____________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-21220
ALAMO GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1621248
(State of incorporation) (I.R.S. Employer Identification Number)
1502 E. Walnut, Seguin, Texas 78155
(Address of principal executive offices)
(830) 379-1480
(Telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of 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 requirement for the past 90 days.
Yes X No ___
At July 31, 1998, 9,735,759 shares of common stock, $.10 par value, of the
Registrant were outstanding.
- - ----------------------------------------------------------------------------
Alamo Group Inc. and Subsidiaries
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Interim Condensed Consolidated
Financial Statements (Unaudited)
Interim Condensed Consolidated Statements of Income -
Three months and Six months ended June 30, 1998 and
June 30, 1997 3
Interim Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 4
Interim Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1998 and June 30, 1997 5
Notes to Interim Condensed Consolidated Financial Statements 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
PART II. OTHER INFORMATION
Item 1. None
Item 2. None
Item 3. None
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. None
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
---------------------- --------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- --------- -------- --------
Net sales .......... $ 60,392 $ 58,433 $109,119 $110,076
Cost of sales....... 44,192 41,864 81,571 80,771
------- ------- ------- -------
Gross profit ...... 16,200 16,569 27,548 29,305
Selling, general and
administrative expense.. 8,424 7,925 15,821 15,066
------- ------- ------- -------
Income from operations. 7,776 8,644 11,727 14,239
Interest expense ....... (742) (654) (1,454) (1,185)
Interest income ........ 142 91 316 222
Other income (net)...... 10 (61) (219) (55)
------- ------- ------- -------
Income before income
taxes ... 7,186 8,020 10,370 13,221
Provision for income taxes 2,714 2,830 3,972 4,753
------- ------- ------- -------
Net income ...... $ 4,472 $ 5,190 $ 6,398 $ 8,468
======= ======= ======== =======
Net income per common share:
Basic............ $ 0.46 $ 0.54 $ 0.66 $ 0.88
Diluted.......... $ 0.46 $ 0.54 $ 0.66 $ 0.88
Average common shares:
Basic............ 9,701 9,595 9,693 9,592
Diluted.......... 9,720 9,654 9,718 9,651
See accompanying notes.
3
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
June 30, December 31,
1998 1997
----------- ---------------
ASSETS
Current assets:
Cash and cash equivalents .... $ 293 $ 789
Accounts receivable .......... 59,608 42,165
Inventories .................. 71,329 65,752
Deferred income taxes ........ 2,288 2,288
Prepaid expenses ............. 1,352 2,152
----------- -------------
Total current assets ........ 134,870 113,146
Property, plant and equipment .. 54,005 51,693
Less: Accumulated depreciation (31,066) (29,216)
----------- -------------
22,939 22,477
Goodwill ....................... 12,107 12,632
Other assets ................... 4,880 7,869
----------- -------------
Total assets ................ $ 174,796 $ 156,124
=========== =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable ....... $ 13,961 $ 12,787
Income taxes payable ......... 3,981 266
Accrued liabilities .......... 8,152 6,096
Current maturities of
long-term debt ............... 449 727
----------- -------------
Total current liabilities ... 26,543 19,876
Long-term debt, net of current
maturities ..................... 36,023 28,617
Deferred income taxes .......... 1,378 1,366
Stockholders' equity:
Common stock, $.10 par value,
20,000,000 shares authorized;
9,735,759 and 9,684,874 issued
and outstanding at June 30,1998
and December 31, 1997, res-
pectively ..................... 974 968
Additional paid-in capital .... 50,506 50,395
Retained earnings ............. 59,199 54,835
Accumulated other comprehensive
income ........................ 173 67
----------- -------------
Total stockholders' equity ... 110,852 106,265
----------- -------------
Total liabilities and stock-
holders' equity .............. $ 174,796 $ 156,124
=========== =============
See accompanying notes.
