<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13098
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CASE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0433811
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
700 STATE STREET, RACINE, WI 53404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (414) 636-6011
----------------
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock, par value $0.01 per share: 74,272,801 shares outstanding as of
March 31, 1997.
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I--Financial Information
Case Corporation and Consolidated Subsidiaries--
Balance Sheets........................................................ 2
Statements of Income.................................................. 3
Statements of Cash Flows.............................................. 4
Statements of Changes in Stockholders' Equity......................... 5
Notes to Financial Statements......................................... 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 9
Part II--Other Information
Item 1. Legal Proceedings............................................... 16
Item 2. Changes in Securities........................................... *
Item 3. Defaults Upon Senior Securities................................. *
Item 4. Submission of Matters to a Vote of Security Holders............. *
Item 5. Other Information............................................... *
Item 6. Exhibits and Reports on Form 8-K................................ 16
</TABLE>
- --------
* No response to this item is included herein for the reason that it is
inapplicable or the answer to such item is negative.
1
<PAGE>
PART I
FINANCIAL INFORMATION
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997, AND DECEMBER 31, 1996
(IN MILLIONS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATED CASE INDUSTRIAL CASE CREDIT
---------------------- ---------------------- ----------------------
MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
--------- ------------ --------- ------------ --------- ------------
ASSETS
------
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents........... $ 104 $ 116 $ 69 $ 99 $ 35 $ 17
Accounts and notes
receivable:
Trade.................. 1,777 1,674 1,333 1,302 444 372
Affiliates............. -- -- 5 3 42 13
Other.................. 48 25 47 25 1 --
Inventories............ 1,189 988 1,189 988 -- --
Deferred income taxes.. 184 188 165 171 19 17
Prepayments and other.. 51 62 50 62 1 --
------ ------ ------ ------ ------ ------
Total current assets. 3,353 3,053 2,858 2,650 542 419
------ ------ ------ ------ ------ ------
Long-Term Receivables... 1,188 1,361 174 309 1,002 1,036
Other Assets:
Investments in joint
ventures.............. 67 63 67 63 -- --
Investment in Case
Credit................ -- -- 281 240 -- --
Goodwill and
intangibles........... 297 306 297 306 -- --
Other.................. 296 269 186 185 122 100
------ ------ ------ ------ ------ ------
Total other assets... 660 638 831 794 122 100
------ ------ ------ ------ ------ ------
Property, Plant and
Equipment, at cost..... 2,028 2,075 2,024 2,072 4 3
Accumulated
depreciation.......... (1,057) (1,068) (1,056) (1,067) (1) (1)
------ ------ ------ ------ ------ ------
Net property, plant and
equipment.............. 971 1,007 968 1,005 3 2
------ ------ ------ ------ ------ ------
Total................ $6,172 $6,059 $4,831 $4,758 $1,669 $1,557
====== ====== ====== ====== ====== ======
<CAPTION>
LIABILITIES AND EQUITY
----------------------
<S> <C> <C> <C> <C> <C> <C>
Current Liabilities:
Current maturities of
long-term debt........ $ 8 $ 9 $ 8 $ 9 $ -- $ --
Short-term debt........ 1,113 1,002 244 173 869 829
Accounts payable....... 598 578 622 564 23 30
Restructuring
liability............. 142 176 142 176 -- --
Other accrued
liabilities........... 727 778 686 735 41 43
------ ------ ------ ------ ------ ------
Total current
liabilities......... 2,588 2,543 1,702 1,657 933 902
------ ------ ------ ------ ------ ------
Long-Term Debt.......... 1,154 1,119 699 704 455 415
Other Liabilities:
Pension benefits....... 119 128 119 128 -- --
Other postretirement
benefits.............. 120 115 120 115 -- --
Other postemployment
benefits.............. 40 40 40 40 -- --
Other.................. 128 132 128 132 -- --
------ ------ ------ ------ ------ ------
Total other
liabilities......... 407 415 407 415 -- --
------ ------ ------ ------ ------ ------
Commitments and
Contingencies (Note 6)
Minority Interest....... 1 1 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 74,356,194,
outstanding,
74,272,801............ 1 1 1 1 -- --
Paid-in capital........ 1,266 1,238 1,266 1,238 219 199
Cumulative translation
adjustment............ (48) (14) (48) (14) (7) (6)
Unearned compensation
on restricted stock... (19) (9) (19) (9) -- --
Pension liability
adjustment............ (4) (4) (4) (4) -- --
Retained earnings...... 751 693 751 693 69 47
Treasury stock, 83,393
shares, at cost....... (2) (1) (2) (1) -- --
------ ------ ------ ------ ------ ------
Total stockholders'
equity.............. 1,945 1,904 1,945 1,904 281 240
------ ------ ------ ------ ------ ------
Total................ $6,172 $6,059 $4,831 $4,758 $1,669 $1,557
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Balance Sheets.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
2
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN MILLIONS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CASE
CONSOLIDATED INDUSTRIAL CASE CREDIT
------------- ------------- --------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
------------- ------------- --------------
1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales......................... $1,176 $1,105 $1,176 $1,105 $ -- $ --
Interest income and other......... 56 66 10 16 66 66
------ ------ ------ ------ ------ ------
1,232 1,171 1,186 1,121 66 66
Costs and Expenses:
Cost of goods sold................ 910 844 910 844 -- --
Selling, general and
administrative................... 134 119 145 128 8 7
Research, development and
engineering...................... 46 45 46 45 -- --
Interest expense.................. 39 40 18 23 22 17
Other, net........................ 8 4 4 4 4 --
------ ------ ------ ------ ------ ------
Income before taxes and
extraordinary loss................ 95 119 63 77 32 42
Income tax provision............... 31 44 21 28 10 16
------ ------ ------ ------ ------ ------
64 75 42 49 22 26
Equity in income--Case Credit...... -- -- 22 26 -- --
------ ------ ------ ------ ------ ------
Income before extraordinary loss... 64 75 64 75 22 26
Extraordinary loss................. -- (22) -- (22) -- --
------ ------ ------ ------ ------ ------
Net income......................... $ 64 $ 53 $ 64 $ 53 $ 22 $ 26
====== ====== ====== ====== ====== ======
Preferred stock dividends.......... 2 2
------ ------
Net income to common............... $ 62 $ 51
====== ======
Per share data:
Primary earnings per share of
common stock..................... $ 0.83 $ 0.70
====== ======
Fully diluted earnings per share
of common stock.................. $ 0.82 $ 0.69
====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Income.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
3
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
CASE
CONSOLIDATED INDUSTRIAL CASE CREDIT
-------------- -------------- --------------
THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31,
-------------- -------------- --------------
1997 1996 1997 1996 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income.................... $ 64 $ 53 $ 64 $ 53 $ 22 $ 26
Adjustments to reconcile net
income to net cash provided
(used) by
operating activities--
Depreciation and
amortization.............. 40 30 35 30 5 --
Deferred income tax expense
(benefit)................. 10 (3) 12 (3) (2) --
(Gain) loss on disposal of
fixed assets.............. (2) 2 (2) 2 -- --
Extraordinary loss, after
tax....................... -- 22 -- 22 -- --
Cash paid for
restructuring............. (24) (18) (24) (18) -- --
Undistributed (earnings)
loss of unconsolidated
subsidiaries.............. (7) 1 (29) (7) -- --
Changes in components of
working capital--
(Increase) decrease in
receivables............ (173) (209) (99) (225) (105) 27
(Increase) decrease in
inventories............ (229) (164) (229) (164) -- --
(Increase) decrease in
prepayments and other
current assets......... 10 (7) 11 (9) (1) 2
Increase (decrease) in
payables............... 47 44 85 56 (8) (23)
Increase (decrease) in
accrued liabilities.... (39) (8) (38) (5) (1) (3)
(Increase) decrease in
long-term receivables..... 166 180 132 132 31 45
Increase (decrease) in
other liabilities......... 5 5 5 5 -- --
Other, net................. (31) 33 (3) (2) (24) 40
------ ------ ------ ------ ------ ------
Net cash provided (used) by
operating activities...... (163) (39) (80) (133) (83) 114
------ ------ ------ ------ ------ ------
Investing activities:
Proceeds from sale of
businesses and assets........ 7 -- 7 -- -- --
Expenditures for property,
plant and equipment.......... (18) (15) (17) (15) (1) --
Acquisitions and investments.. (8) (17) (8) (17) -- --
------ ------ ------ ------ ------ ------
Net cash provided (used) by
investing activities...... (19) (32) (18) (32) (1) --
------ ------ ------ ------ ------ ------
Financing activities:
Proceeds from issuance of
long-term debt............... -- 500 -- 300 -- 200
Payment of long-term debt..... (2) (353) (2) (353) -- --
Net increase (decrease) in
short-term debt and revolving
credit
facilities................... 163 (161) 81 136 82 (297)
Capital contributions......... -- -- (20) -- 20 --
Proceeds from issuance of
common stock................. 13 30 13 30 -- --
Dividends paid (common and
preferred)................... (5) (5) (5) (5) -- (20)
Other, net.................... 2 (1) 2 (1) -- --
------ ------ ------ ------ ------ ------
Net cash provided (used) by
financing activities...... 171 10 69 107 102 (117)
------ ------ ------ ------ ------ ------
Effect of foreign exchange rate
changes on cash and cash
equivalents................... (1) -- (1) -- -- --
------ ------ ------ ------ ------ ------
Increase (decrease) in cash and
cash equivalents.............. $ (12) $ (61) $ (30) $ (58) $ 18 $ (3)
Cash and cash equivalents,
beginning of period........... 116 132 99 117 17 15
------ ------ ------ ------ ------ ------
Cash and cash equivalents, end
of period..................... $ 104 $ 71 $ 69 $ 59 $ 35 $ 12
====== ====== ====== ====== ====== ======
Cash paid during the period for
interest...................... $ 54 $ 53 $ 28 $ 38 $ 26 $ 15
====== ====== ====== ====== ====== ======
Cash paid during the period for
taxes......................... $ 31 $ 27 $ 28 $ 3 $ 3 $ 24
====== ====== ====== ====== ====== ======
</TABLE>
The accompanying notes to financial statements are an integral part of these
Statements of Cash Flows.
Reference is made to Note 1 for definitions of "Case Industrial" and "Case
Credit."
4
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE PENSION
COMMON PAID-IN TRANSLATION UNEARNED LIABILITY RETAINED TREASURY
STOCK CAPITAL ADJUSTMENT COMPENSATION ADJUSTMENT EARNINGS STOCK TOTAL
------ ------- ----------- ------------ ---------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
Net income............. -- -- -- -- -- 64 -- 64
Dividends declared..... -- -- -- -- -- (6) -- (6)
Translation adjustment. -- -- (34) -- -- -- -- (34)
Capital contributions
on stock issuance..... -- 17 -- -- -- -- -- 17
Recognition of
compensation on
restricted stock...... -- -- -- 1 -- -- -- 1
Issuance of restricted
stock................. -- 11 (11) -- -- -- --
Acquisition of treasury
stock................. -- -- -- -- -- -- (1) (1)
--- ------ ---- ---- --- ---- --- ------
BALANCE, MARCH 31, 1997. $ 1 $1,266 $(48) $(19) $(4) $751 $(2) $1,945
=== ====== ==== ==== === ==== === ======
</TABLE>
The accompanying notes to financial statements are an integral part of
these Statements of Changes in Stockholders' Equity.
5
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying financial statements reflect the consolidated results of
Case Corporation ("Case" or the "Company") and also include, on a separate and
supplemental basis, the combination of Case's industrial companies and credit
companies as follows:
Case Industrial -- The financial information captioned "Case Industrial"
reflects the consolidation of all majority-owned subsidiaries
except for the wholly owned retail credit subsidiaries. The
credit operations are included on an equity basis.
Case Credit -- The financial information captioned "Case Credit" reflects
Case's wholly owned retail credit subsidiaries.
All significant intercompany transactions, including activity within and
between Case Industrial and Case Credit, have been eliminated.
In the opinion of management, the accompanying unaudited financial
statements of Case Corporation and Consolidated Subsidiaries contain all
adjustments which are of a normal recurring nature necessary to present fairly
the financial position as of March 31, 1997, and the results of operations,
changes in stockholders' equity and cash flows for the periods indicated.
Interim financial results are not necessarily indicative of operating results
for an entire year.
Certain reclassifications have been made to conform the prior years'
financial statements to the 1997 presentation.
(2) 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.
(3) 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>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials..................................... $ 211 $175
Work-in-process................................... 159 147
Finished goods.................................... 819 666
------ ----
Total inventories.............................. $1,189 $988
====== ====
</TABLE>
6
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) ASSET-BACKED SECURITIZATIONS
In the first quarter of 1997, limited-purpose business trusts organized by
Case Credit issued $830 million of asset-backed securities to outside
investors, of which $180 million was issued pursuant to a private Canadian
placement. Case Credit has sold $502 million of U.S. and Canadian retail notes
to the trusts in connection with these issuances. The remaining $328 million
of retail notes will be sold to the trusts as receivables are acquired. The
proceeds from the sale of retail notes were used to repay outstanding debt and
to finance additional receivables. In the first quarter of 1996, limited-
purpose business trusts organized by Case Credit issued asset-backed
securities to outside investors totaling $625 million, selling $484 million of
retail notes in connection with these issuances.
