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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, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13098
CASE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0433811
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
53404
700 STATE STREET, RACINE, WISCONSIN (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 636-6011
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value
$0.01 per share.......... New York, Chicago and Paris, France, Stock Exchanges
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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. [_]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE
TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES
OF SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF
FILING.
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CLASS OF VOTING STOCK AND NUMBER OF
SHARES MARKET VALUE HELD
HELD BY NON-AFFILIATES AT FEBRUARY BY NON-
28, 1997 AFFILIATES(2)
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<S> <C>
Common Stock, 73,798,570 shares (1) $3,828,300,819
</TABLE>
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(1) Does not include 141,864 shares held by Case executive officers and
directors; however, this determination does not constitute an admission of
affiliate status for any of these stockholders.
(2) Based upon the closing sale price on the Composite Tape for the Common
Stock on February 28, 1997.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. Common Stock, par
value $0.01 per share, 73,940,434 shares outstanding as of February 28, 1997.
DOCUMENT INCORPORATED BY REFERENCE:
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<CAPTION>
PART OF THE FORM 10-K
DOCUMENT INTO WHICH INCORPORATED
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<S> <C>
Case Corporation's Definitive Proxy Statement for Part III
the Annual
Meeting of Stockholders to be Held May 14, 1997
</TABLE>
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<PAGE>
TABLE OF CONTENTS
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PAGE
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PART I
ITEM 1. BUSINESS....................................................... 1
ITEM 2. PROPERTIES..................................................... 10
ITEM 3. LEGAL PROCEEDINGS.............................................. 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 11
ITEM 4.1. EXECUTIVE OFFICERS OF THE REGISTRANT........................... 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS..................................................... 13
ITEM 6. SELECTED FINANCIAL DATA........................................ 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF
OPERATIONS........................................................ 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................... 31
Index to Financial Statements of Case Corporation and Consolidated
Subsidiaries........................................................ 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL
DISCLOSURE........................................................ 66
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 66
ITEM 11. EXECUTIVE COMPENSATION......................................... 66
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 66
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 66
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K....................................................................... 66
Financial Statements Included in Item 8.............................. 66
Index to Financial Statements and Schedule Included in Item 14....... 66
Schedules Omitted as Not Required or Inapplicable.................... 66
Exhibits............................................................. 68
Reports on Form 8-K.................................................. 68
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PART I
ITEM 1. BUSINESS.
Case Corporation, a Delaware corporation (the "Company"), is a leading
worldwide designer, manufacturer, marketer and distributor of farm equipment
and light- and medium-sized construction equipment. The Company's market
position is particularly significant in several product categories, including
loader/backhoes, skid steer loaders, large, high-horsepower farm tractors and
self-propelled combines. As used herein, "Case" refers to the Company and its
consolidated subsidiaries.
Case also manufactures and distributes replacement parts for various models
of its farm and construction equipment, many of which are proprietary, to
support products it has sold. Case distributes these parts to dealers and
distributors through a network of parts depots throughout the world.
To facilitate the sale of its products, Case offers wholesale financing to
its dealers and various types of retail financing to qualified end-users in
the United States, Canada and Australia. Wholesale financing consists
primarily of floorplan financing and allows dealers to maintain a
representative inventory of products. Retail financing consists of the
financing of retail installment sales contracts, leases and similar products
for the benefit of end-use customers in conjunction with the purchase of new
and used equipment from Case dealers and company-owned retail stores and is
intended to be competitive with financing available from third parties.
In 1996, Case's sales of farm and construction equipment represented 78% of
total revenues, while sales of replacement parts represented 18% and financing
operations accounted for 4% of total revenues. In 1996, Case's sales of farm
equipment represented 63% of revenues from equipment sales, and sales of
construction equipment represented 37% of revenues from equipment sales. For
information concerning the revenues, operating results and identifiable assets
attributable to each of the geographic areas in which Case operates, see Note
19 to the Consolidated and Combined Financial Statements of Case Corporation
(the "Case Financial Statements") included in Item 8 hereof.
Case products are distributed through an extensive network of independent
dealers and distributors in more than 150 countries worldwide.
ACQUISITION OF BUSINESSES
The Company completed four strategic business acquisitions in 1996. In
January 1996, the Company acquired Concord, Inc. ("Concord"), a manufacturer
of air drills based in Fargo, North Dakota. Concord products complement the
full array of Case IH agricultural equipment, including the Company's yield
mapping system. In the second quarter of 1996, the Company completed the
purchase of all of the outstanding shares of Austoft Holdings Limited
("Austoft"), the world's largest manufacturer of sugar cane harvesting
equipment, based in Bundaberg, Australia. In the third quarter of 1996, the
Company acquired a 75% interest in Steyr Landmaschinentechnik AG ("Steyr"), an
Austrian tractor manufacturer whose tractors are recognized for their superior
performance in mountainous regions. The Steyr line extends from utility to
row-crop tractors ranging from 48 to 150 horsepower. In the fourth quarter of
1996, the Company acquired Fermec Holdings Limited ("Fermec"), a construction
equipment manufacturer based in Manchester, United Kingdom. Fermec's products
include loader/backhoes, mini-excavators, skid steer loaders and industrial
tractors.
In January 1997, the Company acquired bor-mor Inc., a North American-based
directional drilling company whose "trenchless" technology will expand Case's
product offering in the cable and underground utility installation market.
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FARM EQUIPMENT
Case manufactures and distributes a broad line of farm machinery and
implements, including two-wheel and four-wheel drive tractors ranging in size
from 40 to 425 horsepower, combines, cotton pickers, hay and forage equipment,
planting and seeding equipment, soil preparation and cultivation implements,
sugar cane harvesters and material handling equipment. In 1996, the Company
introduced more than 20 new agricultural products, completing the largest
product launch in its history.
Case's tractor line covers a broad range of requirements to serve widely
varying needs of customers in the global farming industry. Large tractors,
such as the Case MAGNUM(TM) two-wheel drive and STEIGER(R) four-wheel drive
tractors are primarily sold to large, high-volume agricultural producers. In
1996, the Company launched a new line of MAGNUM(TM) two-wheel drive tractors
and the new Quadtrac(TM), four-wheel drive tracked tractor. Small and medium-
sized tractors, such as the MAXXUM(R) and "3200/4200" series of two-wheel
drive tractors, are sold worldwide across a broader range of applications.
Steyr produces tractors in Austria and markets these products primarily in
Europe. Case also distributes tractors manufactured by Carraro S.p.A. to meet
specialized European market requirements.
Harvesting equipment includes combines, cotton pickers and sugar cane
harvesters. AXIAL-FLOW(R) combines are used in a broad variety of grain
harvesting applications. In 1996, the Company acquired exclusive development,
manufacturing and marketing rights to a new combine-attachment design for
"ultra-narrow" row farming that has the potential to substantially increase
farmer productivity. COTTON-EXPRESS(R) cotton pickers are sold to customers
who require highly productive, multi-row cotton harvesting equipment. Austoft
manufactures sugar cane harvesting equipment in Australia and Brazil and
markets these products worldwide.
"Ag Systems" comprise all of the agricultural equipment and attachments that
allow farmers to assemble complete systems of products for their unique
applications. EARLY-RISER(R) planter equipment, CONCORD(R) air seeding
equipment, and a broad line of tillage and cultivation implements are sold for
a variety of row-crop and small grain farming requirements. Hay and Forage
Industries, a joint venture with AGCO Corporation ("AGCO"), manufactures a
broad range of products used primarily in livestock production. Case also
distributes some "Ag Systems" products manufactured by other companies for
specific needs in various regions of the world. In 1996, Case launched an
enhanced software package for the Case IH Advanced Farming System and an
improved line of implements including enhancements to its EARLY-RISER(R)
planters, new field cultivators and chisel plows that can be converted into
air seeders, and new baler and windrower models that are engineered to
increase yields and productivity.
Farm equipment net sales for the year ended December 31, 1996, included the
following components: tractors 59%, combines 27%, implements 6%, hay and
forage 4%, cotton pickers 2% and sugar cane harvesters 2%.
CONSTRUCTION EQUIPMENT
Case manufactures and distributes a broad line of construction machinery
that primarily serves the light- to medium-sized equipment requirements in a
wide range of applications. Product lines include loader/backhoes, crawler and
wheel excavators, wheel loaders, crawler dozers, skid steer loaders, trenchers
and rough terrain forklifts.
Loader/backhoes are used across a large number of construction industry
segments because of their multi-function versatility and the capability of
adding various attachments. Case manufactures a variety of loader/backhoe
models based on a single global product structure to serve the specific
regional markets. Since the acquisition of Fermec, Case has a second product
structure which includes a four-wheel steer version, a segment of growing
importance in Europe. Loader/backhoes are manufactured in North America,
Europe and Brazil for sale to customers worldwide.
2
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Case sells a number of excavator models in different regions of the world.
In North America, Case distributes several excavator models manufactured by
Sumitomo Construction Machinery Co., Ltd. ("Sumitomo"). In Europe, Case
manufactures and sells a broad range of crawler and wheeled excavators. This
product line includes both standard and specially-configured models. Since the
acquisition of Fermec, Case now manufactures mini-excavators in Europe under
license from Kobelco Construction Machinery. Also in Europe, Case distributes
midi-excavators produced by Macmoter, Inc.
Case offers a variety of other construction equipment products worldwide.
Wheel loaders are used in a wide variety of applications and are sold in
various configurations to meet the unique needs of construction, industrial,
utility and government customers. In Europe, Case distributes additional
smaller wheel loaders manufactured by Venieri S.p.A. Case's crawler dozer line
is used primarily in grading applications, with the majority of units sold in
North America. With the continued development of new attachments, Case skid
steer loaders are sold into a continuously growing range of worldwide
applications. Trenchers are used primarily for utility applications for
installation of pipe and cable and are sold equipped with a variety of tools
including cable plows, backhoes and rock saws. Case's acquisition of bor-mor
Inc. will expand Case's product offering in the cable and underground utility
installation market. Case also manufactures and sells rough terrain forklifts,
primarily in North America.
Construction equipment net sales for the year ended December 31, 1996,
included the following components: loader/backhoes 46%, excavators 17%, wheel
loaders 13%, skid steer loaders 13%, crawler dozers 4%, trenchers 3% and other
4%.
REPLACEMENT PARTS
The replacement parts and associated service business is a major source of
revenue and profitability for both Case and its dealers. It is also a
significant factor in overall customer satisfaction and a strong contributor
to the equipment purchase decision.
Case manufactures and distributes replacement parts for various models of
its farm and construction equipment, many of which are proprietary, to support
products it has sold over the past years. Since many of the products Case
sells have economically productive lives of 15 to 25 years when properly
maintained, each unit that is retailed into the marketplace produces a long-
term revenue stream for both Case and its dealers. Sales of replacement parts
have historically been less cyclical than sales of new equipment and typically
generate higher gross margins than new equipment.
Case distributes these parts to dealers and distributors through a network
of parts depots throughout the world. As of December 31, 1996, Case operated
and maintained eleven parts depots, including two depots acquired in
conjunction with the 1996 acquisitions of Steyr and Fermec. In addition, Case
utilized the services of five other depots worldwide. Of these 16 parts
depots, seven are located in the United States, two in Canada, five in Europe,
one in Australia and one in Brazil. These parts depots provide Case's
customers with immediate access to substantially all of the parts required to
support Case's equipment models.
In 1996, Case closed its Ris Orangis, France, parts depot and consolidated
its activities with Case's existing parts depot at LePlessis-Belleville,
France. In addition, Case closed its Racine, Wisconsin, parts depot and
consolidated its activities with other existing Case parts depots in the
United States. In January 1997, Case announced its intention to close its
Batley, United Kingdom, depot and to consolidate its activities in the
LePlessis-Belleville, France, depot. Completion of this project is expected by
the end of March 1997.
RETAIL CREDIT OPERATIONS
Case Credit Corporation is a wholly owned finance subsidiary of Case. Case
Credit Corporation and its wholly owned operating subsidiaries, Case Credit
Ltd. (Canada) and Case Credit Australia Pty Ltd (collectively "the Credit
Companies" or "Case Credit"), provide and administer financing for the retail
purchase or lease of new and used Case agricultural and construction equipment
and other new and used agricultural and construction
3
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equipment. Case Credit offers various types of retail financing to end-use
customers to facilitate the sale or lease of Case products in the United
States, Canada and Australia. The Credit Companies business principally
involves purchasing retail installment sales contracts from Case dealers. In
addition, Case Credit facilitates and finances the sale of insurance products
to retail customers, provides financing for Case dealers and Case rental
equipment yards, and provides other retail financing programs for end-use
customers in the United States and Canada. Case Credit also provides various
financing options to dealers for a variety of purposes, including dealer real
estate acquisitions, construction and remodeling, business acquisitions,
dealer systems, service and maintenance equipment, and working capital. The
Company's dealers and company-owned retail stores assign and sell retail
contracts to the Credit Companies on a daily basis. Credit criteria are set by
the management of the Credit Companies.
Retail sales and financing outside of North America and Australia are
affected by a variety of customs and regulations. The primary function of
credit operations in those markets is to coordinate sales-finance packages
with third parties. These sales packages are diverse and are dependent upon
the customer, product, country and government and are generally funded without
recourse to Case. In Europe, retail financing is offered through third-party
banking arrangements, with the banks having ultimate responsibility for
underwriting and administration. In 1996, Case Credit established a joint
venture with The Association of Banks of Uzbekistan. The new company,
UzCaseagroleasing, will provide financing for the retail acquisition of new
and used Case agricultural equipment in Uzbekistan. In the rest of the world,
Case conducts limited retail financing activities.
Case Credit finances retail sales of equipment under installment sales
contracts with terms generally from three to five years. Case's guidelines for
minimum down payments, which vary with the types of equipment and repayment
provisions, are generally not less than 20% for new farm equipment and 25% for
new construction equipment and 25% and 30%, respectively, for used farm and
construction equipment. Finance charges are sometimes waived for specified
periods or reduced on certain products sold in connection with sales
promotions. Installment sales contracts for financing the retail sales of
equipment (other than parts which are purchased on a revolving account basis)
typically provide for retention of a first priority perfected security
interest in the equipment financed.
The Credit Companies obtain funding for their operations primarily from
banks, the securitization of receivables and the issuance of public debt.
Asset-Backed Securitization Program
Limited-purpose business trusts organized by Case Credit issue asset-backed
notes and certificates in both public and private transactions. These asset-
backed securities are secured by retail installment sales contracts generated
by Case from the sale of farm and construction equipment to retail customers,
which are sold by the Credit Companies to the trusts.
In 1995 and 1996, the following offerings of asset-backed securities were
completed (in millions):
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U.S. CANADIAN
DOLLAR DOLLAR
OFFERING DATE AMOUNT AMOUNT
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March 1995................................................ $600 --
June 1995................................................. -- $300
September 1995............................................ $650 --
February 1996............................................. $625 --
April 1996................................................ -- $199
September 1996............................................ $875 --
</TABLE>
In February 1997, Case Credit Ltd. sold C$250 million of asset-backed
securities. In March 1997, Case Credit Corporation commenced an offering of
$650 million of asset-backed securities of Case Equipment Loan Trust 1997-A
pursuant to its approximate $3 billion shelf registration statement filed with
the Securities and Exchange Commission.
Case Credit anticipates that, depending upon continued market interest and
other economic factors, it will continue to securitize its retail receivables
in both the U.S. and Canadian markets.
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WHOLESALE FINANCING
Case provides wholesale financing to dealers in the United States, Canada
and Australia for extended periods to enable dealers to carry representative
inventories of equipment. Down payments are not required and interest is not
charged for a part of the period for which the inventories are financed. Case
strives to obtain a first priority perfected security interest in dealers'
inventories obtained from or financed by Case, and periodic physical checks
are made of those inventories. Terms to dealers require full payment when the
equipment that secures the indebtedness is sold to retail customers. Variable
market rates of interest are charged on balances outstanding after certain
interest-free periods, which currently vary from three to nine months
depending upon the type of equipment. Financing is also provided to dealers on
used equipment accepted in trade, on repossessed equipment and on approved
equipment from other manufacturers, and Case strives to obtain a security
interest in such equipment.
In June 1995, the Company consummated a transaction whereby it sold (with
limited recourse), on a revolving basis, a fractional undivided interest in
certain of its wholesale receivables pursuant to a private asset-backed
securitization facility. Under this facility, the maximum amount of proceeds
that may be accessed at any one time is $400 million and is subject to change
based on the level of eligible wholesale receivables. The facility consists of
a five-year committed, $300 million, non-renewable facility and a 364-day,
$100 million facility, which is renewable annually at the sole discretion of
the purchasers. At December 31, 1995 and 1996, the undivided interest of the
purchasers under the facility represented $521 million of wholesale
receivables.
Case's wholesale finance policies in Europe are similar to those adopted in
North America, although in Europe, interest-free floorplanning periods are
generally of shorter duration than in North America. The primary function of
the credit operations in non-European international markets is to facilitate
the sale of Case products by coordinating sales finance packages with third
parties. These sales packages are diverse and are dependent upon the customer,
product, country and government involved and are typically funded without
recourse to Case. In some instances, Case arranges wholesale financing through
local banks. In other instances, Case assists dealers in establishing
wholesale financing arrangements directly with local lenders.
MANUFACTURING
Case manufactures equipment and components in ten facilities located in
North America and eleven facilities located in Brazil, France, Germany,
Austria, Australia, and the United Kingdom. Similar manufacturing techniques
are employed in the production of components for both farm and construction
equipment, resulting in certain economies and efficiencies.
Case has entered into several strategic joint ventures. Case has a 50%
interest in a joint venture with Cummins Engine Company, Inc. ("Cummins") that
manufactures a line of diesel engines at a facility in Rocky Mount, North
Carolina. The joint venture, Consolidated Diesel Company ("CDC"), provides
Case with a source of technically advanced, low cost, efficient and reliable
diesel engines that have been incorporated into many of Case's product lines.
Case also has a 50% interest in Hay and Forage Industries, a joint venture
with AGCO that manufactures hay and forage equipment at a plant in Hesston,
Kansas. Each of the co-venturers markets and sells the equipment manufactured
by the joint venture under "Case IH" and "AGCO/Hesston" brand names,
respectively, and through their respective distribution systems. In addition,
Case also owns a 70% interest in a joint venture in Liuzhou, China, for the
assembly and distribution of loader/backhoes. Case's partner in this joint
venture, Guangxi Liugong Machinery Co., Ltd., is a leading wheel loader
manufacturer in China. Case also owns a majority interest in a joint venture
in Uzbekistan that will produce two-row cotton pickers for sale in Uzbekistan
and surrounding countries. The first units from this facility are expected to
be available for the 1997 cotton harvest. Through the acquisition of Austoft,
Case acquired a 50% interest in Brastoft, a joint venture in Piracicaba,
Brazil, that markets and sells sugar cane harvesters primarily in the Latin
American region.
In addition to the equipment manufactured by Case and its joint ventures,
Case purchases both agricultural and construction equipment from other
sources. Case purchases excavators and parts from Sumitomo pursuant to a
multi-year contract entered into in 1992. These excavators are sold under the
"Case" name in North America and enable Case's dealers to offer a full line of
light- to medium-sized construction equipment. Case also purchases small
excavators from Macmoter, Inc.
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SUPPLIERS
During 1996, Case purchased approximately $2.3 billion of material from
outside suppliers, including approximately $1.8 billion in material used to
produce products and $475 million in after-market parts and components
support. Forty suppliers in the aggregate accounted for more than one-third of
Case's 1996 annual purchase volume measured in dollars.
Over the years, Case has reduced the number of its suppliers from
approximately 7,000 in 1989 to approximately 3,000 at the end of 1996. The
Company believes that the reduction in the number of suppliers has resulted in
more cost effective arrangements, reduced investment requirements, provided
greater access to technology developments and resulted in lower per-unit
costs. As a result, however, Case's dependence on its remaining suppliers has
increased, although in most instances the products purchased from Case's
suppliers are available from other sources.
DISTRIBUTION AND SALES
Case sells and distributes its products, including parts, through an
extensive network of independent dealers and distributors in more than 150
countries worldwide. Dealers typically sell either farm equipment or
construction equipment, although some dealers sell both types of equipment.
In most established markets, the distribution of Case products is
accomplished through the dealer network. In several other parts of the world,
Case products are sold initially to distributors and then to dealers (or
initially to dealers and then to sub-dealers) leveraging distributor expertise
and minimizing Case's marketing costs. Distributors generally have
responsibility for the marketing of goods in very large geographic regions,
including entire countries.
Dealer terminations, voluntary and involuntary, have historically averaged
between 6% and 7% annually, worldwide. In North America, Case is contractually
obligated to repurchase new equipment, new parts, business signs and manuals
from terminated dealers. The repurchase price for new equipment is the net
price paid by the dealer or the current net price offered to dealers,
whichever is lower, plus freight previously incurred by the dealer. New parts
are repurchased at the current dealer net price less 15% for restocking and
handling. Outside of North America, repurchase obligations and practices vary
by region.
In addition to the contractual repurchase obligation, various states and
countries have agricultural and construction equipment dealership laws which
require Case to repurchase new equipment and new parts at statutory amounts.
In many areas, the statutory repurchase amount for new equipment is at net
cost, and for parts the price varies from 85% to 100% of the current dealer
net price with a 5% credit if the dealer packs the parts. The dealer may elect
either the contractual repurchase provision or the statutory repurchase
provision. Case repurchases new equipment and new parts whether the
termination is voluntary or involuntary. The dealer and Case generally
negotiate an agreed-upon purchase price for used equipment financed by Case,
but if Case and the dealer cannot agree, a sale is typically held and the
proceeds are applied against any debt owed by the dealer to Case.
RESEARCH, DEVELOPMENT AND ENGINEERING
Case's research, development and engineering personnel design, engineer,
manufacture and test new products, components and systems. Case incurred $193
million, $156 million and $127 million of research, development and
engineering costs in the years ended December 31, 1996, 1995 and 1994,
respectively. Case also benefits from the research, development and
engineering expenditures of its joint ventures, CDC and Hay and Forage
Industries, which are not included in Case's research, development and
engineering expenditure figures, and from the continuing engineering efforts
of its suppliers.
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PATENTS AND TRADEMARKS
Case owns and licenses the rights under a number of domestic and foreign
patents and trademarks relating to its products and businesses. Case
manufactures and distributes equipment primarily under the names "Case," "Case
IH," "Steyr," "Austoft," "Concord" and "Case Poclain." While the Company
considers the patents and trademarks, including the Case and IH tradenames,
important in the operation of its business, the Company does not believe that
its business is dependent on any single patent or group of patents.
EMPLOYEES
At February 28, 1997, Case had approximately 17,500 employees compared to
15,700 employees at December 31, 1995. The increase in headcount, as compared
to December 31, 1995, resulted from the Company's acquisitions of Austoft,
Fermec, Steyr and Concord in 1996.
Most of Case's worldwide production and maintenance employees are
represented by unions. Case's current 38-month collective bargaining agreement
with the United Automobile, Aerospace and Agricultural Implement Workers of
America (the "UAW"), which represents approximately 2,950 of Case's hourly
production and maintenance employees in North America, was ratified in
February 1995. Union contracts covering Case's employees in France and the
United Kingdom expire annually and are renegotiated each year. In April 1997,
the contract for the United Steel Workers of America ("USWA") at the Hamilton,
Ontario, plant will be renegotiated. There can be no assurance that future
contracts with the UAW, USWA or any of Case's other union contracts will be
renegotiated upon terms acceptable to Case. In addition, Case's employees in
Europe are protected by various worker co-determination and similar laws that
afford employees, through local and central works councils, certain rights of
consultation with respect to matters involving the business and operations of
their employers, including the downsizing or closure of facilities and the
termination of employment. Over the years, the Company has experienced various
work slow-downs, stoppages and other labor disruptions. During 1995 and 1996,
no significant labor disruptions occurred.
ENVIRONMENTAL MATTERS
Case's operations are subject to environmental regulation by Federal, state
and local authorities in the United States and regulatory authorities with
jurisdiction over its foreign operations. Case is a voluntary participant in
several government sponsored initiatives at the state and Federal levels that
benefit the environment. Case has also instituted a Pollution Prevention
Program to reduce industrial waste, air emissions and water usage by
incorporating adjustments in business activity, recycling efforts and hazard
assessments of raw materials. Case has a program designed to implement
environmental management practices and compliance, to promote continuing
environmental improvements and to identify and evaluate environmental risks at
manufacturing and other facilities worldwide.
Case will incur capital expenditures in connection with matters relating to
environmental control and will also be required to spend additional amounts in
connection with ongoing compliance with current and future laws and
regulations. In particular, the Clean Air Act Amendments of 1990 will affect
directly the operations of all of Case's manufacturing facilities in the
United States. The manufacturing processes that will be affected include
painting, coating and foundry operations. Although capital expenditures for
environmental control equipment and compliance costs in future years will
depend on legislative, regulatory and technological developments that cannot
accurately be predicted at this time, Case anticipates that these costs are
likely to increase as environmental requirements become more stringent. Case
made capital expenditures applicable to environmental matters aggregating
approximately $19 million in 1996. Capital expenditures applicable to
environmental matters for 1997 and 1998 are estimated by the Company to
approximate $8 million per year. The preceding sentence is a forward-looking
statement, and the actual costs could differ materially from those currently
anticipated by the Company based on the factors discussed in this paragraph.
7
<PAGE>
Pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), and other Federal and state laws that impose similar
liabilities, Case has received inquiries for information or notices of its
potential liability regarding 34 sites to which Case allegedly sent hazardous
substances for disposal ("Waste Sites"). Case has never owned or operated any
of the Waste Sites. Thirteen of the Waste Sites are on the National Priority
List promulgated pursuant to CERCLA. At 30 of the Waste Sites, the monetary
amount or extent of Case's liability has been resolved, Case has not been
named as a potentially responsible party ("PRP"), or Case's liability is
likely de minimis in comparison with other PRPs. Because estimates of
remediation costs are subject to revision as more information becomes
available about the extent and cost of remediation and because settlement
agreements can be reopened under certain circumstances, Case's potential
liability for remediation costs associated with the 34 Waste Sites could
change. Moreover, because liability under CERCLA and similar laws can be joint
and several, Case could be required to pay amounts in excess of its pro rata
share of remediation costs. However, when appropriate, Case's understanding of
the financial strength of other PRPs has been considered in the determination
of Case's potential liability. The Company believes that the costs associated
with the Waste Sites will not have a material adverse effect on the Company's
financial position or results of operations. The preceding sentence is a
forward-looking statement, and the actual costs could differ materially from
the costs currently anticipated by the Company based on the factors discussed
in this paragraph.
The Company has conducted environmental investigatory or remedial activities
at certain properties that are currently or were formerly owned and/or
operated or which are being decommissioned. The Company believes that the
outcome of these activities will not have a material adverse effect on the
Company's financial position or results of operations. The preceding sentence
is a forward-looking statement, and the actual costs could differ materially
from those costs currently anticipated due to the nature of the historical
disposal and release activities typical of manufacturing and related
operations that have occurred in the United States and other countries, and as
a result of U.S. and foreign laws which now and in the future may impose
liability for previously lawful disposal and release activities. As it has
done in the past, the Company intends to fund its costs of environmental
compliance from operating cash flows. Also see Note 15 to the Case Financial
Statements included in Item 8 hereof.
SIGNIFICANT INTERNATIONAL OPERATIONS
In addition to Case's U.S. manufacturing plants, Case operates manufacturing
plants in Europe, Australia, China, Brazil and Canada. Case derived
approximately 56% of its sales in 1996 from the sale of its products in
countries outside the United States. International operations are generally
subject to various risks that are not present in domestic operations. Various
foreign jurisdictions have laws limiting the right and ability of foreign
subsidiaries to pay dividends and remit earnings to affiliated companies
unless specified conditions precedent are met. In addition, sales in foreign
jurisdictions are typically made in local currencies and transactions with
foreign affiliates are customarily accounted for in the local currency of the
selling company. To the extent Case does not take steps to mitigate the effect
of changes in the relative value of the U.S. dollar and foreign currencies,
Case's results of operations and financial condition (which are reported in
U.S. dollars) could be adversely affected by negative changes in these
relative values.
SEASONALITY AND PRODUCTION SCHEDULES
The seasonality of farm equipment retail sales is directly affected by the
timing of major crop activities: tilling, planting and harvesting. The timing
of these activities is impacted by crop production and climate conditions. The
fourth quarter is generally the strongest demand period for retail farm
equipment sales, normally representing approximately 35% of sales by Case's
North American dealers. The weakest retail demand for Case farm equipment in
North America historically occurs in the third quarter, accounting for
approximately 15% to 20% of sales by Case's North American dealers.
Seasonal demand fluctuations for construction equipment are less significant
than those for farm equipment. Nevertheless, in North America, housing
construction slows down, especially in the Midwest and on the East
8
<PAGE>
Coast, beginning in November and continuing through the first quarter. North
American retail demand for Case's construction equipment is strongest in the
second and fourth quarters, which combined represent approximately 50% to 60%
of sales by Case's North American dealers. European demand patterns are similar
to those in North America.
Sales to independent dealers closely correspond with Case's production
levels, which are based upon its estimates of the demand for its products,
taking into account the timing of dealer shipments (which are in advance of
retail demand), dealer inventory levels, the need to shut down production to
enable manufacturing facilities to be prepared for the manufacture of new or
different models and the efficient use of manpower and facilities. The
production levels are adjusted to reflect changes in estimated demand, dealer
inventory levels, labor disruptions and other matters not within Case's
control. In 1996, the Company established a multi-year supply chain management
initiative. In implementing this initiative, Case underproduced relative to
worldwide retail demand, and, as a result, Case sold to dealers throughout the
year at rates below actual retail demand, thereby reducing dealer inventory
levels. The goal of this program is to reduce Case's working capital
requirements.
COMPETITION
The farm equipment industry is highly competitive, particularly in North
America and Europe. Case 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. Case's principal
competitors in the farm equipment business include Deere & Company ("Deere &
Co."), New Holland N.V. and AGCO.
The Company believes several key factors influence a buyer's choice of
equipment. These factors include the strength and quality of a company's
dealers, the quality and pricing of products, brand loyalty, product
availability, financing terms, parts and warranty programs, resale value,
customer service and satisfaction, timely delivery and technological
innovation. The Company continually seeks to improve in each of these areas but
focuses primarily on providing high-quality and high-value products and
supporting those products through its dealer network and parts distribution
system.
The construction equipment industry has a broad spectrum of competitors that
specialize in various product lines. The competitors are globally dispersed.
Principal competitors for Case in North America are Caterpillar Inc.
("Caterpillar"), Deere & Co., and Ingersoll-Rand Company ("Ingersoll-Rand").
Outside North America, the Company's competitors include J.C. Bamford NV,
Caterpillar and others, such as Komatsu Ltd., AB Volvo, Hyundai Corporation,
Samsung Corporation, Daewoo Corporation and Hitachi, Ltd., depending on the
particular markets. Caterpillar is a major supplier of large construction
machines, with emphasis on heavy earthmoving, mining and materials handling
equipment. Competing product lines from Caterpillar include small crawlers,
loader/backhoes, wheel loaders and excavators. Deere & Co. is a smaller
supplier of construction equipment and competes with Case in the same product
families as Caterpillar. Ingersoll-Rand produces a line of skid steer loaders
that competes with Case's products.
The principal factors affecting competition are market share objectives,
profit objectives, exchange rate fluctuations, financial strength of supplier
or retailer, technology and quality advantages, unique product or service
advantages and product support and distribution strength.
SERVICE AND WARRANTY
Case products are warranted to the end-user to ensure end-user confidence in
design, workmanship and material quality. Warranty lengths vary depending on
competitive standards established within individual markets. In general,
warranties tend to be for one to two years, with some at six months, and cover
all parts and labor for non-maintenance repairs and wear items, provided the
repair was not necessitated by operator abuse, improper use or negligence.
Warranty work must be performed by authorized independent Case distributors,
dealers and company-owned retail stores. Warranty on some products is limited
by hours of use. Purchased
9
<PAGE>
warranty is available on most products. Dealers submit claims for warranty
reimbursement to Case and are credited for the cost of repairs so long as the
repairs meet Case's prescribed standards. Warranty expense is accrued at the
time of sale. Purchased warranty is accrued and amortized over the life of the
warranty contract.
Service support outside of the warranty period is provided by Case
distributors, dealers and company-owned retail stores. Retail outlet service
personnel are trained in one of several Case training facilities around the
world or on location at the dealership by Case service engineers or service
training specialists.
REORGANIZATION
The Company was incorporated on April 22, 1994, as a wholly owned subsidiary
of Tenneco Inc. ("Tenneco") for the purpose of acquiring Tenneco's farm and
construction equipment business. In June 1994, pursuant to a Reorganization
Agreement (the "Reorganization Agreement"), between the Company, Tenneco and
Tenneco Equipment Corporation, the Company and its subsidiaries acquired the
business and assets of the farm and construction equipment business (other
than approximately $1.1 billion of U.S. retail receivables) of Tenneco and its
subsidiaries (the "Case Business"). For additional information on the
Reorganization, see Note 4 to the Case Financial Statements included in Item 8
hereof.
ITEM 2. PROPERTIES.
The principal properties of Case as of February 28, 1997, were as follows:
<TABLE>
<CAPTION>
DESCRIPTION OF
LOCATION PROPERTY
-------- ---------------------
<S> <C>
Burlington, Iowa.................................... Manufacturing
East Moline, Illinois............................... Manufacturing
Hamilton, Ontario, Canada........................... Manufacturing
Burr Ridge, Illinois................................ Technology Center
Racine, Wisconsin................................... Manufacturing
Racine, Wisconsin................................... Manufacturing/Foundry
Wichita, Kansas..................................... Manufacturing
Hugo, Minnesota..................................... Manufacturing
Fargo, North Dakota................................. Manufacturing
Fargo, North Dakota................................. Manufacturing
Valley City, North Dakota........................... Manufacturing
St. Valentin, Austria............................... Manufacturing
Crepy, France....................................... Manufacturing
Croix, France....................................... Manufacturing
St. Dizier, France.................................. Manufacturing
Tracy, France....................................... Manufacturing
Neuss, Germany...................................... Manufacturing
Carr Hill, United Kingdom........................... Manufacturing
Doncaster, United Kingdom........................... Manufacturing/Foundry
Manchester, United Kingdom.......................... Manufacturing
Bundaberg, Australia................................ Manufacturing
Sorocaba, Brazil.................................... Manufacturing
</TABLE>
The corporate headquarters for the Company are located in Racine, Wisconsin.
In addition, Case also has, through its various joint ventures, manufacturing
facilities located in Rocky Mount, North Carolina; Hesston, Kansas; Liuzhou,
China; and Piracicaba, Brazil. For additional information on Case's joint
ventures, see Item 1, "Manufacturing."
In January 1996, Case closed its Vierzon, France, facility and transferred
loader/backhoe production to its Crepy, France, facility.
10
<PAGE>
Several of the Company's facilities are leased through operating lease
agreements. For information on operating leases, see Note 15 to the Case
Financial Statements included in Item 8 hereof. Case also owns other
facilities that are currently idle and available for sale.
The Company considers each of its facilities currently in use to be in good
operating condition and adequate for its present use. Management believes that
it has sufficient capacity to meet its current market demand. However, certain
Case facilities are presently underutilized in varying degrees as the
production capabilities of these plants exceed the current market demand for
Case's farm and construction equipment. The Company is considering making
incremental investments at select facilities to increase capacity to meet
continued demand for certain agricultural equipment products.
ITEM 3. LEGAL PROCEEDINGS.
For information pertaining to legal proceedings, see Note 15 to the Case
Financial Statements included in Item 8 hereof, which is incorporated by
reference herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1996.
ITEM 4.1 EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company, their ages as of February 28, 1997,
and their present positions with the Company are set forth in the table below:
<TABLE>
<CAPTION>
AGE AT
FEBRUARY 28,
NAME 1997 OFFICE
---- ------------ ------
<S> <C> <C>
Jean-Pierre Rosso....... 56 Chairman, President, Chief Executive Officer and Director
Steven G. Lamb.......... 40 Executive Vice President and Chief Operating Officer
Theodore R. French...... 42 Senior Vice President and Chief Financial Officer
Richard M. Christman.... 46 Senior Vice President
Richard S. Brennan...... 58 General Counsel and Secretary
</TABLE>
As used in this Item 4.1, the "Company" or "Case" refers to Case Corporation
and its consolidated subsidiaries and to Tenneco Equipment Corporation, the
predecessor of Case Corporation.
Mr. Rosso has served as Chairman, President and Chief Executive Officer of
Case since March 1996. Prior to that time, he served as its President and
Chief Executive Officer since joining the Company in April 1994. Prior
thereto, Mr. Rosso was President of the Home and Building Control business of
Honeywell Inc., a producer of advanced technology products, since 1992 and
served as President of that company's European operations from 1987 through
1991. Mr. Rosso is also a director of ADC Telecommunications, Inc., Crown Cork
& Seal Company, Inc., Inland Steel Industries, Inc., and its subsidiary,
Inland Steel Company, Principal Mutual Life Insurance Company and Ryerson
Tull, Inc. Mr. Rosso became a Director of Case on April 22, 1994.
Mr. Lamb has served as an Executive Vice President of Case since April 1993
and as Chief Operating Officer since March 1995. As Chief Operating Officer,
Mr. Lamb is responsible for worldwide industrial operations. He previously
directed the Company's business activities in Europe, Africa and the Middle
East. Prior to joining Case, Mr. Lamb served as Executive Assistant to the
President and Chief Operating Officer of Tenneco. Previously, Mr. Lamb was
with International Paper Company from 1988 to 1992, where he served in several
key management and operational positions.
11
<PAGE>
Mr. French has served as a Senior Vice President and Chief Financial Officer
of Case since January 1992 and also served as Treasurer from January 1992
until August 1994. Mr. French also has operating responsibility for the Case
finance subsidiaries and has served as Chairman of the Board of Case Credit
Corporation since January 1996. Mr. French joined Case in 1989 as Vice
President, Corporate Planning and Development. Prior to joining Case, Mr.
French spent 12 years with Rockwell International. From 1987 to 1989, he was
Director of Business Development for Rockwell International's Automotive
Operations.
Mr. Christman has served as a Senior Vice President of Case since July 1986.
Mr. Christman leads Global Business Development and focuses on establishment
of new strategic alliances with the implementation of growth strategies. Mr.
Christman joined Case in 1975 and has held various sales and marketing
positions. Beginning in 1986, Mr. Christman served for three years as Senior
Vice President, Europe Sales and Marketing, and returned to Racine in 1989 as
Senior Vice President, Parts Division.
Mr. Brennan was appointed General Counsel and Secretary of the Company in
February 1995. Mr. Brennan has been a partner in the law firm of Mayer, Brown
& Platt since returning to that firm in 1991, and was the General Counsel of
Continental Bank Corporation from 1982 through August 1994.
Each of the executive officers described in this Item 4.1 was elected by the
Board of Directors at its May 1996 meeting to hold office until the first
meeting of the Board of Directors following the 1997 annual meeting of
stockholders, and until his respective successor is duly elected and
qualified, unless any such executive officer is earlier removed or replaced by
the Board of Directors.
12
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The outstanding shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock") are listed on the New York Stock Exchange, which
is the principal market for the Common Stock, under the symbol "CSE." The
Company's Common Stock is also listed on the Chicago Stock Exchange and the
Paris, France, Stock Exchange.
The following table sets forth the high and low sale prices of Common Stock
during the periods indicated on the New York Stock Exchange Composite
Transactions Tape and dividends declared per share of Common Stock during such
periods:
<TABLE>
<CAPTION>
SALE PRICES
--------------- DIVIDENDS
HIGH LOW DECLARED
------- ------- ---------
<S> <C> <C> <C>
1996
1st quarter................................... $56 1/4 $ 40 $0.05
2nd quarter................................... 55 45 1/8 0.05
3rd quarter................................... 50 41 3/4 0.05
4th quarter................................... 56 1/2 45 3/8 0.05
1995
1st quarter................................... $25 3/8 $20 5/8 $0.05
2nd quarter................................... 29 7/8 24 5/8 0.05
3rd quarter................................... 40 7/8 29 3/4 0.05
4th quarter................................... 45 7/8 35 1/8 0.05
</TABLE>
The number of holders of Common Stock of record as of February 28, 1997, was
5,195.
The declaration and payment of dividends to holders of each class of capital
stock of the Company will be at the discretion of the Board of Directors of the
Company and will depend upon many factors, including the Company's competitive
position, financial condition, earnings and capital requirements. Accordingly,
there is no requirement or assurance that dividends will be declared or paid.
No dividends (other than dividends paid in stock ranking junior to the
Company's Preferred Stock, or rights or warrants to purchase such junior stock)
may be paid on the Common Stock unless all unpaid dividends payable on the
Company's Series A Cumulative Convertible Preferred Stock and its Cumulative
Convertible Second Preferred Stock have been declared and paid, or set apart
for payment, in full.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected historical financial data as of and for each of the
five years ended December 31, 1996, has been derived from the audited
consolidated and combined financial statements of the Company and the Case
Business. For all periods subsequent to June 24, 1994, the financial data
reflects the consolidated results of Case Corporation. For all prior periods,
the financial data reflects the combined results of the Case Business. This
information should be read in conjunction with Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
the Case Financial Statements and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales....................... $ 5,176 $ 4,937 $ 4,262 $ 3,748 $ 3,829
Interest income and other....... 233 168 143 255 321
Cost of goods sold.............. (3,953) (3,779) (3,260) (3,106) (3,322)
Selling, general and
administrative expenses........ (544) (553) (576) (526) (691)
Research, development and
engineering expenses........... (193) (156) (127) (95) (88)
Restructuring (charge)
credit(1)...................... -- -- 16 20 (920)
Interest expense................ (160) (174) (160) (232) (353)
Other, net...................... (25) (16) (40) (19) (18)
------- ------- ------- ------- -------
Income (loss) before taxes and
cumulative effect of changes in
accounting principles and
extraordinary loss............. 534 427 258 45 (1,242)
Income tax provision (benefit).. 185 81 93 6 (135)
------- ------- ------- ------- -------
Income (loss) before cumulative
effect of changes in accounting
principles and extraordinary
loss........................... 349 346 165 39 (1,107)
Cumulative effect of changes in
accounting principles(2)....... -- (9) (29) -- (223)
Extraordinary loss(3)........... (33) -- (5) -- --
------- ------- ------- ------- -------
Net income (loss)............... $ 316 $ 337 $ 131 $ 39 $(1,330)
======= ======= ======= ======= =======
Net earnings per share of common
stock after preferred stock
dividends and before cumulative
effect of changes in accounting
principles and extraordinary
loss........................... $ 4.61 $ 4.72 N.A. N.A. N.A.
Net pro forma earnings per
common share after preferred
stock dividends and before
cumulative effect of changes in
accounting principles and
extraordinary loss............. N.A. N.A. $ 2.32 N.A. N.A.
Cash dividends declared per
common share................... $ 0.20 $ 0.20 $ 0.10 N.A. N.A.
BALANCE SHEET DATA: (at the end
of year):
Working capital................. $ 510 $ 386 $ 717 $ 631 $ 1,011
Total assets.................... 6,059 5,469 5,052 6,223 7,659
Long-term debt.................. 1,119 889 1,443 1,547 2,149
Other long-term obligations and
redeemable preferred stock..... 492 594 603 693 907
Equity.......................... 1,904 1,520 1,181 1,730 1,528
Ratio of earnings to fixed
charges and preferred stock
dividends...................... 3.73x 3.03x 2.38x 1.18x (2.22)x
</TABLE>
- --------
(1) For information about the restructuring charges and information regarding
the reversal of a portion of the restructuring reserve, see Item 7,
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," and Note 5 to the Case Financial Statements.
(2) Effective January 1, 1995, Case adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" for its non-U.S. plans, which resulted in a
charge of $9 million on a pre-tax and after-tax basis to reflect the
cumulative effect of the
14
<PAGE>
accounting change. Effective January 1, 1994, Case adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which resulted in a
charge of $29 million after tax to reflect the cumulative effect of the
accounting change. Effective January 1, 1992, Case adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
with respect to its employees in the United States, which resulted in a
charge of $208 million after tax to reflect the cumulative effect of the
accounting change. Also effective January 1, 1992, Case adopted SFAS No.
109, "Accounting for Income Taxes," which resulted in a charge of $15
million after tax to reflect the cumulative effect of the accounting
change. See Notes 12 and 14 to the Case Financial Statements and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(3) In the first quarter of 1996, the Company sold $300 million aggregate
principal amount of its 7 1/4% unsecured and unsubordinated notes due 2016
pursuant to a shelf registration statement filed with the Securities and
Exchange Commission in June 1995. The net proceeds from the offering,
together with cash and additional borrowings under the Company's credit
facilities, were used to exercise the Company's option to repurchase for
cash all of the Company's 10 1/2% Senior Subordinated Notes and pay
accrued interest thereon. As a result of the repurchase, the Company
recorded an extraordinary charge of $22 million after tax in the first
quarter of 1996. During the third quarter of 1996, the Company established
new credit facilities consisting of $3.4 billion in lines of credit and
liquidity facilities. As a result of establishing the new credit
facilities, the Company recorded an $11 million extraordinary, after-tax
charge in the third quarter of 1996 for the write-off of unamortized bank
fees related to the original bank agreements established at the time of
the Company's initial public offering in June 1994. In the second quarter
of 1994, the Company prepaid approximately $519 million of high interest-
bearing debt. The Company recorded an extraordinary loss of $5 million
after tax for the redemption premium resulting from these transactions.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
SUMMARY OF SALES
Case's sales are derived from the manufacture and distribution of a full
line of farm equipment, light- and medium-sized construction equipment and
replacement parts. In recent years Case's sales were derived from the
following sources:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Farm equipment............................................ 52% 49% 47%
Construction equipment.................................... 30 32 31
Replacement parts......................................... 18 19 22
--- --- ---
Total sales........................................... 100% 100% 100%
=== === ===
</TABLE>
Sales are affected by worldwide agricultural production and demand, housing
starts and other construction levels, commodity prices, government subsidies,
weather, interest and exchange rates, industry capacity and equipment levels.
In addition to sales of equipment and parts, revenues include income from the
financing of such sales.
CASE RESTRUCTURING PROGRAMS
In response to depressed market conditions during the early 1990's, Case
embarked on two restructuring programs. The first program, initiated in 1991,
resulted in a pre-tax charge of $461 million ($404 million after tax). This
program has been completed and the intended benefits have been achieved.