4
Alamo Group Inc. and Subsidiaries
Interim Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended
-------------------------
June 30, June 30,
1998 1997
--------- ---------
Operating Activities
Net income ...................... $ 6,398 $ 8,468
Adjustment to reconcile
net income to net cash provided
(used) by operating activities:
Provision for doubtful accounts. 445 391
Depreciation ................... 1,917 1,857
Amortization ................... 689 704
Provision for deferred income
tax benefit .................... 11 11
Gain on sale of equipment ...... (4) (151)
Changes in operating assets and liabilities:
Accounts receivable ............ (17,808) (15,607)
Inventories .................... (5,523) (259)
Prepaid expenses and other assets 3,609 (1,435)
Trade accounts payable and
accrued liabilities ............ 3,204 8,473
Income taxes payable ........... 3,686 1,752
--------- ---------
Net cash provided (used) by oper-
ating activities (3,376) 4,204
Investing Activities
Purchase of property, plant and
equipment ...................... (2,482) (2,496)
Proceeds from sale of property,
plant and equipment ............ 160 184
--------- ---------
Net cash (used) by investing activities (2,322) (2,312)
Financing Activities
Net change in bank revolving
credit facility ................ 7,600 2,000
Principal payments on long-term
debt and capital leases ........ (494) (284)
Dividends paid .................. (2,034) (1,918)
Proceeds from sale of common stock 116 201
--------- ---------
Net cash provided (used) by
financing activities ............ 5,188 (1)
Effect of exchange rate changes
on cash ........................ 14 (153)
--------- ----------
Net change in cash and cash
equivalents .................... (996) 1,738
Cash and cash equivalents at
beginning of the period ........ 789 2,228
--------- ---------
Cash and cash equivalents at end
of the period .................. $ 293 $ 3,966
========= =========
Cash paid during the period for:
Interest ....................... $ 942 $ 752
Income taxes ................... $ 266 $ 2,706
See accompanying notes.
5
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial
Statements - (Unaudited)
June 30, 1998
1. Basis of Financial Statement Presentation
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operting results for the periods presented are not necessarily indicative of
the results that may be expected for the year ended December, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1997.
2 Accounts Receivable
Accounts Receivable is shown less allowance for doubtful accounts of
$2,140,000 and $1,840,000 at June 30, 1998 and December 31, 1997,
respectively.
3. Inventories
Inventories valued at LIFO cost represented 84% and 81% of total inventory
at each of June 30, 1998 and December 31, 1997, respectively. The excess
of current costs over LIFO valued inventories were $3,208,000 and $3,310,000
at June 30, 1998 and December 31, 1997, respectively. Inventory obsoles-
cence reserves were $3,837,000 at June 30, 1998 and $3,779,000 at
December 31, 1997. Net inventories consist of the following (in thousands):
June 30, December 31,
1998 1997
----------- -----------
Finished goods .......... $ 59,874 $ 57,804
Work in process ......... 4,760 3,792
Raw materials ........... 6,695 4,156
----------- -----------
$ 71,329 $ 65,752
=========== ===========
An actual valuation of inventory under the LIFO method can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO must necessarily be based on management's es-
timates of expected year-end inventory levels and costs. Because these are
subject to many forces beyond management's control, interim results are
subject to the final year-end LIFO inventory valuation.
6
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial
Statements - (Unaudited)
June 30, 1998 - (Continued)
4. Common Stock and Dividends
Dividends declared and paid on a per share basis were as follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Dividends declared .... $ 0.11 $ 0.10 $ 0.21 $ 0.20
Dividends paid ........ $ 0.11 $ 0.10 $ 0.21 $ 0.20
5. Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any di-
lutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented and, where appropriate, restated to conform to the Statement 128
requirements.
The following table sets forth the reconciliation from basic to diluted
average common shares and the calculations of net income per common share.
Net income for basic and diluted calculations do not differ. (In thousands,
except per share).