(5) INCOME TAXES
On a consolidated basis, the Company's first quarter effective income tax
rate of 33% was slightly lower than the U.S. statutory tax rate of 35%
primarily due to reductions in the tax valuation reserves in certain foreign
jurisdictions, research and development tax credits and recognition of tax
benefits from the Company's foreign sales corporation, partially offset by
state income taxes and foreign income taxed at different rates. In the first
quarter of 1996, the effective tax rate of 37% was slightly higher than the
U.S. statutory tax rate primarily due to state income taxes and foreign income
taxed at different rates, partially offset by a reduction in the tax valuation
reserve in certain foreign jurisdictions.
(6) COMMITMENTS AND CONTINGENCIES
Environmental
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.
Case has received and from time to time receives inquiries and/or notices of
potential liability at multiple sites that are the subject of remedial
activities under Federal or state environmental laws and 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. Based
upon information currently available, management is of the opinion that any
such potential liability or remediation costs 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.
7
<PAGE>
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
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.
(7) EARNINGS PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- ---------
<S> <C> <C>
Earnings per average share of Common Stock (shares in
millions):
Primary
Net earnings after preferred stock dividends and before
extraordinary loss..................................... $ 0.83 $ 1.00
Extraordinary loss...................................... -- (0.30)
--------- ---------
Net earnings per share of common stock.................. $ 0.83 $ 0.70
========= =========
Average common and common equivalent shares outstanding. 75 73
Fully Diluted
Net earnings before extraordinary loss.................. $ 0.82 $ 0.98
Extraordinary loss...................................... -- (0.29)
--------- ---------
Net earnings per share of common stock.................. $ 0.82 $ 0.69
========= =========
Average common and common equivalent shares outstanding. 79 77
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Case
will adopt SFAS No. 128 effective for the year ending December 31, 1997. The
pro forma impact of adopting SFAS No. 128 for the three months ended March 31,
1997 and 1996, is as follows:
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- ---------
<S> <C> <C>
Pro forma earnings per average share of Common Stock
(shares in millions):
Basic
Net earnings after preferred stock dividends and before
extraordinary loss..................................... $ 0.85 $ 1.03
Extraordinary loss...................................... -- (0.30)
--------- ---------
Net earnings per share of common stock.................. $ 0.85 $ 0.73
========= =========
Average common shares outstanding....................... 73 71
Diluted
Net earnings before extraordinary loss.................. $ 0.82 $ 0.98
Extraordinary loss...................................... -- (0.29)
--------- ---------
Net earnings per share of common stock.................. $ 0.82 $ 0.69
========= =========
Adjusted average common shares outstanding.............. 79 77
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
First Quarter 1997 vs. First Quarter 1996
EARNINGS
The Company recorded net income of $64 million for the first quarter of 1997,
up 21% or $11 million over net income of $53 million for the first quarter of
1996. Primary earnings per share for the first quarter of 1997 was $.83 per
share compared to $.70 per share in the same quarter of 1996. The 19% increase
in primary earnings per share reflects the year-over-year increase in net
income, partially offset by an increase in the number of common shares
outstanding. In January 1996, the Company repurchased for cash all of its 10
1/2% Senior Subordinated Notes. As a result of the repurchase, the Company
recorded an extraordinary loss in the first quarter of 1996 of $22 million,
after tax. For the first quarter of 1997, Case recorded income before
extraordinary loss of $64 million and primary earnings per share of $.83,
compared to $75 million and $1.00, respectively, for the first quarter of 1996.
The Company's industrial operations recorded income before equity income of
Case Credit and extraordinary loss of $42 million in the first quarter of 1997
versus $49 million in the first quarter of 1996. On a pretax basis, the
Company's industrial operations recorded earnings of $63 million in the first
quarter of 1997 as compared to $77 million in the comparable period last year.
The industrial effective income tax rate decreased from 36% in the first
quarter of 1996 to 33% in the first quarter of 1997 primarily due to research
and development tax credits, recognition of tax benefits from the Company's
foreign sales corporation and reductions in the tax valuation reserves in
certain foreign jurisdictions, partially offset by state income taxes and
foreign income taxed at different rates. Case Credit recorded $22 million in
net income for the first quarter of 1997, $4 million less than net income of
$26 million in the first quarter of 1996.
Case's operating earnings for the first quarter of 1997 were $103 million
versus $126 million for the same period in 1996. 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. The year-over-year decrease in operating earnings reflects one-
time costs associated with the first quarter 1997 launch and production start-
up of the new MX series tractor, together with lower production in preparation
for the previously announced closure of the Neuss, Germany, plant later this
year.
A reconciliation of the Company's industrial net income to operating earnings
is as follows (in millions):
<TABLE>
<CAPTION>
CASE INDUSTRIAL
-------------------
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
--------- ---------
<S> <C> <C>
Income before extraordinary loss........................... $ 64 $ 75
Income tax provision....................................... 21 28
Interest expense........................................... 18 23
--------- ---------
Operating earnings....................................... $ 103 $ 126
========= =========
</TABLE>
REVENUES
On a consolidated basis, worldwide revenues increased $61 million or 5% in
the first quarter of 1997 to $1,232 million. Net sales of equipment and parts
increased $71 million or 6% to $1,176 million. The increase in net sales
consists primarily of an 8% volume increase and a 2% improvement in price
realization, partially offset by a 2% decrease due to retail store divestitures
and a 2% deterioration resulting from the impact of foreign exchange. The year-
over-year volume increase was largely driven by incremental sales from the
Company's 1996
9
<PAGE>
acquisitions. These volume increases were partially offset by lower production
of mid-range horsepower tractors in preparation for the Neuss closure, as well
as by impending second quarter shipments to the former Soviet Union that
otherwise would have been available for sale in the North American market in
the first quarter. Net sales in the Company's emerging markets increased 45%
for the first quarter of 1997 as compared to prior year, with increases in the
Latin American and Asia Pacific regions of 61% and 37%, respectively. Net sales
in the first quarter of 1997 also increased in Europe and North America, with
year-over-year increases of 4% and 2%, respectively. Worldwide net sales of
agricultural equipment increased 9%, while net sales of construction equipment
increased 1%.
Worldwide net sales of agricultural equipment increased 9% in the first
quarter of 1997 as compared to the first quarter of 1996. The increase in sales
of agricultural equipment in North America was driven by increases in sales of
40-plus horsepower tractors and MAGNUM(TM) tractors (120-plus horsepower),
increased sales of combines, and increased implement sales largely reflecting
the January 1996 acquisition of Concord. In addition, the Company's continuing
progress in implementing its supply chain management initiatives has enabled
Case to lower production relative to retail demand as compared to 1996 levels,
resulting in lower wholesale (dealer) sales and correspondingly lower seasonal
inventory builds. As a result, Case's first quarter net sales of agricultural
equipment in North America were lower than would have been reported had
production levels relative to retail demand remained constant with 1996 levels.
In the Company's Asia Pacific and Latin American regions, the increase in sales
of agricultural equipment resulted from strong sales increases of 40-plus
horsepower tractors and MAGNUM(TM) tractors, significant increases in sales of
cotton pickers and combines, and incremental sales of sugar cane harvesters as
a result of the June 1996 acquisition of Austoft. Sales of agricultural
equipment in Europe reflect increases in sales of MAGNUM(TM), four-wheel drive
tractors, and the impact of the August 1996 Steyr acquisition, as well as
increased sales of cotton pickers and implements, offset by lower sales of mid-
range horsepower tractors in preparation for the Neuss closure and lower sales
of combines.
Worldwide net sales of construction equipment increased slightly in the first
quarter of 1997 as compared to the first quarter of 1996. The increase in net
sales of construction equipment in Europe primarily reflects increased sales of
loader/backhoes and skid steers as a result of the October 1996 acquisition of
Fermec. In general, however, the European construction equipment market
continues to experience significant economic weakness, particularly in France
and Germany. In the Company's Asia Pacific and Latin American regions, sales of
construction equipment increased significantly due to increases in sales of
loader/backhoes, wheel loaders, crawlers, skid steers and excavators, along
with improvements in the Brazilian and Mexican economies as compared to 1996.
In North America, first quarter sales of construction equipment were impacted
by the Company's continuing supply chain management initiatives, which enabled
Case to lower production relative to retail demand as compared to 1996 levels.
As a result, Case reported lower net sales of construction equipment in 1997
than would have been reported had production levels relative to retail demand
remained constant with 1996 levels. In the near-term, Case's supply chain
management initiative will continue to impact the Company's North American
operating results.
COSTS AND EXPENSES
Cost of goods sold for the industrial operations increased $66 million to
$910 million in the first quarter of 1997 as compared to the same quarter in
1996. The increase was primarily due to the sales volume increase, with cost of
goods sold as a percentage of net sales increasing to 77.4% as compared to
76.4% in the first quarter of 1996. This increase as a percentage of net sales
reflects higher new product launch costs, the impact of lower anticipated gross
margins resulting from acquisition related sales and changes in geographic and
product line sales mix, as well as the impact of the sale of company-owned
retail stores, partially offset by pricing actions and cost improvement
initiatives from restructuring and other cost savings.
Selling, general and administrative expenses for the industrial operations
increased $17 million to $145 million in the first quarter of 1997 as compared
to $128 million in the first quarter of 1996. The increase is
10
<PAGE>
primarily due to higher new product launch costs, including marketing, sales
support and product introduction expenses, as well as the inclusion of selling,
general and administration expenses for the acquisitions of Austoft, Steyr and
Fermec in the second, third and fourth quarters of 1996, respectively. As a
percentage of net sales, selling, general and administrative expenses for the
first quarter of 1997 increased to 12.3% from 11.6% in the first quarter of
1996.
Research, development and engineering expenses increased slightly to $46
million in the first quarter of 1997 as compared to $45 million in the first
quarter of 1996, primarily due to expenditures for new product development.
Interest expense for Case's industrial operations was $18 million in the
first quarter of 1997, $5 million lower than the same quarter of 1996. The
decreased interest expense was primarily due to significantly lower average
debt levels during the first quarter of 1997 as compared to the first quarter
of 1996, including reduced funding costs as a result of the January 1996
repurchase of the Company's 10 1/2% Senior Subordinated Notes.
The consolidated effective income tax rate for the first quarter of 1997 was
33% as compared to 37% in the first quarter of 1996. The 1997 effective income
tax rate was slightly lower than the U.S. statutory rate of 35% primarily due
to reductions in the tax valuation reserves in certain foreign jurisdictions,
research and development tax credits and recognition of tax benefits from the
Company's foreign sales corporation, partially offset by state income taxes and
foreign income taxed at different rates. In the first quarter of 1996, the
effective tax rate of 37% was slightly higher than the U.S. statutory tax rate
primarily due to state income taxes and foreign income taxed at different
rates, partially offset by a reduction in the tax valuation reserve in certain
foreign jurisdictions.
CREDIT OPERATIONS
Net income for the first quarter of 1997 was $22 million as compared to $26
million for the first quarter of 1996. The $4 million decrease in quarter-over-
quarter net income is primarily due to lower margins on asset-backed
securitizations in a rising interest rate environment and reduced income from
Case Corporation marketing programs. These decreases were partially offset by
higher earnings as a result of increased levels of on-balance-sheet
receivables.
Case Credit reported total revenues of $66 million for both the first quarter
of 1997 and 1996. Finance income earned on retail notes and leases increased to
$17 million in the first three months of 1997 as compared to $12 million for
the same period in 1996, primarily due to increased levels of on-balance-sheet
receivables. Case Credit also recognized $5 million of incremental revenues
from rental equipment in the first quarter of 1997. In addition, operating
lease income increased $3 million to a total of $6 million for the first
quarter of 1997, reflecting the growth in Case Credit's equipment leasing
program. These revenue increases were offset by decreases in net gains on
retail notes sold, including reduced revenues from Case Corporation marketing
programs as a result of lower interest rate margins, and lower securitization
and servicing fee income.
Interest expense for the first three months of 1997 was $22 million, up $5
million from the $17 million reported in the first three months of 1996. The
increase in interest expense resulted from higher average debt levels during
the first quarter of 1997 as compared to the first quarter of 1996 due to the
growth in Case Credit's on-balance-sheet receivables and increased equipment on
operating leases.
Operating expenses increased $5 million to a total of $12 million in the
first quarter of 1997 as compared to the first quarter of 1996. This increase
primarily resulted from $3 million of additional depreciation expense for
equipment on operating leases relating to the Company's larger operating lease
portfolio.
11
<PAGE>
During the first quarter of 1997, Case Credit's serviced portfolio of
receivables increased 17% over the same time last year to a record $4.5
billion. Gross receivables acquired in the first three months of 1997
increased 27% for a total of $646 million versus the same period in 1996. Case
Credit's loss-to-liquidation ratio was .13% for the first quarter of 1997,
compared to .15% for the same period in 1996. During the first quarter of
1997, limited-purpose business trusts organized by Case Credit issued $830
million of asset-backed securities to outside investors, of which $180 million
was issued pursuant to a private Canadian placement. Case Credit has sold $502
million of U.S. and Canadian retail notes to the trusts in connection with
these issuances. In the first quarter of 1996, Case Credit issued $625 million
of asset-backed securities to outside investors, of which $484 million was
sold to the trusts in the first quarter of 1996.
First Quarter 1996 vs. First Quarter 1995
EARNINGS
The Company recorded income before cumulative effect of changes in
accounting principles and extraordinary loss of $75 million in the first
quarter of 1996. This represents a $5 million improvement compared to income
of $70 million in the first quarter of 1995. Earnings per share before
accounting changes and extraordinary loss for the quarter was $1.00 per share
compared to $0.96 per share in the first quarter of 1995.
