from the party issuing such notice to the other
party hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision of this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination. A date of
termination specified in the Notice of Termination shall
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<PAGE> 7
not be dated earlier than ninety (90) days from the date such Notice is
delivered or mailed to the applicable party.
(f) OBLIGATION TO PAY. Except upon voluntary termination
by the Executive without Good Reason and subject to Section 6 below, the
Company shall pay the compensation specified in this Subsection 5(f) to the
Executive for the period specified in this Subsection 5(f). The Company also
will continue insurance benefits during the remainder of the applicable period,
including the Severance Period set forth in this Subsection 5(f). If the
Executive's employment shall be terminated by reason of death, the estate of
the Executive shall be paid all sums otherwise payable to the Executive through
the end of the third month after the month in which the death of the Executive
occurred and all bonus or other incentive benefits accrued or accruable to the
Executive through the end of the month in which the death of the Executive
occurred and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment is terminated by reason of
incapacity, the Executive or the person charged with legal responsibility for
the Executive's estate shall be paid all sums otherwise payable to the
Executive, including the bonus and other benefits accrued or accruable to the
Executive, through the date of termination specified in the Notice of
Termination, and the Company shall have no further obligations to the Executive
under this Agreement. If the Executive's employment shall be terminated for
Cause, the Company shall pay the Executive his Base Salary through the date of
termination specified in the Notice of Termination and the Company shall have
no further obligations to the Executive under this Agreement. If the
Executive's employment shall be terminated by the Company, without cause, or by
the Executive for Good Reason, the Company shall (x) continue to pay the
Executive the Base Salary (at the rate in effect on the date of such
termination) for a period of two (2) years beginning as of the date of such
termination (such two (2) year period being referred to hereinafter as the
"Severance Period") at such intervals as the same would have been paid had the
Executive remained in the active service of the Company, and (y) pay the
Executive a pro rata portion of the bonus or other incentive benefits to which
the Executive would have been entitled for the year of termination, had the
Executive remained employed for the entire year, which incentive compensation
shall be payable at the time incentive compensation is payable generally under
the applicable incentive plans. The executive shall have no further right to
receive any other compensation benefits or perquisites after the date of
termination of employment except as determined under the terms of the employee
benefit plans or programs of the Company or under applicable law.
6. CONDITIONS APPLICABLE TO SEVERANCE PERIOD; MITIGATION OF
DAMAGES
(a) If during the Severance Period, the Executive
breaches his obligations under Section 4 above, the Company may, upon written
notice to the Executive, terminate the Severance Period and cease to make any
further payments or provide any benefits described in Subsection 5(f).
(b) Although the Executive shall not be required to
mitigate the amount of any payment provided for in Subsection 5(f) by seeking
other employment, any such payments shall be reduced by any amounts which the
Executive receives or is entitled to receive from another
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<PAGE> 8
employer with respect to the Severance Period. The Executive shall promptly
notify the Company in writing in the event that other employment is obtained
during the Severance Period.
7. NOTICES. For the purpose of this Agreement, notices and all
other communications to either party hereunder provided for in the Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or mailed by certified first-class mail, postage prepaid, addressed:
in the case of the Company to:
AGCO Corporation
4205 River Green Parkway
Duluth, Georgia 30096
Attention: R. J. Ratliff
in the case of the Executive to:
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
or to such other address as either party shall designate by giving written
notice of such change to the other party.
8. ARBITRATION. Any claim, controversy, or dispute arising
between the parties with respect to this Agreement, to the maximum extent
allowed by applicable law, shall be submitted to and resolved by binding
arbitration. The arbitration shall be conducted pursuant to the terms of the
Federal Arbitration Act and (except as otherwise specified herein) the
Commercial Arbitration Rules of the American Arbitration Association in effect
at the time the arbitration is commenced. The venue for the arbitration shall
be the Atlanta, Georgia offices of the American Arbitration Association. Either
party may notify the other party at any time of the existence of an arbitrable
controversy by delivery in person or by certified mail of a Notice of
Arbitrable Controversy. Upon receipt of such a Notice, the parties shall
attempt in good faith to resolve their differences within fifteen (15) days
after the receipt of such Notice. Notice to the Company and the Executive shall
be sent to the addresses specified in Section 7 above. If the dispute cannot be
resolved within the fifteen (15) day period, either party may file a written
Demand for Arbitration with the American Arbitration Association's Atlanta,
Georgia Regional Office, and shall send a copy of the Demand for Arbitration to
the other party. The arbitration shall be conducted before a panel of three (3)
arbitrators. The arbitrators shall be selected as follows: (a) The party filing
the Demand for Arbitration shall simultaneously specify his or its arbitrator,
giving the name, address and telephone number of said arbitrator; (b) The party
receiving such notice shall notify the party demanding the arbitration of his
or its arbitrator, giving the name, address and telephone number of the
arbitrator within five (5) days of the receipt of such Demand for Arbitration;
(c) A neutral person shall be selected through the American Arbitration
Association's arbitrator selection procedures to serve as the third arbitrator.
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<PAGE> 9
The arbitrator designated by any party need not be neutral. In the event that
any person fails or refuses timely to name his arbitrator within the time
specified in this Section 8, the American Arbitration Association shall
(immediately upon notice from the other party) appoint an arbitrator. The
arbitrators thus constituted shall promptly meet, select a chairperson, fix the
time, date(s), and place of the hearing, and notify the parties. To the extent
practical, the arbitrators shall schedule the hearing to commence within sixty
(60) days after the arbitrators have been impaneled. A majority of the panel
shall render an award within ten (10) days of the completion of the hearing,
which award may include an award of interest, legal fees and costs of
arbitration. The panel of arbitrators shall promptly transmit an executed copy
of the award to the respective parties. The award of the arbitrators shall be
final, binding and conclusive upon the parties hereto. Each party shall have
the right to have the award enforced by any court of competent jurisdiction.
Executive initials:_________ Company initials:___________
9. NO WAIVER. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is approved
by the Board and agreed to in a writing signed by the Executive and such
officer as may be specifically authorized by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of any other provisions or
conditions of this Agreement at the same or at any prior or subsequent time.
10. SUCCESSORS AND ASSIGNS. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Company and the Executive's rights under this
Agreement shall inure to the benefit of and be binding upon his heirs and
executors. Neither this Agreement or any rights or obligations of the Executive
herein shall be transferable or assignable by the Executive.
11. VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force and
effect. The parties intend for each of the covenants contained in Section 4 to
be severable from one another.
12. SURVIVAL. The provisions of Section 4 hereof shall survive
the termination of Executive's employment and shall be binding upon the
Executive's personal or legal representative, executors, administrators,
successors, heirs, distributee, devisees and legatees and the provisions of
Section 5 hereof relating to payments and termination of the Executive's
employment hereunder shall survive such termination and shall be binding upon
the Company.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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<PAGE> 10
14. ENTIRE AGREEMENT. This Agreement constitutes the full
agreement and understanding of the parties hereto with respect to the subject
matter hereof and all prior or contemporaneous agreements or understandings are
merged herein. The parties to this Agreement each acknowledge that both of them
and their respective agents and advisors were active in the negotiation and
drafting of the terms of this Agreement.
15. GOVERNING LAW. The validity, construction and enforcement of
this Agreement, and the determination of the rights and duties of the parties
hereto, shall be governed by the laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.
AGCO CORPORATION
By: /s/ Robert J. Ratliff
----------------------------------------
Name: Robert J. Ratliff
--------------------------------------
Title: Chairman
-------------------------------------
EXECUTIVE OFFICER
/s/ Chris E. Perkins
-------------------------------------------
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EXHIBIT 10.12
EXECUTION COPY
- --------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
dated as of January 27, 2000
among
AGCO FUNDING CORPORATION,
as Seller,
AGCO CORPORATION,
as Servicer,
THE CONDUIT PURCHASERS PARTY HERETO
THE COMMITTED PURCHASERS PARTY HERETO
THE ADMINISTRATORS PARTY HERETO
and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL", NEW YORK BRANCH,
as Agent
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PRELIMINARY STATEMENTS
ARTICLE I DEFINITIONS............................................................................2
Section 1.01. Certain Defined Terms.........................................................2
Section 1.02. Other Terms..................................................................19
ARTICLE II PURCHASE FACILITY.....................................................................20
Section 2.01. Purchase Facility............................................................20
Section 2.02. Incremental Purchases........................................................20
Section 2.03. Reinvestment Purchases.......................................................21
Section 2.04. Investment Reductions and Reductions in Maximum Program
Amount.......................................................................21
Section 2.05. Maximum Ownership Interests..................................................21
ARTICLE III PAYMENTS AND COLLECTIONS..............................................................22
Section 3.01. Unpaid Obligations...........................................................22
Section 3.02. Collections Received by Seller; Deemed Collections...........................22
Section 3.03. Collections Prior to Termination Date........................................23
Section 3.04. Collections Following Termination Date.......................................23
Section 3.05. Application of Collections...................................................23
Section 3.06. Payment Requirements.........................................................24
Section 3.07. Collection Account...........................................................24
Section 3.08. Payment Rescission...........................................................25
ARTICLE IV YIELD AND FEES........................................................................25
Section 4.01. Yield Payments...............................................................25
Section 4.02. Suspension of the Adjusted Eurodollar Rate...................................25
Section 4.03. Fees.........................................................................25
Section 4.04. Break Costs..................................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES........................................................26
Section 5.01. Representations and Warranties of the Seller.................................26
Section 5.02. Representations and Warranties of the Servicer...............................29
Section 5.03. Representations and Warranties of the Purchasers.............................31
ARTICLE VI CONDITIONS OF PURCHASES...............................................................32
Section 6.01. Conditions Precedent to Initial Purchase.....................................32
Section 6.02. Conditions Precedent to All Purchases and Reinvestment
Purchases....................................................................32
ARTICLE VII COVENANTS.............................................................................33
Section 7.01. Affirmative Covenants of the Seller..........................................33
Section 7.02. Negative Covenants of the Seller.............................................39
Section 7.03. Affirmative Covenants of the Servicer........................................41
Section 7.04. Negative Covenants of the Servicer...........................................44
ARTICLE VIII ADMINISTRATION AND COLLECTION.........................................................44
Section 8.01. Designation of Servicer......................................................44
Section 8.02. Duties of Servicer...........................................................45
Section 8.03. Collection Notices...........................................................46
Section 8.04. Responsibilities of the Seller...............................................47
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 8.05. Reports and Other Information................................................47
Section 8.06. Servicer Fees................................................................47
Section 8.07. Servicer Defaults............................................................48
ARTICLE IX EARLY AMORTIZATION EVENTS.............................................................49
Section 9.01. Early Amortization Events....................................................50
Section 9.02. Remedies.....................................................................51
ARTICLE X INDEMNIFICATION.......................................................................51
Section 10.01. Indemnities..................................................................51
Section 10.02. Increased Cost and Reduced Return............................................55
Section 10.03. Taxes........................................................................57
Section 10.04. Other Costs and Expenses.....................................................58
ARTICLE XI THE AGENT AND THE ADMINISTRATORS......................................................59
Section 11.01. Authorization and Action of Agent............................................59
Section 11.02. Agents' Reliance, Etc........................................................59
Section 11.03. Rabobank and Affiliates......................................................60
Section 11.04. Purchaser Credit Decision....................................................60
Section 11.05. Indemnification..............................................................60
Section 11.06. Successor Agent..............................................................61
Section 11.07. Authorization and Action of Administrator....................................61
ARTICLE XII ASSIGNMENTS; PARTICIPATIONS; ADDITIONAL RELATED GROUPS................................62
Section 12.01. Assignments and Participations...............................................62
Section 12.02. Additional Related Groups....................................................64
ARTICLE XIII MISCELLANEOUS.........................................................................65
Section 13.01. Waivers and Amendments.......................................................65
Section 13.02. Notices......................................................................66
Section 13.03. Ratable Payments.............................................................66
Section 13.04. Protection of Ownership Interests of the Purchasers..........................67
Section 13.05. Confidentiality..............................................................67
Section 13.06. Bankruptcy Petition..........................................................68
Section 13.07. Limitation of Liability......................................................69
Section 13.08. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF OBJECTION TO VENUE.................................................69
Section 13.09. WAIVER OF JURY TRIAL.........................................................69
Section 13.10. Integration; Binding Effect; Survival of Terms...............................69
Section 13.11. Counterparts; Severability; Section References...............................70
Section 13.12. Roles........................................................................70
Section 13.13. Characterization; Grant of Security Interest.................................70
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
EXHIBITS
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<S> <C>
Exhibit A-1 Form of Monthly Report
Exhibit A-2 Form of Weekly Report
Exhibit B Form of Deposit Account Agreement
Exhibit C Form of Investment Letter
Exhibit D Form of Purchase Notice
Exhibit E Form of Compliance Certificate
Exhibit F Form of Assignment Agreement
Exhibit G Form of Dealer Agreement
<CAPTION>
<S> <C>
SCHEDULES
- ---------
Schedule I List of Deposit Accounts and Deposit Account Banks
Schedule II Special Concentration Limits
Schedule III Principal Place of Business of Seller; Locations of Records; Federal Employer Identification
Number of Seller
Schedule IV List of Closing Documents
</TABLE>
iii
<PAGE> 5
This RECEIVABLES PURCHASE AGREEMENT is entered into as of January 27,
2000 among:
(1) AGCO FUNDING CORPORATION, a Delaware corporation, as the Seller,
(2) AGCO CORPORATION, a Delaware corporation, as initial Servicer,
(3) THE CONDUIT PURCHASERS party hereto,
(4) THE COMMITTED PURCHASERS party hereto,
(5) THE ADMINISTRATORS party hereto, and
(6) COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL" NEW YORK BRANCH, as Agent.
PRELIMINARY STATEMENTS
WHEREAS, the Seller has entered into the Originator Sale Agreement,
pursuant to which the Originator has agreed to sell, transfer and assign to the
Seller from time to time the Dealer Receivables and Related Security with
respect thereto on the terms and subject to the conditions set forth therein;
WHEREAS, the Seller desires to transfer and assign Ownership Interests
in the Dealer Receivables and Related Security with respect thereto to the
Purchasers from time to time;
WHEREAS, each Conduit Purchaser may, in its absolute and sole
discretion, purchase Ownership Interests from the Seller from time to time, and
in the event that a Conduit Purchaser declines to make any purchase, the
Committed Purchasers in the relevant Related Group shall, at the request of the
Seller, purchase Ownership Interests from time to time;
WHEREAS, each Administrator has been requested and is willing to act on
behalf of the Purchasers in its Related Group in accordance with the terms
hereof; and
WHEREAS, Rabobank has been requested and is willing to act as the Agent
on behalf of the Purchasers in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the premises set forth above, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Adjusted Eurodollar Rate" means for any period, a rate per annum equal
to the sum of (a) 1.50%, and (b) the quotient of (i) LIBOR for such period,
divided by (ii) a number equal to 1.00 minus the Eurodollar Reserve Percentage,
if applicable. The Adjusted Eurodollar Rate shall be determined by the Agent and
shall be rounded upward, if necessary, to the nearest 1/100th of 1%.
"Administrator" means (i) with respect to the Related Group that
includes NARCO, Rabobank in its capacity as administrator for such Related Group
hereunder, and any successor thereto in such capacity and (ii) with respect to
any other Related Group that may become party hereto pursuant to Section 12.02,
the Person designated as such in the relevant Joinder Agreement, and any
successor thereto in such capacity.
"Administrator Agreement" means an agreement between an Administrator
and the members of its Related Group relating to the performance of such
Administrator's duties hereunder.
"Adverse Claim" means a lien, security interest, charge, encumbrance,
or other right or claim in, of or on any Person's assets or properties in favor
of any other Person.
"Affected Party" means a Purchaser, a Conduit Funding Source or any of
their respective Affiliates.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person or any Subsidiary of such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
stock, by contract or otherwise.
"AGCO" means AGCO Corporation, a Delaware corporation, and any
successor thereto.
"Agent" means Rabobank in its capacity as agent for the Purchasers
hereunder, and any successor thereto in such capacity.
"Agreement" means this Receivables Purchase Agreement, as it may be
amended, restated, supplemented or modified and in effect from time to time.
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<PAGE> 7
"Alternative Rate" means the Adjusted Eurodollar Rate, provided,
however, that the "Alternative Rate" shall be equal to the Base Rate (i) for any
Settlement Period not equal to a month, (ii) with respect to any portion of
Investment which is not outstanding during an entire Settlement Period or which
does not accrue Yield at the Alternative Rate for an entire Settlement Period,
(iii) at any time when the Adjusted Eurodollar Rate has been suspended as
provided in Section 4.02 and (iv) for any Settlement Period for which the Seller
so elects by delivery of a written notice to such effect to the Agent and each
Administrator not later than the third Business Day prior to the commencement of
such Settlement Period.
"Asset Report" means a Monthly Report or a Weekly Report.
"Assignment Agreement" has the meaning set forth in Section 12.01(c).
"Authorized Officer" shall mean, with respect to the Seller or the
Servicer, its respective corporate controller, treasurer or chief financial
officer.
"Base Rate" means, on any date, a fluctuating rate of interest per
annum equal to the higher of (a) the Prime Rate and (b) the Federal Funds Rate +
0.50%.
"Business Day" means any day on which banks are not authorized or
required to close in New York, New York and, if the applicable Business Day
relates to any computation or payment to be made with respect to the Adjusted
Eurodollar Rate, any day on which dealings in dollar deposits are carried on in
the London interbank market.
"Carrying Cost Reserve Percentage" means, at any time, a percentage
equal to:
1.5 * (3 Month LIBOR - Average Interest Yield + 3.0%) * DSO/365
where
3 Month LIBOR = LIBOR for an assumed Settlement Period of
three months commencing on the immediately
preceding Payment Date.
Average Interest Yield = The lesser of (a) 2.5% and (b) the average
Interest Yield for the three calendar month
period then most recently ended. As used
herein, "Interest Yield" means, with respect
to any calendar month, the annualized
percentage equivalent of a fraction, the
numerator of which is the aggregate amount
of Collections of interest received by the
Servicer in respect of the Dealer
Receivables during such calendar month, and
the denominator of which is equal to the
aggregate Outstanding Balance of all Dealer
Receivables as of the last day of the
immediately preceding calendar month.
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<PAGE> 8
DSO = The product of (i) 182, times (ii) a
fraction, the numerator of which is equal to
the aggregate Outstanding Balance of all
Dealer Receivables as of the last day of the
calendar month most recently ended on or
prior to the date of determination, and the
denominator of which is equal to the
aggregate Outstanding Balance of all Dealer
Receivables arising during the six calendar
month period then most recently ended on or
prior to such date.
"Cash Control Event" means the occurrence of either of the following
events: (i) the Servicer's long-term senior unsecured debt shall be rated Ba3 or
lower by Moody's or BB- or lower by S&P or (ii) any Early Amortization Event.
"Charged-Off Receivable" means a Receivable, (i) as to which the
Obligor has taken any action, or suffered any event to occur, of the type
described in Section 9.01(e) or (ii) which, consistent with the Credit and
Collection Policy, would be written off the Seller's or the Originator's books
as uncollectible.
"Collection Account" means the account maintained in the name of
Servicer at the Collection Account Bank having the account no. 81886-0067, or
any new collection account established by the Servicer pursuant to Section 3.07.
"Collection Account Bank" means Bank of America, N.A. or, if the
Servicer establishes any new Collection Account pursuant to Section 3.07, the
Eligible Bank at which such account is established.
"Collection Notice" means a notice, in substantially the form of Annex
A to Exhibit B, from the Agent to a Deposit Account Bank.
"Collections" means, with respect to any Dealer Receivable, all cash
collections and other cash proceeds in respect of such Dealer Receivable,
including, without limitation, all yield, finance charges or other related
amounts accruing in respect thereof, all cash proceeds of Related Security with
respect to such Dealer Receivable and all Deemed Collections with respect to
such Dealer Receivable. Without limiting the generality of the foregoing, it is
understood and agreed that Collections shall include all amounts received
(including insurance proceeds, if any) with respect to Dealer Receivables which
have previously become Defaulted Receivables or Charged-Off Receivables.
"Commercial Paper Notes" means the short-term promissory notes issued
by a Conduit Purchaser having an original maturity of 270 days or less
(including the date of issuance thereof).
"Commitment" means, for each Committed Purchaser, the amount set forth
opposite the name of such Committed Purchaser under the heading "Commitment" on
the
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signature page to this Agreement or the Assignment Agreement or Joinder
Agreement pursuant to which it became a party hereto, as such amount may be
modified with the written consent of such Committed Purchaser in accordance with
the terms hereof.
"Committed Purchasers" means each Person identified on the signature
pages hereof as a "Committed Purchaser" and each other Person that may become a
party hereto as a "Committed Purchaser" pursuant to Section 12.02, together in
each case with their respective successors and assigns.
"Commitment Termination Date" means January 25, 2001 or such later date
as may be agreed in writing from time to time by the Seller, each Committed
Purchaser, each Administrator and the Agent.
"Conduit Funding Agreement" means any agreement or instrument executed
by any Conduit Funding Source with or for the benefit of a Conduit Purchaser
pursuant to which such Conduit Funding Source provides liquidity, credit
enhancement or back-up purchase support or facilities to such Conduit Purchaser.
"Conduit Funding Source" means any bank, insurance company or other
funding entity providing liquidity, credit enhancement or back-up purchase
support or facilities to a Conduit Purchaser.
"Conduit Purchaser" means NARCO or any other Person that may become a
party hereto as a "Conduit Purchaser" pursuant to a Joinder Agreement as
described in Section 12.02, together in each case with their respective
successors and assigns.
"Contract" means, with respect to any Dealer Receivable, any and all
instruments, agreements, invoices or other writings pursuant to which such
Dealer Receivable arises or which evidences such Dealer Receivable, including,
without limitation, any related Dealer Agreement.
"CP Rate" means, with respect to any Conduit Purchaser for any period,
the per annum rate equivalent to the weighted average of the per annum rates
paid or payable by such Conduit Purchaser from time to time as interest on
Commercial Paper Notes (by means of interest rate hedges or otherwise and taking
into consideration any incremental carrying costs associated with Commercial
Paper Notes issued by such Conduit Purchaser maturing on dates other than those
certain dates on which such Conduit Purchaser is to receive funds) in respect of
Commercial Paper Notes issued by such Conduit Purchaser that are allocated, in
whole or in part, by the related Administrator (on behalf of such Conduit
Purchaser) to fund or maintain the Investment of such Conduit Purchaser during
such period, as determined by the related Administrator (on behalf of such
Conduit Purchaser) and reported to the Seller and the Servicer, which rates
shall reflect and give effect to (i) the commissions of placement agents and
dealers in respect of such Commercial Paper Notes, to the extent such
commissions are reasonably allocated, in whole or in part, to such Commercial
Paper Notes by the related Administrator (on behalf of such Conduit Purchaser)
and (ii) other borrowings by such Conduit Purchaser,
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including, without limitation, borrowings to fund small or odd dollar amounts
that are not easily accommodated in the commercial paper market; provided that
if any component of such rate is a discount rate, in calculating the CP Rate the
related Administrator shall for such component use the rate resulting from
converting such discount rate to an interest bearing equivalent rate per annum;
and provided further that any Conduit Purchaser which becomes a party hereto
pursuant to Section 12.02 may specify a different "CP Rate" in the relevant
Joinder Agreement, in which case the term "CP Rate", when used in reference to
such Conduit Purchaser, shall have the meaning assigned to such term in such
Joinder Agreement.
"Credit and Collection Policy" means the Servicer's credit and
collection policies and practices relating to Contracts, Dealer Receivables and
Related Security existing on the date hereof, as modified from time to time in
accordance with Section 7.04(b).
"Credit Enhancement" means the product of (a) the Net Eligible
Receivables Balance, times (b) the greater of (i) the Dynamic Reserve Percentage
and (ii) 15%.
"Dealer" means a Person that has entered into a Dealer Agreement with
the Originator.
"Dealer Agreement" means an agreement between the Originator and
another Person that has agreed to act as a dealer for equipment manufactured or
distributed by the Originator including, without limitation, any "Dealer Sales
and Service Agreement" in substantially the form attached hereto as Exhibit D or
any substantially similar agreement, howsoever denominated.
"Dealer Concentration Limit" means, at any time with respect to any
Dealer and its Affiliates, 1.5% of the Eligible Receivables Balance (or, if a
Special Concentration Limit is in effect with respect to such Dealer and its
Affiliates, such Special Concentration Limit).
"Dealer Receivable" means the indebtedness and other obligations owed
to the Seller (without giving effect to any transfer or conveyance hereunder) or
in which the Seller has a security interest or other interest, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of farm machinery (other than a sale of
individual parts) to a United States Dealer pursuant to a Dealer Agreement and
includes, without limitation, the obligation to pay any finance, interest, late
payment charges or similar charges with respect thereto; provided, however, that
Dealer Receivables shall not include any indebtedness or obligations arising in
connection with the sale of whole goods inventory comprised of the Spra-Coupe or
Willmar products line. Indebtedness and other rights and obligations arising
from any one transaction, including, without limitation, indebtedness and other
rights and obligations represented by an individual invoice, shall constitute a
Dealer Receivable separate from a Dealer Receivable consisting of the
indebtedness and other rights and obligations arising from any other
transaction.
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<PAGE> 11
"Deemed Collections" means, the aggregate of all amounts the Seller
shall have been deemed to have received as a Collection of a Dealer Receivable
pursuant to Section 3.02.
"Default Ratio" means, at any time, the percentage equivalent of a
fraction, the numerator of which is equal to the sum of (i) the aggregate
Outstanding Balance of Dealer Receivables that were Defaulted Receivables as of
the last day of the immediately preceding month, plus (ii) the aggregate
Outstanding Balance of all Dealer Receivables which became Charged Off
Receivables during the immediately preceding 12 months (such Outstanding Balance
to be computed as of the respective dates such Dealer Receivables became Charged
Off Receivables), minus (iii) the aggregate amount of Collections received in
respect of such Charged Off Receivables during the immediately preceding 12
months (excluding any Collections received prior to the respective dates on
which such Dealer Receivables became Charged Off Receivables), and the
denominator of which is equal to the Eligible Receivables Balance as of the last
day of the immediately preceding month.
"Defaulted Receivable" means a Dealer Receivable as to which any
payment, or part thereof, remains unpaid for 61 days or more from the original
due date for such payment (or, if such due date has been amended in accordance
with the Credit and Collection Policy, from such amended due date).
"Deferred Reinvestment Purchase" has the meaning specified in Section
2.03.
"Delinquent Receivable" means a Dealer Receivable that is not a
Defaulted Receivable and as to which any payment, or part thereof, remains
unpaid for 30 days or more from the original due date for such payment.
"Deposit Account" means the Collection Account or any other
concentration account, depositary account, lock-box account or similar account
in which any Collections are collected or deposited.
"Deposit Account Bank" means, at any time, any of the banks holding one
or more Deposit Accounts.
"Deposit Account Agreement" means an agreement substantially in the
form of Exhibit B among the Originator, the Seller, the Agent and a Deposit
Account Bank.
"Dilution" means, at any time, the amount of any reduction in the
outstanding balance of a Dealer Receivable as a result of any setoff, dispute,
discount, rebate, return, netting, adjustment or any other reason other than (i)
payment in cash of such outstanding balance by the Obligor, (ii) credit for a
trade-in of used equipment, to the extent such credit simultaneously gave rise
to a new Dealer Receivable in respect of such equipment having an original
Outstanding Balance equal to or greater than the amount of such reduction or
(iii) such Dealer Receivable having become a Charged-Off Receivable.
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<PAGE> 12
"Dilution Ratio" means, at any time, the percentage equivalent of a
fraction, the numerator of which is equal to the aggregate amount of Dilutions
which occurred during the calendar month then most recently ended, and the
denominator of which is equal to the original Outstanding Balance of all Dealer
Receivables which arose from the sale of new equipment and for which the final
payment of principal owing by the Obligor was made in the immediately preceding
calendar month.
"Dynamic Reserve Percentage" means, at any time, the sum of (i) the
Loss Reserve Percentage, plus (ii) the Variable Dilution Reserve Percentage,
plus (iii) the Carrying Cost Reserve Percentage.
"Early Amortization Event" has the meaning specified in Section 9.01.
"Eligible Bank" means a depository institution or trust company,
organized under the laws of the United States or any State thereof, that (i) is
a member of the Federal Deposit Insurance Corporation, (ii) has a combined
capital and surplus of not less than $50,000,000, (iii) has (or is a subsidiary
of a Person that has) a long-term unsecured debt rating of at least A or better
by S&P and A2 or better by Moody's and (iv) has been approved in writing by each
Administrator, such approval not to be unreasonably withheld.
"Eligible Receivable" means, at any time, a Dealer Receivable that
satisfies each of the following criteria:
(a) the representations and warranties set forth in Sections
5.01(i) and 5.01(j) are true and correct with respect to such Dealer
Receivable,
(b) the Obligor of such Dealer Receivable is a Dealer and is
not an Affiliate of the Seller or the Originator,
(c) such Dealer Receivable arises under a Dealer Agreement
substantially in the form attached hereto as Exhibit D (or in such
other form as shall have been approved in writing by the Agent, such
approval not to be unreasonably withheld), which, together with such
Dealer Receivable, is in full force and effect and has not been
terminated and constitutes the legal, valid and binding obligation of
the related Obligor enforceable against such Obligor in accordance with
its terms subject to no offset, counterclaim or other defense or
contingency;
(d) such Dealer Receivable is denominated and payable only in
United States dollars in the United States,
(e) the Obligor of such Dealer Receivable (i) if a natural
person, is a resident of the United States or, if a corporation or
other business organization, is organized under the laws of the United
States or any political subdivision thereof and has an office in the
United States; and (ii) is not a government or a governmental
subdivision or agency,
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(f) such Dealer Receivable is evidenced by an invoice issued
pursuant to a Dealer Agreement and constitutes an "account" or "chattel
paper" within the meaning of Section 9-105 and Section 9-106,
respectively, of the UCC of all applicable jurisdictions,
(g) such Dealer Receivable is not a Defaulted Receivable or a
Charged-Off Receivable,
(h) the Obligor of such Dealer Receivable has not been served
with a notice by or on behalf of the Servicer, notifying such Obligor
of breaches committed and unremedied by it of any Contract related to
such Dealer Receivable (including, without limitation, any refusal or
failure of such Dealer to account to the Servicer for the proceeds of
the sale of Equipment) during the immediately preceding twelve (12)
calendar months,
(i) such Dealer Receivable was generated in the ordinary
course of the Originator's business from the sale of equipment to the
Obligor by the Originator, and not by any other Person (in whole or in
part),
(j) such Dealer Receivable complies in all material respects
with all applicable requirements of the Credit and Collection Policy
and has not had its payment terms extended,
(k) such Dealer Receivable is required to be paid in full
within twenty-four (24) months of the date of determination,
(l) either (i) the Dealer Agreement under which such Dealer
Receivable arises provides for interest to accrue on the Outstanding
Balance of such Dealer Receivable prior to its final due date at a rate
per annum equal to or greater than the rate of interest published in
the New York edition of the Wall Street Journal as the prime rate (or,
if such rate is not so published, the rate of interest publicly
announced by the Agent as its prime or reference rate) plus 2% or (ii)
such Dealer Receivable is required to be paid in full within twelve
(12) months of the date such Dealer Receivable arises; provided that
Dealer Receivables which satisfy all criteria in this definition other
than this clause (l) may be treated as Eligible Receivables hereunder
so long as the aggregate Outstanding Balance of such Dealer Receivables
does not exceed 20% of the aggregate Outstanding Balance of all Dealer
Receivables,
(m) such Dealer Receivable arises from the sale of new
equipment; provided that Dealer Receivables arising from the sale of
used equipment may be treated as Eligible Receivables hereunder so long
as the aggregate Outstanding Balance of such Dealer Receivables does
not exceed 25% of the aggregate Outstanding Balance of all Dealer
Receivables,
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<PAGE> 14
(n) the Outstanding Balance of such Dealer Receivable (i) when
combined with the aggregate Outstanding Balance of all other Eligible
Receivables owing by the same Dealer or any Affiliate of such Dealer,
would not exceed the applicable Dealer Concentration Limit and (ii)
when combined with the aggregate Outstanding Balance of all other
Eligible Receivables owing from Dealers located in the same State,
would not exceed 10% of the Eligible Receivables Balance,
(o) the outstanding balance of such Dealer Receivable is due
and payable in full upon the Dealer's sale of the related Equipment,
(p) the outstanding principal balance of such Dealer
Receivable does not exceed the purchase price for the related Equipment
payable by the Dealer,
(q) such Dealer Receivable arises under a Dealer Agreement
which (i) does not require the Obligor under such Dealer Agreement to
consent to the transfer, sale or assignment of the rights and duties of
the Seller under such Dealer Agreement, (ii) does not contain a
confidentiality provision that purports to restrict the ability of any
Purchaser to exercise its rights under this Agreement, including,
without limitation, its right to review such Dealer Agreement, and
(iii) contains an obligation to pay a specified sum of money,
contingent only upon the sale of goods or the provision of services by
the Originator,
(r) such Dealer Receivable, together with the Dealer Agreement
and each other Contract related thereto, does not contravene any law,
rule or regulation applicable thereto to an extent which would in any
way impair the ability of the Servicer to ultimately collect any and
all amounts payable in respect of such Dealer Receivable, and
(s) which the Agent has not designated, in its reasonable
business judgment and in good faith applying the credit criteria
customarily applied by the Agent in transactions of this type, upon
(30) days' notice to the Seller, as no longer eligible for transfer
hereunder.