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net Income ...... $ 4,472 $ 5,190 $ 6,398 $ 8,468
Average Common Shares:
BASIC (weighted-average
outstanding shares) 9,701 9,595 9,693 9,592
Dilutive potential common
shares from stock options
and warrants 19 59 25 59
-------- -------- -------- --------
DILUTED (weighted-average
outstanding shares) 9,720 9,654 9,718 9,651
======== ======== ======== ========
Basic earnings per share $ 0.46 $ 0.54 $ 0.66 $ 0.88
======== ======== ======== ========
Diluted earnings per share $ 0.46 $ 0.54 $ 0.66 $ 0.88
7
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial
Statements - (Unaudited)
June 30, 1998 - (Continued)
6. New Accounting Standards and Disclosures
Disclosures About Segments of an Enterprise and Related Information. In
June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information."
Statement 131 specifies the computation, presentation and disclosure require-
ments for business segment information, and requires that segments be identi-
fied based on, among other factors, reporting used by the Company's manage
ment in evaluating key business decisions. Statement 131 supersedes
Statement 14, "Financial Reporting for Segments of a Business Enterprise."
Statement 131 is effective for the Company's financial statements for the
yearended December 31, 1998. The adoption of Statement 131 will not have
a material impact on the Company.
Derivative Financial Instruments Accounting Policy Disclosure Requirements
and Market Risk Disclosure Rules. During 1997, the Securities and Exchange
Commission issued expanded disclosure requirements of accounting policies
for derivative financial instruments and the exposure to market risks. The
new rules require enhanced descriptions of specific aspects of a registrant's
accounting policies for derivatives as well as qualitative and quantitative
disclosures about each type of market risk. The increased policy disclosures
on derivatives were effective for all public companies for periods ending
after June 15, 1997. The qualitative and quantitative market risk disclosures
must be provided in all filings that include audited financial statements for
fiscal years ending after June 15, 1998. The Company expects compliance with
these requirements to have no material impact on the Company's consolidated
results of operations, financial position, or cash flows.
Accounting for Derivative Instruments and Hedging Activities. In June 1998,
the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
required to be adopted in years beginning after June 15, 1999. Because of
the Company's minimal use of derivatives, management does not anticipate that
the adoption of the new Statement will have a significant effect on earnings
or the financial position of the Company.
7. Comprehensive Income
As of January 1, 1998, the Company adopted Statement 130, Reporting Compre-
hensive Income. The adoption of this Statement has no impact on net income
or shareholders' equity. Statement 130 requires unrealized gains or losses
on the Company's available-for-sale securities and foreign currency transla-
tion adjustments, which prior to adoption were reported in Shareholders'
Equity, to be included, along with Net Income, in Comprehensive Income.
Prior years data have been conformed to the requirements of Statement 130.
During the second quarter of 1998 and 1997, Comprehensive Income amounted
to $4,605,000 and $5,146,000 and for this six months ended June 30, 1998
and 1997, it was $6,504,000 and $ 7,026,000, respectively.
8
Alamo Group Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial
Statements - (Unaudited)
June 30, 1998 - (Continued)
The components of Comprehensive Income, net of related tax are as follows:
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
Net Income........ $ 4,472 $ 5,190 $ 6,398 $ 8,468
Unrealized gains on
securities ....... - 6 - (41)
Foreign currency
translation adjustments 133 (50) 106 (1,401)
-------- -------- -------- -------
Comprehensive Income.... $ 4,605 $ 5,146 $ 6,504 $ 7,026
The components of Accumulated Other Comprehensive Income are as follows:
Three Months Ended
June 30, December 31,
1998 1997
--------- -----------
Unrealized gains on
securities ........ $ - $ -
Foreign currency
translation adjustments 173 67
---------- -----------
Accumulated other
comprehensive income. $ 173 $ 67
========== ===========
8. Contingent Matters
The Company is subject to various unresolved legal actions which arise in
the ordinary course of its business. The most prevalent of such actions
relate to product liability which are generally covered by insurance.
While amounts claimed may be substantial and the ultimate liability with res-
pect to such litigation cannot be determined at this time, the Company
believes that the ultimate outcome of these matters will not have a material
adverse effect on the Company's consolidated financial position.