Net income in the first quarter of 1996 was $53 million, with earnings per
share of $0.70, versus net income and earnings per share of $61 million and
$0.83, respectively, in the first quarter of 1995. In January 1996, the
Company repurchased for cash all of its 10 1/2% Senior Subordinated Notes. As
a result of the repurchase, the Company recorded an extraordinary loss of $22
million, after tax. 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. 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 $49 million in both the first quarter of 1996 and in the first
quarter of 1995. On a pretax basis, income increased $25 million to $77
million in the first quarter of 1996 from $52 million in the first quarter of
1995. The industrial effective income tax rate was lower in the first quarter
of 1995 as a result of the reversal of certain tax valuation reserves in that
period. Case Credit recorded $26 million of net income in the first quarter of
1996, $5 million more than net income of $21 million in the first quarter of
1995.
Case's operating earnings for the first quarter of 1996 were $126 million,
versus $107 million for the same period in 1995. 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 primarily resulted from improved
pricing, lower operating expenses and higher equity income from Case Credit,
partially offset by the effects of inflation, lower sales volumes and
increased expenditures associated with new product development.
A reconciliation of the Company's industrial net income to operating
earnings is as follows (in millions):
<TABLE>
<CAPTION>
CASE
INDUSTRIAL
-----------
THREE
MONTHS
ENDED
MARCH 31,
-----------
1996 1995
----- -----
<S> <C> <C>
Income before cumulative effect of changes in accounting principles
and extraordinary loss............................................ $ 75 $ 70
Income tax provision............................................... 28 3
Interest expense................................................... 23 34
----- -----
Operating earnings............................................... $ 126 $ 107
===== =====
</TABLE>
12
<PAGE>
REVENUES
On a consolidated basis, worldwide revenues decreased $7 million in the first
quarter of 1996 to $1,171 million compared to $1,178 million in the first
quarter of 1995. Consolidated interest income and other revenue increased $29
million in the first quarter of 1996 to $66 million primarily due to a higher
year-over-year net gain on the asset-backed securitization transactions,
resulting from increased portfolio margins. Net sales of equipment and parts
decreased $36 million to $1,105 million. The net sales decrease is comprised of
a 3% decrease in volume and a 3% decrease resulting from actions taken during
1995, including the divestiture of 45 company-owned retail stores and the sale
of Viscosity Oil, both of which are included in the first quarter 1995 results.
These volume declines were partially offset by a 3% improvement in price
realization. Net sales in the first quarter of 1996 decreased 11% in North
America, however net sales increased 5% in Europe, and 33% in the Company's
other international markets as compared to the first quarter of 1995. Worldwide
net sales of agricultural equipment decreased 5%, while construction equipment
net sales decreased 2%.
Worldwide net sales of agricultural equipment decreased 5% in the first
quarter of 1996 as compared to the first quarter of 1995. 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 and correspondingly lower
seasonal inventory builds. As a result, Case reported lower net sales of
agricultural equipment in the first quarter of 1996 than would have been
reported had production levels relative to retail demand remained constant with
1995 levels. This planned action, in combination with higher retail sales, is
expected to reduce the Company's working capital requirements. The increase in
sales of agricultural equipment in Europe was driven by significant increases
in sales of both 40-plus horsepower tractors and MAGNUM(TM) tractors (120-plus
horsepower), along with a significant increase in combine sales. In Case's
other international markets, the increase in agricultural equipment sales
resulted from significant increases in sales of 120-plus horsepower tractors,
four-wheel drive tractors, combines and cotton pickers. Sales in the Asia
Pacific region were particularly strong due to better weather conditions for
broadacre farming and continued stability in commodity prices in Australia/New
Zealand.
Worldwide net sales of construction equipment decreased 2% in the first
quarter of 1996 as compared to the first quarter of 1995. The decrease in net
sales of construction equipment in Europe resulted from lower sales of
excavators, loader/backhoes and compaction equipment primarily due to weakening
economic conditions in Europe, particularly in France and Germany. In Case's
other international markets, the decrease in construction equipment sales was
due to the continued weakness of the construction equipment market in Brazil
that began in the third quarter of 1995. In North America, first quarter net
sales of construction equipment increased as compared to the first quarter of
1995, primarily due to a significant increase in sales of loader/backhoes,
partially offset by reduced sales as a result of the Company's supply chain
management initiatives.
COSTS AND EXPENSES
Cost of goods sold for the industrial operations decreased $32 million to
$844 million in the first quarter of 1996 as compared to the same quarter in
1995. This decrease was primarily due to a decrease in sales volume, with cost
of goods sold as a percentage of net sales decreasing to 76% in the first
quarter of 1996 from 77% in the first quarter of 1995. This decrease, as a
percentage of net sales, reflects benefits from restructuring and other cost
reduction initiatives partially offset by inflationary cost increases.
Selling, general and administrative expenses for the industrial operations
decreased $28 million in the first quarter of 1996 to $128 million. As a
percentage of net sales, selling, general and administrative expenses decreased
to 12% in the first quarter of 1996 as compared to 14% in the first quarter of
1995. This decrease as a percentage of net sales reflects lower selling
expenses as a result of restructuring-related sales of company-owned stores and
decreased selling expenses related to low-rate and other sales financing
programs. Case Industrial makes payments to Case Credit in an amount equal to
the difference between the interest rate actually paid by retail customers and
the interest rate charged by Case Credit.
13
<PAGE>
Research, development and engineering expenses increased 29% to $45 million
in the first quarter of 1996 as compared to the same quarter in 1995. The
increased expenditures primarily related to new product development.
Interest expense for Case Industrial was $23 million, $11 million lower than
the same quarter of 1995. The decreased interest expense was primarily due to
lower debt levels during the first quarter of 1996, as compared to the first
quarter of 1995.
The consolidated income tax provision for the first quarter of 1996 was 37%,
as compared to 20% in the first quarter of 1995. The 1996 effective income tax
rate was slightly higher than the U.S. statutory rate of 35% primarily due to
state income taxes and foreign income taxed at different rates partially offset
by a reversal of the tax valuation reserve in certain foreign jurisdictions.
The income tax rate in 1995 was significantly lower than the U.S. statutory
rate primarily due to reductions in the tax valuation reserve in 1995 that
resulted from income generated in certain tax jurisdictions.
CREDIT OPERATIONS
Case Credit recorded net income of $26 million in the first quarter of 1996,
versus $21 million in the first quarter of 1995. Revenues were $66 million,
compared to $51 million in the first quarter of 1995. The increase in revenues
for the first quarter of 1996 over the prior year was due to the higher net
gain on asset-backed securitization transactions, resulting from increased
margins on portfolio yield versus investor yield, and higher finance income on
retail notes partially offset by lower payments from Case Industrial for low-
rate financing programs.
Interest expense for the first quarter of 1996 was $17 million versus $10
million in the first quarter of 1995. This increase is primarily due to higher
overall debt levels to support the increase in Case Credit's portfolio.
Case Credit's serviced portfolio increased 14% to $3.8 billion. New equipment
acquisitions in the first quarter of 1996 were up 6% versus the comparable
period last year. Portfolio losses for the total serviced portfolio were $0.7
million versus $0.1 million during the first quarter of 1995. This represents a
loss-to- liquidation ratio of 0.14% in the first quarter of 1996 versus 0.04%
in the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The discussion of liquidity and capital resources focuses on the 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.
Cash used by operating activities was $163 million in the first quarter of
1997. This use of cash was primarily due to increased inventories partially
offset by net income and depreciation and amortization. Inventories have
increased since December 31, 1996, as a result of the Company's seasonal build
of inventory for traditionally strong second quarter shipments and the impact
of the Company's 1996 acquisitions. Cash used by operating activities was $39
million in the first quarter of 1996. This use of cash was primarily due to
increased levels of inventories and wholesale (dealer) receivables partially
offset by net income and lower levels of retail receivables.
During the first quarter the Company expended $18 million for property, plant
and equipment in comparison to $15 million in the first quarter of 1996. The
Company also completed two strategic acquisitions during the first quarter of
1997. Case's acquisition of bor-mor, Inc., a manufacturer of directional
drills, complements the Company's existing trencher business. The acquisition
of Agri-Logic, a developer of software for agricultural applications, provides
Case with greater software development capability in the application of the
Company's Advanced Farming Systems in tractors and implements.
14
<PAGE>
Net cash provided by financing activities was $171 million in the first
quarter of 1997 primarily due to increases under the Company's short-term debt
and revolving credit facilities to fund seasonal inventory builds and Case
Credit's growing receivable portfolio. Also during the first quarter of 1997,
Case Industrial provided $20 million of additional capitalization for Case
Credit.
In the first quarter of 1996, the Company received proceeds from the issuance
of long-term debt of $500 million. In January 1996, the Company issued $300
million aggregate principal amount of 7 1/4% unsecured and unsubordinated notes
due 2016. In February 1996, 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 offering were used to
repay indebtedness and finance Case Credit's growing portfolio of receivables.
During the first quarter of 1996, the Company repaid $353 million of long-
term debt. 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. As a result
of this repurchase, the Company recorded an extraordinary after-tax charge of
$22 million in the first quarter of 1996.
Total debt at March 31, 1997, was $2,275 million, $1,324 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 52.9% at March 31,
1997, and the Company's industrial debt to capitalization ratio was 32%. The
consolidated and industrial ratios at December 31, 1996 were 51.8% and 30.9%,
respectively.
FUTURE LIQUIDITY AND CAPITAL RESOURCES
The Company has various sources of future liquidity including the asset-
backed securitization markets, public debt offerings and other available lines
of credit. The Company anticipates that it will continue to pool retail
receivables and issue asset-backed securities in the United States and Canada
depending upon the availability of the asset-backed securities markets. In
addition, the Company has a $400 million private, revolving wholesale (dealer)
receivable asset-backed securitization facility that can be utilized to
periodically sell wholesale (dealer) receivables to third party investors.
OUTLOOK
Case expects the economic fundamentals that have driven growth in its markets
to continue through 1997.
Worldwide demand for grains and other agricultural products remains
exceptionally strong and is growing. Grain stock levels, meanwhile, were at the
low range of normal operating levels at the end of 1996, and extreme weather
conditions in some parts of North America are anticipated to affect winter
wheat prices. These conditions are expected to keep commodity prices favorable
and are generally positive for agricultural equipment sales. In Europe, the
pent-up demand for lower horsepower tractors has slowed. However, the Company
continues to believe that farm consolidation in Europe will drive greater sales
of higher horsepower units.
The construction equipment market is benefiting from historically strong
housing starts in North America. In Europe, housing construction in the United
Kingdom has been brisk, while France and Germany's construction sectors
continue to experience significant weakness. In the Asia Pacific region, the
expected recovery of the Australian housing market has been further delayed due
to general economic conditions. In Latin America, economic conditions in Brazil
and Mexico have improved, and retail sales of agricultural and construction
equipment are expected to be strong year-over-year.
Consistent with 1996, Case anticipates that 1997 unit production and
wholesale sales will be at or below retail demand as part of the Company's
continuing supply chain management initiative to further reduce field
inventories.
15
<PAGE>
The information included in the "Outlook" section represents forward-
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 the Company's Form 10-K Annual Report for 1996, as filed
with the Securities and Exchange Commission: 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.
OTHER MATTERS
Pei-yuan Chia, former Vice Chairman, Citicorp and Citibank, N.A., and Thomas
R. Hodgson, President and Chief Operating Officer, Abbott Laboratories, were
elected to the Company's Board of Directors during the first quarter of 1997.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of legal proceedings to which the Company is party, see
footnote 6 to the Case financial statements included in this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
A list of the exhibits included as part of this Form 10-Q is set forth in the
Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K.
The Company did not file any current reports on Form 8-K during the first
quarter ended March 31, 1997.
16
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Case Corporation
/s/ Theodore R. French
By __________________________________
Theodore R. French
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and authorized signatory
for Case Corporation)
Date: May 6, 1997
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
4(a) The Company hereby agrees to furnish to the Securities and Exchange
Commission,
upon its request, the instruments with respect to its guaranty of
certain indebtedness
issued by its subsidiaries, which indebtedness does not exceed 10%
of the Company's
total consolidated assets.
*10(a) Agreement dated March 20, 1997, between Jean-Pierre Rosso and Case
Corporation.
*10(b)(1) Agreement Regarding Change in Control, dated April 8, 1996, between
Jean-Pierre Rosso and Case Corporation.
*10(b)(2) Agreement Regarding Change in Control, dated April 18, 1996, between
Theodore R. French and Case Corporation.
*10(b)(3) Agreement Regarding Change in Control, dated April 8, 1996, between
Steven G. Lamb and Case Corporation.
11 Computation of Earnings Per Share of Common Stock.
12 Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends.
27 Financial Data Schedule.
</TABLE>
- --------
*Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT 10(a)
CASE CORPORATION
700 STATE STREET
RACINE, WI 53404
TEL: (414) 636-6011
March 20, 1997
Private and Confidential
Mr. Jean-Pierre Rosso
Case Corporation
700 State Street
Racine, WI 53404
Dear Jean-Pierre:
The purpose of this letter (the "Letter Agreement") is to restate the terms and
conditions by which you are and have been employed as President, Chief Executive
Officer and, in addition, effective March 15, 1996, Chairman of Case Corporation
(the "Company"). Certain items of compensation, that you have already received,
are set forth in Exhibit A, which is expressly incorporated herein. You hereby
acknowledge that you have received those items set forth in Exhibit A and that
the Company and Tenneco Inc. ("Tenneco") have performed all of the obligations
imposed upon them by the agreements referenced in Section 12 hereof, except for
items which by their terms have not become due either through the passage of
time or the occurrence of specified events.