While the measures taken by Case under the 1991 restructuring program
resulted in substantial cost reductions, the worldwide farm and construction
equipment market continued to deteriorate during 1992. At that time, the
Company determined that major structural and strategic changes were necessary
in order to rationalize certain component production operations to reduce the
fixed cost portion of the manufacturing process; reduce excess capacity;
focus, discontinue or replace unprofitable and noncompetitive product lines;
and restructure and refocus product and component parts distribution to
strengthen Case's competitive position in the global marketplace.
15
<PAGE>
Consequently, on March 21, 1993, a comprehensive restructuring program (the
"1992 Restructuring Program") was adopted and resulted in a pre-tax
restructuring charge of $920 million ($843 million after tax), which was
reflected in Case's 1992 results. The $920 million pre-tax charge was recorded
as a $340 million reduction of net property, plant and equipment, a $55
million reduction of inventory, a $63 million reduction of intangibles and
other accounts and a $462 million reserve for the future cost of implementing
the various restructuring actions.
An analysis of the 1992 Restructuring Program is summarized in the table
below (in millions):
1992 RESTRUCTURING PROGRAM
<TABLE>
<CAPTION>
1993 AND 1994 ACTIVITY 1995 ACTIVITY
----------------------------------- -----------------------------------
RESERVES RESERVES
UTILIZED UTILIZED
BALANCE AT (INCLUDES CHANGES BALANCE AT (INCLUDES CHANGES BALANCE AT
DECEMBER 31, CURRENCY IN DECEMBER 31, CURRENCY IN DECEMBER 31,
1992 TRANSLATION) ESTIMATES 1994 TRANSLATION) ESTIMATES 1995
------------ ------------ --------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
payments............... $250 $ (45) $ 49 $254 $ (11) $(39) $204
Pension and OPRB costs.. 56 (25) 13 44 (11) 2 35
Lease termination
payments............... 10 1 (6) 5 -- 5 10
Writedown of assets:
Property, plant and
equipment............ 340 (89) (48) 203 (67) 1 137
Provision for
environmental
liabilities.......... 25 (1) 2 26 1 -- 27
Other assets.......... 63 (62) (1) -- (8) 8 --
Writedown of
inventories............ 55 (21) (16) 18 (2) 1 17
Costs related to
closing/selling/
downsizing existing
facilities............. 60 (15) (18) 27 (7) 10 30
Other costs............. 61 (14) (11) 36 (12) 12 36
---- ----- ---- ---- ----- ---- ----
Total restructuring
charge............. $920 $(271) $(36) $613 $(117) $-- $496
==== ===== ==== ==== ===== ==== ====
<CAPTION>
1996 ACTIVITY
-----------------------------------
RESERVES
UTILIZED
BALANCE AT (INCLUDES CHANGES BALANCE AT
DECEMBER 31, CURRENCY IN DECEMBER 31,
1995 TRANSLATION) ESTIMATES 1996 TOTAL COSTS
------------ ------------ --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
payments............... $204 $ (50) $ (6) $148 $ 254
Pension and OPRB costs.. 35 (6) (21) 8 50
Lease termination
payments............... 10 (4) 3 9 12
Writedown of assets:
Property, plant and
equipment............ 137 (115) 2 24 295
Provision for
environmental
liabilities.......... 27 (2) -- 25 27
Other assets.......... -- -- -- -- 70
Writedown of
inventories............ 17 (4) (4) 9 36
Costs related to
closing/selling/
downsizing existing
facilities............. 30 (16) 18 32 70
Other costs............. 36 (10) 8 34 70
---- ----- ---- ---- -----
Total restructuring
charge............. $496 $(207) $-- $289 $ 884
==== ===== ==== ==== =====
</TABLE>
16
<PAGE>
The employee termination payments represent the severance payments to reduce
personnel by approximately 7,100. This reduction is the result of closing
and/or downsizing 11 manufacturing facilities, the consolidation of six parts
distribution locations, the privatization of company-owned retail stores in
North America, Europe and Australia and a reduction in related support
functions. The employee termination payments also include minor amounts for
other costs such as outplacement services and other benefits and certain
contractual obligations under labor agreements. Estimates have been revised in
each year to reflect changes in social, political, legal and economic
conditions where employment reductions will occur. In 1996, headcount and cost
estimates have been updated to reflect recent negotiations with affected
parties.
The pension and other postretirement benefit ("OPRB") costs represent
curtailments as required by Statement of Financial Accounting Standards
("SFAS") No. 88 and SFAS No. 106 resulting from the termination of employees
referred to above. The subsequent revisions to the original estimate reflect
changes in the estimated level of benefits as well as changes in the number of
employee terminations anticipated by the Company.
Lease termination payments represent costs associated with the early
termination of existing lease commitments for an abandoned European
administrative facility and certain company-owned retail stores scheduled to
be closed. The changes in estimates resulted from changes in market conditions
where leases are to be terminated.
The writedown of assets represents estimated losses on property, plant and
equipment to be incurred upon the sale or abandonment of closed/downsized
production facilities. The changes in estimates resulted primarily from
updated valuations of properties and equipment to be sold or abandoned as well
as from property and equipment actually sold in 1993 through 1996. During
1996, the Company allocated the reserve to the specific assets. This is shown
as a utilization of the reserve in the accompanying table.
Environmental costs have been accrued with respect to plants and other
facilities where remediation and decommissioning costs will be required if
such facilities cease operations. Upon the closing of these facilities, as
contemplated by the 1992 Restructuring Program, potential remedial,
decommissioning and environmental costs associated with the eventual sale of
the facility and/or property have been recorded based on current knowledge and
regulations.
Other assets include the writedown to net realizable value of intangibles,
goodwill and other miscellaneous items. Such writedowns were directly
associated with the restructuring decision and primarily involve intangibles
and goodwill in France and Germany.
The writedown of inventories represents the writedown to net realizable
value of inventory, materials and parts at those facilities that will be
closed or for those products that have been discontinued. The changes in
estimates resulted from revised estimates of the various actions still to be
completed.
The costs related to closing/selling/downsizing existing facilities include
the estimated costs to close and/or downsize 11 plant locations and six parts
distribution locations. The changes in the reserve resulted from revised
estimates of the costs of various actions still to be implemented. The 1996
changes in the reserve reflect increased estimates to close the Neuss,
Germany, plant and the Racine, Wisconsin, parts depot.
Other costs include amounts for incremental legal costs required to support
the restructuring projects, personnel transfer costs incurred as a direct
result of closing and/or downsizing operations and other implementation costs.
Other costs also include certain incentives and dealer discounts to close out
discontinued product lines. In 1993 and 1994, the changes in estimates
resulted primarily from improved market conditions resulting in fewer
discounts required to liquidate discontinued products. In 1995 and 1996, the
changes in estimates relate primarily to increased costs required to implement
remaining actions.
The following restructuring actions were completed by the Company in 1996:
. During 1996, Case sold its Racine, Wisconsin, parts depot, where Case had
employed approximately 120 people, and transferred its operations to
Case's remaining regional depots.
17
<PAGE>
. The sale of company-owned retail stores has progressed steadily. At
December 31, 1996, Case had 24 company-owned retail stores, as compared
to 247 at December 31, 1990.
. Case announced its intent to cease engine and component production and
close the tractor manufacturing facility in Neuss, Germany, following the
termination of production of the current MAXXUM(R) tractor models, which
is expected to occur by mid-year 1997. Case closed the foundry located in
Neuss, Germany, in December 1994. As of December 31, 1996, Case employed
approximately 1,000 people at the Neuss facilities.
. Case announced its intent to close the foundry operations at its
Doncaster, United Kingdom, facility in 1997 and began to outsource the
production of components presently manufactured at this facility. In the
third quarter of 1994, an agreement was reached with the trade union for
the eventual termination of approximately 900 employees.
. During 1996, the Company closed its Ris Orangis, France, parts depot and
consolidated its operations with its LePlessis-Belleville, France, parts
depot.
. During 1996, Case closed its Vierzon, France, facility and transferred
loader/backhoe production to its Crepy, France, facility. Case employed
approximately 275 people at the Vierzon facility.
. Case adopted SFAS No. 121 effective January 1, 1996. Adoption of this
standard did not have a material impact on the Company's results of
operations as impaired assets, as defined, had previously been recorded
at fair value. Of the remaining $24 million of restructuring reserves for
property, plant and equipment at December 31, 1996, $3 million is
attributed to assets that will be held for sale in 1997 and $21 million
is attributed to assets currently in use that will ultimately be disposed
of.
The 1992 Restructuring Program is expected to be substantially completed by
December 31, 1997. The Company believes that the remaining reserves should be
adequate to carry out the remaining activities under the 1992 Restructuring
Program. The Company estimates that total cash expenditures of approximately
$480 million will be required to implement the 1992 Restructuring Program, of
which approximately $232 million has been expended through December 31, 1996.
These cash costs do not give effect to cash proceeds generated in the course
of implementing the 1992 Restructuring Program.
The Company believes that the successful completion of the 1992
Restructuring Program will enhance its pre-tax income and pre-tax operating
cash flow through cost reductions by year-end 1997 by approximately $200
million annually over 1992 cost levels. The preceding sentence and the cost
savings estimates contained herein are forward-looking statements, and the
actual cost reductions could differ materially based on the factors discussed
in this paragraph. Approximately 75% of these cost reductions have been
realized through 1996. The remaining cost reductions are expected to be
realized through a reduction of personnel, elimination of costs directly
associated with the manufacture and distribution of discontinued products, a
decrease in costs associated with assembly as a result of capacity reductions,
reduced depreciation expense and the purchase of components at prices lower
than the costs that would have been incurred to manufacture them. The
Company's estimates of annual cost savings from the foregoing are based on the
timely implementation of activities already identified by the Company and the
achievement of projected levels of unit production and operating efficiency.
The 1992 Restructuring Program is highly complex, and effective implementation
continues to be a major undertaking. While the Company is committed to
successfully completing the 1992 Restructuring Program, there can be no
assurance that all of the objectives of the 1992 Restructuring Program or the
Company's estimates of annual savings will be achieved. The specific
restructuring measures and associated estimated costs were based on
management's best business judgment under prevailing circumstances and on
assumptions that have been and may continue to be revised over time and as
circumstances change. As of December 31, 1996, the expected benefits from the
restructuring actions are generally as originally contemplated.
18
<PAGE>
RESULTS OF OPERATIONS
In conjunction with the Reorganization, Case changed its definitions of "Case
Industrial" and "Case Credit." Historically, the Case Business reflected the
combination of all wholesale (dealer) finance and retail credit operations
under the heading of "Case Credit." After the Reorganization, the wholesale
(dealer) finance operations are included in Case Industrial's operations, and
"Case Credit" consists of Case's wholly owned retail credit subsidiaries. The
following reclassified statements of income show what Case's 1994 results of
operations would have been had Case Industrial and Case Credit historically
been reported consistently with the method used after the Reorganization. Net
income per share of common stock is computed based upon historical income and
assumes 70 million common shares outstanding and payment of preferred stock
dividends for all periods prior to June 24, 1994.
RECLASSIFIED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
CONSOLIDATED AND
COMBINED CASE INDUSTRIAL CASE CREDIT
---------------------- ---------------------- ---------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
------ ------ ------ ------ ------ ------ ---- ---- ----
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales............. $5,176 $4,937 $4,262 $5,176 $4,937 $4,262 $-- $-- $--
Interest income and
other................ 233 168 143 63 67 47 244 217 184
------ ------ ------ ------ ------ ------ ---- ---- ----
5,409 5,105 4,405 5,239 5,004 4,309 244 217 184
Costs and Expenses:
Cost of goods sold.... 3,953 3,779 3,260 3,953 3,779 3,260 -- -- --
Selling, general and
administrative....... 544 553 576 589 639 645 27 27 21
Research, development
and engineering...... 193 156 127 193 156 127 -- -- --
Interest expense...... 160 174 160 90 135 104 72 42 56
Other, net............ 25 16 24 13 15 32 12 1 (10)
------ ------ ------ ------ ------ ------ ---- ---- ----
4,875 4,678 4,147 4,838 4,724 4,168 111 70 67
Income before taxes and
cumulative effect of
changes in accounting
principles and
extraordinary loss..... 534 427 258 401 280 141 133 147 117
Income tax provision.... 185 81 93 140 28 46 45 53 47
------ ------ ------ ------ ------ ------ ---- ---- ----
Income before cumulative
effect of changes in
accounting principles
and extraordinary loss. 349 346 165 261 252 95 88 94 70
Equity in income--Case
Credit................. -- -- -- 88 94 70 -- -- --
------ ------ ------ ------ ------ ------ ---- ---- ----
Income before cumulative
effect of changes in
accounting principles
and extraordinary loss. 349 346 165 349 346 165 88 94 70
Cumulative effect of
changes in accounting
principles............. -- (9) (29) -- (9) (29) -- -- --
Extraordinary loss...... (33) -- (5) (33) -- (5) (3) -- --
------ ------ ------ ------ ------ ------ ---- ---- ----
Net income.......... $ 316 $ 337 $ 131 $ 316 $ 337 $ 131 $ 85 $ 94 $ 70
====== ====== ====== ====== ====== ====== ==== ==== ====
Preferred stock
dividends.............. 7 7 7
------ ------ ------
Net income to common.... $ 309 $ 330 $ 124
====== ====== ======
Per share data:
Income per share of
common stock after
preferred stock
dividends and before
cumulative effect of
changes in accounting
principles and
extraordinary loss..... $ 4.61 $ 4.72 $ 2.26
====== ====== ======
Net income per share of
common stock........... $ 4.17 $ 4.60 $ 1.77
====== ====== ======
Fully diluted net income
per share of
common stock........... $ 4.06 $ 4.44 N.A.
====== ====== ======
</TABLE>
19
<PAGE>
1996 Compared to 1995
Earnings
The Company recorded income before cumulative effect of changes in
accounting principles and extraordinary loss of $349 million in 1996 compared
to $346 million in 1995. Earnings per share of common stock after preferred
stock dividends and before accounting changes and extraordinary loss for 1996
was $4.61 per share compared to $4.72 per share in 1995 reflecting an increase
in the average common shares outstanding, including common stock equivalents,
from 71.8 million shares in 1995 to 74.0 million shares in 1996.
Net income in 1996 was $316 million, with earnings per share of $4.17,
versus net income and earnings per share of $337 million and $4.60,
respectively, in 1995. In 1996 the Company incurred an extraordinary loss of
$33 million, after tax. In January 1996, the Company repurchased for cash all
of its 10 1/2% Senior Subordinated Notes. As a result of the repurchase, Case
recorded an extraordinary loss of $22 million, after tax, in the first quarter
of 1996. In August 1996, the Company established new credit facilities
consisting of $3.4 billion in lines of credit and liquidity facilities. In
conjunction with this refinancing, the Company recorded an $11 million
extraordinary, after-tax charge for the write-off of unamortized bank fees
related to the original bank agreements established at the time of the
Company's initial public offering. Effective January 1, 1995, Case adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," for its non-U.S. plans. The cumulative effect of adopting this
standard was to decrease net income by $9 million, after tax, in the first
quarter of 1995.
The Company's industrial operations recorded income before cumulative effect
of changes in accounting principles, extraordinary loss and equity income of
Case Credit of $261 million in 1996, a $9 million earnings improvement from
$252 million in 1995. Case Credit recorded income, before extraordinary items,
of $88 million in 1996, $6 million less than the $94 million reported in 1995.
Case's operating earnings for 1996 were $579 million versus $509 million in
1995, an increase of 14%. Case defines operating earnings as industrial
earnings before interest, taxes, changes in accounting principles and
extraordinary loss, including the income of Case Credit on an equity basis.
Case's operating earnings for the year were up $94 million or 19%, excluding a
$24 million pre-tax gain on the sale of the Viscosity Oil business in 1995.
Case's earnings improvement was primarily the result of improved pricing and
internal cost reductions resulting from restructuring-related actions. These
improvements were partially offset by the effects of inflation and higher
research and development spending.
A reconciliation of the Company's industrial net income to operating
earnings is as follows (in millions):
<TABLE>
<CAPTION>
CASE
INDUSTRIAL
-----------
YEARS ENDED
DECEMBER
31,
-----------
1996 1995
----- -----
<S> <C> <C>
Income before cumulative effect of changes in accounting
principles
and extraordinary loss...................................... $ 349 $ 346
Income tax provision......................................... 140 28
Interest expense............................................. 90 135
----- -----
Operating earnings....................................... $ 579 $ 509
===== =====
</TABLE>
Revenues
On a consolidated basis, worldwide revenues increased $304 million in 1996
to $5,409 million. Net sales of equipment and parts increased 5% to $5,176
million. The improvement in net sales is attributable to a 5% volume increase,
primarily due to the Company's acquisition activity in 1996, and a 3%
improvement in price realization partially offset by a 2% decrease due to
retail store divestitures and a 1% deterioration resulting from the impact
20
<PAGE>
of foreign exchange. Excluding the impact of acquisitions in 1996, year-over-
year net sales increased slightly. Strong retail demand for agricultural and
construction equipment in both the Asia Pacific and Latin American regions
contributed to the overall sales increase. Net sales in 1996 increased 62% in
the Company's emerging markets and 3% in Europe, while decreasing 3% in North
America from 1995 levels. Worldwide net sales of agricultural equipment
increased 11%, while construction equipment net sales decreased 5%.
The Company completed four strategic business acquisitions in 1996. In
January 1996, the Company acquired Concord, Inc. ("Concord"), a manufacturer
of air drills based in Fargo, North Dakota. In the second quarter of 1996, the
Company's Australian subsidiary completed the purchase of all of the
outstanding shares of Austoft Holdings Limited ("Austoft"), the world's
largest manufacturer of sugar cane harvesting equipment. Austoft is based in
Bundaberg, Australia. In August 1996, the Company acquired 75% of Steyr
Landmaschinentechnik AG ("Steyr"), an Austrian tractor manufacturer whose
tractors are recognized for their superior performance in mountainous regions.
In October 1996, Case acquired Fermec Holdings Limited ("Fermec"), a
construction equipment manufacturer based in Manchester, United Kingdom.
Fermec's products include loader/backhoes, mini-excavators, skid steer loaders
and industrial tractors. The acquisition of these businesses is part of the
Company's long-term goal to increase profitability. The Company reported
combined net sales of approximately $190 million in 1996 as a result of these
acquisitions.
Worldwide net sales of agricultural equipment increased 11% in 1996 as
compared to 1995 levels. The increase in sales of agricultural equipment in
Europe was driven by significant increases in sales of combines, four-wheel
drive tractors and MAGNUM(TM) tractors (120-plus horsepower). In Case's other
international markets, the increase in agricultural equipment sales resulted
from significant increases in sales of MAGNUM(TM) and four-wheel drive
tractors, combines, sugar cane harvesters and cotton pickers. Sales in the
Asia Pacific region were particularly strong due to improved crop prices and
favorable weather conditions. In North America, the Company's progress in
implementing its supply chain management initiatives has enabled Case to lower
production relative to retail demand as compared to 1995 levels, resulting in
lower wholesale (dealer) sales. As a result, Case reported lower net sales of
agricultural equipment in 1996 than would have been reported had production
levels relative to retail demand remained constant with 1995 levels. In the
near-term, Case's supply chain management initiative will continue to impact
the Company's North American operating results. Excluding the impact of
acquisitions, worldwide net sales of agricultural equipment increased 7% in
1996 as compared to the prior year.
Worldwide net sales of construction equipment decreased 5% in 1996 as
compared to 1995 levels. In Europe, the decrease in construction equipment
sales reflects the continued weakness of the European construction equipment
market, particularly in France and Germany. In North America, construction
equipment sales were impacted by the Company's supply chain management
initiatives, which enabled Case to lower production relative to retail demand
as compared to 1995 levels. As a result, Case reported lower net sales of
construction equipment in 1996 than would have been reported had production
levels relative to retail demand remained constant with 1995 levels. In the
near-term, Case's supply chain management initiative will continue to impact
the Company's North American operating results. In Case's other international
markets, sales of construction equipment increased due to increases in sales
of loader/backhoes, crawlers and trenchers in the Asia Pacific and Latin
American regions, along with improvements in the Brazilian economy as compared
to 1995. Excluding the impact of acquisitions, worldwide net sales of
construction equipment decreased 7% in 1996 as compared to the prior year.
Costs and Expenses
Cost of goods sold for the industrial operations increased $174 million to
$3,953 million in 1996 as compared to 1995. The increase in cost of goods sold
is primarily due to higher sales volume. Gross margin increased slightly in
1996 reflecting volume-related production efficiencies, improved price
realization and benefits from cost-reduction initiatives partially offset by
lower margins resulting from changes in geographic and product lines sales mix
and acquisition related sales. Selling, general and administrative expenses
for the industrial operations decreased $50 million in 1996 to $589 million.
As a percentage of net sales, selling, general
21
<PAGE>
and administrative expenses improved to 11.4% in 1996 from 12.9% in 1995. This
decrease reflects lower retail selling expenses as a result of restructuring-
related sales of company-owned retail stores, partially offset by the addition
of selling, general and administrative expenses for Concord, Austoft, Steyr
and Fermec. In addition, selling expenses related to the low-rate and other
sales financing programs have also decreased in 1996 as compared to 1995. Case
Industrial makes payment to Case Credit in an amount equal to the difference
between the rate actually paid by retail customers and the rate charged by
Case Credit. These payments are included in selling, general and
administrative expenses of Case Industrial and are eliminated to arrive at
consolidated selling, general and administrative expenses.
Research, development and engineering expenses increased 24% to $193
million, primarily in support of new product development. These increased
expenditures, including the introduction of more than 20 new agricultural
products, completed the largest product launch in the Company's history.
Interest expense for Case's industrial company was $90 million in 1996
versus $135 million in 1995. The decrease in interest expense related
primarily to lower average debt levels in 1996 as compared to 1995, and to
strategic refinancing actions taken during the year.
The consolidated income tax provision for 1996 was $185 million compared to
$81 million for 1995. The Company's 1996 effective tax rate of 35% was equal
to the U.S. statutory tax rate. The Company's effective tax rate was impacted
by a reduction in tax valuation reserves, the recognition of research and
development tax credits, and tax savings related to the Company's foreign
sales corporation, offset by state income taxes, foreign losses with no tax
benefit, and foreign income taxed at different rates. In 1995, the Company's
effective tax rate of 19% was significantly lower than the U.S. statutory tax
rate primarily due to a reduction in the tax valuation reserve in 1995 that
resulted from income generated in certain tax jurisdictions.
Credit Operations
Case Credit recorded net income for 1996 of $85 million as compared to $94
million for 1995. The $9 million decrease is primarily due to increased
interest expense as a result of maintaining higher average debt levels
necessary to fund the growth in both the finance lease and operating lease
equipment programs. In addition, Case Credit's 1996 net income was lower as a
result of lower interest rate margins on the sale of retail notes under asset-
backed securitization ("ABS") transactions. Net income also included a $3
million extraordinary, after-tax charge to write-off unamortized bank fees in
conjunction with the refinancing of the Company's credit facilities in the
third quarter of 1996.
Case Credit reported total revenues of $244 million for 1996, a 12% increase
over the $217 million of revenues reported for 1995. Finance income earned on
retail notes and finance leases increased 90% to $59 million in 1996 as
compared to the same period in 1995 due to higher average receivable levels,
including a growing finance lease portfolio. The increase was also a result of
Case Credit originating a greater percentage of full-rate contracts, which
decreased the interest income from Case. Lease income increased $12 million to
a total of $16 million for 1996, reflecting the growth in Case Credit's
equipment leasing program. Net gain on the sale of retail notes in ABS
transactions decreased as a result of lower interest rate margins.
Operating expenses for Case Credit increased $11 million to a total of $39
million in 1996 as compared to 1995. This increase primarily resulted from a
$7 million increase in depreciation expense for equipment on operating leases
as well as an increase in administrative and operating expenses.
Case Credit's interest expense for 1996 was $72 million, up $30 million from
the $42 million reported in 1995. The increased interest expense resulted from
higher average debt levels during 1996 as compared to 1995 due to the timing
of ABS transactions, growth in the finance lease portfolio and increased
equipment on operating leases.
As of December 31, 1996, Case Credit's serviced portfolio of receivables
increased 14% over the same time last year to a record $4.3 billion. Gross
receivables acquired in 1996 increased 11% for a total of $2.6 billion
22
<PAGE>
versus the same period in 1995. The growth in acquisitions reflects the strong
demand for both new and used equipment, as well as the increased marketing
efforts of Case Credit. Portfolio losses were $3 million in both 1996 and
1995, resulting in a loss to liquidation ratio of 0.15% in 1996 and 0.21% in
1995. Case Credit sold $1,638 million and $1,469 million of retail notes in
ABS transactions during 1996 and 1995, respectively. At December 31, 1996,
Case Credit retained approximately $400 million of additional retail notes and
leases as compared to December 31, 1995.
1995 Compared to 1994
Earnings
The Company recorded income before cumulative effect of changes in
accounting principles and extraordinary loss of $346 million in 1995. This is
more than double the $165 million of income recorded in 1994. Earnings per
share of common stock after preferred stock dividends and before accounting
changes and extraordinary loss for 1995 was $4.72 per share compared to $2.26
per share in 1994, assuming 70 million shares outstanding and payment of
preferred stock dividends for all periods prior to June 24, 1994.
Net income in 1995 was $337 million, with earnings per share of $4.60,
versus net income and earnings per share of $131 million and $1.77,
respectively, in 1994, assuming 70 million shares outstanding and payment of
preferred stock dividends for all periods prior to June 24, 1994. Effective
January 1, 1995, Case adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," for its non-U.S. plans.
Effective January 1, 1994, Case adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." The cumulative effects of adopting these
standards were to decrease net income by $9 million and $29 million, after
tax, in 1995 and 1994, respectively. In the second quarter of 1994, in
conjunction with the Reorganization, Case prepaid approximately $519 million
of high interest-bearing debt. The Company recorded an extraordinary loss of
$5 million, after tax, for the redemption premium resulting from these
transactions.
The Company's industrial operations recorded income before cumulative effect
of changes in accounting principles, extraordinary loss and equity income of
Case Credit of $252 million in 1995, a $157 million earnings improvement from
$95 million in 1994. Case Credit recorded $94 million in net income in 1995,
$24 million more than net income of $70 million in 1994.
Case's operating earnings for 1995 were $509 million versus $315 million in
1994. Case defines operating earnings as industrial earnings before interest,
taxes, changes in accounting principles and extraordinary loss, including the
income of Case Credit on an equity basis. Case's earnings improvement was
primarily the result of higher sales volumes, improved pricing, internal cost
reductions resulting from restructuring-related actions, higher income from
Case Credit and a gain on the sale of the Viscosity Oil business. These
improvements were partially offset by the effects of inflation, higher
manufacturing costs associated with new product launches, higher research and
development spending and charges related to the $400 million revolving
wholesale receivable securitization facility.
A reconciliation of the Company's industrial net income to operating
earnings is as follows (in millions):
<TABLE>
<CAPTION>
CASE
INDUSTRIAL
-----------
YEARS ENDED
DECEMBER
31,
-----------
1995 1994
----- -----
<S> <C> <C>
Income before cumulative effect of changes in accounting
principles
and extraordinary loss...................................... $ 346 $ 165
Income tax provision......................................... 28 46
Interest expense............................................. 135 104
----- -----
Operating earnings....................................... $ 509 $ 315
===== =====
</TABLE>
23
<PAGE>
Revenues
On a consolidated basis, worldwide revenues increased $700 million in 1995
to $5,105 million. Net sales of equipment and parts increased 16% to $4,937
million. The improvement in net sales is attributable to a 9% increase in
volume, a 4% improvement in price realization and a 3% foreign exchange rate
impact. Strong retail demand for agricultural and construction equipment in
both North America and Europe drove the volume increase. Net sales in 1995
increased 12% in North America, 30% in Europe and 4% in the Company's other
international markets over 1994 levels. Worldwide net sales of agricultural
equipment increased 19%, while construction equipment net sales increased 21%.
Worldwide net sales of agricultural equipment increased 19% in 1995 as
compared to 1994 levels. The increase in sales of agricultural equipment in
North America was primarily driven by increased sales of four-wheel drive
tractors and combines, partially offset by decreases in sales of Case row-crop
tractors. The increase in European agricultural equipment sales resulted from
significant increases in both 40-plus horsepower tractors and MAGNUM(TM)
tractors (120-plus horsepower). In Case's other international markets, the
increase in agricultural equipment sales reflects the completion of a $45
million sale of combines to Turkmenistan along with an increase in sales of
four-wheel drive tractors resulting from the introduction of Case's new 9300
series STEIGER(R) tractor in Australia/New Zealand.
Worldwide net sales of construction equipment increased 21% in 1995 as
compared to 1994 levels. In North America, the increase in construction
equipment sales was led by the loader/backhoe. The success of the Case
loader/backhoe, the Company's largest construction equipment product line,
reflects both strong demand for the product and limited availability during
1994, due to the new product change-over. Other product lines contributing to
the sales increase in North America include skid steers, excavators and wheel
loaders. The increase in construction equipment sales in Europe reflects sales
increases in excavators, loader/backhoes, wheel loaders and skid steers. In
Case's other international markets, net sales of construction equipment in
1995 were lower than the prior year as a result of weak economic conditions in
Brazil, Case's largest market in the region.
Costs and Expenses
Cost of goods sold for the industrial operations increased $519 million to
$3,779 million in 1995 as compared to 1994. The increase in cost of goods sold
is primarily due to higher sales volume. Cost of goods sold as a percentage of
net sales remained constant at approximately 76% in 1995. This reflects a
shift in the geographic mix of net sales to Europe versus North America and
inflationary cost increases offset by volume-related production efficiencies,
improved price realization and benefits from cost-reduction initiatives.
Selling, general and administrative expenses for the industrial operations
decreased $6 million in 1995 to $639 million. As a percentage of net sales,
selling, general and administrative expenses improved to 13% in 1995 from 15%
in 1994. This decrease as a percentage of net sales reflects lower retail
selling expenses as a result of restructuring-related sales of company-owned
retail stores partially offset by increased payments to Case Credit related to
low-rate financing of retail notes. Case Industrial makes payments to Case
Credit in an amount equal to the difference between the rate actually paid by
retail customers and the rate charged by Case Credit. These payments are
included in selling, general and administrative expenses of Case Industrial
and are eliminated to arrive at consolidated selling, general and
administrative expenses. The increased expense resulted from a higher volume
of notes processed and the timing and size of ABS transactions.
Research, development and engineering expenses increased 23% in 1995 to $156
million. The increased expenditures primarily supported new product
development.
Interest expense for Case's industrial company was $135 million in 1995
versus $104 million in 1994. The increase in interest expense relates
primarily to higher average debt levels and higher effective interest rates.
24
<PAGE>
In 1995, the Company recognized $27 million in charges related to the
revolving wholesale receivable securitization facility. Also during 1995, the
Company recognized a one-time gain of $24 million on the sale of the Viscosity
Oil business. In 1994, the Company deemed a portion of the restructuring
reserve to be excessive, and reversed $16 million ($9 million after tax) to
income. These amounts are included in "Other, net" on the income statement for
the respective periods.
The consolidated income tax provision for 1995 was $81 million compared to
$93 million for 1994. The Company's 1995 effective tax rate of 19% was lower
than the U.S. statutory tax rate of 35% primarily due to reductions in the tax
valuation reserve resulting from income being generated in certain tax
jurisdictions. The tax provision as a percentage of pre-tax income for 1994 is
slightly higher than the U.S. statutory tax rate primarily due to foreign
losses for which no income tax benefit has been recorded, partially offset by
reductions in the tax valuation reserve.
Credit Operations
Case Credit recorded net income of $94 million in 1995, versus $70 million
for 1994. Revenues in 1995 were $217 million, compared to $184 million for
1994. The increase in revenues is primarily due to higher gains on the sale of
retail receivables to limited-purpose business trusts in connection with ABS
transactions amounting to $45 million and higher securitization and servicing
fee income of $30 million. These increases were partially offset by lower
finance income earned on retail receivables due to Tenneco's retention of $1.1
billion of U.S. retail receivables at the time of the Reorganization..
Interest expense for 1995 declined by 25% from $56 million in 1994 to $42
million in 1995. This decrease is due to a reduction of debt levels as a result
of the retention of $1.1 billion of U.S. retail receivables and the utilization
of ABS transactions. Income tax expense in 1995 includes a $9 million benefit
related to reductions in the tax valuation reserve.
Case Credit successfully built its North American portfolio in 1995. Gross
portfolio acquisitions for 1995 were up 23% over 1994, while losses (including
losses charged to dealers and losses absorbed by trusts) declined to $3 million
in 1995 from $6 million in 1994. This represents a loss to liquidation ratio of
0.2% for 1995, versus 0.4% in 1994. Improvements can be attributed to improved
collection activities, higher resale value of equipment and a generally strong
economy.
LIQUIDITY AND CAPITAL RESOURCES
The discussion of liquidity and capital resources focuses on the consolidated
balance sheets and statements of cash flows. Case's industrial operations are
capital intensive and subject to seasonal variations in financing requirements
for dealer receivables and inventories. Whenever necessary, funds provided from
operations are supplemented from external sources.
1996 Compared to 1995
In August 1996, the Company established new credit facilities consisting of
$3.4 billion in lines of credit and liquidity facilities. Of the $3.4 billion
total, $2.3 billion of the credit facilities benefit Case Credit and its
Canadian subsidiary, and include a five-year, $1.2 billion revolving credit
facility. The remaining $1.1 billion of credit facilities are used to support
the Company's industrial operations. These facilities replace borrowing
agreements originally established at the time of the Company's initial public
offering in June 1994. The new agreements were negotiated at more favorable
terms and rates for the Company than the previous credit facilities. In
November 1996, Case Credit established a $1.2 billion commercial paper program.
Under the terms of the program, the principal amount of the commercial paper
outstanding, combined with the amounts outstanding under Case Credit's five-
year, $1.2 billion revolving credit facility, cannot exceed a total of $1.2
billion.
25
<PAGE>
Cash provided by operating activities was $132 million in 1996. Cash provided
by the industrial operations was $464 million, versus $752 million in 1995.
Cash used by Case Credit was $292 million in 1996 as compared to $477 million
in 1995. The net cash generated from operating activities in 1996 was primarily
due to operating income partially offset by cash used to support increases in
retail receivables and cash used for restructuring activities. The net increase
in receivables is largely due to Case Credit's retention of a larger percentage
of receivables as opposed to selling those receivables under ABS transactions.
In 1995, cash provided by industrial operating activities of $752 million
included the impact of the sale of $400 million of wholesale receivables to a
revolving ABS facility.
Case invested $162 million and $115 million in property, plant and equipment,
during 1996 and 1995, respectively. Proceeds from the sale of businesses and
assets were $27 million and $70 million in 1996 and 1995, respectively. Of the
$70 million in proceeds received in 1995, $34 million related to the cash
proceeds received from the sale of the Viscosity Oil business. During 1996,
Case invested $147 million of cash and an additional $27 million in non-cash
consideration to acquire the businesses of Concord, Austoft, Steyr and Fermec.
Case also assumed additional debt and other liabilities of approximately $244
million in conjunction with these acquisitions.
The Company issued 566,100 shares of its common stock in conjunction with an
over-allotment option exercised by the underwriters of a 15.2 million share
offering of Case shares held by Tenneco Inc. in the first quarter of 1996. The
Company received approximately $30 million in proceeds from the exercise of the
over-allotment options, which were offered at $53.75 per share. The equity
offering fully divested Tenneco of its holdings in Case. Also during the first
quarter of 1996, the Company issued 125,812 shares of its common stock in
conjunction with the acquisition of Concord. Throughout 1996, the Company
issued common stock in conjunction with various employee benefit plans and the
exercise of stock options.
The Company received proceeds from the issuance of long-term debt of $500
million during the first quarter of 1996. In January, the Company issued $300
million aggregate principal amount of its 7 1/4% unsecured and unsubordinated
notes due 2016. In February, Case Credit issued $200 million aggregate
principal amount of its 6 1/8% unsecured and unsubordinated notes due 2003
pursuant to a $300 million shelf registration statement filed with the
Securities and Exchange Commission in 1995. The net proceeds from the Case
Credit offering were used to repay indebtedness and finance Case Credit's
growing portfolio of receivables.
During 1996, Case repaid $647 million of long-term debt. Of this $647
million, approximately $324 million related to the repayment in full of the
$1.0 billion term loan established at the time of the Company's initial public
offering in June 1994. The proceeds from the $300 million note offering,
together with cash and additional borrowings under the Company's credit
facilities, were used to exercise the Company's option to repurchase for cash
all of the Company's 10 1/2% Senior Subordinated Notes and to pay accrued
interest thereon. Amounts outstanding under short-term debt and revolving
credit facilities increased $225 million during 1996. The $225 million net
increase in short-term debt and revolving credit facilities was used, in part,
to support the increase in retail receivables.
Total debt at December 31, 1996, was $2,130 million, $1,244 million of which
related to Case Credit. The consolidated debt to capitalization ratio, defined
as total debt divided by the sum of total debt, stockholders' equity and
preferred stock with mandatory redemption provisions, was 51.8% at December 31,
1996, and the Company's industrial debt to capitalization ratio was 30.9%. The
consolidated and industrial ratios at December 31, 1995, were 54.9% and 39.3%,
respectively.
1995 Compared to 1994
Cash provided by operating activities was $182 million in 1995. The cash
generated from operating activities in 1995 was primarily due to operating
income partially offset by cash used to support increases in retail
receivables. The net increase in wholesale (dealer) receivables and retail
receivables in 1995 includes the sale of approximately $400 million wholesale
(dealer) receivables and $1,469 million retail receivables in ABS transactions.
Cash generated from operating activities in 1994 was $275 million, primarily
due to operating income.
26
<PAGE>
Case invested $115 million and $124 million in property, plant and
equipment, during 1995 and 1994, respectively. Proceeds from the sale of
businesses and assets were $70 million and $78 million in 1995 and 1994,
respectively. Of the $70 million in proceeds in 1995, $34 million related to
the cash proceeds received from the sale of the Viscosity Oil business. The
$1,500 million use of cash for investing activities in 1994 related primarily
to the payment of the Demand Notes to Tenneco and its affiliates in connection
with the Reorganization.
During 1995, Case repaid $681 million of long-term debt. This consisted of a
$300 million payment using a portion of the proceeds from the sale of
wholesale (dealer) receivables, a $296 million payment using the proceeds from
the issuance of 7 1/4% notes and other payments of $85 million. Amounts
outstanding under short-term debt and revolving credit facilities increased
$326 million during 1995. The $326 million net increase in short-term debt and
revolving credit facilities was used to support the increase in retail
receivables. In 1994, Case repaid $1,019 million of high interest-bearing
debt, received $503 million in cash transfers from Tenneco in anticipation of
the Reorganization, received net proceeds of $983 million from the issuance of
the term loan and had net increases in short-term debt and revolving credit
facilities of $795 million.
Total debt at December 31, 1995, was $1,941 million, $908 million of which
related to Case Credit. The consolidated debt to capitalization ratio, defined
as total debt divided by the sum of total debt, stockholders' equity and
preferred stock with mandatory redemption provisions, was 54.9% at December
31, 1995, and the Company's industrial debt to capitalization ratio was 39.3%.
The consolidated and industrial ratios at December 31, 1994, were 61.0% and
56.6%, respectively.
Future Liquidity and Capital Resources
During 1996, the Company established new credit facilities and entered into
certain other facilities resulting in the following facilities being available
at December 31, 1996:
(i) a five-year, $1.2 billion revolving credit facility for Case Credit
Corporation that expires in August 2001, with $724 million available
at December 31, 1996;
(ii) a three-year, $750 million U.S. asset-backed commercial paper
liquidity facility for Case Credit Corporation that expires in
August 1999, with $658 million available at December 31, 1996;
(iii) a five-year, C$500 million revolving credit facility for Case
Credit Ltd. that expires in August 2001, with C$158 million available
at December 31, 1996;
(iv) a five-year, $1.1 billion revolving credit facility for Case
Corporation that expires in August 2001, with $1.1 billion available
at December 31, 1996; and
(v) an A$402 million revolving credit facility for the Company's
Australian subsidiaries with various expiration dates thru 1998,
including A$250 million for Case Credit Australia Pty Ltd, with A$52
million available at December 31, 1996, and A$152 million for Case
Corporation Pty Ltd, with A$67 million available at December 31,
1996.
Pursuant to a support agreement for Case Credit, the Company has agreed to
maintain its ownership in, and provide financial backing for, Case Credit.
In November 1996, Case Credit Corporation established a $1.2 billion
commercial paper program. Under the terms of the program, the principal amount
of the commercial paper outstanding, combined with the amounts outstanding
under Case Credit Corporation's five-year, $1.2 billion revolving credit
facility mentioned above, cannot exceed a total of $1.2 billion.
In addition to the above availability, the Company has other sources of
future liquidity including the asset-backed securities markets in the United
States and Canada, public debt offerings, and other local lines of credit not
mentioned above. As previously mentioned, the Company has a $400 million
private, revolving wholesale (dealer) receivable ABS facility that can be
utilized to periodically sell wholesale receivables to third-party investors.
27
<PAGE>
Case estimates that for 1997 and 1998, capital expenditures and other
investments amounting to $65 million in the aggregate will be required to
complete projects authorized as of December 31, 1996, for which substantial
commitments by the Company have been made. These commitments are expected to
be funded with cash flows from operations and additional borrowings.
The Company estimates that cash outlays for restructuring will approximate
$160 million in 1997. The Company anticipates that such funding will be
derived from continuing operations and proceeds from the disposal of fixed
assets under the restructuring program.
Outlook
Solid customer demand and strong underlying economic fundamentals provide a
positive outlook for Case's agricultural and construction equipment markets in
1997.
In the agricultural sector, worldwide demand for grains and other
agricultural products is expected to continue to grow, and while grain stock
levels improved during 1996, they are expected to remain at the low range of
normal operating levels for the next two years. As a result, commodity prices
are expected to remain favorable in 1997. In North America, 1996 net farm
income is expected to be at record levels and indications are that farm
balance sheets are in good condition. Further, U.S. farmers are now free to
plant in response to market conditions under the "Freedom to Farm Act," which
should result in increased market efficiencies. All of these factors, together
with $7.6 billion in government farm subsidies forecasted by the United States
Department of Agriculture for 1997, will give farmers the ability to invest in
new products and new technology to increase productivity.
The construction equipment sector is gaining strength in the United Kingdom
and Australia, while maintaining favorable levels in North America. Housing
starts are generally increasing in these markets. However, elsewhere in
Europe, the Company believes that France and Germany could continue to
experience significant weakness until economic growth and construction
spending resume.
In Latin America, economic conditions in Brazil have greatly improved and
retail sales of construction equipment are expected to be stronger.
Consistent with 1996, Case anticipates that unit production and wholesale
sales will be at or below retail demand for all of 1997 as part of the
Company's continuing supply chain management initiative. Moreover, in the
first quarter of 1997, preparation for significant new product introductions
will result in lower production of certain of the Company's products than in
the first quarter of 1996, with no adverse impact expected on full year
production schedules.
The information included in this "Outlook" section represents forward-
looking statements and involves risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. The Company's outlook is predominantly based on its interpretation
of what it considers key economic assumptions. Crop production and commodity
prices are strongly affected by weather and can fluctuate significantly.
Housing starts and other construction activity are sensitive to interest rates
and government spending. Some of the other significant factors for the Company
include general economic conditions, the cyclical nature of its business,
foreign currency movements, the Company's access to credit, political
uncertainty and civil unrest in various areas of the world, pricing, product
initiatives and other actions taken by competitors, disruptions in production
capacity, excess inventory levels, the effect of changes in laws and
regulations (including government subsidies and international trade
regulations), changes in environmental laws and employee relations. Further
information concerning factors that could significantly impact expected
results is included in the following sections of this Form 10-K: Business--
Employees, Business--Environmental Matters, Business--Significant
International Operations, Business--Seasonality and Production Schedules,
Business--Competition, Legal Proceedings, and Management's Discussion and
Analysis of Financial Condition and Results of Operations.
28
<PAGE>
Seasonality and Production Schedules
The seasonality of farm equipment retail sales is directly affected by the
timing of major crop activities: tilling, planting and harvesting. The timing
of these activities is impacted by crop production and climate conditions. The
fourth quarter is generally the strongest demand period for retail farm
equipment sales, normally representing approximately 35% of sales by Case's
North American dealers. The weakest retail demand for Case farm equipment in
North America typically occurs in the third quarter, accounting for
approximately 15% to 20% of sales by Case's North American dealers.
Seasonal demand fluctuations for construction equipment are less significant
than those for farm equipment. Nevertheless, in North America, housing
construction slows down, especially in the Midwest and on the East Coast,
beginning in November and continuing through the first quarter. North American
retail demand for Case's construction equipment is strongest in the second and
fourth quarters, which combined represent approximately 50% to 60% of sales by
Case's North American dealers. European demand patterns are similar to those
in the United States.
Sales to independent dealers closely correspond with Case's production
levels, which are based upon its estimates of the demand for its products,
taking into account the timing of dealer shipments (which are in advance of
retail demand), dealer inventory levels, the need to shut down production to
enable manufacturing facilities to be prepared for the manufacture of new or
different models and the efficient use of manpower and facilities. The
production levels are adjusted to reflect changes in estimated demand, dealer
inventory levels, labor disruptions and other matters not within Case's
control.
Inflation
Inflation impacts the Company's business in both the costs of production and
the demand for its products.
A significant portion of the cost of Case machinery is comprised of material
costs. Therefore, material price inflation could result in increased
manufacturing costs through supplier price increases to Case. Case's ability
to recover increased supplier costs would be dependent, in part, on its
competitors' responses to these economic conditions. Manufacturing cost
increases in excess of increased pricing in the market could have an adverse
effect on Case.
Increases in inflation tend to cause higher interest rates. The demand for
farm and, to a greater extent, construction equipment is negatively impacted
by high interest rates. As interest rates on farm debt escalate, farmers tend
to delay equipment purchases. Case's construction equipment business is
heavily tied to the housing construction sector, and in the face of rising
mortgage rates, potential homeowners tend to delay purchases. Increases in the
level of worldwide inflation could have a negative effect on the level of
demand for farm and construction equipment.
Environmental Matters
The Company's operations are subject to stringent environmental regulation
by governmental authorities. Although the Company has a program designed to
implement environmental management practices and compliance and has reserved
for environmental liabilities, it is possible that developments, such as
increasingly strict environmental laws, regulations and enforcement policies
or claims for damages to property, employees, other persons and the
environment resulting from the Company's operations, could result in future
costs and liabilities that may exceed the range currently anticipated by the
Company. As it has done in the past, the Company intends to fund its cost of
environmental compliance from operating cash flows. Also see Note 15 to the
Case Financial Statements.