"Eligible Receivables Balance" means, at any time, the aggregate
Outstanding Balance of all Eligible Receivables at such time.
"Equipment" means, with respect to any Dealer Receivable, the equipment
the sale or financing of which gave rise to such Dealer Receivable and all
financing statements or other filings relating thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
the rules and regulations thereunder, as amended from time to time.
"Eurodollar Reserve Percentage" means for any day, the maximum rate
(expressed as a decimal) at which any lender subject thereto would be required
to maintain reserves under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor or similar regulations relating to such reserve
requirements) against
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Eurocurrency Liabilities (as defined therein), if such liabilities were
outstanding. The Eurodollar Reserve Percentage shall be adjusted automatically
on and as of the effective date of any change in the Eurodollar Reserve
Percentage.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to (a) the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, (b) if such rate is not so published for
any day which is a Business Day, the average of the quotations for such day on
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it in good faith.
"Fee Letter" means (i) with respect to the Related Group that includes
NARCO, that certain fee letter dated as of the date hereof, among the Seller,
NARCO and Rabobank, as Administrator for such Related Group, as the same may be
amended or modified and in effect from time to time and (ii) with respect to any
other Related Group, the fee letter entered into among the Seller, the related
Conduit Purchaser for such Related Group and the related Administrator on or
prior to the date on which the members of such Related Group become parties
hereto, as the same may be amended or modified and in effect from time to time.
"Incremental Purchase" means a purchase of Ownership Interests which
increases the total outstanding Investment hereunder.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens, (iv) obligations which
are evidenced by notes, acceptances, or other instruments, (v) capitalized lease
obligations, (vi) net liabilities under interest rate swap, exchange or cap
agreements, (vii) obligations under any agreement, undertaking or arrangement by
which such Person assumes, guarantees, endorses, contingently agrees to purchase
or provide funds for the payment of, or otherwise becomes or is contingently
liable upon, the obligation or liability of any other Person, or agrees to
maintain the net worth or working capital or other financial condition of any
other Person, or otherwise assures any creditor of such other Person against
loss, including, without limitation, any comfort letter, operating agreement,
take-or-pay contract or application for a letter of credit and (viii)
liabilities in respect of unfunded vested benefits under plans covered by Title
IV of ERISA.
"Independent Director" shall mean a member of the Board of Directors of
the Seller (i) who is not at such time, and has not been at any time during the
preceding five (5) years, (A) a director, officer, employee or affiliate of the
Seller, the Originator, or any of their respective Subsidiaries or Affiliates,
(B) the direct, indirect or beneficial owner (at the time of such individual's
appointment as an Independent Director or at any time
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<PAGE> 16
thereafter while serving as an Independent Director) of any of the outstanding
common shares of the Seller, the Originator, or any of their respective
Subsidiaries or Affiliates, having general voting rights or (C) a Person related
to any Person referred to in clauses (A) or (B) and (ii) who (A) has prior
experience as an independent director for a corporation whose charter documents
required the unanimous consent of all independent directors thereof before such
corporation could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any
applicable federal or state law relating to bankruptcy and (B) has at least
three years of employment experience with one or more entities that provide, in
the ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.
"Intended Tax Characterization" has the meaning specified in Section
10.03(h).
"Investment" means, with respect to any Ownership Interest at any time,
(A) the original amount paid for such Ownership Interest, minus (B) the sum of
the aggregate amount of Collections and other payments received by the Agent
which in each case are applied to reduce such Investment in accordance with the
terms and conditions of this Agreement, provided, however, that such Investment
of such Ownership Interest shall not be reduced by any distribution of any
portion of Collections if at any time such distribution is rescinded or must be
returned for any reason.
"Joinder Agreement" means an agreement, in form and substance
reasonably satisfactory to each of the parties hereto, entered into among each
of the parties hereto and the members of a new Related Group pursuant to Section
12.02.
"LIBOR" means, for any Settlement Period, an interest rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) as determined on
the basis of the offered rates for deposits in U.S. dollars, for a period of
time comparable to such Settlement Period which appears at Telerate Page 3750 as
of 11:00 a.m. (London time) two Business Days before the first day of such
Settlement Period. If the Agent is unable to determine LIBOR by reference to
Telerate Page 3750 on any applicable interest determination date, LIBOR shall be
the rate (rounded upward as described above, if necessary) for deposits in
dollars for a period substantially equal to such Settlement Period on the
Reuters Screen LIBO Page, as of 11:00 a.m. (London time) two Business Days
before the first day of such Settlement Period. If the Agent is unable to
determine LIBOR for any period by reference to either the Telerate Page 3750 or
the Reuters Screen LIBO Page, then LIBOR for that Settlement Period will be
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time comparable to such Settlement Period which are offered by the
Reference Bank in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days before the first day of such Settlement Period.
"Lock-Box" means a locked postal box to which Obligors remit
Collections and with respect to which a Deposit Account Bank has been granted
exclusive access for the purpose of retrieving and processing such Collections.
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"Loss Reserve Percentage" means, at any time, 2.0 times the highest
Default Ratio during the twelve (12) complete calendar month period then most
recently ended.
"Majority Purchasers" means, at any time, Committed Purchasers having
in the aggregate Commitments in excess of 66-2/3% of the aggregate Commitments
hereunder; provided that from and after the Termination Date, "Majority
Purchasers" shall mean the Purchasers owning in excess of 66-2/3% of the
Investment at such time.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition or operations of the Seller, the Originator and its
Subsidiaries or the Servicer, (ii) the ability of the Seller, the Originator or
the Servicer to perform its obligations under this Agreement or the Originator
Sale Agreement, (iii) the legality, validity or enforceability of this Agreement
or the Originator Sale Agreement, (iv) the Seller's or any Purchasers' interest
in the Dealer Receivables generally or in any significant portion of the Dealer
Receivables, the Related Security or the Collections with respect thereto, or
(v) the collectibility of the Dealer Receivables generally or of any material
portion of the Dealer Receivables.
"Maximum Program Amount" means $250,000,000.
"Monthly Report" means a report, in substantially the form of Exhibit
A-1 hereto, furnished by the Servicer to the Agent pursuant to Section 8.05.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto.
"NARCO" means Nieuw Amsterdam Receivables Corporation, a Delaware
corporation, together with its successors and permitted assigns.
"Net Eligible Receivables Balance" means, at any time, an amount equal
to (a) the Eligible Receivables Balance minus (b) the product of (i) the Planned
Dilution Ratio, times (ii) the New Equipment Receivables Percentage, times (iii)
the Eligible Receivables Balance.
"New Equipment Receivables Percentage" means, at any time, the
aggregate Outstanding Balance of the Dealer Receivables which arose from the
sale of new equipment, expressed as a percentage of the aggregate Outstanding
Balance of all Dealer Receivables.
"Obligor" means a Dealer or any other Person obligated to make payments
pursuant to a Contract, including any guarantor.
"Originator" means AGCO, in its capacity as seller under the Originator
Sale Agreement.
"Originator Sale Agreement" means that certain Receivables Sale
Agreement, dated as of the date hereof, between the Originator and the Seller,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
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"Other Taxes" has the meaning specified in Section 10.03(b).
"Outstanding Balance" means, with respect to any Dealer Receivable, the
outstanding principal balance of such Dealer Receivable.
"Ownership Interest" means, at any time, an undivided percentage
ownership interest (computed as set forth below) associated with a designated
amount of Investment in (i) each Dealer Receivable existing at such time, (ii)
all Related Security with respect to each such Dealer Receivable, and (iii) all
Collections with respect to, and other proceeds of, each such Dealer Receivable.
Each such undivided percentage interest shall equal:
I
-----------
(NERB - CE)
where:
I = the Investment of such Ownership Interest.
CE = the Credit Enhancement.
NERB = the Net Eligible Receivables Balance.
Each Ownership Interest shall be computed on its date of purchase and recomputed
(or deemed recomputed) on each day prior to the Termination Date on which the
Investment associated with such Ownership Interest, the Credit Enhancement or
the Net Eligible Receivables Balance changes. The variable percentage
represented by any Ownership Interest as computed (or deemed recomputed) as of
the close of the Business Day immediately preceding the Termination Date shall
remain constant at all times after the Termination Date.
"Payment Date" means (i) the first day of each calendar month (or, if
such day is not a Business Day, the next succeeding Business Day) and (ii) from
and after the occurrence of an Early Amortization Event, each additional
Business Day designated as a "Payment Date" by the Agent.
"Payment Rate" means, at any time, the percentage equivalent of a
fraction, the numerator of which is equal to the original Outstanding Balance of
all Dealer Receivables for which the final payment of principal owing by the
Obligor was made in the immediately preceding calendar month, and the
denominator of which is equal to the aggregate Outstanding Balance of all Dealer
Receivables as of the last day of the immediately preceding calendar month.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Plan" means each employee benefit plan (as defined in Section 3(3) of
ERISA currently sponsored, maintained or contributed to by Seller or any trade
or business (whether or not incorporated) that is treated as a single employer
with the Seller under
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Section 414 of the Code (an "ERISA Affiliate") or with respect to which Seller
or any ERISA Affiliate has any liability.
"Planned Dilution" means, with respect to any calendar month, the
aggregate amount of reserves accrued on the accounting books of the Originator
and the Seller with respect to program discounts expected to be taken by the
Dealers at the time of settlement, as calculated by the Servicer on the last day
of the immediately preceding calendar month in accordance with the accounting
practices of the Originator as in effect on the date hereof.
"Planned Dilution Amount" means an amount, determined as of the
Business Day immediately preceding the Termination Date, equal to the sum of (a)
the Planned Dilution for the calendar month then most recently ended plus (b)
the product of (i) the Variable Dilution Reserve Percentage and (ii) the Net
Eligible Receivables Balance.
"Planned Dilution Ratio" means, with respect to any calendar month, the
percentage equivalent of a fraction, the numerator of which is equal to the
aggregate Planned Dilution for such calendar month, and the denominator of which
is equal to the aggregate Outstanding Balance of the Dealer Receivables which
arose from the sale of new equipment as of the last day of the immediately
preceding calendar month.
"Potential Early Amortization Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute an Early
Amortization Event.
"Prime Rate" means the rate announced by Rabobank from time to time as
its prime rate in the United States, such rate to change as and when such
designated rate changes. The Prime Rate is not intended to be the lowest rate of
interest charged by Rabobank in connection with extension of credit to debtors.
"Pro Rata Share" means, for each Committed Purchaser, a percentage
equal to the Commitment of such Committed Purchaser divided by the aggregate of
the Commitments of all other Committed Purchasers in the same Related Group.
"Purchase" means an Incremental Purchase or a Reinvestment Purchase.
"Purchase Notice" has the meaning set forth in Section 2.02.
"Purchaser" means a Conduit Purchaser or a Committed Purchaser.
"Rabobank" means Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
"Rabobank International", New York Branch, and any successor thereto.
"Records" means, with respect to any Dealer Receivable, all Contracts
and other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Dealer Receivable,
any Related Security therefor and the related Obligor.
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<PAGE> 20
"Reference Bank" means, with respect to any Settlement Period to which
any portion of the Investment of a Related Group has been allocated, the
Administrator for such Related Group or such other bank as the Administrator for
such Related Group shall reasonably and in good faith designate with the consent
of each Purchaser in such Related Group.
"Reinvestment Purchase" has the meaning set forth in Section 2.03.
"Related Group" means (i) NARCO, as a Conduit Purchaser, and Rabobank,
as a Committed Purchaser and as Administrator, together with their respective
successors and assigns or (ii) any other group of Purchasers and their related
Administrator that shall become a party hereto as a "Related Group" pursuant to
Section 12.02, together with their respective successors and assigns.
"Related Group Limit" means, with respect to any Related Group, the
aggregate Commitments of the Committed Purchasers in such Related Group. As of
the date hereof, the Related Group Limit for the Related Group that includes
NARCO is $250,000,000.
"Related Security" means, with respect to any Dealer Receivable:
(i) all of the Seller's interest in the Equipment or other
inventory and goods (including returned, foreclosed or repossessed inventory or
goods) the financing or sale of which by the Originator gave rise to such Dealer
Receivable, and all insurance contracts with respect thereto,
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment of such
Dealer Receivable, whether pursuant to the Dealer Agreement related to such
Dealer Receivable or otherwise, together with all financing statements and
security agreements describing any collateral securing such Dealer Receivable,
(iii) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Dealer Receivable whether pursuant to the Dealer Agreement
related to such Dealer Receivable or otherwise,
(iv) the related Dealer Agreement and all service contracts
and other agreements associated with such Dealer Receivable,
(v) all Records related to such Dealer Receivable,
(vi) to the extent relating to such Dealer Receivable, all of
the Seller's right, title and interest in, to and under the Originator Sale
Agreement in respect of such Dealer Receivable, and
(vii) all proceeds of any of the foregoing.
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"Reporting Date" means the 15th Business Day following the end of each
calendar month.
"Reuters Screen LIBO Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the applicable page on such
service for the purpose of displaying the London interbank rates of major banks
for deposits in U.S. dollars.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.
"Seller" means AGCO Funding Corporation, a Delaware corporation, and
any successor thereto.
"Servicer" means at any time the Person (which may be the Agent) then
authorized pursuant to Article VIII to service, administer and collect Dealer
Receivables.
"Servicer Default" has the meaning set forth in Section 8.07.
"Servicer Fee" has the meaning set forth in Section 8.06.
"Settlement Period" means each period from and including the
immediately preceding Payment Date (or, in the case of the initial Settlement
Period, the date of the initial Purchase hereunder) to but excluding the next
succeeding Payment Date.
"Special Concentration Limit" means, at any time, with respect to all
of the Dealer Receivables owing from a single Obligor, together with Dealer
Receivables owing from its Affiliates, the amount set forth on Schedule II next
to such Obligor's name; provided that the Agent may, with the consent of the
Majority Purchasers, at any time, in its sole discretion, reduce or increase the
Special Concentration Limit for any Obligor upon not less than three (3)
Business Days' notice to the Seller; provided further that in no event shall the
Special Concentration Limit of any single Obligor be reduced so that the Dealer
Receivables owing from such single Obligor together with the Dealer Receivables
owing from its Affiliates are required to be less than 1.50% of the aggregate of
all Dealer Receivables.
"Subordinated Note" has the meaning specified in the Originator Sale
Agreement.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
"Taxes" has the meaning specified in Section 10.03(a).
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"Telerate Page 3750" means the display on Bridge Telerate, Inc. (or any
successor service) on page 3750 (or any other page as may replace such page on
such service) for the purpose of displaying the London interbank rates of major
banks for deposits in U.S. dollars.
"Termination Date" means the earliest to occur of (i) the Commitment
Termination Date, (ii) the Business Day immediately prior to the occurrence of
an Early Amortization Event set forth in Section 9.01(e), (iii) the Business Day
specified in a written notice from the Agent following the occurrence of any
other Early Amortization Event, (iv) the date which is 30 days after the Agent's
receipt of written notice from the Seller that it wishes to terminate the
facility evidenced by this Agreement and (v) January 27, 2005.
"Transaction Documents" means, collectively, this Agreement, each
Purchase Notice, the Originator Sale Agreement, each Joinder Agreement, each
Deposit Account Agreement, the Fee Letters, the Subordinated Note and all other
instruments, documents and agreements executed and delivered in connection
herewith.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"United States Dealer" means a Dealer that is located in the United
States or that remits payments to a Lock-Box or Deposit Account located in the
United States.
"Unpaid Obligations" means, at any time, the aggregate outstanding
Investment hereunder together with all other indebtedness and other liabilities
and obligations (howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, or due or to become due) of the Seller to the
Agent, any Administrator, any Purchaser or any other Affected Party, arising
under or in connection with this Agreement or any of the other Transaction
Documents or the transactions contemplated thereby and shall include, without
limitation, all Yield, fees, expense reimbursements, indemnifications, and other
amounts due or to become due from the Seller under the Transaction Documents,
including, without limitation, Yield, fees and other obligations that accrue
after the commencement of any bankruptcy, reorganization, arrangement,
insolvency, liquidation or similar proceeding with respect to the Seller.
"Variable Dilution" means, with respect to any calendar month, the
aggregate amount of Dilution occurring with respect to the Dealer Receivables
during such calendar month in excess of the Planned Dilution for such calendar
month.
"Variable Dilution Ratio" means, with respect to any calendar month, a
percentage equal to the Dilution Ratio minus the Planned Dilution Ratio.
"Variable Dilution Reserve Percentage" means, at any time, a percentage
equal to the product of (i) 2.0 times, (ii) 1 minus the Loss Reserve Percentage,
times (iii) the New Equipment Receivables Percentage, times (iii) the highest
three month rolling average
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Variable Dilution Ratio during the twelve complete calendar month period then
most recently ended.
"Weekly Report" means a report, in substantially the form of Exhibit
A-2 hereto, furnished by the Servicer to the Agent pursuant to Section 8.05.
"Year 2000 Problem" means any significant risk that computer hardware,
software or equipment containing embedded microchips essential to the business
or operations of the Seller, the Servicer or the Originator or any of their
respective Subsidiaries will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively and reliably as in the
case of times or time periods occurring before January 1, 2000, including the
making of accurate leap year calculations.
"Yield" means, for each respective Settlement Period related to each
Ownership Interest, an amount equal to:
YRT x C x ED
360
<TABLE>
<S> <C> <C> <C>
where: YRT = the Yield Rate applicable to such Ownership Interest for
such Settlement Period;
C = the amount of Investment of such Ownership Interest; and
ED = the actual number of days
elapsed during such
Settlement Period.
</TABLE>
"Yield Rate" means, for any Settlement Period and any Ownership
Interest:
(a) if the holder of such Ownership Interest is a Conduit
Purchaser, (i) to the extent such Conduit Purchaser funds or maintains
its Investment for such Settlement Period through the issuance of
Commercial Paper Notes, the CP Rate and (ii) to the extent such Conduit
Purchaser does not fund or maintain its Investment for such Settlement
Period through the issuance of Commercial Paper Notes, the Alternative
Rate; and
(b) if the holder of such Ownership Interest is a Committed
Purchaser, the Alternative Rate;
provided that from and after the occurrence and during the continuation of an
Early Amortization Event, the Yield Rate for all Ownership Interests shall, if
so declared by the Agent pursuant to Section 9.02, be equal to the Base Rate
plus 2%.
Section 1.02. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles. All terms
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used in Article 9 of the UCC in the State of New York, and not specifically
defined herein, are used herein as defined in such Article 9.
ARTICLE II
PURCHASE FACILITY
Section 2.01. Purchase Facility. Upon the terms and subject to the
conditions hereof, the Seller may, at its option from time to time, sell and
assign and, upon payment of the purchase price therefor, hereby sells and
assigns Ownership Interests to the Purchasers. In accordance with the terms and
conditions set forth herein, each Conduit Purchaser may, at its option,
purchase, or if such Conduit Purchaser shall decline to purchase, the Committed
Purchasers in its Related Group shall purchase, Ownership Interests from time to
time during the period from the date hereof to but not including the Termination
Date; provided that in no event shall any Incremental Purchase be made hereunder
to the extent that, after giving effect thereto, either (i) the aggregate
Investment held by the Purchasers in any Related Group would exceed the Related
Group Limit for such Related Group or (ii) the aggregate Investment held by all
Purchasers hereunder would exceed the Maximum Program Amount. Each Incremental
Purchase to be made hereunder shall be made ratably among the Related Groups in
accordance with their respective Related Group Limits.
Section 2.02. Incremental Purchases. The Seller shall provide each
Administrator with at least three Business Days' prior notice in a form set
forth as Exhibit D hereto of each Incremental Purchase (a "Purchase Notice").
Except as set forth below, each Purchase Notice shall be irrevocable and shall
specify the requested increase in the aggregate Investment outstanding hereunder
(which shall not be less than $10,000,000) and date of purchase (which, in the
case of any Incremental Purchase (after the initial purchase hereunder), may be
on any Business Day) and, in the case of an Incremental Purchase which is to be
funded by the Committed Purchasers (which Incremental Purchase shall be so
funded in the event of a Conduit Refusal (as defined hereinbelow), provided the
Seller does not cancel the Purchase Notice) the requested Alternative Rate.
Following receipt of a Purchase Notice, each Administrator will determine
whether the Conduit Purchaser in its Related Group agrees to make the portion of
the Incremental Purchase to be made by its Related Group. Each Administrator
shall, on or prior to the proposed date of purchase, notify the Seller if its
Conduit Purchaser declines to make the portion of the Incremental Purchase to be
made by its Related Group (a "Conduit Refusal"), and, in such event, the Seller
may cancel the Purchase Notice or, in the absence of such a cancellation, such
portion of the Purchase shall be made by the Committed Purchasers in such
Related Group. Unless it is notified of a Conduit Refusal on or prior to the
date of Purchase, the Seller shall be entitled to assume that the portion of the
Purchase contemplated in such Purchase Notice shall be made by the Conduit
Purchasers in such Administrator's Related Group. On the date of each
Incremental Purchase, upon satisfaction of the applicable conditions precedent
set forth in Article VI, the Conduit Purchasers (or if a Conduit Refusal has
occurred and the Purchase Notice has not been canceled, the Committed
Purchasers) participating in such Incremental Purchase shall deposit to the
Seller's account at SunTrust Bank, Atlanta, Account Number 8800428503, ABA
Number 061000104, in
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<PAGE> 25
immediately available funds, no later than 4:30 p.m. (New York time), an amount
equal to (i) in the case of a Conduit Purchaser, the portion of the increase in
the aggregate Investment which is to be funded by its Related Group (which
portion shall be determined based on the ratio which the Related Group Limit for
such Related Group bears to the aggregate of the Related Group Limits for all
Related Groups hereunder) or (ii) in the case of a Committed Purchaser, such
Committed Purchaser's Pro Rata Share of the portion of the increase in the
aggregate Investment which is to be funded by its Related Group.
Section 2.03. Reinvestment Purchases. On each date on which Collections
are received by the Servicer prior to the Termination Date, the Seller hereby
requests and the Purchasers hereby agree to make, simultaneously with such
receipt and out of Collections available for such purpose pursuant to Article
III, a reinvestment (each a "Reinvestment Purchase", with that portion of each
and every Collection received by the Servicer that is part of any Ownership
Interest, such that after giving effect to such Reinvestment Purchase, the
amount of Investment of such Ownership Interest immediately after such receipt
and corresponding Reinvestment Purchase shall be equal to the amount of
Investment immediately prior to such receipt, provided that if on any such date
the Seller does not have sufficient Dealer Receivables for the Purchasers to
make Reinvestment Purchases as contemplated hereinabove, the Servicer shall set
aside and be deemed to hold in trust for the benefit of the Purchasers all or
such portion of such Collections which cannot on such date be used to make
Reinvestment Purchases, until the next date on which Reinvestment Purchases may
be made as contemplated hereinabove, on which date such Reinvestment Purchases
shall be made (each a "Deferred Reinvestment Purchase").
Section 2.04. Investment Reductions and Reductions in Maximum Program
Amount. The Seller shall provide the Agent with at least five Business Days'
prior written notice of any reduction in Investment from Collections requested
by the Seller. Such notice shall designate (i) the date upon which any such
reduction of Investment shall occur, and (ii) the aggregate amount of Investment
to be reduced. Any such reduction to the Investment shall be applied ratably to
the Ownership Interests of the Purchasers in accordance with the amount of
Investment (if any) held by each. Further, the Seller shall have the right, upon
at least ten Business Days' prior written notice to the Administrators, to
terminate in whole or reduce ratably in part the unused portions of each Related
Group's pro rata share of the Maximum Program Amount, provided, however, that
each such partial reduction shall be in the aggregate amount of 10,000,000 or an
integral multiple of $1,000,000 in excess of that amount.
Section 2.05. Maximum Ownership Interests. The Seller shall ensure that
the aggregate Ownership Interests of the Purchasers shall at no time exceed in
the aggregate 100%. If the aggregate of the Ownership Interests of the
Purchasers exceeds 100%, the Seller shall immediately pay to the Agent an amount
to be applied to reduce the Investment of the Ownership Interests, such that
after giving effect to such payment, the aggregate of the Ownership Interests
equals or is less than 100%. Each such payment shall be allocated among the
Purchasers ratably in accordance with the amount of Investment (if any) held by
each.
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ARTICLE III
PAYMENTS AND COLLECTIONS
Section 3.01. Unpaid Obligations. The Seller shall pay to each
Administrator when due, for the account of the Purchasers in its Related Group,
(i) such fees as are set forth in the Fee Letter to which such Administrator is
a party, (ii) all accrued and unpaid Yield with respect to the Ownership
Interests of such Purchasers, (iii) all amounts payable to reduce the Ownership
Interests, if required, pursuant to Section 2.05, (iv) all amounts payable
pursuant to Article X, if any, and (v) if the Servicer is not AGCO or an
Affiliate thereof, the Servicer Fee. If any Person fails to pay any of the
Unpaid Obligations owing by such Person when due, such Person agrees to pay, on
demand, interest on such amount at a per annum rate equal to the Base Rate plus
2% until paid. Notwithstanding the foregoing, no provision of this Agreement or
the Fee Letters shall require the payment or permit the collection of any
amounts of interest in excess of the maximum permitted by applicable law.
Section 3.02. Collections Received by Seller; Deemed Collections. If at
any time the Seller or any of its Affiliates receives any Collections, the
Seller shall immediately pay (or cause such Affiliate to pay) such Collections
to the Servicer and, at all times prior to such payment, such Collections shall
be held in trust by the Seller or such Affiliate for the exclusive benefit of
the Purchasers and the Agent to the extent of their interests therein. In the
event any Dilution occurs with respect to a Dealer Receivable, the Seller shall
be deemed to have received a Collection of such Dealer Receivable in the amount
of such Dilution; provided that no such Collection shall be deemed to have been
received by the Seller unless (i) if such Dilution occurs on or prior to the
Termination Date, the aggregate Ownership Interests exceed 100% after giving
effect to such Dilution or (ii) if such Dilution occurs after the Termination
Date, the aggregate amount of Dilution that has occurred with respect to the
Dealer Receivables since the Termination Date exceeds the Planned Dilution
Amount. In addition, the Seller shall be deemed to have received a Collection in
full of a Dealer Receivable if either (A) any of the representations or
warranties in Section 5.01(i), (j) or (s) are no longer true with respect to
such Dealer Receivable or (B) such Dealer Receivable shall cease to be an
Eligible Receivable by reason of the Dealer's failure or refusal to account to
the Servicer for the proceeds of the sale of Equipment; provided that no such
Collection shall be deemed to have been received by the Seller unless either (i)
the Ownership Interests exceed 100% or (ii) the Termination Date has occurred.
On each Payment Date, the Seller shall pay to the Servicer an amount equal to
the aggregate amount of Collections deemed to have been received by it pursuant
to this Section 3.02 since the immediately preceding Payment Date; provided
that, with respect to any Collections deemed to have been received by the Seller
pursuant to clause (B) of the immediately preceding sentence, the Seller shall
have no obligation to pay the amount of such deemed Collections to the Servicer
(and the Seller's failure to do so shall not constitute an Early Amortization
Event) unless the Seller has funds available to make such payment, after giving
effect to the payment of all other Unpaid Obligations of the Seller then due and
payable, which funds are not so applied.
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<PAGE> 27
Section 3.03. Collections Prior to Termination Date. On each day prior
to the Termination Date, the Servicer shall, out of Collections received by it
on such day, set aside and hold in trust for the benefit of the Purchasers an
amount equal to the Unpaid Obligations (exclusive of Investment) accrued through
such day and not so previously set aside. Subject to Section 3.07, any
Collections received by the Servicer in excess of the amounts required to be set
aside for the payment of such Unpaid Obligations shall be (i) allocated to the
Seller as a Reinvestment Purchase or a Deferred Reinvestment Purchase or (ii) if
no Reinvestment Purchases or Deferred Reinvestment Purchases are to occur on
such date or on any date prior to the next succeeding Payment Date, set aside
and be deemed to be held in trust for the benefit of the Purchasers for
application on the next succeeding Payment Date in accordance with Section 3.05.
Section 3.04. Collections Following Termination Date. On the
Termination Date and on each day thereafter, the Servicer shall set aside and
hold in trust, for the benefit of the Purchasers to the extent of their interest
therein, all Collections received on such day for application on the next
succeeding Payment Date in accordance with Section 3.05.
Section 3.05. Application of Collections. On each Payment Date, the
Servicer shall, out of Collections set aside for the benefit of the Purchasers
during the most recently ended Settlement Period, pursuant to Section 3.03 or
3.04, pay the following amounts to the following Persons in the following order
of priority:
first, if AGCO or one of its Affiliates is not then acting as
the Servicer, pay to the Servicer the accrued and unpaid Servicer Fee;
second, pay to the Purchasers, ratably in accordance with the
amounts owing to each, the accrued and unpaid Yield for their
respective Ownership Interests,
third, pay to the Purchasers and the Administrators, ratably
in accordance with the amounts owing to each, the accrued and unpaid
fees then due and payable under the Fee Letters,
fourth, if the Termination Date has occurred or no
Reinvestment Purchases or Deferred Reinvestment Purchases are to occur
(and, if any such Reinvestment Purchases or Deferred Reinvestment
Purchases are to occur, following such Purchases), pay to the
Purchasers, ratably in accordance with the Investment held by each, an
amount equal to the lesser of (i) the aggregate Investment then
outstanding with respect to all Ownership Interests and (ii) the
product of (x) the total Collections received in respect of the Dealer
Receivables since the immediately preceding Payment Date, net of the
portion of such Collections distributed pursuant to clauses first
through third above and (y) the aggregate percentage interest
represented by the Ownership Interests,
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<PAGE> 28
fifth, pay to the Agent, the Purchasers and the
Administrators, ratably in accordance with the amounts owing to each,
the amount of all other Unpaid Obligations (other than the Servicer
Fee) then outstanding,
sixth, if AGCO or one of its Affiliates is then acting as the
Servicer, pay to the Servicer the accrued and unpaid Servicer Fee, and
seventh, allocate to the Seller any remaining amounts.
Collections applied to the payment of Unpaid Obligations shall be
distributed in accordance with the aforementioned provisions, and, giving effect
to each of the priorities set forth in this Section 3.05, shall be shared
ratably (within each priority) among the Agent or the Administrators, as the
case may be, and the Purchasers in accordance with the amount of such Unpaid
Obligations owing to each of them in respect of each such priority.
Any Collections allocated to the Seller under this Article III prior to
the Termination Date shall be applied by the Servicer, on behalf of the Seller,
as follows: first, pay to the Originator the purchase price for the Dealer
Receivables to be purchased on such day by the Seller from the Originator in
accordance with the terms of the Originator Sale Agreement; second, pay to the
Originator an amount equal to all indebtedness of the Seller then outstanding
under the Subordinated Note in accordance with the terms of the Originator Sale
Agreement; and third, in such other manner as the Seller may direct.
Section 3.06. Payment Requirements. All amounts to be paid or deposited
by the Seller or the Servicer pursuant to any provision of this Agreement shall
be paid or deposited in accordance with the terms hereof no later than 12:00
p.m. (New York time) on the day when due in immediately available funds, and if
not received before 12:00 p.m. (New York time) shall be deemed to be received on
the next succeeding Business Day. If such amounts are payable to a Purchaser in
a Related Group, they shall be paid to the Administrator for such Related Group,
for the account of such Purchaser, to such account as may be specified from time
to time by such Administrator in a written notice delivered to the Seller and
the Servicer. All computations of Yield and per annum fees hereunder and under
the Fee Letters shall be made on the basis of a year of 360 days for the actual
number of days elapsed. If any amount hereunder shall be payable on a day which
is not a Business Day, such amount shall be payable on the next succeeding
Business Day.
Section 3.07. Collection Account.
