Stock Incentive Plan

Under the 2006 Plan, up to 10.0 million shares of AGCO common stock may be issued. The 2006 Plan allows the Company, under the direction of the Board of Directors’ Compensation Committee, to make grants of performance shares, stock appreciation rights, stock options, restricted stock units and restricted stock awards to employees, officers and non-employee directors of the Company.

Long-Term Incentive Plan

The Company’s primary long-term incentive plan is a performance share plan that provides for awards of shares of the Company’s common stock based on achieving financial targets, such as targets for earnings per share and return on invested capital, as determined by the Company’s Board of Directors. The Company’s other long-term incentive plan includes the margin growth incentive plan, which provides for awards of shares of the Company’s common stock based on achieving operating margin targets as determined by the Company’s Board of Directors. The stock awards under the 2006 Plan are earned over a performance period, and the number of shares earned is determined based on the cumulative or average results for the period, depending on the measurement. Performance periods for the long-term incentive plan are consecutive and overlapping three-year cycles, and performance targets are set at the beginning of each cycle. The primary long-term incentive plan provides for participants to earn 33% to 200% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. The performance period for the margin growth incentive plan is a three- to five-year cycle commencing in January 2011 and performance targets were set at the beginning of the cycle. The margin growth incentive plan provides for participants to earn 33% to 300% of the target awards depending on the actual performance achieved, with no shares earned if performance is below the established minimum target. Awards earned under the 2006 Plan are paid in shares of common stock at the end of each performance period. The compensation expense associated with these awards is amortized ratably over the vesting or performance period based on the Company’s projected assessment of the level of performance that will be achieved and earned.

Compensation expense recorded during 2014, 2013 and 2012 with respect to awards granted was based upon the stock price as of the grant date. The weighted average grant-date fair value of performance awards granted under the 2006 Plan during 2014, 2013 and 2012 was as follows:



	Years Ended December 31,
	2014		2013		2012
Weighted average grant-date fair value	$	53.87	$	51.51	$	52.11

The 2006 Plan allows for the participant to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the participant’s statutory minimum federal, state and employment taxes which would be payable at the time of grant. Based on the level of performance achieved as of December 31, 2014 and 2013, the following shares were earned under the related performance period and issued in the subsequent year, net of shares that were withheld for taxes related to the earned awards:



	Years Ended December 31,
	2014	2013
Shares earned at year-end	286,804	622,018
Shares withheld for taxes on the earned awards	113,334	226,721
Shares issued subsequent to year-end, net	173,470	395,297	⁽¹⁾

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(1) 26,800 shares were issued during 2013.

During 2014, the Company granted 887,198 performance awards for the three-year performance period commencing in 2014 and ending in 2016. The awards granted assume the maximum target level of performance is achieved.

Performance award transactions during 2014 were as follows and are presented as if the Company were to achieve its maximum levels of performance under the plan:



Shares awarded but not earned at January 1	2,808,519
Shares awarded	887,198
Shares forfeited or unearned	(317,684	)
Shares earned	(896,266	)
Shares awarded but not earned at December 31	2,481,767

During the year ended December 31, 2014, the Company recorded a credit of approximately $16.9 million for the reversal of previously recorded stock compensation expense to reflect the Company’s projected level of performance for the margin growth incentive plan and all three-year cycles under the Company’s primary long-term incentive plan. The Company currently projects that the minimum target level of performance related to the 2013-2015 and the 2014-2016 three-year cycles and the margin growth incentive plan will not be achieved and earned, and therefore, there will be no compensation cost related to unearned performance awards not yet recognized with respect to those cycles.

Stock-settled Appreciation Rights

In addition to the performance share plans, certain executives and key managers are eligible to receive grants of SSARs. The SSARs provide a participant with the right to receive the aggregate appreciation in stock price over the market price of the Company’s common stock at the date of grant, payable in shares of the Company’s common stock. The participant may exercise his or her SSARs at any time after the grant is vested but no later than seven years after the date of grant. The SSARs vest ratably over a four-year period from the date of grant. SSAR award grants made to certain executives and key managers under the 2006 Plan are made with the base price equal to the price of the Company’s common stock on the date of grant. The Company recorded stock compensation expense of approximately $5.2 million, $4.7 million and $3.8 million associated with SSAR award grants during 2014, 2013 and 2012, respectively. The compensation expense associated with these awards is being amortized ratably over the vesting period. The Company estimated the fair value of the grants using the Black-Scholes option pricing model.