Foreign Currency Risk Management
The Company has significant manufacturing operations in the United States,
France, Germany and the United Kingdom. For the most part, Case's products and
components are only produced at a single
29
<PAGE>
manufacturing facility. As a result, significant volumes of finished goods and
components are exported to other countries. In addition, the Company buys
finished products from Germany, Italy and Japan for sale through its
distribution network. For goods purchased from other Case affiliates, the
Company denominates the transaction in the functional currency of the
producing nation. Large volume purchase agreements for products purchased from
third parties normally contain currency risk sharing clauses that limit the
amount of exposure from currency fluctuations. Foreign exchange transaction
gains/(losses) were $(5) million, $(2) million and $4 million, for the years
ended December 31, 1996, 1995 and 1994, respectively.
The Company has adopted the following guidelines to manage its foreign
exchange exposures:
(i) increase the predictability of costs associated with goods whose
purchase price is not denominated in the functional currency of the
buyer;
(ii) minimize the cost of hedging through use of naturally offsetting
positions; and
(iii) where possible, sell product in the functional currency of the
producing operation.
The Company's identifiable exposures for fluctuations in exchange rates of
foreign currencies result primarily from accounts receivable, accounts
payable, or cash outflows that are denominated in foreign currencies due to
scheduled cash remittances. The Company identifies naturally occurring
offsetting positions and then purchases forward contracts for the residual
exposures. For further information regarding Case's foreign currency risk
management, see Note 11 to the Case Financial Statements.
Interest Rate Risk Management
The Company has implemented an interest rate risk management program with
respect to a portion of the credit facilities, which carry a floating rate of
interest. The program is within guidelines of the policies approved by the
Board of Directors to limit exposure to rising interest rates. The exact
nature, timing and size of the program is based upon the amount of debt in
Case Industrial and the Credit Companies. For further information regarding
Case's interest rate risk management, see Note 11 to the Case Financial
Statements.
30
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS OF CASE CORPORATION
AND CONSOLIDATED SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of independent public accountants.................................. 32
Statements of income for each of the three years in the period ended
December 31, 1996........................................................ 33
Balance sheets as of December 31, 1996 and 1995........................... 34
Statements of cash flows for each of the three years in the period ended
December 31, 1996........................................................ 35
Statements of changes in stockholders' equity for each of the three years
in the period ended
December 31, 1996........................................................ 36
Notes to financial statements............................................. 37
</TABLE>
31
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Case Corporation:
We have audited the accompanying consolidated balance sheets of Case
Corporation (a Delaware Corporation) and subsidiaries, formerly the Farm and
Construction Equipment Business of Tenneco Inc., as of December 31, 1996 and
1995, and the related consolidated and combined statements of income, cash
flows and changes in stockholders' equity for each of the three years in the
period ended December 31, 1996. These financial statements and the
supplemental financial statements and supplemental schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements, the supplemental financial
statements and supplemental schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Case Corporation and
subsidiaries as of December 31, 1996 and 1995, and the consolidated and
combined results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective January 1,
1995, the Company changed its method of accounting for postretirement benefits
other than pensions for its non-U.S. plans. Also, as discussed in Note 2 to
the financial statements, effective January 1, 1994, the Company changed its
method of accounting for postemployment benefits.
Our audits were made for the purpose of forming an opinion on the
consolidated and combined financial statements taken as a whole. The
supplemental financial statements of Case Industrial and Case Credit are
presented for purposes of additional analysis and are not a required part of
the consolidated and combined financial statements. This information has been
subjected to the auditing procedures applied in our audits of the consolidated
and combined financial statements and, in our opinion, is fairly stated in all
material respects in relation to the consolidated and combined financial
statements taken as a whole. Also, the supplemental schedule listed in the
index to Item 14 is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 21, 1997
32
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND
THE FARM AND CONSTRUCTION EQUIPMENT BUSINESS OF TENNECO INC.
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONSOLIDATED AND COMBINED CASE INDUSTRIAL CASE CREDIT
---------------------------- ---------------------- ---------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
-------- -------- -------- ------ ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Net sales.............. $ 5,176 $ 4,937 $ 4,262 $5,176 $4,937 $4,262 $-- $-- $--
Interest income and
other................. 233 168 143 63 67 44 244 217 233
-------- -------- -------- ------ ------ ------ ---- ---- ----
5,409 5,105 4,405 5,239 5,004 4,306 244 217 233
COSTS AND EXPENSES:
Cost of goods sold..... 3,953 3,779 3,260 3,953 3,779 3,260 -- -- --
Selling, general and
administrative........ 544 553 576 589 639 682 27 27 15
Research, development
and engineering....... 193 156 127 193 156 127 -- -- --
Restructuring credit... -- -- (16) -- -- (16) -- -- --
Interest expense....... 160 174 160 90 135 87 72 42 88
Other, net............. 25 16 40 13 15 48 12 1 (10)
-------- -------- -------- ------ ------ ------ ---- ---- ----
4,875 4,678 4,147 4,838 4,724 4,188 111 70 93
Income before taxes and
cumulative effect of
changes in accounting
principles and
extraordinary loss..... 534 427 258 401 280 118 133 147 140
Income tax provision.... 185 81 93 140 28 38 45 53 55
-------- -------- -------- ------ ------ ------ ---- ---- ----
Income before cumulative
effect of changes in
accounting principles
and extraordinary loss. 349 346 165 261 252 80 88 94 85
Equity in income--Case
Credit................. -- -- -- 88 94 85 -- -- --
-------- -------- -------- ------ ------ ------ ---- ---- ----
Income before cumulative
effect of changes in
accounting principles
and extraordinary loss. 349 346 165 349 346 165 88 94 85
Cumulative effect of
changes in accounting
principles............. -- (9) (29) -- (9) (29) -- -- --
Extraordinary loss...... (33) -- (5) (33) -- (5) (3) -- (4)
-------- -------- -------- ------ ------ ------ ---- ---- ----
Net income............. $ 316 $ 337 $ 131 $ 316 $ 337 $ 131 $ 85 $ 94 $ 81
======== ======== ======== ====== ====== ====== ==== ==== ====
Preferred stock
dividends.............. 7 7 3
-------- -------- --------
Net income to common... $ 309 $ 330 $ 128
Pro forma adjustments... N.A. N.A. 1
-------- -------- --------
Net pro forma income to
common................ N.A. N.A. $ 129
======== ======== ========
PER SHARE DATA:
Primary income per share
of common stock........ $ 4.17 $ 4.60 N.A.
======== ======== ========
Net pro forma income per
share of common stock.. N.A. N.A. $ 1.74
======== ======== ========
Fully diluted net income
per share of common
stock.................. $ 4.06 $ 4.44 N.A.
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Income. Reference is made to Note 2 for definitions of "Case
Industrial" and "Case Credit."
33
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(IN MILLIONS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CASE
CONSOLIDATED INDUSTRIAL CASE CREDIT
-------------- -------------- --------------
ASSETS 1996 1995 1996 1995 1996 1995
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..... $ 116 $ 132 $ 99 $ 117 $ 17 $ 15
Accounts and notes
receivable:
Trade....................... 1,674 1,504 1,302 1,323 372 181
Affiliates.................. -- -- 3 -- 13 16
Other....................... 25 55 25 18 -- 37
Inventories................... 988 901 988 901 -- --
Deferred income taxes......... 188 200 171 185 17 15
Prepayments and other......... 62 60 62 57 -- 3
------ ------ ------ ------ ------ ------
TOTAL CURRENT ASSETS...... 3,053 2,852 2,650 2,601 419 267
------ ------ ------ ------ ------ ------
Long-Term Receivables.......... 1,361 1,244 309 395 1,036 835
OTHER ASSETS:
Investments in joint
ventures..................... 63 65 63 65 -- --
Investment in Case Credit..... -- -- 240 193 -- --
Goodwill and intangibles...... 306 176 306 176 -- --
Other......................... 269 176 185 139 100 51
------ ------ ------ ------ ------ ------
TOTAL OTHER ASSETS........ 638 417 794 573 100 51
------ ------ ------ ------ ------ ------
Property, Plant and Equipment,
at cost....................... 2,075 1,970 2,072 1,970 3 --
Accumulated depreciation....... (1,068) (1,014) (1,067) (1,014) (1) --
------ ------ ------ ------ ------ ------
NET PROPERTY, PLANT AND
EQUIPMENT................ 1,007 956 1,005 956 2 --
------ ------ ------ ------ ------ ------
TOTAL..................... $6,059 $5,469 $4,758 $4,525 $1,557 $1,153
====== ====== ====== ====== ====== ======
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-
term debt.................... $ 9 $ 47 $ 9 $ 47 $ -- $ --
Short-term debt............... 1,002 1,005 173 97 829 908
Accounts payable.............. 578 533 564 533 30 16
Restructuring liability....... 176 97 176 97 -- --
Other accrued liabilities..... 778 784 735 748 43 36
------ ------ ------ ------ ------ ------
TOTAL CURRENT LIABILITIES. 2,543 2,466 1,657 1,522 902 960
------ ------ ------ ------ ------ ------
Long-Term Debt................. 1,119 889 704 889 415 --
OTHER LIABILITIES:
Pension benefits.............. 128 134 128 134 -- --
Other postretirement
benefits..................... 115 98 115 98 -- --
Other postemployment
benefits..................... 40 40 40 40 -- --
Restructuring liability....... -- 210 -- 210 -- --
Other......................... 132 35 132 35 -- --
------ ------ ------ ------ ------ ------
TOTAL OTHER LIABILITIES... 415 517 415 517 -- --
------ ------ ------ ------ ------ ------
Commitments and Contingencies
(Note 15)
Minority Interest.............. 1 -- 1 -- -- --
Preferred Stock with Mandatory
Redemption Provisions......... 77 77 77 77 -- --
STOCKHOLDERS' EQUITY:
Common Stock, $0.01 par
value; authorized
200,000,000 shares, issued
73,738,641 shares in 1996
and 71,465,531 shares in
1995......................... 1 1 1 1 -- --
Paid-in capital............... 1,238 1,154 1,238 1,154 199 199
Cumulative translation
adjustment................... (14) (21) (14) (21) (6) (8)
Unearned compensation on
restricted stock............. (9) (10) (9) (10) -- --
Pension liability adjustment.. (4) (2) (4) (2) -- --
Retained earnings............. 693 399 693 399 47 2
Treasury stock, 30,841 shares
in 1996 and 29,906 shares in
1995, at cost................ (1) (1) (1) (1) -- --
------ ------ ------ ------ ------ ------
TOTAL STOCKHOLDERS'
EQUITY................... 1,904 1,520 1,904 1,520 240 193
------ ------ ------ ------ ------ ------
TOTAL..................... $6,059 $5,469 $4,758 $4,525 $1,557 $1,153
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
Reference is made to Note 2 for definitions of "Case Industrial" and "Case
Credit."
34
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
AND
THE FARM AND CONSTRUCTION EQUIPMENT BUSINESS OF TENNECO INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
CONSOLIDATED AND
COMBINED CASE INDUSTRIAL CASE CREDIT
-------------------- -------------------- -------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
----- ----- ------ ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............ $ 316 $ 337 $ 131 $ 316 $ 337 $ 131 $ 85 $ 94 $ 81
Adjustments to
reconcile net income
to net cash provided
(used) by operating
activities:
Depreciation and
amortization......... 138 133 132 126 130 132 12 3 --
Deferred income tax
expense (benefit).... 16 (106) (94) 15 (97) (88) 1 (9) (2)
(Gain) loss on
disposal of fixed
assets............... 5 (25) 7 5 (25) 7 -- -- --
Extraordinary loss,
after tax............ 33 -- 5 33 -- 5 3 -- 4
Cumulative effect of
changes in accounting
principles........... -- 9 29 -- 9 29 -- -- --
Non cash restructuring
credit............... -- -- (16) -- -- (16) -- -- --
Cash paid for
restructuring........ (73) (46) (62) (73) (46) (62) -- -- --
Undistributed
(earnings) loss of
unconsolidated
subsidiaries......... 7 -- -- (40) (1) (1) -- -- --
Changes in components
of working capital:
(Increase) decrease
in receivables...... (162) (56) 114 86 85 236 (248) (156) (125)
(Increase) decrease
in inventories...... 10 (20) (18) 10 (20) (18) -- -- --
(Increase) decrease
in prepayments and
other current
assets.............. -- (12) (3) (2) (10) 2 2 (2) 1
Increase (decrease)
in payables......... (30) 46 287 (45) 62 (71) 15 (1) (2)
Increase (decrease)
in accrued
liabilities......... (53) 32 80 (59) 28 104 6 4 (28)
(Increase) decrease in
long-term
receivables.......... (71) (124) (282) 89 245 (114) (158) (367) (125)
Increase (decrease) in
other liabilities.... 55 22 (25) 55 22 (25) -- -- --
Other, net............ (59) (8) (10) (52) 33 (36) (10) (43) (15)
----- ----- ------ ----- ----- ------ ----- ----- -----
NET CASH PROVIDED
(USED) BY OPERATING
ACTIVITIES......... 132 182 275 464 752 215 (292) (477) (211)
INVESTING ACTIVITIES:
Proceeds from sale of
businesses and
assets............... 27 70 78 27 70 78 -- -- --
Expenditures for
property, plant and
equipment............ (162) (115) (124) (160) (115) (124) (2) -- --
Acquisitions and
investments.......... (147) -- -- (147) -- -- -- -- --
Acquire net assets of
the farm and
construction
equipment business of
Tenneco.............. -- -- (1,461) -- -- (1,557) -- -- (89)
Other, net............ -- 13 7 -- 8 (7) -- -- (3)
----- ----- ------ ----- ----- ------ ----- ----- -----
NET CASH PROVIDED
(USED) BY INVESTING
ACTIVITIES......... (282) (32) (1,500) (280) (37) (1,610) (2) -- (92)
FINANCING ACTIVITIES:
Proceeds from issuance
of long-term debt.... 500 296 983 300 296 994 200 -- 12
Payment of long-term
debt................. (647) (681) (1,022) (647) (681) (90) -- -- (955)
Net increase
(decrease) in short-
term debt and
revolving credit
facilities........... 225 326 795 89 (250) 110 136 576 997
Cash transfers from
Tenneco.............. -- -- 503 -- -- 407 -- -- 284
Proceeds from issuance
of common stock...... 75 -- -- 75 -- -- -- -- --
Dividends paid (common
and preferred)....... (21) (21) (7) (21) (21) (7) (40) (93) (24)
Other, net............ 2 (7) (19) 2 (7) (6) -- 5 (16)
----- ----- ------ ----- ----- ------ ----- ----- -----
NET CASH PROVIDED
(USED) BY FINANCING
ACTIVITIES......... 134 (87) 1,233 (202) (663) 1,408 296 488 298
Effect of foreign
exchange rate changes
on cash and cash
equivalents........... -- 1 1 -- 1 1 -- -- --
----- ----- ------ ----- ----- ------ ----- ----- -----
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS........... (16) 64 9 (18) 53 14 2 11 (5)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF YEAR............... 132 68 59 117 64 50 15 4 9
----- ----- ------ ----- ----- ------ ----- ----- -----
CASH AND CASH
EQUIVALENTS, END OF
YEAR.................. $ 116 $ 132 $ 68 $ 99 $ 117 $ 64 $ 17 $ 15 $ 4
===== ===== ====== ===== ===== ====== ===== ===== =====
CASH PAID DURING THE
YEAR FOR INTEREST..... $ 169 $ 153 $ 102 $ 98 $ 115 $ 74 $ 71 $ 40 $ 28
===== ===== ====== ===== ===== ====== ===== ===== =====
CASH PAID DURING THE
YEAR FOR TAXES........ $ 160 $ 181 $ 70 $ 113 $ 125 $ 20 $ 47 $ 56 $ 50
===== ===== ====== ===== ===== ====== ===== ===== =====
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Cash Flows.
Reference is made to Note 2 for definitions of "Case Industrial" and "Case
Credit."
35
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND
THE FARM AND CONSTRUCTION EQUIPMENT BUSINESS OF TENNECO INC.
STATEMENTS OF CHANGES IN COMBINED EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
INVESTMENT PAID- CUMULATIVE PENSION
BY COMMON IN TRANSLATION UNEARNED LIABILITY RETAINED TREASURY
TENNECO STOCK CAPITAL ADJUSTMENT COMPENSATION ADJUSTMENT EARNINGS STOCK TOTAL
---------- ------ ------- ----------- ------------ ---------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993 $1,778 $-- $ -- $(43) $-- $(5) $-- $-- $1,730
Net income............. 36 -- -- -- -- -- 95 -- 131
Dividends declared..... -- -- -- -- -- -- (12) -- (12)
Translation adjustment. -- -- -- 21 -- -- -- -- 21
Capital contributions
from (distributions
to) Tenneco........... (704) -- 9 -- -- -- -- -- (695)
Acquire net assets of
the farm and
construction equipment
business of Tenneco... (1,110) 1 1,109 -- -- -- -- -- --
Capital contributions
on stock issuance..... -- -- 5 -- -- -- -- -- 5
Pension liability
adjustment............ -- -- -- -- -- 3 -- -- 3
Issuance of restricted
stock................. -- -- 5 -- (7) -- -- -- (2)
------ ---- ------ ---- ---- --- ---- ---- ------
BALANCE, DECEMBER 31,
1994 -- 1 1,128 (22) (7) (2) 83 -- 1,181
Net income............. -- -- -- -- -- -- 337 -- 337
Dividends declared..... -- -- -- -- -- -- (21) -- (21)
Translation adjustment. -- -- -- 1 -- -- -- -- 1
Capital contributions
on stock issuance..... -- -- 20 -- -- -- -- -- 20
Recognition of
compensation on
restricted stock...... -- -- -- -- 3 -- -- -- 3
Issuance of restricted
stock................. -- -- 6 -- (6) -- -- -- --
Acquisition of treasury
stock................. -- -- -- -- -- -- -- (1) (1)
------ ---- ------ ---- ---- --- ---- ---- ------
BALANCE, DECEMBER 31,
1995 -- 1 1,154 (21) (10) (2) 399 (1) 1,520
Net income............. -- -- -- -- -- -- 316 -- 316
Dividends declared..... -- -- -- -- -- -- (22) -- (22)
Translation adjustment. -- -- -- 7 -- -- -- -- 7
Capital contributions
on stock issuance..... -- -- 84 -- -- -- -- -- 84
Recognition of
compensation on
restricted stock...... -- -- -- -- 4 -- -- -- 4
Issuance of restricted
stock................. -- -- -- -- (3) -- -- -- (3)
Pension liability
adjustment............ -- -- -- -- -- (2) -- -- ( 2)
------ ---- ------ ---- ---- --- ---- ---- ------
BALANCE, DECEMBER 31,
1996 $ -- $ 1 $1,238 $(14) $ (9) $(4) $693 $ (1) $1,904
====== ==== ====== ==== ==== === ==== ==== ======
</TABLE>
The accompanying notes to financial statements are an integral part of
these Statements of Changes in Stockholders' Equity.
36
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1: NATURE OF OPERATIONS
Case Corporation ("Case" or the "Company") engages in two types of
operations. The industrial operations manufacture and distribute a full line
of farm equipment and light- and medium-sized construction equipment on a
worldwide basis. Its products are sold through independent dealers and
company-owned retail stores. The credit operations provide and administer
financing for sales to retail customers in the United States, Canada and
Australia.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
The accompanying financial statements reflect the consolidated results of
Case for all periods subsequent to June 24, 1994. All prior periods represent
the combined results of the farm and construction equipment business (the
"Case Business") of Tenneco Inc. ("Tenneco"). On June 23, 1994, the Case
Business was reorganized under one corporate identity (the "Reorganization")
in anticipation of an initial public offering (the "Initial Offering") by
certain subsidiaries of Tenneco of a portion of their equity interests in
Case.
The accompanying financial statements also include, on a separate and
supplemental basis, the combination of Case's industrial companies and credit
companies as follows:
Case Industrial--For all periods subsequent to June 24, 1994, the financial
information captioned "Case Industrial" reflects the consolidation of all
majority-owned subsidiaries except for the wholly owned retail credit
subsidiaries. For all prior periods, the financial information captioned "Case
Industrial" reflects the combination of all operations except for retail
receivables and wholesale finance operations of the Case Business. In all
periods, the credit operations have been included using the equity method of
accounting whereby the net income and net assets of these companies are
reflected, respectively, in the income statement caption, "Equity in
income--Case Credit," and in the balance sheet caption, "Investment in Case
Credit."
Case Credit--For all periods subsequent to June 24, 1994, the financial
information captioned "Case Credit" reflects Case's wholly owned retail credit
subsidiaries. For all prior periods, the financial information captioned "Case
Credit" reflects the combination of the wholesale and retail receivable
finance operations of the Case Business.
All significant intercompany transactions, including activity within and
between "Case Industrial" and "Case Credit" have been eliminated.
Certain reclassifications have been made to conform prior years financial
statements to the 1996 presentation.
Use of Estimates in the Preparation of Financial Statements
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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Foreign Currency Translation
The assets and liabilities of foreign affiliates are generally translated
into U.S. dollars using year-end exchange rates. Revenues and expenses are
translated at average rates during the year. Adjustments resulting
37
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
from this translation, except for those foreign affiliates operating in highly
inflationary economies, are deferred and reflected as a separate component of
Stockholders' Equity. For affiliates operating in highly inflationary
economies, adjustments resulting from the translation of financial statements
are reflected in the Statements of Income. Foreign exchange transaction
gains/(losses) were $ (5) million, $(2) million and $4 million, for the years
ended December 31, 1996, 1995 and 1994, respectively.
Revenue Recognition
Sales to independent dealers are recorded at the time of shipment to those
dealers. Sales through company-owned retail stores are recorded at the time of
sale to retail customers. Case grants certain sales incentives to stimulate
sales of Case products to retail customers. The expense for such incentive
programs is recorded at the time of sale to the dealer. At December 31, 1996
and 1995, Case had accrued $165 million and $171 million, respectively, for
these incentive programs and such amounts are included in "Other accrued
liabilities" in the accompanying Balance Sheets.
Case Credit records earned finance charges (interest income) on retail
receivables using the effective interest method.
Under terms of most dealer agreements, wholesale notes receivable are
generally interest free for periods ranging from three to nine months, after
which interest is based on market rates.
Modification Programs and Warranty Costs
The costs of major programs to modify products in the customer's possession
are accrued when these costs can be identified and quantified. Normal warranty
costs are recorded at the time of sale. Reserves for modification programs and
warranty costs were $117 million and $153 million at December 31, 1996 and
1995, respectively, and are included in "Other accrued liabilities" in the
accompanying Balance Sheets.
Advertising
The Company expenses advertising costs as incurred. Advertising expense
totaled $37 million, $35 million and $38 million, for the years ended December
31, 1996, 1995 and 1994, respectively.
Long-Lived Assets
Effective January 1, 1996, Case adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Adoption of this standard
did not have a material impact on the Company's financial position or results
of operations.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which established financial
accounting and reporting standards for stock-based employee compensation. The
statement allows for companies to continue to apply the accounting treatment
under the provisions of Accounting Principles Board Opinion 25. Effective
December 31, 1996, Case has chosen to adopt the disclosure requirement of SFAS
123, however, in the opinion of management, the pro-forma impact of
compensation expense for stock-based employee compensation arrangements is not
material to the financial statements.
38
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Changes in Accounting Principles
Effective January 1, 1995, Case adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," for its non-U.S. plans. This
standard requires employers to accrue the estimated costs of retiree benefits
other than pensions (primarily health care benefits and life insurance) during
the employee's active service period. Case had previously expensed the cost of
these benefits under non-U.S. plans as medical and insurance claims were paid.
The impact of adopting this standard for non-U.S. plans was reported as a
cumulative catch-up adjustment of $9 million on a pre-tax and after-tax basis
during the first quarter of 1995.
Effective January 1, 1994, Case adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." This standard requires employers to recognize
the cost of benefits provided to former or inactive employees after employment
but before retirement when it is probable that a benefit will be provided.
Such benefits include disability and continuation of health care benefits. The
impact of adopting this standard was reported as a cumulative catch-up
adjustment of $29 million (net of taxes) during the first quarter of 1994.
Reference is made to Note 14, "Postretirement and Postemployment Benefits"
for further information regarding these changes.
Cash and Cash Equivalents
Cash equivalents are comprised of all highly liquid investments with an
original maturity of three months or less.
Inventories
Inventories are stated at the lower of cost or market, generally using the
first-in, first-out (FIFO) method. Inventory cost includes material, labor and
overhead.
Inventories consist of the following (in millions):
<TABLE>
<CAPTION>
DECEMBER
31,
---------
1996 1995
---- ----
<S> <C> <C>
Raw materials................................................... $175 $159
Work-in-process................................................. 147 128
Finished goods.................................................. 666 614
---- ----
Total inventories........................................... $988 $901
==== ====
</TABLE>
Goodwill and Intangibles
Goodwill is being amortized on a straight-line basis over 15 to 40 years.
Case continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant revision
or that the remaining balance of goodwill may not be recoverable. When factors
indicate that goodwill should be evaluated for possible impairment, Case uses
an estimate of the undiscounted cash flows over the remaining life of the
goodwill in measuring whether the goodwill is recoverable.
At December 31, 1996 and 1995, goodwill totaled $313 million and $163
million, respectively, while accumulated amortization of goodwill was $62
million and $53 million, at those respective dates. Amortization expense
totaled $9 million, $5 million and $8 million for the years ended December 31,
1996, 1995 and 1994, respectively.
39
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Intangibles consist primarily of acquired dealer network, trademarks,
product drawings and patents, and are being amortized on a straight-line basis
over 3 to 17 years. At December 31, 1996 and 1995, intangibles totaled $209
million and $207 million, respectively, while accumulated amortization of
intangibles was $154 million and $141 million, at those respective dates.
Amortization expense totaled $13 million for the year ended December 31, 1996,
and $12 million for each of the years ended December 31, 1995 and 1994.
Derivatives
Derivative financial instruments are used by the Company to manage its
foreign currency and interest rate exposures. Depending on the item being
hedged, gains and losses on foreign currency instruments are either recognized
in the results of operations as they accrue or are deferred until the hedged
transaction occurs. Amounts to be received or paid under interest rate swap
contracts are recognized as interest income or expense in the periods in which
they accrue.
Extraordinary Loss
In the first quarter of 1996, the Company sold $300 million aggregate
principal amount of its 7 1/4% unsecured and unsubordinated notes due 2016
pursuant to a shelf registration statement filed with the Securities and
Exchange Commission in June 1995. The net proceeds from the offering, together
with cash and additional borrowings under the Company's credit facilities,
were used to exercise the Company's option to repurchase for cash all of the
Company's 10 1/2% Senior Subordinated Notes and pay accrued interest thereon.
As a result of the repurchase, the Company recorded an extraordinary charge of
$22 million after tax in the first quarter of 1996.
In the third quarter of 1996, the Company established new credit facilities
consisting of $3.4 billion in lines of credit and liquidity facilities. As a
result of establishing these credit facilities, the Company recorded an $11
million extraordinary, after-tax charge for the write-off of unamortized bank
fees related to the original bank agreements established at the time of the
Company's initial public offering in June 1994.
In the second quarter of 1994, the Company prepaid approximately $519
million of high interest-bearing debt. The Company recorded an extraordinary
loss of $5 million after tax for the redemption premium resulting from these
transactions.
NOTE 3: ACQUISITION OF BUSINESSES
In 1996, the Company completed four strategic acquisitions of businesses. On
January 12, 1996, the Company acquired Concord Inc., a manufacturer of air
drills based in Fargo, North Dakota. On June 3, 1996, the Company's Australian
subsidiary, Case Corporation Pty Ltd, completed the purchase of all of the
outstanding shares of Austoft Holdings Limited, a manufacturer of sugar cane
harvesting equipment. On August 30, 1996, the Company acquired 75% of the
common shares of Steyr Landmaschinentechnik AG, an Austrian tractor
manufacturer based in St. Valentin, Austria. On October 4, 1996, the Company
acquired Fermec Holdings Limited, a construction equipment manufacturer based
in Manchester, United Kingdom.
The aggregate purchase price for these businesses included approximately
$169 million in cash and notes payable, and 125,812 shares of the Company's
common stock. Case also assumed additional debt and other liabilities of
approximately $244 million in conjunction with these acquisitions. These
acquisitions were accounted for as purchases and, accordingly, the
accompanying consolidated financial statements include the results of
operations of these businesses as of their respective acquisition dates. In
total, the purchase price plus the liabilities assumed exceeded the fair value
of the tangible and intangible assets purchased by approximately $149 million,
on a preliminary basis. The goodwill associated with these acquisitions is
being amortized on a straight-line basis over 15 to 20 years.
40
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The impact of these acquisitions on the Company's results of operations for
the year ended December 31, 1996, as compared to the prior year, is not
material.
NOTE 4: REORGANIZATION AND PUBLIC OFFERING
Formation of Company and Reorganization
Case Corporation, formerly Case Equipment Corporation, was formed on April
22, 1994, as a wholly owned subsidiary of Tenneco to acquire the Case
Business.
On June 23, 1994, in connection with the Initial Offering, Case, Tenneco and
Tenneco Equipment Corporation entered into a Reorganization Agreement (the
"Reorganization Agreement") pursuant to which the assets of the Case Business
(other than approximately $1.1 billion of U.S. retail receivables) were
transferred to Case and certain of its subsidiaries in exchange for (i) the
assumption by the Company and/or certain of its subsidiaries of all
liabilities related to the Case Business (with the exception of certain
pension and postretirement benefits, certain tax liabilities, approximately
$1.9 billion of debt of Tenneco's finance subsidiaries not sold to the Company
and certain remaining intercompany cash advances); (ii) demand notes to be
repaid on June 30, 1994, with proceeds from borrowings under new credit
facilities; (iii) 70 million shares of Common Stock of Case; (iv) 1,500,000
shares of Series A Cumulative Convertible Preferred Stock of Case valued at
$75 million; and (v) $250 million of subordinated notes. The Reorganization
Agreement and the credit facilities required that, after giving effect to the
Reorganization, the Company and its subsidiaries have a consolidated
stockholders' equity (including the Series A Cumulative Convertible Preferred
Stock and the Cumulative Convertible Second Preferred Stock) of $1,152 million
at June 23, 1994. To the extent stockholders' equity exceeded such amount, the
Company was required to pay a dividend on the shares of Common Stock issued to
Tenneco and its subsidiaries in the amount of such excess. A dividend in the
aggregate amount of $12.9 million was paid by the Company on August 12, 1994,
in accordance with the Reorganization Agreement. Holders of the shares of
Common Stock sold in the Initial Offering and holders of Common Stock issuable
upon conversion of the Series A Cumulative Convertible Preferred Stock were
not entitled to such dividend. All assets and liabilities sold and transferred
by Tenneco and its subsidiaries to the Company and its subsidiaries are
recorded on the Company's books at the carrying value of such assets and
liabilities to Tenneco and its subsidiaries. The tax basis of the assets and
liabilities transferred to Case was adjusted to fair market value.
Pension and Postretirement Benefits
Pursuant to the Reorganization Agreement, Tenneco retained the accumulated
pension benefit obligation related to all existing U.S. employees and retirees
as of June 23, 1994. Tenneco also retained the accumulated postretirement
health and life insurance benefit obligations relating to all U.S. employees
who retired on or before July 1, 1994, and their dependents.
Tax Sharing Agreement
Tenneco and Case have entered into a tax sharing agreement under which
Tenneco is responsible for all U.S. Federal, state and local income and
franchise taxes and all foreign income taxes with respect to Case for all
periods before the date of the Reorganization Agreement, except that Case will
indemnify Tenneco for 25% of certain amounts resulting from tax audit
adjustments for periods before the Initial Offering. Case is responsible for
all other taxes owing with respect to Case and its subsidiaries.
41
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Transactions with Tenneco
Prior to the Reorganization, Tenneco provided equity financing to the Case
Business through a noninterest-bearing intercompany account. This intercompany
account has been classified within the "Investment by Tenneco" account on the
Statements of Changes in Stockholders' Equity. The Case Business had depended
upon Tenneco for substantial support, particularly with respect to Case
Credit, as well as for various services such as legal, financial, human
resources, insurance, risk management and communications. Tenneco allocated
the costs for these services pro rata among its businesses based on operating
revenues, payroll expense and gross property employed. The allocated cost for
these services, included in "Selling, general and administrative expenses,"
totaled $9 million and $20 million for the years ended December 31, 1995 and
1994, respectively. The allocated cost for these services for the year ended
December 31, 1996, was not material. Management believes that the method used
to allocate these expenses reasonably reflects the costs of actual services
provided.
NOTE 5: RESTRUCTURING COSTS
In response to depressed market conditions during the early 1990's, Case
embarked on two restructuring programs. The first program, initiated in 1991,
resulted in a pre-tax charge of $461 million ($404 million after tax). This
program has been completed and the intended benefits have been achieved.
While the measures taken by Case under the 1991 restructuring program
resulted in substantial cost reductions, the worldwide farm and construction
equipment market continued to deteriorate during 1992. At that time, the
Company determined that major structural and strategic changes were necessary
in order to rationalize certain component production operations to reduce the
fixed cost portion of the manufacturing process; reduce excess capacity;
focus, discontinue or replace unprofitable and noncompetitive product lines;
and restructure and refocus product and component parts distribution to
strengthen Case's competitive position in the global marketplace.
Consequently, on March 21, 1993, a comprehensive restructuring program (the
"1992 Restructuring Program") was adopted and resulted in a pre-tax
restructuring charge of $920 million ($843 million after tax), which was
reflected in Case's 1992 results. The $920 million pre-tax charge was recorded
as a $340 million reduction of net property, plant and equipment, a $55
million reduction of inventory, a $63 million reduction of intangibles and
other accounts and a $462 million reserve for the future cost of implementing
the various restructuring actions.
42
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
An analysis of the 1992 Restructuring Program is summarized in the table
below (in millions):
<TABLE>
<CAPTION>
1993 AND 1994 ACTIVITY 1995 ACTIVITY
----------------------------------- -----------------------------------
RESERVES RESERVES
UTILIZED UTILIZED
BALANCE AT (INCLUDES CHANGES BALANCE AT (INCLUDES CHANGES BALANCE AT
DECEMBER 31, CURRENCY IN DECEMBER 31, CURRENCY IN DECEMBER 31,
1992 TRANSLATION) ESTIMATES 1994 TRANSLATION) ESTIMATES 1995
------------ ----------- --------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
payments............... $250 $ (45) $ 49 $254 $ (11) $(39) $204
Pension and OPRB costs.. 56 (25) 13 44 (11) 2 35
Lease termination
payments............... 10 1 (6) 5 -- 5 10
Writedown of assets:
Property, plant and
equipment............ 340 (89) (48) 203 (67) 1 137
Provision for
environmental
liabilities.......... 25 (1) 2 26 1 -- 27
Other assets.......... 63 (62) (1) -- (8) 8 --
Writedown of
inventories............ 55 (21) (16) 18 (2) 1 17
Costs related to
closing/selling/
downsizing existing
facilities............. 60 (15) (18) 27 (7) 10 30
Other costs............. 61 (14) (11) 36 (12) 12 36
---- ----- ---- ---- ----- ---- ----
Total restructuring
charge............. $920 $(271) $(36) $613 $(117) $-- $496
==== ===== ==== ==== ===== ==== ====
<CAPTION>
1996 ACTIVITY
-----------------------------------
RESERVES
UTILIZED
BALANCE AT (INCLUDES CHANGES BALANCE AT
DECEMBER 31, CURRENCY IN DECEMBER 31,
1995 TRANSLATION) ESTIMATES 1996 TOTAL COSTS
------------ ----------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
payments............... $204 $ (50) $ (6) $148 $ 254
Pension and OPRB costs.. 35 (6) (21) 8 50
Lease termination
payments............... 10 (4) 3 9 12
Writedown of assets:
Property, plant and
equipment............ 137 (115) 2 24 295
Provision for
environmental
liabilities.......... 27 (2) -- 25 27
Other assets.......... -- -- -- -- 70
Writedown of
inventories............ 17 (4) (4) 9 36
Costs related to
closing/selling/
downsizing existing
facilities............. 30 (16) 18 32 70
Other costs............. 36 (10) 8 34 70
---- ----- ---- ---- -----
Total restructuring
charge............. $496 $(207) $-- $289 $ 884
==== ===== ==== ==== =====
</TABLE>
43
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Of the remaining reserves, $24 million pertain to property, plant and
equipment, $9 million pertain to inventories, $8 million pertain to pensions
and $248 million is reflected as a reserve for future costs of implementing
other various restructuring actions. Of this $248 million reserve, $176
million is recorded as a current liability and $72 million is included in
"Other" long-term liabilities on the Balance Sheet as of December 31, 1996.
The specific restructuring measures and associated estimated costs were
based on management's best business judgment under prevailing circumstances
and on assumptions which have been and may continue to be revised as
circumstances change. The remaining reserves are expected to be substantially
utilized during 1997.
Case adopted SFAS No. 121 on January 1, 1996. Adoption of this statement did
not have a material impact on the Company's results of operations as impaired
assets, as defined, had previously been recorded at fair value. Of the
remaining $24 million of restructuring reserves for property, plant and
equipment at December 31, 1996, $3 million is attributed to assets that will
be held for sale in 1997 and $21 million is attributed to assets held for use
that will ultimately be disposed.
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment, is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Land and improvements................................... $ 50 $ 52
Buildings and improvements.............................. 486 507
Machinery and equipment................................. 1,395 1,323
Construction in progress................................ 144 88
------- -------
2,075 1,970
Accumulated depreciation................................ (1,068) (1,014)
------- -------
Net property, plant and equipment................... $ 1,007 $ 956
======= =======
</TABLE>
Depreciation of Case properties and equipment is provided on a straight-line
basis over their estimated useful lives. Useful lives range from 10 to 50
years for buildings and improvements and from 3 to 16 years for machinery and
equipment. Depreciation expense totaled $102 million, $108 million and $107
million for the years ended December 31, 1996, 1995 and 1994, respectively.
Expenditures for maintenance and repairs are charged to expense as incurred.
NOTE 7: SHORT-TERM DEBT
In August 1996, the Company established new credit facilities consisting of
$3.4 billion in lines of credit and liquidity facilities. Of the $3.4 billion
total, $2.3 billion of the credit facilities benefit Case Credit and its
Canadian subsidiary and consist of: (i) a five-year, $1.2 billion revolving
credit facility; (ii) a three-year, $750 million U.S. asset-backed commercial
paper liquidity facility; and (iii) a five-year, C$500 million revolving
credit facility. Case Industrial's credit facility consists of a five-year,
$1.1 billion revolving credit facility. The new credit facilities were
negotiated at more favorable rates and terms for the Company than previous
credit facilities.
44
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As a result of establishing the new credit facilities, the Company recorded
an $11 million extraordinary after-tax charge in the third quarter of 1996 to
write-off unamortized bank fees related to the original bank agreements
established at the time of the Company's Initial Offering in June 1994.
In November 1996, Case Credit established a $1.2 billion commercial paper
program. Under the terms of this program, the principal amount of the
commercial paper outstanding, combined with the amounts outstanding under Case
Credit's five-year, $1.2 billion revolving credit facility, cannot exceed a
total of $1.2 billion.
In addition to the above credit facilities, Case also has A$402 million in
credit facilities for the Company's Australian operations, as well as other
lines of credit for various foreign operations.
A summary of short-term debt is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
------ ------
<S> <C> <C>
Case Industrial
Credit agreements (a).................................... $ 173 $ 97
------ ------
Case Credit
Credit agreements (a).................................... $ 438 $ 711
Commercial paper......................................... 299 --
Commercial paper liquidity facility...................... 92 197
------ ------
Total short-term debt--Case Credit..................... $ 829 $ 908
------ ------
Total short-term debt.................................. $1,002 $1,005
====== ======
</TABLE>
- --------
(a) The credit agreements for both Case Industrial and Case Credit include
borrowings under both committed credit facilities and uncommitted lines of
credit and similar arrangements.
The weighted-average interest rates on consolidated short-term debt at
December 31, 1996 and 1995, were 5.5% and 6.5%, respectively. At December 31,
1996, the unused portion of the combined committed credit facilities and the
Case Credit commercial paper program was $2,037 million, and the unused
portion of the asset-backed commercial paper liquidity facility was $658
million. At December 31, 1995, the unused portion of committed credit
facilities was $1,324 million and the unused portion of the asset-backed
commercial paper liquidity facility was $392 million.
The Company has classified an aggregate of $282 million of borrowings under
the revolving credit facilities of Case Corporation Pty Ltd, Case Credit
Corporation, Case Credit Australia Pty Ltd and Case Credit Ltd. as long-term,
as the applicable lenders do not require final payment within twelve months,
nor does the Company intend to reduce the long-term portions of these
revolvers within twelve months.
At the option of the Company, borrowings under the revolving credit
facilities bear interest at: (i) prime rate; (ii) LIBOR, plus an applicable
margin; or (iii) banker's bills of acceptance rates, plus an applicable
margin. Borrowings may be obtained in U.S. dollars and certain other foreign
currencies. Case Credit's revolving credit facilities (other than the
commercial paper liquidity facility) contain restrictive covenants that
require that Case Credit maintain certain financial conditions including a
maximum ratio of debt to net worth and a minimum fixed-charge coverage ratio.
Pursuant to a support agreement, Case Corporation has agreed to maintain its
ownership in, and provide financial backing for, Case Credit. Case
Industrial's revolving credit facility contains restrictive covenants that
require that Case Industrial maintain certain financial conditions including a
maximum debt to capitalization ratio and a minimum net worth. The revolving
credit facilities (other than the commercial
45
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
paper liquidity facility) also impose certain restrictions on certain
indebtedness, liens on Company assets and ownership of certain subsidiaries.
At December 31, 1996, the Company was in compliance with all debt covenants.
The credit facilities generally provide for facility fees on the total
commitment, whether used or unused, and also provide for annual agency fees to
the administrative agents for the facilities.
NOTE 8: LONG-TERM DEBT
A summary of long-term debt is set forth in the following table (in
millions):
<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1995
------ ----
<S> <C> <C>
Case Industrial
Case Corporation
Senior subordinated notes, interest rate of 10.5%, retired
January 1996.................................................. $ -- $277
Term loan, payable on various dates through 2000, average
interest rate of 6.4% in 1995; retired July 1996.............. -- 324
Notes, payable in 2005, interest rate of 7.25%................. 298 298
Notes, payable in 2016, interest rate of 7.25%................. 300 --
Case France S.A.
Notes, payable on various dates through 2000, interest rate of
4.5%.......................................................... 24 33
Case Corporation Pty Ltd (Australia)
Long-term portion of borrowings under revolving credit
facilities, average interest
rate of 6.0%.................................................. 67 --
Other debt....................................................... 24 4
------ ----
713 936
Less--current maturities......................................... (9) (47)
------ ----
Total long-term debt--Case Industrial........................ $ 704 $889
------ ----
Case Credit
Case Credit Corporation
Notes, payable in 2003, interest rate of 6.125%................ $ 200 $--
Long-term portion of borrowings under revolving credit
facilities, average interest
rate of 6.1%.................................................. 100 --
Case Credit Australia Pty Ltd
Long-term portion of borrowings under revolving credit
facilities, average interest
rate of 6.3%.................................................. 79 --
Case Credit Ltd. (Canada)
Long-term portion of borrowings under revolving credit
facilities, average interest
rate of 6.2%.................................................. 36 --
------ ----
Total long-term debt--Case Credit............................ $ 415 $--
------ ----
Total long-term debt......................................... $1,119 $889
====== ====
</TABLE>
In the first quarter of 1996, the Company sold $300 million aggregate
principal amount of its 7 1/4% unsecured and unsubordinated notes due 2016
pursuant to a shelf registration statement filed with the Securities and
Exchange Commission in June 1995. The net proceeds from the offering, together
with cash and additional borrowings under the Company's credit facilities,
were used to exercise the Company's option to repurchase for
46
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
cash all of the Company's 10 1/2% Senior Subordinated Notes and pay accrued
interest thereon. The Company incurred an extraordinary charge of $22 million
after tax in the first quarter of 1996 as a result of the repurchase.
In the first quarter of 1996, Case Credit sold $200 million aggregate
principal amount of its 6 1/8% unsecured and unsubordinated notes due 2003
pursuant to a $300 million shelf registration statement filed with the
Securities and Exchange Commission in December 1995. The net proceeds from the
offering were used to repay indebtedness and finance Case Credit's growing
portfolio of receivables. Case Corporation had originally guaranteed the
obligations of Case Credit under these notes. As a result of the new credit
facilities established by the Company on August 23, 1996, Case Corporation was
released from its obligations under this guarantee. Pursuant to a support
agreement, Case Corporation has agreed, however, to maintain its ownership in,
and provide financial backing for, Case Credit.
The Company has classified an aggregate of $282 million of borrowings under
the revolving credit facilities of Case Corporation Pty Ltd, Case Credit
Corporation, Case Credit Australia Pty Ltd and Case Credit Ltd. as long-term,
as the applicable lenders do not require final payment within twelve months,
nor does the Company intend to reduce the long-term portions of these
revolvers within twelve months.
A summary of the minimum annual repayments of long-term debt as of December
31, 1996, is as follows (in millions):
<TABLE>
<S> <C>
1998.............................. $ 155
1999.............................. 9
2000.............................. 6
2001.............................. 151
2002 and thereafter............... 798
------
Total......................... $1,119
======
</TABLE>
NOTE 9: STOCKHOLDERS' EQUITY AND PREFERRED STOCK WITH MANDATORY REDEMPTION
PROVISIONS
As of December 31, 1996, Case has 210 million shares of authorized capital
stock itemized by class and series as follows:
(i) 200 million shares of Common Stock, par value $0.01 per share, with 74
million shares issued and outstanding;
(ii) 10 million shares of Preferred Stock, par value $0.01 per share,
divided into the following series:
(a) 5 million shares of Series A Cumulative Convertible Preferred
Stock, par value $0.01 per share, with 1.5 million shares issued
and outstanding; and
(b) 5 million shares of Cumulative Convertible Second Preferred Stock,
par value $0.01 per share, with 40,000 shares issued and 37,500
shares outstanding.