(a) The Servicer has established, and during the term of this Agreement shall
maintain, the Collection Account. If, at any time, the bank at which the
Collection Account is maintained ceases to be an Eligible Bank, the Servicer
shall within 30 days of acquiring knowledge that such bank is no longer an
Eligible Bank establish a new Collection Account with an Eligible Bank
reasonably satisfactory to the Agent and shall transfer any cash and any
investments held in the old Collection Account to such new Collection Account.
Prior to establishing any new Collection Account with an Eligible
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Bank, the Servicer shall obtain from such Eligible Bank a fully executed
Deposit Account Agreement covering such new Collection Account.
(b) If at any time the Originator's long-term senior unsecured debt shall not be
rated at least Ba2 by Moody's and at least BB by S&P, then, on the last Business
Day of each calendar week, the Servicer shall cause all Collections received
during such week to be deposited into the Collection Account until the amount on
deposit therein is equal to the greater of (i) the product of the Carrying Cost
Reserve Percentage in effect as of such day and the Eligible Receivables Balance
as of such day and (ii) the amount of Collections required to be set aside and
held in trust for the benefit of the Purchasers pursuant to Section 3.03 or
3.04, as applicable.
Section 3.08. Payment Rescission. No payment of any of the Unpaid
Obligations shall be considered paid or applied hereunder to the extent that, at
any time, all or any portion of such payment or application is rescinded by
application of law or judicial authority, or must otherwise be returned or
refunded for any reason. The Seller shall remain obligated for the amount of any
payment or application so rescinded, returned or refunded, and shall promptly
pay to the Agent (for application to the Person or Persons who suffered such
rescission, return or refund) the full amount thereof, plus interest on such
amount at a per annum rate equal to the Base Rate plus 2.0% from the date of any
such rescission, return or refunding.
ARTICLE IV
YIELD AND FEES
Section 4.01. Yield Payments. On each Payment Date, the Seller shall
pay to each Administrator (for the benefit of the Purchasers in its Related
Group) an aggregate amount equal to the accrued and unpaid Yield for all
Ownership Interests held by the members of such Related Group, such payment to
be made out of Collections available for such purpose pursuant to Section 3.05.
Section 4.02. Suspension of the Adjusted Eurodollar Rate. If any
Purchaser notifies the Agent that it has determined in good faith that funding
its portion of the Investment at an Adjusted Eurodollar Rate would violate any
applicable law, rule, regulation, or directive of any governmental or regulatory
authority, whether or not having the force of law, or that (i) deposits of a
type and maturity appropriate to match fund its Ownership Interests at such
Adjusted Eurodollar Rate are not available or (ii) such Adjusted Eurodollar Rate
does not accurately reflect the cost of acquiring or maintaining an Ownership
Interest at such Adjusted Eurodollar Rate, then the Agent shall suspend the
availability of such Adjusted Eurodollar Rate and require the Seller to select
the Base Rate for any Ownership Interest accruing Yield at such Adjusted
Eurodollar Rate.
Section 4.03. Fees. The Seller shall pay all fees set forth in each Fee
Letter on the dates and in the amounts set forth therein, such payment to be
made out of Collections available for such purpose pursuant to Section 3.05.
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Section 4.04. Break Costs. In the event that any Purchaser shall incur
any loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Purchaser to make or maintain any funding with respect to its Investment) as a
result of (i) any reduction to the Investment on any day other than the
scheduled last day of a Settlement Period, or (ii) any Purchase not being made
in accordance with a request therefor under Section 2.02 (whether because of the
failure of the conditions precedent with respect to such Purchase to be
satisfied or for any other reason, other than default by the relevant
Purchaser), then the Seller shall, upon written demand, pay to such Purchaser
the amount of such loss or expense. Such written demand (which shall include
calculations in reasonable detail) shall, in the absence of demonstrable error,
be conclusive and binding upon the Seller.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to the Agent, the Administrators and the
Purchasers that:
(a) Corporate Existence and Power. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation, and has and holds all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted, except where
the absence of any such governmental license, authorization, consent or approval
would not have a Material Adverse Effect.
(b) Power and Authority; Due Authorization Execution and Delivery. The
execution and delivery by the Seller of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and the Seller's use of the proceeds of
purchases made hereunder, are within its corporate powers and authority and have
been duly authorized by all necessary corporate action on its part. This
Agreement and each other Transaction Document to which the Seller is a party has
been duly executed and delivered by the Seller.
(c) No Conflict. The execution and delivery by the Seller of this
Agreement and each other Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder do not contravene or
violate (i) its certificate or articles of incorporation or by-laws, (ii) any
law, rule or regulation applicable to it the violation or contravention of which
would have a Material Adverse Effect, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or by which it or any
of its property is bound the violation or contravention of which would have a
Material Adverse Effect or (iv) any order, writ, judgment, award, injunction or
decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on the assets of the Seller (except
as created hereunder) and no transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
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(d) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution and delivery by the Seller of this Agreement
and each other Transaction Document to which it is a party and the performance
of its obligations hereunder and thereunder other than those which, if not
obtained, would not have a Material Adverse Effect.
(e) Actions, Suits. There are no actions, suits or proceedings pending,
or to the best of the Seller's knowledge, threatened, against or affecting the
Seller, or any of its properties, in or before any court, arbitrator or other
body, that could reasonably be expected to have a Material Adverse Effect. The
Seller is not in default with respect to any order of any court, arbitrator or
governmental body.
(f) Binding Effect. This Agreement and each other Transaction Document
to which the Seller is a party constitute the legal, valid and binding
obligations of the Seller enforceable against the Seller in accordance with
their respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Accuracy of Information. All information heretofore furnished in
writing by the Seller or any of its Affiliates to the Agent or the Purchasers
for purposes of or in connection with this Agreement, any of the other
Transaction Documents or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished in writing by the Seller or any of its
Affiliates to the Agent or the Purchasers will be, true and accurate in every
material respect on the date such information is stated or certified and does
not and will not contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained therein not
materially misleading.
(h) Use of Proceeds. No proceeds of any purchase hereunder will be used
for a purpose that violates Regulations T, U or X promulgated by the Board of
Governors of the Federal Reserve System from time to time.
(i) Good Title. Immediately prior to each purchase hereunder, the
Seller shall be the legal and beneficial owner of the Dealer Receivables and
Related Security with respect thereto, free and clear of any Adverse Claim,
except as created by the Transaction Documents. There have been duly filed all
financing statements or other similar instruments or documents necessary under
the UCC (or any comparable law) of all appropriate jurisdictions to perfect the
Seller's ownership interest in each Dealer Receivable, its Collections and the
Related Security.
(j) Perfection. This Agreement, together with the filing of the
financing statements contemplated hereby, is effective to, and shall, upon each
purchase hereunder, transfer to the Agent for the benefit of the relevant
Purchaser or Purchasers (and the
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Agent for the benefit of such Purchaser or Purchasers shall acquire from the
Seller) a valid and perfected first priority undivided percentage ownership
interest in each Dealer Receivable existing or hereafter arising and in the
Related Security and Collections with respect thereto, free and clear of any
Adverse Claim, except as created by the Transaction Documents. There have been
duly filed all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect the Agent's (on behalf of the Purchasers) ownership interest in the
Dealer Receivables, the Related Security and the Collections.
(k) Places of Business. The principal place of business and chief
executive office of the Seller and the offices where it keeps all of its Records
are located at the address(es) listed on Schedule III or such other locations of
which the Agent has been notified in accordance with Section 7.02(a) in
jurisdictions where all action required by Section 13.04(a) has been taken and
completed. The Seller's Federal Employer Identification Number is correctly set
forth on Schedule III.
(l) Collections. The conditions and requirements set forth in Section
7.03(g) and Section 8.02 save where, in the context of Section 8.02 only, the
failure to so duly perform would not have a Material Adverse Effect, have at all
times been satisfied and duly performed. The names and addresses of all Deposit
Account Banks, together with the account numbers of the Deposit Accounts of the
Seller at each Deposit Account Bank and the post office box number of each
Lock-Box, are listed on Schedule I, as such Schedule may be updated from time to
time by the Servicer.
(m) Ownership of the Seller. The Originator owns, directly or
indirectly, 100% of the issued and outstanding capital stock of the Seller, free
and clear of any Adverse Claim. Such capital stock is validly issued, fully paid
and nonassessable, and there are no options, warrants or other rights to acquire
securities of the Seller.
(n) Not a Holding Company or an Investment Company. The Seller is not a
"holding company" or a "subsidiary holding company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute. The Seller is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.
(o) Compliance with Law. The Seller has complied in all respects with
all applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, except where the failure to comply
would not have a Material Adverse Effect.
(p) ERISA. The Seller is not part of any Plan.
(q) Compliance with Credit and Collection Policy. The Seller has
complied in all material respects with the Credit and Collection Policy with
regard to each Dealer Receivable and the related Contract, and has not made any
change to such Credit and
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Collection Policy, other than as permitted under Section 7.02(c), and in
compliance with the notification requirements in Section 7.01(a)(i).
(r) Payments to the Originator. With respect to each Dealer Receivable
transferred to the Seller under the Originator Sale Agreement, the Seller has
given reasonably equivalent value to the Originator in consideration therefor
and such transfer was not made for or on account of an antecedent debt. No
transfer by the Originator of any Dealer Receivable under the Originator Sale
Agreement is or may be voidable under any section of the Bankruptcy Reform Act
of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.
(s) Eligible Receivables. Except as otherwise disclosed by the
Originator to the Seller and the Agent in writing in accordance with the
Originator Sale Agreement, each Dealer Receivable included in the Eligible
Receivables Balance on the date of its purchase under the Originator Sale
Agreement was an Eligible Receivable on such purchase date, provided that if any
Dealer Receivable was not an Eligible Receivable as contemplated herein the
representation and warranty of the Seller contained herein shall not be regarded
as breached if the Originator repurchases such Dealer Receivable under the terms
of the Originator Sale Agreement or a "Purchase Price Credit" is granted to the
Seller by the Originator in accordance with Section 1.3 of the Originator Sale
Agreement.
(t) Year 2000 Problem. The Seller has reviewed its operations with a
view to assessing whether its businesses, will be vulnerable to a Year 2000
Problem or will be vulnerable to the effects of a Year 2000 Problem suffered by
any of the Seller's major commercial counter-parties. The Seller has a
reasonable basis to believe that no Year 2000 Problem will cause a Material
Adverse Effect.
Section 5.02. Representations and Warranties of the Servicer. The
Servicer hereby represents and warrants to the Agent and the Purchasers that:
(a) Corporate Existence and Power. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation, and has and holds all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted, except where
the absence of any such governmental license, authorization, consent or approval
would not have a Material Adverse Effect.
(b) Power and Authority; Due Authorization Execution and Delivery. (i)
The execution and delivery by the Servicer of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder, are within its corporate powers and
authority and have been duly authorized by all necessary corporate action on its
part, and (ii) this Agreement and each other Transaction Document to which the
Servicer is a party has been duly executed and delivered by the Servicer, except
in the case of both clauses (i) and (ii), where any such
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deviation from the representations and warranties set out in both clauses (i)
and (ii) would not have a Material Adverse Effect.
(c) No Conflict. The execution and delivery by the Servicer of this
Agreement and each other Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder do not contravene or
violate (i) its certificate or articles of incorporation or by-laws, (ii) any
law, rule or regulation applicable to it, (iii) any restrictions under any
material agreement, contract or instrument to which it is a party or by which it
or any of its property is bound, or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, except, in the
case of each of clauses (i), (ii) and (iv) where such contravention or violation
would not have a Material Adverse Effect.
(d) Governmental Authorization. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by the Servicer
of this Agreement and each other Transaction Document to which it is a party and
the performance of its obligations hereunder and thereunder other than those
which, if not obtained, would not have a Material Adverse Effect.
(e) Actions, Suits. There are no actions, suits or proceedings pending,
or to the best of the Servicer's knowledge, threatened, against or affecting the
Servicer, or any of its properties, in or before any court, arbitrator or other
body, that could reasonably be expected to have a Material Adverse Effect. The
Servicer is not in default in any material respect with respect to any order of
any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other Transaction Document
to which the Servicer is a party constitute the legal, valid and binding
obligations of the Servicer enforceable against the Servicer in accordance with
their respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Accuracy of Information. All information heretofore furnished in
writing by the Servicer or any of its Affiliates to the Agent or the Purchasers
for purposes of or in connection with this Agreement, any of the other
Transaction Documents or any transaction contemplated hereby or thereby is, and
all such information hereafter furnished, in writing, by the Servicer or any of
its Affiliates to the Agent or the Purchasers will be, true and accurate in
every material respect on the date such information is stated or certified and
does not and will not contain any material misstatement of fact or omit to state
a material fact or any fact necessary to make the statements contained therein
not misleading in any material respect.
(h) Collections. The conditions and requirements set forth in Section
7.03(g) and Section 8.02 save where, in the context of Section 8.02 only, the
failure to so duly
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perform would not have a Material Adverse Effect, have at all times been
satisfied and duly performed. The names and addresses of all Deposit Account
Banks, together with the account numbers of the Deposit Accounts of the Seller
at each Deposit Account Bank and the post office box number of each Lock-Box,
are listed on Schedule I, as such Schedule may from time to time hereafter be
updated by the Servicer.
(i) Material Adverse Effect. The consolidated balance sheets of the
Servicer and its consolidated subsidiaries as at December 31, 1998, and the
related statements of income and retained earnings of the Servicer and its
consolidated subsidiaries for the fiscal year then ended, certified by Arthur
Andersen LLP, independent public accountants, copies of which have been
furnished to each Administrator, fairly present in all material respects the
consolidated financial condition of the Servicer and its consolidated
subsidiaries as at such date and the consolidated results of the operations of
the Servicer and its consolidated subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principals,
consistently applied. Since September 30, 1999, no event has occurred that would
have a material adverse effect on the financial condition or operations of the
Servicer and its Subsidiaries or the ability of the Servicer to perform its
obligations under this Agreement.
(j) Not a Holding Company or an Investment Company. The Servicer is not
a "holding company" or a "subsidiary holding company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute. The Servicer is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.
(k) Compliance with Law. The Servicer has complied in all respects with
all applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject, except where failure to comply
would not have a Material Adverse Effect.
(l) Compliance with Credit and Collection Policy. The Servicer has
complied in all material respects with the Credit and Collection Policy with
regard to each Dealer Receivable and the related Contract, and has not made any
change to such Credit and Collection Policy, other than as permitted under
Section 7.04(b), and in compliance with the notification requirements in Section
7.03(a)(vii).
(m) Year 2000 Problem. The Servicer has reviewed its operations and
those of its Subsidiaries with a view to assessing whether its businesses, or
the businesses of any of its Subsidiaries, will be vulnerable to a Year 2000
Problem or will be vulnerable to the effects of a Year 2000 Problem suffered by
any of the Servicer's or any of its Subsidiaries' major commercial
counter-parties. The Servicer has a reasonable basis to believe that no Year
2000 Problem will cause a Material Adverse Effect.
Section 5.03. Representations and Warranties of the Purchasers. Each of
the Purchasers generally (each with respect to itself only) represents and
warrants to, and agrees with, the Seller that:
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(a) Such Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has the power
and authority and is duly authorized to enter into and perform this Agreement
and has duly executed and delivered this Agreement;
(b) This Agreement constitutes the valid and binding obligation of such
Purchaser, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, receivership and other laws relating to, or
affecting generally the enforcement of creditors' rights and remedies as the
same may be applied in the event of the bankruptcy, insolvency, reorganization,
receivership or liquidation or similar event of such Purchaser or a moratorium
applicable to such Purchaser and to general principles of equity (regardless of
whether such enforceability is in a proceeding of law or in equity);
(c) No registration with, consent or approval of or other action by any
federal, state of governmental authority or regulatory body having jurisdiction
over such Purchaser is required in connection with the execution, delivery or
performance by such Purchaser of this Agreement; and
(d) Such Purchaser has executed and delivered to the Seller an
Investment Letter substantially in the form of Exhibit C .
ARTICLE VI
CONDITIONS OF PURCHASES
Section 6.01. Conditions Precedent to Initial Purchase. The initial
purchase of an Ownership Interest under this Agreement is subject to the
conditions precedent that (a) the Agent shall have received on or before the
date of such purchase those documents listed on Schedule IV and (b) the Agent
shall have received all fees and expenses required to be paid on such date
pursuant to the terms of this Agreement and the Fee Letter to which NARCO is a
party.
Section 6.02. Conditions Precedent to All Purchases and Reinvestment
Purchases. Each purchase of an Ownership Interest and each Reinvestment Purchase
shall be subject to the further conditions precedent that (a) in the case of
each such purchase or Reinvestment Purchase the Servicer shall have delivered to
the Agent on or prior to the date of such purchase, in form and substance
satisfactory to the Agent, all Asset Reports as and when due under Section 8.05
(b) on the date of each such purchase or Reinvestment Purchase, the following
statements shall be true (and acceptance of the proceeds of such purchase or
Reinvestment Purchase shall be deemed a representation and warranty by the
Seller that such statements are then true):
(i) the representations and warranties set forth in Sections 5.01
and 5.02 are true and correct in all material respects on and
as of the date of such purchase or Reinvestment Purchase as
though made on and as of such date (except to the extent any
such representation and warranty specifically relates to a
prior date, in which case such
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representation and warranty shall be true and correct in all
material respects on and as of such prior date);
(ii) no event has occurred and is continuing, or would result from
such purchase or Reinvestment Purchase, that will constitute
an Early Amortization Event, and no event has occurred and is
continuing, or would result from such purchase or Reinvestment
Purchase, that would constitute a Potential Early Amortization
Event;
(iii) the Commitment Termination Date shall not have occurred; and
(iv) immediately after giving effect to such Purchase or
Reinvestment Purchase, the Net Eligible Receivables Balance
shall be at least equal to the sum of (i ) the aggregate
Investment of all Ownership Interests, plus (ii) the Credit
Enhancement;
and (c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request to demonstrate compliance with the
requirements of this Section 6.02. It is expressly understood that each
Reinvestment Purchase shall, unless otherwise directed by the Agent or any
Purchaser, occur automatically on each day that the Servicer shall receive any
Collections without the requirement that any further action be taken on the part
of any Person and notwithstanding the failure of the Seller to satisfy any of
the foregoing conditions precedent in respect of such Reinvestment Purchase. The
failure of the Seller to satisfy any of the foregoing conditions precedent in
respect of any Reinvestment Purchase shall give rise to a right of the Agent and
the Purchasers, which right may be exercised at any time on demand of the Agent,
to rescind the related purchase and direct the Seller to pay to the Agent for
the benefit of the Purchasers an amount equal to the Collections that shall have
been applied to effect such Reinvestment Purchase.
ARTICLE VII
COVENANTS
Section 7.01. Affirmative Covenants of the Seller. Until the date on
which the Unpaid Obligations have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, the Seller hereby covenants,
as set forth below:
(a) Notices. The Seller will, unless otherwise stated, promptly upon
learning of the occurrence thereof, provide to each Administrator notice of the
following events, which notice, in the case of clause (iii) will include a
description of the relevant events and the steps, if any, being taken with
respect thereto:
(i) Change in Credit and Collection Policy. At least ten (10)
days prior to the effectiveness of any material change in or amendment
to the Credit and Collection Policy, a notice describing in reasonable
detail such change or amendment.
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(ii) Other Information. Promptly, from time to time, such
other information, documents, records or reports relating to the Dealer
Receivables or the condition or operations, financial or otherwise, of
the Seller or the Originator as the Agent or any Administrator may from
time to time reasonably request.
(iii) Early Amortization Events or Potential Early
Amortization Events. The occurrence of each Early Amortization Event
and each Potential Early Amortization Event, by a statement of an
Authorized Officer of the Seller.
(iv) Judgment and Proceedings. (A) The entry of any judgment
or decree against the Seller; or (B) the institution of any litigation,
arbitration proceeding or governmental proceeding against the Seller.
(v) Material Adverse Effect. The occurrence of any event or
condition that, has, or could reasonably be expected to have, a
Material Adverse Effect.
(vi) Termination Date. The occurrence of the "Termination
Date" under the Originator Sale Agreement.
(vii) Downgrade of the Originator. Any downgrade in the rating
of any Indebtedness of the Originator by S&P or by Moody's setting
forth the Indebtedness affected and the nature of such change.
(b) Compliance with Laws and Preservation of Corporate Existence. The
Seller will comply in all material respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, except where the failure to comply would not be reasonably
likely to have a Material Adverse Effect. The Seller will preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where its business is conducted, except
where its failure to be so qualified and in good standing could not reasonably
be expected to have a Material Adverse Effect.
(c) Audits. The Seller will furnish to each Administrator from time to
time such information with respect to it and the Dealer Receivables as such
Administrator may reasonably request. The Seller will, from time to time during
regular business hours as requested by any Administrator upon reasonable notice
and at the sole cost of the Seller, permit such Administrator, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
Records in the possession or under the control of the Seller relating to the
Dealer Receivables and the Related Security, including, without limitation, the
related Contracts, and (ii) to visit the offices and properties of the Seller
for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to the Seller's financial condition or the Dealer
Receivables and the Related Security or the Seller's performance under any of
the Transaction Documents or performance under the Contracts and, in each case,
with any of the officers or employees of the Seller having knowledge of such
matters, provided that (x) the Administrators of all
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Related Groups shall coordinate with each other so as to jointly arrange and
conduct the visits contemplated in clause (ii) and (y) in no single calendar
year will the total number of such visits exceed two.
(d) Keeping and Marking of Records and Books. The Seller will (i) on or
prior to the date hereof, mark its master data processing records and other
books and records relating to the Ownership Interests with a legend describing
the Ownership Interests and (ii) upon the request of any Administrator following
the occurrence of an Early Amortization Event (A) mark each such Contract
constituting chattel paper under the UCC with a legend describing the Ownership
Interests and (B) deliver to the Agent all Contracts (including, without
limitation, all multiple originals of any such Contract) relating to the Dealer
Receivables.
(e) Compliance with Contracts and Credit and Collection Policy. The
Seller will timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Dealer Receivables, and (ii) comply in all respects with the
Credit and Collection Policy in regard to each Dealer Receivable and the related
Contract, in the case of both (i) and (ii) except to any extent which would not
in any way materially impair the ability of the Servicer to ultimately collect
all amounts payable in respect of the Dealer Receivables. The Seller will pay
when due any taxes payable in connection with the Dealer Receivables unless
contested in good faith.
(f) Performance and Enforcement of Originator Sale Agreement. The
Seller shall, and shall require the Originator to, perform their respective
obligations and undertakings under and pursuant to the Originator Sale
Agreement, shall purchase Dealer Receivables thereunder in compliance with the
terms thereof and shall vigorously enforce the rights and remedies accorded to
the Seller under the Originator Sale Agreement. The Seller shall take all
actions reasonably required to perfect and enforce its rights and interests (and
the rights and interests of the Agent and the Purchasers as assignees of the
Seller) under the Originator Sale Agreement as the Agent may from time to time
reasonably request, including, without limitation, making claims to which it may
be entitled under any indemnity, reimbursement or similar provision contained in
the Originator Sale Agreement.
(g) Ownership. The Seller shall take all necessary action to (i) vest
legal and equitable title to the Dealer Receivables, the Related Security and
the Collections purchased under the Originator Sale Agreement irrevocably in the
Seller, free and clear of any Adverse Claims other than Adverse Claims in favor
of the Agent and the Purchasers (including, without limitation, the filing of
all financing statements or other similar instruments or documents necessary
under the UCC (or any comparable law) of all appropriate jurisdictions to
perfect the Seller's interest in such Dealer Receivables, Related Security and
Collections and such other action to perfect, protect or more fully evidence the
interest of the Seller therein as the Agent may reasonably request), and (ii)
establish and maintain, in favor of the Agent, for the benefit of the
Purchasers, a valid and perfected first
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priority undivided percentage ownership interest (and/or a valid and perfected
first priority security interest) in all Dealer Receivables, Related Security
and Collections to the full extent contemplated herein, free and clear of any
Adverse Claims other than Adverse Claims in favor of the Agent for the benefit
of the Purchasers (including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Agent's (for
the benefit of the Purchasers) interest in such Dealer Receivables, Related
Security and Collections and such other action as may be reasonably required to
perfect, protect or more fully evidence the interest of the Agent for the
benefit of the Purchasers as the Agent may reasonably request).
(h) Purchasers' Reliance. The Seller acknowledges that the Purchasers
are entering into the transactions contemplated by this Agreement in reliance
upon the Seller's identity as a legal entity that is separate from the
Originator (and any Affiliates or Subsidiaries of the Originator (each, an
"Originator Entity")). Therefore, from and after the date of execution and
delivery of this Agreement, the Seller shall take reasonable steps, including,
without limitation, all steps that the Agent or any Purchaser may from time to
time reasonably request, to maintain the Seller's identity as a separate legal
entity and to make it manifest to third parties that the Seller is an entity
with assets and liabilities distinct from those of any Originator Entity and not
just a division of any Originator Entity. Without limiting the generality of the
foregoing and in addition to the other covenants set forth herein, the Seller
shall:
(i) conduct its own business in its own name and require that
all full-time employees of the Seller, if any, identify themselves as
such and not as employees of any Originator Entity (including, without
limitation, by means of providing appropriate employees with business
or identification cards identifying such employees as the Seller's
employees);
(ii) compensate all employees, consultants and agents
directly, from the Seller's bank accounts, for services provided to the
Seller by such employees, consultants and agents and, to the extent any
employee, consultant or agent of the Seller is also an employee,
consultant or agent of any Originator Entity, allocate the compensation
of such employee, consultant or agent between the Seller and such
Originator Entity on a basis that reflects the services rendered to the
Seller and such Originator Entity;
(iii) clearly identify its offices (by signage or otherwise)
as its offices and, if such office is located in the offices of any
Originator Entity, the Seller shall lease such office at a fair market
rent;
(iv) have a separate telephone number, which will be answered
only in its name and separate stationery, invoices and checks in its
own name;
(v) conduct all transactions with each Originator Entity and
the Servicer (including, without limitation, any delegation of its
obligations hereunder as Servicer) strictly on an arm's-length basis,
allocate all overhead expenses
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(including, without limitation, telephone and other utility charges)
for items shared between the Seller and such Originator Entity on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual
use;
(vi) at all times have a Board of Directors consisting of
three members, at least one member of which is an Independent Director;
(vii) observe all corporate formalities as a distinct entity,
and ensure that all corporate actions relating to (A) the selection,
maintenance or replacement of the Independent Director, (B) the
dissolution or liquidation of the Seller or (C) the initiation of,
participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving the Seller,
are duly authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(viii) maintain the Seller's books and records separate from
those of any Originator Entity and otherwise readily identifiable as
its own assets rather than assets of any Originator Entity;
(ix) prepare its financial statements separately from those of
any Originator Entity and insure that any consolidated financial
statements of any Originator Entity thereof that include the Seller and
that are filed with the Securities and Exchange Commission or any other
governmental agency have notes clearly stating that the Seller is a
separate corporate entity and that its assets will be available first
and foremost to satisfy the claims of the creditors of the Seller;
(x) except as herein specifically otherwise provided, maintain
the funds or other assets of the Seller separate from, and not
commingled with, those of any Originator Entity and only maintain bank
accounts or other depository accounts to which the Seller alone is the
account party, into which the Seller alone makes deposits and from
which the Seller alone (or the Servicer or the Agent hereunder) has the
power to make withdrawals;
(xi) pay all of the Seller's operating expenses from the
Seller's own assets (except for certain payments by an Originator
Entity or other Persons pursuant to allocation arrangements that comply
with the requirements of this Section 7.01(h));
(xii) operate its business and activities such that: it does
not engage in any business or activity of any kind, or enter into any
transaction or indenture, mortgage, instrument, agreement, contract,
lease or other undertaking, other than the transactions contemplated
and authorized by this Agreement, the Originator Sale Agreement and the
other Transaction Documents;
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(xiii) maintain its corporate charter in conformity with this
Agreement;
(xiv) maintain the effectiveness of, and continue to perform
under, the Originator Sale Agreement;
(xv) refrain from paying dividends or making distributions,
loans or other advances to any of its Affiliates except as duly
authorized by its board of directors and in accordance with applicable
corporation law;
(xvi) refrain from holding itself out to be responsible for
the Indebtedness of any Originator Entity, and not permit any
Originator Entity to hold itself out as responsible for the
Indebtedness of the Seller; and
(xvii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion issued
by Troutman Sanders LLP, as counsel for the Seller, in connection with
the closing or initial purchase under this Agreement and relating to
true sale and substantive consolidation issues, and in the certificates
accompanying such opinion, remain true and correct in all material
respects at all times.
(i) Collections. The Seller shall cause (1) all proceeds from all
Lock-Boxes to be directly deposited by a Deposit Account Bank into a Deposit
Account and (2) each Lock-Box and Deposit Account to be subject at all times to
a Deposit Account Agreement that is in full force and effect. In the event any
payments relating to Dealer Receivables are remitted directly to the Seller or
any Affiliate of the Seller, the Seller shall remit (or shall cause all such
payments to be remitted) directly to a Deposit Account Bank and deposited into a
Deposit Account within two (2) Business Days following receipt thereof and, at
all times prior to such remittance, the Seller shall itself hold or, if
applicable, shall cause such payments to be held in trust for the exclusive
benefit of the Agent and the Purchasers to the extent of their Investment
therein. The Seller shall maintain exclusive ownership, dominion and control
(subject to the terms of this Agreement) of each Lock-Box and Deposit Account
and shall not grant the right to take dominion and control of any Lock-Box or
Deposit Account at a future time or upon the occurrence of a future event to any
Person, except to the Agent as contemplated by this Agreement.
(j) Year 2000 Problem. The Seller has taken all actions reasonably
necessary and has committed adequate resources to assure that its computer-based
and other systems are able to effectively process data, including dates before,
on and after January 1, 2000, without experiencing any Year 2000 Problem that
could cause a Material Adverse Effect. At the reasonable request of any
Administrator, the Seller will provide such Administrator with assurances and
substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to such Administrator as to the capability of the Seller to conduct
its business and operations without experiencing a Year 2000 Problem that could
reasonably be expected to have a Material Adverse Effect.
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(k) Taxes. The Seller shall file all tax returns and reports required
by law to be filed by it and shall promptly pay all taxes and governmental
charges at any time owing, except any such taxes which are not yet delinquent or
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books.
Section 7.02. Negative Covenants of the Seller. Until the date on which
the Unpaid Obligations have been indefeasibly paid in full and this Agreement
terminates in accordance with its terms, the Seller hereby covenants that:
(a) Name Change, Offices and Records. The Seller will not change its
name, identity or corporate structure (within the meaning of Section 9-402(7) of
any applicable enactment of the UCC) or relocate its chief executive office or
any office where Records are kept unless it shall have: (i) given each
Administrator at least thirty (30) days' prior written notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other documents
reasonably requested by the Agent in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Seller will not add
or terminate any bank as a Deposit Account Bank, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box or
Deposit Account in respect of Dealer Receivables, unless the Agent shall have
received, at least ten (10) days before the proposed effective date therefor,
(i) written notice of such addition, termination or change and (ii) with respect
to the addition of a Deposit Account Bank or a Deposit Account or Lock-Box, an
executed Deposit Account Agreement with respect to the new Deposit Account or
Lock-Box; provided, however, that the Seller may make changes in instructions to
Obligors regarding payments on Dealer Receivables if such new instructions
require such Obligor to make payments to another existing Deposit Account or
Lock-Box.
(c) Modifications to Contracts and Credit and Collection Policy. The
Seller will not make, or consent to, any material change to the Credit and
Collection Policy that could reasonably be expected to adversely affect the
timely collectibility of the Dealer Receivables other than those which (i) have
been approved in writing by each Administrator (such approval not to be
unreasonably withheld) or (ii) are required by applicable law. Except as
provided in Section 8.02(d), the Seller will not, and will not consent to, any
extension, amendment or other modification to the terms of any Dealer Receivable
or any Contract related thereto other than in accordance with the Credit and
Collection Policy.
(d) Sales, Liens. The Seller shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or grant any option with respect to,
or create or suffer to exist any Adverse Claim upon (including, without
limitation, the filing of any financing statement) or with respect to, any
Dealer Receivable, Related Security or Collections, or upon or with respect to
any Contract under which any Dealer Receivable arises, or any Lock-Box or
Deposit Account, or assign any right to receive income with respect thereto
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(other than, in each case, the creation of the interests therein in favor of the
Agent and the Purchasers provided for herein), and the Seller shall defend the
right, title and interest of the Agent and the Purchasers in, to and under any
of the foregoing property, against all claims of third parties claiming through
or under the Seller or the Originator.