1. Your employment commenced on April 1, 1994. You are reporting to the
Board of Directors.
2. Your base salary will be at least $600,000 a year through December 31,
1995, $700,000 per year effective January 1, 1996 and, effective January
1, 1997, your base salary will be increased to $800,000 per year, which
shall be subject to such increase as may from time to time be approved by
the Compensation Committee of the Company's Board of Directors (which
increased salary shall not thereafter be decreased).
3. Beginning in 1995, the annual target value of your long-term stock awards,
whether in the form of restricted stock, stock options, other forms of
stock-based grants or a combination thereof, in the aggregate for each
year, shall be not less than $1,000,000.
4. Effective for bonuses which relate to 1996 and later years, the annual
target of your bonus will be no less than $400,000. Effective January 1,
1996, your bonus target will be no less than your base salary.
<PAGE>
Mr. Jean-Pierre Rosso
Page 2
March 20, 1997
5. You will receive non-cash compensation (e.g., Company car) and
qualified/welfare benefits provided to the Company's senior executives.
The Company will also reimburse you for the costs of financial and estate
planning up to $20,000 per year.
6. You will have four weeks vacation per year. If you choose to spend your
vacation in your home country, the Company will pay round trip air travel
for you and your family once a year. The Company's normal policy regarding
accrued but unused vacation time will apply to you.
7. You will receive a pension benefit from the Company and its pension plans
which, in the aggregate, will not be less than the amount which you would
have been entitled to receive if your coverage under the Honeywell, Inc.,
defined benefit plans in effect at March 18, 1994 had continued until your
separation of service from the Company, less any benefits from such
Honeywell, Inc. plans. If, within four years of the date specified in
Section 1 hereof, the Company terminates your employment other than for
death, disability or the gross neglect of your duties or if you
voluntarily terminate your employment with the Company and are entitled to
severance benefits under Section 8 below, you will, nevertheless be
treated as having received four years credit for service with the Company.
The benefits guaranteed hereunder includes an age 57 subsidized early
retirement benefit.
8. If your employment with the Company is terminated within four years of the
date specified in Section 1 hereof, other than for death, disability, or
the gross neglect of your duties, the Company will pay you a severance
benefit in an amount equal to three times your base salary then in effect.
If your employment is terminated thereafter other than for death,
disability, or the gross neglect of your duties, the Company will pay you
a severance benefit in an amount equal to two times your base salary then
in effect. If you resign voluntarily or retire, you will not be entitled
to this severance benefit.
In addition, notwithstanding the foregoing, you may elect to voluntarily
terminate your employment with the Company and still be entitled to
receive the above indicated severance benefit if: (a) there is a material
reduction or material adverse alteration in the nature of your position,
responsibilities or authorities (including the failure to elect and
continue to elect you to the Board of the Company); (b) there is a
material reduction of your compensation or benefits hereunder; (c) you
become the holder of a lesser office or title than Chairman, President and
Chief Executive Officer of the Company; or (d) your job is relocated to a
Letter Agreement; provided that if the event is not due to intentional or
repeated action, you will provide the company with written notice of the
event and the opportunity to cure the event within 15 days from the date
of the notice. If the written notice is not required, you will have 30
days from the date of the event to elect to voluntarily terminate your
employment with the Company and still be entitled to receive the above
indicated severance. If you give the required notice and the Company fails
to cure the event within the 15 day period, you
<PAGE>
Mr. Jean-Pierre Rosso
Page 3
March 20, 1997
may elect within 30 days after such period to voluntarily terminate your
employment with the Company and still be entitled to receive the above
indicated severance.
For purposes of this Letter Agreement, errors in your judgment or any act
or omission believed by you in good faith to have been in or not opposed
to the interests of the Company will not be considered "gross neglect of
your duties."
You will not receive the severance benefits described in this Section 8 if
you receive severance benefits under the Agreement Regarding Change in
Control between yourself and the Company dated April 8, 1996.
9. The Company will reimburse you for the tuition and fees for secondary
private school for your eligible children.
10. If you are entitled to receive severance under Section 8 above, (a) the
Company will continue to provide you with all the same benefits as in
effect immediately prior to your termination for a period of two years
following your termination (if your severance equals two times your base
salary) or three years following your termination (if your severance
equals three times your base salary), and (b) all of your Tenneco stock
options will vest on the date of your termination and will remain
exercisable for a period of not less than 90 days from such termination;
all of your Company stock options will vest on the date of your
termination and will remain exercisable for a period of not less than 12
months from such termination, and (c) the Company will make a payment to
you in cash in an amount equal to the value of all of your Tenneco
restricted stock, Company restricted stock and Company convertible second
preferred stock, which you forfeit. In addition, the minimum pension under
Section 7 above, will be determined by treating the severance benefit as
compensation and service to the same extent as if you remained employed by
the Company and earned the amount of severance ratably over the two or
three year period, as applicable, in addition to the four years specified
in Section 7 above. If, under the terms of the Company's stock option
plans, any stock options which have been granted to you are forfeited on
the date of your termination, notwithstanding the foregoing provisions of
this Section 10, the Company shall make a payment to you with respect to
such options in an amount equal to the amount by which the fair market
value of the Company stock on the date of such forfeiture exceed the
option exercise price of such forfeited options. For all purposes hereof,
the value of the Company's convertible second preferred stock shall be
equal to the greater of (a) the number of shares of common stock of the
Company into which such convertible second preferred shares could have
been converted, multiplied by the closing price of a share of Company
common stock on the date of your termination of employment plus the
discounted present value (using First National Bank of Chicago prime or
reference rate in effect on the date of your termination of employment) of
the dividends payable with respect to such convertible second preferred
shares from the date of termination through July 1, 2000 or if higher (b)
the liquidation preference
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<PAGE>
Mr. Jean-Pierre Rosso
Page 4
March 20, 1997
that would have been payable with respect to such forfeited convertible
second preferred shares, including any accrued and unpaid dividends
thereon.
11. If you incur legal or other fees and expenses in an effort to establish
entitlement to benefits under this Letter Agreement, the Company will
reimburse you for such fees and expenses unless a court determines that
such effort was conducted in bad faith. The Company will reimburse you on
a monthly basis upon your written request for reimbursement together with
proof that the fees and expenses were incurred.
12. This Letter Agreement supersedes any and all prior agreements, whether
oral or written, regarding your employment by the Company. Without
limiting the generality of the foregoing, this Letter Agreement supersedes
the letter agreements dated June 13, 1996 and May 4, 1995 between you and
the Company, the two letter agreements dated March 18, 1994 between you
and Case Equipment Corporation and you and Tenneco, Inc. and Barry
Schuman's June 3, 1994 memorandum to you, but this is without prejudice to
amounts or awards already paid or awarded to you.
13. None of the awards specified hereunder will prejudice your eligibility for
additional awards.
14. The Company will provide you with a membership in a country club of your
choice.
15. The provisions of this Letter Agreement shall apply notwithstanding any
inconsistent provisions contained in any current or future plan or
agreement of the Company or Tenneco. The Company and Tenneco agree to
amend all current and future plans and agreements to be consistent with
the provisions herein. Any failure of the Company or Tenneco to conform
any present or future plan or agreement to the provisions of this Letter
Agreement shall not be deemed to waive the provisions of this Letter
Agreement unless there is an agreement in writing between the Company,
Tenneco and you which expressly provides that it is the parties intent to
waive or modify such provisions of the Letter Agreement.
16. If you forfeit any Tenneco stock options, the Company shall pay you an
amount of cash with respect to each such option equal to the amount by
which the market value of Tenneco shares subject to such options exceeds
the option exercise price on the date of your election to receive such
benefits (determined under the terms and conditions of the Tenneco stock
option plans and agreements, as though your employment with the Company
were employment with Tenneco and the your right to elect this payment was
a right to elect to exercise such forfeited Tenneco stock option). If you
should forfeit any Tenneco restricted stock, the Company shall make a
payment to you in cash in an amount equal to the value of all of your
Tenneco restricted stock so forfeited at the date you would have become
vested in such Tenneco restricted stock had your employment with the
Company been treated for all purposes under the Tenneco restricted stock
grant to be employment with Tenneco.
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<PAGE>
Mr. Jean-Pierre Rosso
Page 5
March 20, 1997
Please acknowledge your agreement of these terms by executing a copy of this
letter in the space provided below and returning it to me.
Sincerely,
CASE CORPORATION
/s/ Marc J. Castor
ACKNOWLEDGED AND ACCEPTED:
/s/ Jean-Pierre Rosso
- --------------------------
On this 30th day of March, 1997.
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<PAGE>
EXHIBIT A
1. You have become a participant in the Case Non-Qualified Deferred
Compensation Plan ("DCP"). You have been credited with $25,000, as a
discretionary Company credit with respect to 1994. This credit is in lieu
of any credit previously awarded under the Tenneco Deferred Compensation
Plan.
2. You were previously awarded 20,000 restricted shares of Tenneco Inc.
Common Stock under the 1994 Tenneco Inc. Stock Ownership Plan (the
"Tenneco Stock Plan") which are subject to the Restricted Stock Award
Agreement attached hereto as Exhibit A-1. You were previously awarded a
non-qualified stock option under the Tenneco Stock Plan to purchase 20,000
shares of Tenneco Common Stock, which are subject to the Non-Qualified
Stock Options Award Agreement attached hereto as Exhibit A-2, except to
the extent that Section 10 of the Letter Agreement may provide you with
greater rights with respect thereto.
3. On June 23, 1994, you were issued 20,500 shares of the Company's
convertible second preferred stock. On August 17, 1994, you were granted
a non-qualified option to purchase 200,000 shares of Company Common Stock
under the Case Equity Incentive Plan (the "CEIP"). On December 7, 1994,
you were granted a non-qualified stock option to purchase an additional
200,000 shares of Company Common Stock under the CEIP. These grants are
subject to the Non-Qualified Stock Options Award Agreements, as amended
and restated in the form attached hereto as Exhibits A-3 and A-4,
respectively, (which agreements are in substitution of the prior
agreements executed with respect to the August 17, 1994 and December 7,
1994 non-qualified stock option grants) except to the extent that Section
10 of the Letter Agreement may provide you with greater rights with
respect thereto.
4. In December 1995, the Company paid you a bonus of $699,900, consisting of
a $300,000 cash payment and shares of stock (net of shares withheld to
satisfy tax withholding) with a value of $399,900. In January 1997, the
Company paid you a bonus of $1,283,333, consisting of a $550,000 cash
payment and shares of stock (net of shares withheld to satisfy tax
withholding) with a value of $733,333.
5. On each of December 7, 1995 and December 11, 1996, you were granted a
non-qualified option to purchase 75,000 shares of Company Common Stock
under the CEIP. On December 7, 1995 and December 11, 1996, you were
awarded 20,000 and 25,000 shares, respectively, of restricted Common Stock
under the CEIP.
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<PAGE>
AGREEMENT REGARDING
CHANGE IN CONTROL
-------------------
This Agreement entered into as of the 8th day of April, 1996 by and between
Case Corporation, a Delaware corporation (the "Company"), and Jean-Pierre Rosso
(the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company wishes to assure itself of the continuity of the
Executive's services in the event of any actual or threatened change in control
of the Company; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1999; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year unless, not later than
the second preceding January 1 either party shall have given notice that such
party does not wish to extend the Term; and provided, further, that if a Change
in Control (as defined in paragraph 3 below) shall have occurred during the
original or any extended Term of this Agreement, the Term of this Agreement
shall continue for a period of thirty-six calendar months beyond the calendar
month in which such Change in Control occurs.
2. Employment After a Change or Potential Change in Control. If the
Executive is in the employ of the Company on the date of a Change in Control,
the Company hereby agrees to continue the Executive in its employ for the period
commencing on the date of the Change in Control and ending on the last day of
the Term of this Agreement. If the Executive is in the employ of the Company on
the first day of a Potential Change in Control (as defined in paragraph 4
below), the Company hereby agrees to continue the Executive in its employ for
the twelve-month period commencing on such date and, if a Change in Control
occurs during such period agrees to continue the Executive in its employ until
the last day of the Term of this Agreement. During the period of employment
<PAGE>
described in the foregoing provisions of this paragraph 2 (the "Employment
Period"), the Executive shall hold such position with the Company and exercise
such authority and perform such executive duties as are commensurate with his
position, authority and duties immediately prior to the Change in Control or
Potential Change in Control, as the case may be. The Executive agrees that
during the Employment Period he shall devote his full business time exclusively
to the executive duties described herein and perform such duties faithfully and
efficiently; provided, however, that nothing in this Agreement shall prevent the
Executive from voluntarily resigning from employment upon 90 days' written
notice to the Company under circumstances which do not constitute a Termination
(as defined below in paragraph 6); provided, further, however, that the
Executive agrees to remain in the employ of the Company from the date on which a
Potential Change in Control (as defined in paragraph 4 below) occurs through the
earlier of six months thereafter, or the last day of the Term of this Agreement.
3. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary of securities held under an employee
benefit plan of the Company;
(ii) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of the Company; or
(iii) any person in which the Executive 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 Company representing 25% or more of the total voting power of the
Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company by a person other
than a person described in subparagraph (a)(i), (ii) or (iii), and one
of the following occurs:
(i) the person making the offer owns or has accepted for payment
stock of the Company representing 25%
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<PAGE>
or more of the total voting power of the Company's stock; or
(ii) 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
Company's outstanding stock when the offer terminates;
(c) during any period of two consecutive years there shall cease to be a
majority of the Company'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 Company's stockholders was
approved by a vote of 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
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) such a merger or consolidation which would result in the
Company's voting stock outstanding immediately prior thereto
continuing to represet (either by remaining outstanding or by
being converted into voting stock of the surviving entity) more
than 70% of the combined voting power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) such a merger or consolidation which would result in the
directors of the Company 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 (d), "surviving entity" shall mean only
an entity in which all of the Company's stockholders become
stockholders by the terms of such merger or consolidation, and the
phrase "directors of the Company who were directors immediately prior
thereto" shall not include:
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<PAGE>
(A) any director of the Company who was designated by a person who
has entered into an agreement with the Company to effect a
transaction described in this paragraph or in paragraph (a)
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 Company'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.
4. Potential Change in Control. For purposes of this Agreement, a
"Potential Change in Control" shall be deemed to occur if (i) any person who is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more of the combined voting power of the Company's then
outstanding securities over the percentage so owned by such person on the date
hereof; (ii) a tender offer is made for stock of the Company representing 25% or
more of the total voting power of the Company's stock; (iii) any person makes a
solicitation of proxies for the election of directors who have not been
recommended by the Company; (iv) the Company enters into negotiations with
respect to a transaction which would upon consummation constitute a Change in
Control; or (v) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred.
5. Compensation During the Employment Period. During the Employment
Period, the Executive shall be compensated as follows:
(a) he shall receive an annual salary which is not less than his annual
salary immediately prior to the Employment Period, with an increase as
of each January 1 which is not less than the increase, if any, in the
cost of living, as measured by the Consumer Price Index for All Urban
Consumers (CPI-U), for the 12-month period ending on the preceding
December 31;
(b) he shall be entitled to participate in short-term and long-term cash-
based incentive compensation plans which, in the aggregate, provide
bonus opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided by the
Company for executives with comparable duties; and (ii) the
opportunities provided to the Executive under all such
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<PAGE>
plans in which he was participating prior to the Employment Period;
(c) he shall be eligible to participate in stock option, stock
appreciation rights, performance awards, restricted stock and other
equity-based incentive compensation plans on a basis not materially
less favorable to the Executive than that applicable (i) to the
Executive immediately prior to the Employment Period or (ii) to other
executives of the Company with comparable duties; and
(d) he shall be entitled to receive employee benefits (including, but not
limited to, tax-qualified and nonqualified pension and savings plan
benefits, medical insurance, disability income protection, life
insurance coverage and death benefits) and perquisites which are not
materially less favorable to the Executive than (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to
which the Executive would be entitled under the Company's employee
benefit plans and perquisites as in effect immediately prior to the
Employment Period.
In the event of a termination of the Executive's employment for any reason
during the Employment Period, he shall be entitled to his accrued vacation as
of the date of termination, plus long-term and short-term bonuses based on the
targeted bonus amounts for the bonus period which includes his date of
termination pro rated based on the number of days elapsed in the bonus period.
6. Termination. For purposes of this Agreement, the term "Termination"
shall mean:
(a) Termination of the employment of the Executive during the Employment
Period by the Company, for any reason other than death, Disability (as
defined below), or Cause (as described below).
(b) Termination of employment of the Executive during the Employment
Period by reason of the Executive's resignation upon the occurrence
of one of the following events:
(i) a significant change in the nature or scope of the Executive's
authorities or duties from those described in paragraph 2 above,
a breach of any of the subparagraphs of paragraph 5 above, or
the breach by the Company of any other provision of this
Agreement;
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<PAGE>
(ii) the relocation of the Executive's office to a location more
than fifty miles from the location of his office immediately
prior to the Employment Period;
(iii) a reasonable determination by the Executive that, as a result
of a Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise
the authorities, powers, functions or duties associated with
his position and contemplated by paragraph 2 above; or
(iv) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this
Agreement as contemplated in paragraph 17 below.
(c) Termination of employment of the Executive during the 90-day period
commencing on the first anniversary of the date of a Change in Control
due to the Executive's resignation for any reason.
The date of the Executive's Termination under this paragraph 6 shall be the date
specified by the Executive or the Company, as the case may be, in a written
notice to the other party complying with the requirements of paragraph 13 below.
For purposes of this Agreement, the term "Disability" means an incapacity, due
to physical injury or illness or mental illness, causing the Executive to be
unable to perform his duties with the Company on a full-time basis for a period
of at least six consecutive calendar months. For purposes of this Agreement, the
term "Cause" means a willful and material breach of this Agreement by the
Executive resulting in material injury to the Company or a willful and continued
failure of the Executive to substantially perform his duties (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness) which failure has not been corrected by the Executive within 30 days
after the Board of Directors of the Company has given the Executive written
notice of such failure. No act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that the action or omission was in the best
interest of the Company.
7. Severance Payments. Subject to the provisions of paragraphs 8 and 9
below, in the event of a Termination described in paragraph 6 above, in lieu of
the amount otherwise payable under paragraph 5, the Executive shall continue to
receive medical insurance, disability income protection, life insurance coverage
and death benefits and perquisites in accordance with subparagraph 5(d) above
for a period of 36 months after the date of Termination,
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<PAGE>
and shall be entitled to a lump sum payment in cash no later than ten business
days after the Termination equal to the sum of:
(a) an amount equal to three times the Executive's annual salary rate in
effect under subparagraph 5(a) above immediately prior to the date of
Termination;
(b) an amount equal to three times the greatest of (i) the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the date of Termination, or (ii) the estimated amount
of the short term incentive award and other bonuses which would
otherwise be payable to the Executive in accordance with subparagraph
5(b) above for the year of Termination, or (iii) the targeted bonus
amounts under the short term incentive award and other bonuses which
would otherwise be payable to the Executive in accordance with
subparagraph 5(b) above for the year of Termination;
(c) an amount equal to three times the amount of the Company's
contribution to the Case Corporation Savings Plan allocated to the
Executive's account under that plan for the calendar year preceding
the year of Termination.
(d) The actuarial equivalent (using the Pension Benefit Guaranty
Corporation interest rate for valuing immediate annuities and
assumptions then applicable) of the additional pension benefits which
the Executive would have received under Section 7 of the Employment
Agreement between the Executive and the Company dated May 4, 1995,
including any amounts the Executive would have received had the
Executive continued in service with the Company for the 36-month
period following his date of Termination and received over such period
annual salary and short-term incentive awards and other bonuses at the
levels described in subparagraphs (a) and (b) of this paragraph 7.]
8. Make-Whole Payments. If any amount payable to the Executive by the
Company or any subsidiary or affiliate thereof, whether under this Agreement or
otherwise (a "Payment"), is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar federal
or state law (an "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Make Whole-Amount") which is equal to (i) the amount of
the Excise Tax, plus (ii) the aggregate amount of any interest, penalties, fines
or additions to any tax which are imposed in connection with the imposition of
such Excise Tax, plus (iii) all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state or local
government or taxing
-7-
<PAGE>
authority by reason of the payments required under clause (i) and clause (ii)
and this clause (iii).
(a) For purposes of determining the Make-Whole Amount, the Executive
shall be deemed to be taxed at the highest marginal rate under all
applicable local, state, federal and foreign income tax laws for the
year in which the Make-Whole Amount is paid. The Make-Whole Amount
payable with respect to an Excise Tax shall be paid by the Company
coincident with the Payment with respect to which such Excise Tax
relates.
(b) All calculations under this paragraph 8 shall be made initially by the
Company and the Company shall provide prompt written notice thereof to
the Executive to enable the Executive to timely file all applicable
tax returns. Upon request of the Executive, the Company shall provide
the Executive with sufficient tax and compensation data to enable the
Executive or his tax advisor to independently make the calculations
described in subparagraph (a) above and the Company shall reimburse
the Executive for reasonable fees and expenses incurred for any such
verification.
(c) If the Executive gives written notice to the Company of any objection
to the results of the Company's calculations within 60 days of the
Executive's receipt of written notice thereof, the dispute shall be
referred for determination to tax counsel selected by the independent
auditors of the Company ("Tax Counsel"). The Company shall pay all
fees and expenses of such Tax Counsel. Pending such determination by
Tax Counsel, the Company shall pay the Executive the Make-Whole Amount
as determined by it in good faith. The Company shall pay the Executive
any additional amount determined by Tax Counsel to be due under this
paragraph 8 (together with interest thereon at a rate equal to 120% of
the Federal short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
(d) The determination by Tax Counsel shall be conclusive and binding upon
all parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency
(a "Tax Authority") determines that the Executive owes a greater or
lesser amount of Excise Tax with respect to any Payment than the
amount determined by Tax Counsel.
(e) If a Taxing Authority makes a claim against the Executive which, if
successful, would require the Company to make a payment under this
paragraph 8, the Executive agrees to
-8-
<PAGE>
contest the claim on request of the Company subject to the following
conditions:
(i) The Executive shall notify the Company of any such claim within
10 days of becoming aware thereof. In the event that the Company
desires the claim to be contested, it shall promptly (but in no
event more than 30 days after the notice from the Executive or
such shorter time as the Taxing Authority may specify for
responding to such claim) request the Executive to contest the
claim. The Executive shall not make any payment of any tax which
is the subject of the claim before the Executive has given the
notice or during the 30-day period thereafter unless the
Executive receives written instructions from the Company to make
such payment together with an advance of funds sufficient to
make the requested payment plus any amounts payable under this
paragraph 8 determined as if such advance were an Excise Tax, in
which case the Executive will act promptly in accordance with
such instructions.
(ii) If the Company so requests, the Executive will contest the claim
by either paying the tax claimed and suing for a refund in the
appropriate court or contesting the claim in the United States
Tax Court or other appropriate court, as directed by the
Company; provided, however, that any request by the Company for
the Executive to pay the tax shall be accompanied by an advance
from the Company to the Executive of funds sufficient to make
the requested payment plus any amounts under this paragraph 8
determined as if such advance were an Excise Tax. If directed by
the Company in writing the Executive will take all action
necessary to compromise or settle the claim, but in no event
will the Executive compromise or settle the claim or cease to
contest the claim without the written consent of the Company;
provided, however, that the Executive may take any such action
if the Executive waives in writing his right to a payment under
this paragraph 8 for any amounts payable in connection with such
claim. The Executive agrees to cooperate in good faith with the
Company in contesting the claim and to comply with any
reasonable request from the Company concerning the contest of
the claim, including the pursuit of administrative remedies, the
appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the Company, the
Executive shall take appropriate appeals of any judgment or
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<PAGE>
decision that would require the Company to make a payment under
this paragraph 8. Provided that the Executive is in compliance
with the provisions of this section, the Company shall be liable
for and indemnify the Executive against any loss in connection
with, and all costs and expenses, including attorneys' fees,
which may be incurred as a result of, contesting the claim, and
shall provide to the Executive within 30 days after each written
request therefor by the Executive cash advances or reimbursement
for all such costs and expenses actually incurred or reasonably
expected to be incurred by the Executive as a result of
contesting the claim.
(f) Should a Tax Authority finally determine that an additional Excise Tax
is owed, then the Company shall pay an additional Make-Up Amount to
the Executive in a manner consistent with this paragraph 8 with
respect to any additional Excise Tax and any assessed interest, fines,
or penalties. If any Excise Tax as calculated by the Company or Tax
Counsel, as the case may be, is finally determined by a Tax Authority
to exceed the amount required to be paid under applicable law, then
the Executive shall repay such excess to the Company within 30 days of
such determination; provided that such repayment shall be reduced by
the amount of any taxes paid by the Executive on such excess which is
not offset by the tax benefit attributable to the repayment.
9. Accelerated Vesting of Stock Awards. As of the date of a Change in
Control, all stock option and restricted stock awards held by the Executive
shall become vested and nonforfeitable, to the extent that such vesting is
permitted under the terms of the plans pursuant to which such awards were
granted. If such vesting is not permitted under the terms of the plans, and on
or after the date of the Change in Control the Executive forfeits unvested
options or restricted stock awarded prior to the date of the Change in Control,
the Executive shall be entitled to a cash payment equal to (i) in the case of
options, the excess of the fair market value of the option shares forfeited
over the exercise price thereof, and (ii) in the case of restricted stock, the
fair market value of such stock, with fair market value in either case
determined as of the forfeiture date in accordance with the terms of the plan
pursuant to which the award was made. Such cash payment shall be made as soon as
practicable after the date of forfeiture.
10. Withholding. All payments to the Executive under this Agreement will
be subject to all applicable withholding of state and federal taxes.
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<PAGE>
11. Non-Competition and Confidentiality. The Executive agrees that:
(a) for a period of one year after the termination of the Executive's
employment with the Company, the Executive shall not be employed by,
or otherwise engage or be interested in, any business which is
competitive with any business of the Company or of any of its
subsidiaries in which the Executive was engaged during his employment
prior to his termination, but this restriction shall apply only if
such employment or activity is likely to cause, or causes, serious
damage to the Company or any of its subsidiaries; and
(b) during and after the Executive's employment by the Company, he will not
divulge or appropriate to his own use, or the use of others, any
secret or confidential information or knowledge pertaining to the
business of the Company, or any of its subsidiaries, obtained during
his employment by the Company or any of its subsidiaries.
12. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the State of
Illinois, by three arbitrators appointed by the parties. If the parties cannot
agree on the appointment of the arbitrators, one shall be appointed by the
Company and one by the Executive and the third shall be appointed by the first
two arbitrators. If the first two arbitrators cannot agree on the appointment of
a third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
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13. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
14. Notices. Any notice of Termination of the Executive's employment by
the Company or the Executive for any reason shall be upon no less than 15 days'
and no greater than 45 days' advance written notice to the other party. Any
notices, requests, demand and other communications provided for by this
Agreement shall be sufficient if in writing and if sent by registered or
certified mail to the Executive at the last address he has filed in writing with
the Company or, in the case of the Company, to the attention of the Secretary of
the Company, at its principal executive offices.
15. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
16. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without application of
conflict of laws provisions thereunder.
17. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
18. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no succession had taken place.
-12-
<PAGE>
19. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and attested by its Secretary, all as of the day and year
first above written.
/s/ Jean-Pierre Rosso
-------------------------------
Jean-Pierre Rosso
CASE CORPORATION
By /s/ Marc J. Castor
-----------------------------
Its VP Human Resources
----------------------------
ATTEST:
/s/ Richard S. Brennan
- -------------------------------
Secretary
-13-
<PAGE>
EXHIBIT 10(b)(2)
AGREEMENT REGARDING
CHANGE IN CONTROL
-------------------
This Agreement entered into as of the 18th day of April, 1996 by and
between Case Corporation, a Delaware corporation (the "Company"), and Theodore
R. French (the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company wishes to assure itself of the continuity of the
Executive's services in the event of any actual or threatened change in control
of the Company; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1999; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year unless, not later than
the second preceding January 1 either party shall have given notice that such
party does not wish to extend the Term; and provided, further, that if a Change
in Control (as defined in paragraph 3 below) shall have occurred during the
original or any extended Term of this Agreement, the Term of this Agreement
shall continue for a period of thirty-six calendar months beyond the calendar
month in which such Change in Control occurs.
2. Employment After A Change or Potential Change in Control. If the
Executive is in the employ of the Company on the date of a Change in Control,
the Company hereby agrees to continue the Executive in its employ for the period
commencing on the date of the Change in Control and ending on the last day of
the Term of this Agreement. If the Executive is in the employ of the Company on
the first day of a Potential Change in Control (as defined in paragraph 4
below), the Company hereby agrees to continue the Executive in its employ for
the twelve-month period commencing on such date and, if a Change in Control
occurs during such period agrees to continue the Executive in its employ until
the last day
<PAGE>
of the Term of this Agreement. During the period of employment described in the
foregoing provisions of this paragraph 2 (the "Employment Period"), the
Executive shall hold such position with the Company and exercise such authority
and perform such executive duties as are commensurate with his position,
authority and duties immediately prior to the Change in Control or Potential
Change in Control, as the case may be. The Executive agrees that during the
Employment Period he shall devote his full business time exclusively to the
executive duties described herein and perform such duties faithfully and
efficiently; provided, however, that nothing in this Agreement shall prevent the
Executive from voluntarily resigning from employment upon 90 days' written
notice to the Company under circumstances which do not constitute a Termination
(as defined below in paragraph 6); provided, further, however, that the
Executive agrees to remain in the employ of the Company from the date on which a
Potential Change in Control (as defined in paragraph 4 below) occurs through the
earlier of six months thereafter, or the last day of the Term of this Agreement.
3. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary of securities held under an
employee benefit plan of the Company;
(ii) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of the Company; or
(iii) any person in which the Executive 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, or stock of
the Company representing 25% or more of the total voting power of the
Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company by a person other
than a person described in subparagraph (a) (i), (ii) or (iii), and
one of the following occurs:
(i) the person making the offer owns or has accepted for payment
stock of the Company representing 25%
-2-
<PAGE>
or more of the total voting power of the Company's stock; or
(ii) 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
Company's outstanding stock when the offer terminates;
(c) during any period of two consecutive years there shall cease to be a
majority of the Company'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 Company'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
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) such a merger or consolidation which would result in the
Company'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 power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) such a merger or consolidation which would result in the
directors of the Company 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 (d), "surviving entity" shall mean only
an entity in which all of the Company's stockholders become
stockholders by the terms of such merger or consolidation, and the
phrase "directors of the Company who were directors immediately prior
thereto" shall not include:
-3-
<PAGE>
(A) any director of the Company who was designated by a person who
has entered into an agreement with the Company to effect a
transaction described in this paragraph or in paragraph (a)
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 Company'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.
4. Potential Change in Control. For purposes of this Agreement, a
"Potential Change in Control" shall be deemed to occur if (i) any person who is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more of the combined voting power of the Company's then
outstanding securities over the percentage so owned by such person on the date
hereof; (ii) a tender offer is made for stock of the Company representing 25% or
more of the total voting power of the Company's stock; (iii) any person makes a
solicitation of proxies for the election of directors who have not been
recommended by the Company; (iv) the Company enters into negotiations with
respect to a transaction which would upon consummation constitute a Change in
Control; or (v) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred.
5. Compensation During the Employment Period. During the Employment
Period, the Executive shall be compensated as follows:
(a) he shall receive an annual salary which is not less than his annual
salary immediately prior to the Employment Period, with an increase as
of each January 1 which is not less than the increase, if any, in the
cost of living, as measured by the Consumer Price Index for All Urban
Consumers (CPI-U), for the 12-month period ending on the preceding
December 31;
(b) he shall be entitled to participate in short-term and long-term cash
based incentive compensation plans which, in the aggregate, provide
bonus opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided by the
Company for executives with comparable duties; and (ii) the
opportunities provided to the Executive under all such
-4-
<PAGE>
plans in which he was participating prior to the Employment Period;
(c) he shall be eligible to participate in stock option, stock
appreciation rights, performance awards, restricted stock and other
equity-based incentive compensation plans on a basis not materially
less favorable to the Executive than that applicable (i) to the
Executive immediately prior to the Employment Period or (ii) to other
executives of the Company with comparable duties; and
(d) he shall be entitled to receive employee benefits (including, but not
limited to, tax-qualified and nonqualified pension and savings plan
benefits, medical insurance, disability income protection, life
insurance coverage and death benefits) and perquisites which are not
materially less favorable to the Executive than (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to
which the Executive would be entitled under the Company's employee
benefit plans and perquisites as in effect immediately prior to the
Employment Period.
In the event of a termination of the Executive's employment for any reason
during the Employment Period, he shall be entitled to his accrued vacation as
of the date of termination, plus long-term and short-term bonuses based on the
targeted bonus amounts for the bonus period which includes his date of
termination pro rated based on the number of days elapsed in the bonus period.
6. Termination. For purposes of this Agreement, the term "Termination"
shall mean:
(a) Termination of the employment of the Executive during the Employment
Period by the Company, for any reason other than death, Disability (as
defined below), or Cause (as described below).
(b) Termination of employment of the Executive during the Employment
Period by reason of the Executive's resignation upon the occurrence
of one of the following events:
(i) a significant change in the nature or scope of the Executive's
authorities or duties from those described in paragraph 2 above,
a breach of any of the subparagraphs of paragraph 5 above, or
the breach by the Company of any other provision of this
Agreement;
-5-
<PAGE>
(ii) the relocation of the Executive's office to a location more
than fifty miles from the location of his office immediately
prior to the Employment Period;
(iii) a reasonable determination by the Executive that, as a result
of a Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise
the authorities, powers, functions or duties associated with
his position and contemplated by paragraph 2 above; or
(iv) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this
Agreement as contemplated in paragraph 17 below.
(c) Termination of employment of the Executive during the 90-day period
commencing on the first anniversary of the date of a Change in Control
due to the Executive's resignation for any reason.
The date of the Executive's Termination under this paragraph 6 shall be the date
specified by the Executive or the Company, as the case may be, in a written
notice to the other party complying with the requirements of paragraph 13 below.
For purposes of this Agreement, the term "Disability" means an incapacity, due
to physical injury or illness or mental illness, causing the Executive to be
unable to perform his duties with the Company on a full-time basis for a period
of at least six consecutive calendar months. For purposes of this Agreement, the
term "Cause" means a willful and material breach of this Agreement by the
Executive resulting in material injury to the Company or a willful and continued
failure of the Executive to substantially perform his duties (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness) which failure has not been corrected by the Executive within 30 days
after the Board of Directors of the Company has given the Executive written
notice of such failure. No act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that the action or omission was in the best
interests of the Company.
7. Severance Payments. Subject to the provisions of paragraphs 8 and 9
below, in the event of a Termination described in paragraph 6 above, in lieu of
the amount otherwise payable under paragraph 5, the Executive shall continue to
receive medical insurance, disability income protection, life insurance coverage
and death benefits and perquisites in accordance with subparagraph 5(d) above
for a period of 36 months after the date of Termination,
-6-
<PAGE>
and shall be entitled to a lump sum payment in cash no later than ten business
days after the Termination equal to the sum of:
(a) an amount equal to three times the Executive's annual salary rate in
effect under subparagraph 5(a) above immediately prior to the date of
Termination;
(b) an amount equal to three times the greatest of (i) the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the date of Termination, or (ii) the estimated amount
of the short term incentive award and other bonuses which would
otherwise be payable to the Executive in accordance with subparagraph
5(b) above for the year of Termination, or (iii) the targeted bonus
amounts under the short term incentive award and other bonuses which
would otherwise be payable to the Executive in accordance with
subparagraph 5(b) above for the year of Termination;
(c) an amount equal to three times the amount of the Company's
contribution to the Case Corporation Savings Plan allocated to the
Executive's account under that plan for the calendar year preceding
the year of Termination.
8. Make-Whole Payments. If any amount payable to the Executive by the
Company or any subsidiary or affiliate thereof, whether under this Agreement or
otherwise (a "Payment"), is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar federal
or state law (an "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Make Whole-Amount") which is equal to (i) the amount of
the Excise Tax, plus (ii) the aggregate amount of any interest, penalties, fines
or additions to any tax which are imposed in connection with the imposition of
such Excise Tax, plus (iii) all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state or local
government or taxing authority by reason of the payments required under clause
(i) and clause (ii) and this clause (iii).
(a) for purposes of determining the Make-Whole Amount, the Executive shall
be deemed to be taxed at the highest marginal rate under all
applicable local, state, federal and foreign income tax laws for the
year in which the Make-Whole Amount is paid. The Make-Whole Amount
payable with respect to an Excise Tax shall be paid by the Company
conincident with the Payment with respect to which such Excise Tax
relates.
(b) All calculations under this paragraph 8 shall be made initially by the
Company and the Company shall provide
<PAGE>
prompt written notice thereof to the Executive to enable the Executive
to timely file all applicable tax returns. Upon request of the
Executive, the Company shall provide the Executive with sufficient tax
and compensation data to enable the Executive or his tax advisor to
independently make the calculations described in subparagraph (a)
above and the Company shall reimburse the Executive for reasonable
fees and expenses incurred for any such verification.
(c) If the Executive gives written notice to the Company of any objection
to the results of the Company's calculations within 60 days of the
Executive's receipt of written notice thereof, the dispute shall be
referred for determination to tax counsel selected by the independent
auditors of the Company ("Tax Counsel"). The Company shall pay all
fees and expenses of such Tax Counsel. Pending such determination by
Tax Counsel, the Company shall pay the Executive the Make-Whole Amount
as determined by it in good faith. The Company shall pay the Executive
any additional amount determined by Tax Counsel to be due under this
paragraph 8 (together with interest thereon at a rate equal to 120% of
the Federal short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
(d) The determination by Tax Counsel shall be conclusive and binding upon
all parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency
(a "Tax Authority") determines that the Executive owes a greater or
lesser amount of Excise Tax with respect to any Payment than the
amount determined by Tax Counsel.
(e) If a Taxing Authority makes a claim against the Executive which, if
successful, would require the Company to make a payment under this
paragraph 8, the Executive agrees to contest the claim on reques of
the Company subject to the following conditions:
(i) The Executive shall notify the Company of any such claim within
10 days of becoming aware thereof. In the event that the Company
desires the claim to be contested, it shall promptly (but in no
event more than 30 days after the notice from the Executive or
such shorter time as the Taxing Authority may specify for
responding to such claim) request the Executive to contest the
claim. The Executive shall not make any payment of any tax which
is the subject of the claim before the Executive has given the
notice or during the 30-day period thereafter
-8-
<PAGE>
unless the Executive receives written instructions from the
Company to make such payment together with an advance of funds
sufficient to make the requested payment plus any amounts
payable under this paragraph 8 determined as if such advance
were an Excise Tax, in which case the Executive will act
promptly in accordance with such instructions.
(ii) If the Company so requests, the Executive will contest the claim
by either paying the tax claimed and suing for a refund in the
appropriate court or contesting the claim in the United States
Tax Court or other appropriate court, as directed by the
Company; provided, however, that any request by the Company for
the Executive to pay the tax shall be accompanied by an advance
from the Company to the Executive of funds sufficient to make
the requested payment plus any amounts payable under this
paragraph 8 determined as if such advance were an Excise Tax. If
directed by the Company in writing the Executive will take all
action necessary to compromise or settle the claim, but in no
event will the Executive compromise or settle the claim or cease
to contest the claim without the written consent of the Company;
provided, however, that the Executive may take any such action
if the Executive waives in writing his right to a payment under
this paragraph 8 for any amounts payable in connection with such
claim. The Executive agrees to cooperate in good faith with the
Company in contesting the claim and to comply with any
reasonable request from the Company concerning the contest of
the claim, including the pursuit of administrative remedies, the
appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the Company, the
Executive shall take appropriate appeals of any judgment or
decision that would require the Company to make a payment under
this paragraph 8. Provided that the Executive is in compliance
with the provisions of this section, the Company shall be liable
for and indemnify the Executive against any loss in connection
with, and all costs and expenses, including attorneys' fees,
which may be incurred as a result of, contesting the claim, and
shall provide to the Executive within 30 days after each written
request therefor by the Executive cash advances or reimbursement
for all such costs and expenses actually incurred or reasonably
expected to be incurred by the Executive as a result of
contesting the claim.