Holders of the Series A Cumulative Convertible Preferred Stock are entitled
to receive cumulative cash dividends equal to $4.50 per annum, payable
quarterly, and are entitled to receive $50 per share in the event of a
liquidation, dissolution, or winding up of the Company. The holders have the
right to convert each share of the Series A Cumulative Convertible Preferred
Stock into 2.2686 shares of Case's Common Stock (subject to adjustment as set
forth in the Certificate of Designation for such series of stock). The Series
A Cumulative Convertible Preferred Stock shall be redeemed by Case no later
than June 30, 2002, and Case may call the outstanding shares at any time on or
after July 1, 1999, at a premium. Holders of the Series A Cumulative
Convertible Preferred Stock are not entitled to vote except as set forth in
the Certificate of Designation for such series of stock or as required by law.
47
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Holders of the Cumulative Convertible Second Preferred Stock are entitled to
receive cumulative cash dividends equal to $4.25 per annum, payable quarterly,
and are entitled to receive $50 per share in the event of a liquidation,
dissolution, or winding up of the Company. The holders have the right to
convert each share of the Cumulative Convertible Second Preferred Stock into
2.2883 shares of Case's Common Stock (subject to adjustment as set forth in
the Certificate of Designation for such series of stock). The Cumulative
Convertible Second Preferred Stock shall be redeemed by Case no later than
June 30, 2007, and Case may call the outstanding shares at any time following
July 1, 2000, at a premium. Holders of the Cumulative Convertible Second
Preferred Stock are not entitled to vote except as set forth in the
Certificate of Designation for such series of stock or as required by law.
The following table presents the changes in preferred stock with mandatory
redemption provisions (in millions):
<TABLE>
<CAPTION>
SERIES A CUMULATIVE
CUMULATIVE CONVERTIBLE
CONVERTIBLE SECOND
PREFERRED PREFERRED
STOCK STOCK TOTAL
----------- ----------- -----
<S> <C> <C> <C>
Balance, December 31, 1993................. $-- $-- $--
Issuance of Series A Cumulative Convertible
Preferred Stock........................... 75 -- 75
Issuance of Cumulative Convertible Second
Preferred Stock........................... -- 2 2
---- ---- ----
Balance, December 31, 1996, 1995 and 1994.. $ 75 $ 2 $ 77
==== ==== ====
</TABLE>
Case Equity Incentive Plan
The Case Equity Incentive Plan provides for grants of various types of
awards to employees of the Company and its subsidiaries. There are 9.5 million
shares of Common Stock and 40,000 shares of Cumulative Convertible Second
Preferred Stock reserved for issuance under this plan (subject to certain
adjustments) that are available for grant by 2003. In general, no award may
vest in less than six months from the award date.
Stock options awarded under this plan were granted at the average market
price on the date of the award and become exercisable between two and four
years from the award date. All options awarded in 1994, 1995 and 1996 expire
ten years after issuance.
48
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During the last three fiscal years, changes in the status of shares subject
to issuance under stock options were as follows:
Stock options with exercise price less than $30:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996
------------------- -------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- -- 4,904,100 $19.36 5,089,328 $19.92
Granted............... 4,904,100 $19.36 1,156,000 22.32 -- --
Exercised............. -- -- (78,266) 21.60 (1,092,226) 19.66
Forfeited............. -- -- (892,506) 19.82 (292,043) 19.25
--------- --------- ----------
Outstanding at end of
year................... 4,904,100 $19.36 5,089,328 $19.92 3,705,059 $20.05
========= ========= ==========
Exercisable at end of
year................... -- $ -- 305,042 $21.06 900,127 $19.98
Stock options with exercise price greater than or equal to $30:
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996
------------------- -------------------- ---------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- $ -- -- -- 670,417 $41.15
Granted............... -- -- 670,417 $41.15 274,603 50.05
Exercised............. -- -- -- -- (6,845) 42.88
Forfeited............. -- -- -- -- (9,067) 42.89
--------- --------- ----------
Outstanding at end of
year................... -- $ -- 670,417 $41.15 929,108 $43.75
========= ========= ==========
Exercisable at end of
year................... -- $ -- -- $ -- 162,782 $42.88
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged from
$19.125 to $54.122. The weighted-average remaining contractual life of those
options is approximately eight years.
Under the Case Equity Incentive Plan, shares may also be granted as
restricted stock. The Company establishes the period of restriction for each
award and holds the stock during the restriction period, which ranges from six
months to four years. For the years ended December 31, 1996, 1995 and 1994,
restricted shares of 53,200, 196,779 and 312,821, respectively, were awarded
at no cost to employees, at weighted-average fair market values of $52.95,
$42.37 and $19.19, respectively.
In addition, all 40,000 shares of Cumulative Convertible Second Preferred
Stock were granted in 1994. At December 31, 1996, restricted common stock
outstanding totaled 458,371 shares and Cumulative Convertible Second Preferred
Stock outstanding totaled 37,500 shares.
Employee Stock Purchase Plan
Case's Employee Stock Purchase Plan was initiated on February 1, 1995. The
plan allows for certain North American employees to purchase Case's Common
Stock at a price per share equal to 85% of the lower of (i) the fair market
value of the Company's Common Stock as of the first business day of the plan
year, or (ii) the fair
49
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
market value on the last business day of the calendar quarter. Case has
reserved 1.4 million shares of Common Stock for issuance under this plan. For
the years ended December 31, 1996 and 1995, shares totaling 229,192 and
297,183, respectively, were issued at weighted-average fair market values of
$45.56 and $22.19, respectively.
Stockholder Rights Plan
On December 8, 1995, the Board of Directors adopted a Stockholder Rights
Plan which is designed to strengthen its ability to act for common
stockholders in the event of an unsolicited bid to acquire control of the
Company. To implement this plan, the Board of Directors declared a dividend
payable on December 29, 1995, of one preferred share purchase right on each
outstanding share of the Company's Common Stock. The rights will cause
substantial dilution to a person or entity attempting to acquire the Company
without conditioning the offer on the rights being redeemed or a substantial
number of rights being acquired.
Each outstanding share of common stock is entitled to one right under the
plan. Each right, when exercisable, entitles the holder to purchase one one-
thousandth of a share of Series A Junior Participating Preferred Stock, $.01
par value, for $170, subject to adjustment. If a person or entity becomes a
15% owner of the Company's Common Stock, each holder of a right (other than
the 15% owner) would be entitled to receive for the exercise price, subject to
adjustment, in lieu of the Series A Junior Participating Preferred Stock,
common stock having a value equal to two times the exercise price of the
right. If, at any time after a person or entity has acquired 15% or more of
the Company's Common Stock, the Company is acquired in a merger or other
business combination, or 50% or more of the Company's assets or earning power
are sold, proper provision will be made so that each holder of a right would
be entitled to receive, at the then current exercise price of the right,
common stock of the acquiring company having a value equal to two times the
exercise price of the right. The rights, which are not entitled to vote,
expire on December 29, 2005. They may be redeemed by the Company at a price of
$.01 per right at any time until a person or entity becomes a 15% owner of the
Company's Common Stock. The Company has reserved 100,000 shares of Series A
Junior Participating Preferred Stock for issuance in the event of exercise of
the rights.
NOTE 10: ACCOUNTS AND NOTES RECEIVABLE
A summary of receivables is as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Wholesale notes and accounts............................ $ 1,330 $ 1,233
Retail notes............................................ 1,642 1,524
Other................................................... 302 276
------- -------
Gross receivables................................... 3,274 3,033
------- -------
Less--Total unearned finance charges.................... (137) (156)
Less--Allowance for doubtful accounts................... (77) (74)
Less--Current portion................................... (1,699) (1,559)
------- -------
Total long-term receivables, net.................... $ 1,361 $ 1,244
======= =======
</TABLE>
In accordance with the standard terms of the wholesale receivable
agreements, repayment is required when wholesale equipment is sold.
Classification of wholesale receivables for financial statement presentation
is based on interest-bearing dates. Approximately 13% and 17% of the wholesale
receivables are classified as being due between 12 to 18 months after December
31, 1996 and 1995, respectively. The terms of retail notes generally range
from two to six years. Interest rates on retail notes vary depending on
prevailing market interest rates and certain incentive programs offered by the
Company.
50
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996 and 1995, the Company had $115 million and $197
million, respectively, of retail notes that secure the asset-backed commercial
paper liquidity facility.
Maturities of receivables as of December 31, 1996, are estimated as follows
(in millions):
<TABLE>
<S> <C>
1998.............................................................. $ 614
1999.............................................................. 336
2000.............................................................. 191
2001.............................................................. 123
2002 and thereafter............................................... 183
------
1,447
Less--Unearned finance charges.................................... (86)
------
Total long-term receivables, net.............................. $1,361
======
</TABLE>
Wholesale and retail notes receivable have significant concentrations of
credit risk in the farm and construction business sectors. Case typically
retains, as collateral, a security interest in the equipment associated with
wholesale and retail notes receivable.
The Company plans to adopt SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities," on January
1, 1997. The adoption of this statement will not have a material impact on
Case Corporation's financial position or results of operations.
Wholesale Receivables Securitizations
In June 1995, the Company consummated a transaction whereby it sold (with
limited recourse), on a revolving basis, a fractional undivided interest in
certain of its wholesale receivables pursuant to a privately structured
facility. The counterparties to this facility are two special purpose entities
administered by a major financial institution. Under this facility, the
maximum amount of proceeds that may be accessed at any one time is $400
million and is subject to change based on the level of eligible wholesale
receivables. The facility consists of a five-year committed, $300 million non-
renewable facility and a 364-day $100 million facility, which is renewable
annually at the sole discretion of the purchasers. At December 31, 1995 and
1996, the undivided interest of the purchasers under the facility represented
$521 million of wholesale receivables. The excess of $521 million over the
$400 million of proceeds received from the transaction represents
overcollateralization included in the transaction to cover yield to the
purchasers and certain other costs aggregating $13 million with the remainder
available to cover losses on receivables. The Company has reserved for
expected losses as part of the allowance for doubtful accounts. The Company
also maintains a security interest in the equipment financed by wholesale
receivables such that in the event of non-performance by the dealer, Case can
repossess the related equipment to minimize losses.
Under this program, Case records a loss each time receivables are sold to
the counterparties to the facility. This loss, which reflects the difference
between the current and future value of the receivables sold along with
related transaction expenses, is computed at the then prevailing market rates
as stated in the sale agreement. During 1996 and 1995, Case incurred charges
of $28 million and $27 million, respectively, relating to such sales of
receivables. These charges are included in "Other, net" in the Statements of
Income. The proceeds from the initial sale of the wholesale receivables were
used by the Company to repay a portion of its five-year, $1 billion bank term
loan facility by $300 million and its revolving bank credit facility by $100
million.
51
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Retail Receivables Securitizations
Case Credit sold $1,638 million and $1,469 million of retail notes (net of
unearned finance charges) in 1996 and 1995, respectively, to limited-purpose
business trusts ("Trusts") in the United States and Canada. The Trusts were
formed for the purpose of purchasing Case receivables and the receivables were
used as collateral for the issuance of asset-backed securities (asset-backed
securitizations) to outside investors. The proceeds received from the sales of
notes were reduced by $73 million and $90 million in 1996 and 1995,
respectively, pursuant to certain recourse provisions in the sale agreements.
These reductions in proceeds are held in escrow by the Trusts to provide
security in the event of uncollectible notes and are released to Case when the
notes are collected. Amounts held by the Trusts are recorded in "Accounts and
notes receivable--Other" on the Balance Sheets. Case has established reserves
for the estimated losses on amounts held in escrow. These Trusts are
controlled by third parties and, accordingly, are not included on the Balance
Sheets.
At December 31, 1996, Case Credit serviced a portfolio of $3,844 million of
retail notes (net of unearned financed charges) that includes notes amounting
to $2,260 million (net of unearned finance charges) owned by Trusts in the
United States and Canada. Case Credit is subject to recourse with respect to
receivables serviced for the Trusts up to $171 million and $219 million as of
December 31, 1996 and 1995, respectively. The Company has reserved for
expected losses as part of the allowance for doubtful accounts. A security
interest in the equipment financed by the retail notes is maintained such that
in the event of non-performance, the related equipment can be repossessed to
minimize losses.
NOTE 11: FINANCIAL INSTRUMENTS
Fair Market Value of Financial Instruments
The estimated fair market values of financial instruments that do not
approximate the carrying values in the financial statements are as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995
--------------- ---------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Accounts and notes receivable.......... $3,060 $3,087 $2,803 $2,819
Long-term debt (including current
maturities)........................... 1,128 1,117 936 989
Interest rate swaps.................... -- (9) -- (14)
</TABLE>
The fair value of accounts and notes receivable was based on discounting the
estimated future payments at prevailing market rates. The fair value of fixed-
rate, long-term debt was based on the market value of debt with similar
maturities and interest rates; the carrying amount of floating-rate, long-term
debt was assumed to approximate its fair value. The fair value of interest
rate swaps was based on the cost that would have been incurred to buy out
those swaps in a loss position and the consideration that would have been
received to terminate those swaps in a gain position. The fair values and
carrying values of the Company's foreign exchange forward contracts were not
material.
Derivatives
The Company uses derivative financial instruments to manage its interest
rate and foreign currency exposures. Case does not hold or issue financial
instruments for trading purposes. The notional amounts of these contracts do
not represent amounts exchanged by the parties and, thus, are not a measure of
the Company's risk. The net amounts exchanged are calculated on the basis of
the notional amounts and other terms of the contracts, such as interest rates
or exchange rates, and only represent a small portion of the notional amounts.
The credit and market risk under these agreements is minimized through
diversification among counterparties with high credit ratings.
52
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Foreign Exchange Contracts
Case enters into foreign exchange forward contracts and swaps to hedge
certain purchase and sale commitments and loans made to foreign subsidiaries
denominated in foreign currencies. Some of these transactions involve two
foreign currencies depending on the local exchange exposures of foreign
subsidiaries. The term of these contracts is one year or less. The purpose of
the Company's foreign currency hedging activities is to protect the Company
from the risk that the eventual cash flows resulting from loan repayments and
inventory purchases will be adversely affected by changes in exchange rates.
The recognition of gain or loss on these instruments is accrued as foreign
exchange rates change or delayed until the date of maturity. At December 31,
1996, Case had foreign exchange contracts with a notional value of $652
million. At December 31, 1995, Case had foreign exchange contracts with a
notional value of $425 million.
Interest Rate Swaps
Case enters into interest rate swaps to stabilize funding costs by
minimizing the effect of potential increases in floating-rate debt in a rising
interest rate environment. Under these agreements, the Company contracts with
a counterparty to exchange the difference between a fixed rate and a floating
rate applied to the notional amount of the swap. At December 31, 1996 and
1995, Case was a party to interest rate swaps with a notional value of $531
million and $698 million, respectively. The differential to be paid or
received on interest rate swap agreements is accrued as interest rates change
and is recognized as an adjustment to interest expense.
The following table indicates the types of swaps used and their weighted-
average interest rates. Variable interest rates are presented on the basis of
rates in effect at the reporting date. These rates may change significantly in
the future due to market factors. Swap contracts are principally between one
and four years in duration.
<TABLE>
<CAPTION>
DECEMBER
31,
----------
1996 1995
---- ----
<S> <C> <C>
Pay-fixed swaps
Weighted-average pay rate................................... 6.80% 6.66%
Weighted-average receive rate............................... 5.00% 5.89%
</TABLE>
Back-to-Back Interest Rate Caps
The asset-backed commercial paper liquidity facility (the "Liquidity
Facility") requires a subsidiary of Case Credit to have interest rate cap
agreements in place. Due to the relatively high expense of obtaining such an
instrument, Case Credit sells an identical cap, concurrent with the cap
purchase, to the same counterparty. This effectively minimizes the overall
expense to Case Credit, meets the requirements of the Liquidity Facility and
eliminates any risk of financial loss on the purchased cap. The defined term
of the cap is approximately 48 months. At December 31, 1996, Case Credit had a
back-to-back cap at a rate of 7.00% at a notional amount of approximately $98
million. At December 31, 1995, Case Credit had back-to-back caps at rates of
7.25% and 7.50%, at notional amounts of approximately $190 million and $60
million, respectively.
Treasury Rate Lock Agreements
A Treasury rate lock is a commitment to either purchase or sell the
designated financial instrument at a future date (the determination date) for
a specified price (the reference yield). The purpose of this instrument is to
protect the issuance of fixed-rate debt from fluctuations in the yield of the
Treasury Note that forms the basis of pricing the debt. As of December 31,
1996, the Company had no Treasury rate locks outstanding. As of December 31,
1995, the Company entered into $50 million of Treasury rate locks based on a
seven-year Treasury Note at a yield of 5.6% at the time. These rate locks were
settled in February 1996.
53
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Guarantees
At December 31, 1996, Case had guaranteed payment and performance of
approximately $18 million primarily related to performance bonds and letters
of credit.
NOTE 12: INCOME TAXES
Until June 23, 1994, the income and expense of the Case Business' domestic
subsidiaries and certain foreign operations were included in the tax returns
of other Tenneco entities. In accordance with tax sharing agreements, any
benefit to or liability incurred by Tenneco from such inclusion was to be
reimbursed to or paid by the Case Business. Tax benefits that were not
reimbursed by Tenneco in the current year were offset against deferred tax
liabilities.
Effective June 23, 1994 (the date of the Reorganization), the tax basis of
the assets and liabilities transferred to Case were adjusted to reflect fair
market value. Also on June 23, 1994, Tenneco realized a previously
unrecognized tax benefit on its investment in Case. A portion of the benefit,
amounting to approximately $120 million, was allocated to the Case Business in
accordance with the tax sharing agreement and was reflected as a reduction in
the tax provision and intercompany payable to Tenneco. The adjustment of
deferred taxes to reflect the revised tax values was not significant.
Subsequent to June 23, 1994, Case's results are no longer included in the tax
returns of Tenneco entities. As a result, management evaluated the
realizability of the deferred tax assets and determined it was not more likely
than not that certain deferred tax assets would be realized. As a result, a
valuation reserve of approximately $120 million was established.
Case and Tenneco entered into a tax sharing agreement covering
indemnification for all periods before the Reorganization.
The sources of income before taxes and cumulative effect of changes in
accounting principles and extraordinary loss were as follows (in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
U.S. sources.............................................. $389 $254 $191
Foreign sources........................................... 145 173 67
---- ---- ----
Income before taxes and cumulative effect of changes in
accounting principles and extraordinary loss............. $534 $427 $258
==== ==== ====
</TABLE>
The provision for income taxes consisted of the following (in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
United States......................................... $124 $123 $121
Foreign............................................... 29 44 50
State................................................. 16 20 16
---- ---- ----
Total current....................................... 169 187 187
Deferred:
United States......................................... 27 (94) (66)
Foreign............................................... (15) 1 (21)
State................................................. 4 (13) (7)
---- ---- ----
Total deferred...................................... 16 (106) (94)
---- ---- ----
Total tax provision................................. $185 $ 81 $ 93
==== ==== ====
</TABLE>
54
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Following is a reconciliation of income taxes computed at the U.S. Federal
income tax rate to the tax provision reflected in the Statements of Income (in
millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1995 1994
---- ----- ----
<S> <C> <C> <C>
Tax provision at U.S. Federal income tax rate.......... $187 $ 149 $ 90
Foreign losses with no tax benefit..................... 10 25 10
Reduction in valuation allowance....................... (49) (126) (31)
State taxes net of Federal benefit..................... 15 2 5
Foreign income taxed at different rates................ 6 20 --
Other.................................................. 16 11 19
---- ----- ----
Total tax provision................................ $185 $ 81 $ 93
==== ===== ====
</TABLE>
During 1996, 1995 and 1994, the Company generated income in certain
jurisdictions that supported reductions in the valuation reserve.
The components of the net deferred tax asset are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER
31,
----------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net income tax operating loss carryforwards................. $380 $384
Restructuring costs......................................... 73 117
Postretirement and postemployment benefits.................. 58 51
Sales returns and allowance reserves........................ 62 61
Warranty reserve............................................ 41 56
Other....................................................... 183 197
Valuation reserve........................................... (429) (468)
---- ----
Total deferred tax assets................................. 368 398
---- ----
Deferred tax liabilities:
Fixed assets--basis difference/depreciation................. 109 131
Pension costs............................................... 22 8
Purchase discounts.......................................... 27 33
Other....................................................... 39 49
---- ----
Total deferred tax liabilities............................ 197 221
---- ----
Net deferred tax asset.................................... $171 $177
==== ====
</TABLE>
The valuation allowance for deferred tax assets decreased $39 million from
December 31, 1995, to December 31, 1996. In 1996, the Company generated income
in certain tax jurisdictions to support a decrease in the valuation reserve of
$49 million. This reduction was offset by an increase in valuation reserves of
$10 million, established for certain foreign losses for which management
believes it is not more likely than not that such benefits will be realized.
The valuation allowance for deferred tax assets decreased $101 million from
December 31, 1994, to December 31, 1995. In 1995, the Company generated income
in certain tax jurisdictions to support a decrease in the valuation reserve of
$126 million. This was offset by an increase in valuation reserves of $25
million, established for certain foreign losses for which management believes
it is not more likely than not that such benefits will be realized.
55
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The classification of the net deferred tax asset is as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1995
------ ------
<S> <C> <C>
Current deferred tax asset................................ $ 188 $ 200
Long-term deferred tax asset.............................. 27 6
Current deferred tax liability............................ (11) (8)
Long-term deferred tax liability.......................... (33) (21)
------ ------
Net deferred tax asset................................ $ 171 $ 177
====== ======
</TABLE>
The tax benefits of significant foreign net tax operating loss carryforwards
as of December 31, 1996, are as follows (in millions):
<TABLE>
<S> <C>
Case France S.A.:
Expires 1997 through 1999.......................................... $ 19
Indefinite carryforward............................................ 150
----
169
Case United Kingdom Limited:
Indefinite carryforward............................................ 140
Case Spain S.A.:
Expires 1997 through 2000.......................................... 34
Case do Brasil (Brazil):
Indefinite carryforward............................................ 22
Other................................................................ 15
----
Total tax benefits of net tax operating loss carryforwards....... $380
====
</TABLE>
Case has recorded deferred tax assets in tax jurisdictions where the Company
has been profitable as management believes it is more likely than not that
such assets will be realizable. The Company continues to have valuation
reserves in certain tax jurisdictions where net operating losses exist
(particularly in the United Kingdom, France, Spain and Brazil). Realization of
these deferred tax assets is dependent on generating future income; however,
with the exception of France, none of these entities have displayed a
consistent earnings trend. The amount of the deferred tax assets considered
realizable could increase in the near term if future estimates of income are
experienced.
In 1996, the Company reversed a portion of its valuation reserve recorded
for France as past and projected earnings warranted such a reversal. The
Company has not reversed the France valuation reserve in total due to
uncertainties as to future income based upon the European agricultural and
construction markets.
NOTE 13: EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
Case has various defined benefit plans that cover substantially all of its
U.S. union and foreign employees. In connection with the Reorganization,
Tenneco retained the accumulated pension benefit obligation and assets
relating to all existing U.S. employees, deferred, vested, terminated
employees and retirees as of June 23, 1994. Benefits are based on years of
service and, for most salaried employees, on final average compensation.
Case's funding policies are to contribute to the plans amounts necessary to
satisfy the funding requirements as prescribed by the laws and regulations of
each country. Plan assets consist principally of listed equity and fixed
income securities.
56
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the remaining plans, reconciled with amounts recognized
in the Balance Sheets are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995 1996 1995
------- ------- ----- -----
PLANS IN
WHICH
PLANS IN WHICH ACCUMULATED
ASSETS EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
---------------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation
at measurement date,
September 30:
Vested benefit obligation.................... $ 334 $ 275 $ 139 $ 125
Non-vested benefit obligation................ -- 1 15 10
------- ------- ----- -----
Accumulated benefit obligation................. 334 276 154 135
Additional amounts related to projected salary
increases..................................... 10 8 13 16
------- ------- ----- -----
Projected benefit obligation................... 344 284 167 151
Plan assets at fair value at measurement date.. 456 361 21 9
------- ------- ----- -----
Plan assets in excess of (less than) total
projected benefit obligation at
measurement date.............................. 112 77 (146) (142)
Contributions after measurement date but
before reporting date....................... -- 1 3 3
Unrecognized prior service cost.............. 32 42 13 17
Unrecognized net (gain) loss resulting from
plan experience and
changes in actuarial assumptions............ (21) 1 6 (1)
Remaining unrecognized net obligation (asset)
at initial application...................... (5) (6) 1 1
Additional minimum liability................. -- -- (16) (8)
------- ------- ----- -----
Total prepaid (accrued) pension cost....... $ 118 $ 115 $(139) $(130)
======= ======= ===== =====
</TABLE>
Net pension costs consist of the following components (in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the year.................. $ 15 $ 13 $ 18
Interest cost on projected benefit obligation................. 37 33 65
Expected return on plan assets:
Actual return............................................... (65) (43) (60)
Deferral of gain (loss)..................................... 28 11 (7)
Net amortization of unrecognized amounts...................... 11 13 15
---- ---- ----
Total net pension cost.................................... $ 26 $ 27 $ 31
==== ==== ====
</TABLE>
The following assumptions were utilized in determining the funded status of
the plans:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
-------------- -------------- --------------
U.S. FOREIGN U.S. FOREIGN U.S. FOREIGN
PLANS PLANS PLANS PLANS PLANS PLANS
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Weighted-average discount rates..... 7.75% 8.10% 7.75% 8.30% 8.25% 8.70%
Rate of increase in future
compensation....................... N.A. 5.70% N.A. 5.60% N.A. 6.70%
Weighted-average long-term rates of
return on plan assets.............. 9.00% 9.40% 9.00% 9.70% 10.00% 10.00%
</TABLE>
57
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Defined Contribution Plans
Case has various defined contribution plans that cover certain U.S. and
foreign employees. At the time of the Reorganization, the Company adopted a
money purchase pension plan and a profit sharing plan pursuant to the Internal
Revenue Code for its U.S. salaried employees. Annually, the Company
contributes to the money purchase pension plan an amount equal to 4% of each
participant's eligible compensation, which amounted to $7 million, $6 million
and $3 million for 1996, 1995 and 1994, respectively. Effective December 31,
1996, the Company merged the money purchase pension plan into the profit
sharing plan. The Company currently intends to continue the 4% contribution
previously made under the money purchase pension plan as a profit sharing
contribution under the profit sharing plan. Under the profit sharing plan,
certain salaried participants may make pre-tax contributions of up to 8% of
base compensation. The Company will match 100% of a participant's
contribution. This matching contribution may be made in Common Stock of the
Company, and the Company has reserved 4.7 million shares of Common Stock for
this purpose. During 1996, 1995 and 1994, the Company contributed $11 million,
$10 million and $5 million, respectively, of Common Stock to the profit
sharing plan. Subject to the Company's operating results, the Company may make
additional contributions to the profit sharing plan.
NOTE 14: POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits
Case has postretirement health and life insurance plans that cover
substantially all of its U.S. and Canadian employees. For U.S. salaried
employees, the plans cover employees retiring from Case on or after attaining
age 55 who have had at least 10 years of service with Case after attaining age
45. The salaried plans were amended during 1993 to reduce the cost of
providing future benefits. Canadian salaried employees with seven or more
years of consecutive service are covered under the plans upon retirement. For
U.S. and Canadian hourly employees, the plans generally cover employees who
retire pursuant to their respective hourly plans. These benefits may be
subject to deductibles, copayment provisions and other limitations, and Case
has reserved the right to change these benefits, subject to the provisions of
any collective bargaining agreement.
Effective January 1, 1995, for its foreign operations, Case adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which requires employers to account for the cost of these postretirement
benefits on the accrual basis rather than on the "pay-as-you-go" basis, which
was Case's previous practice. Case elected to recognize this change in
accounting principle on the cumulative catch-up basis. The effect on 1995
income of immediately recognizing the transaction obligation was $9 million on
a pre-tax and after-tax basis.
Pursuant to the Reorganization Agreement, Tenneco retained the accumulated
postretirement health and life insurance benefit obligations relating to all
U.S. employees who retired on or before July 1, 1994, and their dependents.
The net periodic postretirement benefit cost included the following
components (in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned during the year................ $ 6 $ 4 $ 4
Interest cost on accumulated postretirement benefit obligation.. 15 7 16
Amortization of other unrecognized amounts...................... 4 (1) (5)
--- --- ---
Net periodic postretirement benefit cost........................ $25 $10 $15
=== === ===
</TABLE>
58
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As a result of the plans being unfunded, the liability of the plans was as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER
31,
------------
1996 1995
----- -----
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit
obligation at measurement date, September 30:
Retirees....................................................... $ 29 $ 9
Fully eligible active plan participants........................ 50 34
Other active plan participants................................. 113 100
----- -----
Total accumulated postretirement benefit obligation.......... 192 143
Plan assets at fair value at measurement date.................... -- --
----- -----
Accumulated postretirement benefit obligation in excess of plan
assets at measurement date...................................... (192) (143)
Unrecognized reduction of prior service obligations resulting
from plan amendments............................................ (3) (3)
Unrecognized net loss resulting from plan experience and changes
in actuarial assumptions........................................ 80 48
----- -----
Total accrued postretirement benefit cost.................... $(115) $ (98)
===== =====
</TABLE>
The weighted-average assumed health care cost trend rate used in determining
the 1996 and 1995 accumulated postretirement benefit obligation covering U.S.
employees was 7% and 8% for indemnity and 6% for managed care participants,
respectively, both declining to 5.5% in 1998 and remaining at that level
thereafter. The weighted-average assumed health care cost trend rate used in
determining the 1996 accumulated postretirement benefit obligation related to
the Canadian employees was 12%, declining to 7% in 2002 and remaining at that
level thereafter.
Increasing the assumed health care cost trend by one percentage point in
each year would increase the total accumulated postretirement benefit
obligation as of September 30, 1996 and 1995, by approximately $35 million and
$31 million, respectively, and would increase the aggregate of the service
cost and interest cost components of the net postretirement benefit cost by
approximately $4 million in 1996 and 1995, and by approximately $2 million in
1994.
The discount rate (which is based on long-term market rates) used in
determining the 1996 and 1995 accumulated postretirement benefit obligation
covering the U.S. employees was 7.75%. The discount rate used in determining
the 1996 and 1995 accumulated postretirement benefit obligation related to the
Canadian employees was 8.5%.
Postemployment Benefits
Effective January 1, 1994, Case adopted SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," which requires employers to recognize the cost
of benefits provided to former or inactive employees after employment but
before retirement when it is probable that a benefit will be provided. Such
benefits include disability and continuation of health care benefits. The
impact of adopting SFAS No. 112 was reported as a cumulative catch-up
adjustment of $29 million (after tax) during the first quarter of 1994.
NOTE 15: COMMITMENTS AND CONTINGENCIES
Environmental
Case has received and from time to time receives inquiries and/or notices of
potential liability at multiple sites ("Waste Sites") that are the subject of
remedial activities under Federal or state environmental laws and
59
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Case may be required to share in the cost of clean-up. Case is also involved
in remediating a number of other sites, including certain of its currently and
formerly operated facilities or those assumed through corporate acquisitions.
Expenditures for ongoing compliance with environmental regulations that relate
to current operations are expensed or capitalized as appropriate. Expenditures
that relate to an existing condition caused by past operations and which do
not contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments indicate that remedial
efforts are probable and the costs can be reasonably estimated. Estimates of
the liability are based upon currently available facts, existing technology
and presently enacted laws and regulations. All available evidence is
considered, including prior experience in remediation of contaminated sites,
other parties' share of liability at the Waste Sites and their ability to pay
and data concerning the Waste Sites released by the U.S. Environmental
Protection Agency or other organizations. These liabilities are included in
the accompanying Balance Sheets at their undiscounted amounts. Recoveries are
evaluated separately from the liability and, if appropriate, are recorded
separately from the associated liability in the accompanying Balance Sheets.
Based upon information currently available, management estimates potential
environmental remediation, decommissioning, restoration, monitoring and other
closure costs associated with current or formerly owned or operated facilities
to be in the range of $22 million to $42 million, including Case's estimated
share at the Waste Sites. As of December 31, 1996, environmental reserves of
approximately $34 million had been established to address these specific
estimated potential liabilities. After considering these reserves, management
is of the opinion that the outcome of these matters will not have a material
adverse effect on Case's financial position or results of operations.
Product liability
Product liability claims against Case arise from time to time in the
ordinary course of business. There is an inherent uncertainty as to the
eventual resolution of unsettled claims. However, in the opinion of
management, any losses with respect to existing claims will not have a
material adverse effect on Case's financial position or results of operations.
Other
Case is the subject of various other legal claims arising from its
operations, including product warranty, dealer disputes, workmen's
compensation and employment matters. Management is of the opinion that the
resolution of these claims, individually and in the aggregate, will not have a
material adverse effect on Case's financial position or results of operations.
60
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Commitments
Minimum rental commitments at December 31, 1996, under non-cancelable
operating leases with lease terms in excess of one year are as follows (in
millions):
<TABLE>
<S> <C>
1997................................. $14
1998................................. 10
1999................................. 6
2000................................. 4
2001................................. 3
2002 and thereafter.................. 17
---
Total minimum rental commitments. $54
===
</TABLE>
Commitments under capital leases are not significant to the financial
statements. Total rental expense for all operating leases was $36 million, $35
million and $33 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
In connection with a supply agreement with Consolidated Diesel Company, a
joint venture that is 50% owned by Case, the Company is required to purchase
engine products in amounts to provide for the recovery of specified fixed and
variable costs of the joint venture. Under this agreement, Case purchased
engine products totaling $154 million, $138 million and $121 million in 1996,
1995 and 1994, respectively, with future minimum purchases (representing only
fixed costs) of $11 million in 1997, $10 million in 1998, $11 million in 1999,
$11 million in 2000, $10 million in 2001, and $66 million in the aggregate, in
subsequent years.
61
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16: UNAUDITED PRO FORMA STATEMENT OF INCOME
The unaudited Pro forma Statement of Income has been prepared as if the
Reorganization and Initial Offering had occurred as of January 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Revenues:
Net sales................................ $4,262 $-- $4,262
Interest income and other................ 143 (41)(a) 130
28 (b)
------ ---- ------
4,405 (13) 4,392
Costs and Expenses:
Cost of goods sold....................... 3,260 (12)(c) 3,246
(2)(d)
Selling, general and administrative...... 576 6 (b) 582
Research, development and engineering.... 127 -- 127
Restructuring credit..................... (16) -- (16)
Interest expense......................... 160 (41)(a) 167
29 (b)
19 (e)
Other, net............................... 40 (10)(f) 32
2 (g)
------ ---- ------
4,147 (9) 4,138
Income before taxes and cumulative effect
of changes in accounting principles and
extraordinary loss........................ 258 (4) 254
Income tax provision....................... 93 (2)(h) 91
------ ---- ------
Income before cumulative effect of changes
in accounting principles and extraordinary
loss...................................... 165 (2) 163
Cumulative effect of changes in accounting
principles................................ (29) -- (29)
Extraordinary loss......................... (5) -- (5)
------ ---- ------
Net income............................. $ 131 $ (2) $ 129
====== ==== ======
Preferred stock dividends.................. 7(i)
------
Net income to common................... $ 122
======
Net income per share of common stock....... $ 1.74(j)
======
</TABLE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
(a) Reflects the elimination of earned finance charges, interest expense and
other costs and expense related to approximately $1.1 billion of U.S.
retail receivables retained by a subsidiary of Tenneco.
(b) Reflects accumulation of new U.S. retail receivables since January 1, 1994,
including earned finance charges, interest expense and other related costs
and expenses.
(c) Reflects the reduction of postretirement health and life insurance benefit
expense as a result of the retention by Tenneco of such liabilities
provided under Case's welfare plan to Case's retirees in the United States
and current employees in the United States who retired on or before July 1,
1994, and their dependents.
62
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(d) Reflects the net reduction of pension expense as a result of the retention
by Tenneco of pension liabilities for existing employees and retirees as
of June 23, 1994.
(e) Recognizes the net increase in interest expense (exclusive of retail
receivable financing) resulting from increased borrowings. For pro forma
purposes, the assumed interest rate is 7% on the credit facilities;
interest on the subordinated notes is accrued at the per annum rate of 10
1/2%.
(f) Reflects a servicing fee charged by Case for servicing the U.S. retail
notes receivable retained by a subsidiary of Tenneco. Such fee is equal to
2% per annum of the average amount of receivables outstanding during each
month.
(g) Reflects the amortization of deferred financing costs related to the
credit facilities over a five-year period.
(h) Adjusts the tax provision to reflect the impact of the above pro forma
adjustments.
(i) Dividends on preferred stock are accumulated at $4.50 per annum on the
Series A Cumulative Convertible Preferred Stock and $4.25 per annum on the
Cumulative Convertible Second Preferred Stock.
(j) Earnings per common share is computed assuming 70 million common shares
outstanding and payment of preferred stock dividends for periods prior to
June 24, 1994.
NOTE 17: EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of Common Stock for 1996 and 1995 are based upon actual
results. Pro forma earnings per share of Common Stock for 1994 are based upon
pro forma earnings, calculated as if the Reorganization and Initial Offering
had occurred as of January 1, 1994, assuming 70 million common shares issued
and outstanding.
Earnings per average share of Common Stock (in millions except per share
data):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Primary
Net earnings after preferred stock dividends and
before cumulative effect of changes in accounting
principles and extraordinary loss................... $ 4.61 $ 4.72 $ 2.22
Cumulative effect of changes in accounting
principles.......................................... -- (0.12) (0.41)
Extraordinary loss................................... (0.44) -- (0.07)
------ ------ ------
Net earnings per share of common stock............... $ 4.17 $ 4.60 $ 1.74
====== ====== ======
Average common and common equivalent shares
outstanding......................................... 74 72 70
Fully Diluted
Net earnings before cumulative effect of changes in
accounting principles and extraordinary loss........ $ 4.48 $ 4.56 N.A.
Cumulative effect of changes in accounting
principles.......................................... -- (0.12) N.A.
Extraordinary loss................................... (0.42) -- N.A.
------ ------ ------
Net earnings per share of common stock............... $ 4.06 $ 4.44 N.A.
====== ====== ======
Average common and common equivalent shares
outstanding......................................... 78 76 N.A.
</TABLE>
For the year ended December 31, 1994, the pro forma fully diluted earnings
per common share computation is antidilutive.
63
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 18: QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN MILLIONS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1996
Revenues..................................... $1,171 $1,466 $1,199 $1,573
Gross profit (a)............................. 216 300 220 294
Income before cumulative effect of changes in
accounting principles and extraordinary
loss........................................ 75 110 62 102
Net income................................... 53 110 51 102
Income per common share after preferred stock
dividends and before cumulative effect of
changes in accounting principles and
extraordinary loss.......................... $ 1.00 $ 1.47 $ 0.81 $ 1.33
Net income per common share.................. 0.70 1.47 0.66 1.33
1995
Revenues..................................... $1,178 $1,418 $1,182 $1,327
Gross profit (a)............................. 230 297 212 263
Income before cumulative effect of changes in
accounting principles and extraordinary
loss........................................ 70 110 88 78
Net income................................... 61 110 88 78
Income per common share after preferred stock
dividends and before cumulative effect of
changes in accounting principles and
extraordinary loss.......................... $ 0.96 $ 1.53 $ 1.19 $ 1.05
Net income per common share.................. 0.83 1.53 1.19 1.05
</TABLE>
- --------
(a) Gross profit is defined as net sales less cost of goods sold and research,
development and engineering expenses.
NOTE 19: GEOGRAPHICAL AREA INFORMATION
Case is engaged in the sale of products for export from the United States.
Such sales are reflected in the table below (in millions):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Canada..................................................... $336 $258 $268
European Community......................................... 193 154 97
Other Foreign.............................................. 378 203 163
---- ---- ----
Total export sales..................................... $907 $615 $528
==== ==== ====
</TABLE>
64
<PAGE>
CASE CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
The following highlights Case's operations by geographic area (in millions):
<TABLE>
<CAPTION>
RECLASSES
UNITED EUROPE OTHER AND
STATES CANADA COMMUNITY FOREIGN ELIMINATIONS TOTAL
------ ------ --------- ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1996, and
for the year then ended:
Net sales:
External................. $2,767 $442 $1,551 $416 $ -- $5,176
Intergeographical
area(s)................. 656 106 238 4 (1,004) --
------ ---- ------ ---- ------- ------
Total net sales........ 3,423 548 1,789 420 (1,004) 5,176
Interest income............ 194 33 4 17 (15) 233
------ ---- ------ ---- ------- ------
Total revenues......... $3,617 $581 $1,793 $437 $(1,019) $5,409
====== ==== ====== ==== ======= ======
Income (loss) before taxes
and cumulative effect of
changes in accounting
principles and
extraordinary loss........ $ 518 $ 52 $ 71 $ 23 $ (130) $ 534
====== ==== ====== ==== ======= ======
Identifiable assets........ $4,560 $679 $1,510 $525 $(1,278) $5,996
Investment in joint
ventures.................. 59 -- 1 3 -- 63
------ ---- ------ ---- ------- ------
Total assets........... $4,619 $679 $1,511 $528 $(1,278) $6,059
====== ==== ====== ==== ======= ======
At December 31, 1995, and
for the year then ended:
Net sales:
External................. $2,809 $390 $1,484 $254 $ -- $4,937
Intergeographical
area(s)................. 459 67 272 -- (798) --
------ ---- ------ ---- ------- ------
Total net sales........ 3,268 457 1,756 254 (798) 4,937
Interest income............ 142 18 6 13 (11) 168
------ ---- ------ ---- ------- ------
Total revenues......... $3,410 $475 $1,762 $267 $ (809) $5,105
====== ==== ====== ==== ======= ======
Income (loss) before taxes
and cumulative effect of
changes in accounting
principles and
extraordinary loss........ $ 377 $ 69 $ 84 $ 20 $ (123) $ 427
====== ==== ====== ==== ======= ======
Identifiable assets........ $4,213 $552 $1,127 $327 $ (815) $5,404
Investment in joint
ventures.................. 65 -- -- -- -- 65
------ ---- ------ ---- ------- ------
Total assets........... $4,278 $552 $1,127 $327 $ (815) $5,469
====== ==== ====== ==== ======= ======
At December 31, 1994, and
for the year then ended:
Net sales:
External................. $2,426 $398 $1,164 $274 $ -- $4,262
Intergeographical
area(s)................. 421 34 278 -- (733) --
------ ---- ------ ---- ------- ------
Total net sales........ 2,847 432 1,442 274 (733) 4,262
Interest income............ 132 7 6 15 (17) 143
------ ---- ------ ---- ------- ------
Total revenues......... $2,979 $439 $1,448 $289 $ (750) $4,405
====== ==== ====== ==== ======= ======
Income (loss) before taxes
and cumulative effect of
changes in accounting
principles and
extraordinary loss........ $ 175 $ 47 $ 35 $ 20 $ (19) $ 258
====== ==== ====== ==== ======= ======
Identifiable assets........ $3,677 $470 $1,040 $296 $ (510) $4,973
Investment in joint
ventures.................. 79 -- -- -- -- 79
------ ---- ------ ---- ------- ------
Total assets........... $3,756 $470 $1,040 $296 $ (510) $5,052
====== ==== ====== ==== ======= ======
</TABLE>
65
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10, "Directors and Executive Officers of the Registrant," Item 11,
"Executive Compensation," Item 12, "Security Ownership of Certain Beneficial
Owners and Management," and Item 13, "Certain Relationships and Related
Transactions," have been omitted from this report inasmuch as the Company will
file with the Securities and Exchange Commission pursuant to Regulation 14A
within 120 days after the end of the fiscal year covered by this report a
definitive Proxy Statement for the Annual Meeting of Stockholders of the
Company to be held on May 14, 1997, at which meeting the stockholders will
vote upon the election of directors. The information under the captions
"Election of Directors," "Stock Ownership," "Executive Officer Compensation"
(other than the subsection titled "Compensation Committee Report on Executive
Officer Compensation"), and "Certain Relationships and Transactions" in such
definitive Proxy Statement are incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS INCLUDED IN ITEM 8
See "Index to Financial Statements of Case Corporation and Consolidated
Subsidiaries" set forth in Item 8, "Financial Statements and Supplementary
Data."
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE INCLUDED IN ITEM 14
<TABLE>
<C> <S> <C>
Schedule of the Company and Consolidated Subsidiaries--
<CAPTION>
PAGE
----
<C> <S> <C>
--Valuation and qualifying accounts--three years ended
Schedule II December 31, 1996........................................ 67
</TABLE>
SCHEDULES OMITTED AS NOT REQUIRED OR INAPPLICABLE
<TABLE>
<C> <S>
Schedule I --Condensed financial information of
registrant
Schedule III --Real estate and accumulated depreciation
Schedule IV --Mortgage loans on real estate
Schedule V --Supplemental Information Concerning
Property--Casualty Insurance Operations
</TABLE>
66
<PAGE>
SCHEDULE II
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
AND
THE FARM AND CONSTRUCTION EQUIPMENT BUSINESS OF TENNECO INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(MILLIONS)
<TABLE>
<CAPTION>
ADDITIONS
-----------------
BALANCE CHARGED
AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
----------- --------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable:
Year ended December 31, 1996. $(74) $ (3) $-- $-- (a) $(77)
==== ==== ==== ==== ====
Year ended December 31, 1995. $(80) $-- $-- $ 6(b) $(74)
==== ==== ==== ==== ====
Year ended December 31, 1994. $(71) $(23) $-- $ 14(c) $(80)
==== ==== ==== ==== ====
</TABLE>
- --------
(a) Reflects a $3 million reversal of reserves (as such reserves were deemed
to be no longer required), offset by the impact of exchange rate changes
of $(1) million and a $(2) million increase resulting from the acquisition
of businesses.
(b) Deductions reflect a $5 million reversal of reserves (as such reserves
were deemed to be no longer required), write-offs, net of recoveries of $4
million, the impact of exchange rate changes of $(2) million and other
items of $(1) million.
(c) Deductions in 1994 primarily reflect write-offs, net of recoveries.
67
<PAGE>
EXHIBITS
A list of the exhibits included as part of this Form 10-K is set forth in
the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
REPORTS ON FORM 8-K
Case Corporation did not file any current reports on Form 8-K during its
fiscal quarter ended December 31, 1996.
68
<PAGE>
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.