(e) Termination Date Determination. The Seller shall not designate a
Termination Date (as defined in the Originator Sale Agreement), or send any
written notice to the Originator in respect thereof, without the prior written
consent of the Agent, except with respect to the occurrence of such Termination
Date as a result of the occurrence of an Amortization Event (as defined in the
Originator Sale Agreement) pursuant to Section 5.1(d) thereof.
(f) Nature of Business; Other Agreements; Other Indebtedness. The
Seller shall not engage in any business or activity of any kind or enter into
any transaction or indenture, mortgage, instrument, agreement, contract, lease
or other undertaking other than the transactions contemplated and authorized by
this Agreement, the Originator Sale Agreement and the other Transaction
Documents. Without limiting the generality of the foregoing, the Seller shall
not create, incur, guarantee, assume or suffer to exist any indebtedness or
other liabilities, whether direct or contingent, other than (i) as a result of
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (ii) the incurrence of
obligations under this Agreement, (iii) the incurrence of obligations, as
expressly contemplated in the Originator Sale Agreement or any other Transaction
Document, and (iv) the incurrence of operating expenses in the ordinary course
of business. In the event the Seller shall at any time borrow a loan under the
Originator Sale Agreement, the obligations of the Seller in connection with any
such borrowing shall be subordinated to the Unpaid Obligations, on such terms as
shall be reasonably satisfactory to each Administrator.
(g) Amendments to the Originator Sale Agreement. The Seller shall not,
without the prior written consent of the Agent (which consent will not be
unreasonably withheld), (i) cancel or terminate the Originator Sale Agreement,
(ii) amend, supplement or otherwise modify any of the terms of the Originator
Sale Agreement, (iii) give any consent, waiver, directive or approval under the
Originator Sale Agreement except as required by applicable law, (iv) waive any
default, action, omission or breach under the Originator Sale Agreement, or
otherwise grant any indulgence thereunder or (v) terminate or consent to the
termination of any sub-servicer under the Originator Sale Agreement.
(h) Amendments to Organizational Documents. Without the prior written
consent of the Agent (such consent not to be unreasonably withheld), the Seller
shall not amend or otherwise modify any provision of its Certificate of
Incorporation or By-Laws to the extent such amendment or modification would
require the prior written consent of each "Independent Director" (as defined
therein) pursuant to the provisions thereof as in effect on the date of this
Agreement.
(i) Merger. The Seller shall not merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of
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transactions, and except as otherwise contemplated herein) all or any material
part of its assets (whether now owned or hereafter acquired) to, or acquire all
or any material part of the assets of, any Person.
(j) ERISA. The Seller shall not establish or become a part of any Plan.
(k) Accounting. The Seller will not account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby or by
the Originator Sale Agreement in any manner other than the sale of Receivables
by the Seller to the Purchasers or the sale of the Receivables by the Originator
to the Seller, as applicable.
Section 7.03. Affirmative Covenants of the Servicer. Until the date on
which the Unpaid Obligations have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, the Servicer hereby covenants
as set forth below:
(a) Financial Reporting. The Servicer will maintain, for itself and
each of its Subsidiaries, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to each
Administrator:
(i) Annual Reporting. Within 100 days after the close of each
of its fiscal years, audited, consolidated financial statements (which
shall include balance sheets, statements of income and retained
earnings and a statement of cash flows) for the Servicer and its
consolidated subsidiaries for such fiscal year certified without
qualification by Arthur Andersen or other independent public
accountants acceptable to each Administrator.
(ii) Quarterly Reporting. Within 45 days after the close of
the first three (3) quarterly periods of each of its fiscal years,
consolidated balance sheets of the Servicer as at the close of each
such period and statements of income and retained earnings and a
statement of cash flows for the Servicer and its consolidated
subsidiaries for the period from the beginning of such fiscal year to
the end of such quarter, all certified by an Authorized Officer of the
Servicer.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in
substantially the form of Exhibit E signed by the Servicer's Authorized
Officer and dated the date of such annual financial statement or such
quarterly financial statement, as the case may be.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of the Servicer copies of all
financial statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies
of all registration statements and annual, quarterly, monthly or other
regular reports which the Servicer or any of its Subsidiaries files
with the Securities and Exchange Commission.
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(vi) Change in Credit and Collection Policy. At least ten (10)
days prior to the effectiveness of any material change in or amendment
to the Credit and Collection Policy, a notice indicating such change or
amendment.
(vii) Other Information. Promptly, from time to time, such
other information, documents, records or reports relating to the Dealer
Receivables or the condition or operations, financial or otherwise, of
the Servicer as any Administrator may from time to time reasonably
request.
(b) Notices. The Servicer will notify each Administrator in writing of
any of the following promptly upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken with respect
thereto:
(i) Events of Termination or Potential Events of Termination.
The occurrence of each Early Amortization Event and each Potential
Early Amortization Event, by a statement of an Authorized Officer of
the Servicer.
(ii) Servicer Default. The occurrence of any Servicer Default.
(iii) Material Adverse Effect. The occurrence of any event or
condition that, has, or could reasonably be expected to have, a
Material Adverse Effect.
(c) Compliance with Laws and Preservation of Corporate Existence. The
Servicer will comply in all material respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, other than where failure would not result in a Material
Adverse Effect. The Servicer will preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign corporation in each
jurisdiction where its business is conducted other than where failure to so
qualify would not have a Material Adverse Effect.
(d) Audits. The Servicer will, from time to time during regular
business hours as requested by any Administrator upon reasonable notice and at
the sole cost of the Servicer, permit any Administrator, or its agents or
representatives, (i) to examine and make copies of and abstracts from all
Records in the possession or under the control of the Servicer relating to the
Dealer Receivables and the Related Security, including, without limitation, the
related Contracts, and (ii) to visit the offices and properties of the Servicer
for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to the Servicer's financial condition or the Dealer
Receivables and the Related Security or the Servicer's performance under any of
the Transaction Documents or performance under the Contracts, in each case, with
any of the officers or employees of the Servicer having knowledge of such
matters; provided that they will not interfere with the conducting of Servicer's
business and, provided further, (x) the Administrators of all Related Groups
shall coordinate with each other so as to jointly arrange and conduct the visits
contemplated in clause (ii) and (y) in no single calendar year will the total
number of such visits exceed two.
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(e) Keeping and Marking of Records and Books.
(i) The Servicer will maintain and implement administrative
and operating procedures (including, without limitation, an ability to
recreate records evidencing Dealer Receivables in the event of the
destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary
for the collection of all Dealer Receivables (including, without
limitation, records adequate to permit the prompt identification of
each new Dealer Receivable and all Collections of and adjustments to
each existing Dealer Receivable). The Servicer will give each
Administrator notice of any material change in the administrative and
operating procedures referred to in the previous sentence.
(ii) The Servicer will (A) on or prior to the date hereof,
mark its master data processing records and other books and records
relating to the Ownership Interests with a legend describing the
Ownership Interests and (B) upon the request of any Administrator
following the occurrence of an Early Amortization Event (x) mark each
Contract constituting chattel paper under the UCC with a legend
describing the Ownership Interests and (y) deliver to the Agent all
such Contracts (including, without limitation, all multiple originals
of any such Contract) relating to the Dealer Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. The
Servicer will timely (i) perform and comply with all provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Dealer Receivables, and (ii) comply in all respects with the Credit and
Collection Policy in regard to each Dealer Receivable and the related Contract
except where, in the case of each of both clauses (i) and (ii) such failure to
perform or comply would not have a Material Adverse Effect.
(g) Collections. The Servicer shall cause (1) all proceeds from all
Lock-Boxes to be directly deposited by a Deposit Account Bank into a Deposit
Account and (2) each Lock-Box and Deposit Account to be subject at all times to
a Deposit Account Agreement that is in full force and effect. In the event any
payments relating to Dealer Receivables are remitted directly to the Servicer or
any Affiliate of the Servicer, the Servicer shall remit (or shall cause all such
payments to be remitted) directly to a Deposit Account Bank and deposited into a
Deposit Account within two (2) Business Days following receipt thereof and, at
all times prior to such remittance, the Servicer shall itself hold or, if
applicable, shall cause such payments to be held in trust for the exclusive
benefit of the Agent and the Purchasers to the extent of their interests
therein.
(h) Year 2000 Problem. The Servicer has taken all actions reasonably
necessary and committed adequate resources to assure that its and its
Subsidiaries computer-based and other systems are able to effectively process
data, including dates before, on and after January 1, 2000, without experiencing
any Year 2000 Problem that could reasonably be expected to cause a Material
Adverse Effect. At the request of any Administrator, the Servicer will provide
such Administrator with assurances and
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substantiations (including, but not limited to, the results of internal or
external audit reports prepared in the ordinary course of business) reasonably
acceptable to such Administrator as to the capability of the Servicer and its
Subsidiaries to conduct its and their businesses and operations without
experiencing a Year 2000 Problem causing a Material Adverse Effect.
(i) Taxes. The Servicer shall file all tax returns required by law to
be filed by it and shall promptly pay all taxes and governmental charges at any
time owing, except any such taxes which are not yet delinquent or are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with generally accepted accounting principles
shall have been set aside on its books.
Section 7.04. Negative Covenants of the Servicer. Until the date on
which the Unpaid Obligations have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, the Servicer hereby covenants
that:
(a) Change in Payment Instructions to Obligors. The Servicer will not
add or terminate any bank as a Deposit Account Bank, or make any change in the
instructions to Obligors regarding payments to be made to any Lock-Box or
Deposit Account in respect of Dealer Receivables, unless the Agent shall have
received, at least ten (10) days before the proposed effective date therefor,
(i) written notice of such addition, termination or change and (ii) with respect
to the addition of a Deposit Account Bank or a Deposit Account or Lock-Box, an
executed Deposit Account Agreement with respect to the new Deposit Account or
Lock-Box; provided, however, that the Servicer may make changes in instructions
to Obligors regarding payments on Dealer Receivables if such new instructions
require such Obligor to make payments to another existing Deposit Account or
Lock-Box.
(b) Modifications to Contracts and Credit and Collection Policy. The
Servicer will not make any material change to the Credit and Collection Policy
that could reasonably be expected to adversely affect the timely collectibility
of the Dealer Receivables other than those which (i) have been approved in
writing by each Administrator (such approval not to be unreasonably withheld) or
(ii) are required by applicable law. Except as provided in Section 8.02(d), the
Servicer will not extend, amend or otherwise modify the terms of any Dealer
Receivable or any Contract related thereto other than in accordance with the
Credit and Collection Policy.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
Section 8.01. Designation of Servicer.
(a) The servicing, administration and collection of the Dealer
Receivables shall be conducted by such Person (the "Servicer") so designated
from time to time in accordance with this Section 8.01. AGCO is hereby
designated as, and hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms of this
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Agreement. The Agent may at any time following the occurrence of a Servicer
Default designate as Servicer any Person to succeed AGCO or any successor
Servicer.
(b) Without the prior written consent of each Administrator and the
Majority Purchasers (which consent shall not be unreasonably withheld), AGCO
shall not be permitted to delegate any of its duties or responsibilities as
Servicer to any Person other than (i) the Seller and (ii) with respect to
certain Defaulted Receivables, outside collection agencies in accordance with
its customary practices. The Seller shall not be permitted to further delegate
to any other Person any of the duties or responsibilities of the Servicer
delegated to it by AGCO. If at any time the Agent shall, in accordance with the
provisions hereof, designate as Servicer any Person other than AGCO, all duties
and responsibilities theretofore delegated by AGCO to the Seller may, at the
discretion of the Agent, be terminated forthwith on notice given by the Agent to
AGCO and to the Seller.
(c) Notwithstanding the foregoing subsection (b), (i) so long as it is
Servicer hereunder, AGCO shall be and remain primarily liable to the Agent and
the Purchasers for the full and prompt performance of all duties and
responsibilities of the Servicer hereunder and (ii) the Agent and the Purchasers
shall be entitled to deal exclusively with AGCO in matters relating to the
discharge by the Servicer of its duties and responsibilities hereunder. The
Agent and the Purchasers shall not be required to give notice, demand or other
communication to any Person other than AGCO in order for communication to the
Servicer and its sub-Servicer or other delegate with respect thereto to be
accomplished. AGCO, at all times that it is the Servicer, shall be responsible
for providing any sub-Servicer or other delegate of the Servicer with any notice
given to the Servicer under this Agreement.
Section 8.02. Duties of Servicer.
(a) The Servicer shall take or cause to be taken such actions as may be
reasonably necessary to collect each Dealer Receivable from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit and Collection Policy.
(b) The Servicer will instruct all Obligors to pay all Collections
directly to a Lock-Box or Deposit Account. The Servicer shall maintain in full
force and effect a Deposit Account Agreement substantially in the form of
Exhibit B with each bank party to a Deposit Account at any time. In the case of
any remittances received in any Lock-Box or Deposit Account that shall have been
identified, to the reasonable satisfaction of the Servicer, to not constitute
Collections or other proceeds of the Dealer Receivables or the Related Security,
the Servicer shall promptly remit such items to the Person identified to it as
being the owner of such remittances. From and after the date the Agent delivers
to any Deposit Account Bank a Collection Notice pursuant to Section 8.03, the
Agent may request that the Servicer, and the Servicer thereupon promptly shall
instruct all Obligors with respect to the Dealer Receivables, to remit all
payments thereon to a new depositary account specified by the Agent and, at all
times thereafter, the Seller and the Servicer shall not deposit or otherwise
credit, and shall not permit any other Person to deposit or
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otherwise credit to such new depositary account any cash or payment item other
than Collections.
(c) The Servicer shall administer the Collections in accordance with
the procedures described herein and in Article III. The Servicer shall set aside
and hold in trust for the account of the Seller and the Purchasers their
respective shares of the Collections of Dealer Receivables in accordance with
Article III. The Servicer shall, upon the request of any Administrator,
segregate, in a manner reasonably acceptable to such Administrator, all cash,
checks and other instruments received by it from time to time constituting
Collections from the general funds of the Servicer or the Seller prior to the
remittance thereof in accordance with Article III. If the Servicer shall be
required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the Agent such
allocable share of Collections of Dealer Receivables set aside for the
Purchasers on the first Business Day following receipt by the Servicer of such
Collections, duly endorsed or with duly executed instruments of transfer.
(d) The Servicer may, in accordance with the Credit and Collection
Policy, extend the maturity of any Dealer Receivable or adjust the outstanding
balance of any Dealer Receivable as the Servicer determines to be appropriate to
maximize Collections thereof. Notwithstanding anything herein to the contrary,
from and after the Termination Date until this Agreement is terminated, neither
the Seller nor the Servicer shall, without the consent of the Agent, grant any
discount or take any other action the effect of which would be to reduce the
outstanding balance of any Dealer Receivable or modify the obligation of any
Obligor to pay the full outstanding balance of any Dealer Receivable or extend
the maturity thereof.
(e) The Servicer shall hold in trust for the Seller and the Purchasers
to the extent of their interests therein all Records that (i) evidence or relate
to the Dealer Receivables, the related Contracts and Related Security or (ii)
are otherwise necessary or desirable to collect the Dealer Receivables and
shall, as soon as reasonably practicable upon demand of the Agent, make
available to the Agent all such Records, at the offices of the Servicer. The
Servicer shall, as soon as practicable following receipt thereof turn over to
the Seller or other owner thereof any cash collections or other cash proceeds
received with respect to Indebtedness owing to the Seller not constituting
Dealer Receivables. The Servicer shall, from time to time at the reasonable
request of any Purchaser, furnish to such Purchaser (promptly after any such
request) a calculation of the amount set aside for the Purchaser pursuant to
Article III.
(f) Any payment by an Obligor in respect of any indebtedness owed by it
to the Originator or the Seller shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless otherwise instructed
by the Agent, be applied in accordance with the methodology set out in for the
application of such payments in the Credit and Collection Policy.
Section 8.03. Collection Notices. The Agent is authorized at any time
after the occurrence and during the continuation of a Cash Control Event to date
and to deliver to
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the Deposit Account Banks the Collection Notices. The Seller hereby transfers to
the Agent for the benefit of the Purchasers, effective when the Agent delivers
such notice, the exclusive ownership and control of each Lock-Box and the
Deposit Accounts. In case any authorized signatory of the Seller whose signature
appears on a Deposit Account Agreement shall cease to have such authority before
the delivery of such notice, such Collection Notice shall nevertheless be valid
as if such authority had remained in force. The Seller hereby authorizes the
Agent, and agrees that the Agent shall be entitled at any time after the
occurrence and during the continuation of a Cash Control Event to (i) endorse
the Seller's name on checks and other instruments representing Collections, (ii)
enforce the Dealer Receivables, the related Contracts and the Related Security
and (iii) take such action as shall be necessary or desirable to cause all cash,
checks and other instruments constituting Collections of Dealer Receivables to
come into the possession of the Agent rather than the Seller.
Section 8.04. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding, the exercise by the Agent, the Administrators and the
Purchasers of their rights hereunder shall not release the Servicer, the
Originator or the Seller from any of their duties or obligations with respect to
any Dealer Receivables or under the related Contracts. The Purchasers shall have
no obligation or liability with respect to any Dealer Receivables or related
Contracts, nor shall any of them be obligated to perform the obligations of the
Seller.
Section 8.05. Reports and Other Information. The Servicer shall prepare
and forward to each Administrator (i) on each Reporting Date and at such times
as any Administrator shall reasonably request, a duly completed Monthly Report
containing information accurate as of the last day of the calendar month then
most recently ended and (ii) on Tuesday (or, if such day is not a Business Day,
the next succeeding Business Day) of each calendar week a duly completed Weekly
Report containing information accurate as of the last day of the calendar week
then most recently ended. The Servicer shall determine the Net Eligible
Receivables Balance, the aggregate Investment and the Credit Enhancement in
connection with each Purchase hereunder.
Section 8.06. Servicer Fees. In consideration of AGCO's agreement to
act as Servicer hereunder, the Purchasers hereby agree that, so long as AGCO
shall continue to perform as Servicer hereunder, the Seller shall pay over to
AGCO a fee (the "Servicer Fee") on each Payment Date equal to 1% per annum of
the average daily Outstanding Balance of the Dealer Receivables during the
calendar month then most recently ended as compensation for its servicing
activities. The Servicer Fee shall be payable solely out of Collections
available for such purpose pursuant to Article III. In the event such
Collections are insufficient to pay the accrued and unpaid Servicer Fee in full,
the Servicer shall have no claim against the Seller, the Agent or any
Administrator for such deficiency. In the event the Agent shall, in accordance
with the provisions hereof, designate as Servicer any Person other than AGCO,
then the Servicer Fee payable to such successor Servicer shall be such fee as
shall be agreed in writing between such successor Servicer and the Agent;
provided that in no event shall such Servicer Fee exceed 2% per annum on the
average daily Outstanding Balance of the Dealer Receivables.
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Section 8.07. Servicer Defaults. The occurrence of any one or more of
the following events shall constitute a "Servicer Default":
(a) The Servicer shall fail to make any payment or deposit to the
Agent, any Purchaser or any Administrator required under the provisions of
Section 3.05 of this Agreement when due and such failure shall continue for one
(1) Business Day after such due date;
(b) The Servicer shall fail to make any payment or deposit required
under the provisions hereof and of the other Transaction Documents (other than
those contemplated in (a) hereinabove) when due and such failure shall continue
for five (5) Business Days after such due date;
(c) The Servicer shall fail to perform or observe any term, covenant or
agreement hereunder or under any other Transaction Document (other than as
referred to in paragraph (a)) and such failure shall continue for fifteen (15)
days after the earlier of (i) the date on which the Servicer obtains knowledge
thereof and (ii) the date on which written notice thereof is given to the
Servicer;
(d) Any representation, warranty, certification or statement made by
the Servicer in this Agreement, any other Transaction Document or in any other
document delivered pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made or deemed made and either (i) the failure of
such representation, warranty, certification or statement to be true and correct
shall have a Material Adverse Effect or (ii) such representation, warranty,
certification or statement shall continue to be incorrect;
(e) The Servicer or any of its Subsidiaries shall generally not pay its
debts as such debts become due or shall admit in writing its inability to pay
its debts generally or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against any such Person
seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee or other similar official for it or
any substantial part of its property or (ii) any such Person shall take any
corporate action to authorize any of the actions set forth in clause (i) above
in this subsection (d);
(f) The Agent for the benefit of the Purchasers shall cease to have a
valid and perfected first priority security interest in the Dealer Receivables,
the Related Security and the Collections with respect thereto and the Deposit
Accounts;
(g) The long-term senior unsecured debt of AGCO shall not be rated at
least B+ by S&P and at least B1 by Moody's;
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(h) A material adverse change shall have occurred in the collectibility
of the Dealer Receivables generally or of any material portion of the Dealer
Receivables; or
(i) One or more final judgments for the payment of money in excess or
$10,000,000 shall be entered against the Servicer, and such judgment shall
continue unsatisfied and in effect for fifteen (15) consecutive days without a
stay of execution; or
(j) The failure of the Servicer to pay any Indebtedness when due in
excess of $10,000,000 and the continuance of such failure after the applicable
grace period, if any, specified in the agreement or instrument relating to such
Indebtedness; or the default by the Servicer in the performance of any term,
provision or condition contained in any agreement under which any such
Indebtedness was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Indebtedness to cause, such Indebtedness to
become due prior to its stated maturity; or any such Indebtedness of the
Servicer shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the date of maturity
thereof;
provided, however, that notwithstanding the foregoing, a delay in or a failure
of performance referred to in clause (a) and (b) for a period of five (5)
Business Days, or referred to under clauses (c) or (d) for a period of fifteen
(15) days (in addition to any period provided in (a), (b), (c) or (d) (together,
the "Additional Grace Periods") shall not constitute a Servicer Default until
the expiration of such Additional Grace Periods, if such delay or failure could
not be prevented by the exercise of reasonable diligence by the Servicer and
such delay was caused by force majeur.
Section 8.08. Replacement of the Servicer. If AGCO is removed as
Servicer pursuant to Section 9.02 following the occurrence of an Early
Amortization Event, AGCO shall take all actions necessary, or that the Agent may
reasonably request, to facilitate the prompt and efficient transfer of
responsibilities of the Servicer to any successor Servicer designated by the
Agent, including without limitation, transferring to the Agent or such successor
all Records, correspondence and documents (including computer software)
requested by the Agent or such successor and to permit the Agent and such
successor to have access to, and to copy, all software used by AGCO in the
collection, administration or monitoring of the Dealer Receivables, Related
Security and Collections. In connection therewith, the Agent may enter into a
separate servicing agreement with any such successor Servicer relating to the
rights and obligations of such successor as Servicer hereunder and, to the
extent of any inconsistency between such servicing agreement and this Agreement
regarding such rights and obligations, such servicing agreement shall control;
provided that the Agent shall use reasonable efforts to minimize any such
inconsistency to the extent such inconsistency would have a material adverse
effect on the Seller or the Originator.
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ARTICLE IX
EARLY AMORTIZATION EVENTS
Section 9.01. Early Amortization Events. The occurrence of any one or
more of the following events shall constitute an "Early Amortization Event":
(a) Either the Seller or the Originator shall fail to make any payment
or deposit required hereunder or under any other Transaction Document when due
and such failure shall remain unremedied for five (5) Business Days;
(b) Either the Seller or the Originator shall fail to perform or
observe any term, covenant or agreement hereunder or under any other Transaction
Document (other than as referred to in paragraph (a)) and such failure shall
continue for fifteen (15) days after the earlier of (i) the date on which the
Seller or the Originator obtains knowledge thereof and (ii) the date on which
written notice thereof is given to the Seller or the Originator;
(c) Any representation, warranty, certification or statement made by
the Seller or the Originator in this Agreement, any other Transaction Document
or in any other document delivered pursuant hereto or thereto shall prove to
have been incorrect in any material respect when made or deemed made and either
(i) the failure of such representation, warranty, certification or statement to
be true and correct shall have a Material Adverse Effect or (ii) such
representation, warranty, certification or statement shall continue to be
incorrect;
(d) Any Servicer Default shall occur and be continuing;
(e) (i) The Seller, the Originator or any of their respective
Subsidiaries shall generally not pay its debts as such debts become due or shall
admit in writing its inability to pay its debts generally or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against any such Person seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its property
or (ii) any such Person shall take any corporate action to authorize any of the
actions set forth in clause (i) above in this subsection (e);
(f) The Agent for the benefit of the Purchasers shall cease to have a
valid and perfected first priority security interest in the Dealer Receivables,
the Related Security and the Collections with respect thereto and the Deposit
Accounts;
(g) The Seller shall be required to register as an "investment company"
by the provisions of the Investment Company Act of 1940, as amended;
(h) As at the end of any calendar month, (i) the Variable Dilution
Ratio shall exceed 5.0%, (ii) the average of the Planned Dilution Ratios for the
three most recently ended calendar months shall exceed 20%, (y) the average of
the Payment Rates for the three most recently ended calendar months shall be
less than (x) if such three calendar
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month period shall end with the month of January, February, March or April, 4.0%
and (y) in all other cases, 9.0% or (iv) the Default Ratio shall exceed 2.0%;
(i) The aggregate Ownership Interests shall exceed 100% and shall
continue as such until the earlier of (i) two Business Days following the date
either the Seller or the Servicer has actual knowledge thereof and (ii) the next
Payment Date; or
(j) The "Termination Date" or an "Amortization Event" shall occur under
the Originator Sale Agreement or the Originator shall for any reason cease to
transfer, or cease to have the legal capacity to transfer, or otherwise be
incapable of transferring Dealer Receivables to the Seller under the Originator
Sale Agreement.
Section 9.02. Remedies. Upon the occurrence and during the continuation
of an Early Amortization Event, the Agent may, or upon the direction of the
Majority Purchasers shall, take any of the following actions: (i) replace the
Person then acting as Servicer, (ii) declare the Termination Date to have
occurred, whereupon the Termination Date shall forthwith occur, without demand,
protest or further notice of any kind, all of which are hereby expressly waived
by each of the Seller and the Servicer; provided, however, that upon the
occurrence of an Early Amortization Event described in Section 9.01(e), or of an
actual or deemed entry of an order for relief with respect to the Seller or the
Servicer under the Federal Bankruptcy Code, the Termination Date shall
automatically occur, without demand, protest or any notice of any kind, all of
which are hereby expressly waived by each of the Seller and the Servicer, (iii)
to the fullest extent permitted by applicable law, declare that the Yield Rate
shall be equal to the Base Rate plus 2% for all outstanding Ownership Interests,
(iv) deliver the Collection Notices to the Deposit Account Banks, and (v) notify
Obligors of the Purchasers' interest in the Dealer Receivables. Further, in the
event of an Early Amortization Event arising as a result of a Servicer Default
under Section 8.07 (a), (b), (c) or (d), during the Additional Grace Periods
applicable to such Servicer Defaults (and unless the relevant actions or
omissions are remedied prior to the expiration of the applicable Additional
Grace Periods) the Purchasers shall not be required to make any Purchases, of
whatever type, of any Dealer Receivables. The aforementioned rights and remedies
shall be in addition to all other rights and remedies of the Agent and the
Purchasers available under this Agreement, by operation of law, at equity or
otherwise, all of which are hereby expressly preserved, including, without
limitation, all rights and remedies provided under the UCC, all of which rights
shall be cumulative.
ARTICLE X
INDEMNIFICATION
Section 10.01. Indemnities.
(a) Seller Indemnities. Without limiting any other rights that the
Agent, any Administrator or any Purchaser may have hereunder or under applicable
law, the Seller hereby agrees to indemnify the Agent, each Administrator and
each Purchaser and their respective assigns, officers, directors, agents and
employees (each an "Indemnified Party")
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from and against any and all damages, losses, claims, taxes, liabilities, costs,
expenses and for all other amounts payable, including reasonable attorneys' fees
(which attorneys may be employees of the Agent or such Purchaser) and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
or as a result of this Agreement or the acquisition, either directly or
indirectly, by the Agent or a Purchaser of an interest in the Dealer Receivables
excluding, however:
(i) Indemnified Amounts to the extent a final judgment of a
court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same include losses
in respect of Dealer Receivables that are uncollectible on account of
the insolvency, bankruptcy or lack of creditworthiness or other failure
to pay of the related Obligor where such failure is not caused by any
action or inaction on the part of AGCO in connection with any Dealer
Receivable or Dealer Agreement;
(iii) taxes imposed by the jurisdiction in which such
Indemnified Party is organized or in which it is otherwise doing
business on or measured by the overall net income of such Indemnified
Party to the extent that the computation of such taxes is consistent
with the Intended Tax Characterization;
provided, however, that nothing contained in this sentence shall limit the
liability of either the Seller or the Servicer or limit the recourse of the
Purchasers to either the Seller or the Servicer for amounts otherwise
specifically provided to be paid by such Person under the terms of this
Agreement. Without limiting the generality of the foregoing indemnification, the
Seller shall indemnify each Indemnified Party for Indemnified Amounts
(including, without limitation, losses in respect of uncollectible receivables,
regardless of whether reimbursement therefor would constitute recourse to the
Seller or the Servicer) resulting from:
(i) breach of any representation or warranty made by the
Seller, the Servicer or the Originator (or any officers of any such
Person) under or in connection with this Agreement, any other
Transaction Document or any other information or report delivered by
any such Person pursuant hereto or thereto, which shall have been false
or incorrect when made or deemed made;
(ii) the failure by the Seller, the Servicer or the Originator
to comply with any applicable law, rule or regulation with respect to
any Dealer Receivable or Contract related thereto, or the nonconformity
of any Dealer Receivable or Contract included therein with any such
applicable law, rule or regulation or any failure of the Originator to
keep or perform any of its obligations, express or implied, with
respect to any Contract;
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(iii) any failure of the Seller, the Servicer or the
Originator to perform its duties, covenants or other obligations in
accordance with the provisions of this Agreement or any other
Transaction Document;
(iv) any products liability, personal injury or damage suit,
or similar claim arising out of or in connection with merchandise,
insurance or services that are the subject of any Contract or any
Dealer Receivable;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Dealer Receivable arising on or prior to the Termination Date
(including, without limitation, a defense based on such Dealer
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the
merchandise or service related to such Dealer Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling of Collections of Dealer Receivables at
any time with other funds;
(vii) any investigation, litigation or proceeding related to
or arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby, the use of the proceeds of a
purchase, the ownership of the Ownership Interests or any other
investigation, litigation or proceeding relating to the Seller, the
Servicer or the Originator in which any Indemnified Party becomes
involved as a result of any of the transactions contemplated hereby;
(viii) any inability to litigate any claim against any Obligor
in respect of any Dealer Receivable as a result of such Obligor being
immune from civil and commercial law and suit on the grounds of
sovereignty or otherwise from any legal action, suit or proceeding;
(ix) any Early Amortization Event described in Section
9.01(d);
(x) any failure of the Seller to acquire and maintain legal
and equitable title to, and ownership of any Dealer Receivable and the
Related Security and Collections with respect thereto from the
Originator, free and clear of any Adverse Claim (other than as created
hereunder); or any failure of the Seller to give reasonably equivalent
value to the Originator under the Originator Sale Agreement in
consideration of the transfer by the Originator of any Dealer
Receivable, or any attempt by any Person to void such transfer under
statutory provisions or common law or equitable action; or any failure
of the Seller to have a first priority perfected security interest in
the Equipment the sale of which gave rise to any Dealer Receivable;
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(xi) any failure to vest and maintain vested in the Agent and
the Purchasers, or to transfer to the Agent and the Purchasers, legal
and equitable title to, and ownership of, a first priority undivided
percentage ownership (to the extent of the Ownership Interests
contemplated hereunder) in the Dealer Receivables, the Related Security
and the Collections, free and clear of any Adverse Claim;
(xii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Dealer Receivable, the Related Security and Collections
with respect thereto, and the proceeds of any thereof, whether at the
time of any Incremental Purchase or Reinvestment Purchase or at any
subsequent time;
(xiii) any action or omission by either the Seller or the
Servicer which reduces or impairs the rights of the Agent or the
Purchasers with respect to any Dealer Receivable or the value of any
such Dealer Receivable;
(xiv) any attempt by any Person to void any Incremental
Purchase or Reinvestment Purchase hereunder under statutory provisions
or common law or equitable action; or
(xv) the failure of any Dealer Receivable treated as or
represented to be an Eligible Receivable at any time by the Seller, the
Originator or the Servicer (including, without limitation, for purposes
of calculating the Net Eligible Receivables Balance) to be an Eligible
Receivable as of such time.