The former owner of Rhino International (a subsidiary of the Company) has
commenced a lawsuit against the Company alleging fraud, breach of contract,
and other claims and seeking actual and punitive damages in an unspecified
amount. The Company has filed counterclaims against the Plaintiff. The
Company believes it has meritorious defenses against this lawsuit and will
vigorously defend against the pending claims and prosecute appropriate
counterclaims. While the ultimate outcome of this matter cannot be determined
at this time, the Company believes this matter will not have a material
adverse effect on the Company's consolidated financial position.
In addition to the lawsuit described above, the Company is involved in a
lawsuit between Rhino International and certain of its dealers and former
dealers. This lawsuit involved claims against Rhino International totaling
$3.8 million. In April, a judgement was entered requiring the Company to
pay $110,000, net of its recovery. The judgment is being appealed. While
the ultimate outcome of this matter cannot be determined at this time, the
Company believes this matter will not have a material adverse effect on the
Company's consolidated financial position.
9
Alamo Group Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following tables set forth, for the periods indicated,
certain financial data:
Three Months Ended Six Months Ended
Sales Data In Thousands June 30, June 30, June 30, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
American
Agricultural ........ $ 29,495 $ 27,612 $ 55,444 $ 54,228
Industrial .......... 18,866 16,726 32,196 29,384
European ............ 12,031 14,095 21,479 26,464
-------- -------- -------- --------
Total sales, net ... $ 60,392 $ 58,433 $ 109,119 $ 110,076
======== ======== ========= =========
Three Months Ended Six Months Ended
Cost Trends and June30, June30, June30, June30,
Profit Margin, as 1998 1997 1998 1997
Percentages of Net Sales ------- ------- ------- -------
Gross margin ........... 26.8% 28.4 % 25.2% 26.6 %
Income from operations . 12.9% 14.8 % 10.7% 12.9 %
Income before income taxes 11.9% 13.7 % 9.5% 12.0 %
Net income ............... 7.4 % 8.9 % 5.9% 7.7 %
Results of Operations
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Net sales increased $1,959,000, up 3.4% over 1997's second quarter. The
Company's net income for the second quarter of 1998 was $4,472,000 compared
to $5,190,000 for the same period in 1997, a decrease of $718,000 or 13.8%.
Profitability declines for the second quarter (and year-to-date) were sub-
stantially attributable to the Company's European operations and Chinese
tractor import operations. European sales were down 15%. Profit from
European operations declined primarily due to a general deterioration in farm
income in the United Kingdom and the impact on sales and margins of currency
movements, particularly the strength of the British Pound against the French
Franc. This currency movement negatively impacted sales of the Company's
U.K. manufactured products. Although the currency issues continue, European
sales showed some firming the quarter. The Company's Chinese tractor import
operation, included in agricultural, although relatively small, has seen a
decline in sales and profitability erlated to market fators. American sales
in both industrial (up 13%) and agricultural (up 7%) increased in the quarter
as a result of continued strength in order input in core U.S. areas.
However, the current drought in the Southern U.S. may negatively impact the
Company's future results of operations. The Company's selling, general and
administrative expenses increased $499,000 (6.3%) from $7,925,000 in the
second quarter of 1997 to $8,424,000 in the comparable period in 1998. This
increase in expenses was primarily attributable to the Company's sales
growth.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales decreased by $957,000, or 1% for the six months ended June 30, 1998
compared to the same period in 1997. The Company's net income for the first
six months of 1998 was $6,398,000 compared to $8,468,000 in the comparable
period in 1997, a decrease of $2,070,000 or 24.4%. In addition to negative
impacts on sales and profitability in both the first and second quarters
from the European and Chinese tractor import operations, the first quarter
had shipment and profit pressures in U.S. operations from production
shortfalls arising largely from outsource/supply issues.