Case Corporation
/s/ Jean-Pierre Rosso
By___________________________________
Chairman, President and Chief
Executive Officer
Date: March 14, 1997
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 AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S> <C>
/s/ Jean-Pierre Rosso
-------------------------------------------
Jean-Pierre Rosso Chairman, President and
Chief Executive Officer
(Principal Executive
Officer and Director)
/s/ Theodore R. French
-------------------------------------------
Theodore R. French Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Mark Andrews
-------------------------------------------
Mark Andrews Director
/s/ Jeffery T. Grade
-------------------------------------------
Jeffery T. Grade Director
/s/ Katherine M. Hudson
-------------------------------------------
Katherine M. Hudson Director
/s/ Dana G. Mead
-------------------------------------------
Dana G. Mead Director
/s/ Gerald Rosenfeld
-------------------------------------------
Gerald Rosenfeld Director
/s/ Theodore R. Tetzlaff
-------------------------------------------
Theodore R. Tetzlaff Director
/s/ Thomas N. Urban
-------------------------------------------
Thomas N. Urban Director
</TABLE>
Date: March 14, 1997
69
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
------- ----------------------- ------------
<C> <S> <C>
2 --Reorganization Agreement dated as of June 23,
1994, among Case Equipment Corporation, Case Corpo-
ration and Tenneco Inc. (Filed as Exhibit 2 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, and incorporated
herein by reference).
3(a)(1) --Certificate of Incorporation of Case Equipment
Corporation. (Filed as Exhibit (3)(a)(1) to Amend-
ment No. 4 to the Company's Registration Statement
No. 33-78148 and incorporated herein by reference).
3(a)(2) --Certificate of Designation, Preferences and Rights
of Series A Cumulative Convertible Preferred Stock.
(Filed as Exhibit (3)(a)(2) to the Company's Regis-
tration Statement No. 33-78148, and incorporated
herein by reference).
3(a)(3) --Certificate of Designation, Preferences and Rights
of Cumulative Convertible Second Preferred Stock.
(Filed as Exhibit (3)(a)(3) to the Company's Regis-
tration Statement No. 33-78148, and incorporated
herein by reference).
3(a)(4) --Certificate of Amendment of Certificate of Incor-
poration of Case Equipment Corporation. (Filed as
Exhibit (3)(a)(4) to the Company's Registration
Statement No. 33-82158, and incorporated herein by
reference).
3(a)(5) --Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock.
(Filed as Exhibit 1 to the Company's Current Report
on Form 8-K dated December 12, 1995, and incorpo-
rated herein by reference).
3(b) --By-Laws of Case Corporation, as amended and re-
stated on October 2, 1996.
4(a) --Form of Certificate of Cumulative Convertible Sec-
ond Preferred Stock. (Filed as Exhibit 4(c) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1994, as amended on Form 10-K/A
dated April 6, 1995, and incorporated herein by
reference).
4(b) --Indenture, dated as of July 31, 1995, between Case
Corporation and The Bank of New York. (Filed as Ex-
hibit 4(c) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated herein by reference).
4(c) --Resolutions of the Board of Directors of Case Cor-
poration authorizing the public offering of debt
securities of the Company in an aggregate principal
amount of up to $600,000,000. (Filed as Exhibit
4(d) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, and incorpo-
rated herein by reference).
4(d) --Actions of the Authorized Officers of Case Corpo-
ration authorizing the issuance of $300,000,000 ag-
gregate principal amount of 7 1/4% Notes due August
1, 2005. (Filed as Exhibit 4(e) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, and incorporated herein by refer-
ence).
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
------- ----------------------- ------------
<C> <S> <C>
4(e) --Officer's Certificate and Company Order of Case
Corporation executed in conjunction with the issu-
ance of $300,000,000 aggregate principal amount of
7 1/4% Notes due August 1, 2005. (Filed as Exhibit
4(f) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, and incorpo-
rated herein by reference).
4(f) --Form of 7 1/4% Note due August 1, 2005. (Filed as
Exhibit 4(b) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, and
incorporated herein by reference).
4(g) --Actions of the Authorized Officers of Case Corpo-
ration authorizing the issuance of $300,000,000 ag-
gregate principal amount of 7 1/4% Notes due 2016.
(Filed as Exhibit 4(d) to the Company's Current Re-
port on Form 8-K dated January 16, 1996, and incor-
porated herein by reference).
4(h) --Officer's Certificate and Company Order of Case
Corporation executed in con- junction with the is-
suance of $300,000,000 aggregate principal amount
of 7 1/4% Notes due 2016. (Filed as Exhibit 4(e) to
the Company's Current Report on Form 8-K dated Jan-
uary 16, 1996, and incorporated herein by refer-
ence).
4(i) --Form of 7 1/4% Note due 2016. (Filed as Exhibit
4(b) to the Company's Current Report on Form 8-K
dated January 16, 1996, and incorporated herein by
reference).
4(j) --The Company hereby agrees to furnish to the Secu-
rities and Exchange Commission, upon its request,
the instruments with respect to certain indebted-
ness issued by its subsidiaries, which indebtedness
does not exceed 10% of the Company"s total consoli-
dated assets.
10(a)(1) --Revolving Credit and Guarantee Agreement, dated as
of August 23, 1996, among Case Corporation, Case
Canada Corporation/Corporation Case Canada, certain
Foreign Subsidiary Borrowers from time to time par-
ties thereto, the Lenders parties thereto, the Co-
Agents and Lead Managers named therein, The Chase
Manhattan Bank, as General Administrative Agent,
and The Bank of Nova Scotia, as Canadian Adminis-
trative Agent. (Filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, and incorporated
herein by reference).
10(a)(2) --First Amendment, dated as of November 21, 1996, to
the Revolving Credit and Guarantee Agreement, dated
as of August 23, 1996, among Case Corporation, Case
Canada Corporation/Corporation Case Canada, certain
Foreign Subsidiary Borrowers from time to time par-
ties thereto, the Lenders parties thereto, the Co-
Agents and Lead Managers named therein, The Chase
Manhattan Bank, as General Administrative Agent,
and The Bank of Nova Scotia, as Canadian Adminis-
trative Agent.
10(b)(1) --Revolving Credit and Guarantee Agreement, dated as
of August 23, 1996, among Case Credit Corporation,
and certain foreign Subsidiaries from time to time
parties thereto, the Lenders parties thereto, the
Co-Agents and Lead Managers named therein, and The
Chase Manhattan Bank, as Administrative Agent.
(Filed as Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1996, and incorporated herein by reference).
10(b)(2) --First Amendment, dated as of November 21, 1996, to
the Revolving Credit and Guarantee Agreement dated
as of August 23, 1996, among Case Credit Corpora-
tion, certain Foreign Subsidiary Borrowers from
time to time parties thereto, the Lenders parties
thereto, the Co-Agents and Lead Managers named
therein, and The Chase Manhattan Bank, as Adminis-
trative Agent.
</TABLE>
71
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
------- ----------------------- ------------
<C> <S> <C>
10(c)(1) --Revolving Credit Agreement, dated as of August 23,
1996, among Case Credit Ltd., the Lenders parties
thereto, Canadian Imperial Bank of Commerce, as Co-
Agent, and The Bank of Nova Scotia, as Administra-
tive Agent. (Filed as Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, and incorporated
herein by reference).
10(c)(2) --First Amendment, dated as of November 21, 1996, to
the Revolving Credit Agreement, dated as of August
23, 1996, among Case Credit Ltd., the Lenders par-
ties thereto, the Canadian Imperial Bank of Com-
merce, as Co-Agent, and The Bank of Nova Scotia, as
Administrative Agent.
10(d)(1) --Banking Facilities extended to Case Corporation
Pty Ltd by the National Australia Bank, dated as of
February 15, 1996. (Filed as Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1995, and incorporated herein by
reference.)
10(d)(2) --Letter of Amendment to Banking Facilities extended
to Case Corporation Pty Ltd by the National Austra-
lia Bank, dated as of October 22, 1996.
10(d)(3) --Deed of Amendment and Acknowledgment, dated Febru-
ary 17, 1997, to the Banking Facilities extended to
Case Corporation Pty Ltd by the National Australia
Bank, dated as of February 15, 1996.
10(e)(1) --Banking Facilities extended to Case Credit Austra-
lia Pty Ltd by the National Australia Bank, dated
as of September 28, 1995. (Filed as Exhibit
10(c)(2) to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, and
incorporated herein by reference).
10(e)(2) --Deed of Amendment and Acknowledgment, dated Decem-
ber 31, 1996, to the Banking Facilities extended to
Case Credit Australia Pty Ltd by the National Aus-
tralia Bank, dated as of September 28, 1995.
10(f)(1) --Liquidity Agreement, dated as of June 23, 1994,
among Case Equipment Loan Trust 1994-B, the Lenders
named therein, the Co-Agents named therein, and
Chemical Bank, as U.S. Administrative Agent. (Filed
as Exhibit 10(a)(3) to the Company's Registration
Statement No. 33-82158, and incorporated herein by
reference).
10(f)(2) --Second Amendment and Consent, dated as of August
28, 1996, among Case Equipment Loan Trust 1994-B,
the Lenders parties thereto, the Co-Agents named
therein and The Chase Manhattan Bank, as Adminis-
trative Agent, to the Liquidity Agreement, dated as
of June 23, 1994, as previously amended, among Case
Equipment Loan Trust 1994-B, the Lenders parties
thereto, and The Chase Manhattan Bank, as Adminis-
trative Agent. (Filed as Exhibit 10(d) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, and incorporated
herein by reference).
10(g) --Rights Agreement between Case Corporation and
First Chicago Trust Company of New York, dated as
of December 8, 1995. (Filed as Exhibit 1 to the
Company's Form 8-K filed December 18, 1995, and in-
corporated herein by reference).
*10(h)(1) --Agreement dated May 4, 1995, between Jean-Pierre
Rosso and Case Corporation. (Filed as Exhibit
10(h)(1) to the Company's Annual Report on Form 10-
K for the year ended December 31, 1995, and incor-
porated herein by reference.)
*10(h)(2) --Restructuring Retention Agreement dated June 7,
1993, between Case Corporation and Steven G. Lamb.
(Filed as Exhibit 10(c)(1) to the Company's Regis-
tration Statement No. 33-78148, and incorporated
herein by reference).
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
------- ----------------------- ------------
<C> <S> <C>
*10(h)(3) --Restructuring Retention Agreement dated June 2,
1993, between Case Corporation and Richard M.
Christman. (Filed as Exhibit 10(c)(2) to the
Company's Registration Statement No. 33-78148, and
incorporated herein by reference).
*10(h)(4) --Restructuring Retention Agreement dated June 1,
1993, between Case Corporation and Theodore R.
French. (Filed as Exhibit 10(c)(3) to the Company's
Registration Statement No. 33-78148, and incorpo-
rated herein by reference).
*10(h)(5) --Agreement dated February 3, 1995, between Case
Corporation and Richard S. Brennan. (Filed as Ex-
hibit 10(h)(5) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, and
incorporated herein by reference.)
*10(i) --Case Corporation Equity Incentive Plan.
*10(j) --Case Corporation Deferred Compensation Plan.
(Filed as Exhibit 10(j) to the Company's Annual Re-
port on Form 10-K for the year ended December 31,
1995, and incorporated herein by reference.)
10(k) --Employee Benefits and Compensation Allocation
Agreement dated as of June 23, 1994, among Case
Equipment Corporation, Case Corporation and Tenneco
Inc. (Filed as Exhibit 10(f) to the Company's Reg-
istration Statement No. 33-82158, and incorporated
herein by reference).
10(l) --Tax Sharing Agreement dated as of June 23, 1994,
between Case Equipment Corporation and Tenneco Inc.
(Filed as Exhibit 10(g) to the Company's Registra-
tion Statement No. 33-82158, and incorporated
herein by reference).
10(m) --Receivables Servicing Agreement dated as of June
23, 1994, between Case Credit Corporation and
Tenneco Credit Corporation. (Filed as Exhibit 10(h)
to the Company's Registration Statement No. 33-
82158, and incorporated herein by reference).
**10(n)(1) --Restated Sponsors Agreement between Case Corpora-
tion and Cummins Engine Company, Inc., dated Decem-
ber 7, 1990, together with the Restated Partnership
Agreement between Case Engine Holding Company, Inc.
and Cummins Engine Holding Company, Inc., dated De-
cember 7, 1990. (Filed as Exhibit 10(f) to Amend-
ment No. 3 to the Company's Registration Statement
No. 33-78148, and incorporated herein by refer-
ence).
**10(n)(2) --Agreement, dated as of September 29, 1995, among
Cummins Engine Company, Inc., Case Corporation,
Cummins Engine Holding Company, Inc. and Case CDC
Holdings, Inc. (Filed as Exhibit 10(d) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, and incorporated
herein by reference).
**10(o) --Amended and Restated Contract Manufacturing Agree-
ment dated as of March 7, 1995, among Case Corpora-
tion, Link-Belt Construction Equipment Corporation
and Sumitomo (S.H.I.) Construction Machinery Co.,
Ltd. (Filed as Exhibit 4(c) to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994, as amended on Form 10-K/A dated April 6,
1995, and incorporated herein by reference).
</TABLE>
73
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGES
------- ----------------------- ------------
<C> <S> <C>
10(p) --Sponsors' Agreement dated as of October 21, 1987,
by and between Hesston Corporation and J.I. Case
Company (now Case Corporation), together with the
General Partnership Agreement dated as of October
21, 1987, by and between Hesston Ventures Corpora-
tion and Case Ventures Corporation. (Filed as Ex-
hibit 10(g) to Amendment No. 3 to the Company's Reg-
istration Statement No. 33-78148, and incorporated
herein by reference).
11 --Computation of Pro Forma Earnings Per Share of Com-
mon Stock.
12 --Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends.
21 --Subsidiaries of Case Corporation.
23 --The consent of Arthur Andersen LLP, Independent
Public Accountants for Case Corporation (Milwaukee,
Wisconsin).
</TABLE>
- --------
*Management contract or compensatory plan or arrangement.
**Confidential information contained in this agreement has been omitted from
this filing and has been filed separately with the Securities and Exchange
Commission.
74
<PAGE>
EXHIBIT 3 (b)
CASE CORPORATION
BY-LAWS
AMENDED AND RESTATED
OCTOBER 2, 1996
ARTICLE I
MEETINGS OF STOCKHOLDERS
PLACE OF MEETING
SECTION 1. All meetings of the stockholders of the Corporation shall be held
at such place or places, within or without the State of Delaware, as may from
time to time be fixed by the Board of Directors (the "Board"), or as shall be
specified or fixed in the respective notices or waivers of notice thereof.
ANNUAL MEETING
SECTION 2. The Annual Meeting of Stockholders shall be held on such date and
at such time as may be fixed by the Board and stated in the notice thereof, for
the purpose of electing directors and for the transaction of only such other
business as is properly brought before the meeting in accordance with these By-
Laws.
To be properly brought before the meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting by
or at the direction of the Board, or (c) otherwise properly brought before the
meeting by a stockholder. In addition to any other applicable requirements, for
business to be properly brought before the Annual Meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than 50 days nor more than 75 days prior to the meeting; provided, however,
that in the event that less than 65 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the Annual Meeting was mailed or such public disclosure was made, whichever
first occurs. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the Annual Meeting (i) a
brief description of the business desired to be brought before the Annual
Meeting and the reasons for conducting such business at the Annual Meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class and number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
<PAGE>
Notwithstanding anything in these By-Laws to the contrary, no business shall
be transacted at the Annual Meeting except in accordance with the procedures set
forth in this Section, provided, however, that nothing in this Section shall be
deemed to preclude discussion by any stockholder of any business properly
brought before the Annual Meeting.
The Chairman of the Annual Meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section, and if so determined, so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
SPECIAL MEETING
SECTION 3. Special meetings of the stockholders shall be called only by the
Board. The business transacted at a special meeting shall be confined to the
purposes specified in the notice thereof. Special meetings shall be held at
such date and at such time as the Board may designate.
NOTICE OF MEETING
SECTION 4. Unless otherwise provided by law, written notice of each meeting
of stockholders, stating the place, date and hour of the meeting, and the
purpose or purposes thereof, shall be mailed not less than ten nor more than
sixty days before the date of such meeting to each stockholder entitled to vote
thereat.
QUORUM
SECTION 5. Unless otherwise provided by statute or the Certificate of
Incorporation, at each meeting of stockholders the presence in person or by
proxy of the holders of a majority in voting power of the outstanding shares of
stock entitled to vote at the meeting shall constitute a quorum at such meeting.
VOTING
SECTION 6. Except as otherwise provided by the Certificate of Incorporation,
each stockholder entitled to vote at any meeting of stockholders shall be
entitled to one vote for each share of stock held which has voting power upon
the matter in question. Subject to the final sentence of this Section 6, voting
at meetings of stockholders need not be by written ballot. At all meetings of
stockholders for the election of directors a plurality of the votes cast shall
be sufficient to elect. All other elections and questions shall, unless
otherwise provided by law, the Certificate of Incorporation or these By-Laws, be
decided by the affirmative vote of the holders of a majority in voting power of
the shares of stock which are present in person or by proxy and entitled to vote
thereon.
-2-
<PAGE>
Election of directors need not be by ballot; provided, however, that by
resolution duly adopted by the stockholders of the Corporation, a vote by ballot
may be required.
PROXIES
SECTION 7. Any stockholder entitled to vote upon any matter at any meeting of
stockholders may so vote by proxy. Every proxy shall be in writing (which shall
include telegraphing or cabling or other electronic transmission) and shall be
dated, but need not be sealed, witnessed or acknowledged. Proxies shall be
delivered to the Secretary of the Corporation before such meeting.
INSPECTORS
SECTION 8. At each meeting of the stockholders the polls shall be opened and
closed, the proxies and ballots shall be received and be taken in charge, and
all questions touching the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by one or more
Inspectors. Such Inspectors shall be appointed by the Board before the meeting,
or in default thereof by the presiding officer at the meeting, and shall be
sworn to the faithful performance of their duties. If any of the Inspectors
previously appointed shall fail to attend or refuse or be unable to serve,
substitutes shall be appointed by the presiding officer.
ARTICLE II
BOARD OF DIRECTORS
NUMBER, METHOD OF ELECTION,
TERMS OF OFFICE AND QUALIFICATION
SECTION 1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board. The number of directors which shall
constitute the whole Board shall be not less than three nor more than sixteen
(exclusive of directors, if any, elected by the holders of the Corporation's
Preferred Stock or Second Preferred Stock) and the exact number thereof within
such limits shall be determined from time to time by resolution adopted by a
majority of the whole Board.
Except as otherwise provided in the Certificate of Incorporation, a director
shall hold office until the Annual Meeting for the year in which his or her term
expires and until a successor shall be elected and shall qualify, subject,
however, to prior death, resignation, retirement, disqualification or removal
from office. Except as provided in the Certificate of Incorporation, any
vacancy on the Board that results from an increase in the number of directors
may be filled by a majority of the directors then in office, provided that a
quorum is present, and any other vacancy occurring in the Board may be filled by
a majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Except as otherwise provided in the Certificate of
Incorporation, any director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same remaining term as that
of his or her predecessor.
Nominations of persons for election to the Board of the Corporation may be
made at a meeting of stockholders by or at the direction of the Board of
Directors by any nominating committee or person appointed by the Board, or by
any stockholder of the
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Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Article II. Such
nominations, other than those made by or at the direction of the Board, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 50
days nor more than 75 days prior to the meeting; provided, however, that in the
event that less than 65 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a director, (i)
the name, age, business address and residence of the person, (ii) the principal
occupation or employment of the person, (iii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the person and
(iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Rule 14A under the Securities Exchange Act of 1934 as amended; and (b) as to the
stockholder giving the notice (i) the name and record address of the stockholder
and (ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as director of the Corporation. No person shall be eligible for election
as a director of the Corporation at the Annual Meeting of Stockholders unless
nominated in accordance with the procedures set forth herein. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if so determined, so declare to the meeting and the defective nomination shall
be disregarded. The provisions of this paragraph shall not apply with respect to
nominations of directors to be elected by the holders of any series of Preferred
Stock or Second Preferred Stock, voting separately as a series or together with
other series thereof, pursuant to the terms of any such series.
Any director may resign his or her office at any time by delivering a
resignation in writing to the Corporation, and the acceptance of such
resignation unless required by the terms thereof shall not be necessary to make
such resignation effective.
No director who shall have attained the age of 70 shall be eligible for re-
election as a director of the Corporation.
MEETINGS
SECTION 2. The Board may hold its meetings and have an office in such place
or places within or without the State of Delaware as the Board by resolution
from time to time may determine.
The Board may in its discretion provide for regular or stated meetings of the
Board. Notice of regular or stated meetings need not be given. Special meetings
of the Board shall be held whenever called by direction of the Chief Executive
Officer, the President or any two of the directors. The Secretary or any
Assistant Secretary shall give notice of any special meeting by mailing the same
at least three days, or by telegraphing or telephoning the same at least one
day, before the meeting to each director; but such
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notice may be waived by any director. Unless otherwise indicated in the notice
thereof, any and all business may be transacted at a special meeting.
Except as otherwise provided by law, at any meeting at which every director
shall be present, even though without notice, any business may be transacted.
No notice of any adjourned meeting need be given.
The Board shall meet immediately after election, following the Annual Meeting
of Stockholders, for the purpose of organizing, for the election of corporate
officers as hereinafter specified, and for the transaction of any other business
which may come before it. No notice of such meeting shall be necessary.
Prior to the date of the Annual Meeting of Stockholders an annual report of
the operations of the Corporation during the preceding fiscal year shall be
submitted to the Board, which reports shall include consolidated statements of
income and expenditures, and a balance sheet showing the consolidated financial
condition of the Corporation and its consolidated subsidiaries at the close of
such fiscal year.
QUORUM
SECTION 3. Except as otherwise expressly required by the Certificate of
Incorporation, these By-Laws or by statute, a majority of the directors then in
office shall be present at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and the vote of a
majority of the directors present at any such meeting at which a quorum is
present shall be necessary for the passage of any resolution or for an act to be
the act of the Board. In the absence of a quorum, a majority of the directors
present may adjourn such meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting need not be given.
COMPENSATION OF BOARD OF DIRECTORS
SECTION 4. Each director (other than a director who is a salaried officer of
the Corporation or of any subsidiary corporation), in consideration of serving
as such, shall be entitled to receive from the Corporation such amount per annum
and such fees for attendance at meetings of the Board or of any Committee, or
both, as the Board shall from time to time determine. The Board may likewise
provide that the Corporation shall reimburse each director or member of a
Committee for any expenses incurred on account of attendance at any such
meeting. Nothing contained in this Section shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor.
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ARTICLE III
COMMITTEES OF THE BOARD
COMMITTEES
SECTION 1. The Board shall elect as promptly as practicable from its members,
by the affirmative vote of a majority of the whole Board, an Audit Committee, a
Compensation Committee, a Nominating Committee and any other Committee which the
Board may by resolution prescribe. Any such other Committee shall be comprised
of such persons and shall possess such authority as shall be set forth in such
resolution.
PROCEDURE
SECTION 2. Each Committee shall fix its own rules of procedure and shall meet
where and as provided by such rules. Unless otherwise stated in these By-Laws,
a majority of a Committee shall constitute a quorum.
In the absence or disqualification of a member of any Committee, the members
of such Committee present at any meeting, and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another member
of the Board to act at the meeting in the place of any such absent or
disqualified member. Fees in connection with such appointments shall be
established by the Board.
REPORTS TO THE BOARD
SECTION 3. All completed actions by the Audit, Compensation and Nominating
Committees shall be reported to the Board at the next succeeding Board meeting.
AUDIT COMMITTEE
SECTION 4. The Board shall elect as promptly as practicable an Audit Committee
consisting of such number of members of the Board as shall be determined from
time to time by resolution adopted by a majority of the whole Board, none of
whom shall be officers or employees of the Corporation or any subsidiary of the
Corporation. The Board shall appoint a Chairman of such Committee who shall be
one of its members. The Audit Committee shall have such authority and duties as
the Board by resolution shall prescribe.
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COMPENSATION COMMITTEE
SECTION 5. The Board shall elect as promptly as practicable a Compensation
Committee consisting of such number of members of the Board as shall be
determined from time to time by resolution adopted by a majority of the whole
Board, none of whom shall be officers or employees of the Corporation or any
subsidiary of the Corporation. The Board shall appoint a Chairman of such
Committee who shall be one of its members. The Compensation Committee shall have
such authority and duties as the Board by resolution shall prescribe.
NOMINATING COMMITTEE
SECTION 6. The Board shall elect as promptly as practicable a Nominating
Committee consisting of such number of members of the Board as shall be
determined from time to time by resolution adopted by a majority of the whole
Board. The Board shall appoint a Chairman of such Committee who shall be one of
its members. The Nominating Committee shall have such authority and duties as
the Board by resolution shall prescribe.
ARTICLE IV
OFFICERS
GENERAL PROVISIONS
SECTION 1. The officers of the Corporation shall be a Chairman who shall be
designated the Chief Executive Officer, a Secretary, and such other officers as
the Board may from time to time designate or authorize. Insofar as permitted by
statute, the same person may hold two or more offices. Each such officer shall
hold office until his or her successor is elected or his or her earlier death,
resignation, or removal.
The Board shall elect any officer who, at the time of election, is subject
to Section 16(a) and Section 16(b) of the Securities Exchange Act of 1934.
Unless determined otherwise by the Board, the Chief Executive Officer shall be
authorized to elect all other officers.
Any officer may be removed, with or without cause, at any time by the
Board. Subject to the foregoing, any officer who is not elected by the Board
shall hold office at the discretion of the Chief Executive Officer.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided in these By-Laws for election to such
office.
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POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER
SECTION 2. The Chief Executive Officer shall have general charge and
management of the affairs, property and business of the Corporation, subject to
the Board and the provisions of these By-Laws. The Chief Executive Officer
shall perform all duties assigned to him or her in these By-Laws and such other
duties as may from time to time be assigned to him or her by the Board.
The Chief Executive Officer or, in his or her absence, such director as the
Board may select, shall preside at all meetings of stockholders and the Board.
POWERS AND DUTIES OF OTHER OFFICERS
SECTION 3. The Secretary or any Assistant Secretary shall attend and record
the proceedings of all meetings of stockholders and the Board, and unless
otherwise directed by the Board, of all Committees of the Board, in books kept
for that purpose; shall see that all notices are given and records and reports
properly kept and filed by the Corporation as required by these By-Laws or as
required by law; shall have charge of and control over the records of the
Corporation and the certificate books, transfer books and stock ledgers and such
other books and papers as the Board may direct; shall be the custodian of the
corporate seal and shall see that it is affixed to all documents to be executed
on behalf of the Corporation under its seal; and shall perform such other duties
as may be required by the Board or the Chief Executive Officer.
SECTION 4. Each other officer of the Corporation shall have such powers and
perform such duties as are incident to their respective offices or as may be
designated by the Chief Executive Officer, subject to the supervision and
direction of the Board.
COMPENSATION OF OFFICERS
SECTION 5. Unless otherwise determined by the Board, the annual base salary,
any executive perquisite, and any bonus or incentive award (exclusive of any
stock option grant or stock award) of any officer subject to Section 16(a) and
Section 16(b) of the Securities Exchange Act of 1934 shall be fixed, or made, as
the case may be, by the Compensation Committee. The annual base salary, any
executive perquisite, and any bonus or incentive award for other officers and
employees shall be fixed by the Chief Executive Officer unless otherwise
required by resolution of the Board or provision of any relevant plan. Any
stock option grant or stock award intended to comply with the requirements of
Securities and Exchange Commission Rule 16b-3 to an officer who, at the time the
grant or award is made or any other action is taken with respect thereto, is
subject to Section 16(a) and Section 16(b) of the Securities Exchange Act of
1934 shall be granted or awarded or acted upon solely by the Compensation
Committee or a subcommittee thereof. Stock option grants or stock awards to
other officers and employees or any other action taken with respect thereto
shall be made or taken by the Chief Executive Officer unless otherwise required
by resolution of the Board or provision of any relevant plan, and the Chief
Executive Officer is hereby designated as a Committee of the Board for this
purpose.
A report shall be made annually to the Compensation Committee by the Chief
Executive Officer detailing the compensation paid (including any stock option
grant, stock award or other equity-based award, and any executive perquisite) to
any officer or
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employee of the Corporation the sum of whose bonus or incentive awards for any
calendar year and annual base salary for such year is $250,000 or more. The
report shall contain such other data as the Compensation Committee from time to
time shall deem appropriate.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 6.1. Right to indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director of officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans (an "indemnitee"), against all liability and
loss suffered and expenses (including attorneys' fees) reasonably incurred by
such indemnitee. Subject to Section 14.3 hereof, the Corporation shall be
required to indemnify an indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if the initiation of such proceeding
(or part thereof) by the indemnitee was authorized by the Board of Directors of
the Corporation.
SECTION 6.2. Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred by an indemnitee in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director of officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Section 14 or otherwise.
SECTION 6.3. Claims. If a claim for indemnification or payment of expenses
under this Section 14 is not paid in full within ninety days after a written
claim therefor by the indemnitee has been received by the Corporation, the
indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or in part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the Corporation shall have the
burden of proving that the indemnitee was not entitled to the requested
indemnification or payment of expenses under applicable law.
SECTION 6.4. Nonexclusivity of Rights. The rights conferred on any person by
this Section 14 shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-Laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 6.5. Other Indemnification. The Corporation's obligation, if any, to
indemnify or advance expenses to any person who was or is serving at its request
as a
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director, officer, employee or agent of another corporation, partnership, joint
venture, trust, enterprise or nonprofit entity shall be reduced by any amount
such person may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit entity.
SECTION 6.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of Section 14 shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE V
CAPITAL STOCK
CERTIFICATES OF STOCK
SECTION 1. Certificates of stock certifying the number of shares owned shall
be issued to each stockholder in such form not inconsistent with the Certificate
of Incorporation as shall be approved by the Board. Such certificates of stock
shall be numbered and registered in the order in which they are issued and shall
be signed by the Chairman, the President or a Vice President, and by the
Secretary or an Assistant Secretary. Any and all the signatures on the
certificates may be a facsimile.
TRANSFER OF SHARES
SECTION 2. Transfers of shares shall be made only upon the books of the
Corporation by the holder, in person, or by power of attorney duly executed and
filed with the Secretary of the Corporation, and on the surrender of the
certificate or certificates of such shares, properly assigned. The Corporation
may, if and whenever the Board shall so determine, maintain one or more offices
or agencies, each in charge of an agent designated by the Board, where the
shares of the capital stock of the Corporation shall be transferred and/or
registered. The Board may also make such additional rules and regulations as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Corporation.
LOST, STOLEN OR DESTROYED CERTIFICATES
SECTION 3. The Corporation may issue a new certificate of capital stock of
the Corporation in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, and the Corporation
may, but shall not be obligated to, require the owner of the alleged lost,
stolen or destroyed certificate, or his or her legal representatives, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate, as the officers of the
Corporation may, in their discretion, require.
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FIXING OF RECORD DATE
SECTION 4. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or for the purpose of any other lawful action the Board may
fix, in advance, a record date, which shall not be more that 60 nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders entitled to notice of or to vote at a
meeting of the stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VI
CONSENTS TO CORPORATE ACTION
RECORD DATE
SECTION 1. The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall be as fixed by
the Board or as otherwise established under this Section. Any person seeking to
have the stockholders authorize or take corporate action by written consent
without a meeting shall by written notice addressed to the Secretary and
delivered to the Corporation, request that a record date be fixed for such
purpose. The Board may fix a record date for such purpose which shall be no
more than 10 days after the date upon which the resolution fixing the record
date is adopted by the Board and shall not precede the date such resolution is
adopted. If the Board fails within 10 days after the Corporation receives such
notice to fix a record date for such purpose, the record date shall be the day
on which the first written consent is delivered to the Corporation in the manner
described in Section 2 below unless prior action by the Board is required under
the General Corporation Law of Delaware, in which event the record date shall be
at the close of business on the day on which the Board adopts the resolution
taking such prior action.
PROCEDURES
SECTION 2. Every written consent purporting to authorize or to take corporate
action and/or related revocations (each such written consent and related
revocation is referred to in this Article VI as a "Consent") shall bear the date
of signature of each stockholder who signs the Consent, and no Consent shall be
effective to take the corporate action referred to therein unless, within 60
days of the earliest dated Consent delivered in the manner required by this
Section 2, Consents signed by a sufficient number of stockholders to take such
action are delivered to the Corporation.
A Consent shall be delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery to the Corporation's registered
office shall be made by hand or by certified or registered mail, return receipt
requested.
In the event of the delivery to the Corporation of a Consent, the Secretary of
the Corporation shall provide for the safe-keeping of such Consent and shall
promptly
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conduct such ministerial review of the sufficiency of the Consents and of the
validity of the action to be taken by shareholder consent as he or she deems
necessary or appropriate, including, without limitation, whether the holders of
a number of shares having the requisite voting power to authorize or take the
action specified in the Consent have given consent; provided, however, that if
the corporate action to which the Consent relates is the removal or replacement
of one or more members of the Board, the Secretary of the Corporation shall
promptly designate two persons, who shall not be members of the Board, to serve
as Inspectors with respect to such Consent and such Inspectors shall discharge
the functions of the Secretary of the Corporation under this Section 2. If after
such investigation the Secretary or the Inspectors (as the case may be) shall
determine that the Consent is valid and that the action therein specified has
been validly authorized, that fact shall forthwith be certified on the records
of the Corporation kept for the purpose of recording the proceedings of meetings
of stockholders, and the Consent shall be filed in such records, at which time
the Consent shall become effective as stockholder action. In conducting the
investigation required by this Section 2, the Secretary or the Inspectors (as
the case may be) may, at the expense of the Corporation, retain special legal
counsel and any other necessary or appropriate professional advisors, and such
other personnel as they may deem necessary or appropriate, to assist them, and
shall be fully protected in relying in good faith upon the opinion of such
counsel or advisors.
ARTICLE VII
MISCELLANEOUS
DIVIDENDS AND RESERVES
SECTION 1. Dividends upon the capital stock of the Corporation may be
declared as permitted by law by the Board at any regular or special meeting.
Before payment of any dividend or making any distribution of profits, there may
be set aside out of the surplus or net profits of the Corporation such sum or
sums as the Board, from time to time, in their absolute discretion, think proper
as a reserve fund to meet contingencies, or for such other purposes as the Board
shall think conducive to the interests of the Corporation, and any reserve so
established may be abolished and restored to the surplus account by like action
of the Board.
SEAL
SECTION 2. The seal of the Corporation shall bear the corporate name of the
Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware".
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WAIVER
SECTION 3. Whenever any notice whatsoever is required to be given by statute
or under the provisions of the Certificate of Incorporation or these By-Laws, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
FISCAL YEAR
SECTION 4. The fiscal year of the Corporation shall begin with January first
and end with December thirty-first.
AMENDMENTS
SECTION 5. The Board from time to time shall have the power to make, alter,
amend or repeal any and all of these By-Laws and additional By-Laws, but any By-
Laws or additional By-Laws, so made, altered, amended or repealed by the Board
may be amended, altered or repealed by the stockholders.
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EXHIBIT 10(a)(2)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of November 21, 1996 (this "Amendment"), to
the Credit Agreement, dated as of August 23, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among CASE
CORPORATION, a Delaware corporation (the "U.S. Borrower"), CASE CANADA
CORPORATION/CORPORATION CASE CANADA, a company organized under the laws of the
province of Ontario, Canada (the "Canadian Borrower"), each FOREIGN SUBSIDIARY
BORROWER (as defined therein) (together with the U.S. Borrower and the Canadian
Borrower, the "Borrowers"), the Co-Agents named on the signature pages thereof
(the "Lead Managers"), the several banks and other financial institutions from
time to time parties thereto (the "Lenders") and THE BANK OF NOVA SCOTIA, a
Canadian chartered bank (as therein defined, the "Canadian Administrative
Agent") and THE CHASE MANHATTAN BANK, a New York banking corporation (as therein
defined, the "General Administrative Agent") as administrative agents for the
Lenders thereunder.
WITNESSETH:
----------
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrowers; and
WHEREAS, the Borrowers have requested, and, upon this Amendment
becoming effective, the Majority Lenders have agreed, that certain provisions of
the Credit Agreement be amended in the manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
2. Amendments to Credit Agreement. (a) Subsection 2.3 of the Credit
Agreement is hereby amended by (i) deleting the words "at least (a)" contained
in the proviso of the first sentence of such subsection and inserting in lieu
thereof the words "(a) at least" and (ii) deleting the words "(b) one Business
Day prior to" contained in the proviso of the first sentence of such subsection
and inserting in lieu thereof the words "(b) on";
(b) Subsection 5.3 of the Credit Agreement is hereby amended by
deleting the words "at least one Business Day prior to" contained in the proviso
of the first sentence of such subsection and inserting in lieu thereof the word
"on"; and
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2
(c) Subsection 6.2(a) of the Credit Agreement is hereby amended by
deleting the words" 11:00 A.M., Toronto time, one Business Day prior to" and
inserting in lieu thereof the words "9:30 A.M., Toronto time, on".
3. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Amendment Effective Date") on which the Borrowers, the
General Administrative Agent and the Majority Lenders shall have executed and
delivered to the General Administrative Agent this Amendment.
4. Representations and Warranties. The representations and warranties
made by the Borrowers in the Credit Agreement are true and correct in all
material respects on and as of the Amendment Effective Date, after giving effect
to the effectiveness of this Amendment, as if made on and as of the Amendment
Effective Date.
5. No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.
6. Governing Law. This Amendment and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
7. Counterparts. This Amendment may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the U.S. Borrower and the General Administrative Agent.
This Amendment may be delivered by facsimile transmission of the relevant
signature pages hereof.
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3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CASE CORPORATION
By: /S/ BENSON K. WOO
--------------------------------------
Title: Vice President & Treasurer
CASE CANADA CORPORATION/CORPORATION
CASE CANADA
By: /S/ BENSON K. WOO
--------------------------------------
Title: Vice President & Treasurer
THE CHASE MANHATTAN BANK, as General
Administrative Agent and a Lender
By: /S/ TIMOTHY J. STORMS
--------------------------------------
Title: Credit Executive
THE CHASE MANHATTAN BANK OF CANADA
By: /S/ OWEN ROBERTS
--------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK OF CANADA
By: /S/ ARUN BERY
--------------------------------------
Title: Vice President
<PAGE>
4
THE BANK OF NOVA SCOTIA, as
Canadian Administrative Agent
and a Lender
By: /S/ JUDY MCKAY
--------------------------------------
Title: Relationship Manager
By: /S/ F.C.H. ASHBY
--------------------------------------
Title: Senior Manager Loan Operations
ABN AMRO BANK N.V. CHICAGO BRANCH
By: /S/ DAVID C. SAGERS
--------------------------------------
Title: Vice President
By: /S/ CHRISTINE E. HOLMES
--------------------------------------
Title: Vice President
ARAB BANKING CORPORATION (B.S.C.)
By: /S/ GRANT E. MCDONALD
--------------------------------------
Title: Vice President
THE ASAHI BANK, LTD., CHICAGO BRANCH
By: /S/ NOBUO SUZUKI
--------------------------------------
Title: General Manager
<PAGE>
5
AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED
By: /S/ ROBERT SLOAN
--------------------------------------
Title: First Vice President
BANK AUSTRIA AKTIENGESELLSCHAFT
By: /S/ J. ANTHONY SEAY
--------------------------------------
Title: Vice President
By: /S/ KAREN JILL
--------------------------------------
Title: Assistant Vice President
BANCA COMMERCIALE ITALIANA, CHICAGO
BRANCH
By: /S/ JULIAN M. TEODORI
--------------------------------------
Title: Senior Vice President & Branch Manager
By: /S/ MARK D. MOONEY
--------------------------------------
Title: Vice President
BANCA COMMERCIALE ITALIANA OF
CANADA
By: /S/ PIETRO CORDOVA
--------------------------------------
Title: Department Manager
By: /S/ MASSIMO OSTI
--------------------------------------
Title: Executive Vice President
<PAGE>
6
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /S/ W. THOMAS BARNETT
--------------------------------------
Title: Vice President
BANK OF AMERICA CANADA
By: /S/ D.B. LINKLETTER
--------------------------------------
Title: Vice President
BANK OF HAWAII
By: /S/ DONNA PARKER
--------------------------------------
Title: Assistant Vice President
BANK OF MONTREAL
By: /S/ MICHAEL D. PINCUS
--------------------------------------
Title: Managing Director
THE BANK OF NEW YORK
By: /S/ MARK T. FAMILO
--------------------------------------
Title: Assistant Vice President
THE BANK OF TOKYO - MITSUBISHI LTD.,
CHICAGO BRANCH
By: /S/ NOBORU KOBAYASHI
--------------------------------------
Title: Deputy General Manager
<PAGE>
7
BANQUE NATIONALE DE PARIS
By: /S/ FREDERICK H. MORYL, JR.
--------------------------------------
Title: Senior Vice President
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /S/ W. LEROY STARTZ
--------------------------------------
Title: First Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
By: /S/ ALEKSANDRA DYMANUS
--------------------------------------
Title: Authorized Signatory
By: /S/ MARY L. SCHMITZ
--------------------------------------
Title: Authorized Signatory
THE CHUO TRUST & BANKING CO., LTD. NEW
YORK AGENCY
By: /S/ SADAO TERUYAMA
--------------------------------------
Title: Deputy General Manager
CITIBANK, N.A.
By: /S/ DAVID L. HARRIS
--------------------------------------
Title: Vice President
<PAGE>
8
CITIBANK CANADA
By: /S/ MARGARET E. LAMBERT
------------------------------------
Title: Vice President
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
By: /S/ PAUL KARLIN
------------------------------------
Title: Assistant Treasurer
By: /S/ MARK MONSON
------------------------------------
Title: Vice President
COOPERATIVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /S/ MICHEL DE KONKOLY THEGE
------------------------------------
Title: Deputy General Manager
By: /S/ CHRIS G. KORTLANDT
------------------------------------
Title: Vice President
CREDIT LYONNAIS CHICAGO BRANCH
By: /S/ MARY ANN KLEMM
------------------------------------
Title: Vice President & Group Head
<PAGE>
9
CREDIT SUISSE
By: /S/ GEOFFREY M. CRAIG
------------------------------------
Title: Member of Senior Management
By: /S/ KRISTINN R. KRISTINSSON
------------------------------------
Title: Associate
THE DAI-ICHI KANGYO BANK, LTD.
By: /S/ MITSUAKI YAMAZAKI
------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /S/ SARAH FAULKNER PAGLIONE
------------------------------------
Title: Authorized Agent
THE FUJI BANK, LIMITED
By: /S/ PETER L. CHINNICI
------------------------------------
Title: Joint General Manager
HERITAGE BANK AND TRUST
By: /S/ SUSAN P. JENSEN
------------------------------------
Title: Vice President
<PAGE>
10
THE INDUSTRIAL BANK OF JAPAN, LTD.
By: /S/ HIROKI YAMADA
------------------------------------
Title: General Manager
ISTITUTO BANCARIO SAN PAOLO DI TORINO SPA
By: /S/ CARLO PERSICO
------------------------------------
Title: Deputy General Manager
By: /S/ ROBERT WURSTER
------------------------------------
Title: First Vice President
THE LTCB TRUST COMPANY, NEW YORK
By: /S/ JOHN SULLIVAN
------------------------------------
Title: Executive Vice President
MELLON BANK, N.A.
By: /S/ J.M. ANDERSON
------------------------------------
Title: Vice President
THE MITUSI TRUST AND BANKING COMPANY,
LTD. - NEW YORK BRANCH
By: /S/ MARGARET HOLLOWAY
------------------------------------
Title: Vice President & Manager
<PAGE>
11
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /S/ CHARLES H. KING
-----------------------------------------
Title: Vice President
J.P MORGAN CANADA
By: /S/ JOHN MAYNARD
-----------------------------------------
Title: Vice President & Controller
NATIONAL AUSTRALIA BANK LIMITED
By: /S/ SHAUN DOOLEY
-----------------------------------------
Title: Vice President
NATIONSBANK, N.A.
By: /S/ MARY CAROL DALY
-----------------------------------------
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By: /S/ PETRA FRANK-WITT
-----------------------------------------
Title: Vice President
By: /S/ STEPHEN K. HUNTER
-----------------------------------------
Title: Senior Vice President
<PAGE>
12
THE NORTHERN TRUST COMPANY
By: /S/ LISA M. TAYLOR
------------------------------------------
Title: Commercial Banking Officer
PT. BANK NEGARA INDONESIA (PERSERO)
By: /S/ DEWA SUTHAPA
-----------------------------------------
Title: General Manager
ROYAL BANK OF CANADA
By: /S/ PRESTON D. JONES
-----------------------------------------
Title: Senior Manager, Corporate Banking
THE SAKURA BANK, LIMITED
By: /S/ SHUNJI SAKURAI
-----------------------------------------
Title: Joint General Manager
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /S/ JOSEPH P. HOWARD
-----------------------------------------
Title: Vice President
SOCIETE GENERALE
By: /S/ ERIC SIEBERT, JR.
-----------------------------------------
Title: Corporate Banking Member
<PAGE>
13
THE SUMITOMO BANK, LTD., CHICAGO BRANCH
By: /S/ A. IWAN
-----------------------------------------
Title: Joint General Manager
THE SUMITOMO TRUST & BANKING CO., LTD.
NEW YORK BRANCH
By: /S/ SURAJ P. BHATIA
-----------------------------------------
Title: Senior Vice President & Manager
Corporate Finance Dept.
THE TOKAI BANK, LIMITED CHICAGO BRANCH
By: /S/ TATSUO ITO
-----------------------------------------
Title: Joint General Manager
TORONTO DOMINION (TEXAS), INC.
By: /S/ DARLENE RIEDEL
-----------------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By: /S/ DAVID G. PARKER
-----------------------------------------
Title: Manager, Credit Administration
<PAGE>
14
THE TORONTO-DOMINION BANK
By: /S/ DAVID PANKHURST
-----------------------------------------
Title: Manager
THE TORONTO-DOMINION BANK
By: /S/ G. COOMBS
-----------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /S/ NANCY BRUSATI-DIAS
-----------------------------------------
Title: Vice President & Division Manager
WACHOVIA BANK OF GEORGIA, N.A.
By: /S/ ELIZABETH CORT
-----------------------------------------
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /S/ SALVATORE BATTINELLI
-----------------------------------------
Title: Vice President, Credit Department
By: /S/ C.D. ROCKEY
-----------------------------------------
Title: Associate
<PAGE>
15
THE YASUDA TRUST & BANKING COMPANY, LTD.