(b) Servicer Indemnities. Without limiting any other rights that any
Indemnified Party may have hereunder or under applicable law, the Servicer
hereby agrees to indemnify each Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made by the Servicer (or
any officers of the Servicer) in writing under or in connection with
this Agreement, any other Transaction Document or any other information
or report delivered by any such Person pursuant hereto or thereto,
which shall have been false or incorrect when made or deemed made;
(ii) the failure by the Servicer to comply with any applicable
law, rule or regulation with respect to any Dealer Receivable or
Contract related thereto;
(iii) any failure of the Servicer to perform its duties,
covenants or other obligations in accordance with the provisions of
this Agreement or any other Transaction Document;
(iv) the commingling of Collections of Dealer Receivables at
any time with other funds;
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(v) any failure of the Seller to acquire and maintain legal
and equitable title to, and ownership of any Dealer Receivable and the
Related Security and Collections with respect thereto from the
Originator, free and clear of any Adverse Claim (other than as created
hereunder); or any failure of the Seller to give reasonably equivalent
value to the Originator under the Originator Sale Agreement in
consideration of the transfer by the Originator of any Dealer
Receivable, or any attempt by any Person to void such transfer under
statutory provisions or common law or equitable action;
(vi) any failure to vest and maintain vested in the Agent and
the Purchasers, or to transfer to the Agent and the Purchasers, legal
and equitable title to, and ownership of, a first priority undivided
percentage ownership (to the extent of the Ownership Interests
contemplated hereunder) in the Dealer Receivables arising on or prior
to the Termination Date and the Related Security and the Collections
with respect thereto free and clear of any Adverse Claim created by or
arising as a result of a claim against Servicer;
(vii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Dealer Receivable, the Related Security and Collections
with respect thereto, and the proceeds of any thereof, to the extent
the Servicer is required to file the same, whether at the time of any
Incremental Purchase or Reinvestment Purchase or at any subsequent
time;
(viii) any action or omission by the Servicer (other than in
accordance with or as contemplated by this Agreement or any other
Transaction Document) which reduces or impairs the rights of the Agent
or the Purchasers with respect to any Dealer Receivable or the value of
any such Dealer Receivable;
(ix) the Year 2000 Problem; or
(x) the failure of any Dealer Receivable treated as or
represented to be an Eligible Receivable at any time by the Servicer
(including, without limitation, for purposes of calculating the Net
Eligible Receivables Balance) to be an Eligible Receivable as of such
time.
Section 10.02. Increased Cost and Reduced Return.
(a) If, due to either (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental agency or
authority (whether or not having the force of law), there shall be any increase
in the cost to any Affected Party with respect to this Agreement or any Conduit
Funding Agreement or in connection with its obligations under this Agreement or
any Conduit Funding Agreement related to this Agreement for which the Affected
Party is not entitled to payment hereunder, then the Seller shall from time to
time, upon demand by such Affected Party (with a copy of such demand to the
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Agent), pay to such Affected Party additional amounts sufficient to compensate
such Affected Party for such increased cost. A certificate setting forth in
reasonable detail the amount of such increased cost submitted to the Seller by
such Affected Party shall be conclusive and binding for all purposes, absent
manifest error.
(b) Without duplication of (a), if either (i) the introduction
following the date of this Agreement of, or any change following the date of
this Agreement in or in the interpretation of, any law or regulation or (ii) the
compliance by any Affected Party with any law or regulation or any guideline or
request or any written interpretation from any central bank or other
governmental authority issued after the date of this Agreement (whether or not
having the force of law), affects the amount of capital required to be
maintained by such Affected Party or any corporation controlling such Affected
Party and the amount of such capital is increased by or based upon this
Agreement or any Conduit Funding Agreement related to this Agreement or an
Affected Party's obligations under this Agreement or a Conduit Funding
Agreement, then, upon demand by such Affected Party (with a copy of such demand
to be sent to the Agent related to this Agreement), the Seller shall pay to such
Affected Party, from time to time as specified by such Affected Party,
additional amounts sufficient to compensate such Affected Party or such
controlling corporation in the light of such circumstances. A certificate
setting forth in reasonable detail such amounts submitted to the Seller by such
Affected Party shall be conclusive and binding for all purposes, absent manifest
error.
(c) Notwithstanding anything herein to the contrary, the Seller shall
not be obligated to pay any amounts under Section 10.2(a) or (b), to the extent
such amounts resulted from an increased cost incurred or an increased capital
requirement imposed more than 90 days prior to the date of the certificate in
which such amounts were set forth; provided, that, for purposes of the
foregoing, any such increased cost or increased capital requirement shall be
deemed to have been incurred or imposed, as applicable, on the date on which
such increased cost is actually incurred or such increased capital requirement
is actually imposed, whether or not such increased cost or increased capital
requirement relates back to a period of time prior to such date.
(d) Each Affected Party shall use reasonable efforts (consistent with
its internal policy and legal and regulatory restrictions) to reduce or
eliminate any claim for compensation pursuant to this Section 10.02, provided
that nothing contained herein shall obligate any Affected Party to take any
action which, in the opinion of such Affected Party, is unlawful or otherwise
disadvantageous to such Affected Party.
(e) Any Committed Purchaser making a claim for payment pursuant to
Section 10.02 shall, upon request from the Seller delivered to such Committed
Purchaser, assign, in accordance with the provisions of Section 12.01(b) all of
its rights and obligations under this Agreement to another financial institution
selected by the Seller and approved by the related Administrator in
consideration for the payment to such Committed Purchaser of the amount of its
outstanding Investment, together with any and all accrued and unpaid Yield
thereon and all other Unpaid Obligations owing to such Committed Purchaser under
the Transaction Documents accrued to the date of such assignment.
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Section 10.03. Taxes.
(a) Any and all payments by the Seller hereunder shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Purchaser, each Administrator and the
Agent, net income taxes and franchise taxes that are imposed on such Purchaser
or the Agent and, in the case of each Purchaser, franchise taxes and net income
taxes that are imposed on such Purchaser (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Seller shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder to any Purchaser or the
Agent, (i) the sum payable shall be increased as may be necessary so that, after
making all required deductions (including deductions applicable to additional
sums payable under this Section 10.03), such Purchaser or the Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Seller shall make such deductions and (iii) the
Seller shall pay the full amount deducted to the relevant taxation authority or
other authority in accordance with applicable law.
(b) In addition, the Seller agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
(c) The Seller will indemnify each Purchaser and the Agent for (i) the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
10.03) paid by such Purchaser or the Agent (as the case may be) and (ii) any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto other than those resulting from such Purchaser's or the Agent's
willful or negligent failure to pay such Taxes or Other Taxes; provided that a
Purchaser or the Agent, as appropriate, making a demand for indemnity payment
shall provide the Seller, at its address referred to in Section 13.02, with a
certificate from the relevant taxing authority or from a responsible officer of
such Purchaser or the Agent stating or otherwise evidencing that a Purchaser or
the Agent has made payment of such Taxes or Other Taxes and will provide a copy
of or extract from documentation, if available, furnished by such taxing
authority evidencing assertion or payment of such Taxes or Other Taxes.
(d) Within 30 days after the date of any payment of Taxes, the Seller
will furnish to the Agent, at its address referred to in Section 13.02,
appropriate evidence of payment thereof.
(e) The Agent and each Purchaser that is not created or organized under
the laws of the United States or a political subdivision thereof shall, to the
extent that it may then do so under applicable laws and regulations, deliver to
the Seller (with, in the case of each Purchaser, a copy to the Agent) (i) within
15 days after the date hereof, or, if later, the date on which such Purchaser
becomes a Purchaser pursuant to Section 12.01 hereof,
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two (or such other number as may be from time to time prescribed by applicable
laws or regulations) duly completed copies of IRS Form 4224 or Form 1001 (or any
successor forms or other certificates or statements which may be required from
time to time by the relevant United States taxing authorities or applicable laws
or regulations), as appropriate, to permit the Seller to make payments hereunder
for the account of such Purchaser or the Agent, as the case may be, without
deduction or withholding of United States federal income or similar taxes and
(ii) upon the obsolescence of or after the occurrence of any event requiring a
change in, any form or certificate previously delivered pursuant to this Section
10.03(e), copies (in such numbers as may from time to time be prescribed by
applicable laws or regulations) of such additional, amended or successor forms,
certificates or statements as may be required under applicable laws or
regulations to permit the Seller and the Agent to make payments hereunder for
the account of such Purchaser or the Agent, as the case may be, without
deduction or withholding of United States federal income or similar taxes.
(f) For any period with respect to which a Purchaser or the Agent has
failed to provide the Seller with the appropriate form, certificate or statement
described in Section 10.03(e) (other than if such failure is due to a change in
law occurring after the date of this Agreement), such Purchaser or the Agent, as
the case may be, shall not be entitled to indemnification under Section 10.03(a)
or 10.03(c) with respect to Taxes imposed by the United States.
(g) Within 30 days of the written request of the Seller therefor, the
Agent and each Purchaser, as appropriate, shall execute and deliver to the
Seller such certificates, forms or other documents which can be furnished
consistent with the facts and which are reasonably necessary to assist the
Seller in applying for refunds of taxes remitted hereunder.
(h) The parties hereto have structured this Agreement with the
intention that the Ownership Interests of the Purchasers will be treated under
applicable federal, state, local and foreign tax law as indebtedness secured by
the Dealer Receivables, the Related Security, the Deposit Accounts and the
Collections (the "Intended Tax Characterization"). Each of the parties hereto
agrees to treat and to take no action inconsistent with the treatment of the
Ownership Interests of the Purchasers as such indebtedness for purposes of
federal, state, local and foreign income or franchise taxes and any other tax
imposed on or measured by income.
Section 10.04. Other Costs and Expenses. The Seller shall pay to the
Agent, each Administrator and each Purchaser on demand all reasonable costs and
out-of-pocket expenses in connection with the preparation, execution, delivery
and administration of this Agreement, the transactions contemplated hereby and
the other documents to be delivered hereunder, including without limitation, (i)
the cost of the Agent's or any Administrator's auditors auditing the books,
records and procedures of the Seller, (ii) rating agency fees incurred by any
Administrator or Conduit Purchaser in connection with the transactions
contemplated hereby, and (iii) reasonable fees and out-of-pocket expenses of
legal counsel for the Agent, each Administrator and each Purchaser with respect
thereto and with
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respect to advising the Agent, such Administrator or such Purchaser as to its
rights and remedies under this Agreement. The Seller shall pay to the Agent,
each Administrator and each Purchaser on demand any and all reasonable costs and
expenses of such Person, if any, including reasonable counsel fees and expenses
in connection with the enforcement of this Agreement and the other documents
delivered hereunder and in connection with any restructuring or workout of this
Agreement or such documents, or the administration of this Agreement following
an Early Amortization Event.
ARTICLE XI
THE AGENT AND THE ADMINISTRATORS
Section 11.01. Authorization and Action of Agent. Each Purchaser hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the other Transaction Documents
to which the Agent is a party, as are delegated to the Agent by the terms hereof
and thereof, together with such powers as are reasonably incidental thereto. As
to any matters not expressly provided for by this Agreement, the Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Purchasers, and
such instructions shall be binding upon all the Purchasers; provided, however,
that the Agent shall not be required to take any action which exposes it to
personal liability or which is contrary to this Agreement or applicable law. The
Agent agrees to give to each Purchaser prompt notice of each notice given to it
by the Seller or the Servicer pursuant to the terms of this Agreement.
Section 11.02. Agents' Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for the gross negligence or willful misconduct of the Agent. Without
limiting the generality of the foregoing, the Agent: (i) may treat the Purchaser
that made any purchase as the holder of the Ownership Interest related thereto
until the Agent receives and accepts an Assignment Agreement entered into by
such Purchaser, as assignor, and another Person, as assignee, as provided in
Section 12.01; (ii) may consult with legal counsel (including counsel for the
Seller), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Purchaser and shall not be
responsible to any Purchaser for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement or any
other Transaction Document; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any other Transaction Document on the part of
the Seller or to inspect the property (including the books and records) of the
Seller; (v) shall not be responsible to any Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement, the other Transaction Documents, or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall incur no liability under or
in respect of this Agreement by acting upon any notice, consent, certificate or
other
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instrument or writing (which may be by facsimile) reasonably believed by it to
be genuine and signed or sent by the proper party or parties.
Section 11.03. Rabobank and Affiliates. With respect to its Commitment
and the Ownership Interests held by it, if any, Rabobank shall have the same
rights and powers as any other Committed Purchaser and may exercise the same as
though it were not the Agent or acting in any other capacity under any
Transaction Document or Conduit Funding Agreement, and the term "Committed
Purchaser" or "Committed Purchasers" shall, unless otherwise expressly
indicated, include Rabobank in its individual capacity as a Committed Purchaser
hereunder. Rabobank and its Affiliates may accept deposits from, lend money to,
act as trustee under indentures of, and generally engage in any kind of business
with, the Seller, any of its Affiliates and any Person who may do business with
or own securities of the Seller or any such Affiliate, all as if Rabobank were
not the Agent or acting in any other capacity under any Transaction Document or
Conduit Funding Agreement, and without any duty to account therefor to the
Purchasers.
Section 11.04. Purchaser Credit Decision. Each Purchaser acknowledges
that it has, independently and without reliance upon the Agent or any other
Purchaser and based on such financial statements and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Transaction Documents to
which it is a party. Each Purchaser also acknowledges that it will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and such other Transaction Documents.
Section 11.05. Indemnification. The Committed Purchasers agree to
indemnify the Agent and its directors, officers and employees (to the extent not
reimbursed by the Seller), ratably in proportion to their respective
Commitments, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement, any of the other Transaction Documents or the transactions
contemplated hereby or thereby, or any action taken or omitted by the Agent or
in any such capacity under this Agreement or any of the other Transaction
Documents, provided that no Committed Purchaser shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation to the foregoing,
each Committed Purchaser agrees to reimburse the Agent promptly upon demand for
such Committed Purchaser's ratable share (computed based on the ratio which such
Committed Purchaser's Commitment bears to the aggregate of the Commitments
hereunder) of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any of the other Transaction
Documents, to the extent that such Agent
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is not reimbursed for such expenses by the Seller. From and after the occurrence
of the Termination Date, the indemnification obligations of the Committed
Purchasers under this Section 11.05 shall be calculated as if their respective
Commitments on the day immediately prior to the Termination Date remained in
effect.
Section 11.06. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Purchasers and the Seller, and may be
removed at any time with or without cause by the Majority Purchasers upon
written notice thereof to the Agent and the Seller. Such resignation or removal
shall become effective as set forth below. The Majority Purchasers shall have
the right to appoint a successor Agent, provided that the Seller, the Servicer
and each Administrator shall have the right to approve the successor Agent,
which approval shall not be unreasonably withheld. If no successor Agent shall
have been so appointed by the Majority Purchasers and approved by the Seller,
the Servicer and each Administrator, and shall have accepted such appointment,
within 30 days after the departing Agent's giving of notice of resignation or
the Majority Purchasers' removal of the departing Agent, then the departing
Agent may, on behalf of the Purchasers, appoint a successor Agent, which
successor Agent shall have short-term debt ratings of at least A-1 from S&P and
P-1 from Moody's and shall be either a commercial bank having a combined capital
and surplus of at least $250,000,000 or an Affiliate of such an institution.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all of
the rights, powers, privileges and duties of the departing Agent, and the
departing Agent shall be discharged from its duties and obligations under this
Agreement; provided that the appointment of such successor Agent shall not
become effective until each Conduit Purchaser shall have received written
confirmation from each of the rating agencies then rating the Commercial Paper
Notes of such Conduit Purchaser that the rating of such Commercial Paper Notes
would not, as a result of such appointment, be reduced or withdrawn.
Notwithstanding anything contained to the contrary herein, until such time as
such successor Agent shall have accepted such appointment as aforesaid, the
departing Agent shall not be discharged from any of its duties and obligations
as the Agent under this Agreement. After any departing Agent's resignation or
removal hereunder as such agent, the provisions of this Article XI shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
such agent under this Agreement.
Section 11.07. Authorization and Action of Administrator. Each
Purchaser in a Related Group hereby appoints and authorizes the Administrator
for such Related Group to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Transaction Documents to
which such Administrator is a party, as are delegated to such Administrator by
the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. The Purchasers in a Related Group may at any time appoint a
new Administrator in accordance with the terms of the applicable Administrator
Agreement. Upon the acceptance of any appointment as Administrator hereunder by
a successor Administrator, such successor Administrator shall thereupon succeed
to and become vested with all of the rights, powers, privileges and duties of
the
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departing Administrator, and the departing Administrator shall be discharged
from its duties and obligations under this Agreement.
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS; ADDITIONAL RELATED GROUPS
Section 12.01. Assignments and Participations.
(a) Neither the Seller nor the Servicer nor any Purchaser shall have
the right to assign its rights or obligations under this Agreement except to the
extent otherwise provided herein. The Seller hereby agrees and consents to the
complete or partial assignment by any Conduit Purchaser of all or any portion of
its rights under, interest in, title to and obligations under this Agreement to
(i) any member of its Related Group and (ii) any other Person approved by the
Seller (such approval not to be unreasonably withheld), and upon such
assignment, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such assignment, have the rights and obligations of a Conduit Purchaser
hereunder and (y) the Conduit Purchaser assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an assignment covering all or the remaining
portion of an assigning Conduit Purchaser's rights and obligations under this
Agreement, such Conduit Purchaser shall cease to be a party hereto).
(b) Each Committed Purchaser may, with the prior written consent of the
Administrator for its Related Group, the Seller and AGCO (which consent shall
not be unreasonably withheld), assign to one or more banks or other entities all
its rights and obligations under this Agreement (including, without limitation,
all or a portion of its Commitment and the Ownership Interests owned by it);
provided, however, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all of the assigning Committed Purchaser's rights and
obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Committed Purchaser being assigned pursuant to each such assignment
(determined as of the date of the Assignment Agreement with respect to such
assignment) shall in no event be less than the lesser of (A) $20,000,000 or an
integral multiple of $1,000,000 in excess of that amount and (B) the full amount
of the assigning Committed Purchaser's Commitment, (iii) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment Agreement together with a processing
and recordation fee of $2,000 or such lesser amount as shall be approved by the
Agent, (iv) the parties to each such Assignment Agreement shall have agreed to
reimburse the Agent for all fees, costs and expenses (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent) incurred by the Agent in connection with such assignment and (v) the
assignee shall execute and deliver to the Seller and the Agent an Investment
Letter substantially in the form of Exhibit C. Upon such execution, delivery,
acceptance and recording by the Agent, from and after the effective date
specified in such Assignment Agreement, which effective date shall be the date
of acceptance of such Assignment
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Agreement by the Agent, unless a later date is specified therein, (x) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, have the rights and obligations of a Committed Purchaser hereunder
and (y) the Committed Purchaser assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights and be released from its obligations
under this Agreement (and, in the case of an Assignment Agreement covering all
or the remaining portion of an assigning Committed Purchaser's rights and
obligations under this Agreement, such Committed Purchaser shall cease to be a
party hereto).
(c) By executing and delivering an assignment agreement in
substantially the form of Exhibit F hereto (an "Assignment Agreement"), the
Committed Purchaser assignor thereunder and the assignee thereunder confirm to
and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment Agreement, such assigning Committed
Purchaser makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such assigning Committed
Purchaser makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Seller, the Servicer or the Originator
or the performance or observance by the Seller, the Servicer or the Originator
of any of their respective obligations under this Agreement or any other
Transaction Documents; (iii) such assignee confirms that it has received a copy
of this Agreement, together with copies of such financial statements and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment Agreement; (iv) such
assignee will, independently and without reliance upon the Agent, any
Administrator, such assigning Committed Purchaser or any other Purchaser and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to such agent by the terms hereof, together with such
powers as are reasonably incidental thereto; (vi) such assignee appoints and
authorizes the Administrator for its Related Group to take such actions on its
behalf and to exercise such powers under this Agreement as are delegated to such
Administrator by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Committed Purchaser.
(d) Subject to the provisions of Section 12.01(b), upon its receipt of
an Assignment Agreement executed by an assigning Committed Purchaser and an
assignee, the Agent shall, if such Assignment Agreement has been completed and
is in substantially the form of Exhibit F hereto, (i) accept such Assignment
Agreement, (ii) record the
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information contained therein in the Register and (iii) give prompt notice
thereof to the Seller and each Administrator.
(e) Each Committed Purchaser may sell participations to one or more
banks or other entities in or to all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Commitment and the Ownership Interests owned by it); provided, however, that (i)
such Committed Purchaser's obligations under this Agreement (including, without
limitation, its Commitment to the Seller hereunder) shall remain unchanged, (ii)
such Committed Purchaser shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Seller, the Servicer,
each Administrator, the Agent and the other Purchasers shall continue to deal
solely and directly with such Committed Purchaser in connection with such
Committed Purchaser's rights and obligations under this Agreement and (iv) such
Committed Purchaser shall give prior written notice to the Agent and the
Administrator for its Related Group of the identity of such participant.
Notwithstanding anything herein to the contrary, each participant shall have the
rights of a Committed Purchaser (including any right to receive payment under
Sections 10.02 and 10.03); provided, however, that no participant shall be
entitled to receive payment under either such Section in excess of the amount
that would have been payable under such Section by the Seller to the Committed
Purchaser granting its participation had such participation not been granted,
and no Committed Purchaser granting a participation shall be entitled to receive
payment under such Section in an amount which exceeds the sum of (x) the amount
to which such Committed Purchaser is entitled under such Section with respect to
payments to be made to it which are not subject to any participation, plus (y)
the aggregate amount to which its participants are entitled under such Sections
with respect to the amounts of their respective participations. With respect to
any participation described in this Section 12.01(e), the participant's rights
as set forth in the agreement between such participant and the applicable
Committed Purchaser to agree to or to restrict such Committed Purchaser's
ability to agree to any modification, waiver or release of any of the terms of
this Agreement or any other Transaction Document or to exercise or refrain from
exercising any powers or rights which such Committed Purchaser may have under or
in respect of any Transaction Document shall be limited to the right to consent
to any of the matters set forth in Section 13.01(b)(i) of this Agreement.
(f) Nothing herein shall prohibit any Purchaser from pledging or
assigning as collateral any of its rights under this Agreement to any Federal
Reserve Bank in accordance with applicable law and any such pledge or collateral
assignment may be made without compliance with this Section 12.01.
Section 12.02. Additional Related Groups. Upon the Seller's request, an
additional Related Group may be added to this Agreement at any time by the
execution and delivery of a Joinder Agreement by the members of such proposed
additional Related Group and each of the parties hereto, which execution and
delivery shall not be unreasonably refused by such parties. Upon the effective
date of such Joinder Agreement, (i) each Person specified therein as a "Conduit
Purchaser" shall become a party hereto as a Conduit Purchaser, entitled to the
rights and subject to the obligations of a Conduit
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Purchaser hereunder, (ii) each Person specified therein as a "Committed
Purchaser" shall become a party hereto as a Committed Purchaser, entitled to the
rights and subject to the obligations of a Committed Purchaser hereunder and
(iii) each Person specified therein as an "Administrator" shall become a party
hereto as an Administrator, entitled to the rights and subject to the
obligations of an Administrator hereunder. On or prior to the effective date of
such Joinder Agreement, the Seller, the new Conduit Purchaser and the new
Administrator shall enter into a fee letter for purposes of setting forth the
fees payable to the members of such Related Group in connection with this
Agreement, which fee letter shall be considered a "Fee Letter" for all purposes
of this Agreement.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Waivers and Amendments.
(a) No failure or delay on the part of the Agent, any Administrator or
any Purchaser in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or remedy preclude any other further exercise thereof or
the exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any waiver of this Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of this
Section 13.01(b). The Seller, the Servicer, the Agent, each Administrator and
the Majority Purchasers, may enter into written modifications or waivers of any
provisions of this Agreement, provided, however, that no such modification or
waiver shall:
(i) without the consent of each affected Purchaser, (A) extend
the Commitment Termination Date or the date of any payment or deposit
of Collections by the Seller or the Servicer, (B) reduce the rate or
extend the time of payment of Yield (or any component thereof), (C)
reduce any fee payable to any Administrator for the benefit of the
Purchasers in its Related Group, (D) except pursuant to Article XII
hereof, change the amount of the Investment of any Purchaser, any
Committed Purchaser's Pro Rata Share or any Committed Purchaser's
Commitment, or create, with respect to any Committed Purchaser in any
Related Group, any obligation for such Committed Purchaser to make any
purchase allocable to another Related Group, (E) amend, modify or waive
any provision of the definition of Majority Purchasers or this Section
13.01(b), (F) consent to or permit the assignment or transfer by the
Seller of any of its rights and obligations under this Agreement, (G)
change the definition of "Eligible Receivable" or "Credit Enhancement",
or (H) amend or modify any defined term (or any defined term used
directly or indirectly in such defined term) used in clauses (A)
through (G) above in a manner that would circumvent the intention of
the restrictions set forth in such clauses;
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(ii) without the written consent of the then Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent; or
(iii) without the consent of each affected Administrator,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Administrator.
Any modification or waiver made in accordance with this Section 13.01 shall
apply to each of the Purchasers equally and shall be binding upon the Seller,
the Purchasers, the Administrators and the Agent. Notwithstanding anything
herein to the contrary, no amendment to this Agreement shall become effective
unless and until each rating agency then rating any of the Commercial Paper
Notes of the Conduit Purchasers hereunder confirms that such amendment will not
result in the reduction, withdrawal or suspension of the then current rating of
such Commercial Paper Notes.
Section 13.02. Notices. Except as provided below, all communications
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other parties hereto at their respective addresses or telecopy
numbers set forth on the signature pages hereof or at such other address or
telecopy number as such Person may hereafter specify for the purpose of notice
to each of the other parties hereto. Each such notice or other communication
shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if
given by mail, three (3) Business Days after the time such communication is
deposited in the mail with first class postage prepaid or (iii) if given by any
other means, when received at the address specified in this Section 13.02. The
Seller hereby authorizes each Administrator to effect purchases and Settlement
Period and Alternative Rate selections based on telephonic notices made by any
Person whom such Administrator in good faith believes to be acting on behalf of
the Seller. The Seller agrees to deliver promptly to each Administrator a
written confirmation of each telephonic notice signed by an Authorized Officer
of the Seller; however, the absence of such confirmation shall not affect the
validity of such notice. If the written confirmation differs from the action
taken by an Administrator, the records of such Administrator shall govern absent
manifest error.
Section 13.03. Ratable Payments. If any Purchaser, whether by setoff or
otherwise, has payment made to it with respect to any portion of the Unpaid
Obligations owing to such Purchaser (other than payments received pursuant to
Section 10.02 or 10.03) in a greater proportion than that received by any other
Purchaser entitled to receive a ratable share of such Unpaid Obligations, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of such Unpaid Obligations held by the other Purchasers so
that after such purchase each Purchaser will hold its ratable proportion of such
Unpaid Obligations; provided that if all or any portion of such excess amount is
thereafter recovered from such Purchaser, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
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Section 13.04. Protection of Ownership Interests of the Purchasers.
(a) The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that may be necessary or that the Agent or any Administrator may
reasonably request, to perfect, protect or more fully evidence the Ownership
Interests, or to enable the Agent, the Administrators or the Purchasers to
exercise and enforce their rights and remedies hereunder. At any time following
the occurrence and during the continuation of a Cash Control Event, the Agent
may, or the Agent may direct the Seller or the Servicer to, notify the Obligors
of Dealer Receivables in which the Seller has an interest, at the Seller's
expense, of the ownership interests of the Purchasers under this Agreement and
may also direct that payments of all amounts due or that become due under any or
all Dealer Receivables in which the Seller has an interest be made directly to
the Agent or its designee. The Seller or the Servicer (as applicable) shall, at
any Purchaser's request, withhold the identity of such Purchaser in any such
notification.
(b) If either the Seller or the Servicer fails to perform any of its
obligations hereunder, the Agent, any Administrator or any Purchaser may (but
shall not be required to) perform, or cause performance of, such obligation, and
the Agent's, such Administrator's or such Purchaser's costs and expenses
incurred in connection therewith shall be payable by the Seller as provided in
Section 10.04. Each of the Seller and the Servicer irrevocably authorizes the
Agent at any time and from time to time in the sole discretion of the Agent, and
appoints the Agent as its attorney-in-fact, to act on its behalf (i) to execute
on behalf of the Seller as debtor and to file financing statements necessary in
the Agent's sole discretion to perfect and to maintain the perfection and
priority of the interest of the Agent and/or of the Purchasers in the Dealer
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Dealer Receivables
as a financing statement in such offices as the Agent in its sole discretion
deems necessary or desirable to perfect and to maintain the perfection and
priority of the interests of the Purchasers in the Dealer Receivables. This
appointment is coupled with an interest and is irrevocable.
Section 13.05. Confidentiality.
(a) Each of the Seller and the Servicer, the Agent, each Administrator
and Purchaser shall maintain and shall cause each of its employees, directors
and officers to maintain the confidentiality of this Agreement and the other
confidential proprietary information with respect to the Agent, the
Administrators and the Conduit Purchasers, the Seller and the Servicer and their
respective businesses obtained by it or them in connection with the structuring,
negotiating and execution of the transactions contemplated herein, except that
the Seller, the Servicer and each Purchaser and its officers, directors and
employees may disclose such information to such Person's officers, directors
(including the Independent Director of the Seller and any company that employs
such Independent Director) and external accountants and attorneys and as
required by any applicable law, rule, direction, request or order of any
judicial, administrative or regulatory body or any stock exchange, issued during
any proceeding or otherwise.
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(b) Anything herein to the contrary notwithstanding, each of the Seller
and the Servicer hereby consents to the disclosure of any nonpublic information
with respect to it (i) to the Agent, the Administrators and the Purchasers by
each other, (ii) by the Agent, the Administrators or the Purchasers to any
prospective or actual assignee or participant of any of them, (iii) by the Agent
or any Administrator to any rating agency or (iv) by the Agent or any
Administrator to any Commercial Paper Note dealer or provider of a surety,
guaranty or credit or liquidity enhancement to a Conduit Purchaser or any entity
organized for the purpose of purchasing, or making loans secured by, financial
assets for which such Administrator acts as the administrative or servicing
agent and to any officers, directors, employees, outside accountants and
attorneys of any of the foregoing, provided each such Person is informed of the
confidential nature of such information and, in the case of a Person described
in clause (ii) or clause (iv), agrees to maintain the confidentiality of such
information on the terms and conditions set forth in this Section 13.05. In
addition, the Purchasers, the Administrators and the Agent may disclose any such
nonpublic information pursuant to any law, rule, regulation, direction, request
or order of any judicial, administrative or regulatory authority or proceedings
(whether or not having the force or effect of law).
Section 13.06. Bankruptcy Petition. (a) The Seller, the Servicer, the
Agent, each Administrator and each Purchaser hereby covenants and agrees that,
prior to the date that is one year and one day after the latest maturing
Commercial Paper Note issued by any Conduit Purchaser (whether or not issued to
fund the purchase or maintenance of the Ownership Interests of such Conduit
Purchaser hereunder), it will not institute against, or join any other Person in
instituting against, such Conduit Purchaser any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
(b) Notwithstanding any provisions contained in this Agreement to the
contrary, no Conduit Purchaser shall be obligated to pay any amount pursuant to
this Agreement unless (i) such Conduit Purchaser has received funds which may be
used to make such payment and which funds are not required to repay the
Commercial Paper Notes of such Conduit Purchaser when due and (ii) after giving
effect to such payment, either (x) there is sufficient liquidity availability
(determined in accordance with the program documents governing such Conduit
Purchaser's securitization program) under all of such Conduit Purchaser's
liquidity facilities to pay the face amount of all outstanding Commercial Paper
Notes of such Conduit Purchaser when due or (y) all Commercial Paper Notes of
such Conduit Purchaser are paid in full. Any amount which a Conduit Purchaser
does not pay pursuant to the operation of the preceding sentence shall not
constitute a claim (as defined in ss.101 of the Bankruptcy Code) against or
corporate obligation of such Conduit Purchaser for any such insufficiency unless
and until such Conduit Purchaser satisfies the provisions of clauses (i) and
(ii) above. Failure of a Conduit Purchaser to make a payment for any purchase of
an Ownership Interest hereunder shall be deemed to be an election of such
Conduit Purchaser not to purchase such Ownership Interest, whereupon the
Committed Purchasers in its Related Group shall purchase such Ownership Interest
as provided in Article II hereof.