10
Alamo Group Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations - (Continued)
Liquidity and Capital Resources
Cash used by operations was $3,876,000 for the six-month period ended
June 30, 1998, with the net income cash flows for the period offset by a net
increase in working capital accounts related primarily to sales growth and
seasonal effects, as well as increased stocking of replacement parts in
warehouses.
As of June 30, 1998, $31,450,000 was utilized under the Company's
$45,000,000 bank revolving credit facility, of which $1,850,000 was for
standby letters of credit and $29,600,000 was borrowed. The Company's bor-
rowings are seasonal in nature with the greatest utilization generally
occurring in the first quarter and early spring.
The bank credit facility and the Company's ability to internally generate
funds from operations should be sufficient to meet the Company's cash
requirements in the near future.
_____________________________________________________________________________
This report may be deemed to contain forward-looking statements which
involve known and unknown risks and uncertainties which may cause the
Company's actual results in future periods to differ materially from
forecasted results. Among those factors which could cause actual results
to differ materially are the following: market demand, competition,
weather, and other risk factors listed from time to time in the Company's
SEC reports.
11
Alamo Group Inc. and Subsidiaries
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on
April 28, 1998, with the following results of elections and
approvals.
Votes Cast
______________________________________
Against/ Abstentions/
For Withheld Non-Votes
------ ---------- --------------
a. The following Directors
were electedto serve
until the next Annual
Meeting of Stockholders.
Donald J. Douglass 8,243,565 57,251 N/A
Oran F. Logan 8,242,565 58,251 N/A
Joseph C. Graf 8,243,565 57,251 N/A
O.S. Simpson, Jr. 8,243,565 57,251 N/A
William R. Thomas 8,241,265 59,551 N/A
David Morris 8,243,565 57,251 N/A
James B. Skaggs 8,243,565 57,251 N/A
b. Ernst & Young was approved
as the Company's auditors
for the 1998 fiscal year.
8,280,768 200 19,848
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are included herein:
(10.16) Severance Pay Agreement For Twelve Months Between The Company
and Certain Officers of the Company
(10.17) Severance Pay Agreement For Eighteen Months Between The Company
and Certain Officers of the Company
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
None
12
Alamo Group Inc. and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Alamo Group Inc.
(Registrant)
/s/____________________________
Jim A. Smith
Executive Vice President and CFO
(Principal Accounting and Financial Officer)
13
Exhibit 10.16
SEVERANCE PAY AGREEMENT
THIS SEVERANCE PAY AGREEMENT ("Agreement") is executed and effective as of
the 28th day of April, 1998, by and between Alamo Group Inc., a Delaware
corporation (together with its subsidiaries, the "Company"), and the
"Employee").
WITNESSETH:
WHEREAS, the Employee is a key employee of the Company and has made and is
expected to continue to make contributions to the profitability and growth
of the Company; and
WHEREAS, the Company desires to induce its key employees to remain in the
employment of the Company and to assure itself of both present and future
continuity of management in the event of any actual or threatened Change of
Control of the Company; and
WHEREAS, the Employee desires to remain in the employment of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
AGREEMENT
Section 1. Operation of Agreement. This Agreement shall be effective
immediately upon its execution, but its provisions shall not be operative
unless and until a Change of Control as defined in Section 2 hereof has
occurred.
Section 2. Change of Control. For purposes of this Agreement, "Change
of Control" means the first to occur of any of the following:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more
of either (i) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power
of the then-outstanding voting securities of the Company entit
14
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but exc
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Section 3. Severance Pay Upon Termination by Company Without Cause or
by Employee for Cause. If, during the one-year period immediately following
a Change of Control, the Employee's employment with the Company is terminated
either:
15
(a) by the Company for no reason or for any reason other than as the result
of the Employee's willful misconduct or gross negligence in the performance
of his duties, or for any act of dishonesty of the Employee, including, but
not limited to, theft of or other unauthorized personal use of Company funds
or other property or the acceptance of unauthorized gratuities or other
remuneration from Company suppliers or potential suppliers; or
(b) by the Employee as the result of, and within thirty days following, a
reduction by the Company of his base salary from the Company as in effect
immediately prior to the Change of Control, or because of a move of his job
location by more than 50 miles;
then, subject to the limitation contained in the next sentences, the Company
shall pay to the Employee equal monthly installments payable on the last
business day of each month (commencing with the month in which termination
occurs) with each installment equal to his base monthly salary for a number
of months equal to the number by which 18 exceeds the number of whole months
that such employee was retained and paid by the Company following the Change
of Control; provided, however, that in no event will the Employee be
entitled to receive less than three monthly payments. For purposes of this
Section 3, an Employee's base salary shall be the amount payable to the
Employee during the month immediately preceding the Change of Control.