By: /S/ JOSEPH C. MEEK
-----------------------------------------
Title: Deputy General Manager
<PAGE>
EXHIBIT 10(b)(2)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of November 21, 1996 (this "Amendment"), to
the Credit Agreement, dated as of August 23, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among CASE CREDIT
CORPORATION, a Delaware corporation (the "U.S. Borrower"), each FOREIGN
SUBSIDIARY BORROWER (as therein defined) (together with the U.S. Borrower, the
"Borrowers"), the Co-Agents named on the signature pages thereof (the "Co-
Agents"), the Lead Managers named on the signature pages thereof (the "Lead
Managers"), the several banks and other financial institutions from time to time
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation (as therein defined, the "Administrative Agent"), as administrative
agent for the Lenders hereunder.
WITNESSETH:
-----------
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrowers; and
WHEREAS, the Borrowers have requested, and, upon this Amendment
becoming effective, the Majority Lenders have agreed, that certain provisions of
the Credit Agreement be amended in the manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
2. Amendments to Credit Agreement. Subsection 2.3 of the Credit
Agreement is hereby amended by (a) deleting the words "at least (a)" contained
in the proviso of the first sentence of such subsection and inserting in lieu
thereof the words "(a) at least" and (b) deleting the words "(b) one Business
Day prior to" contained in the proviso of the first sentence of such subsection
and inserting in lieu thereof the words "(b) on".
3. Conditions to Effectiveness. This Amendment shall become effective
on the date (the "Amendment Effective Date") on which the Borrowers, the
Administrative Agent and the Majority Lenders shall have executed and delivered
to the Administrative Agent this Amendment.
4. Representations and Warranties. The representations and warranties
made by the Borrowers in the Credit Agreement are true and correct in all
material respects
<PAGE>
2
on and as of the Amendment Effective Date, after giving effect to the
effectiveness of this Amendment, as if made on and as of the Amendment Effective
Date.
5. No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.
6. Governing Law. This Amendment and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York.
7. Counterparts. This Amendment may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all the parties
shall be lodged with the U.S. Borrower and the Administrative Agent. This
Amendment may be delivered by facsimile transmission of the relevant signature
pages hereof.
<PAGE>
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CASE CREDIT CORPORATION
By: /S/ ROBERT A. WEGNER
----------------------------------------
Title: Vice President, CFO & Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent and a Lender
By: /S/ TIMOTHY J. STORMS
----------------------------------------
Title: Credit Executive
THE ASAHI BANK, LTD., CHICAGO BRANCH
By: /S/ NOBUO SUZUKI
----------------------------------------
Title: General Manager
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
By: /S/ ROBERT SLOAN
----------------------------------------
Title: First Vice President
BANK OF AMERICA ILLINOIS
By: /S/ W. THOMAS BARNETT
----------------------------------------
Title: Vice President
<PAGE>
4
BANK OF HAWAII
By: /S/ DONNA PARKER
----------------------------------------
Title: Assistant Vice President
BANK OF MONTREAL
By: /S/ MICHAEL D. PINCUS
----------------------------------------
Title: Managing Director
THE BANK OF NEW YORK
By: /S/ MARK T. FAMILO
----------------------------------------
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /S/ F.C.H. ASHBY
----------------------------------------
Title: Senior Manager Loan Operations
THE BANK OF TOKYO-MITSUBISHI LTD.,
CHICAGO BRANCH
By: /S/ NOBORU KOBAYASHI
----------------------------------------
Title: Duty General Manager
BANQUE NATIONALE DE PARIS
By: /S/ FREDERICK H. MORYL, JR.
----------------------------------------
Title: Senior Vice President
<PAGE>
5
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /S/ W. LEROY STARTZ
----------------------------------------
Title: First Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
By: /S/ ROBIN W. ELLIOTT
----------------------------------------
Title: Authorized Signatory
CANADIAN IMPERIAL BANK OF COMMERCE
By: /S/ ALEKSANDRA K. DYMANUS
----------------------------------------
Title: Authorized Signatory
CITIBANK, N.A.
By: /S/ DAVID L. HARRIS
----------------------------------------
Title: Vice President
COMMERZBANK AKTIENGESELLSCHAFT,
CHICAGO BRANCH
By: /S/ PAUL KARLIN
----------------------------------------
Title: Assistant Treasurer
By: /S/ MARK MONSON
----------------------------------------
Title: Vice President
<PAGE>
6
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By: /S/ MICHEL DE KONKOLY THEGE
----------------------------------------
Title: Deputy General Manager
By: /S/ CHRIS G. KORTLANDT
----------------------------------------
Title: Vice President
CREDIT LYONNAIS CHICAGO BRANCH
By: /S/ MARY ANN KLEMM
----------------------------------------
Title: Vice President & Group Head
CREDIT SUISSE
By: /S/ GEOFFREY M. CRAIG
----------------------------------------
Title: Member of Senior Management
By: /S/ KRISTINN R. KRISTINSSON
----------------------------------------
Title: Associate
THE FIRST NATIONAL BANK OF CHICAGO
By: /S/ TODD E. RITZ
----------------------------------------
Title: As authorized agent
<PAGE>
7
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /S/ THOMAS M. CAMBERN
----------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By: /S/ PETER L. CHINNICI
----------------------------------------
Title: Joint General Manager
THE INDUSTRIAL BANK OF JAPAN, LTD.
By: /S/ HIROKI YAMADA
----------------------------------------
Title: General Manager
THE LTCB TRUST COMPANY, NEW YORK
By: /S/ JOHN SULLIVAN
----------------------------------------
Title: Executive Vice President
MELLON BANK, N.A.
By: /S/ J.M. ANDERSON
----------------------------------------
Title: Vice President
THE MITUSI TRUST & BANKING COMPANY,
LTD. - NEW YORK BRANCH
By: /S/ MARGARET HOLLOWAY
----------------------------------------
Title: Vice President & Manager
<PAGE>
8
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /S/ CHARLES H. KING
----------------------------------------
Title: Vice President
NATIONAL AUSTRALIA BANK LIMITED
By: /S/ SHAUN DOOLEY
----------------------------------------
Title: Vice President
NATIONSBANK, N.A.
By: /S/ MARY CAROL DALY
----------------------------------------
Title: Vice President
NORDDEUTSCHE LANDESBANK
GIROZENTRALE NEW YORK BRANCH AND/OR
CAYMAN ISLANDS BRANCH
By: /S/ PETRA FRANK-WITT
----------------------------------------
Title: Vice President
By: /S/ STEPHEN K. HUNTER
----------------------------------------
Title: Senior Vice President
THE NORTHERN TRUST COMPANY
By: /S/ LISA M. TAYLOR
----------------------------------------
Title: Commerce Banking Officer
<PAGE>
9
ROYAL BANK OF CANADA
By: /S/ PRESTON D. JONES
------------------------------------
Title: Senior Manager, Corporate Banking
THE SAKURA BANK, LIMITED
By: /S/ SHUNJI SAKURAI
------------------------------------
Title: Joint General Manager
THE SANWA BANK, LIMITED, CHICAGO BRANCH
By: /S/ JOSEPH P. HOWARD
------------------------------------
Title: Vice President
SOCIETE GENERALE
By: /S/ ERIC SIEBERT, JR.
------------------------------------
Title: Corporate Banking Member
THE SUMITOMO BANK, LTD. CHICAGO BRANCH
By: /S/ A. IWAN
------------------------------------
Title: Joint General Manager
<PAGE>
10
THE SUMITOMO TRUST & BANKING CO., LTD.
NEW YORK BRANCH
By: /S/ SURAJ P. BHATIA
------------------------------------
Title: Senior Vice President & Manager,
Corporate Finance Department
THE TOKAI BANK, LIMITED CHICAGO BRANCH
By: /S/ TATSUO ITO
--------------------------------------
Title: Joint General Manager
TORONTO DOMINION (TEXAS), INC.
By: /S/ DARLENE RIEDEL
--------------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /S/ NANCY BRUSANTI-DIAS
-------------------------------------
Title: Vice President & Division Manager
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
By: /S/ ALFRED IMHOLZ
------------------------------------
Title: Managing Director
By: /S/ JAN BUETTGEN
------------------------------------
Title: Vice President, Corporate Banking
<PAGE>
11
WACHOVIA BANK OF GEORGIA, N.A.
By: /S/ ELIZABETH CORT
------------------------------------
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /S/ SALVATORE BATTINELLI
--------------------------------------
Title: Vice President
By: /S/ C.D. ROCKEY
--------------------------------------
Title: Associate
THE YASUDA TRUST & BANKING COMPANY
By: /S/ JOSEPH C. MEEK
-------------------------------------
Title: Deputy General Manager
<PAGE>
EXHIBIT 10(c)(2)
FIRST AMENDMENT
FIRST AMENDMENT, dated as of November 21, 1996 (the "AMENDMENT") to
the Credit Agreement, dated as of August 23, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement") among Case Credit
Ltd., a company organized under the laws of the Province of Alberta (the
"Borrower"), the several banks and other financial institutions from time to
time parties thereto (the "Lenders"), the co-agent named on the signature pages
thereof (the "Co-Agent"), and The Bank of Nova Scotia, a Canadian chartered bank
(the "Administrative Agent"), as Administrative Agent for the Lenders hereunder.
WITNESSETH:
-----------
WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to
make, and have made, certain loans and other extensions of credit to the
Borrower; and
WHEREAS, the Borrower has requested, and, upon this Amendment becoming
effective, the Majority Lenders have agreed, that certain provisions of the
Credit Agreement be amended in the manner provided for in this Amendment;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
2. Amendments to Credit Agreement.
(a) Section 2.3 of the Credit Agreement is hereby amended by deleting
the words "at least one day prior to" contained in the proviso of the first
sentence of such section and inserting in lieu thereof the word "on".
(b) Section 3.2 of the Credit Agreement is hereby amended by (i)
deleting the words "one business day prior to" in the third line of subsection
(a) of such section and inserting in lieu thereof the word "on"; and (ii) by
deleting the words "11:00 a.m." in the third line of subsection (a) of such
section and inserting in lieu thereof the words "9:30 a.m."
3. Conditions to Effectiveness. This Amendment shall become
effective on the date (the "Amendment Effective Date") on which the Borrower,
the Administrative Agent and the Majority Lenders shall have executed and
delivered to the Administrative Agent this Amendment.
<PAGE>
-2-
4. Representations and Warranties. The representations and
warranties made by the Borrower in the Credit Agreement are true and correct in
all material respects on and as of the Amendment Effective Date, after giving
effect to the effectiveness of this Amendment, as if made on and as of the
Amendment Effective Date.
5. No Other Amendments; Confirmation. Except as expressly amended,
modified and supplemented hereby, the provisions of the Credit Agreement are and
shall remain in full force and effect.
6. Governing Law. This Amendment and the rights and obligations of
the parties hereto shall be governed by, and construed and interpreted in
accordance with, the laws of the Province of Ontario.
7. Counterparts. This Amendment may be executed by one or more of
the parties to this Amendment on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Amendment signed by all of the parties
shall be lodged with the Borrower and the Administrative Agent. This Amendment
may be delivered by facsimile transmission of the relevant signature pages
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CASE CREDIT LTD.
By: "Robert A. Wegner"
------------------------------------
Title: Vice President, CFO and Treasurer
THE BANK OF NOVA SCOTIA,
as Administrative Agent and a Lender
By: "Judy McKay"
------------------------------------
Title: Relationship Manager
By: "David Tyreman"
------------------------------------
Title: Account Officer
<PAGE>
-3-
BANK OF AMERICA CANADA
as a Lender
By: "D.B. Linkletter"
---------------------------------
Title: Vice President
By:
---------------------------------
Title:
BANK OF MONTREAL
as a Lender
By: "Michael D. Pincus"
---------------------------------
Title: Managing Director
By:
---------------------------------
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, as a Co-Agent and a Lender
By: "R.M. Callander"
---------------------------------
Title: Director
By: "Doug Zinkiewich"
---------------------------------
Title: Director
THE CHASE MANHATTAN BANK OF
CANADA,
as a Lender
By: "Owen G. Roberts"
---------------------------------
Title: Vice President
By: "Arun Bery"
---------------------------------
Title: Vice President
CITIBANK CANADA,
as a Lender
By: "Margaret E. Lambert"
---------------------------------
Title: Vice President
By:
---------------------------------
Title:
<PAGE>
-4-
FIRST CHICAGO NBD BANK, CANADA,
as a Lender
By: "Colleen Delaney"
-------------------------------
Title: Assistant Vice President
By: "Jeremiah A. Hynes III"
-------------------------------
Title: First Vice President
J.P. MORGAN CANADA,
as a Lender
By: "John Maynard"
-------------------------------
Title: Vice President and Controller
By:
-------------------------------
Title:
ROYAL BANK OF CANADA,
as a Lender
By: "Preston D. Jones"
-------------------------------
Title: Senior Manager, Corporate Banking
By:
--------------------------------
Title:
SAKURA BANK (CANADA),
as a Lender
By: "E.R. Langley"
-------------------------------
Title: Vice President
By:
-------------------------------
Title:
SANWA BANK CANADA,
as a Lender
By: "Shigeki Iwashita"
-------------------------------
Title: Vice President
By:
-------------------------------
Title:
<PAGE>
-5-
SOCIETE GENERALE (CANADA),
as a Lender
By: "Duncan Irvine"
--------------------------------
Title: Senior Manager
By: "T.C. Leung"
--------------------------------
Title: Senior Manager
THE SUMITOMO BANK OF CANADA,
as a Lender
By: "Koichi Sasa"
--------------------------------
Title: Senior Vice President
By: "Alfred Lee"
--------------------------------
Title: Vice President
THE TORONTO-DOMINION BANK,
as a Lender
By: "David Pankhurst"
--------------------------------
Title: Manager
By: "John Coombs"
--------------------------------
Title: Vice President
<PAGE>
EXHIBIT 10(d)(2)
13 February 1996
Finance Director
Case Corporation Pty Limited
31-67 Kurrajong Avenue
ST MARYS NSW 2760
Dear Sir,
BANKING FACILITIES TO CASE CORPORATION PTY LIMITED
National Australia Bank Limited (A.C.N. 004 044 937) ("BANK") is pleased to
advise Case Corporation Pty Limited (A.C.N. 000 031 130) ("COMPANY") that the
undermentioned facilities have been approved for the Company's use and also to
provide assistance in connection with the A Co acquisition, subject to the terms
and conditions detailed herein and the normal terms, conditions and usages
applicable to bank lending and dealing in Australia.
This letter supersedes all prior letters of offer, understandings,
communications and agreements between the Bank and the Company, written or oral,
except those specified in this letter.
Words used but not defined in this letter of offer have the same meaning given
to them in the Negative Pledge.
FACILITIES
1. OVERDRAFT FACILITY
Limit: A$980,000 (Nine Hundred and Eighty Thousand
Australian Dollars).
Purpose: To meet day to day working capital requirements of
the Company.
Overdraft Interest: The Bank's variable Benchmark (BE) Rate, currently
10.75% per annum calculated daily and payable
monthly in arrears on the last business day of
each month.
<PAGE>
Credit Interest: Corporation (VN) Rate calculated daily on balances in
excess of $5,000 and paid monthly. Our VN rate is
currently 7% per annum.
Line Fee: 0.50% per annum calculated on the Limit, payable
quarterly in advance on each 15 March, June, September
and December.
2. BILL ACCEPTANCE AND/OR DISCOUNT FACILITY
Limit: A$35,000,000 (Thirty Five Million Australian Dollars).
Purpose: To meet short term working capital requirements of the
Company.
Term: Three (3) year revolving facility commencing on 30
September, 1995. The Company may during the term of
this facility in relation to the face value of any bill
retired, redraw or request the Bank to accept and
discount bills under this facility, the amount prepaid
or the face value of bills retired, as the case may be.
Line Fee: 0.25% per annum on the Limit, payable quarterly in
advance on each 15 March, June, September and December.
Activation Fee: 0.275% per annum, calculated on the face value and
tenor of bills drawn and charged upon activation.
Conditions: The terms contained in the Bill Facility Conditions set
out in Annexure "B" attached to this letter of offer
will apply to this facility.
3. A CO ACQUISITION BILL ACCEPTANCE AND/OR DISCOUNT FACILITY
Limit: Up to A$80,000,000 (eight million Australian Dollars)
as reduced by any prepayment or cancellation which will
be permanent.
Purpose: To assist in the acquisition by the Company of A Co.
Term: Two (2) years from the date of drawdown.
Line Fee: 0.25% per annum on the Limit, payable quarterly in
advance on each 15 March, June, September and December.
The line fee will be calculated from a date which is
earlier of 90 days after delivery
<PAGE>
of the Part A statement by the Company to A Co or the
date upon which the Company draws down this facility.
Accordingly, the first payment of this line fee will be
due on the earlier of the above dates in the amount
calculated at this rate for the period commencing on
that date until the end of the then current quarter.
Activation Fee: 0.25% per annum calculated on the face value and tenor
of bills drawn and charged upon activation.
Disclosure Fee: A disclosure fee of A$40,000 will be paid by the
Company to the Bank at the time of delivery of the Part
A statement by the Company to A Co.
Establishment Fee: An establishment fee of A$40,000 will be paid by the
Company on initial drawdown of all or part of this
facility to cover all cost associated with the
establishment of this facility, including the Bank's
legal costs up to A$10,000.
Drawdown
Conditions: Subject to 5 clear Banking Days notice of activation or
such lesser time as agreed to by the Bank.
Cancellation of drawdown amounts to this facility are
not available for redrawing.
The terms contained in the Bill Facility Conditions set
out in Annexure "B" attached to this letter of offer
will apply to this facility.
The Company must give to the Bank a drawing notice in
the form of Annexure "C" ("DRAWING NOTICE") signed by
an authorised officer of the Company at least 2 clear
Banking Days before the day it requires funds or such
lesser time as agreed to by the Bank.
4. GUARANTEE BY BANK
Limit: A$200,000 (Two Hundred Thousand Australian Dollars).
Purpose: To allow the establishment of guarantees in relation to
various contractual obligations of a non-funding
nature.
Fees: 0.60% per annum calculated on the face value of
guarantees issued and payable half yearly in advance.
<PAGE>
Terms: The Bank's standard terms for the issue of bank guarantees
will apply to this facility.
5. ENCASHMENT/NEGOTIATION ADVICES
Limit: A$50,000 (Fifty Thousand Australian Dollars).
Purpose: To allow the encashment of the Company's cheques or the
issuance of bank cheques on behalf of the Company at various
Bank locations.
Fees: The Bank's scale fees/charges to apply.
6. TAPE NEGOTIATION ADVICE
Limit: A$500,000 (Five Hundred Thousand Australian Dollars).
Purpose: To allow the Company to meet its wages and salaries by means
of computerised tapes.
Fees: The Bank's scale fees/charges to apply.
7. FLEXILINK DAILY TRANSFER LIMIT
Limit: A$1,000,000 (One Million Australian Dollars).
Purpose: To allow the Company to electronically transfer funds
between specified parties both domestically and
internationally via the Bank's Flexilink product.
Fees: The Bank's scale fees/charges to apply.
8. UNCOMMITTED TREASURY FACILITIES
8.1 AVAILABILITY
Subject to the terms of this letter of offer and any subsequent
arrangements in writing between the Bank and the Company, the Bank
agrees to enter into treasury transactions ("TREASURY FACILITY") with
or for the benefit of the Company on an uncommitted basis for the
purpose of establishing an interest rate, foreign exchange or any
other hedging program for the Company with the Bank.
8.2 Notwithstanding anything in this clause 8, or elsewhere in this
letter of offer, the Bank is under no obligation to provide to the
Company the Treasury Facility, unless the Bank in its absolute
discretion agrees in writing to do so.
<PAGE>
8.3 If the Bank determines to provide the Treasury Facility, the Treasury
Facility will be on such terms and conditions as the Bank may from
time to time agree with the Company and will include, inter alia, the
Company's execution of the International Swap Dealers Association
Interest Rate and Currency Exchange Agreement prior to such dealing.
FACILITY TERM
The above facilities are available on a continuing basis subject to the Bank's
annual review due by, but not no later than, 30 June 1996, at which date the
subject facilities will be at call at the Bank's discretion. Any commitment by
the Bank to a particular "Term" for the above facilities is as provided in this
letter of offer and will be withdrawn by the Bank only on the occurrence of an
Event of Default.
CONDITIONS PRECEDENT
The obligations of the Bank pursuant to this letter of offer shall be subject to
the Bank receiving the following conditions precedent, each in form and
substance acceptable to the Bank:
(a) a statutory declaration that the Company is solvent and not acting as
trustee, signed by a director of the Company;
(b) a copy certified by an authorised officer as being a correct copy of the
Company's resolutions approving entry by the Company into each of the above
facilities and authorising the execution, acceptance, delivery and
observance of obligations under this letter of offer and each of the
Security Documents to which the Company is a party. It is noted that the
Bank holds these documents in respect of all facilities other than facility
3 above;
(c) a certified copy of each authority under which a person signs and delivers
a document for the Company and, if the authority is a power of attorney,
evidence of its stamping (where required by law) and registration in any
jurisdiction that the Bank deems necessary;
(d) this letter of offer and the Security Documents executed and delivered by
the parties to them (other than the Bank) and, where applicable and if
required by the Bank, evidence of their stamping; and
(e) such other conditions precedent as the Bank may specify by notice to the
Company prior to the first drawdown or initial funding by the Bank.
It is noted that the Bank already holds a copy of the executed US Second Amended
and Restated Revolving Credit and Term Loan Agreement dated 15 September 1995
and its First Amendment dated 31 October 1995 and Second Amendment dated 5
December 1995.
<PAGE>
SECURITY DOCUMENTS
During the currency of the aforementioned facilities, the Bank will rely on the
following documentation:
(i) This letter of offer, including Annexure A, Annexure B and Annexure C.
(ii) Bill Facility Power of Attorney granted by the Company to the Bank (in
the form attached to and which forms part of Annexure B) in respect of
facilities 2 and 3;
(iii) Negative Pledge Agreement dated 29 September 1995 between the Company and
the Bank ("NEGATIVE PLEDGE")'
(iv) Amending Agreement to Negative Pledge;
(v) A new Deed of Guarantee and Indemnity granted by Case Corporation (US) in
favour of the Bank (unconditional) in respect of all of the obligations
of the Company other than those that relate to the debts of Case Credit
Australia Pty Limited (ACN 069 132 396) under the interlocking Guarantee
("NEW GUARANTEE") (The Bank will release the New Guarantee to Case
Corporation (US) at such time as the Bank is reasonably satisfied that
the Company has achieved a ratio of Shareholders' Funds to Total Tangible
Assets (both such terms as defined in the Negative Pledge) of 40%);
(vi) Interlocking Guarantee dated 22 June, 1994 between the Company, J.I Case
Credit Corporation of Australia PTY Limited ACN 000 108 387 and all
wholly owned subsidiaries of the Company ("INTERLOCKING GUARANTEE"); and
(vii) Acknowledgment of continuation of the parties' obligations under the
Interlocking Guarantee,
(each and all are to be referred to as "SECURITY DOCUMENTS")
Where any of the above are not already held by the Bank, their delivery to the
Bank, in form and substance satisfactory to the Bank, is a condition precedent
to the availability of the above facilities.
FINANCIAL ACCOUNTS
The financial accounts of the Company required by the Bank are those set out in
the Negative Pledge.
RIGHT OF SELL DOWN
The Bank, following consultation with the Company, may sell down all or any part
of the Company's debt or indebtedness to the Bank to any Australian financial
institution about which the Bank and the Company reasonably agree. If as a
consequence of the Bank exercising its right to sell down under this
<PAGE>
paragraph a liability to withholding tax arises then any such liability will not
be debited to the Company's account.
FEES
To the extent any fee described above is calculated by reference to a facility
limit, if that limit is reduced or cancelled, that fee will be adjusted
accordingly from the date of the reduction or cancellation.
GENERAL
In addition to normal banking terms, conditions and usages, the special terms
and conditions as detailed in Annexure A and Annexure B shall apply.
Unless otherwise specifically stated, interest rates and fees shown above may
be varied by the Bank in the light of conditions prevailing from time to time.
However, the Bank will notify the Company of any variation to any of the fees
specifically stated in this letter of offer.
To help keep you informed on a regular basis, the Bank's variable Benchmark Rate
is published in national daily newspapers and financial newspapers at least
weekly. While we shall endeavour to notify you of any changes in interest rates
and fees, should we not do so for any reason this will not preclude the charging
of the new or adjusted charges.
The above arrangements may be accepted before 27 February 1996 or at a later
date acceptable to the Bank by forwarding a certified copy of the Board
Resolution of the Company. In the meantime, please do not hesitate to contact
either one of us on the numbers mentioned below if any matter requires
clarification or if we can be of further assistance.
Yours faithfully,
/s/ M.A. Harvey /s/ K. Thomas
- --------------------------- ---------------
M.A. Harvey K. Thomas
SENIOR RELATIONSHIP MANAGER ACCOUNT MANAGER
Tel: 237 1827 Tel: 237 1489
<PAGE>
ANNEXURE "A"
TERMS AND CONDITIONS
APPLYING TO THE FACILITIES EXTENDED TO
CASE CORPORATION PTY LIMITED ("COMPANY")
1. CHANGE OF CIRCUMSTANCES - INCREASED COST AND ILLEGALITY
(a) In the event that any change in applicable law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration thereof shall make it unlawful and/or impossible for
the Bank to maintain or give effect to its obligations as contemplated
by this letter, and the Bank shall so certify to the Company, the Bank
shall during the period that such condition exists be discharged from
those obligations.
(b) If any order of any court or any change in applicable law or
regulation (including any policy, directive or guideline, whether or
not having the force of law, but compliance with which is in
accordance with the practice of responsible Bankers) or in the
official interpretation or application thereof by any governmental
authority charged with the administration thereof shall:
(i) subject the Bank to any taxes or duties with respect to the
said facilities or any part thereof or change the basis of
taxation of the Bank for payments hereunder (except for
taxes on the overall net income of the Bank imposed by any
taxing authorities having the power to levy taxes on the
Bank);
(ii) impose, modify or deem applicable any reserve, capital
adequacy and/or liquidity adequacy requirements against any
asset of, deposit with or for the account of, or loans by
the Bank; or
(iii) impose on the Bank any other condition with respect to this
letter or the obligations assumed by the Bank hereunder or
if the Bank complies with any request from any applicable
fiscal or monetary authority (whether or not having the
force of law),
and the result of any of the foregoing is to increase the cost to the
Bank of making available or maintaining the said facilities or to
reduce the amount receivable in respect of the facilities or any other
payment due to the Bank in connection with the said facilities by an
amount which the Bank deems material then and in each case the
provisions of the following clause 1(c) shall apply.
<PAGE>
(c) In the circumstances envisaged in clause 1(b) above:
(i) the Bank shall use its best efforts to promptly notify the
Company in writing of the happening of such event; and
(ii) the Company shall pay to the Bank on demand as additional
interest or charges such amount as will compensate the Bank
for such additional cost calculated from the date of
notification, provided however that the Company may at its
option elect to repay all or part of the facilities in full.
(d) The Bank shall not be entitled to require the Company to pay to the
Bank as contemplated in clause 1(c) above any increased costs arising
from circumstances envisaged in clause 1(b) above unless it notifies
the Company in writing within a period of 6 months after the Bank
becomes aware of any such circumstances.
2. CONTESTING OF TAXES
(a) In the event of the Bank receiving any formal assessment, notification
or demand for payment in respect of the above facilities from any
proper authority whether under existing law or as a result of the
occurrence of any event contemplated by clause 1(b) above, it will
notify the Company in writing thereof by the fastest reasonable means
available or in any event no later than 15 days following receipt of
such assessment, notification or demand.
(b) if any of the events contemplated by clause 1(b) or clause 2(a) above
occur and the Company produces to the Bank written legal advice to the
effect that there is reasonable argument that any tax, duty, impost or
condition is wrongfully or improperly assessed, levied or imposed on
the Bank in relation to the above facilities then the Bank and the
Company will discuss in good faith;
(i) such action (if any) that may be appropriate to take in all
the circumstances including, but without limiting the
generality of the foregoing, the commencement of proceedings
to contest such assessment, levy or imposition; and
(ii) the terms and conditions of such action that the Bank and
the Company reasonably agree to be in their best interests.
<PAGE>
3. COSTS AND EXPENSES
The Company will pay to the Bank on demand all legal costs (including the
Bank's solicitors' fees on a solicitor and own client basis in excess of
$10,000) and all other costs and expenses of any nature incurred by the
Bank including without limitation stamp duty, financial institutions duty
and bank account debits tax (whether payable directly or otherwise paid by
the Bank) and in the case of stamp duty any penalties, fines and interest
for late payment (other than penalties, fines and interest for late payment
where the Bank has been put in funds by the Company to make the payment and
has not done so, except for any negligent or willful omissions or errors by
the Bank) thereof in any case in relation to the preparation, negotiation,
execution, registration, administration and enforcement of this arrangement
and all costs and expenses in respect of all transactions (including,
without limitation, all payments, receipts and the banking thereof) and all
matters connected with or arising out of or contemplated by this
arrangement.
4. TERMS AND CONDITIONS APPLICABLE TO FACILITIES INVOLVING FOREIGN CURRENCY
All facilities referred to herein and which involve foreign currencies are
made available subject to those of the following terms and conditions which
may be appropriate:
(a) FUNDING RISK AND NON-AVAILABILITY
Notwithstanding anything to the contrary herein contained, if the Bank
shall at any time determine (which determination shall be conclusive
and binding on the Company) that by reason of;
(i) any change in national or international financial, political
or economic conditions, currency exchange rates, currency
availability or exchange controls;
(ii) the occurrence of an event or contingency which materially
and adversely affects the inter-bank markets generally;
(iii) any change in applicable law or governmental regulation or
order (whether or not having the force of law);
the making redenomination or continuation of the facilities is
impractical or impossible the Bank shall as soon as practicable give
written notice to the Company.
During the period of thirty days from the giving of notice, the Bank
shall negotiate with the Company for a mutually acceptable alternative
basis to make or continue to make available or
<PAGE>
redenominate the facilities. Should the parties fail to agree to an
alternative basis acceptable to both of them within the said period of
thirty days the obligation of the Company to borrow and the obligation
of the Bank to provide the facilities shall be terminated and the
Company shall repay the facilities (together with accrued interest and
such amounts as may be necessary to compensate the Bank for any losses
or expenses of liquidation of or re-employing fixed deposits) within
fourteen days from the end of such period.
(b) CURRENCY INDEMNITY
(i) In the event of a judgment or order being rendered by any
court or tribunal for the payment of any amounts owing to
the Bank under this letter or for the payment of damages in
respect of any breach of the terms hereof or under or in
respect of a judgement or order of another court or tribunal
for payment of such amounts or damages, such judgement or
order being expressed in a currency ("JUDGEMENT CURRENCY")
other than the foreign currency otherwise expressed to be
payable pursuant to the facility in question ("RELEVANT
FOREIGN CURRENCY"), the Company shall indemnify and hold
harmless the Bank against any deficiency in terms of the
Relevant Foreign Currency in the amounts received by the
Bank arising or resulting from any variation between:
(A) the rate of exchange at which the Relevant Foreign
Currency is converted into the Judgement Currency
for the purposes of such judgement or order; and
(B) the rate of exchange at which the Bank is able to
purchase the Relevant Foreign Currency with the
amount of the Judgement Currency actually received
at the time of its receipt by the Bank.
(ii) The above indemnity shall constitute a separate and
independent obligation of the Company from its other
obligations hereunder and shall apply irrespective of any
time or other indulgence granted by the Bank, and no proof
or evidence of actual loss shall be required by the Company.
(c) The Bank should not be regarded as managing or supervising the
Company's exposure as aforesaid.
<PAGE>
5. NON-WAIVER CLAUSE
No delay in exercising or failure to exercise any right power or
remedy accruing to the Bank upon the happening of any of the events of
default herein shall affect the Bank's rights, powers or remedies or
be construed as a waiver of any such event of default or agreement to
waive any future happening of any events of default herein.
<PAGE>
ANNEXURE "B"
TERMS AND CONDITIONS
APPLYING TO THE BILL FACILITY EXTENDED TO
CASE CORPORATION PTY LIMITED ("COMPANY")
1. DRAWINGS
1.1 Bills drawn by the Company under a Bill acceptance and/or
discount facility will be accepted by the Bank in accordance with
the Bank's normal requirements and the letter of offer for the
accommodation of the Company. Subject to paragraph 2 below, the
Bank will pay to the Company the discounted proceeds of the Bills
less any moneys due and payable to the Bank by the Company. The
face value of all Bills so accepted by the Bank and outstanding
will not exceed the limit of the facility at any time.
1.2 The Company must give the Bank not less than three Banking Days'
notice prior to the proposed discount date or such shorter period
of notice as the Bank may permit and must deliver to the Bank the
Bills which the Company wishes to accept and discount.
1.3 The Bank is not obliged to accept any Bill having a maturity date
later than the expiry date for the Term of the facility.
1.4 Bills will be drawn by the Company on the Bank with face values,
payable on such days to such persons and at such places in
Australia as the Company and the Bank shall agree. A Bill must
not mature on a day which is not a Banking Day.
1.5 The Company and the Bank agree to observe the provisions of the
Bills of Exchange Act (Cwth) as to anything necessary to be done
to ensure the validity of any Bills to be drawn or accepted under
this facility or to attract the benefit of any provision of that
Act.
1.6 Bills accepted by the Bank will be discounted by the Bank at the
"BBSY" bid rate (that rate shown at approximately 10.10am (Sydney
time) on page "BBSY" on the Reuters Monitor System on the day the
Bills are to be discounted). The proceeds will be paid into the
Company's account or as the Company may direct in the Drawing
Notice, or applied under paragraph 3.2 below.
2. REPLACEMENT BILLS
The Bank will accept and discount replacement Bills tendered to it in
accordance with paragraph 1 at least two Banking Days or such shorter
<PAGE>
period as agreed before the maturity of those Bills previously
accepted and discounted pursuant to the letter of offer so that the
maturing Bills will be funded in whole or in part by replacement Bills
and in such circumstances the amount payable by the Bank to the
Company in respect of the replacement Bills will be netted off to
satisfy or partly satisfy the payment obligations of the Company in
respect of the maturing Bills.
3. INDEMNITY IN RESPECT OF BILLS
3.1 The Company indemnifies the Bank against all liabilities of any
kind whether actual or contingent which are incurred by the Bank
in accepting, discounting, endorsing or becoming the payee or
other holder of any Bill to which the Company is party. Subject
to paragraph 3.2, the Company will pay to the Bank in immediately
available funds an amount equal to the face value of each Bill
not later than 11 am on the date of maturity of each Bill.
3.2 Where the Bank accepts replacement Bills under paragraph 2, the
obligation of the Company to pay to the Bank the face value of a
maturing Bill on its maturity date will be satisfied by the Bank:
(a) debiting the face value of the maturing Bill to an
internal suspense account of the Bank;
(b) accepting a replacement Bill;
(c) crediting the discounted proceeds of the
replacement Bill in reduction of the debit created
to the suspense account; and
(d) debiting the account of the Company for the amount
of the remaining balance of the debit to the
suspense account.
3.3 The procedure outlined in paragraph 3.2 shall not prejudice the
right of the Bank at any time to require the Company to pay to it
the face value of any Bill on its maturity date where the Bank
does not accept replacement Bills under paragraph 2.
3.4 The obligations and liabilities of the Company under this
facility and in relation to each Bill drawn and accepted shall
continue notwithstanding that the Bank becomes the holder of a
Bill in its own right on or after its maturity date.
3.5 The Bank may pay any Bill on or after its maturity date without
being under any obligation to enquire as to the title of the
person presenting the same for payment.
<PAGE>
3.6 If the Company fails to pay to the Bank the face value of any
Bill either on its maturity date or upon service of a notice of
default pursuant to this letter of offer, the Bank may debit an
account in the name of the Company (whether opened by the Bank or
the Company) with the face value of each such Bill, and any
costs, expenses and outgoings payable by the Company pursuant to
this letter of offer.
3.7 The entitlements of the Bank herein set forth and the consequent
obligations of the Company shall be subject to any liability the
Bank may have in accordance with law by reason of any wilful
misconduct or gross negligence on the part of the Bank.
<PAGE>
ANNEXURE C
(COMPRISING 1 PAGE)
BILL DRAWING NOTICE
To: National Australia Bank Limited ("Bank")
Level 25, 255 George Street
Sydney NSW 2000
Attention: Senior Relationship Manager - Set 630 - Corporate Banking & Finance -
NSW & ACT
Letter of offer from the Bank to Case Corporate Pty Limited (ACN 000 031 130)
("Customer") ("Letter of Offer")
The Customer gives you notice that it wishes to switch the whole or part of a
principal amount of A$[ ] to Bills accepted and discounted under either
the Bill Acceptance and/or Discount Facility or the A Co Acquisition Acceptance
and/or Discount Facility.
The particular required to be given are as follows:
A. proposed Drawdown Date: [ ]
B. proposed tenor of the Bills: [ ] days
C. aggregate Face Value of the Bills: A$[ ]
D. Other instructions: [ ]
[** Delete whichever is inapplicable] ** Duly completed "Bank" form(s) and form
of Bill or Bills are attached.
OR
** The Customer hereby authorises and directs the Bank to complete on the
Customer's behalf, the "Bank" form(s) and form of Bill or Bills.
Please confirm in due course the applicable interest rates in respect of this
drawing.
The Customer confirms that:
(a) all representations and warranties contained in clause 6 of the Negative
Pledge which are deemed to be repeated in this notice are correct and not
misleading and that each will be correct and not misleading on the Drawdown
Date; and
(b) no Event of Default or event which with the giving of notice, lapse of time
or fulfilment of any condition would be likely to become an Event of
Default continues unremedied or would result from any acceptance or
discounting of a Bill requested in this notice.
The Customer acknowledges that a term or expression which has a defined meaning
in the Letter of Offer has the same meaning as in the Letter of Offer when used
in this Bill Drawing Notice unless otherwise defined in this Bill Drawing
Notice.
DATED: [ 199 ]
Signed for and on behalf of
CASE CORPORATION PTY LIMITED
by an authorised signatory
in the present of:
................................. .................................
Signature of witness Signature of authorised signatory
................................. .................................
Occupation Office held
................................. .................................
Name of witness (block letters) Name of authorised signature
(block letters)
<PAGE>
BILL FACILITY
POWER OF ATTORNEY
BY THIS POWER OF ATTORNEY each individual or company named in Item 1 of the
Schedule (the "Customer") IRREVOCABLY NOMINATES CONSTITUTES AND APPOINTS
National Australia Bank Limited A.C.N. 004044937 (the "Bank") to be the trust
and lawful attorney of the Customer for and on behalf of the Customer and in the
Customer's name to draw, make, deliver, sign, endorse or negotiate any bill of
exchange ("Bill") drawn or which may be drawn under the terms of the bill
facility or facilities referred to in Item 2 of the Schedule (the "Facility"),
as the same may be extended or varied from time to time.
THE CUSTOMER DECLARES that:
1. The Bank may act on instructions in writing received from the Customer
concerning whether or not to draw Bills and the aggregate face value and
tenor of Bills to be drawn.
2. This Power of Attorney may be exercised under hand or by facsimile
signature of any two officers of the Bank acting jointly who, at the time
of exercise of power under this Power of Attorney, are authorised by the
Bank to sign, accept or endorse bills of exchange on behalf of the Bank
(each an "Authorised Officer").
3. This Power of Attorney is granted to secure the performance of the
obligations of the Customer under the Facility, is irrevocable and shall
remain in full force and effect until all obligations of the Customer under
the Facility and any Bills are discharged unless the Bank expressly
consents in writing to the earlier revocation of the Power of Attorney.
4. The Customer will indemnify and keep indemnified the Bank and each
Authorised Officer against all claims, demands, costs, damages, losses and
expenses arising from the exercise of all or any of the powers and
authorities contained in this Power of Attorney.
5. No person dealing with the Bank be concerned to see or enquire as to the
propriety or expediency of any act, deed, matter or thing which the Bank
may do or purport or agree to do or perform in the Customer's name by
virtue of this Power of Attorney and the Customer shall ratify and confirm
all that the Bank lawfully does or causes to be done by virtue of this
Power of Attorney.
<PAGE>
Case Corporation Pty Limited (ACN 000 031 130)
- --------------------------------------------------------------------------------
Address/Registered Office
31-67 Kurrajong Avenue, St Marys, New South Wales 2760
- --------------------------------------------------------------------------------
ITEM 2
+Bill Acceptance Facility, the terms and conditions of which are set out in a
Bill Facility -- Letter of Offer dated* 13/2/96.
+DELETE WHICHEVER ARE INAPPLICABLE
*INSERT RELEVANT DATE
________________________________________________________________________________
EXECUTED as a Deed this 14th day of February 1996.
NON INCORPORATED CUSTOMERS (If more than one, each must sign)
SIGNED SEALED AND DELIVERED by )
the Customer in the presence of: ) _________________________
__________________________________________________
Signature of Witness
__________________________________________________
Full Name of Witness
SIGNED SEALED AND DELIVERED by )
the Customer in the presence of: ) _________________________
__________________________________________________
Signature of Witness
__________________________________________________
Full Name of Witness
INCORPORATED CUSTOMERS
THE COMMON SEAL of the Customer was )
hereunto affixed in accordance with its Articles )
of Association in the presence of: )
__________________________________________________
Director [SEAL]
__________________________________________________
Director or Secretary
<PAGE>
15 February 1996
Finance Director
Case Corporation Pty Limited
31-67 Kurrajong Avenue
ST MARYS NSW 2760
Dear Sir,
BANKING FACILITIES TO CASE CORPORATION PTY LIMITED LETTER OF AMENDMENT TO LETTER
OF OFFER DATED 13 FEBRUARY, 1996 FROM NATIONAL AUSTRALIA BANK LIMITED ("BANK")
TO CASE CORPORATION PTY LIMITED ("COMPANY")
We refer to the Bank's Letter of Offer dated 13 February, 1996 that sets out
various facilities numbered 1 to 8 approved by the Bank for the Company's use
("LETTER OF OFFER").
The Bank has agreed at the request of the Company to vary the "Limit" in
Facility 3- "A Co Acquisition Bill Acceptance and/or Discount Facility" on
page 2 of the Letter of Offer by deleting:
"Limit: Up to A$80,000,000 (eighty million Australian Dollars) as reduced by
any prepayment or cancellation which will be permanent."
and replacing that paragraph with:
"Limit: Up to A$90,000,000 (ninety million Australian Dollars) as reduced by
any prepayment or cancellation which will be permanent."
All other facilities, terms and conditions contained in the Letter of Offer
remain unchanged.
The increase in the "Limit" in Facility 3 (as provided for above) will require
provision to the Bank of further documentation that will constitute additional
conditions precedent to those set out on page 5 of the Letter of Offer. The Bank
has instructed Dibbs Crowther & Osborne to contact the Company's solicitors in
order to settle those additional conditions precedent between them.
<PAGE>
The above arrangements may be accepted before 27 February, 1996 or at a later
date acceptable to the Bank by forwarding a certified copy of the Board
Resolution of the Company. In the meantime, please do not hesitate to contact
either one of us on the numbers mentioned below if any matter requires
clarification or if we can be of further assistance.
Yours faithfully,
/s/ M.A. Harvey /s/ K. Thomas
M.A. Harvey K. Thomas
SENIOR RELATIONSHIP MANAGER ACCOUNT MANAGER
Tel: 237 1827 Tel: 237 1489
<PAGE>
[LETTERHEAD OF CASE CORPORATION APPEARS HERE]
February 15, 1996
Mr. Malcolm A. Harvey
Senior Relationship Manager
National Australia Bank Limited
255 George Street
Sydney, Australia
Ref: Banking Facilities to Case Corporation Pty Limited
-------------------------------------------------------
Dear Sir:
In relation to your letter of offer dated 13 February 1996 to our
wholly-owned subsidiary, Case Corporation Pty Limited ("Letter of Offer"), we
wish to confirm that our obligations under the Deed of Guarantee and Indemnity
dated 14 February 1996 ("Guarantee") continue in full force and effect and that
the Guaranteed Amount (as that term is defined in the Guarantee) extend to all
amounts owing under or in connection with the Letter of Offer, as amended on 15
February 1996 (including without limitation, the increase in the limit to
A$90,000,000 from A$80,000,000 for the "A Co Acquisition Bill Acceptance and/or
Discount Facility").
Very truly,
CASE CORPORATION
by /s/ Benson K. Woo
----------------------
Benson K. Woo
Vice President & Treasurer
<PAGE>
[LETTERHEAD OF NATIONAL AUSTRALIA BANK]
22 October 1996
Finance Director
Case Corporation Pty Limited [SEAL]
31-67 Kurrajong Avenue
ST MARYS NSW 2760
Dear Sir,
BANKING FACILITIES TO CASE CORPORATION PTY LIMITED
SECOND LETTER OF AMENDMENT TO LETTER OF OFFER DATED 13 FEBRUARY, 1996 FROM
NATIONAL AUSTRALIA BANK LIMITED ("BANK") TO CASE CORPORATION PTY LIMITED
("COMPANY")
We refer to the Bank's Letter of Offer dated 13 February, 1996 (as varied by a
first letter of amendment dated 15 February, 1996) in which the Bank agreed to
provide certain banking facilities (described in paragraphs 1-8) approved by the
Bank for the Company's use ("LETTER OF OFFER").
Words used but not defined in this letter have the same meaning given to them in
the Letter of Offer.
At the request of the Company, the Bank has agreed:-
1. to vary the "Limit" in Facility 2 "Bill Acceptance and/or Discount
Facility" on page 2 of the Letter of Offer by deleting:-
"Limit: A$35,000,000 (Thirty Five Million Australian Dollars)."
and replacing that paragraph with:-
"Limit: A$50,000,000 (Fifty Million Australian Dollars).";
2. to vary the "Limit" in Facility 3 "A Co Acquisition Bill Acceptance
and/or Discount Facility" on page 2 of the Letter of Offer, amended on
page 1 of the first Letter of Amendment by deleting:-
"Limit: up to A$90,000,000 (ninety million Australian Dollars) as
reduced by any prepayment or cancellation which will be
permanent."
and replacing that paragraph with:-
<PAGE>
-2-
"Limit: up to A$84,100,000 (eighty four million one hundred thousand
Australian Dollars) as reduced by any prepayment or
cancellation which will be permanent."
All other facilities, terms and conditions contained in the Letter of Offer
remain unchanged.
It is a condition precedent to the Bank's agreement to vary the facilities in
the manner contemplated above that each of the Company, Case Credit Wholesale
Pty Limited (formerly J.I. Case Credit Corporation of Australia Pty Limited) and
Case Corporation acknowledge and consent to the above variations (such
acknowledgment and consent to be evidenced in each case by their respective
execution of the attached acknowledgment of this letter) and also that their
respective obligations under:-
(a) an Interlocking Guarantee and Indemnity dated 22 June, 1994; and
(b) a Deed of Guarantee and Indemnity dated 14 February, 1996.
remain in full force and effect in accordance with their respective terms (as
varied by this letter) and all moneys owing under either of those documents
extend to all amounts owing under or in connection with the Letter of Offer (as
varied by this letter).