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<PAGE> 73
Section 13.07. Limitation of Liability. Except with respect to any
claim arising out of the willful misconduct or gross negligence of a Purchaser,
an Administrator or the Agent, no claim may be made by either the Seller or the
Servicer or any other Person against any Purchaser, any Administrator or the
Agent or any of their respective Affiliates, directors, officers, managers,
employees, attorneys or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection
therewith; and each of the Seller and the Servicer hereby waives, releases, and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
Section 13.08. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
OBJECTION TO VENUE. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO
HEREBY AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED IN NEW YORK, NEW
YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY
OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
Section 13.09. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 13.10. Integration; Binding Effect; Survival of Terms.
(a) This Agreement, each Deposit Account Agreement and the Fee Letters
contain the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, superseding all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns
(including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until all Investment
hereunder together with all interest, fees, indemnities and other amounts due
hereunder have been paid or repaid in full, as the case may be.
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<PAGE> 74
Section 13.11. Counterparts; Severability; Section References. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and
sections of, and schedules and exhibits to, this Agreement.
Section 13.12. Roles. Each of the Purchasers acknowledges that Rabobank
and its Affiliates act, or may in the future act, (i) as administrative agent
for NARCO, (ii) as issuing and paying agent for the Commercial Paper Notes of
NARCO, (iii) to provide credit or liquidity enhancement for the timely payment
for the Commercial Paper Notes of NARCO and (iv) to provide other services from
time to time for NARCO (collectively, the "Rabobank Roles"). Without limiting
the generality of this Section 13.12, each Purchaser hereby acknowledges and
consents to any and all Rabobank Roles and agrees that in connection with any
Rabobank Role, Rabobank may take, or refrain from taking, any action that it, in
its discretion, deems appropriate, including, without limitation, in its role as
administrative agent for NARCO.
Section 13.13. Characterization; Grant of Security Interest.
(a) It is the intention of the parties hereto that each purchase
hereunder shall constitute and be treated as an absolute and irrevocable sale,
which purchase shall provide the applicable Purchaser with the full benefits of
ownership of the applicable Ownership Interest. Except as specifically provided
in this Agreement, each sale of an Ownership Interest hereunder is made without
recourse to the Seller; provided, however, that (i) the Seller shall be liable
to each Purchaser, each Administrator and the Agent for all representations,
warranties and covenants made by the Seller pursuant to the terms of this
Agreement, and (ii) such sale does not constitute and is not intended to result
in an assumption by any Purchaser, any Administrator or the Agent or any
assignee thereof of any obligation of the Seller or the Originator or any other
Person arising in connection with the Dealer Receivables, the Related Security,
or the related Contracts, or any other obligations of the Seller or the
Originator.
(b) In addition to any ownership interest which the Agent may from time
to time acquire pursuant hereto, the Seller hereby grants to the Agent for the
ratable benefit of the Purchasers a valid security interest in all of the
Seller's right, title and interest in, to and under all Dealer Receivables now
existing or hereafter arising, the Collections, each Deposit Account, all
Related Security, all other rights and payments relating to such Dealer
Receivables, all of the Seller's rights under the Originator Sale Agreement and
all proceeds of any thereof prior to all other liens on and security interests
therein to secure the prompt and complete payment of the Unpaid Obligations;
provided, however, that the
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<PAGE> 75
Agent and the Purchasers hereby agree that no security interest is granted in
any cash collections or other property included in any Deposit Account to the
extent such cash collections or other property does not constitute Dealer
Receivables, Related Security or Collections, and the Servicer shall dispose of
such cash collections or other property as provided in Section 8.02(e) hereof.
After an Early Amortization Event, the Agent and the Purchasers shall have, in
addition to the rights and remedies that they may have under this Agreement, all
other rights and remedies provided to a secured creditor after default under the
UCC and other applicable law, which rights and remedies shall be cumulative.
(c) The Seller acknowledges that the Related Security includes the
Originator Sale Agreement, and that all of the Seller's right and title to, and
interest in, the Originator Sale Agreement is subject to the Ownership Interests
acquired by the Purchasers hereunder and the security interest granted to the
Agent, for the benefit of the Purchasers, pursuant to Section 13.3(b).
Accordingly, the Seller agrees that the Agent, on behalf of the Purchasers,
shall have the right (which, upon the occurrence and during the continuance of
an Early Amortization Event, shall be an exclusive right) to enforce the
Seller's rights and remedies under the Originator Sale Agreement, to receive all
amounts payable thereunder or in connection therewith, to consent to amendments,
modifications or waivers thereof, and to direct, instruct or request any action
thereunder, but in each case without any obligation on the part of the Agent to
perform any of the obligations of the Seller under the Originator Sale
Agreement. The Agent, on behalf of the Purchasers shall have the exclusive right
to direct enforcement by the Seller of its rights and remedies under the
Originator Sale Agreement.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
AGCO FUNDING CORPORATION
By: Stephen D. Lupton
--------------------------------------
Name: Stephen D. Lupton
------------------------------------
Title: Director and Secretary
------------------------------------
AGCO Funding Corporation
4205 River Green Parkway
Duluth, GA 30096-2568
Attention: Patrick S. Shannon
Fax: (770) 813-6118
AGCO CORPORATION
By: Stephen D. Lupton
--------------------------------------
Name: Stephen D. Lupton
------------------------------------
Title: Vice President and General Counsel
-----------------------------------
AGCO Corporation
4205 River Green Parkway
Duluth, GA 30096-2568
Attention: Stephen D. Lupton
Fax: (770) 813-6118
First Signature Page to
Receivables Purchase Agreement
<PAGE> 77
Commitment
$250,000,000 COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
INTERNATIONAL", NEW YORK BRANCH, as a
Committed Purchaser, as an Administrator and as Agent
By: MARY B.W. COE
-------------------------------------------
Name: MARY B.W. COE
-----------------------------------------
Title: MANAGING DIRECTOR
----------------------------------------
By: WING NG
-------------------------------------------
Name: WING NG
-----------------------------------------
Title: VICE PRESIDENT
-----------------------------------------
Rabobank International
245 Park Avenue, 38th Floor
New York, New York 10167
Attention: WING NG
Fax: (212) 309-5120
NIEUW AMSTERDAM RECEIVABLES
CORPORATION, as a Conduit Purchaser
By: COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A.,
"RABOBANK INTERNATIONAL", NEW YORK BRANCH,
its Attorney-in-Fact
By: MARY B.W. COE
------------------------------------
Name: MARY B.W. COE
-----------------------------------------
Title: MANAGING DIRECTOR
----------------------------------------
By: WING NG
-------------------------------------------
Name: WING NG
-----------------------------------------
Title: VICE PRESIDENT
----------------------------------------
c/o Rabobank International
245 Park Avenue, 38th Floor
New York, New York 10167
Attention: Wing Ng
Fax: (212) 309-5120
Second Signature Page to
Receivables Purchase Agreement
<PAGE> 1
EXHIBIT 12.0
AGCO CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(IN MILLIONS, EXCEPT RATIO DATA)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
----------- -------- -------- --------- ----------
Fixed Charges Computation:
<S> <C> <C> <C> <C> <C>
Interest expense ............................................. $ 69.1 $ 79.7 $ 69.1 $ 45.2 $ 73.3
Interest component of rent expense (a) ....................... 4.8 5.3 5.6 5.4 5.0
Proportionate share of fixed charges of 50%-owned affiliates . 2.5 2.8 1.8 2.0 2.0
Amortization of debt cost .................................... 2.3 1.7 1.6 1.4 1.6
------- -------- -------- -------- --------
Total fixed charges ..................................... $ 78.7 $ 89.5 $ 78.1 $ 54.0 $ 81.9
======= ======== ======== ======== ========
Earnings Computation:
Pretax earnings .............................................. $ (19.2) $ 84.8 $ 245.7 $ 171.6 $ 190.6
Fixed charges ................................................ 78.7 89.5 78.1 54.0 81.9
------- -------- -------- ------- --------
Total earnings as adjusted .............................. $ 59.5 $ 174.3 $ 323.8 $ 225.6 $ 272.5
======= ======== ======== ======== ========
Ratio of earnings to combined fixed charges ............. 0.8:1(b) 1.9:1 4.2:1 4.2:1 3.3:1
======= ======== ======== ======== ========
</TABLE>
(a) The interest factor was calculated to be one-third of rental expense and
is considered to be a representative interest factor.
(b) The dollar amount of the deficiency, based on a one-to-one coverage ratio,
is $19.2 million.
<PAGE> 1
EXHIBIT 13
AGCO CORPORATION
1999 FINANCIAL REVIEW
CONTENTS
<TABLE>
<S> <C>
Selected Financial Data Page 18
- --------------------------------------------------------------------
Management's Discussion and Analysis Page 19 - 26
- --------------------------------------------------------------------
Report of Independent Public Accountants Page 27
- --------------------------------------------------------------------
Financial Statements Page 28 - 31
- --------------------------------------------------------------------
Notes To Financial Statements Page 32 - 44
- --------------------------------------------------------------------
</TABLE>
<PAGE> 2
AGCO CORPORATION
SELECTED FINANCIAL DATA
IN MILLIONS, EXCEPT PER SHARE DATA AND NUMBER OF EMPLOYEES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $ 2,413.3 $ 2,941.4 $ 3,224.4 $ 2,317.5 $ 2,068.4
Gross profit 356.4 537.3 666.8 470.3 440.7
Income from operations(2) 57.7 170.5 319.1 211.9 220.6
Net income (loss)(2) (11.5) 60.6 168.7(3) 125.9(3) 129.1
Net income (loss) per common share - diluted(2)(4) $ (0.20) $ 0.99 $ 2.71(3) $ 2.20(3) $ 2.31
Weighted average shares outstanding - diluted(4) 58.7 61.2 62.1 57.4 56.6
Dividends declared per common share(4) $ 0.04 $ 0.04 $ 0.04 $ 0.04 $ 0.02
OTHER FINANCIAL DATA
Working capital $ 733.9 $ 1,029.9 $ 884.3 $ 750.5 $ 661.5
Total assets 2,273.2 2,750.4 2,620.9 2,116.5 1,628.6
Long-term debt 691.7 924.2 727.4 567.1 415.9(5)
Stockholders' equity 829.1 982.1 991.6 774.6 588.9
Number of employees 9,287 10,572 11,829 7,801 5,548
</TABLE>
(1) AGCO sold a 51% joint venture interest in its retail finance
subsidiary, Agricredit-North America, effective November 1, 1996.
Accordingly, Agricredit-North America is reflected on the equity basis
of accounting for the years ended December 31, 1996, 1997, 1998 and
1999. For comparative purposes, the above table also reflects
Agricredit-North America on the equity basis of accounting for the year
ended December 31, 1995. If the Company's 100% interest in
Agricredit-North America were reflected on a consolidated basis for the
year ended December 31, 1995, total revenues would be $2,125.0 million,
total assets would be $2,162.9 million, and long-term debt would be
$568.9 million.
(2) These amounts include nonrecurring expenses of $24.5 million, $40.0
million, $18.2 million, $22.3 million and $6.0 million for the years
ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively. The
effect of these nonrecurring charges reduced net income per common
share on a diluted basis by $0.26, $0.41, $0.19, $0.25 and $0.07 for
the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Nonrecurring Expenses."
(3) Includes extraordinary loss, net of taxes, of $2.1 million, or $0.03
per share, and $3.5 million, or $0.06 per share, for the write-off of
unamortized debt costs related to the refinancing of the Company's
revolving credit facility in 1997 and 1996, respectively.
(4) Net income per common share - diluted, weighted average shares
outstanding - diluted and dividends declared per common share have been
restated for all periods to reflect all stock splits.
(5) Includes $37.6 million of the Company's 6.5% Convertible Subordinated
Debentures, which were subsequently converted into common stock during
1996.
AGCO CORPORATION
TRADING AND DIVIDEND INFORMATION (1)
<TABLE>
<CAPTION>
Dividends Dividends
(IN DOLLARS) High Low Declared (IN DOLLARS) High Low Declared
- -------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998
First Quarter $ 8 9/16 $ 6 1/16 $.01 First Quarter $30 9/16 $26 15/16 $.01
Second Quarter 12 15/16 6 5/16 .01 Second Quarter 29 7/16 20 7/16 .01
Third Quarter 13 1/2 8 11/16 .01 Third Quarter 20 11/16 6 7/16 .01
Fourth Quarter 14 1/8 9 15/16 .01 Fourth Quarter 10 3/8 5 3/4 .01
</TABLE>
(1) The Company's stock trades on the New York Stock Exchange under the
symbol AG. As of February 29, 2000, there were approximately 783
stockholders of record.
18
<PAGE> 3
AGCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AGCO Corporation ("AGCO" or the "Company") is a leading manufacturer and
distributor of agricultural equipment and related replacement parts throughout
the world. The Company sells a full range of agricultural equipment, including
tractors, combines, hay tools, sprayers, forage equipment and implements. The
Company distributes its products through a combination of approximately 8,200
independent dealers, distributors, associates and licensees. In addition, the
Company provides retail financing in North America, the United Kingdom, France,
Germany, Spain and Brazil through its finance joint ventures with Rabobank
Nederland.
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 practicable, 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. However, 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, which varies based on the timing and level of retail demand, between
the date the Company records a sale and the date a dealer sells the equipment to
a retail customer. During this time lag between the wholesale and retail sale,
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 retail
sale, as opposed to when products are sold to dealers.
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of certain items included in the Company's
Consolidated Statements of Income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 85.2 81.7 79.3
- ----------------------------------------------------------------------------------------
Gross profit 14.8 18.3 20.7
Selling, general and
administrative expenses 9.6 9.2 8.5
Engineering expenses 1.8 1.9 1.7
Nonrecurring expenses 1.0 1.4 0.6
- ----------------------------------------------------------------------------------------
Income from operations 2.4 5.8 9.9
Interest expense, net 2.4 2.3 1.7
Other expense, net 1.3 1.0 0.6
- ----------------------------------------------------------------------------------------
Income (loss) before income
taxes, equity in net earnings of
affiliates and extraordinary loss (1.3) 2.5 7.6
Provision (benefit) for income taxes (0.4) 0.9 2.7
- ----------------------------------------------------------------------------------------
Income (loss) before equity
in net earnings of affiliates
and extraordinary loss (0.9) 1.6 4.9
Equity in net earnings of affiliates 0.4 0.5 0.4
- ----------------------------------------------------------------------------------------
Income (loss) before
extraordinary loss (0.5) 2.1 5.3
Extraordinary loss, net of taxes -- -- (0.1)
- ----------------------------------------------------------------------------------------
Net income (loss) (0.5)% 2.1% 5.2%
========================================================================================
</TABLE>
1999 COMPARED TO 1998
The Company recorded a net loss for 1999 of $11.5 million compared to net income
of $60.6 million for 1998. Net income (loss) per common share on a diluted basis
was $(0.20) for 1999 compared to $0.99 in 1998. Net income (loss) for 1999 and
1998 included nonrecurring expenses of $24.5 million and $40.0 million, or $0.26
and $0.41 per common share on a diluted basis, respectively (see "Nonrecurring
Expenses"). The results for 1999 were negatively impacted by lower sales and
operating margins caused by unfavorable industry conditions, lower production,
lower price realization and the negative impact of currency translation as
compared to 1998.
RETAIL SALES
Global demand for agricultural equipment continued to weaken in 1999 in most
major markets. The industry decline was primarily due to the continued effects
of high global commodity stocks and lower export demand for farm commodities,
which resulted in lower commodity prices. These conditions have the effect of
reducing farm income in most major markets thereby reducing demand for new
equipment purchases.
19
<PAGE> 4
AGCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the United States and Canada, industry unit retail sales of tractors
increased approximately 2% in 1999 over 1998, with significant increases in the
under 40 horsepower segment offsetting modest declines in the utility tractor
segment and significant declines in the high horsepower segment. Industry
retail sales of combines declined approximately 47% compared to 1998. Company
retail sales of tractors and combines decreased compared to the same period in
1998, with competitive pricing affecting the Company's sales relative to the
industry.
In Western Europe, industry unit retail sales of tractors in 1999 increased
approximately 2% compared to 1998. Industry results were mixed with declines
experienced in Spain and Scandinavia offset by increases in France, the United
Kingdom, Germany and Italy. Company retail sales of tractors in 1999 were
unchanged from 1998. However, the Company's retail sales were stronger compared
to the industry in the third and fourth quarters of 1999 due to the favorable
acceptance of the Company's new Massey Ferguson high horsepower tractor line,
which was introduced during the first half of 1999 and, accordingly, had limited
availability in the first half of the year.
In South America, industry unit retail sales of tractors in 1999 decreased
approximately 15% compared to 1998. Industry results in 1999 were also mixed in
this region with slightly favorable industry results in Brazil offset by
significant industry declines in Argentina and the remaining South American
markets due to low commodity prices, tightening credit and economic uncertainty.
Company retail sales of tractors in South America were comparable to the
industry decline.
In other international markets, industry and Company unit retail sales of
tractors were lower than 1998 in most regions including the Middle East, Africa
and Eastern Europe.
STATEMENT OF INCOME
Net sales for 1999 were $2,413.3 million compared to $2,941.4 million in 1998.
This decline primarily reflects lower retail demand in the majority of markets
throughout the world. In addition, net sales for 1999 were negatively impacted
by foreign currency translation due to the weakening of the Euro and the
Brazilian real against the U.S. dollar. Foreign currency translation had the
effect of reducing net sales by approximately $135.1 million in 1999 compared to
1998. Net sales for 1999 were positively impacted by approximately $36.0 million
due to the Company's 1998 acquisitions of MF Argentina, Spra-Coupe and Willmar,
which were only partially included in the 1998 results. Excluding the impact of
currency translation and acquisitions, net sales decreased approximately 14.6%
compared to 1998.
On a regional basis, net sales in North America decreased $327.9 million, or
34.8%, compared to 1998, primarily due to unfavorable market conditions and the
Company's planned efforts to lower dealer inventories by generating wholesale
sales to dealers at a rate less than retail demand. The decline was partially
offset by the impact of the Willmar and Spra-Coupe acquisitions. In the
Europe/Africa/Middle East region, net sales in 1999 decreased $90.3 million, or
5.7%, compared to 1998 primarily due to lower sales outside Western Europe and
the negative impact of foreign currency translation. Net sales for 1999 in South
America decreased $118.2 million, or 37.5%, compared to 1998, primarily due to
unfavorable industry conditions outside of Brazil and the negative impact of
foreign currency translation due to the devaluation of the Brazilian real in
January 1999. In the East Asia/Pacific region, net sales in 1999 increased $8.3
million, or 9.5%, compared to 1998, primarily due to improving market conditions
in Asia.
Gross profit was $356.4 million (14.8% of net sales) for 1999 compared to
$537.3 million (18.3% of net sales) for 1998. Gross profit margins declined due
to reduced production overhead absorption, lower price realization in certain
markets and an unfavorable mix of higher margin products. The Company reduced
1999 worldwide tractor and combine unit production by 16% compared to 1998 in
response to the weakening industry demand. Price realization in 1999 was
impacted by a more competitive global market environment and higher levels of
used dealer inventories in the North American market. The Company increased its
sales incentives costs in order to reduce used inventory levels and sell older
discontinued products. Gross profit in 1999 also included a one-time write-down
of production inventory of approximately $5.0 million which was recorded to cost
of goods sold and was related to the planned closure of the Company's Coldwater,
Ohio and Lockney, Texas manufacturing facilities.
Selling, general and administrative expenses (SG&A expenses) were $229.6
million (9.6% of net sales) compared to $270.7 million (9.2% of net sales) in
1998. Engineering expenses were $44.6 million (1.8% of net sales) compared to
$56.1 million (1.9% of net sales). The $52.6 million decrease in SG&A and
engineering expenses in 1999 was primarily a result of the Company's expense
reduction initiatives implemented in late 1998, which included reductions in the
Company's worldwide workforce and decreases in discretionary spending levels.
Nonrecurring expenses were $24.5 million in 1999 and $40.0 million in 1998.
The 1999 nonrecurring expenses consisted of a write-down of property, plant and
equipment, severance and other costs related to the permanent closure of certain
production facilities. The 1998 nonrecurring expenses consisted of severance and
related costs associated with a reduction in the Company's worldwide workforce.
See "Nonrecurring Expenses" for further discussion.
Income from operations was $57.7 million for 1999 compared to $170.5 million
in 1998. Excluding nonrecurring expenses in both years, income from operations
was $82.2 million in 1999 (3.4% of net sales) compared to
20
<PAGE> 5
$210.5 million (7.2% of net sales) in 1998. Operating income was negatively
impacted in 1999 by lower sales and gross profit margins, partially offset by
lower SG&A expenses.
Interest expense, net was $57.6 million in 1999 compared to $67.7 million in
1998. The lower expense in 1999 was primarily due to lower average debt levels
and lower effective interest rates on the Company's outstanding borrowings.
Other expense, net was $32.3 million in 1999 compared to $28.5 million in
1998. The increase in other expense, net is primarily attributable to higher
amortization of intangibles due to full year amortization of the Company's 1998
acquisitions.
The Company recorded an income tax benefit of $10.2 million in 1999 compared
to a provision of $27.5 million in 1998. The Company's effective tax rate
increased in 1999 compared to 1998 due to an increase in losses incurred in
certain foreign tax jurisdictions for which no immediate tax benefit was
recognized.
Equity in net earnings of affiliates was $10.5 million in 1999 compared to
$13.8 million in 1998. The reduction in earnings primarily related to decreased
earnings in the Company's engine joint venture and slightly lower earnings in
the Company's retail finance joint ventures.
1998 COMPARED TO 1997
The Company recorded net income for 1998 of $60.6 million compared to $168.7
million for 1997. Net income per common share on a diluted basis was $0.99 for
1998 compared to $2.71 in 1997. Net income for 1998 and 1997 included
nonrecurring expenses of $40.0 million and $18.2 million, or $0.41 and $0.19 per
common share on a diluted basis, respectively (see "Nonrecurring Expenses"). In
addition, net income for 1997 included an extraordinary loss of $2.1 million, or
$0.03 per share on a diluted basis, for the write-off of unamortized debt costs
related to the refinancing of the Company's revolving credit facility (see
"Liquidity and Capital Resources"). The results for 1998 were negatively
impacted by lower sales and operating margins caused by unfavorable industry
conditions, lower production, lower price realization and the negative impact of
foreign currency translation.
ACQUISITIONS AND DIVESTITURES
The Company completed the following transactions in late 1997 and 1998 which
impacted the Company's results in 1998:
- - In December 1997, the Company acquired the remaining 68% of Dronningborg
Industries a/s (the "Dronningborg Acquisition"), the Company's supplier of
combine harvesters sold under the Massey Ferguson brand name in Europe. The
Company previously owned 32% of this combine manufacturer which developed and
manufactured combine harvesters exclusively for AGCO. The Dronningborg
Acquisition enabled the Company to achieve certain synergies within its
worldwide combine manufacturing.
- - In December 1997, the Company sold 50% of Deutz Argentina's engine production
and distribution business to Deutz AG, a global supplier of diesel engines.
This joint venture (the "Engine Joint Venture") allows the Company to share in
research and development costs and gain access to advanced technology.
- - In December 1997, the Company sold its Fendt caravan and motor home business
in order to focus on its core agricultural equipment business (the "Fendt
Caravan Sale").
- - In May 1998, the Company acquired the distribution rights for the Massey
Ferguson brand in Argentina (the "MF Argentina Acquisition"). The MF Argentina
Acquisition expanded the Company's distribution network in the second largest
market in South America.
- - In July 1998, the Company acquired the Spra-Coupe product line, a brand of
agricultural self-propelled sprayers sold primarily in North America (the
"Spra-Coupe Acquisition"). In October 1998, the Company acquired the Willmar
product line, a brand of agricultural self-propelled sprayers, spreaders and
loaders sold primarily in North America (the "Willmar Acquisition"). The
Spra-Coupe and Willmar Acquisitions expanded the Company's product offerings
to include a full line of self-propelled sprayers.
RETAIL SALES
Global demand for agricultural equipment weakened significantly in the second
half of 1998 in most major markets. The industry decline was primarily due to
the effects of high global commodity stocks and lower export demand for farm
commodities, which resulted in lower commodity prices. In many markets, this
impact offset relatively favorable industry demand in the first half of the
year.
In the United States and Canada, industry unit retail sales of tractors
increased approximately 4% in 1998 over 1997, despite declining in the second
half of the year. Industry retail sales of combines declined approximately 4%
compared to 1997. Company retail sales of tractors were slightly higher than in
1997, and Company retail sales of combines were below the prior year. The
Company's combine sales were negatively impacted relative to the industry
primarily due to lower 1998 pre-season sales and new product introductions by
competitors.
In Western Europe, industry unit retail sales of tractors in 1998 decreased
approximately 3% compared to 1997. Industry results were mixed with significant
declines experienced in the United Kingdom and Scandinavia offset by increases
in Germany and Italy. Company retail sales of tractors decreased in 1998
compared to 1997. The Company's retail sales were negatively impacted by sales
declines of the Massey Ferguson high horsepower tractors and aggressive pricing
in this segment of the market.
21
<PAGE> 6
AGCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In South America, industry unit retail sales of tractors in 1998 decreased
approximately 5% compared to 1997. Industry results in 1998 were also mixed in
this region with favorable industry results in Brazil offset by industry
declines in Argentina and the remaining South American markets. Company retail
sales of tractors were slightly below 1997, thereby outperforming the market
primarily due to favorable acceptance of new product introductions.
In other international markets, industry unit retail sales of tractors were
lower than in 1997, particularly in Asia and Africa. The Company also
experienced lower retail sales in these markets.
STATEMENT OF INCOME
Net sales for 1998 were $2,941.4 million compared to $3,224.4 million in 1997.
This decline primarily reflects lower retail demand in the majority of markets
throughout the world. Net sales for 1998 were also negatively impacted by
approximately $85.4 million due to the Fendt Caravan Sale and Engine Joint
Venture divestitures and approximately $53.7 million from the negative impact on
foreign currency translation due to the strengthening of the U.S. dollar against
most European currencies. Net sales for 1998 were positively impacted by
approximately $40.4 million from the Dronningborg, MF Argentina, Spra-Coupe and
Willmar Acquisitions. Excluding the impact of currency translation, acquisitions
and divestitures, net sales decreased approximately 5.7% compared to 1997.
On a regional basis, net sales in North America decreased $15.7 million, or
1.6%, compared to 1997, primarily due to unfavorable market conditions which
particularly impacted sales of combines and replacement parts in the second half
of the year. In the Europe/Africa/Middle East region, net sales in 1998 declined
$183.6 million, or 10.3%, compared to 1997 primarily due to unfavorable industry
conditions, the impact of the Fendt Caravan Sale, and the negative impact of
foreign currency translation. Net sales in South America decreased $19.0
million, or 5.7%, in 1998 compared to 1997, primarily due to the impact of the
Engine Joint Venture and the negative impact of foreign currency translation. In
the East Asia/Pacific region, net sales declined $64.7 million, or 42.5%, for
1998 compared to 1997, primarily due to depressed industry conditions resulting
from the Asian currency devaluation and the negative impact of currency
translation.
Gross profit was $537.3 million (18.3% of net sales) for 1998, compared to
$666.8 million (20.7% of net sales) for 1997. Gross profit margins were
negatively impacted by reduced production overhead absorption, lower price
realization in the majority of markets and unfavorable foreign currency exchange
primarily relating to the weakening of the Canadian dollar in relation to the
U.S. dollar and the strengthening of the British pound compared to
other European currencies. The Company reduced 1998 worldwide tractor and
combine unit production by 13% compared to 1997 in response to the weakening
industry demand. Price realization in 1998 was impacted by a more competitive
market environment and higher discounts to liquidate older, slower-moving
inventory.
SG&A expenses were $270.7 million (9.2% of net sales) in 1998 compared to
$275.4 million (8.5% of net sales) in 1997. As a percentage of net sales, SG&A
expenses were higher in 1998 due to the lower sales volumes and Year 2000 costs
recorded in 1998 (see "Year 2000"). Engineering expenses were $56.1 (1.9% of net
sales) compared to $54.1 million (1.7% of net sales). As a percentage of net
sales, engineering expenses were higher in 1998 primarily due to lower sales
volumes and higher expenses due to the Dronningborg Acquisition.
Nonrecurring expenses were $40.0 million in 1998 and $18.2 million in 1997.
The 1998 nonrecurring expenses consisted of severance and related costs
associated with a reduction in the Company's worldwide workforce. The 1997
nonrecurring expenses primarily related to the restructuring of the Company's
European operations, the integration of the Company's Argentina and Fendt
operations and executive severance costs. See "Nonrecurring Expenses" for
further discussion.
Income from operations was $170.5 million for 1998 compared to $319.1 million
in 1997. Excluding nonrecurring expenses in both years, income from operations
was $210.5 million in 1998 (7.2% of net sales) compared to $337.3 million (10.5%
of net sales) in 1998. Operating income was negatively impacted in 1998 by lower
sales and gross profit margins.
Interest expense, net was $67.7 million in 1998 compared to $53.5 million in
1997. The higher expense in 1998 was primarily due to additional borrowings to
fund the Company's acquisitions, common stock repurchases and higher levels of
working capital.
Other expense, net was $28.5 million in 1998 compared to $19.9 million in
1997. The increase in other expense, net primarily relates to increased hedging
costs and foreign exchange losses in addition to higher amortization of
intangibles due to the Company's acquisitions completed in late 1997 and during
1998.
The Company recorded an income tax provision of $27.5 million in 1998
compared to a provision of $87.5 million in 1997. The Company's effective tax
rate increased in 1998 compared to 1997 due to a change in the mix of income to
jurisdictions with higher tax rates.
Equity in net earnings of affiliates was $13.8 million in 1998 compared to
$12.6 million in 1997. The increase in earnings primarily related to increased
earnings in the Company's retail finance joint ventures and earnings from the
Engine Joint Venture.
22
<PAGE> 7
QUARTERLY RESULTS
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 period. (In millions, except
per share data.)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999:
Net sales $ 561.6 $ 683.5 $ 570.5 $ 597.7
Gross profit 79.0 111.1 97.1 69.2
Income (loss) from
operations(1) 9.3 43.6 30.2 (25.4)
Net income (loss)(1) (7.2) 15.5 7.5 (27.3)
Net income (loss)
per common
share - diluted(1) (0.12) 0.26 0.13 (0.46)
1998:
Net sales $ 701.5 $ 816.1 $ 665.7 $ 758.1
Gross profit 144.5 156.5 131.2 105.1
Income (loss) from
operations(1) 67.9 73.2 46.1 (16.7)
Net income (loss)(1) 32.7 32.3 17.9 (22.3)
Net income (loss)
per common
share - diluted(1) 0.52 0.52 0.30 (0.37)
</TABLE>
(1) The 1999 and 1998 operating results include nonrecurring expenses of
$24.5 and $40.0 million, or $0.26 and $0.42 per share, for the three
months ended December 31, 1999 and 1998, respectively.
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 investments in inventory. However,
retail sales 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.
NONRECURRING EXPENSES
In the fourth quarter of 1999, the Company recorded non-recurring expenses of
$24.5 million, or $.26 per share on a diluted basis, related to the planned
closure of its Coldwater, Ohio; Lockney, Texas; and Noetinger, Argentina
manufacturing facilities. The majority of production in these facilities will be
relocated to existing Company facilities or outsourced to third parties. The
nonrecurring expenses primarily relate to the write-down of property, plant and
equipment, severance and other facility closure costs. The Company also expects
to incur an additional $8.0 million of nonrecurring expenses in 2000 related to
the closures. These nonrecurring expenses relate to severance and costs to
integrate the production from these facilities into other existing AGCO
facilities. These expenses will be recorded as they are incurred in 2000. In
addition to the nonrecurring expenses, the Company recorded a one-time $5.0
million write-down of production inventory which was charged to cost of goods
sold and was directly related to the closures.
The closure of these facilities is consistent with the Company's efforts to
resize its operations to current industry demand. The rationalization of the
Company's production facilities is expected to generate annual cost savings of
$10 million to $15 million.
In 1998, the Company recorded nonrecurring expenses of $40.0 million
primarily related to severance and related costs associated with the reduction
in the Company's worldwide permanent workforce of approximately 1,400
employees. These headcount reductions were made to address the negative market
conditions which adversely impacted demand in the majority of markets. The
headcount reductions resulted in significant cost savings related to
manufacturing costs and SG&A expenses.