-9-
<PAGE>
(f) Should a Tax Authority finally determine that an additional Excise Tax
is owed, then the Company shall pay an additional Make-Up Amount to
the Executive in a manner consistent with this paragraph 8 with
respect to any additional Excise Tax and any assessed interest, fines,
or penalties. If any Excise Tax as calculated by the Company or Tax
Counsel, as the case may be, is finally determined by a Tax Authority
to exceed the amount required to be paid under applicable law, then
the Executive shall repay such excess to the Company within 30 days of
such determination; provided that such repayment shall be reduced by
the amount of any taxes paid by the Executive on such excess which is
not offset by the tax benefit attributable to the repayment.
9. Accelerated Vesting of Stock Awards. As of the date of a Change in
Control, all stock option and restricted stock awards held by the Executive
shall become vested and nonforfeitable, to the extent that such vesting is
permitted under the terms of the plans pursuant to which such awards were
granted. If such vesting is not permitted under the terms of the plans, and on
or after the date of the Change in Control the Executive forfeits unvested
options or restricted stock awarded prior to the date of the Change in Control,
the Executive shall be entitled to a cash payment equal to (i) in the case of
options, the excess of the fair market value of the option shares forfeited over
the exercise price thereof, and (ii) in the case of restricted stock, the fair
market value of such stock, with fair market value in either case determined as
of the forfeiture date in accordance with the terms of the plan pursuant to
which the award was made. Such cash payment shall be made as soon as practicable
after the date of forfeiture.
10. Withholding. All payments to the Executive under this Agreement will
be subject to all applicable withholding of state and federal taxes.
11. Non-Competition and Confidentiality. The Executive agrees that:
(a) for a period of one year after the termination of the Executive's
employment with the Company, the Executive shall not be employed by,
or otherwise engage or be interested in, any business which is
competitive with any business of the Company or of any of its
subsidiaries in which the Executive was engaged during his employment
prior to his termination, but this restriction shall apply only if
such employment or activity is likely to cause, or causes, serious
damage to the Company or any of its subsidiaries; and
-10-
<PAGE>
(b) during and after the Executive's employment by the Company, he will
not divulge or appropriate to his own use, or the use of others, any
secret or confidential information or knowledge pertaining to the
business of the Company, or any of its subsidiaries, obtained
during his employment by the Company or any of its subsidiaries.
12. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the State of
Illinois, by three arbitrators appointed by the parties. If the parties cannot
agree on the appointment of the arbitrators, one shall be appointed by the
Company and one by the Executive and the third shall be appointed by the first
two arbitrators. If the first two arbitrators cannot agree on the appointment
of a third arbitrator, then the third arbitrator shall be appointed by the
Chief Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
13. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
14. Notices. Any notice of Termination of the Executive's employment by
the Company or the Executive for any reason shall be upon no less than 15 days'
and no greater than 45 days' advance written notice to the other party. Any
notices, requests, demand
-11-
<PAGE>
and other communications provided for by this Agreement shall be sufficient if
in writing and if sent by registered or certified mail to the Executive at the
last address he has filed in writing with the Company or, in the case of the
Company, to the attention of the Secretary of the Company, at its principal
executive offices.
15. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
16. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without application of
conflict of laws provisions thereunder.
17. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
18. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no succession had taken place.
19. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and
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<PAGE>
attested by its Secretary, all as of the day and year first above written.
/s/ Theodore R. French
-------------------------------
Theodore R. French
CASE CORPORATION
By /s/ Marc J. Castor
-----------------------------
Its VP Human Resources
----------------------------
ATTEST:
/s/ Richard S. Brennan
- -----------------------
Secretary
<PAGE>
EXHIBIT 10(b)(3)
AGREEMENT REGARDING
CHANGE IN CONTROL
-------------------
This Agreement entered into as of the 8th day of April, 1996 by and
between Case Corporation, a Delaware corporation (the "Company"), and Steven G.
Lamb (the "Executive"),
WITNESSETH THAT:
---------------
WHEREAS, the Company wishes to assure itself of the continuity of the
Executive's services in the event of any actual or threatened change in control
of the Company; and
WHEREAS, the Company and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on the
date hereof and shall continue through December 31, 1999; provided, however,
that on such date and on each December 31 thereafter, the Term of this Agreement
shall automatically be extended for one additional year unless, not later than
the second preceding January 1 either party shall have given notice that such
party does not wish to extend the Term; and provided, further, that if a Change
in Control (as defined in paragraph 3 below) shall have occurred during the
original or any extended Term of this Agreement, the Term of this Agreement
shall continue for a period of thirty-six calendar months beyond the calendar
month in which such Change in Control occurs.
2. Employment After a Change or Potential Change in Control. If the
Executive is in the employ of the Company on the date of a Change in Control,
the Company hereby agrees to continue the Executive in its employ for the period
commencing on the date of the Change in Control and ending on the last day of
the Term of this Agreement. If the Executive is in the employ of the Company on
the first day of a Potential Change in Control (as defined in paragraph 4
below), the Company hereby agrees to continue the Executive in its employ for
the twelve-month period commencing on such date and, if a Change in Control
occurs during such period agrees to continue the Executive in its employ until
the last day of the Term of this Agreement. During the period of employment
<PAGE>
described in the foregoing provisions of this paragraph 2 (the "Employment
Period"), the Executive shall hold such position with the Company and exercise
such authority and perform such executive duties as are commensurate with his
position, authority and duties immediately prior to the Change in Control or
Potential Change in Control, as the case may be. The Executive agrees that
during the Employment Period he shall devote his full business time exclusively
to the executive duties described herein and perform such duties faithfully and
efficiently; provided, however, that nothing in this Agreement shall prevent the
Executive from voluntarily resigning from employment upon 90 days' written
notice to the Company under circumstances which do not constitute a Termination
(as defined below in paragraph 6); provided, further, however, that the
Executive agrees to remain in the employ of the Company from the date on which a
Potential Change in Control (as defined in paragraph 4 below) occurs through the
earlier of six months thereafter, or the last day of the Term of this Agreement.
3. Change in Control. For purposes of this Agreement, the term "Change in
Control" means a change in the beneficial ownership of the Company's voting
stock or a change in the composition of the Company's Board of Directors which
occurs as follows:
(a) any "person" (as such term is used in Section 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than:
(i) a trustee or other fiduciary of securities held under an
employee benefit plan of the Company;
(ii) a corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of the Company; or
(iii) any person in which the Executive 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 Company representing 25% or more of the total voting power of the
Company's then outstanding stock;
(b) a tender offer is made for the stock of the Company by a person other
than a person described in subparagraph (a) (i), (ii) or (iii), and
one of the following occurs:
(i) the person making the offer owns or has accepted for payment
stock of the Company representing 25%
-2-
<PAGE>
or more of the total voting power of the Company's stock; or
(ii) 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
Company's outstanding stock when the offer terminates;
(c) during any period of two consecutive years there shall cease to be a
majority of the Company'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 Company'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 selection or nomination for election was previously so
approved; or
(d) the stockholders of the Company approve a merger or consolidation of
the Company with any other company other than:
(i) such a merger or consolidation which would result in the
Company'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 power of the Company's or such
surviving entity's outstanding voting stock immediately after
such merger or consolidation; or
(ii) such a merger or consolidation which would result in the
directors of the Company 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 (d), "surviving entity" shall mean only
an entity in which all of the Company's stockholders become
stockholders by the terms of such merger or consolidation, and the
phrase "directors of the Company who were directors immediately prior
thereto" shall not include:
-3-
<PAGE>
(A) any director of the Company who was designated by a person who
has entered into an agreement with the Company to effect a
transaction described in this paragraph or in paragraph (a)
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 Company'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.
4. Potential Change in Control. For purposes of this Agreement, a
"Potential Change in Control" shall be deemed to occur if (i) any person who is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 9.5% or more of the combined voting power of the Company's
then outstanding securities increases his beneficial ownership of such
securities by 5% or more of the combined voting power of the Company's then
outstanding securities over the percentage so owned by such person on the date
hereof; (ii) a tender offer is made for stock of the Company representing 25% or
more of the total voting power of the Company's stock; (iii) any person makes a
solicitation of proxies for the election of directors who have not been
recommended by the Company; (iv) the Company enters into negotiations with
respect to a transaction which would upon consummation constitute a Change in
Control; or (v) the Board adopts a resolution to the effect that, for the
purposes of this Agreement, a Potential Change in Control has occurred.
5. Compensation During the Employment Period. During the Employment
Period, the Executive shall be compensated as follows:
(a) he shall receive an annual salary which is not less than his annual
salary immediately prior to the Employment Period, with an increase as
of each January 1 which is not less than the increase, if any, in the
cost of living, as measured by the Consumer Price Index for All Urban
Consumers (CPI-U), for the 12-month period ending on the preceding
December 31;
(b) he shall be entitled to participate in short-term and long-term cash-
based incentive compensation plans which, in the aggregate, provide
bonus opportunities which are not materially less favorable to the
Executive than the greater of (i) the opportunities provided by the
Company for executive with comparable duties; and (ii) the
opportunities provided to the Executive under all such
-4-
<PAGE>
plans in which he was participating prior to the Employment Period;
(c) he shall be eligible to participate in stock option, stock
appreciation rights, performance awards, restricted stock and other
equity-based incentive compensation plans on a basis not materially
less favorable to the Executive than that applicable (i) to the
Executive immediately prior to the Employment Period or (ii) to other
executives of the Company with comparable duties; and
(d) he shall be entitled to receive employee benefits (including, but not
limited to, tax-qualified and nonqualified pension and savings plan
benefits, medical insurance, disability income protection, life
insurance coverage and death benefits) and perquisites which are not
materially less favorable to the Executive than (i) the employee
benefits and perquisites provided by the Company to executives with
comparable duties or (ii) the employee benefits and perquisites to
which the Executive would be entitled under the Company's employee
benefit plans and perquisites as in effect immediately prior to the
Employment Period.
In the event of a termination of the Executive's employment for any reason
during the Employment Period, he shall be entitled to his accrued vacation as of
the date of termination, plus long-term and short-term bonuses based on the
targeted bonus amounts for the bonus period which includes his date of
termination pro rated based on the number of days elapsed in the bonus period.
6. Termination. For purposes of this Agreement, the term "Termination"
shall mean:
(a) Termination of the employment of the Executive during the Employment
Period by the Company, for any reason other than death, Disability (as
defined below), or Cause (as described below).
(b) Termination of employment of the Executive during the Employment
Period by reason of the Executive's resignation upon the occurrence of
one of the following events:
(i) a significant change in the nature or scope of the Executive's
authorities or duties from those described in paragraph 2 above,
a breach of any of the subparagraphs of paragraph 5 above, or
the breach by the Company of any other provision of this
Agreement;
-5-
<PAGE>
(ii) the relocation of the Executive's office to a location more
than fifty miles from the location of his office immediately
prior to the Employment Period;
(iii) a reasonable determination by the Executive that, as a result
of a Change in Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise
the authorities, powers, functions or duties associated with
his position and contemplated by paragraph 2 above; or
(iv) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this
Agreement as contemplated in paragraph 17 below.
(c) Termination of employment of the Executive during the 90-day period
commencing on the first anniversary of the date of a Change in Control
due to the Executive's resignation for any reason.
The date of the Executive's Termination under this paragraph 6 shall be the date
specified by the Executive or the Company, as the case may be, in a written
notice to the other party complying with the requirements of paragraph 13 below.
For purposes of this Agreement, the term "Disability" means an incapacity, due
to physical injury or illness or mental illness, causing the Executive to be
unable to perform his duties with the Company on a full-time basis for a period
of at least six consecutive calendar months. For purposes of this Agreement, the
term "Cause" means a willful and material breach of this Agreement by the
Executive resulting in material injury to the Company or a willful and continued
failure of the Executive to substantially perform his duties (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness) which failure has not been corrected by the Executive within 30 days
after the Board of Directors of the Company has given the Executive written
notice of such failure. No act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that the action or omission was in the best
interest of the Company.
7. Severance Payments. Subject to the provisions of paragraphs 8 and 9
below, in the event of a Termination described in paragraph 6 above, in lieu of
the amount otherwise payable under paragraph 5, the Executive shall continue to
receive medical insurance, disability income protection, life insurance coverage
and death benefits and perquisites in accordance with subparagraph 5(d) above
for a period of 36 months after the date of Termination,
-6-
<PAGE>
and shall be entitled to a lump sum payment in cash no later than ten business
days after the date of Termination equal to the sum of:
(a) an amount equal to three times the Executive's annual salary rate in
effect under subparagraph 5(a) above immediately prior to the date of
Termination;
(b) an amount equal to three times the greatest of (i) the Executive's
short term incentive award and other bonuses payable for the calendar
year preceding the date of Termination, or (ii) the estimated amount
of the short term incentive award and other bonuses which would
otherwise be payable to the Executive in accordance with subparagraph
5(b) above for the year of Termination, or (iii) the targeted bonus
amounts under the short term incentive award and other bonuses which
would otherwise be payable to the Executive in accordance with
subparagraph 5(b) above for the year of Termination;
(c) an amount equal to three times the amount of the Company's
contribution to the Case Corporation Savings Plan allocated to the
Executive's account under that plan for the calendar year preceding
the year of Termination.