The above arrangements may be accepted before 30 November, 1996 or at a later
date acceptable to the Bank by forwarding a certified copy of the Board
Resolution of the Company.
In the meantime, please do not hesitate to contact either one of us on the
numbers mentioned below if any matters require clarification or if we can be of
any further assistance.
Yours faithfully,
/s/ M. A. Harvey /s/ W. Shaw
M. A. Harvey W. Shaw
Senior Relationship Manager Relationship Manager
Tel: 9237 1827 Tel: 9237 1828
<PAGE>
-3-
ACKNOWLEDGMENT AND CONSENT
In consideration of the Bank agreeing to the amendments to the Letter of Offer
referred to on pages 1 and 2 of this letter, at the request of the Company, Case
Credit Wholesale Pty Limited and Case Corporation, each of the Company, Case
Credit Wholesale Pty Limited and Case Corporation, jointly and severally, by
their respective execution of this letter, consents to those amendments and:-
1. acknowledges that the Letter of Offer as varied by this letter, mutatis
mutandis, remains in full force and effect;
2. acknowledges and agrees that each of the security interests granted by them
in favour of the Bank to secure the "Guaranteed Amount" or the "Moneys
Owing" (as those terms are defined in any Transaction Document) continue in
full force and effect in accordance with their terms and conditions to
secure the Guaranteed Amount and the Moneys Owing and their obligations to
the Bank;
3. acknowledge their continuing liability to the Bank under the Interlocking
Guarantee dated 22 June, 1994 and under the Deed of Guarantee and Indemnity
dated 14 February, 1996 (as the case may be) notwithstanding the Bank
varying the "Limits" of Facility 2 and 3 in the Letter of Offer;
4. acknowledge and confirm that the financial accommodation contemplated in
the Letter of Offer (as varied by this letter) is or will be (as the case
may be) for the benefit of the Company and for the benefit of each person
granting a security interest; and
5. acknowledge and agree with the Bank that this letter constitutes a
Transaction Document and is also supplemental and collateral to the Letter
of Offer (unless otherwise agreed to by the Bank).
The common seal of CASE )
CORPORATION PTY LIMITED was )
affixed in accordance with its )
articles of association in the )
presence of: )
) /s/ Stuart Redman
) ------------------------------
/s/ Ian Fisher ) Signature of
------------------------------ ) authorised person
Signature of authorised )
person ) Director
) ------------------------------
Alternate Director ) Office held
------------------------------ )
Office held ) STUART REDMAN
) ------------------------------
IAN FISHER ) Name of authorised person
------------------------------ ) (block letters)
Name of authorised person
(block letters)
<PAGE>
-4-
The common seal of CASE CREDIT )
WHOLESALE PTY LIMITED was )
affixed in accordance with its )
articles of association in the )
presence of: ) /s/ STUART REDMAN
) --------------------------
/s/ Ian Fisher ) Signature of
- -------------------------- ) authorised person
Signature of authorised )
person ) Director
) --------------------------
Alternate Director ) Office held
- -------------------------- )
Office held )
) STUART REDMAN
) --------------------------
IAN FISHER ) Name of authorised person
- -------------------------- ) (block letters)
Name of authorised person
(block letters)
Signed for and on behalf of CASE )
CORPORATION by a person duly )
authorised in that regard in the )
presence of: )
)
) ________________________________
) Signature of
) authorised person
)
________________________________ ) ________________________________
Signature of witness ) Office held
)
)
________________________________ ) ________________________________
Name of Witness (block letters) Name of authorised person
(block letters)
<PAGE>
AMENDING AGREEMENT
TO NEGATIVE PLEDGE AGREEMENT
DATE: 14 February, 1996
BETWEEN
CASE CORPORATION PTY LIMITED
A.C.N. 000 031 130
AND
NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004 044 937
DIBBS CROWTHER & OSBORNE
Solicitors
50 Carrington Street
SYDNEY NSW 2000
DX 101 Sydney
Tel: 290-8200
Fax: 290-2964
Ref: RG/PRE
<PAGE>
CONTENTS
1.DEFINITIONS AND INTERPRETATION- 1 -
2.CONSIDERATION- 1 -
3.TRANSACTION DOCUMENT- 1 -
4.ACKNOWLEDGMENT AND CONFIRMATION- 2 -
5.AMENDMENT- 2 -
6.CONDITIONS PRECEDENT- 3 -
7.REPRESENTATIONS AND WARRANTIES- 3 -
9.MISCELLANEOUS- 4 -
<PAGE>
TO NEGATIVE PLEDGE AGREEMENT
THIS AGREEMENT is made on 14 February 1996
BETWEEN: CASE CORPORATION PTY LIMITED A.C.N. 000 031 130 of 31-67
Kurrajong Avenue, St. Marys, New South Wales, 2760 ("CUSTOMER")
AND: NATIONAL AUSTRALIA BANK LIMITED A.C.N. 004 044 937 of Level 25,
National Australia Bank House, 255 George Street, Sydney, New
South Wales, 2000 ("BANK")
RECITALS:
A. The Customer and the Bank entered into a Negative Pledge Agreement dated 29
September 1995 ("NEGATIVE PLEDGE").
B. The Customer and the Bank have agreed to vary the Negative Pledge in the
manner set out in this agreement.
C. This Agreement is collateral to and secures the same money and obligations
as contained in the Negative Pledge.
OPERATIVE PROVISIONS:
1. DEFINITIONS AND INTERPRETATION
1.1 Words defined in the Negative Pledge that are not defined in this
agreement have the same meaning given to them in the Negative Pledge
unless contrary to or inconsistent with the intention or as the
context otherwise requires.
1.2 The provisions of clauses 1.1 (definitions), 1.2 (interpretation), 8
(miscellaneous), 9 (notices) and 10 (governing law and jurisdiction)
of the Negative Pledge apply to this agreement, mutatis mutandis, as
if they are set out in full in this agreement.
2. CONSIDERATION
The parties acknowledge entering into this agreement for valuable
consideration.
3. TRANSACTION DOCUMENT
Each of the parties to this agreement acknowledges and agrees with the Bank
that:
(a) this agreement;
(b) any other document dated on or before the date of this
agreement which varies or evidences a facility, or any other
financial accommodation by the Bank to or in favor of the
Customer; and
(c) all Security Interest granted or to be granted from time to
time by the Customer to or in favor of the Bank (which
provide financial accommodation as contemplated by any
document),
constitute a "TRANSACTION DOCUMENT" unless otherwise agreed to by the Bank.
<PAGE>
[LETTERHEAD OF NATIONAL AUSTRALIA BANK]
19th March 1996
Finance Director
Case Corporation Pty Limited and
Case Credit Australia Pty Limited
31-67 Kurrajong Avenue
ST. MARYS NSW 2760
Dear Sir,
NATIONAL AUSTRALIA BANK LIMITED ("BANK")
BANKING FACILITIES TO CASE CORPORATION PTY LTD
AND CASE CREDIT AUSTRALIA PTY LTD
The Bank refers to the following documents:-
1. Negative Pledge Agreement dated 29 September, 1995 between Case Corporation
Pty Limited ("Case Corporation") and the Bank (as varied by an Amending
Agreement to Negative Pledge Agreement dated 14 February, 1996); and
2. Negative Pledge Agreement dated 29 September, 1995 between Case Credit
Australia Pty Limited ("Case Credit") and the Bank,
(collectively, "Negative Pledges").
Words defined in the Negative Pledges that are not defined in this letter have
the same meaning given to them in the Negative Pledges.
On the joint and several request of each of the Case Corporation, Case Credit
and each Group member, the Bank agrees to amend clauses 4.1(d) in the Negative
Pledges by inserting the words "(other than interim draft documents)"
immediately after the word "document" in the first line of clauses 4.1(d) of the
Negative Pledges.
It is a condition precedent to the Bank agreeing to amend the Negative Pledges
in the manner contemplated above that each of Case Corporation, Case Credit and
each Group Member acknowledge and consent-
1. to the above amendment (such acknowledgement and consent to be evidenced in
each case by their respective execution of the attached acknowledgment of
this letter); and
<PAGE>
(i) in relation to tangible rather than intangible
assets;
(ii) is conducted by a qualified independent valuer;
and
(iii) is supported by the Customer's directors and
auditors."
(c) clause 5.1 "Financial Undertakings" on page 9 of the Negative
Pledge is deleted and replaced with the following new clause 5.1;
"5.1 The Customer undertakes to ensure that the Customer and its
consolidated subsidiaries complies with the following
financial undertakings:
(a) Shareholders' Funds shall not be less than 25% of
Total Tangible Assets at any time;
(b) the ratio of Current Assets to Current Liabilities
shall not be less than 1.25:1 at any time;
(c) Shareholders' Funds shall not be less than
A$65,000,000 at any time;
(d) the Financial Charges Cover Ratio shall not be
less than 2:1 at any time in respect of any fiscal
quarter; and
(e) unless the Bank otherwise agrees in writing,
aggregate dividend repatriation to Case
Corporation (US) shall not exceed 100% of the
Customer's aggregate net profit after for the
period from 30 June, 1994 up to the date the
Customer's board of directors declares the latest
dividend."
6. CONDITIONS PRECEDENT
6.1 The variation of the Negative Pledge contemplated by clause 5 of this
agreement is subject to the condition precedent that the Bank has
received the following in form and substance reasonably satisfactory
to it:
(a) a disclosure fee of AUD40,000:
(b) an establishment fee of AUD40,000; and
(c) any other information or document (whether originals or copies)
which the Bank reasonably considers necessary or desirable to
examine or hold.
6.2 It is a further condition precedent to the Bank agreeing to amend the
Negative Pledge, as contemplated by clause 5 of this agreement, that
no Event of Default or event which with the giving of notice, lapse of
time or any determination would be an Event of Default, has occurred
or would be likely to occur.
<PAGE>
7.1 The Customer repeats the representations and warranties in clause 6 of
the Negative Pledge for the benefit of the Bank; and
7.2 The Customer acknowledges that the Bank will be entering into this
agreement in reliance, inter alia, on these representations and
warranties.
9. MISCELLANEOUS
9.1 Nothing contained in this agreement abrogates, prejudices, diminishes
or otherwise adversely affects any rights, powers remedies,
obligations or liabilities (in any case whether present, future or
contingent) in relation to any act, matter or thing done or effected
or otherwise arising in relation to a Transaction Document or any
document to which the Customer and the Bank are parties before the
execution of this agreement.
9.2 This agreement binds each of the signatories to it even if one or more
of those persons named in this agreement never executes it or that the
execution by any one or more of those persons (other than the persons
sought to be made liable under it) is or may become void or voidable.
9.3 If there is any inconsistency between the terms of this agreement and
any prior communications between the Customer and the Bank, the terms
of this agreement will prevail and the parties acknowledge that this
agreement supersedes in all respects the terms of those prior
communications.
9.4 The Customer agrees to pay to the Bank, and to indemnify and keep
indemnified the Bank against all and any costs, charges, fees,
expenses and taxes (including any late fees or penalties) and in
relation to the preparation, negotiation, settlement, stamping,
enforcement or attempted enforcement of this agreement now and in
the future, except insofar as the Bank will meet any legal fees of the
Bank in respect of this transaction up to $10,000.
9.5 Each of the covenants of this agreement are severable and distinct
from one another and if at any time any one or more of the provisions
of this agreement is or becomes invalid, illegal or unenforceable in
any respect under any law, the validity, legality and enforceability
of the remaining provisions will not in any way be affected or
impaired.
9.6 This agreement is governed by the laws in force in New South Wales and
each party irrevocably and unconditionally consents to the non-
exclusive jurisdiction of the courts of New South Wales and courts of
appeal from them.
9.7 This agreement may consist of a number of counterparts and the
counterparts taken together constitute one and the same instrument.
<PAGE>
Executed as an agreement.
Signed by MALCOLM ARTHUR HARVEY )
for and on behalf of NATIONAL AUSTRALIA )
BANK LIMITED under power of attorney )
registered book 3834 number 549 in the )
presence of: )
)
)
) (Signed) M A HARVEY
(SIGNED) K A THOMAS ) By executing this agreement the
Signature of witness ) attorney states that the attorney
) has received no notice of
KATHERINE A THOMAS ) revocation of the power of
Name of witness (block letters) ) attorney
The common seal of CASE CORPORATION PTY )
LIMITED was affixed in accordance with its )
articles of association in the presence of:)
)
)
(Signed) IAN FISHER GORDON CADROW ) (Signed) PHILIP MOORE
Signature of authorised ) Signature of
person ) authorised person
)
Company Officer Director ) Managing Director
Office held ) Office held
)
)
IAN FISHER GORDON CADROW ) PHILIP MOORE
Name of authorised person ) Name of authorised person
(block letters) ) (block Letters)
<PAGE>
4.1 The Customer unconditionally and irrevocably consents to the execution
and performance of this agreement.
4.2 For the removal of doubt, nothing in this agreement affects any
rights, powers or remedies of the Bank which may have accrued to the
Bank as a result of any act, omission, matter or thing occurring
before the date of this agreement.
4.3 The Customer confirms and acknowledges that:
(a) the Customer's obligations under the Negative Pledge (as varied
by this agreement), and the obligations of each person that is a
party to a Transaction Document will continue in full force and
effect in accordance with their terms notwithstanding the
execution and performance of this agreement;
(b) the Negative Pledge will continue to secure the obligations of
the Customer pursuant to any facility or other financial
accommodation provided or to be provided for the time being by
the Bank;
(c) each Security Interest granted by the Customer in favor of the
Bank to secure the Moneys Owing continues in full force and
effect in accordance with its terms and conditions to secure the
Moneys Owing; and
(d) the financial accommodation contemplated by any one or more of
the documents to which the Customer or the Bank are a party are
or will be (as the case may be) for the benefit of the Customer.
5. AMENDMENT
Subject to clause 6 of this agreement, from the date of this agreement the
Negative Pledge is amended in the following manner:
(a) the definition of "LETTER OF OFFER" on page 3 of the Negative
Pledge is deleted and replaced with the following:
""LETTER OF OFFER" means the Letter of Offer from the Bank to the
Customer dated 13 February, 1996";
(b) the definition of "SHAREHOLDERS' FUNDS" on page 5 of the Negative
Pledge is deleted and replace with the following:
""SHAREHOLDERS' FUNDS" means the Customer's Total Tangible
Assets, minus:
(a) Total Liabilities (excluding Subordinated Debt);
(b) the amount of any redeemable preference share capital (and
the associated premium attached thereto);
(c) the amount of any minority interests; and
(d) any asset revaluation reserve made after the date of the
Letter of Offer (unless the Bank agrees in writing to
include that amount in the calculation of Shareholders'
Funds), provided that the
<PAGE>
-2-
2. that the Negative Pledges and each of the "Security Documents" referred to
in the Letters of Offer (as varied from time to time) each remain in full
force and effect in accordance with their respective terms (as varied by
this letter) and each of the "Security Documents" continue to secure, inter
alia, the Moneys Owing.
Yours faithfully,
/s/ M.A. Harvey /s/ T.V. Walker
M.A. Harvey T.V. Walker
Senior Relationship Manager Relationship Manager
Tel: 237 1827 Tel: 237 1569
<PAGE>
-3-
ACKNOWLEDGMENT AND CONSENT
In consideration of the bank agreeing to the amendment to the Negative Pledges
referred to on page 1 of this letter, at the request of Case Corporation and
Case Credit, each of Case Corporation and Case Credit by their respective
execution of this letter consents to the amendment and acknowledges that:-
1. the Negative Pledges (as varied) and the "Security Documents" (referred to
in the Letters of Offer), mutatis mutandis, each remain in full force and
effect; and
2. this letter is also supplemental and collateral to the Negative Pledges and
is deemed to be a "Security Document" in the Letters of Offer.
The common seal of CASE )
CORPORATION PTY LIMITED ) [SEAL]
was affixed in accordance with its )
articles of association in the )
presence of: ) /s/ Ian Fisher
) --------------------------
/s/ Gordon Cadrow ) Signature of
- -------------------------- ) authorised person
Signature of authorised )
person ) (Director - alternate)
) --------------------------
Director ) Office held
- -------------------------- )
Office held )
) IAN FISHER
) --------------------------
GORDON CADROW ) Name of authorised person
- -------------------------- ) (block letters)
Name of authorised person
(block letters)
The common seal of CASE CREDIT )
AUSTRALIA PTY LIMITED was )
affixed in accordance with its ) [SEAL]
articles of association in the )
presence of: )
)
/s/ Andrew Mohr ) __________________________
- -------------------------- ) Signature of
Signature of authorised ) authorised person
person )
)
Director ) __________________________
- -------------------------- ) Office held
Office held )
)
)
ANDREW MOHR ) __________________________
- -------------------------- ) Name of authorised person
Name of authorised person (block letters)
(block letters)
<PAGE>
EXHIBIT 10(d)(3)
DEED OF AMENDMENT AND ACKNOWLEDGMENT
DATED: 17 February 1997
BETWEEN
CASE CORPORATION PTY LIMITED
A.C.N. 000 031 130
AND
CASE CREDIT WHOLESALE LIMITED
(formerly J.I. Case Credit Corporation of Australia Pty Limited)
A.C.N. 000 108 387
AND
CASE CORPORATION
AND
NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004 044 937
DIBBS CROWTHER & OSBORNE
50 Carrington Street
Sydney 2000
Phone: (02) 290 8200 Fax: (02) 290 2964
DX 101 Sydney
<PAGE>
CONTENTS
1. DEFINITIONS AND INTERPRETATION....................................... -1-
2. CONSIDERATION........................................................ -2-
3. RELEVANT AGREEMENT................................................... -2-
4. CONSENT, CONFIRMATION AND ACKNOWLEDGMENT............................. -2-
5. AMENDMENT............................................................ -3-
5.1 Letter of Offer dated 13 February, 1996 (as varied) from the
Bank to Case Australia......................................... -3-
5.2 Negative Pledge Agreement dated 29 September, 1995
between Case Australia and the Bank (as amended by
Amending Agreement dated 14 February, 1996).................... -5-
5.3 Guarantee and Indemnities...................................... -5-
5.4 Deed of Guarantee and Indemnity dated 14 February 1996
between Case Corporation and the Bank.......................... -5-
6. CONDITIONS PRECEDENT................................................. -6-
7. REPRESENTATIONS AND WARRANTIES....................................... -6-
8. MISCELLANEOUS........................................................ -6-
SCHEDULE TO LETTER OF OFFER..................... -8-
<PAGE>
DEED OF AMENDMENT AND ACKNOWLEDGMENT
THIS DEED is made on 17 February 1997
BETWEEN: CASE CORPORATION PTY LIMITED A.C.N. 000 031 130 of 31-67 Kurrajong
Avenue, St Marys, New South Wales, 2760 ("Case Australia")
AND: CASE CREDIT WHOLESALE PTY LIMITED (formerly J. I. Case Credit
Corporation of Australia Pty Limited) A.C.N. 000 108 387 of 31-67
Kurrajong Avenue, St Marys, New South Wales, 2760 ("Case Credit
Wholesale")
AND: CASE CORPORATION of 621 State Street, Racine, Wisconsin, 53404, United
States of America ("Case Corporation")
AND: NATIONAL AUSTRALIA BANK LIMITED A.C.N. 004 044 937 of Level 25,
National Australia Bank House, 255 George Street, Sydney, New South
Wales, 2000 ("Bank")
RECITALS:
A. Under the Bank's Letter of Offer, the Bank agreed to make available
financial accommodation to the Customer on the terms and conditions set out
in the Letter of Offer.
B. The Customer and the Bank entered into a Negative Pledge Agreement which,
in addition to the Letter of Offer, set out the Customer's obligations to
the Bank.
C. In support of the Customer's obligations under the Letter of Offer and the
Negative Pledge Agreement, Case Corporation, the Customer and Case Credit
Wholesale respectively provided to the Bank the Guarantees and Indemnities.
D. The Customer, Case Corporation and Case Credit Wholesale have requested the
Bank to vary the terms of the Facility provided under the terms of the
Letter of Offer, the Negative Pledge Agreement and the Guarantees and
Indemnities.
E. The Bank has agreed to that request on the basis that the Customer, Case
Corporation and Case Credit Wholesale deliver to the Bank a deed in the
form of this deed.
F. This deed is collateral to and secures the same moneys and obligations
under the Facility as provided for in the Letter of Offer and in the
Negative Pledge Agreement.
OPERATIVE PROVISIONS:
1. DEFINITIONS AND INTERPRETATION
1.1 Words defined in the Negative Pledge Agreement that are not defined in
this deed have the same meaning given to them in the Negative Pledge
Agreement unless contrary to or inconsistent with the intention or as
the context otherwise requires.
1.2 The provisions of clauses 1.1 (definitions), 1.2 (interpretation),
8 (miscellaneous), 9 (notices) and 10 (governing law and
jurisdiction) of the Negative Pledge Agreement apply to this deed,
mutatis mutandis, as if they are set out in full in this deed.
1.3 In this deed (including the Recitals), the following expressions have
the following meanings unless inconsistent or contrary to the context:
"Customer" means Case Australia.
<PAGE>
-2-
"Guarantees and Indemnities" means:-
(a) a Deed of Guarantee and Indemnity (unconditional) dated February
14, 1996 granted by Case Corporation in favour of the Bank in
respect of all of the obligations of Case Australia but without
creating any liability on Case Corporation for any moneys or
amounts owning by Case Credit Australia to the Bank including,
but not limited to the debts of Case Credit Australia under the
Interlocking Guarantee; and
(b) an Interlocking Guarantee dated 22 June, 1994 between Case
Australia, Case Credit Wholesale and all wholly owned
subsidiaries of Case Australia ("Interlocking Guarantee").
"Guarantors" means a reference to each as well as all of Case
Corporation and Case Credit Wholesale under the terms of their
respective Guarantees and Indemnities.
"Letter of Offer" means a Letter of Offer dated 13 February, 1996 from
the Bank to Case Australia (as varied by a first letter of amendment
dated 15 February, 1996 and a second letter of amendment dated 22
October, 1996).
"Negative Pledge Agreement" means a Negative Pledge Agreement dated 29
September, 1995 between Case Australia and the Bank (as amended by an
Amending Agreement to Negative Pledge Agreement dated 14 February,
1996 and a letter of amendment dated 19 March, 1996).
2. CONSIDERATION
The parties to this deed acknowledge entering into this deed an incurring
obligations and granting rights under this deed for valuable consideration.
3. RELEVANT AGREEMENT
Each of the parties to this deed acknowledges and agrees with the Bank
that:
(a) this deed;
(b) any other document dated on or before the date of this deed which
varies or evidences a facility, or any other financial accommodation
by the Bank to or in favour of the Customer; and
(c) all Security Interests granted or to be granted from time to time by
the Customer to or in favour of the Bank.
constitute a "Relevant Agreement" unless otherwise agreed to by the Bank,
4. CONSENT, CONFIRMATION AND ACKNOWLEDGMENT
4.1 The Customer and the Guarantors unconditionally and irrevocably
consent to their entry into, execution of and performance of the terms
of this deed and the observance by each of them of their respective
obligations under this deed and the Relevant Agreements.
4.2 For the removal of doubt, nothing in this deed affects any rights,
powers or remedies of the Bank which may have accrued to the Bank as a
result of any act, omission, matter or thing occurring before the date
of this deed.
4.3 The Customer and the Guarantors all jointly and each of them severally
confirm and acknowledge:
<PAGE>
- 3 -
(a) that the Customer's obligations under the Letter of Offer and
under the Negative Pledge Agreement (as varied by this deed), and
the obligations of each person that is a party to a Relevant
Agreement will continue in full force and effect in accordance
with their terms notwithstanding the execution and performance of
this deed;
(b) their continuing obligations under the Letter of Offer, the
Negative Pledge Agreement and the Guarantees and Indemnities and
acknowledge and agree that, except as varied or supplemented by
this deed, the Customer's obligations and the Guarantors'
obligations under the Relevant Agreements to which they are a
party remain and will continue in full force and effect in
accordance with their terms; and
(c) that the financial accommodation contemplated in the Letter of
Offer (as amended, varied or supplemented from time to time) is
or will be (as the case may be) for the benefit of the Customer
and for the benefit of each person entering into a Relevant
Agreement.
4.4 The Guarantors acknowledge that all of the terms of their Guarantees
and Indemnities (except as varied by clause 5.3 of this deed) continue
in full force and effect to secure the obligations of the Customer to
the Bank.
5. AMENDMENT
Subject to clause 6 of this deed, from the date of this deed the following
amendments are made in the following manner:-
5.1 Letter of Offer dated 13 February, 1996 (as varied) from the Bank to
Case Australia
(a) Overdraft Facility
The following words are inserted at the end of the paragraph
entitled "Purposes":
"For general corporate purposes of the Company and otherwise to
permit the Company to make funds available to any Group Member on
an intercompany loan account basis in order to maximize the
Group's cash management flexibility."
(b) Bill Acceptance and/or Discount Facility
(i) The following words are inserted at the end of the paragraph
entitled "Purpose":
"For general corporate purposes of the Company and otherwise
to permit the Company to make funds available to any Group
Member on an intercompany loan account basis in order to
maximize the Group's cash management flexibility."
(ii) The following words are inserted at the end of the paragraph
entitled "Conditions":
"The Company must give to the Bank written notice of its
request to drawdown funds under this facility by at least
5:00pm on the day before it requires those funds."
(iii) The paragraphs entitled "Line Fee" and the "Activation Fee"
are deleted and replaced with the following provision:-
"While the Bank continues to have the benefit of the
Guarantee and Indemnity given to it by Case Corporation, the
Bank will charge to the Company Line Fees and Activation
Fees as a direct consequence of Case Corporation's Senior
Unsecured Long Term Rating determined by two nationally
recognised rating
<PAGE>
-4-
agencies selected by the Company (at least one of which
shall be Standard & Poors or Moody's), in accordance with
the pricing grid set out in the schedule to letter of offer.
If the ratings of such nationally recognised rating agencies
do not coincide, the Line Fee and Activation Fee set out
opposite the higher of such ratings will apply. If at any
time an event occurs which results in there being no rating
or only one rating in effect, a new Line Fee and Activation
Fee will be determined in a manner to be agreed upon by the
Bank and the Company and until such new Line Fee and
Activation Fee shall be so agreed upon, the relevant fees
will be deemed to be the Line Fee and Activation Fee in
effect immediately prior to the date on which such event
occurs.
As at 15 December, 1996, the Line Fees and Activation Fees
for this facility are:
Rating Line Fee Activation Fee
BBB/Baa2 0.125% p.a. 0.250% p.a.
The Line Fees are payable quarterly in advance of each 15
March, June, September and December.
Activation Fees are calculated on the face value and tenor
of bills drawn and charged upon activation."
(c) A Co Acquisition Bill Acceptance and/or Discount Facility
The paragraphs entitled "Line Fee" and the "Activation Fee" are
deleted and replaced with the following provision:
"While the Bank continues to have the benefit of the Guarantee
and Indemnity given to it by Case Corporation, the bank will
charge to the Company Line Fees and Activation Fees as a direct
consequence of Case Corporation's Senior Unsecured Long Term
Rating determined by two nationally recognized rating agencies
selected by the Company (at least one of which shall be Standard
& Poors or Moody's), in accordance with the pricing grid set out
in the schedule to this letter or offer.
If the ratings of such nationally rating agencies do not
coincide, the Line Fee and Activation Fee set out opposite the
higher of such ratings will apply. If at any time an event occurs
which results in there being no rating or only one rating in
effect, a new Line Fee and Activation Fee will be determined in a
manner to be agreed upon by the Bank and the Company and until
such new Line Fee and Activation Fee shall be so agreed upon, the
relevant fees will be deemed to be the Line Fee and Activation
Fee in effect immediately prior to the date on which such event
occurs. As of 15 December, 1996, the Line Fees and the Activation
Fees for this facility are:
Rating Line Fee Activation Fee
BBB/Baa2 0.125% p.a. 0.250% p.a.
The Line Fees are payable quarterly in advance on each 15 March,
June, September and December.
Activation Fees are calculated on the face value and tenor
of bills drawn and charged upon activation."
<PAGE>
-5-
5.2 Negative Pledge Agreement dated 29 September, 1995 between Case
Australia and the Bank (as amended by Amending Agreement dated 14
February, 1996).
(a) The definition of "Financial Charges Cover Ratio" is deleted.
(b) The definition of "Financial Charges Expenses" is deleted.
(c) The definition of "Financial Undertakings" is deleted.
(d) The following words are inserted after the words "the Bank" in
line 2 of paragraph (c) of the definition of "insolvency Event":
"or except if Austoft Industries Limited (ACN 009 736 234)
merges, amalgamates or is consolidated with Case Australia":
(e) The definition of "Permitted Security Interest" is deleted.
(f) Clause 3 is deleted.
(g) Clause 4.1(b) is deleted.
(h) Clause 4.1(c) is amended by deleting the words "and the half
yearly unaudited" accounts.
(i) Clause 4.1(c)(i)(A) is deleted.
(j) Clause 5 is deleted.
(k) Clause 7.1(g) is deleted.
(l) Clause 7.4 is deleted.
5.3 Guarantees and Indemnities
(a) The definition of or reference to the "Revolving Credit
Agreement" in the Guarantees and Indemnities (except the
Interlock Guarantee) is deleted and replaced with the following
new definition or description (where applicable):
"Case Corporation Revolving Credit nd Guarantee Agreement"
means a document entitled "US$1,100,000,000 Revolving Credit
and Guarantee Agreement" dated as of August 23, 1996 between
Case Corporation, Case Canada Corporation, its foreign
subsidiary borrowers, the Co-Agents and the Lead Managers
named in that document, the Bank of Nova Scotia and the
Chase Manhattan Bank."
(b) All references to sections 7, 9 and 10 of the Revolving Credit
Agreement referred to in clause 9 of the Guarantees and
Indemnities (except the Interlocking Guarantee) are deleted and
replaced with references to sections 10, 12 and 13 in the Case
Corporation Revolving Credit and Guarantee Agreement.
5.4 Deed of Guarantee and Indemnity dated 14 February, 1996 between Case
Corporation and the Bank
The following words are inserted after the first paragraph in clause 9
of the Guarantee and Indemnity:
<PAGE>
-6-
"Notwithstanding the preceding paragraph, the Guarantor is
not bound by section 12.1(b) of the Case Corporation
Revolving Credit and Guarantee Agreement to cause the Debtor
and its consolidated subsidiaries to furnish to the Bank the
financial statements referred to in that section."
6. CONDITIONS PRECEDENT
6.1 The variation of the Letter of Offer, the Negative Pledge Agreement
and the Guarantees and Indemnities contemplated by clause 5 of this
deed is subject to the condition precedent that the Bank has received
the following in form and substance reasonably satisfactory to it:
(a) the execution and delivery of this deed;
(b) a certified copy of each authority under which each party to this
deed (other than the Bank) signs and delivers this deed (or any
other document contemplated by this deed) and if the authority is
a power of attorney, evidence of its stamping (where required by
law) and its registration;
(c) certified extracts evidencing the resolutions of each party to
this deed (where relevant) (other than the Bank) approving the
entry into this deed and authorising execution, delivery and
observance of obligations under this deed; and
(d) such ancillary documents or any other information or document
(whether originals or copies) which the Bank, in its discretion,
may request or reasonably considers necessary or desirable to
examine or hold.
6.2 It is a further condition precedent to the Bank agreeing to amend the
Letter of Offer, the Negative Pledge Agreement and the Guarantees and
Indemnities, as contemplated by clause 5 of this deed, that no Event
of Default or event which with the giving of notice, lapse of time or
any determination would be an Event of Default, has occurred or would
be likely to occur.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Customer repeats the representations and warranties in clause 6 of
the Negative Pledge Agreement for the benefit of the Bank.
7.2 The Guarantors repeat the representations and warranties in the
Guarantees and Indemnities for the benefit of the Bank.
7.3 The Customer acknowledges that the Bank will be entering into this
deed in reliance, inter alia, an all of these representations and
warranties.
8. MISCELLANEOUS
8.1 Nothing contained in this deed abrogates, prejudices, diminishes or
otherwise adversely affects any rights, powers, remedies, obligations
or liabilities (in any case whether present, future or contingent) in
relation to any act, matter or thing done or effected or otherwise
arising in relation to a Relevant Agreement or any documents which the
Customer, the Guarantors and the Bank are parties before the execution
of this deed.
8.2 This deed binds each of the signatories to it even if one or more
of those persons named in this deed never executes it or that the
execution by any one or more of those persons (other than the persons
sought to be made liable under it) is or may become void or voidable.
8.3 If there is any inconsistency between the terms of this deed and any
prior communications between the Customer and the Bank, the terms of
this deed will prevail and the parties
<PAGE>
-7-
acknowledge that this deed supersedes in all respects the terms of
those prior communications.
8.4 The Customer agrees to pay to the Bank, and to indemnify and keep
indemnified the Bank against all and any costs, charges, fees,
expenses and taxes (including any late fees or penalties) in relation
to the preparation, negotiation, settlement, stamping, enforcement
or attempted enforcement of this deed now and in the future.
8.5 Each of the covenants of this deed are severable and distinct from one
another and if at any time any one or more of the provisions of this
deed is or becomes invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired.
8.6 This deed is governed by the laws in force in New South Wales and each
party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of New South Wales and courts of appeal
from them.
8.7 This deed may consist of a number of counterparts and the counterparts
taken together constitute one and the same instrument.
<PAGE>
-8-
SCHEDULE TO LETTER OF OFFER
<TABLE>
<CAPTION>
Pricing Grid: Sr. Unsec. L T Rating Line Fee Activation Fee
Standard & Poors/Moody's
<S> <C> <C> <C>
A/A2 and above 0.07% p.a. 0.155% p.a.
A-/A3 0.08% p.a. 0.17% p.a.
BBB+/Baa1 0.10% p.a. 0.20% p.a.
BBB/Baa2 0.125% p.a. 0.25% p.a.
BBB-/Baa3 0.175% p.a. 0.275% p.a.
BB+/Ba1 0.25% p.a. 0.425% p.a.
Under BB+/Ba1 0.30% p.a. 0.575% p.a.
</TABLE>
<PAGE>
- 8 -
EXECUTED as a deed.
The common seal of CASE CORPORATION PTY )
LIMITED was affixed in accordance with )
its articles of association in the )
presence of: )
)
)
- ---------------------------------- ) ----------------------------------
Signature of authorised person ) Signature of authorised person
)
)
- ---------------------------------- ) ----------------------------------
Office held ) Office held
)
)
- ---------------------------------- ) ----------------------------------
Name of authorised person ) Name of authorised person
(block letters) ) (block letters)
The common seal of CASE CREDIT WHOLESALE )
PTY LIMITED (formerly J. I. Case Credit )
Corporation of Australia Pty Limited) was )
affixed in accordance with its articles )
of association in the presence of: )
)
- ---------------------------------- ) ----------------------------------
Signature of authorised person ) Signature of authorised person
)
)
- ---------------------------------- ) ----------------------------------
Office held ) Office held
)
)
- ---------------------------------- ) ----------------------------------
Name of authorised person ) Name of authorised person
(block letters) ) (block letters)
Signed, sealed and delivered for and on )
behalf of CASE CORPORATION by a person )
duly authorised in that regard in the )
presence of: ) /s/ Benson K. Woo
) ----------------------------------
) Signature of authorised person
/s/ Dawn M. Beck )
- ---------------------------------- ) Vice President and Treasurer
Signature of Witness ) ----------------------------------
) Office held
/s/ Dawn M. Beck )
- ---------------------------------- ) /s/ Benson K. Woo
Name of Witness (block letters) ) ----------------------------------
) Name of authorised person
(block letters)
<PAGE>
- 9 -
EXECUTED as a deed.
The common seal of CASE CORPORATION PTY ) [CORPORATE SEAL
LIMITED was affixed in accordance with ) APPEARS HERE]
its articles of association in the )
presence of: )
)
/s/ Philip E. Moore ) /s/ Ian P. Fisher
- ---------------------------------- ) ----------------------------------
Signature of authorised person ) Signature of authorised person
)
Vice President GM APC ) G.M. Finance
- ---------------------------------- ) ----------------------------------
Office held ) Office held
)
/s/ Philip E. Moore ) /s/ Ian P. Fisher
- ---------------------------------- ) ----------------------------------
Name of authorised person ) Name of authorised person
(block letters) ) (block letters)
/s/ Petra Tinker
---------------------------------
Company Secretary
Petra Tinker
The common seal of CASE CREDIT WHOLESALE ) [CORPORATE SEAL
PTY LIMITED (formerly J. I. Case Credit ) APPEARS HERE]
Corporation of Australia Pty Limited) was )
affixed in accordance in the presence of: )
)
/s/ Philip E. Moore ) /s/ Ian P. Fisher
- ---------------------------------- ) ----------------------------------
Signature of authorised person ) Signature of authorised person
)
Vice President GM APAC ) GM Finance
- ---------------------------------- ) ----------------------------------
Office held ) Office held
)
/s/ Philip E. Moore ) /s/ Ian P. Fisher
- ---------------------------------- ) ----------------------------------
Name of authorised person ) Name of authorised person
(block letters) ) (block letters)
/s/ Petra Tinker
---------------------------------
Company Secretary
Petra Tinker
Signed, sealed and delivered for and on )
behalf of CASE CORPORATION by a person )
duly authorised in that regard in the )
presence of: )
) ----------------------------------
) Signature of authorised person
)
- ---------------------------------- )
Signature of Witness ) ----------------------------------
) Office held
)
- ---------------------------------- )
Name of Witness (block letters) ) ----------------------------------
) Name of authorised person
) (block letters)
<PAGE>
-10-
Signed, sealed and delivered by )
MALCOLM ARTHUR HARVEY )
for and on behalf of NATIONAL AUSTRALIA )
BANK LIMITED under power of attorney )
registered book 3834 number 549 in the )
presence of: )
)
)
)
/s/ Warren Shaw ) /s/ ????
- ------------------------------- ) ------------------------------------
Signature of witness ) By executing this deed the attorney
) states that the attorney has
/s/ WARREN JAMES SHAW ) received no notice of revocation of
- ------------------------------- ) the power of attorney
Name of witness (block letters) )
<PAGE>
EXHIBIT 10(e)(2)
DEED OF AMENDMENT AND ACKNOWLEDGMENT
DATED: 31ST DECEMBER 1996
BETWEEN
CASE CREDIT AUSTRALIA PTY LIMITED
A.C.N. 069 132 396
AND
CASE CREDIT CORPORATION
AND
NATIONAL AUSTRALIA BANK LIMITED
A.C.N. 004 044 927
DIBBS CROWTHER & OSBORNE
Solicitors
50 Carrington Street
SYDNEY NSW 2000
OX 101 Sydney
Tel: 290-8200
Fax: 290-2964
Ref: RG/PRE
<PAGE>
(I)
CONTENTS
1. DEFINITIONS AND INTERPRETATION....................................... -1-
2. CONSIDERATION........................................................ -2-
3. RELEVANT AGREEMENT................................................... -2-
4. CONSENT, CONFIRMATION AND ACKNOWLEDGEMENT............................ -2-
5. AMENDMENT............................................................ -3-
5.1 Letter of Offer dated 28 September, 1996 from the Bank to
Case Credit Australia.......................................... -3-
5.2 Negative Pledge Agreement dated 29 September, 1996
between Case Credit Australia and the Bank..................... -4-
5.3 Guarantee and Indemnity........................................ -5-
6. CONDITIONS PRECEDENT................................................. -5-
7. REPRESENTATIONS AND WARRANTIES....................................... -5-
8. MISCELLANEOUS........................................................ -6-
SCHEDULE TO LETTER OF OFFER..................... -7-
<PAGE>
DEED OF AMENDMENT AND ACKNOWLEDGMENT
THIS DEED is made on 31st December 1996,
BETWEEN: CASE CREDIT AUSTRALIA PTY LIMITED A.C.N. 069 132 396 of 31-87
Kurrajong Avenue, St Marys, New South Wales, 2760 ("Case Credit
Australia")
AND: CASE CREDIT CORPORATION of 621 State Street, Racine, Wisconsin, 53404,
United States of America ("Case Credit")
AND: NATIONAL AUSTRALIA BANK LIMITED A.C.N. 004 044 937 of Level 25,
National Australia Bank House, 255 George Street, Sydney, New South
Wales, 2000 ("Bank")
RECITALS:
A. Under the Bank's Letter of Offer, the Bank agreed to make available
financial recommodation to the Customer on the terms and conditions set out
in the Letter of Offer.
B. The Customer and the Bank entered into a Negative Pledge Agreement which,
in addition to the Letter of Offer, set out the Customer's obligations to
the Bank.
C. In support of the Customer's obligations under the Letter of Offer and the
Negative Pledge Agreement, Case Credit provided to the Bank the Guarantee
and Indemnity.
D. The Customer and Case Credit have requested the Bank to vary the terms of
the Facility provided under the terms of the Letter of Offer, the Negative
Pledge Agreement and the Guarantee and Indemnity.
E. The Bank has agreed to that request on the basis that the Customer and Case
Credit deliver to the Bank a deed in the form of this deed.
F. This deed is collateral to and secures the same moneys and obligations
under the Facilities as provided for in the Letter of Offer and in the
Negative Pledge Agreement.
OPERATIVE PROVISIONS:
1. DEFINITIONS AND INTERPRETATION
1.1 Words defined in the Negative Pledge Agreement that are not defined in
this deed have the same meaning given to them in the Negative Pledge
Agreement unless contrary to or inconsistent with the intention or as
the context otherwise requires.
1.2 The provisions of clauses 1.1 (definitions), 1.2 (interpretation),
__(miscellaneous), __ (notices) and 10 (governing law and
jurisdiction) of the Negative Pledge Agreement apply to this deed,
mutatis mutandis, as if they are set out in full in this deed.
1.3 In this deed (including the Recitals), the following expressions have
the following meanings unless inconsistent or contrary to the context.
"Customer" means Case Credit Australia.
"Guarantee and Indemnity" means a Deed of Guarantee and Indemnity
dated September 26, 1996 (unconditional) granted by Case Credit in
favour of the Bank in respect of the obligations of Case Credit
Australia.
"Guarantor" means Case Credit.
<PAGE>
-2-
"Letter of Offer" means a Letter of Offer dated 28 September, 1996
from the Bank to Case Credit Australia.
"Negative Pledge Agreement" means a Negative Pledge Agreement dated 29
September, 1996 between Case Credit Australia and the Bank (as varied
by a letter of amendment dated 19 March, 1996).
2. CONSIDERATION
The parties to this deed acknowledge entering into this deed and incurring
obligations and granting rights under this deed for valuable consideration.
3. RELEVANT AGREEMENT
Each of the parties to this deed acknowledges and agrees with the Bank
that:
(a) this deed;
(b) any other document dated on or before the date of this deed which
varies or evidences a facility, or any other financial accommodation
by the Bank to or in favour of the Customer's end
(c) all Security interests granted or to be granted from time to time by
the Customer to or in favour of the Bank,
constitute a "Relevant Agreement" unless otherwise agreed to by the Bank.
4. CONSENT, CONFIRMATION AND ACKNOWLEDGEMENT
4.1 The Customer and the Guarantor unconditionally and irrevocably consent
to their entry into, execution of and performance of the terms of
this deed and the observance by each of them of their respective
obligations under this deed and the Relevant Agreements.
4.2 For the removal of doubt, nothing in this deed affects any rights,
powers or remedies of the Bank which may have accrued to the Bank as a
result of any set, emission, matter or thing occurring before the date
of this deed.
4.3 The Customer and the Guarantor both jointly and severally confirm and
acknowledge:
(a) that the Customer's obligations under the Letter of Offer and
under the Negative Pledge Agreement (as varied by this deed),
and the obligations of each person that is a party to a Relevant
Agreement will continue in full force and affect in accordance
with their terms notwithstanding the execution and performance of
this deed;
(b) their continuing obligations under the Letter of Offer, the
Negative Pledge Agreement and the Guarantee and Indemnity and
acknowledge and agree that, except as varied or supplemented by
this deed, the Customer's obligations and the Guarantor's
obligations under the Relevant Agreements to which they are a
party remain and will continue in full force and effect in
accordance with their terms; and
(c) that the financial accommodation contemplated in the Letter of
Offer (as amended, varied or supplemented from time to time) is
or will be (as the case may be) for the benefit of the Customer
and for the benefit of each person entering into a Relevant
Agreement.
<PAGE>
-3-
4.4 The Guarantor acknowledges that all of the terms of the Guarantee and
Indemnity (except as varied by clause 5.3 of this deed) continue in
full force and effect to secure the obligations of the Customer to the
Bank.
5. AMENDMENT
Subject to clause 6 of this deed, from the date of this deed the following
amendments are made in the following manner:
5.1 Letter of Offer dated 28 September, 1995 from the Bank to Case Credit
Australia
(a) the Acceptance and/or Discount Facility
(i) The following words are inserted at the end of the paragraph
entitled "Purpose":
"Otherwise to make funds available to any Group Member on an
intercompany loan account basis in order to maximize the
Group's cash management flexibility."
(ii) The paragraph entitled "Line Fee" and the "Activation Fee"
are deleted and replaced with the following provision:
"While the Bank continues to have the benefit of the
Guarantee and Indemnity given to it by Case Credit
Corporation, the Bank will charge to the Company Line Fees
and Activation Fees as a direct consequence of Case
Corporation's Senior Unsecured Long Term Rating determined
by two nationally recognized rating agencies selected by the
Company (at least one of which shall be Standard & Poor's or
Moody's), in accordance with the pricing grid set out in
the schedule to this letter of offer.
If the ratings of such nationally recognized rating agencies
do not coincide, the Line Fee and Activation Fee set out
opposite the higher of such ratings will apply. If at any
time an event occurs which results in there being no rating
or only one rating in effect, a new Line Fee and Activation
Fee will be determined in a manner to be agreed upon by the
Bank and the Company and until such new Line Fee and
Activation Fee shall be so agreed upon, the relevant fees
will be deemed to be the Line Fee and Activation Fee in
effect immediately prior to the date on which such event
occurs.
As at 15 December, 1996, the Line Fees and the Activation
Fees for this facility are:
Rating Line Fee Activation Fee
BBB/Baa2 0.125% p.a. 0.250% p.a.
Line Fees are payable quarterly in advance on each 18 March,
June, September and December.