In 1997, the Company recorded nonrecurring expenses of $18.2 million which
consisted of (i) $15.0 million related to the restructuring of the Company's
European operations and the integration of the Deutz Argentina and Fendt
operations, acquired in December 1996 and January 1997, respectively, and (ii)
$3.2 million related to executive severance. The costs associated with the
restructuring and integration activities primarily related to the centralization
and rationalization of certain manufacturing, selling and administrative
functions in addition to the rationalization of a small portion of the Company's
European dealer network. These restructuring and integration activities resulted
in cost savings related to manufacturing costs and selling, general and
administrative expenses. In addition, the European dealer rationalization is
expected to improve long-term sales in certain markets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing requirements are subject to variations due to seasonal
changes in company and dealer inventory levels. Internally generated funds are
supplemented when necessary from external sources, primarily the Company's
revolving credit facility. In January 1997, the Company established a five-year
unsecured revolving credit facility (the "Revolving Credit Facility"), which is
the Company's primary source of financing. As of December 31, 1999, the lending
commitment under the Revolving Credit Facility was $1.0 billion. Borrowings
under the Revolving Credit Facility may not exceed the sum of 90% of eligible
23
<PAGE> 8
AGCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
accounts receivable and 60% of eligible inventory. As of December 31, 1999,
approximately $431.4 million was outstanding under the Revolving Credit Facility
and available borrowings, based on the lending commitment of $1.0 billion, were
approximately $568.3 million, subject to the accounts receivable and inventory
borrowing base requirements.
In January 2000, the Company entered into a $250 million asset backed
securitization facility whereby certain U.S. wholesale accounts receivable are
sold through a wholly-owned special purpose subsidiary to a third party (the
"Securitization Facility"). Funding under the Securitization Facility is
provided on a revolving basis and is dependent upon the level of U.S. dealer
wholesale receivables eligible to be sold through the facility. The Company
initially funded $200 million under the Securitization Facility which was used
to reduce outstanding borrowings under the Revolving Credit Facility. The $1.0
billion lending commitment under the Revolving Credit Facility was permanently
reduced by the $200 million initial proceeds received from the Securitization
Facility and will be further reduced by any additional funding received from the
Securitization Facility. The Securitization Facility provides the Company with
several benefits, including a lower cost of borrowings and a one-time
acceleration of cash flow with a corresponding reduction in outstanding debt.
This transaction is consistent with the Company's objective of reducing its
leverage and diversifying its capital sources at the lowest cost possible. In
conjunction with the closing of the securitization transaction, the Company
recorded a loss in January 2000 on the sale of the receivables of approximately
$8 million. The loss represents the difference between the current and future
value of the receivables sold, related transaction expenses and the write-off of
certain unamortized debt issuance costs due to the reduction in the lending
commitment of the Revolving Credit Facility.
During 1999, the Company entered into a sale/leaseback transaction involving
certain real property. The proceeds from the transaction of $18.7 million were
used to reduce outstanding borrowings under the Revolving Credit Facility.
In March 1996, the Company issued $250.0 million of 8.5% Senior Subordinated
Notes due 2006 (the "Notes") at 99.139% of their principal amount. 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.
In December 1997, the Company's Board of Directors authorized the repurchase
of up to $150.0 million of its outstanding common stock. In 1998, the Company
repurchased approximately 3.5 million shares of its common stock at a cost of
approximately $88.1 million. In 1999, the Company did not repurchase any of its
common stock. The purchases are made through open market transactions, and the
timing and number of shares purchased depends on various factors, such as price
and other market conditions.
Total long-term debt for the Company was $691.7 million at December 31, 1999
compared to $924.2 million at December 31, 1998. The Company's debt to
capitalization ratio was 45.5% at December 31, 1999 compared to 48.5% at
December 31, 1998. The decrease in the debt to capitalization ratio was
primarily due to a reduction in long-term debt of $232.5 million, offset to some
extent by a negative cumulative translation adjustment to equity of $145.5
million compared to 1998, due to the devaluation of the Brazilian real and a
weakening of the Euro relative to the U.S. dollar.
The Company's working capital requirements 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. The Company had $733.9 million of
working capital as of December 31, 1999 compared to $1,029.9 million as of
December 31, 1998. The decrease in working capital was primarily due to lower
accounts receivable and inventories, resulting from the decrease in net sales in
1999 compared to 1998, the effect of foreign currency translation and the
planned reduction of North America dealer inventories by producing below retail
demand.
Cash flow provided by operating activities was $233.7 million in 1999, $11.2
million in 1998 and $100.0 million in 1997. The increase in operating cash flow
in 1999 was primarily due to a reduction in accounts receivable and inventory
levels offset to some extent by lower net income. The improved cash flow in 1999
reflects the impact of the Company's initiatives to reduce receivables and
inventory levels. In response to the industry decline and to reduce the level of
dealer and Company inventories, worldwide unit production of tractors and
combines was 16% lower than 1998. The decrease in operating cash flow for 1998
compared to 1997 was primarily due to lower net income, lower provision for
deferred taxes, primarily due to the utilization of net operating loss
carryforwards in 1997 and lower accounts payable. This impact was offset to some
extent by a lower use of cash for accounts receivable and inventory in 1998
compared to 1997, primarily due to the Company lowering production levels in the
second half of 1998 in response to the weakening industry conditions.
Capital expenditures were $44.2 million in 1999, $61.0 million in 1998 and
$72.1 million in 1997. For all years, the Company's capital expenditures related
to the development and enhancement of new and existing products as well as
facility and equipment improvements. The decreases in capital expenditures in
1999 compared to 1998 and 1998 compared to 1997 was primarily due to lower
capital requirements for new products and facility improvements. The Company
currently estimates that aggregate capital expenditures for 2000 will range from
approximately $50 million to $60 million and will primarily be used to support
the development and enhancement of new and existing products. Capital
expenditures for 2000 are expected to be funded with cash flows from operations.
24
<PAGE> 9
During 1999, the Company's Board of Directors declared dividends of $0.04 per
share of common stock. The declaration and payment of future dividends will be
at the sole discretion of the Board of Directors and will depend upon the
Company's results of operations, financial condition, cash requirements, future
prospects, limitations imposed by the Company's credit facilities and other
factors deemed relevant by the Company's Board of Directors.
The Company believes that available borrowings under the Revolving Credit
Facility, funding under the Securitization 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.
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.
Global demand for agricultural equipment in 1999 remained weak due to low
commodity prices and reduced commodity export demand. These factors are expected
to continue in 2000, which will adversely impact farm income, and consequently,
lower the demand for agricultural equipment. As a result, worldwide retail
demand in 2000 is expected to be between 0% and 5% below 1999 levels. Net sales
in 2000 are expected to be slightly below 1999 levels due to the forecasted
decline in retail demand and the anticipated negative currency translation
impact of the strengthening U.S. dollar compared to European currencies. Despite
these conditions, the Company expects production to increase marginally due to
inventory corrections made in 1999. As a result of the increased production and
the Company's cost reduction initiatives, operating margins and overall
profitability in 2000 are expected to improve compared to 1999.
FOREIGN CURRENCY RISK MANAGEMENT
The Company has significant manufacturing operations in the United States, the
United Kingdom, France, Germany, Denmark and Brazil, 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. The Company's most
significant transactional foreign currency exposures are the British pound in
relation to the Euro and the British pound, Euro and the Canadian dollar in
relation to the U.S. dollar. 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 transactional foreign exchange exposure by
hedging identifiable foreign currency cash flow commitments arising from
receivables, payables, and expected purchases and sales. Where naturally
offsetting currency positions do not occur, the Company hedges certain of its
exposures through the use of foreign currency forward contracts. The Company's
hedging policy prohibits foreign currency forward contracts for speculative
trading purposes. The Company's translation exposure resulting from translating
the financial statements of foreign subsidiaries into U.S. dollars is not
hedged. The Company's most significant translation exposures are the British
pound, the Euro and the Brazilian real in relation to the U.S. dollar. When
practical, this translation impact is reduced by financing local operations with
local borrowings.
The following is a summary of foreign currency forward contracts used to
hedge currency exposures. All contracts have a maturity of less than one year.
The net notional amounts and fair value gains or losses as of December 31, 1999
stated in U.S. dollars are as follows (in millions):
<TABLE>
<CAPTION>
Net
Notional Average Fair
Amount Contract Value
Buy/(Sell) Rate* Gain/(Loss)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Australian dollar $ 7.0 1.57 $0.2
British pound (32.4) 0.63 (0.8)
Danish krone 9.6 7.37 -
Euro currency 280.9 0.97 (6.0)
French franc (6.8) 6.25 0.3
German mark 1.5 1.90 -
Greek drachma (6.3) 323.77 0.1
Japanese yen 0.6 113.31 0.1
Norwegian krone 0.7 7.09 (0.1)
Swedish krona 2.4 4.83 (1.1)
- --------------------------------------------------------------------
$257.2 $(7.3)
====================================================================
</TABLE>
* per U. S. dollar
Because these contracts were entered into for hedging purposes, the gains and
losses on the contracts would largely be offset by gains and losses on the
underlying firm commitment.
INTEREST RATES
The Company manages interest rate risk through the use of fixed rate debt and
interest rate swap contracts. The Company has fixed rate debt from its $250
million 8.5% Senior Subordinated Notes due 2006. In addition, the Company
25
<PAGE> 10
AGCO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
entered into an interest rate swap contract to further minimize the effect of
potential interest rate increases on floating rate debt in a rising interest
rate environment. At December 31, 1999, the Company had an interest rate swap
contract outstanding with a notional amount of $94.3 million which expires on
December 31, 2001. The interest rate swap has the effect of converting a portion
of the Company's floating rate indebtedness to a fixed rate of 5.1%. The
Company's floating rate debt is primarily the Revolving Credit Facility, which
is tied to changes in U.S. and European libor rates. Assuming a 10% increase in
interest rates, the Company's interest expense, net, including the effect of the
interest rate swap contract for 1999, would have increased by approximately $3.6
million.
YEAR 2000
The Company assessed the impact of the Year 2000 issue on its reporting systems
and operations. Based on its assessment, the Company developed a Year 2000
compliance plan, in which all critical and noncritical systems were tested and
all identified noncompliant software or technology was modified or replaced.
This review included all information technology systems and embedded systems
located in the Company's manufacturing equipment, facility equipment and in the
Company's products. Through December 31, 1999, the Company incurred
approximately $9.5 million to modify existing computer systems, applications and
embedded systems. The Company expects no significant costs during 2000 related
to the Year 2000 issue. In addition, the Company has experienced no significant
issues relating to the Year 2000 issue.
EURO CURRENCY
The Company has established the capability to trade in the common European
currency (the "Euro") in all European locations beginning January 1, 1999. The
Company began communicating with suppliers, dealers and financial institutions
in 1998 and has formulated a transition plan to move to a Euro-based business in
2001. The Company does not currently expect its competitive position (including
pricing, purchasing contracts and systems modifications) to be materially
affected by the change to the Euro.
ACCOUNTING CHANGES
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition." SAB No. 101 does not
change existing accounting literature on revenue recognition, but rather
explains the SEC staff's general framework for revenue recognition. SAB No. 101
states that changes in accounting to apply the guidance in SAB No. 101 may be
accounted for as a change in accounting principle and must be recorded in the
first quarter of 2000. The Company is currently reviewing its revenue
recognition policy and does not expect the adoption of SAB No. 101 to have a
material impact on the Company's results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. The
Company will be required to adopt the new statement on January 1, 2001. The
Company has not yet quantified the financial impact of adopting SFAS No. 133 and
has not determined the method of adoption. However, SFAS No. 133 could increase
volatility in earnings and other comprehensive income.
FORWARD LOOKING STATEMENTS
Certain statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this report are forward
looking, including certain statements set forth under the "Outlook," "Liquidity
and Capital Resources," "Nonrecurring Expenses," "Year 2000" and "Euro Currency"
headings. Forward looking statements include the Company's expectations with
respect to future commodity prices, export demand for commodities, farm income,
demand for agricultural equipment, production levels, the impact of cost
reduction initiatives, operating margins, overall profitability and the
availability of capital. Although the Company believes that the statements it
has made are based on reasonable assumptions, they are based on current
information and beliefs and, accordingly, the Company can give no assurance that
its statements will be achieved. In addition, these statements are subject to
factors that could cause actual results to differ materially from those
suggested by the forward looking statements. These factors include, but are not
limited to, general economic and capital market conditions, the demand for
agricultural products, world grain stocks, crop production, commodity prices,
farm income, farm land values, government farm programs and legislation, the
levels of new and used field inventories, weather conditions, interest and
foreign currency exchange rates, the conversion to the Euro, pricing and product
actions taken by competitors, customer access to credit, production disruptions,
supply and capacity constraints, Company cost reduction and control initiatives,
Company research and development efforts, labor relations, dealer and
distributor actions, technological difficulties including the Year 2000
readiness, changes in environmental, international trade and other laws, and
political and economic uncertainty in various areas of the world. Further
information concerning factors that could significantly affect the Company's
results is included in the Company's filings with the Securities and Exchange
Commission. The Company disclaims any responsibility to update any forward
looking statements.
26
<PAGE> 11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AGCO Corporation:
We have audited the accompanying consolidated balance sheets of AGCO CORPORATION
AND SUBSIDIARIES as of December 31, 1999 and 1998 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits 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, 1999 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 1, 2000
27
<PAGE> 12
AGCO CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
IN MILLIONS, EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,413.3 $2,941.4 $3,224.4
Cost of goods sold 2,056.9 2,404.1 2,557.6
- ---------------------------------------------------------------------------------------------------------
Gross profit 356.4 537.3 666.8
Selling, general and administrative expenses 229.6 270.7 275.4
Engineering expenses 44.6 56.1 54.1
Nonrecurring expenses 24.5 40.0 18.2
- ---------------------------------------------------------------------------------------------------------
Income from operations 57.7 170.5 319.1
Interest expense, net 57.6 67.7 53.5
Other expense, net 32.3 28.5 19.9
- ---------------------------------------------------------------------------------------------------------
Income (loss) before income taxes, equity in net earnings
of affiliates and extraordinary loss (32.2) 74.3 245.7
Income tax provision (benefit) (10.2) 27.5 87.5
- ---------------------------------------------------------------------------------------------------------
Income (loss) before equity in net earnings of affiliates
and extraordinary loss (22.0) 46.8 158.2
Equity in net earnings of affiliates 10.5 13.8 12.6
- ---------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary loss (11.5) 60.6 170.8
Extraordinary loss, net of taxes -- -- (2.1)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (11.5) $ 60.6 $ 168.7
=========================================================================================================
Net income (loss) per common share:
Basic:
Income (loss) before extraordinary loss $ (0.20) $ 1.01 $ 2.82
Extraordinary loss -- -- (0.03)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.20) $ 1.01 $ 2.79
=========================================================================================================
Diluted:
Income (loss) before extraordinary loss $ (0.20) $ 0.99 $ 2.74
Extraordinary loss -- -- (0.03)
- ---------------------------------------------------------------------------------------------------------
Net income (loss) $ (0.20) $ 0.99 $ 2.71
=========================================================================================================
Weighted average shares outstanding:
Basic 58.7 59.7 60.4
=========================================================================================================
Diluted 58.7 61.2 62.1
=========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 13
AGCO CORPORATION
CONSOLIDATED BALANCE SHEETS
IN MILLIONS, EXCEPT SHARE AMOUNTS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 19.6 $ 15.9
Accounts and notes receivable, net 758.2 1,016.3
Inventories, net 561.1 671.6
Other current assets 77.2 86.7
- -------------------------------------------------------------------------------------------------------------
Total current assets 1,416.1 1,790.5
Property, plant and equipment, net 310.8 417.6
Investments in affiliates 93.6 95.2
Other assets 140.1 76.6
Intangible assets, net 312.6 370.5
- -------------------------------------------------------------------------------------------------------------
Total assets $2,273.2 $2,750.4
=============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 244.2 $ 287.0
Accrued expenses 408.2 428.0
Other current liabilities 29.8 45.6
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 682.2 760.6
Long-term debt 691.7 924.2
Postretirement health care benefits 25.4 24.5
Other noncurrent liabilities 44.8 59.0
- -------------------------------------------------------------------------------------------------------------
Total liabilities 1,444.1 1,768.3
- -------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Common stock; $0.01 par value, 150,000,000 shares authorized, 59,579,559
and 59,535,921 shares issued and outstanding in 1999 and 1998, respectively 0.6 0.6
Additional paid-in capital 427.7 427.3
Retained earnings 621.9 635.8
Unearned compensation (5.1) (11.1)
Accumulated other comprehensive income (216.0) (70.5)
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 829.1 982.1
- -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,273.2 $2,750.4
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 14
AGCO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
IN MILLIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (11.5) $ 60.6 $ 168.7
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss, net of taxes -- -- 2.1
Depreciation and amortization 55.8 57.6 49.4
Amortization of intangibles 14.8 13.2 12.1
Amortization of unearned compensation 6.2 8.9 10.5
Equity in net earnings of affiliates, net of cash received 2.4 (3.3) (12.6)
Deferred income tax provision (benefit) (47.2) (22.4) 53.4
Loss on write-down of property, plant and equipment 14.9 -- --
Changes in operating assets and liabilities, net of effects
from purchase/sale of businesses:
Accounts and notes receivable, net 194.3 17.7 (94.7)
Inventories, net 72.1 (17.3) (100.4)
Other current and noncurrent assets (20.3) (1.2) (10.0)
Accounts payable (38.5) (87.7) 25.5
Accrued expenses (3.5) (15.0) (1.3)
Other current and noncurrent liabilities (5.8) 0.1 (2.7)
- ------------------------------------------------------------------------------------------------------------------
Total adjustments 245.2 (49.4) (68.7)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 233.7 11.2 100.0
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (44.2) (61.0) (72.1)
Proceeds from sale/leaseback of property 18.7 -- --
Sale/(purchase) of businesses, net 6.0 (60.6) (289.2)
Investments in unconsolidated affiliates (1.1) -- --
- ------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (20.6) (121.6) (361.3)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from long-term debt 536.1 984.4 932.2
Repayments of long-term debt (740.8) (798.9) (813.8)
Payment of debt issuance costs -- -- (3.5)
Proceeds from issuance of common stock -- 0.4 142.2
Repurchases of common stock -- (88.1) --
Dividends paid on common stock (2.4) (2.4) (2.5)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (207.1) 95.4 254.6
- ------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (2.3) (0.3) (3.8)
- ------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 3.7 (15.3) (10.5)
Cash and cash equivalents, beginning of period 15.9 31.2 41.7
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 19.6 $ 15.9 $ 31.2
==================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 15
AGCO CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
IN MILLIONS, EXCEPT SHARE AMOUNTS
<TABLE>
<CAPTION>
Common Stock Additional Cumulative Total Compre-
------------------- Paid-In Retained Unearned Translation Stockholders' hensive
Shares Amount Capital Earnings Compensation Adjustment Equity Income
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 57,260,151 $ 0.6 $ 360.1 $ 411.4 $ (17.8) $ 20.3 $ 774.6
Net income -- -- -- 168.7 -- -- 168.7 $ 168.7
Issuance of common stock,
net of offering expenses 5,175,000 -- 140.4 -- -- -- 140.4
Issuance of restricted stock 373,017 -- 12.7 -- (12.7) -- --
Stock options exercised 164,255 -- 1.8 -- -- -- 1.8
Common stock dividends
($0.04 per common share) -- -- -- (2.5) -- -- (2.5)
Amortization of unearned
compensation -- -- -- -- 10.5 -- 10.5
Change in cumulative
translation adjustment -- -- -- -- -- (101.9) (101.9) (101.9)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 62,972,423 0.6 515.0 577.6 (20.0) (81.6) 991.6 66.8
========
Net income -- -- -- 60.6 -- -- 60.6 60.6
Repurchases of common stock (3,487,200) -- (88.1) -- -- -- (88.1)
Stock options exercised 50,698 -- 0.4 -- -- -- 0.4
Common stock dividends
($0.04 per common share) -- -- -- (2.4) -- -- (2.4)
Amortization of unearned
compensation -- -- -- -- 8.9 -- 8.9
Change in cumulative
translation adjustment -- -- -- -- -- 11.1 11.1 11.1
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 59,535,921 0.6 427.3 635.8 (11.1) (70.5) 982.1 71.7
========
Net loss -- -- -- (11.5) -- -- (11.5) (11.5)
Issuance of restricted stock 26,500 -- 0.2 -- (0.2) -- --
Stock options exercised 17,138 -- 0.2 -- -- -- 0.2
Common stock dividends
($0.04 per common share) -- -- -- (2.4) -- -- (2.4)
Amortization of unearned
compensation -- -- -- -- 6.2 -- 6.2
Change in cumulative
translation adjustment -- -- -- -- -- (145.5) (145.5) (145.5)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 59,579,559 $ 0.6 $ 427.7 $ 621.9 $ (5.1) $ (216.0) $ 829.1 $ (157.0)
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 16
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
AGCO Corporation ("AGCO" or the "Company") is a leading manufacturer and
distributor of agricultural equipment and related replacement parts throughout
the world. The Company sells a full range of agricultural equipment, including
tractors, combines, hay tools, sprayers, forage equipment and implements. The
Company's products are widely recognized in the agricultural equipment industry
and are marketed under the following brand names: AGCO Allis, Massey Ferguson,
Hesston, White, GLEANER, New Idea, AGCOSTAR, Landini (North America), Tye,
Farmhand, Glencoe, Deutz (South America), Fendt, Spra-Coupe and Willmar. The
Company distributes its products through a combination of approximately 8,200
independent dealers, distributors, associates and licensees. In addition, the
Company provides retail financing in North America, the United Kingdom, France,
Germany, Spain and Brazil through its retail finance joint ventures with
Cooperative Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" (the
"Retail Finance Joint Ventures").
BASIS OF PRESENTATION
The consolidated financial statements represent the consolidation of all
majority owned companies. The Company records all affiliate companies
representing a 20%-50% ownership using the equity method of accounting. Other
investments representing an ownership of less than 20% are recorded at cost. All
significant intercompany transactions 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. 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 U.S. currency in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 52, "Foreign Currency Translation." Assets and
liabilities are translated to U.S. dollars at period-end exchange rates. Income
and expense items are translated at average rates of exchange prevailing during
the period. Translation adjustments are included in "Accumulated other
comprehensive income" in 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 U.S. dollar with
adjustments resulting from the translation of monetary assets and liabilities
reflected in the accompanying consolidated statements of income.
For 1997, the Company accounted for its subsidiary in Brazil by applying the
highly inflationary economy provisions of SFAS No. 52, where the U.S. dollar is
substituted as the functional currency. For the years ended December 31, 1999
and 1998, the Company ceased the application of highly inflationary accounting
of its Brazilian subsidiary and established the functional currency as the
Brazilian real.
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.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of three months
or less to be cash equivalents.
32
<PAGE> 17
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, 1999 and 1998 were as follows (in
millions):
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------
<S> <C> <C>
Sales incentive discounts $53.6 $ 58.4
Doubtful accounts 43.0 49.4
- --------------------------------------------------
$96.6 $107.8
==================================================
</TABLE>
The Company occasionally transfers certain accounts receivable to various
financial institutions. The Company records such transfers as sales of accounts
receivable when it is considered to have surrendered control of such receivables
under the provisions of SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities."
INVENTORIES
Inventories are valued at the lower of cost or market using the first-in,
first-out method. 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.
Inventory balances at December 31, 1999 and 1998 were as follows (in
millions):
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 248.4 $ 271.2
Repair and replacement parts 229.3 256.7
Work in process, production parts
and raw materials 154.6 222.6
- -----------------------------------------------------------------------------------
Gross inventories 632.3 750.5
Allowance for surplus and obsolete inventories (71.2) (78.9)
- -----------------------------------------------------------------------------------
Inventories, net $ 561.1 $ 671.6
===================================================================================
</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, three
to 15 years for machinery and equipment and three to 10 years for furniture and
fixtures. Expenditures for maintenance and repairs are charged to expense as
incurred.
Property, plant and equipment at December 31, 1999 and 1998 consisted of the
following (in millions):
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Land $ 40.0 $ 52.2
Buildings and improvements 101.3 139.5
Machinery and equipment 263.1 321.3
Furniture and fixtures 47.4 55.9
- ------------------------------------------------------------------------------
Gross property, plant and equipment 451.8 568.9
Accumulated depreciation and amortization (141.0) (151.3)
- ------------------------------------------------------------------------------
Property, plant and equipment, net $ 310.8 $ 417.6
==============================================================================
</TABLE>
INTANGIBLE ASSETS
Intangible assets at December 31, 1999 and 1998 consisted of the following (in
millions):
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------
<S> <C> <C>
Goodwill $ 284.4 $ 330.1
Trademarks 66.0 66.0
Other 4.0 4.2
Accumulated amortization (41.8) (29.8)
- -------------------------------------------------------------
Intangible assets, net $ 312.6 $ 370.5
=============================================================
</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.
Goodwill and accumulated amortization are shown net of the excess of net assets
over cost ("negative goodwill") of $23.2 million for both 1999 and 1998 and its
related accumulated amortization of $21.6 million and $19.5 million for 1999 and
1998, respectively. The Company also assigned values to certain acquired
trademarks which are being amortized to income on a straight-line basis over 40
years. The net amortization expense included in other expense, net in the
accompanying consolidated statements of income was $14.8 million, $13.2 million
and $12.1 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
The Company periodically reviews the carrying values assigned to goodwill and
other intangible assets based on expectations of future cash flows and operating
income generated by the underlying tangible assets.
33
<PAGE> 18
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCRUED EXPENSES
Accrued expenses at December 31, 1999 and 1998 consisted of the following (in
millions):
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Reserve for volume discounts and
sales incentives $ 88.2 $ 93.8
Warranty reserves 66.1 79.4
Accrued employee compensation and benefits 49.9 55.7
Accrued taxes 76.9 50.1
Other 127.1 149.0
- -----------------------------------------------------------------------------
$ 408.2 $ 428.0
=============================================================================
</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 accrues for future warranty costs at the time of sale based on
historical warranty experience.
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 1997, the Company refinanced its revolving credit facility and recorded an
extraordinary loss of $2.1 million, net of taxes of $1.4 million, for the
write-off of unamortized debt costs related to the revolving credit facility
existing at the time of refinancing.
NET INCOME PER COMMON SHARE
The computation, presentation and disclosure requirements for earnings per share
are presented in accordance with SFAS No. 128, "Earnings Per Share." Basic
earnings per common share is computed by dividing net income by the weighted
average number of common shares outstanding during each period. Diluted earnings
per share assumes exercise of outstanding stock options and vesting of
restricted stock into common stock during the periods outstanding when the
effects of such assumptions are dilutive.
A reconciliation of net income (loss) and the weighted average number of
common and common equivalent shares outstanding used to calculate basic and
diluted net income (loss) per common share for the years ended December 31,
1999, 1998 and 1997 is as follows (in millions, except per share data):
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic Earnings Per Share
Weighted average number of
common shares outstanding 58.7 59.7 60.4
========================================================================================
Income (loss) before
extraordinary loss $ (11.5) $ 60.6 $ 170.8
Extraordinary loss -- -- (2.1)
- ----------------------------------------------------------------------------------------
Net income (loss) $ (11.5) $ 60.6 $ 168.7
========================================================================================
Net income (loss) per common share:
Income (loss) before
extraordinary loss $ (0.20) $ 1.01 $ 2.82
Extraordinary loss -- -- (0.03)
- ----------------------------------------------------------------------------------------
Net income (loss) per share $ (0.20) $ 1.01 $ 2.79
========================================================================================
Diluted Earnings Per Share
Weighted average number of
common shares outstanding 58.7 59.7 60.4
Shares issued upon assumed
vesting of restricted stock -- 1.3 1.4
Shares issued upon assumed exercise
of outstanding stock options -- 0.2 0.3
- ----------------------------------------------------------------------------------------
Weighted average number
of common and common
equivalent shares outstanding 58.7 61.2 62.1
========================================================================================
Income (loss) before
extraordinary loss $ (11.5) $ 60.6 $ 170.8
Extraordinary loss -- -- (2.1)
- ----------------------------------------------------------------------------------------
Net income (loss) $ (11.5) $ 60.6 $ 168.7
========================================================================================
Net income (loss) per
common share:
Income (loss) before
extraordinary loss $ (0.20) $ 0.99 $ 2.74
Extraordinary loss -- -- (0.03)
- ----------------------------------------------------------------------------------------
Net income (loss) $ (0.20) $ 0.99 $ 2.71
========================================================================================
</TABLE>
COMPREHENSIVE INCOME
The Company reports comprehensive income, defined as the total of net income and
all other nonowner changes in equity and the components thereof in the
Consolidated Statements of Stockholders' Equity. The cumulative translation
adjustment is the sole component of "Accumulated other comprehensive income" in
the Consolidated Balance Sheets.
34
<PAGE> 19
FINANCIAL INSTRUMENTS
The carrying amounts reported in the Company's Consolidated Balance Sheets for
"Cash and cash equivalents," "Accounts and notes receivable" and "Accounts
payable" 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 6) approximates fair value based on
the borrowing rates currently available to the Company for loans with similar
terms and average maturities. At December 31, 1999, the estimated fair value of
the Company's 8.5% Senior Subordinated Notes (Note 6), based on its listed
market value, was $230.4 million compared to the carrying value of $248.5
million.
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. At
December 31, 1999 and 1998, the Company had foreign exchange forward contracts
with gross notional amounts of $348.2 million and $429.1 million, respectively.
Gains and losses on foreign exchange forward contracts are deferred and
recognized in income in the same period as the hedged transaction. As such, the
Company has foreign forward exchange contracts with a market value loss of
approximately $7.3 million at December 31, 1999. These 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.
The Company entered into an interest rate swap contract to further minimize
the effect of potential interest rate increases on floating rate debt in a
rising interest rate environment. At December 31, 1999, the Company had an
interest rate swap contract outstanding with a notional amount of $94.3 million.
This contract has the effect of converting a portion of the Company's floating
rate indebtedness under its revolving credit facility (Note 6) to a fixed
interest rate of 5.1%. The interest rate swap contract expires on December 31,
2001. The fair value of the Company's interest rate swap agreement is the
estimated amount that the Company would receive or pay to terminate the
agreements at the reporting date, taking into account interest and currency
rates. At December 31, 1999, the Company estimates that the interest rate swap
agreement has a market value of approximately $1.1 million. The Company
anticipates holding the interest rate swap agreement through maturity.
The notional amounts of foreign exchange forward contracts and the interest
rate swap contract 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
contracts. The credit and market risks under these contracts are not considered
to be significant.
ACCOUNTING CHANGES
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition." The SAB does
not change existing accounting literature on revenue recognition, but rather
explains the SEC staff's general framework for revenue recognition. SAB No. 101
states that changes in accounting to apply the guidance in SAB No. 101 may be
accounted for as a change in accounting principle and must be recorded in the
first quarter of 2000. The Company is currently reviewing its revenue
recognition policy and does not expect the adoption of SAB No. 101 to have a
material impact on the Company's results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in a derivative's
fair value be recognized currently in earnings unless specific hedge accounting
criteria are met. The Company will be required to adopt the new statement on
January 1, 2001. The Company has not yet quantified the financial impact of
adopting SFAS No. 133 and has not determined the method of adoption. However,
SFAS No. 133 could increase the volatility in earnings and other comprehensive
income.
Effective December 31, 1998, the Company adopted SFAS No. 132, "Employer's
Disclosures About Pensions and Other Postretirement Benefits," which revises
disclosure requirements related to the Company's employee benefit plans and
postretirement benefits (Note 7), and SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which revises disclosure requirements
related to segment reporting (Note 11). SFAS No. 132 and SFAS No. 131 require
disclosure only; therefore, their adoption had no impact on the Company's
financial position or results of operations.
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which requires disclosures regarding the Company's
comprehensive income defined as the total of net income and all other nonowner
changes in equity. SFAS No. 130 requires disclosure only; therefore, its
adoption had no impact on the Company's financial position or results of
operations.
35
<PAGE> 20
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
The Company completed several acquisitions in 1998 and 1997 which were primarily
financed with borrowings under the Company's revolving credit facility (Note 6).
In most cases, the Company acquired assets and assumed liabilities consisting
primarily of accounts receivable, inventories, property, plant and equipment,
trademarks, trade names and technology, accounts payable and accrued
liabilities. The results of operations for the Company's acquisitions are
included in the Company's consolidated financial statements as of and from the
respective dates of acquisition.
Effective October 1, 1998, the Company acquired the net assets of the Willmar
product line, a brand of agricultural self-propelled sprayers, spreaders and
loaders, sold primarily in North America (the "Willmar Acquisition") for
approximately $33.0 million. Effective July 1, 1998, the Company acquired
certain assets related to the Spra-Coupe product line, a brand of agricultural
self-propelled sprayers sold primarily in North America, for approximately $37.2
million (the "Spra-Coupe Acquisition").