The weighted average grant-date fair value of SSARs granted under the 2006 Plan and the weighted average assumptions under the Black-Scholes option model were as follows for the years ended December 31, 2014, 2013 and 2012:



	Years Ended December 31,
	2014			2013			2012
Weighted average grant-date fair value	$	13.11		$	21.10		$	22.50
Weighted average assumptions under Black-Scholes option model:
Expected life of awards (years)	3.0			5.5			5.5
Risk-free interest rate	0.9		%	0.9		%	0.8		%
Expected volatility	35.7		%	50.3		%	51.0		%
Expected dividend yield	0.8		%	0.8		%	—

SSAR transactions during the year ended December 31, 2014 were as follows:



SSARs outstanding at January 1	1,094,836
SSARs granted	301,400
SSARs exercised	(112,050		)
SSARs canceled or forfeited	(63,362		)
SSARs outstanding at December 31	1,220,824
SSAR price ranges per share:
Granted	$ 52.85 - 55.23
Exercised	21.45 - 52.94
Canceled or forfeited	21.45 - 56.98
Weighted average SSAR exercise prices per share:
Granted	$	55.20
Exercised	23.08
Canceled or forfeited	53.31
Outstanding at December 31	50.31

At December 31, 2014, the weighted average remaining contractual life of SSARs outstanding was approximately four years. As of December 31, 2014, the total compensation cost related to unvested SSARs not yet recognized was approximately $8.6 million and the weighted-average period over which it is expected to be recognized is approximately two years.

The following table sets forth the exercise price range, number of shares, weighted average exercise price, and remaining contractual lives by groups of similar price as of December 31, 2014:



	SSARs Outstanding				SSARs Exercisable
Range of Exercise Prices	Number of Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Exercisable as of December 31, 2014	Weighted Average Exercise Price
$21.45 - $32.01	56,625	1.2	$	22.64	56,625	$	22.64
$33.65 - $43.39	125,525	2.1	$	33.88	124,800	$	33.82
$47.89 - $63.64	1,038,674	4.5	$	53.80	414,652	$	53.56
	1,220,824				596,077	$	46.49

The total fair value of SSARs vested during 2014 was approximately $4.3 million. There were 624,747 SSARs that were not vested as of December 31, 2014. The total intrinsic value of both outstanding and exercisable SSARs as of December 31, 2014 was $2.7 million. The total intrinsic value of SSARs exercised during 2014 was approximately $2.6 million.

The shortfall in tax benefit realized for tax deductions in the United States related to the exercise of SSARs and vesting of performance awards under the 2006 Plan was approximately $0.2 million for the year ended December 31, 2014. The excess tax benefit realized for tax deductions in the United States related to the exercise of SSARs, vesting of performance awards under the 2006 Plan and exercise of stock options under the Company’s 1991 Stock Option Plan was approximately $11.4 million for the year ended December 31, 2013. No excess tax benefit was realized for tax deductions for the year ended December 31, 2012 in the United States. The Company realized an insignificant tax benefit from the exercise of SSARs, vesting of performance awards and exercise of stock options in certain foreign jurisdictions during the years ended December 31, 2014, 2013 and 2012.

On January 21, 2015, the Company granted 358,950 performance award shares (subject to the Company achieving future target levels of performance), 325,200 SSARs, and 142,150 of restricted stock units under the 2006 Plan.

Director Restricted Stock Grants

Pursuant to the 2006 Plan, all non-employee directors receive annual restricted stock grants of the Company’s common stock. All restricted stock grants made to the Company’s directors prior to April 24, 2014 were restricted as to transferability for a period of three years. Effective April 24, 2014, the shares granted on that date and all future grants made to the Company’s directors are restricted as to transferability for a period of one year. In the event a director departs from the Company’s Board of Directors, the non-transferability period expires immediately. The plan allows each director to have the option of forfeiting a portion of the shares awarded in lieu of a cash payment contributed to the participant’s tax withholding to satisfy the statutory minimum federal, state and employment taxes that would be payable at the time of grant. The 2014 grant was made on April 24, 2014 and equated to 18,846 shares of common stock, of which 14,907 shares of common stock were issued, after shares were withheld for taxes. The Company recorded stock compensation expense of approximately $1.1 million during 2014 associated with these grants.

As of December 31, 2014, of the 10.0 million shares reserved for issuance under the 2006 Plan, approximately 3.6 million shares were available for grant, assuming the maximum number of shares are earned related to the performance award grants discussed above.