Activation Fees are calculated on the face value and
tenor of bills drawn and charged upon activation."
(b) Stand-by Bill Acceptance and/or Discount Facility
(i) The following words are inserted at the end of the paragraph
entitled "Purpose":
<PAGE>
- 4 -
"Otherwise to make funds available to any Group Member on an
Intercompany loan account basis in order to maximise the
Group's cash management flexibility.
(ii) In the paragraph entitled "Drawdown Conditions" the words,
"at least 2 other Banking Days before the day it requires
funds" are deleted and replaced with the following words:
"at least by 6:00 p.m. on the day before it requires
funds".
(iii)Following the Bank's annual review of this facility at the
end of 1996, this facility is extended to 30 November 1997.
(iv) The paragraph entitled "Line Fee" is deleted and replaced
with the following:
"Line Fee: 0.10% per annum on the Limit, payable quarterly
in advance on each 15 March, June, September
and December".
5.2 Negative Pledge Agreement dated 29 September, 1995 between Case Credit
Australia and the Bank
(a) The definition of "Third Party Receivables" on page 5 of the
Negative Pledge Agreement is deleted and replaced with the
following:
""Third Party Receivables" means receivables owing to the
Customer by any person other than a Related Body Corporate
excluding any component of such receivable that comprises
unearned finance charges and any provision for bad or
doubtful debts".
(b) In paragraph (?) of the definition of "Permitted Security
Interest" the words, "$100,000 in aggregate" are deleted and
replaced with the following words," "$10,000,000 in
aggregate".
(c) In clause 4.2 "General Undertakings" on page 8 and 9 of
the Negative Pledge Agreement, clause 4.2(d) is deleted and
replaced with the following new clause 4.2(d):-
"(d) net, without first obtaining the Bank's prior written
consent (such consent not to be unreasonably withheld),
to apply any funds available to it under the Facility
for the acquisition of Third Party Receivables where
the debtor and/or the equipment to which the Third
Party Receivables relate are outside Australia except
where the total of the non-Australian Third Party
Receivables does not exceed 10% of the aggregate total
of Third Party Receivables at any time."
(d) In clause 5.1 "financial undertakings" on page 9 of the
Negative Pledge Agreement, clause 5.1(a) is deleted and
replaced with the following new clause 6.1(a):-
"(?) The ratio of Total Liabilities to Shareholders' Funds
shall not exceed ?.1 at any time;"
(e) The reference to the ratio "1.10:1" in paragraph (b) of
clause 6.1 of the Negative Pledge Agreement is deleted and
replaced with the ratio "1.05:1".
(f) Paragraphs (c) and (d) of clause 5.1 of the Negative Pledge
Agreement are deleted.
<PAGE>
-5-
(g) Clause 7.1 (g) of the Negative Pledge Agreement is deleted.
(h) Clause 7.4 of the Negative Pledge Agreement is deleted.
5.3 Guarantee and Indemnity
(a) The definition of or reference to the "Revolving Credit
Agreement" in the Guarantee and Indemnity is deleted and replaced
with the following new definition or description:-
""Case Credit Corporation Revolving Credit and Guarantee
Agreement" means a document entitled "US $1,200,000,000 Revolving
Credit and Guarantee Agreement" dated as of August 23, 1996
between Case Credit Corporation, the foreign subsidiary
borrowers, the Co-Agents and the Lead Managers named in that
document and the Chase Manhattan Bank."
(b) All references to sections 7.5 and 10 of the Revolving Credit
Agreement referred to in clause 9 of the Guarantee and Indemnity
are deleted and replaced with references to sections 8, 10 and 11
in the Case Credit Corporation Revolving Credit and Guarantee
Agreement.
6. CONDITIONS PRECEDENT
6.1 The variation of the Letter of Offer, the Negative Pledge Agreement
and the Guarantee and Indemnity contemplated by clause 5 of this deed
is subject to the condition precedent that the Bank has received the
following in form and substance reasonably satisfactory to it:
(a) the execution and delivery of this deed;
(b) a certified copy of each authority under which each party to this
deed (other than the Bank) signs and delivers this deed (or any
other document contemplated by this deed) and if the authority is
a power of attorney, evidence of its stamping (where required by
law) and its registration;
(c) certified extracts evidencing the resolutions of each party to
this deed (where relevant) (other than the Bank) approving the
entry into this deed and authorising execution, delivery and
observance of obligations under this deed; and
(d) such ancillary documents or any other information or document
(whether originals or copies) which the Bank, in its discretion,
may request or reasonably considers necessary or desirable to
examine or hold.
6.2 It is a further condition precedent to the Bank agreeing to amend the
Letter of Offer, the Negative Pledge Agreement and the Guarantee and
Indemnity, as contemplated by clause 6 of this deed, that no Event of
Default or event which with the giving of notice, lapse of time or any
determination would be an Event of Default, has occurred or would be
likely to occur.
7. REPRESENTATIONS AND WARRANTIES
7.1 The Customer repeats the representations and warranties in clause 6 of
the Negative Pledge Agreement for the benefit of the Bank.
7.2 The Guarantor repeats the representations and warranties in the
Guarantee and Indemnity for the benefit of the Bank.
7.3 The Customer acknowledges that the Bank will be entering into this
deed in reliance, inter alia, on all of these representations and
warranties.
<PAGE>
-6-
8. MISCELLANEOUS
8.1 Nothing contained in this deed abrogates, prejudices, diminishes or
otherwise adversity affects any rights, powers, remedies, obligations
or liabilities (in any case whether present, future or contingent) in
relation to any act, matter or thing done or effected or otherwise
arising in relation to a Relevant Agreement or any documents to which
the Customer and the Bank are parties before the execution of this
deed.
8.2 This deed binds each of the signatories to it even if one or more
of these persons named in this deed never executes it or that the
execution by any one or more of those persons (other than the persons
sought to be made liable under it) is or may become void or voidable.
8.3 If there is any inconsistency between the terms of this deed and any
prior communications between the Customer and the Bank, the terms of
this deed will prevail and the parties acknowledge that this deed
supersedes in all respects the terms of those prior communications.
8.4 The Customer agrees to pay to the Bank, and to indemnify and keep
indemnified the Bank against all and any costs, charges, fees,
expenses and taxes (including any lost fees or penalties) in relation
to the preparation, negotiation, settlement, attempting, enforcement
or attempted enforcement of this deed now and in the future.
8.5 Each of the covenants of this deed are severable and distinct from one
another and if at any time any one or more of the provisions of this
deed is or becomes invalid, illegal or unenforceable in any respect
under any law, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired.
8.6 This deed is governed by the laws in force in New South Wales and each
party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the courts of New South Wales and courts of appeal
from them.
8.7 This deed may consist of a number of counterparts and the counterparts
taken together constitute one and the same instrument.
<PAGE>
-7-
SCHEDULE TO LETTER OF OFFER
<TABLE>
<CAPTION>
Pricing Grid: Sr. Unsec. L T Rating Line Fee Activation Fee
Standard & Poors/Moody's
<S> <C> <C> <C>
A/A2 and above 0.07% p.a. 0.155% p.a.
A-/A3 0.08% p.a. 0.17% p.a.
BBB+/Baa1 0.10% p.a. 0.20% p.a.
BBB/Baa2 0.125% p.a. 0.25% p.a.
BBB-/Baa3 0.175% p.a. 0.275% p.a.
BB+/Ba1 0.25% p.a. 0.425% p.a.
Under BB+/Ba1 0.30% p.a. 0.575% p.a.
</TABLE>
<PAGE>
- 8 -
EXECUTED as a deed.
The common seal of CASE CREDIT AUSTRALIA PTY LIMITED was affixed in accordance)
with Its articles of association in the presence of: )
)
)
/s/ Andrew Mour )
- ------------------------------------------- )
Signature of authorised person )
)
DIRECTOR )
- ------------------------------------------- )
Office held )
)
/s/ ANDREW MOUR )
- ------------------------------------------- )
Name of authorised person )
(block letters) )
Signed, sealed and delivered for and on behalf of CASE CREDIT CORPORATION by a)
person duly authorized in that regard in the presence of: )
)
)
/s/ Frank A. Anglin )
- ------------------------------------------- )
Signature of Witness )
)
/s/ FRANK A. ANGLIN )
- ------------------------------------------- )
Name of Witness (block letters) )
Signed, sealed and delivered by )
)
for and on behalf of NATIONAL AUSTRALIA BANK LIMITED under power of attorney )
registered book 5834 number 549 in the presence of: )
)
)
/s/ D. Muter )
- ------------------------------------------- )
Signature of witness )
)
/s/ DARREN MUTER )
- ------------------------------------------- )
Name of witness (block letters) )
[CORPORATE SEAL APPEARS HERE]
/s/ Robert A. Wegner
- -------------------------------------------
Signature of authorised person
DIRECTOR
- -------------------------------------------
Office held
/s/ ROBERT A. WEGNER
- -------------------------------------------
Name of authorised person
(block letters)
/s/ Robert A. Wegner
- -------------------------------------------
Signature of authorised person
VICE PRESIDENT
- -------------------------------------------
Office held
/s/ ROBERT A. WEGNER
- -------------------------------------------
Name of authorised person (block letters)
/s/ Warren James Shaw
- -------------------------------------------
By executing this deed the attorney states that the attorney has received no
notice of revocation of the power of attorney
<PAGE>
EXHIBIT 10(i)
CASE CORPORATION EQUITY INCENTIVE PLAN
(As Amended and Restated, Effective January 1, 1996,
including amendments through December 11, 1996)
1. Purpose
The purpose of the Plan is to promote the long-term success of the Case
Companies for the benefit of the Corporation's stockholders by encouraging its
officers and key employees to have meaningful investments in the Corporation so
that, as stockholders themselves, those individuals will be more likely to
represent the views and interests of other stockholders and by providing
incentives to such officers and key employees for continued service. The
Corporation believes that the possibility of participation under the Plan will
provide this group of officers and employees an incentive to perform more
effectively and will assist the Corporation and the Case Companies in attracting
and retaining people of outstanding training, experience and ability.
2. Definitions
"Authorized Plan Shares" shall mean the shares of capital stock of the
Corporation available for issuance under the Plan as set forth in Section 6.A.
"Award" means an award or grant made to a Participant under Section 8.
"Award Agreement" means the agreement provided in connection with an Award
under Section 12.
"Award Date" means the date that an Award is made, as specified in an Award
Agreement.
"Board of Directors" means the Board of Directors of the Corporation.
"Case Company" means the Corporation, any stock corporation of which a
majority of the capital stock generally entitled to vote for directors is owned
directly or indirectly by the Corporation, and any other company designated as
such by the Committee, but only during the period of such ownership or
designation.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"Corporation" means Case Corporation, a Delaware corporation.
"Committee" means the Compensation Committee of the Board of Directors, or
any sub-committee thereof, or any successor committee thereto.
<PAGE>
"Common Stock" means the Corporation's common stock, par value $0.01 per
share.
"Covered Employees" shall have the meaning specified in Section 162(m)(3)
of the Code.
"Dividend Equivalent" means an amount equal to the amount of the cash
dividends that are declared and become payable after the Award Date for the
Award to which it relates and on or before the Settlement Date for such Award.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" on any date means the average of the highest and the
lowest sales prices of a share of Common Stock on the Composite Tape for such
date, as reported by the National Quotation Bureau Incorporated; provided that
if (i) no sales of Common Stock are included on the Composite Tape for such
date, or (ii) in the opinion of the Committee, the sales of Common Stock on such
date are insufficient to constitute a representative market, then the Fair
Market Value of a share of Common Stock on such date shall be deemed to be the
average of the highest and lowest prices of a share of Common Stock as reported
on said Composite Tape for the next preceding day on which (x) sales of Common
Stock are included and (y) the circumstances described in clause (ii) do not
exist.
"ISO" means any Stock Option designated in an Award Agreement as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an ISO.
"Option Price" means the purchase price of one share of Common Stock under
a Stock Option.
"Participant" means an employee or officer of a Case Company who has been
selected by the Committee to receive an Award under the Plan.
"Performance Unit" means an Award denominated in cash, the amount of which
may be based on performance of the Participant or of Case Corporation or of any
subsidiary or division thereof.
"Plan" means this Case Corporation Equity Incentive Plan, as amended from
time to time.
"Reload Stock Option" means a Stock Option (i) that is awarded, either
automatically in accordance with the terms of an Award Agreement in which one or
more other Awards are made or by separate Award, upon the exercise of a Stock
Option granted under this Plan or otherwise where the option price is paid by
the option holder by delivery of shares of Common Stock on the Settlement Date
for such exercise and (ii) that entitles such holder to purchase the number of
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shares so delivered for an Option Price equal to the Fair Market Value of a
share of Common Stock on such Settlement Date.
"Restricted Stock" means shares of Common Stock subject to restrictions and
conditions pursuant to Section 8.C.
"Rule 16b-3" means Regulation (S) 240.16b-3 of the rules and regulations of
the Securities and Exchange Commission promulgated under the Exchange Act, as
such Rule became effective May 1, 1991, as it may be amended after December 8,
1993.
"Second Preferred Stock" shall mean the Cumulative Convertible Second
Preferred Stock of the Corporation, par value $0.01 per share.
"Settlement Date" means, (i) with respect to any Stock Option that has been
exercised in whole or in part, the date or dates upon which shares of Common
Stock are to be delivered to the Participant and the Option Price therefor paid,
(ii) with respect to any SARs that have been exercised, the date or dates upon
which a cash payment is to be made to the Participant, or in the case of SARs
that are to be settled in shares of Common Stock, the date or dates upon which
such shares are to be delivered to the Participant, (iii) with respect to
Performance Units, the date or dates upon which cash or shares of Common Stock
are to be delivered to the Participant, (iv) with respect to Dividend
Equivalents, the date upon which payment thereof is to be made, and (v) with
respect to Stock Equivalent Units, the date upon which payment thereof is to be
made, in each case determined in accordance with the terms of the Award
Agreement under which any such Award was made.
"Stock Appreciation Right" or "SAR" means an Award that entitles the
Participant to receive on the Settlement Date an amount equal to the excess of
(i) the Fair Market Value of a share of Common Stock on the date of
exercise of the SAR over
(ii) the Fair Market Value of one share of Common Stock on the Award
Date or any other higher amount specified in the Award Agreement.
"Stock Equivalent Unit" means an Award that entitles the Participant to
receive on the Settlement Date an amount equal to the Fair Market Value of one
share of Common Stock on such date.
"Stock Option" or "Option" means any right to purchase shares of Common
Stock (including a Reload Stock Option) awarded pursuant to Section 8.A.
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<PAGE>
3. Term
The Plan shall be effective as of June 1, 1994, and shall remain in effect
through December 31, 2003. After termination of the Plan, no further Awards may
be granted other than Reload Stock Options granted in accordance with Award
Agreements existing as of December 31, 2003, but outstanding Awards shall remain
effective in accordance with their terms and the terms of the Plan.
4. Plan Administration
A. The Committee shall be responsible for administering the Plan.
(i) Composition of the Committee. The Committee shall be
comprised of two or more members of the Board of Directors, all of
whom shall be "disinterested persons" as defined in Rule 16b-3.
(ii) Powers. The Committee shall have full and exclusive
discretionary power to interpret the Plan and to determine eligibility
for benefits and to adopt such rules, regulations and guidelines for
administering the Plan as the Committee may deem necessary or proper.
Such power shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions and, subject
to Section 13, adopting modifications and amendments to the Plan or
any Award Agreement, including without limitation, any that are
necessary to comply with the laws of the countries in which the
Corporation or its affiliates operate; provided, however, no such
modification or amendment shall impair the rights of any Participant,
without his consent, in any Award previously granted under the Plan.
Notwithstanding the foregoing provisions of this paragraph, subject to
Section 13, the Chief Executive Officer of the Corporation shall have
the authority to select Award recipients and establish the terms and
conditions of such Awards within the limits of the Plan with respect
to officers and employees of the Corporation and its subsidiaries who
at the time such authority is exercised are not subject to Section
16(a) and Section 16(b) of the Exchange Act.
(iii) Delegation. The Committee may delegate to one or more of
its members or to one or more agents or advisors such non-
discretionary administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid
may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
B. The Committee may employ attorneys, consultants, accountants and
other persons, and the Committee, the Corporation and its officers and
directors shall be entitled
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<PAGE>
to rely upon the advice, opinions or valuations of any such persons. All
actions taken and all interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Participants,
the Corporation and all other interested persons. No member of the
Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan or Awards, and
all members of the Committee shall be fully protected by the Corporation,
to the fullest extent permitted by applicable law, in respect of any such
action, determination or interpretation.
5. Eligibility
Awards will be limited to persons who are officers or employees of the Case
Companies. In determining the persons to whom Awards shall be made, the
Committee shall, in its discretion, take into account the nature of the person's
duties, past and potential contributions to the success of the Case Companies
and such other factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan. A director of the Corporation or a Case
Company who is not also an officer or employee shall not be eligible to receive
an Award. A person who has received an Award or Awards may receive an
additional Award or Awards. For purposes of this Section 5, the terms
"employee" and "officer" shall also include any former employee or former
officer of a Case Company eligible to receive a replacement award as
contemplated in the third sentence of Section 8.
6. Authorized Awards; Limitations
A. Except for adjustments pursuant to Section 7, the maximum number
of shares of Common Stock that shall be available for issuance under the
Plan shall be 9,500,000 and the maximum number of shares of Second
Preferred Stock that shall be available for issuance under the Plan shall
be 40,000.
B. Determinations as to the number of Authorized Plan Shares that
remain available for issuance under the Plan shall be made in accordance
with such rules or procedures as the Committee shall determine from time to
time, which shall be consistent with the requirements of Rule 16b-3 and
such interpretations thereof as have been made, or may be made from time to
time, by courts of competent jurisdiction or the Securities and Exchange
Commission or the staff of such Commission to the end that all persons
subject to Section 16 of the Exchange Act shall be entitled to the fullest
extent possible to the exemption provided by Rule 16b-3.
If an Award expires unexercised or is forfeited, surrendered,
canceled, terminated or settled in cash in lieu of Common Stock, the shares
of Common Stock or Second Preferred Stock that were theretofore subject (or
potentially subject) to such Award may again be made subject to an Award
Agreement; provided, however, that any such shares subject to a forfeited
Award shall not again be made subject to an Award Agreement to
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<PAGE>
Participants who are subject to Section 16 of the Exchange Act if any
Participant received, directly or indirectly, any of the benefits of
ownership of the securities of the Corporation underlying such Award,
including without limitation, the receipt of dividend payments but
excluding (i) the right to vote such shares and (ii) the accumulation of
dividends or Dividend Equivalents which also are forfeited.
C. Common Stock and Second Preferred Stock that may be issued under
the Plan may be either authorized and unissued shares or issued shares that
have been reacquired by the Corporation and that are being held as treasury
shares. No fractional shares of Common Stock or Second Preferred Stock
shall be issued under the Plan; provided, however, that cash, in an amount
equal to the Fair Market Value of a fractional share of Common Stock or
Second Preferred Stock as of the Settlement Date of the Award, shall be
paid in lieu of any fractional shares in the settlement of Awards payable
in shares of Common Stock or Second Preferred Stock.
D. In no event shall the aggregate number of shares of Common Stock
underlying Options and SARs awarded to any one Participant during any four-
consecutive-year period exceed 1,000,000 shares.
7. Adjustments and Reorganization
The Committee may make such adjustments to Awards granted under the Plan
(including the terms, exercise price and otherwise) as it deems appropriate in
the event of changes that impact the Corporation, the Corporation's share price,
or share status, provided that any such actions are consistently and equitably
applied to all affected Participants; provided, however, that, notwithstanding
any other provisions hereof, insofar as any Award is subject to performance
goals established to qualify payments thereunder as "performance-based
compensation" as described in Section 162(m) of the Code, the Committee shall
have no power to adjust such Awards other than (i) negative discretion and (ii)
the power to adjust Awards for corporate transactions, in either case to the
extent permissible under regulations interpreting Code Section 162(m).
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, extraordinary
dividend, spin-off, split-up, rights offering, share combination, or other
change in the corporate structure of the Corporation affecting the Common Stock,
the number and kind of shares that may be delivered under the Plan shall be
subject to such equitable adjustment as the Committee, in its sole discretion,
may deem appropriate in order to preserve the benefits or potential benefits to
be made available under the Plan, and the number and kind and price of shares
subject to outstanding Awards and any other terms of outstanding Awards shall be
subject to such equitable adjustment as the Committee, in its sole discretion,
may deem appropriate in order to prevent dilution or enlargement of outstanding
Awards.
8. Awards
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<PAGE>
The Committee shall determine the type and amount of any Award to be made
to any Participant; provided, however, that, except as provided in paragraph G,
no Awards granted pursuant to this Plan shall vest in less than six months after
the date the Award is granted. Awards may be granted singly, in combination, or
in tandem. Awards may also be made in combination or in tandem with, in
replacement of, as alternatives to, or as the payment form for, grants or rights
under any other employee benefit or compensation plan of the Case Companies,
including any such employee benefit or compensation plan of any acquired entity.
A. Stock Options
(i) Grants. Stock Options (including Reload Stock Options)
granted under this Plan may be any of the following:
(a) an ISO; or
(b) a Non-Qualified Stock Option.
The Committee may grant any Participant one or more ISOs, Non-
Qualified Stock Options, or both, in each case with or without SARs or
Reload Stock Options or any other form of Award. Stock Options
granted pursuant to this Plan shall be subject to such additional
terms, conditions, or restrictions as may be provided in the Award
Agreement relating to such Stock Option.
(ii) Option Price. The Option Price of a Stock Option shall be
not less than 100% of the Fair Market Value of a share of Common Stock
on the Award Date; provided, however, that in the case of a Stock
Option granted retroactively in tandem with or as substitution for
another Award, including for this purpose substitution of an award
designated in shares of Tenneco, Inc. common stock (a "Tenneco
Award"), the Option Price shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of such other
Award or, with respect to a Tenneco Award, shall not be lower than the
price that the Committee determines necessary to preserve the value of
the Tenneco Award on the date of substitution; and provided further
that in any case ISOs shall have a price equal to 100% of the Fair
Market Value of a share of Common Stock on the Award Date.
(iii) ISOs. Anything in this Plan to the contrary
notwithstanding, no term of this Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority
awarded under the Plan be exercised, so as to disqualify this Plan
under Section 422 of the Code, or, without the consent of the
Participants affected, to disqualify any ISO under Section 422 of the
Code.
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<PAGE>
An ISO shall not be granted to an individual who, on the date of
grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the employing Case Company or
of its parent or any subsidiary corporation.
The aggregate Fair Market Value, determined on the Award Date, of
the shares of Common Stock or other stock with respect to which one or
more ISOs (or other "incentive stock options," within the meaning of
Subsection (b) of Section 422 of the Code, under all other stock
option plans of the Participant's employing Case Company and its
parent and subsidiary corporations) granted on or after January 1,
1987, that are exercisable for the first time by the Participant
during any particular calendar year shall not exceed the $100,000
limitation imposed by Section 422(d) of the Code.
(iv) Manner of Payment of Option Price. The Option Price shall
be paid in full at the time of the exercise of the Stock Option and
may be paid in any of the following methods or combinations thereof;
(a) In the United States dollars in cash, check, bank draft
or money order payable to the order of the Corporation;
(b) By the delivery of shares of Common Stock having an
aggregate Fair Market Value on the date of such exercise equal to
the Option Price;
(c) In any other manner that the Committee shall approve,
including without limitation, any arrangement that the Committee
may establish to enable Participants to simultaneously exercise
Stock Options and sell the shares of Common Stock acquired
thereby and apply the proceeds to the payment of the Option Price
therefor.
(v) Reload Stock Options. The Committee may award Reload Stock
Options to any Participant either in combination with other Awards or
in separate Award Agreements that grant Reload Stock Options upon
exercise of outstanding stock options granted under this Plan or
otherwise.
B. Stock Appreciation Rights.
(i) Grants. The Committee may award any Participant SARs, which
shall be subject to such additional terms, conditions, or restrictions
as may be provided in the Award Agreement relating to such SAR Award,
including any
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limits on aggregate appreciation. SARs may be settled in Common Stock
or cash or both.
(ii) Award Price. The Award Price per share of Common Stock of a
SAR shall be fixed in the Award Agreement and shall be not less than
100% of the Fair Market Value of a share of Common Stock on the date
of the Award; provided, however, that in the case of a SAR awarded
retroactively in tandem with or as a substitution for another Award,
the Award Price per share of a SAR shall be not less than 100% of the
Fair Market Value of a share of Common Stock on the date of such other
Award.
(iii) Distribution of SARs. SARs shall be exercisable in
accordance with the conditions and procedures set out in the Award
Agreement relating to such SAR Award.
C. Restricted Stock. The Committee may award Restricted Stock to any
Participant. Awards of Restricted Stock shall be subject to such
conditions and restrictions as are established by the Committee and set
forth in the Award Agreement, which may include, but are not limited to,
continued service with the Corporation, achievement of specific business
objectives, and other measurements of individual or business unit or
Corporation performance.
In addition to Awards of Restricted Stock described in the preceding
paragraph, the Committee may make Awards of restricted Second Preferred
Stock ("Restricted Preferred Stock"). All provisions of this Plan that
apply to Awards of Restricted Stock shall also apply to Awards of
Restricted Preferred Stock.
D. Stock Equivalent Units. The Committee may award Stock Equivalent
Units to any Participant. All or part of any Stock Equivalent Units Award
may be subject to conditions and restrictions established by the Committee,
and set forth in the Award Agreement, which may include, but are not
limited to, continued service with the Corporation, achievement of specific
business objectives, and other measurements of individual or business unit
or Corporation performance that may include but shall not be limited to,
earnings per share, net profits, total stockholder return, cash flow,
return on stockholders' equity, and cumulative return on net assets
employed.
E. Dividend Equivalents. The Committee may provide in any Award
Agreement in which Stock Equivalent Units are awarded that such Stock
Equivalent Units may accrue Dividend Equivalents. In lieu of awarding
Dividend Equivalents, the Committee may provide for automatic awards of
additional Stock Equivalent Units on each date that cash dividends are paid
on the Common Stock in an amount equal to (i) the product of the dividend
per share on the Common Stock times the total number of Stock
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Equivalent Units then held by the Participant, divided by (ii) the Fair
Market Value of the Common Stock on the dividend payment date.
F. Performance Units. Performance Units shall be based on attainment
over a specified period of individual performance targets or on other
parameters that may include, but shall not be limited to, earnings per
share, total stockholder return, cash flow, return on stockholders' equity,
and cumulative return on net assets employed. Performance Units may be
settled in Common Stock or cash or both.
G. The Committee may also, in its sole discretion, shorten or
terminate the restricted period of waive any other conditions for the lapse
of restrictions with respect to all or any portion of any Award.
Notwithstanding the foregoing, all restricted periods shall terminate and
the Awards shall be fully vested with respect to any Participant upon the
Participant's (a) retirement at age 65 or older, (b) with respect to the
service recognition award granted July 20, 1994, retirement at age 55 or
older, (c) death, or (d) Total Disability, coincident with termination of
employment with the Corporation; provided that the application of this
sentence shall not cause an Award to vest in less than six months after the
date the Award is granted. For purposes of this Section 8:
"Total Disability" means the permanent inability of the Participant,
which is a result of accident or sickness, to perform such Participant's
occupation or employment for which the Participant is suited by reason of
the Participant's previous training, education and experience and which
results in the termination of the Participant's employment with any Case
Company.
H. Change in Control. Notwithstanding the foregoing provisions of
this Section 8, to the extent provided by the Committee at the time of an
Award or thereafter, stock options and restricted stock awards which have
been outstanding for a period of at least six months shall become fully
vested if the Participant's employment is terminated by the Corporation for
reasons other than cause during the 24 month period following a Change in
Control of the Corporation. For purposes of this paragraph H, the term
"Change in Control" means a change in the beneficial ownership of the
Corporation's voting stock or a change in the composition of the
Corporation's Board of Directors which occurs as follows:
(i) any "person" (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) other than:
(a) a trustee or other fiduciary of securities held under an
employee benefit plan of the Corporation;
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(b) a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same
proportions as their ownership of the Corporation; or
(c) with respect to any Participant, any person in which
such Participant has a substantial equity interest;
is or becomes a beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of stock of
the Corporation representing 25% or more of the total voting power of
the Corporation's then outstanding stock;
(ii) a tender offer is made for the stock of the Corporation by a
person other than a person described in subparagraph (i)(a), (b) or
(c), and one of the following occurs:
(a) the person making the offer owns or has accepted for
payment stock of the Corporation representing 25% or more of the
total voting power of the Corporation's stock; or
(b) three business days before the offer is to terminate
(unless the offer is withdrawn first) such person could own, by
the terms of the offer plus any shares owned by such person,
stock representing 50% or more of the total voting power of the
Corporation's outstanding stock when the offer terminates;
(iii) during any period of two consecutive years there shall
cease to be a majority of the Corporation's Board of Directors
comprised as follows: individuals who at the beginning of such period
constitute the Board of Directors and any new director(s) whose
election by the Board of Directors or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved; or
(iv) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other company other than:
(a) such a merger or consolidation which would result in the
Corporation's voting stock outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting stock of the surviving entity) more
than 70% of the combined voting
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power of the Corporation's or such surviving entity's outstanding
voting stock immediately after such merger or consolidation; or
(b) such a merger or consolidation which would result in the
directors of the Corporation who were directors immediately prior
thereto continuing to constitute at least 50% of the directors of
the surviving entity immediately after such merger or
consolidation.
For purposes of this paragraph (iv), "surviving entity" shall mean
only an entity in which all of the Corporation's stockholders become
stockholders by the terms of such merger or consolidation, and the
phrase "directors of the Corporation who were directors immediately
prior thereto" shall not include:
(a) any director of the Corporation who was designated by a
person who has entered into an agreement with the Corporation to
effect a transaction described in this paragraph or in paragraph
(i) next above; or
(b) any director who was not a director at the beginning of
the 24-consecutive-month period preceding the date of such merger
or consolidation
unless his election by the Board of Directors or nomination for
election by the Corporation's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who
were directors before the beginning of such period.
9. Dividends
The Committee may provide in the appropriate Award Agreement that dividends
on Restricted Stock may be paid currently in cash or credited to a Participant's
account for subsequent distribution as determined by the Committee. The Award
Agreement may provide for the reinvestment of dividends paid on Restricted Stock
in shares of Common Stock.
10. Deferrals and Settlements
Settlement of Awards may be in the form of cash, Common Stock, other
Awards, or in combinations thereof as the Committee shall determine, and with
such other restrictions as it may impose. Subject to paragraph 4.A.(ii), the
Committee may also require or permit Participants to defer the issuance or
vesting of shares or the settlement of Awards under such rules and procedures as
it may establish under the Plan. The Committee may also provide that deferred
settlements include the payment of, or crediting of interest on, the deferral
amounts or the payment or crediting of Dividend Equivalents on deferred
settlements denominated in shares.
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11. Transferability and Beneficiaries
No Awards under the Plan shall be assignable, alienable, saleable or
otherwise transferable other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined by
the Code) or Title I of the Employee Retirement Income Security Act or the rules
thereunder unless otherwise determined by the Committee; provided, however,
unless otherwise provided by the Committee, a Participant who is an executive
officer of the Corporation (as designated by the Corporation from time to time)
may transfer a Non-Qualified Stock Option to or for the benefit of a member or
members of such Participant's immediate family (including, without limitation to
a trust for the benefit of members of such Participant's immediate family),
subject to such limitations as the Committee may determine.
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12. Award Agreements
Awards under the Plan shall be evidenced by Award Agreements that set forth
the details, conditions and limitations for each Award, which may include the
term of an Award (except that (i) except as provided in Section 8.G, no Award
shall vest in less than six months after the date the Award is granted and (ii)
in no event shall the term of any ISO exceed a period of ten years from the date
of its grant), the provisions applicable in the event the Participant's
employment terminates, and the Corporation's authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind any Award, subject to the
terms of the Plan.
13. Amendments: Compliance with Rule 16b-3
The Committee may suspend, terminate, or amend the Plan as it deems
necessary or appropriate to better achieve the purposes of the Plan, except
that, without the approval of the Corporation's stockholders, no such amendment
shall be made for which stockholder approval is necessary to comply with any
applicable tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief under Section
16(b) of the Exchange Act, and provided that no such suspension, termination or
amendment shall impair the rights of any Participant, without his consent, in
any Award previously granted under the Plan.
14. Tax Withholding
The Corporation shall have the right to (i) make deductions from any
settlement of an Award made under the Plan, including the delivery or vesting of
shares, or require shares or cash or both be withheld from any Award, in each
case in an amount sufficient to satisfy withholding of any federal, state or
local taxes required by law, or (ii) take such other action as may be necessary
or appropriate to satisfy any such withholding obligations. The Committee may
determine the manner in which such tax withholding may be satisfied, and may
permit shares of Common Stock (rounded up to the next whole number) to be used
to satisfy required tax withholding based on the Fair Market Value of any such
shares of Common Stock, as of the Settlement Date of the applicable Award.
15. Other Corporation Benefit and Compensation Programs
Unless otherwise specifically determined by the Committee, settlements of
Awards received by a Participant under the Plan shall not be deemed a part of
the Participant's regular, recurring compensation for purposes of calculating
payments or benefits from any Corporation benefit plan, severance program or
severance pay law of any country. Further, the Corporation may adopt other
compensation programs, plans or arrangements as it deems appropriate or
necessary.
-14-
<PAGE>
16. Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or a separate fund or
funds. The Plan shall not establish any fiduciary relationship between the
Corporation and any Participant or other person. To the extent any person holds
any rights by virtue of a grant awarded under the Plan, such right (unless
otherwise determined by the Committee) shall be not greater than the right of an
unsecured general creditor of the Corporation.
17. Future Rights
No person shall have any claim or right to be granted an Award under the
Plan, and no Participant shall have any right under the Plan to be retained in
the employment of the Corporation or its affiliates.
18. Governing Law
The validity, construction and effect of the Plan, and any actions taken or
relating to the Plan, shall be determined in accordance with the laws of the
State of Delaware and applicable federal law.
19. Successors and Assigns
The Plan shall be binding on all successors and assigns of a Participant,
including, without limitation, the estate of such Participant and the executor,
administrator or trustee of such estate, or any receiver or trustee in
bankruptcy or representative of the Participant's creditors.
20. Rights as a Stockholder
Except as otherwise provided in any Award Agreement, a Participant shall
have no rights as a stockholder of the Corporation until he or she becomes the
holder of record of Common Stock or Second Preferred Stock.
-15-
<PAGE>
EXHIBIT 11
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(MILLIONS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994(A)
---------- ---------- ----------
<S> <C> <C> <C>
COMPUTATIONS FOR STATEMENTS OF INCOME
Primary earnings per share of common
stock (average shares outstanding):
Income before cumulative effect of
changes in accounting principles and
extraordinary loss.................... $ 349 $ 346 $ 163
Cumulative effect of changes in
accounting principles................. -- (9) (29)
Extraordinary loss..................... (33) -- (5)
---------- ---------- ----------
Net income............................. 316 337 129
Preferred stock dividends.............. 7 7 7
---------- ---------- ----------
Net income to common................... $ 309 $ 330 $ 122
========== ========== ==========
Average shares of common stock
outstanding........................... 72,196,920 70,553,376 70,069,447
Incremental common shares applicable to
restricted common stock based on the
common stock daily average market
price during the period............... 188,547 109,866 --
Incremental common shares applicable to
common stock options based on the
common stock daily average market
price during the period............... 1,645,138 1,101,489 25,701
---------- ---------- ----------
Average common shares, as adjusted..... 74,030,605 71,764,731 70,095,148
========== ========== ==========
Earnings per share of common stock
(including common stock equivalents):
Net income after preferred stock
dividends and before cumulative
effect of changes in accounting
principles and extraordinary loss... $ 4.61 $ 4.72 $ 2.22
Cumulative effect of changes in
accounting principles............... -- (0.12) (0.41)
Extraordinary loss................... (0.44) -- (0.07)
---------- ---------- ----------
Net earnings per share of common
stock............................... $ 4.17 $ 4.60 $ 1.74
========== ========== ==========
Fully diluted earnings per share:
Average shares of common stock
outstanding........................... 72,196,920 70,553,376 70,069,447
Incremental common shares applicable to
restricted common stock based on the
more dilutive of the common stock
ending or average market price during
the period............................ 195,831 152,350 --
Incremental common shares applicable to
common stock options based on the more
dilutive of the common stock ending or
average market price during the
period................................ 1,801,893 1,704,203 109,519
Average common shares issuable assuming
conversion of the Series A Cumulative
Convertible Preferred Stock and the
Cumulative Convertible Second
Preferred Stock....................... 3,488,711 3,483,354 3,494,432
---------- ---------- ----------
Average common shares assuming full
dilution.............................. 77,683,355 75,893,283 73,673,398
========== ========== ==========
Fully diluted earnings per average
share of common stock, assuming
conversion of all applicable
securities:
Net income before cumulative effect
of changes in accounting principles
and extraordinary loss.............. $ 4.48 $ 4.56 $ 2.21
Cumulative effect of changes in
accounting principles............... -- (0.12) (0.39)
Extraordinary loss................... (0.42) -- (0.07)
---------- ---------- ----------
Net earnings per share of common
stock............................... $ 4.06 $ 4.44 $ 1.75
========== ========== ==========
</TABLE>
- -------
(a) The 1994 presentation is on a pro forma basis. For all periods prior to
June 23, 1994, pro forma earnings per common share is computed based upon
historical income and assumes 70 million shares outstanding and payment of
preferred stock dividends. For more information on the pro forma adjustments,
see Note 16 to the Case Financial Statements.
<PAGE>
EXHIBIT 12
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
AND
THE FARM AND CONSTRUCTION EQUIPMENT BUSINESS
OF TENNECO INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net Income................................................... $316 $337 $131
Add:
Interest................................................... 160 174 160
Amortization of capitalized debt expense................... 4 6 --
Portion of rentals representative of interest factor....... 12 12 11
Income tax expense and other taxes on income............... 185 81 93
Fixed charges of unconsolidated subsidiaries............... 3 2 2
Extraordinary loss (net of taxes).......................... 33 -- 5
Cumulative effect of change in accounting principles (net
of taxes)................................................. -- 9 29
---- ---- ----
Earnings as defined...................................... $713 $621 $431
==== ==== ====
Interest..................................................... $160 $174 $160
Interest capitalized......................................... 1 2 3
Amortization of capitalized debt expense..................... 4 6 --
Portion of rentals representative of interest factor......... 12 12 11
Fixed charges of unconsolidated subsidiaries................. 3 2 2
---- ---- ----
Fixed charges as defined................................. $180 $196 $176
==== ==== ====
Preferred dividends:
Amount declared............................................ $ 7 $ 7 $ 3
Gross-up to pre-tax based on 35%, 19% and 36% effective
rates, respectively....................................... $ 11 $ 9 $ 5
Ratio of earnings to fixed charges and preferred dividends... 3.73x 3.03x 2.38x
==== ==== ====
</TABLE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF CASE CORPORATION
As of December 31, 1996
STATE OR OTHER OTHER NAMES(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ---------------- ----------------
A. M. Exports Limited United Kingdom None
Austoft Holdings Limited Australia None
Austoft Inc. Florida None
Austoft Industries Limited Australia None
Brahma Steyr Tractors Limited India None
Brascor Corretora de Seguros Brazil None
Participacoes e Servicos S.A.
Brastoft Maquinas E Systemas Brazil None
Agro-Industrials S.A.
C.W., Inc. North Dakota None
Case (Barbados) FSC, Ltd. Barbados None
Case Belgium N.V. Belgium None
Case Beteiligungsverwaltung GmbH Austria None
Case Bodenverdichtungsgerate Germany None
Verwaltungs GmbH
Case bor-mor Holdings, Inc. Delaware None
Case Brasil & Cia Brazil None
Case Brasil Holdings, Inc. Delaware None
Case Canada Corporation Ontario Case Canada
Case Power &
Equipment
Case Canada Equipment Corporation Delaware None
Case Canada Investments, Ltd. Alberta None
Case Canada Receivables, Inc. Alberta None
1
<PAGE>
SUBSIDIARIES OF CASE CORPORATION
As of December 31, 1996
<TABLE>
<CAPTION>
STATE OR OTHER OTHER NAME(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ------------ --------
<S> <C> <C>
Case CDC Holdings, Inc. Delaware None
Case Corporation Pty. Ltd Australia None
Case Credit Australia Pty., Ltd. Australia None
Case Credit Corporation Delaware None
Case Credit Holdings Limited Delaware None
Case Credit Insurance Agency Inc. Delaware None
Case Credit Limited United Kingdom None
Case Credit Ltd. Alberta None
Case Credit Wholesale Pty. Limited Australia None
Case Credits Limited United Kingdom None
Case Equipment Baumaschinen GmbH Germany None
Case Equipment Holdings Limited Delaware None
Case Equipment International Delaware None
Corporation
Case Equipment International Delaware None
Marketing
Case Europe S.A.R.L. France None
Case France S.A. France None
Case Germany GmbH Germany None
Case International Marketing, Inc. Delaware None
Case Irrigation Company Delaware None
Case Italy SpA Italy None
Case Licensing/Lending Company Delaware None
</TABLE>
2
<PAGE>
SUBSIDIARIES OF CASE CORPORATION
AS OF DECEMBER 31, 1996
STATE OR OTHER OTHER NAME(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ---------------- ---------------
Case Mexico, S.A. Mexico None
Case Poclain GmbH & Co. KG. German General None
Partnership
Case Receivables II Inc. Delaware None
Case Receivables, Inc. Delaware None
Case Spain S.A. Spain None
Case Steyr Landmaschinentechnik AG Austria None
Case United Kingdom Limited United Kingdom None
Case Wholesale Receivables, Inc. Delaware None
Case-Poclain Ltd. United Kingdom None
Concord, Inc. North Dakota None
Consolidated Diesel Company North Carolina General None
Partnership
Consolidated Diesel of North North Carolina None
Carolina, Inc.
Consolidated Diesel, Inc. Delaware None
David Brown Tractors (Belfast) Ltd. United Kingdom None
David Brown Tractors (Ireland) Ltd. Ireland None
David Brown Tractors (Retail) Ltd. United Kingdom None
David Brown Tractors Limited United Kingdom None
Farm One AgServices, Inc. Delaware None
Fermec Baumaschinen GmbH Germany None
Fermec Holdings Limited United Kingdom None
3
<PAGE>
SUBSIDIARIES OF CASE CORPORATION
As of December 31, 1996
<TABLE>
<CAPTION>
STATE OR OTHER OTHER NAME(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ------------ --------
<S> <C> <C>
Fermec International Limited United Kingdom None
Fermec Manufacturing Limited United Kingdom None
Fermec North America Limited United Kingdom None
Fermec S.A. France None
Fermec Trustee Limited United Kingdom None
Grand Detour Plow Company Wisconsin None
Hay & Forage Industries Kansas General None
Partnership
HFI Holdings, Inc. Delaware None
Highlyn Pty. Ltd. Australia None
International Harvester Company Delaware None
International Harvester Co. Belgium None
of Belgium N.V.
International Harvester Co. of United Kingdom None
Great Britain Limited
J. I. Case A/S Denmark None
J. I. Case Argentina, S.A. Argentina None
J. I. Case Company Limited United Kingdom None
J. I. Case Germany Holdings, Inc. Delaware None
J. I. Case International, S.A. Venezuela None
J. I. Case Leasing Corporation Wisconsin None
J. I. Case Property Company Delaware None
J. I. Case Sweden A.B. Sweden None
</TABLE>
4
<PAGE>
SUBSIDIARIES OF CASE CORPORATION
As of December 31, 1996
<TABLE>
STATE OR OTHER OTHER NAME(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ---------------- ---------------
<S> <C> <C>
J.I. Case Threshing Machine Company Wisconsin None
Jaxborough Pty. Ltd. Australia None
Kase, S.A. De C. V. Mexio None
Kestrin Pty. Ltd. Australia None
Lake Hull Pty. Ltd. Australia None
Liuzhou Case Liugong Construction China None
Equipment Company Limited
Masstock (Zambia) Limited Zambia None
Megavolt L.P. Delaware Limited None
Partnership
Poclain do Brasil S.A. Brazil None
Poclain GmbH Germany None
Poclain Limited United Kingdom None
Poclain Services North America Inc. Delaware None
PPM do Brasil Ltda. Brazil None
Pryor Foundry, Inc. Oklahoma None
Receivables Credit Corporation Alberta None
Servicios Case Mexicana, S.A. de C.V. Mexico None
Steiger Credit Canada Ltd. Saskatchewan None
Steiger Credit Company North Dakota None
Steiger International, Ltd. Guam None
Steyr Traktorem Handles GmbH Germany None
Tractorwork, Limited United Kingdom None
</TABLE>
5
<PAGE>
SUBSIDIARIES OF CASE CORPORATION
As of December 31, 1996
<TABLE>
STATE OR OTHER OTHER NAME(S)
JURISDICTION OF UNDER WHICH
INCORPORATION OR SUBSIDIARY DOES
NAME OF SUBSIDIARY ORGANIZATION BUSINESS
- ------------------ ---------------- ---------------
<S> <C> <C>
Ukrainian Agricultural Development Co. Delaware None
Universaltrac Beteiligungs GmbH Germany None
UzCaseagroleasing Uzbekistan None
Versatile Credit Pty. Ltd. Australia None
Versatile Farm Equipment Pty. Ltd. Australia None
</TABLE>
6
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-82158, 33-80775, 333-04995, 33-93298, 33-
99128, 33-83862.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FORM 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 116
<SECURITIES> 0
<RECEIVABLES> 1,699
<ALLOWANCES> 0
<INVENTORY> 988
<CURRENT-ASSETS> 3,053
<PP&E> 2,075
<DEPRECIATION> 1,068
<TOTAL-ASSETS> 6,059
<CURRENT-LIABILITIES> 2,543
<BONDS> 1,119
<COMMON> 1
77
0
<OTHER-SE> 1,903
<TOTAL-LIABILITY-AND-EQUITY> 6,059
<SALES> 5,176
<TOTAL-REVENUES> 5,409
<CGS> 3,953
<TOTAL-COSTS> 4,690
<OTHER-EXPENSES> 25
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160
<INCOME-PRETAX> 534
<INCOME-TAX> 185
<INCOME-CONTINUING> 349
<DISCONTINUED> 0
<EXTRAORDINARY> 33
<CHANGES> 0
<NET-INCOME> 316
<EPS-PRIMARY> 4.17
<EPS-DILUTED> 4.06
</TABLE>