Monthly base salary shall exclude earned commissions, any overtime pay or
bonuses. If applicable to the determination of the amount payable hereunder,
an Employee's period of service with the Company shall be deemed to include
all service, whether or not continuous, with any subsidiary corporation of
which it directly or indirectly owns the majority interest.
Section 4. No Severance Pay Upon Other Termination. Upon any
termination of the Employee's employment with the Company other than a
termination specified in Section 3 hereof, the sole obligation of the
Company to the Employee shall be to pay to him the amount of compensation
he has accrued through the effective date of the termination.
Section 5. Entire Obligation. Payment to the Employee pursuant to
Section 3 or 4 of this Agreement shall constitute the entire obligation of
the Company to the Employee and full settlement of any claim under law or
equity that the Employee might otherwise assert against the Company or any
of its employees, officers or directors on account of the Employee's
termination.
Section 6. Noncompetition Agreement. Notwithstanding the facts and
circumstances which entitle the Employee to severance pay under Section 3
of this Agreement, the Employee shall remain subject to and bound by any
noncompetition agreement he may have entered into with the Company that is
in effect as of the date of his termination of employment.
16
Section 7. No Obligation to Continue Employment. This Agreement is not
an employment contract and does not create any obligation on the part of the
Company to continue to employ the Employee following a Change of Control or
in the absence of a Change of Control.
Section 8. Term of Agreement. This Agreement shall terminate and no
longer be effective on the earlier of (i) December 31, 1998 or such later
date as may be established by the Company or (ii) the date upon which the
Employee ceases to be an employee of the Company for any reason; provided,
however, if a Change of Control occurs prior to the date of termination of
this Agreement, this Agreement shall continue to be effective until the date
one year following the Change of Control.
Section 9. Assignment; Successors in Interest. This Agreement, being
personal to the Employee, may not be assigned by him. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the successors and assigns (whether direct or indirect, by purchase,
merger, or otherwise) to all or substantially all of the business or assets
of the Company, and the heirs, executors and personal representatives of
the Employee.
Section 10. Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be deemed
a waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time
or times.
Section 11. Amendment. This Agreement may only be amended by a
written instrument executed by both parties hereto.
Section 12. Attorney's Fees. If the Employee is determined by a court
of competent jurisdiction to be entitled to severance pay under Section 3
hereof, he shall be entitled to reasonable attorney's fees and court costs
associated with any legal action brought by him to enforce his rights under
this Agreement.
Section 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas.
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as
of the date first above written.
ALAMO GROUP INC.
By_______________________________
________________________________
[Name]
17
Exhibit 10.17
SEVERANCE PAY AGREEMENT
THIS SEVERANCE PAY AGREEMENT ("Agreement") is executed and effective as of
the 28th day of April, 1998, by and between Alamo Group Inc., a Delaware
corporation (together with its subsidiaries, the "Company"), and
(the "Employee").
WITNESSETH:
WHEREAS, the Employee is a key employee of the Company and has made and is
expected to continue to make contributions to the profitability and growth
of the Company; and
WHEREAS, the Company desires to induce its key employees to remain in the
employment of the Company and to assure itself of both present and future
continuity of management in the event of any actual or threatened Change of
Control of the Company; and
WHEREAS, the Employee desires to remain in the employment of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
AGREEMENT
Section 1. Operation of Agreement. This Agreement shall be effective
immediately upon its execution, but its provisions shall not be operative
unless and until a Change of Control as defined in Section 2 hereof has
occurred.