8. Make-Whole Payments. If any amount payable to the Executive by the
Company or any subsidiary or affiliate thereof, whether under this Agreement or
otherwise (a "Payment"), is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar federal
or state law (an "Excise Tax"), the Company shall pay to the Executive an
additional amount (the "Make Whole-Amount") which is equal to (i) the amount of
the Excise Tax, plus (ii) the aggregate amount of any interest, penalties, fines
or additions to any tax which are imposed in connection with the imposition of
such Excise Tax, plus (iii) all income, excise and other applicable taxes
imposed on the Executive under the laws of any Federal, state or local
government or taxing authority by reason of the payments required under clause
(i) and clause (ii) and this clause (iii).
(a) For purposes of determining the Make-Whole Amount, the Executive shall
be deemed to be taxed at the highest marginal rate under all
applicable local, state, federal and foreign income tax laws for the
year in which the Make-Whole Amount is paid. The Make-Whole Amount
payable with respect to an Excise Tax shall be paid by the Company
conincident with the Payment with respect to which such Excise Tax
relates.
(b) All calculations under this paragraph 8 shall be made initially by the
Company and the Company shall provide
-7-
<PAGE>
prompt written notice thereof to the Executive to enable the Executive
to timely file all applicable tax returns. Upon request of the
Executive, the Company shall provide the Executive with sufficient tax
and compensation data to enable the Executive or his tax advisor to
independently make the calculations described in subparagraph (a)
above and the Company shall reimburse the Executive for reasonable
fees and expenses incurred for any such verification.
(c) If the Executive gives written notice to the Company of any objection
to the results of the Company's calculations within 60 days of the
Executive's receipt of written notice thereof, the dispute shall be
referred for determination to tax counsel selected by the independent
auditors of the Company ("Tax Counsel"). The Company shall pay all
fees and expenses of such Tax Counsel. Pending such determination by
Tax Counsel, the Company shall pay the Executive the Make-Whole Amount
as determined by it in good faith. The Company shall pay the Executive
any additional amount determined by Tax Counsel to be due under this
paragraph 8 (together with interest thereon at a rate equal to 120% of
the Federal short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
(d) The determination by Tax Counsel shall be conclusive and binding upon
all parties unless the Internal Revenue Service, a court of competent
jurisdiction, or such other duly empowered governmental body or agency
(a "Tax Authority") determines that the Executive owes a greater or
lesser amount of Excise Tax with respect to any Payment than the
amount determined by Tax Counsel.
(e) If a Taxing Authority make a claim against the Executive which, if
successful, would require the Company to make a payment under this
paragraph 8, the Executive agrees to contest the claim on request of
the Company subject to the following conditions:
(i) The Executive shall notify the Company of any such claim within
10 days of becoming aware thereof. In the event that the Company
desires the claim to be contested, it shall promptly (but in no
event more than 30 days after the notice from the Executive or
such shorter time as the Taxing Authority may specify for
responding to such claim) request the Executive to contest the
claim. The Executive shall not make any payment of any tax which
is the subject of the claim before the Executive has given the
notice or during the 30-day period thereafter
-8-
<PAGE>
unless the Executive receives written instructions from the
Company to make such payment together with an advance of funds
sufficient to make the requested payment plus any amounts
payable under this paragraph 8 determined as if such advance
were an Excise Tax, in which case the Executive will act
promptly in accordance with such instructions.
(ii) If the Company so requests, the Executive will contest the claim
by either paying the tax claimed and suing for a refund in the
appropriate court or contesting the claim in the United States
Tax Court or other appropriate court, as directed by the
Company; provided, however, that any request by the Company for
the Executive to pay the tax shall be accompanied by an advance
from the Company to the Executive of funds sufficient to make
the requested payment plus any amounts payable under this
paragraph 8 determined as if such advance were an Excise Tax. If
directed by the Company in writing the Executive will take all
action necessary to compromise or settle the claim, but in no
event will the Executive compromise or settle the claim or cease
to contest the claim without the written consent of the Company;
provided, however, that the Executive may take any such action
if the Executive waives in writing his right to a payment under
this paragraph 8 for any amounts payable in connection with such
claim. The Executive agrees to cooperate in good faith with the
Company in contesting the claim and to comply with any
reasonable request from the Company concerning the contest of
the claim, including the pursuit of administrative remedies, the
appropriate forum for any judicial proceedings, and the legal
basis for contesting the claim. Upon request of the Company, the
Executive shall take appropriate appeals of any judgment or
decision that would require the Company to make a payment under
this paragraph 8. Provided that the Executive is in compliance
with the provisions of this section, the Company shall be liable
for and indemnify the Executive against any loss in connection
with, and all costs and expenses, including attorneys' fees,
which may be incurred as a result of, contesting the claim, and
shall provide to the Executive within 30 days after each written
request therefor by the Executive cash advances or reimbursement
for all such costs and expenses actually incurred or reasonably
expected to be incurred by the Executive as a result of
contesting the claim.
-9-
<PAGE>
(f) Should a Tax Authority finally determine that an additional Excise Tax
is owed, then the Company shall pay an additional Make-Up Amount to
the Executive in a manner consistent with this paragraph 8 with
respect to any additional Excise Tax and any assessed interest, fines,
or penalties. If any Excise Tax as calculated by the Company or Tax
Counsel, as the case may be, is finally determined by a Tax Authority
to exceed the amount required to be paid under applicable law, then
the Executive shall repay such excess to the Company within 30 days of
such determination; provided that such repayment shall be reduced by
the amount of any taxes paid by the Executive on such excess which is
not offset by the tax benefit attributable to the repayment.
9. Accelerated Vesting of Stock Awards. As of the date of a Change in
Control, all stock option and restricted stock awards held by the Executive
shall become vested and nonforfeitable, to the extent that such vesting is
permitted under the terms of the plans pursuant to which such awards were
granted. If such vesting is not permitted under the terms of the plans, and on
or after the date of the Change in Control the Executive forfeits unvested
options or restricted stock awarded prior to the date of the Change in Control,
the Executive shall be entitled to a cash payment equal to (i) in the case of
options, the excess of the fair market value of the option shares forfeited over
the exercise price thereof, and (ii) in the case of restricted stock, the fair
market value of such stock, with fair market value in either case determined as
of the forfeiture date in accordance with the terms of the plan pursuant to
which the award was made. Such cash payment shall be made as soon as practicable
after the date of forfeiture.
10. Withholding. All payments to the Executive under this Agreement will
be subject to all applicable withholding of state and federal taxes.
11. Non-Competition and Confidentiality. The Executive agrees that:
(a) for a period of one year after the termination of the Executive's
employment with the Company, the Executive shall not be employed by,
or otherwise engage or be interested in, any business which is
competitive with any business of the Company or of any of its
subsidiaries in which the Executive was engaged during his employment
prior to his termination, but this restriction shall apply only if
such employment or activity is likely to cause, or causes, serious
damage to the Company or any of its subsidiaries; and
-10-
<PAGE>
(b) during and after the Executive's employment by the Company, he will
not divulge or appropriate to his own use, or the use of others, any
secret or confidential information or knowledge pertaining to the
business of the Company, or any of its subsidiaries, obtained during
his employment by the Company, or any of its subsidiaries.
12. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Chicago, in accordance with the laws of the State of
Illinois, by three arbitrators appointed by the parties. If the parties cannot
agree on the appointment of the arbitrators, one shall be appointed by the
Company and one by the Executive and the third shall be appointed by the first
two arbitrators. If the first two arbitrators cannot agree on the appointment of
a third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Seventh Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 11. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. In the event that it shall be necessary or desirable for the Executive
to retain legal counsel or incur other costs and expenses in connection with
enforcement of his rights under this Agreement, the Company shall pay (or the
Executive shall be entitled to recover from the Company, as the case may be) his
reasonable attorneys' fees and costs and expenses in connection with enforcement
of his rights (including the enforcement of any arbitration award in court).
Payments shall be made to the Executive at the time such fees, costs and
expenses are incurred. If, however, the arbitrators shall determine that, under
the circumstances, payment by the Company of all or a part of any such fees and
costs and expenses would be unjust, the Executive shall repay such amounts to
the Company in accordance with the order of the arbitrators.
13. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Company by the Executive, any amounts earned by the Executive in
other employment after termination of his employment with the Company, or any
amounts which might have been earned by the Executive in other employment had he
sought such other employment.
14. Notices. Any notice of Termination of the Executive's employment by
the Company or the Executive for any reason shall be upon no less than 15 days'
and no greater than 45 days' advance written notice to the other party. Any
notices, requests, demand
-11-
<PAGE>
and other communications provided for by this Agreement shall be sufficient if
in writing and if sent by registered or certified mail to the Executive at the
last address he has filed in writing with the Company or, in the case of the
Company, to the attention of the Secretary of the Company, at its principal
executive offices.
15. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph shall limit the Executive's rights or powers
to dispose of his property by will or limit any rights or powers which his
executor or administrator would otherwise have.
16. Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois, without application of
conflict of laws provisions thereunder.
17. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
18. Successors to the Company. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company. The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no succession had taken place.
19. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
20. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name and on its behalf, and its corporate seal to
be hereunto affixed and
-12-
<PAGE>
attested by its Secretary, all as of the day and year first above written.
/s/ Steven G. Lamb
-------------------------------
Steven G. Lamb
CASE CORPORATION
By /s/ Marc J. Castor
-----------------------------
Its VP Human Resources
----------------------------
ATTEST:
/s/ Richard S. Brennan
- -----------------------
Secretary
<PAGE>
EXHIBIT 11
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
(MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
COMPUTATIONS FOR STATEMENTS OF INCOME
Primary earnings per share of common stock (average
shares outstanding):
Income before extraordinary loss................... $ 64 $ 75
Extraordinary loss................................. -- (22)
---------- ----------
Net income......................................... 64 53
Preferred stock dividends.......................... (2) (2)
---------- ----------
Net income to common............................... $ 62 $ 51
========== ==========
Average shares of common stock outstanding......... 73,480,274 71,298,347
Incremental common shares applicable to restricted
common stock based on the common stock daily
average market price during the period............ 209,604 176,296
Incremental common shares applicable to common
stock options based on the common stock daily
average market price during the period............ 1,363,785 1,807,869
---------- ----------
Average common stock, as adjusted.................. 75,053,663 73,282,512
========== ==========
Earnings per share of common stock (including common
stock equivalents):
Net income after preferred stock dividends and
before extraordinary loss....................... $ 0.83 $ 1.00
Extraordinary loss............................... -- (0.30)
---------- ----------
Net earnings per share of common stock........... $ 0.83 $ 0.70
========== ==========
Fully diluted earnings per share of common stock:
Average shares of common stock outstanding........... 73,480,274 71,298,347
Incremental common shares applicable to restricted
common stock based on the more dilutive of the
common stock ending or daily average market price
during the period................................... 209,604 189,084
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.............................................. 1,364,255 1,851,934
Average common shares issuable assuming conversion of
the Series A Cumulative Convertible Preferred Stock
and the Cumulative Convertible Second Preferred
Stock............................................... 3,488,711 3,488,711
---------- ----------
Average common shares assuming full dilution......... 78,542,844 76,828,076
========== ==========
Fully diluted earnings per average share of common
stock, assuming conversion of all applicable
securities:
Net income before extraordinary loss............. $ 0.82 $ 0.98
Extraordinary loss............................... -- (0.29)
---------- ----------
Net earnings per share of common stock........... $ 0.82 $ 0.69
========== ==========
</TABLE>
<PAGE>
EXHIBIT 12
CASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDENDS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
--------- ---------
<S> <C> <C>
Net Income................................................. $ 64 $ 53
Add:
Interest................................................. 39 40
Amortization of capitalized debt expense................. -- 1
Portion of rentals representative of interest factor..... 2 3
Income tax expense and other taxes on income............. 31 44
Fixed charges of unconsolidated subsidiaries............. 1 --
--------- ---------
Earnings as defined.................................... $ 137 $ 141
========= =========
Interest................................................... $ 39 $ 40
Amortization of capitalized debt expense................... -- 1
Portion of rentals representative of interest factor....... 2 3
Fixed charges of unconsolidated subsidiaries............... 1 --
--------- ---------
Fixed charges as defined............................... $ 42 $ 44
========= =========
Preferred Dividends:
Amount declared.......................................... $ 2 $ 2
Gross-up to pre-tax based on effective rates of 33% and
37%, respectively....................................... $ 3 $ 3
Ratio of earnings to fixed charges and preferred dividends. 3.04x 3.00x
========= =========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This information contains summary financial information extracted from
the Company's Form 10Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 104
<SECURITIES> 0
<RECEIVABLES> 1,825
<ALLOWANCES> 0
<INVENTORY> 1,189
<CURRENT-ASSETS> 3,353
<PP&E> 2,028
<DEPRECIATION> 1,057
<TOTAL-ASSETS> 6,172
<CURRENT-LIABILITIES> 2,588
<BONDS> 1,154
1
77
<COMMON> 0
<OTHER-SE> 1,945
<TOTAL-LIABILITY-AND-EQUITY> 6,172
<SALES> 1,176
<TOTAL-REVENUES> 1,232
<CGS> 910
<TOTAL-COSTS> 1,090
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 95
<INCOME-TAX> 31
<INCOME-CONTINUING> 64
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-PRIMARY> .83
<EPS-DILUTED> .82
</TABLE>