On December 4, 1997, the Company acquired the remaining 68% of Dronningborg
Industries a/s ("Dronningborg") for approximately $22.0 million (the
"Dronningborg Acquisition"). Prior to the acquisition, the Company owned 32% of
Dronningborg which manufactured combine harvesters sold exclusively to the
Company for sale under the Massey Ferguson brand name. Effective January 1,
1997, the Company acquired Xaver Fendt GmbH & Co. KG ("Fendt") for approximately
$283.5 million plus approximately $38.3 million of assumed working capital debt
(the "Fendt Acquisition"). Fendt's primary business is the manufacture and
distribution of tractors through a network of independent agricultural
cooperatives, dealers and distributors in Germany and throughout Europe and
Australia. Effective December 31, 1997, the Company sold Fendt's caravan and
motor home business for approximately $10.0 million.
The above acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion ("APB") 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 Fendt, Spra-Coupe and Willmar Acquisitions
included liabilities associated with certain costs to integrate the acquired
businesses into the Company's operations. These costs related to the
consolidation of certain acquired manufacturing operations into existing Company
facilities and the integration of certain sales and marketing functions. As of
December 31, 1999, the Company had established liabilities totaling $10.5
million for employee severance and relocation and other integration costs and
had incurred $6.1 million of expenses charged against these liabilities.
DISPOSITIONS
Effective February 5, 1999, the Company sold its manufacturing plant in Haedo,
Argentina (the "Haedo Sale") for approximately $19.0 million. The Company
received $12.3 million of the purchase price in December 1998 in the form of a
deposit and received the remaining balance in December 1999. The Haedo Sale
included property, plant and equipment at the facility in addition to the
transfer of manufacturing hourly and salaried employees. The Haedo Sale had no
material impact to the Company's 1999 results of operations.
3. NONRECURRING EXPENSES
In the fourth quarter of 1999, the Company recorded nonrecurring expenses of
$24.5 million, or $0.26 per share on a diluted basis, related to the planned
closure of its Coldwater, Ohio; Lockney, Texas; and Noetinger, Argentina
manufacturing facilities. The majority of production in these facilities will be
relocated to existing Company facilities or outsourced. The Coldwater, Ohio
facility was permanently closed in 1999 and the Lockney, Texas and Noetinger,
Argentina are planned to close in 2000. The Company believes that the closure of
these facilities will not have a significant impact on 2000 revenues. The
components of the nonrecurring charge are summarized in the following table (in
millions):
<TABLE>
<CAPTION>
Balance at
Nonrecurring Expenses December 31,
Expense Incurred 1999
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Employee severance $ 1.9 $0.5 $1.4
Facility closure costs 7.7 0.9 6.8
Write-down of property,
plant and equipment 14.9 14.9 --
- ----------------------------------------------------------------------------
$24.5 $16.3 $8.2
============================================================================
</TABLE>
The $1.9 of employee severance costs relate to the termination of
approximately 680 employees in the Cold-water, Ohio; Lockney, Texas; and
Noetinger, Argentina facilities of which approximately 490 employees had been
terminated as of December 31, 1999. The $7.7 million of facility closure costs
include employee and other exit costs to be incurred after operations cease in
addition to non-cancelable operating lease obligations. The $14.9 million
write-down of property, plant and equipment represents the impairment of assets
resulting from the facility closures. The write-down was based on the estimated
fair value of the assets compared to their carrying value.
36
<PAGE> 21
The results of operations for 1998 included nonrecurring expenses of $40.0
million, or $0.41 per share on a diluted basis. The nonrecurring expenses
primarily related to severance, pension and postretirement benefit expense and
related costs associated with reductions in the Company's worldwide permanent
workforce. All 1,400 employees identified for termination were terminated as of
December 31, 1999. Of the $40.0 million total expense, $34.9 million had been
incurred as of December 31, 1999.
The results of operations for 1997 included nonrecurring expenses of $18.2
million, or $0.19 per share on a diluted basis. These nonrecurring expenses
included $15.0 million related to the restructuring of the Company's European
operations and certain costs associated with the integration of the Company's
Argentina and Fendt operations. The nonrecurring expenses for 1997 also included
$3.2 million related to executive severance costs. The costs included for these
restructuring and integration activities in 1997 primarily related to the
centralization and rationalization of certain manufacturing, selling and
administrative functions in addition to the rationalization of a certain portion
of the Company's European dealer network. Of the $18.2 million total expense,
$13.7 million had been incurred as of December 31, 1999.
4. INVESTMENTS IN AFFILIATES
At December 31, 1999 and 1998, the Company's investments in affiliates primarily
consisted of (i) the Retail Finance Joint Ventures, (ii) the Company's 50%
investments in manufacturing joint ventures with various unrelated manufacturers
to produce hay and forage equipment in North America, driveline assemblies in
Europe, and engines in South America and (iii) certain other minority
investments in farm equipment manufacturers and licensees.
Investments in affiliates as of December 31, 1999 and 1998 were as follows
(in millions):
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------
<S> <C> <C>
Retail Finance Joint Ventures $63.0 $61.2
Manufacturing joint ventures 21.5 24.2
Other 9.1 9.8
- -----------------------------------------------------
$93.6 $95.2
=====================================================
</TABLE>
The Company's equity in net earnings of affiliates for 1999, 1998 and 1997
were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------
<S> <C> <C> <C>
Retail Finance Joint Ventures $11.0 $11.4 $10.9
Other (0.5) 2.4 1.7
- -----------------------------------------------------------------
$10.5 $13.8 $12.6
=================================================================
</TABLE>
The manufacturing joint ventures of the Company primarily sell their
products to the joint venture partners at prices which result in operating at or
near breakeven on an annual basis.
Summarized combined financial information of the Retail Finance Joint
Ventures as of and for the years ended December 31, 1999 and 1998 were as
follows (in millions):
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
Total assets $ 1,402.8 $ 1,340.2
Total liabilities 1,276.5 1,220.8
Partner's equity 126.3 119.4
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
Revenues $ 144.1 $ 136.6
Costs 109.3 102.2
- ---------------------------------------------------------------------
Income before income taxes $ 34.8 $ 34.4
=====================================================================
</TABLE>
5. INCOME TAXES
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." 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
affiliates and extraordinary loss were as follows for the years ended December
31, 1999, 1998 and 1997 (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $ (96.9) $ (9.4) $ 51.7
Foreign 64.7 83.7 194.0
- ---------------------------------------------------------------------------------------
Income (loss) before income taxes,
equity in net earnings of affiliates
and extraordinary loss $ (32.2) $ 74.3 $ 245.7
=======================================================================================
</TABLE>
37
<PAGE> 22
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision (benefit) for income taxes by location of the taxing
jurisdiction for the years ended December 31, 1999, 1998 and 1997 consisted of
the following (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States:
Federal $ (3.3) $ 0.6 $ (2.6)
State -- 0.2 (0.8)
Foreign 40.3 49.1 37.5
- ------------------------------------------------------------------------
Total current 37.0 49.9 34.1
- ------------------------------------------------------------------------
Deferred:
United States:
Federal (31.2) (6.1) 19.0
State (4.1) (0.8) 2.6
Foreign (11.9) (15.5) 31.8
- ------------------------------------------------------------------------
Total deferred (47.2) (22.4) 53.4
- ------------------------------------------------------------------------
Provision (benefit)
for income taxes $(10.2) $27.5 $ 87.5
========================================================================
</TABLE>
Certain foreign operations of the Company are subject to United States
as well as foreign income tax regulations. Therefore, the preceding sources of
income (loss) 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%) to the provision (benefit) for income taxes
reflected in the Consolidated Statements of Income for the years ended December
31, 1999, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision (benefit) for income
taxes at United States federal
statutory rate of 35% $(11.3) $26.0 $86.0
State and local income taxes,
net of federal income tax benefit (3.9) (0.4) 1.8
Taxes on foreign income which
differ from the United States
statutory rate (0.7) (0.3) (0.5)
Foreign losses with no tax benefit 6.2 4.3 1.8
Benefit of foreign sales corporation (0.5) (1.3) (1.0)
Other -- (0.8) (0.6)
- -----------------------------------------------------------------------------------
$(10.2) $27.5 $87.5
===================================================================================
</TABLE>
The significant components of the net deferred tax assets at December 31,
1999 and 1998 were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards $116.9 $ 63.6
Sales incentive discounts 18.8 15.5
Inventory valuation reserves 10.1 13.1
Postretirement benefits 8.2 7.2
Other 76.3 77.3
Valuation allowance (78.8) (75.0)
- ---------------------------------------------------------------------------------
Total deferred tax assets 151.5 101.7
- ---------------------------------------------------------------------------------
Deferred Tax Liabilities:
Tax over book depreciation 46.2 35.9
Tax over book amortization of goodwill 18.1 21.9
Other 5.0 11.8
- ---------------------------------------------------------------------------------
Total deferred tax liabilities 69.3 69.6
- ---------------------------------------------------------------------------------
Net deferred tax assets 82.2 32.1
Less: Current portion of deferred tax asset (22.3) (22.9)
- ---------------------------------------------------------------------------------
Noncurrent net deferred tax assets $ 59.9 $ 9.2
=================================================================================
</TABLE>
At December 31, 1999, the Company has recorded a net deferred tax asset of
$82.2 million, which is included in "Other current assets" and "Other assets" in
the Consolidated Balance Sheet. Realization of the asset is dependent on
generating sufficient taxable income in future periods. Management believes that
it is more likely than not that the deferred tax asset will be realized. As
reflected in the preceding table, the Company established a valuation allowance
of $78.8 million and $75.0 million as of December 31, 1999 and 1998,
respectively. The majority of the valuation allowance relates to net operating
loss carryforwards in certain foreign entities where there is an uncertainty
regarding their realizability. The Company has net operating loss carryforwards
of $307.5 million as of December 31, 1999, with expiration dates as follows:
2000 - $29.7 million, 2001 - $25.9 million, 2002 - $14.9 million, 2003 - $16.5
million, 2004 - $38.4 million and thereafter and unlimited - $182.1 million.
The Company paid income taxes of $6.1 million, $87.8 million and $42.0 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
6. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1999 and 1998 (in
millions):
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------
<S> <C> <C>
Revolving credit facility $431.4 $661.2
Senior Subordinated Notes 248.5 248.3
Other long-term debt 11.8 14.7
- ---------------------------------------------------
Total long-term debt $691.7 $924.2
===================================================
</TABLE>
38
<PAGE> 23
In January 1997, the Company established a five-year unsecured revolving
credit facility (the "Revolving Credit Facility"). At December 31, 1999, the
lending commitment under the Revolving Credit Facility was $1.0 billion.
Aggregate borrowings outstanding under the Revolving 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 Revolving Credit Facility primarily at LIBOR
plus an applicable margin, as defined. At December 31, 1999, interest rates on
the outstanding borrowings, including the effect of the interest rate swap
contract (Note 1), ranged from 4.8% to 8.5%, and the weighted average interest
rate during 1999 was 5.3%. The Revolving 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, a fixed charge coverage ratio and a ratio of debt
to cash flow, as defined. At December 31, 1999, $431.4 million was outstanding
under the Revolving Credit Facility and available borrowings, based on the
lending commitment of $1.0 billion, were $568.3 million, subject to the accounts
receivable and inventory borrowing base requirements.
In 1996, the Company issued $250.0 million of 8.5% 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 restricting the incurrence of
indebtedness and the making of certain restrictive payments, including
dividends.
At December 31, 1999, the aggregate scheduled maturities of long-term debt
are as follows (in millions):
<TABLE>
<S> <C>
2001 $ 4.9
2002 432.3
2003 1.0
2004 1.0
2005 and thereafter 252.5
--------------------------------
$691.7
================================
</TABLE>
Cash payments for interest were $71.8 million, $77.4 million and $70.9
million for the years ended December 31, 1999, 1998 and 1997, 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, 1999, outstanding letters of credit totaled $8.4
million, of which $0.3 million were issued under the Revolving Credit Facility.
In January 2000, the Company entered into a $250 million asset backed
securitization facility whereby certain U.S. wholesale accounts receivable are
sold through a wholly-owned special purpose subsidiary to a third party. Funding
under the securitization facility is provided on a revolving basis and is
dependent upon the level of U.S. dealer wholesale receivables eligible to be
sold under the facility. The Company initially funded $200 million under the
securitization facility which was used to reduce outstanding borrowings under
the Revolving Credit Facility. The $1.0 billion lending commitment under the
Revolving Credit Facility was permanently reduced by the $200 million initial
proceeds received from the securitization facility and will be further reduced
by any additional funding received under the securitization facility. This
transaction had no impact on the financial statements as of and for the year
ended December 31, 1999.
7. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering certain employees
principally in the United States, the United Kingdom and Germany. The Company
also provides certain postretirement health care and life insurance benefits for
certain employees principally in the United States.
Net annual pension and postretirement cost and the measurement assumptions
for the plans for the years ended December 31, 1999, 1998 and 1997 are set forth
below (in millions):
<TABLE>
<CAPTION>
PENSION BENEFITS 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 8.0 $ 8.4 $ 6.5
Interest cost 25.9 25.1 24.4
Expected return on plan assets (27.9) (29.7) (27.2)
Amortization of prior service cost 0.5 0.5 0.5
Amortization of net loss 1.1 -- --
Special termination benefits -- 6.7 --
- -------------------------------------------------------------------------------------------
Net annual pension costs $ 7.6 $ 11.0 $ 4.2
===========================================================================================
Weighted average discount rate 6.4% 6.1% 7.0%
Weighted average expected long-
term rate of return on plan assets 7.3% 7.6% 8.0%
Rate of increase in future
compensation 4.0% 4.0% 4.0%
</TABLE>
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS 1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 0.9 $ 0.9 $ 0.8
Interest cost 1.5 1.3 1.2
Amortization of transition
and prior service cost (0.1) (0.6) (0.6)
Amortization of unrecognized net gain (0.1) (0.8) (0.7)
Special termination benefits -- 0.5 --
- -------------------------------------------------------------------------------------------
Net annual postretirement costs $ 2.2 $ 1.3 $ 0.7
- -------------------------------------------------------------------------------------------
Weighted average discount rate 7.8% 7.0% 7.3%
===========================================================================================
</TABLE>
39
<PAGE> 24
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth reconciliations of the changes in benefit
obligations, plan assets and funded status as of December 31, 1999 and 1998 (in
millions):
<TABLE>
<CAPTION>
Pension Postretirement
CHANGE IN Benefits Benefits
BENEFIT OBLIGATION 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligation at
beginning of year $ 443.4 $ 364.0 $ 22.3 $ 18.9
Service cost 8.0 8.4 0.9 0.9
Interest cost 25.9 25.1 1.5 1.3
Plan participant
contributions 2.5 3.0 -- --
Actuarial (gain) loss 21.2 50.6 (2.1) 1.3
Amendments -- -- -- 0.5
Curtailments -- -- -- 0.2
Special termination benefits -- 6.7 -- 0.5
Benefits paid (27.7) (18.6) (1.3) (1.3)
Foreign currency
exchange rate changes (12.2) 4.2 -- --
- ---------------------------------------------------------------------------------------------------
Benefit obligation
at end of year $ 461.1 $ 443.4 $ 21.3 $ 22.3
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Pension Postretirement
CHANGE IN Benefits Benefits
PLAN ASSETS 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets
at beginning of year $ 384.7 $ 352.5 $ -- $ --
Actual return of plan assets 59.1 33.3 -- --
Employer contributions 16.7 11.6 1.3 1.3
Plan participant
contributions 2.5 3.0 -- --
Benefits paid (27.7) (18.6) (1.3) (1.3)
Foreign currency
exchange rate changes (8.5) 2.9 -- --
- ---------------------------------------------------------------------------------------------------
Fair value of plan assets
at end of year $ 426.8 $ 384.7 $ -- $ --
===================================================================================================
Funded status $ (34.3) $ (58.7) $ (21.3) $ (22.3)
Unrecognized net obligation 0.7 0.9 0.4 0.4
Unrecognized net loss (gain) 46.7 58.0 (4.9) (2.8)
Unrecognized prior
service cost 1.7 2.2 0.4 0.2
- ---------------------------------------------------------------------------------------------------
Net amount recognized $ 14.8 $ 2.4 $ (25.4) $ (24.5)
===================================================================================================
Amounts recognized
in Consolidated
Balance Sheet:
Prepaid benefit cost $ 31.4 $ 20.5 $ -- $ --
Accrued benefit liability (17.6) (19.4) (25.4) (24.5)
Intangible asset 1.0 1.3 -- --
- ---------------------------------------------------------------------------------------------------
Net amount recognized $ 14.8 $ 2.4 $ (25.4) $ (24.5)
===================================================================================================
</TABLE>
The aggregate projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were $417.8 million, $403.7 million and
$381.5 million, respectively, as of December 31, 1999 and $433.8 million, $420.5
million and $374.3 million, respectively, as of December 31, 1998.
For measuring the expected postretirement benefit obligation, a 8.25% health
care cost trend rate was assumed for 1999, decreasing 0.75% per year to 6.0% and
remaining at that level thereafter. For 1998, a 9.0% health care cost trend rate
was assumed. Changing the assumed health care cost trend rates by one percentage
point each year and holding all other assumptions constant would have the
following effect to service and interest cost and the accumulated postretirement
benefit obligation at December 31, 1999 (in millions):
<TABLE>
<CAPTION>
One One
percentage percentage
point point
increase decrease
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on service and interest cost $ 0.3 $ (0.2)
Effect on accumulated benefit obligation $ 2.1 $ (1.8)
</TABLE>
The Company maintains a separate defined contribution 401(k) savings plan
covering certain salaried employees in the United States. Under the plan, the
Company contributes a specified percentage of each eligible employee's
compensation. The Company contributed $1.5 million, $1.6 million and $1.7
million for the years ended December 31, 1999, 1998 and 1997, respectively.
8. COMMON STOCK
At December 31, 1999, the Company had 150.0 million authorized shares of common
stock with a par value of $0.01, with 59.6 million shares of common stock
outstanding, 0.7 million shares reserved for issuance under the Company's 1991
Stock Option Plan (Note 9), 0.1 million shares reserved for issuance under the
Company's Nonemployee Director Stock Incentive Plan (Note 9) and 2.3 million
shares reserved for issuance under the Company's Long-Term Incentive Plan (Note
9).
In December 1997, the Company's Board of Directors authorized the repurchase
of up to $150.0 million of its outstanding common stock. In 1998, the Company
repurchased approximately 3.5 million shares of its common stock at a cost of
approximately $88.1 million. In 1999, the Company did not repurchase any of its
common stock. The purchases are made through open market transactions, and the
timing and number of shares purchased depend on various factors, such as price
and other market conditions.
40
<PAGE> 25
In March 1997, the Company completed a public offering of 5.2 million shares
of its common stock (the "Offering"). The net proceeds to the Company from the
Offering were approximately $140.4 million, after deduction of underwriting
discounts and commissions and other expenses. The Company used the proceeds from
the Offering to reduce a portion of the borrowings outstanding under the
Revolving Credit Facility.
In April, 1994, the Company designated 300,000 shares of Junior Cumulative
Preferred Stock ("Junior Preferred Stock") in connection with the adoption of a
Stockholders' Rights Plan (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.
9. STOCK INCENTIVE PLANS
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
The Company's Nonemployee Director Stock Incentive Plan (the "Director Plan")
provides for restricted stock awards to nonemployee directors based on increases
in the price of the Company's common stock. 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, 1999, 72,500 shares have been awarded to plan participants
under the Director Plan, of which, 41,000 shares were earned and 21,500 shares
were vested.
LONG-TERM INCENTIVE PLAN
The Company's Long-Term Incentive Plan (the "LTIP") provides for restricted
stock awards to executives based on increases in the price of the Company's
common stock. 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, 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 $8.5
million, $12.0 million and $14.8 million for the years ended December 31, 1999,
1998 and 1997, respectively, consisting of amortization of the stock award and
the related cash bonus.
Additional information regarding the LTIP for the years ended December 31,
1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares awarded but not
earned at January 1 927,500 965,000 1,597,500
Shares awarded,
net of forfeitures 133,500 (37,500) (270,000)
Shares earned (15,000) -- (362,500)
- ----------------------------------------------------------------------------------------
Shares awarded but not
earned at December 31 1,046,000 927,500 965,000
Shares available for grant 1,234,000 1,367,500 1,330,000
- ----------------------------------------------------------------------------------------
Total shares reserved
for issuance 2,280,000 2,295,000 2,295,000
- ----------------------------------------------------------------------------------------
Shares vested during year 441,166 375,833 194,000
========================================================================================
</TABLE>
41
<PAGE> 26
AGCO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK OPTION PLAN
The Company's Stock Option Plan (the "Option Plan") provides for the granting of
nonqualified and incentive stock options to officers, employees, directors and
others. 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. In 1998, the Option Plan was amended to increase the number of
shares authorized for issuance by 1,600,000 shares.
Stock option transactions during the three years ended December 31, 1999,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding
at January 1 1,238,294 797,968 787,250
Options granted 701,700 586,700 193,900
Options exercised (17,138) (50,698) (164,255)
Options canceled (66,937) (95,676) (18,927)
- -------------------------------------------------------------------------------
Options outstanding
at December 31 1,855,919 1,238,294 797,968
- -------------------------------------------------------------------------------
Options available
for grant at
December 31 740,718 1,375,481 266,505
- -------------------------------------------------------------------------------
Option price ranges
per share:
Granted $ 11.00 $ 8.31-27.00 $ 31.25
Exercised 1.52-11.00 1.52-27.00 1.52-31.25
Canceled $14.63-31.25 $11.75-31.25 $14.63-31.25
Weighted average
option prices
per share:
Granted $ 11.00 $ 22.08 $ 31.25
Exercised 3.09 9.52 10.36
Canceled 23.15 23.78 21.68
Outstanding at
December 31 16.90 20.39 18.87
</TABLE>
At December 31, 1999, the outstanding options had a weighted average
remaining contractual life of approximately 8.3 years and there were 884,893
options currently exercisable with option prices ranging from $1.52 to $31.25
and with a weighted average exercise price of $17.46.
The Company accounts for all stock-based compensation awarded under the
Director Plan, the LTIP and the Option Plan as prescribed under APB No. 25,
"Accounting for Stock Issued to Employees" and also provides the disclosures
required under SFAS No. 123, "Accounting for Stock Based Compensation." ABP No.
25 requires no recognition of compensation expense for options granted under the
Option Plan. However, ABP No. 25 does require recognition of compensation
expense under the Director Plan and the LTIP.
For disclosure purposes only, under SFAS No. 123, the Company estimated the
fair value of grants under the Company's stock incentive plans using the
Black-Scholes pricing model. Based on this model, the weighted average fair
value of options granted under the Option Plan and the weighted average fair
value of awards granted under the Director Plan and the LTIP, including the
related cash bonus, were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Director Plan $ 13.61 $ 43.47 $ 39.96
LTIP * 12.13 -- --
Option Plan 7.07 12.18 15.75
</TABLE>
* There were no awards under the LTIP in 1998 or 1997.
The fair value of the grants and awards are 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.
Based on applying the provisions of SFAS No. 123, pro forma net income, net
income per common share and the assumptions under the Black-Scholes pricing
model were as follows (in millions, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (14.0) $ 57.4 $ 166.5
Net income (loss) per common
share - diluted $ (0.24) $ 0.94 $ 2.60
Weighted average assumptions
under Black-Scholes:
Expected life of options (years) 7.0 7.0 7.0
Risk free interest rate 5.9% 5.6% 6.1%
Expected volatility 61.0% 46.0% 35.0%
Expected dividend yield 0.4% 0.2% 0.1%
</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.
42
<PAGE> 27
10. COMMITMENTS AND CONTINGENCIES
The Company leases land, buildings, machinery, equipment and furniture under
various noncancelable operating lease agreements. At December 31, 1999, future
minimum lease payments under noncancelable operating leases were as follows (in
millions):
<TABLE>
<S> <C>
2000 $12.2
2001 11.1
2002 9.3
2003 8.0
2004 7.0
Thereafter 35.1
----------------------
$82.7
======================
</TABLE>
Total lease expense under noncancelable operating leases was $14.5 million,
$15.9 million and $16.8 million, for the years ended December 31, 1999, 1998 and
1997, respectively.
At December 31, 1999, the Company was obligated under certain circumstances
to purchase through the year 2002 up to $70.6 million of equipment upon
expiration of certain operating leases between Agricredit, the Company's retail
finance joint venture in North America, and end users. Management believes that
any losses which might be incurred on the resale of this equipment will not
materially impact the Company's financial position or results of operations.
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.
11. SEGMENT REPORTING
The Company has four geographic reportable segments: North America, South
America, Europe/Africa/Middle East and Asia/Pacific. Each segment distributes a
full range of agricultural equipment and related replacement parts. The
accounting policies of the segments are the same as described in the summary of
significant accounting policies. The Company evaluates segment performance based
on income from operations. Sales for each segment are based on the location of
the third-party customer. All intercompany transactions between segments have
been eliminated. The Company's selling, general and administrative expenses and
engineering expenses are charged to each segment based on the region where the
expenses are incurred. As a result, the components of operating income for one
segment may not be comparable to another segment. Segment results for 1999, 1998
and 1997 are as follows (in millions):
<TABLE>
<CAPTION>
Europe/Africa/
North America South America Middle East Asia/Pacific Consolidated
------------- ------------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1999
Net Sales $ 613.0 $197.1 $1,507.5 $ 95.7 $2,413.3
Income (loss) from operations (25.3) (14.1) 116.5 13.6 90.7
Depreciation and amortization 12.7 6.1 35.0 2.0 55.8
Assets 667.4 189.0 728.1 32.8 1,617.3
Capital expenditures 4.9 7.6 31.7 -- 44.2
1998
Net Sales $ 940.9 $ 315.3 $1,597.8 $ 87.4 $2,941.4
Income from operations 57.0 13.5 136.2 15.8 222.5
Depreciation and amortization 14.3 8.9 32.9 1.5 57.6
Assets 876.7 260.9 922.5 30.2 2,090.3
Capital expenditures 14.5 6.4 40.1 -- 61.0
1997
Net Sales $ 956.6 $ 334.3 $1,781.4 $ 152.1 $3,224.4
Income from operations 108.3 19.3 192.4 32.1 352.1
Depreciation and amortization 11.1 9.4 27.2 1.7 49.4
Assets 799.9 245.2 926.4 33.6 2,005.1
Capital expenditures 20.4 7.2 44.4 0.1 72.1
</TABLE>
43
<PAGE> 28
A reconciliation from the segment information to the consolidated balances
for income from operations and assets is set forth below (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Segment income from
operations $ 90.7 $ 222.5 $ 352.1
Restricted stock
compensation expense (8.5) (12.0) (14.8)
Nonrecurring expenses (24.5) (40.0) (18.2)
- -----------------------------------------------------------------------------------
Consolidated income from
operations $ 57.7 $ 170.5 $ 319.1
===================================================================================
Segment assets $1,617.3 $2,090.3 $2,005.1
Cash and cash equivalents 19.6 15.9 31.2
Receivables from affiliates 12.8 15.2 18.5
Investments in affiliates 93.6 95.2 87.6
Other current and
noncurrent assets 217.3 163.3 139.5
Intangible assets, net 312.6 370.5 339.0
- -----------------------------------------------------------------------------------
Consolidated total assets $2,273.2 $2,750.4 $2,620.9
===================================================================================
</TABLE>
Net sales by customer location for the years ended December 31, 1999, 1998
and 1997 were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales:
United States $ 479.8 $ 759.0 $ 738.5
Canada 92.1 142.4 182.6
Germany 439.5 449.3 470.5
France 315.2 321.5 347.8
United Kingdom and Ireland 137.4 122.2 179.5
Other Europe 480.4 540.3 614.6
South America 197.1 315.3 334.3
Middle East 97.5 115.8 105.7
Asia 48.4 36.7 87.8
Australia 47.3 50.7 64.3
Africa 37.5 48.7 63.3
Mexico, Central America
and Caribbean 41.1 39.5 35.5
- ---------------------------------------------------------------------------------
$2,413.3 $2,941.4 $3,224.4
=================================================================================
</TABLE>
Net sales by product for the years ended December 31, 1999, 1998 and 1997
were as follows (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Tractors $1,540.3 $1,838.8 $1,990.6
Combines 162.3 293.5 330.5
Other machinery 253.5 318.5 389.7
Replacement parts 457.2 490.6 513.6
- -----------------------------------------------------------------------
$2,413.3 $2,941.4 $3,224.4
=======================================================================
</TABLE>
44
<PAGE> 1
EXHIBIT 21.0
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OR JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION
- --------------------------------------------------------------------------------------------------------
<S> <C>
AGCO Corporation Delaware
AGCO AB Germany
AGCO Acceptance Corporation Delaware
AGCO Argentina SA Sweden
AGCO Australia, Ltd. Argentina
AGCO Canada, Ltd. Canada
AGCO Danmark AS Denmark
AGCO de Mexico SA de CV Mexico
AGCO do Brazil Brazil
AGCO Export Corp. Barbados
AGCO Farm Finance Corp. Delaware
AGCO France SA France
AGCO GmbH & Co. Germany
AGCO Holding BV Netherlands
AGCO Iberia SA Spain
AGCO International, Ltd. United Kingdom
AGCO Ltd. United Kingdom
AGCO Manufacturing Ltd. United Kingdom
AGCO Pension Trust Ltd. United Kingdom
AGCO Romania SRL Romania
AGCO SA United Kingdom
AGCO Services, Ltd. United Kingdom
AGCO Vertriebs GmbH Germany
AGCO Verwaltungs GmbH Germany
Agricredit Acceptance Canada, Ltd. Canada
Araus SA Argentina
Blue Corp. Delaware
Dania Finans A/S Denmark
Deutz SA Argentina
Dronningborg Industries AS Denmark
Eikmaskin AS Norway
Fendt GmbH Germany
Fendt Italiana GmbH Italy
Gleaner-Allis Company, Ltd. Delaware
Hesston Ventures Corp. Kansas
Indamo SA Argentina
Kemptener Maschinenfabrik GmbH Germany
Manufacturers Leasing Corp. Delaware
Massey Ferguson Corp. Delaware
Massey Ferguson de Mexico, SA de CV Mexico
Massey Ferguson Europa BV Netherlands
Massey Ferguson Executive Pension Trust Ltd. United Kingdom
Massey Ferguson SPA Italy
Massey Ferguson Staff Pension Trust Ltd. United Kingdom
Massey Ferguson Works Pension Trust Ltd. United Kingdom
Terramec SA Argentina
The Hesston Company, Ltd. Delaware
Wohungsbau GmbH Germany
</TABLE>
<PAGE> 1
EXHIBIT 23.0
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included (or incorporated by reference) in this Form 10-K into AGCO
Corporation's previously filed Registration Statements on Form S-8
(File No.33-63802, File No. 33-83104, File No. 33-91686 and File No. 333-04707).
Arthur Andersen LLP
Atlanta, Georgia
March 27, 2000
<PAGE> 1
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below, hereby constitutes and appoints John M. Shumejda, Patrick S.
Shannon and Stephen D. Lupton his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign the annual
report on Form 10-K of AGCO Corporation for the fiscal year ended December
31, 1999 and any or all amendments or supplements thereto, and to file the
same with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing necessary or appropriate to be done with respect to
the Form 10-K or any amendments or supplements thereto in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Date: March 20, 2000
/s/ Henry J. Claycamp /s/ Hamilton Robinson, Jr.
--------------------------------- ---------------------------------
Henry J. Claycamp Hamilton Robinson, Jr.
/s/ Wolfgang Deml /s/ Robert J. Ratliff
--------------------------------- ---------------------------------
Wolfgang Deml Robert J. Ratliff
/s/William H. Fike /s/ Wolfgang Sauer
--------------------------------- ---------------------------------
William H. Fike Wolfgang Sauer
/s/ Gerald B. Johanneson /s/ John M. Shumejda
--------------------------------- ---------------------------------
Gerald B. Johanneson John M. Shumejda
/s/ Anthony D. Loehnis
---------------------------------
Anthony D. Loehnis
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AGCO CORPORATION FOR THE TWELVE MONTHS ENDED DECEMBER
31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 20
<SECURITIES> 0
<RECEIVABLES> 758
<ALLOWANCES> 0
<INVENTORY> 561
<CURRENT-ASSETS> 1,416
<PP&E> 311
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,273
<CURRENT-LIABILITIES> 682
<BONDS> 692
0
0
<COMMON> 1
<OTHER-SE> 828
<TOTAL-LIABILITY-AND-EQUITY> 2,273
<SALES> 2,413
<TOTAL-REVENUES> 2,413
<CGS> 2,057
<TOTAL-COSTS> 2,057
<OTHER-EXPENSES> 45
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> (32)
<INCOME-TAX> (10)
<INCOME-CONTINUING> (12)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