Section 2. Change of Control. For purposes of this Agreement, "Change
of Control" means the first to occur of any of the following:
(a) The acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more
of either (i) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power
of the then-outstanding voting securities of the Company entit
18
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but exc
(c) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly
ectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions as th
ly prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 30% or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting from
such Busines
mbined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
Section 3. Severance Pay Upon Termination by Company Without Cause or
by Employee for Cause. If, during the eighteen-month period immediately
following a Change of Control, the Employee's employment with the Company
is terminated either:
19
(a) by the Company for no reason or for any reason other than as the result
of the Employee's willful misconduct or gross negligence in the performance
of his duties, or for any act of dishonesty of the Employee, including, but
not limited to, theft of or other unauthorized personal use of Company funds
or other property or the acceptance of unauthorized gratuities or other
remuneration from Company suppliers or potential suppliers; or
(b) by the Employee as the result of, and within thirty days following, a
reduction by the Company of his base salary from the Company as in effect
immediately prior to the Change of Control, or because of a move of his job
location by more than 50 miles;
then, subject to the limitation contained in the next sentences, the Company
shall pay to the Employee equal monthly installments payable on the last
business day of each month (commencing with the month in which termination
occurs) with each installment equal to his base monthly salary for a number
of months equal to the number by which 18 exceeds the number of whole months
that such employee was retained and paid by the Company following the Change
of Control; provided, however, that in no event will the
Section 4. No Severance Pay Upon Other Termination. Upon any
termination of the Employee's employment with the Company other than a
termination specified in Section 3 hereof, the sole obligation of the
Company to the Employee shall be to pay to him the amount of compensation he
has accrued through the effective date of the termination.
Section 5. Entire Obligation. Payment to the Employee pursuant to
Section 3 or 4 of this Agreement shall constitute the entire obligation of
the Company to the Employee and full settlement of any claim under law or
equity that the Employee might otherwise assert against the Company or any
of its employees, officers or directors on account of the Employee's
termination.
Section 6. Noncompetition Agreement. Notwithstanding the facts and
circumstances which entitle the Employee to severance pay under Section 3
of this Agreement, the Employee shall remain subject to and bound by any
noncompetition agreement he may have entered into with the Company that is
in effect as of the date of his termination of employment.
Section 7. No Obligation to Continue Employment. This Agreement is not
an employment contract and does not create any obligation on the part of
the Company to continue to employ the Employee following a Change of
Control or in the absence of a Change of Control.
20
Section 8. Term of Agreement. This Agreement shall terminate and no
longer be effective on the earlier of (i) December 31, 1998 or such later
date as may be established by the Company or (ii) the date upon which the
Employee ceases to be an employee of the Company for any reason; provided,
however, if a Change of Control occurs prior to the date of termination of
this Agreement, this Agreement shall continue to be effective until the date
eighteen months following the Change of Control.
Section 9. Assignment; Successors in Interest. This Agreement, being
personal to the Employee, may not be assigned by him. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the successors and assigns (whether direct or indirect, by purchase,
merger, or otherwise) to all or substantially all of the business or assets
of the Company, and the heirs, executors and personal representatives of the
Employee.
Section 10. Waiver. Failure to insist upon strict compliance with any
of the terms, covenants or conditions of this Agreement shall not be deemed
a waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of such right or power at any other time
or times.
Section 11. Amendment. This Agreement may only be amended by a written
instrument executed by both parties hereto.
Section 12. Attorney's Fees. If the Employee is determined by a court
of competent jurisdiction to be entitled to severance pay under Section 3
hereof, he shall be entitled to reasonable attorney's fees and court costs
associated with any legal action brought by him to enforce his rights under
this Agreement.
Section 13. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas.
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned as
of the date first above written.
ALAMO GROUP INC.
By_______________________________
_________________________________
[Name]
21
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