<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 2000
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARVINMERITOR, INC.
(FORMERLY NAMED MU SUB, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
INDIANA 3714 [APPLIED FOR]
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
2135 WEST MAPLE ROAD
TROY, MICHIGAN 48084-7186
(248) 435-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
VERNON G. BAKER, II
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ARVINMERITOR, INC.
2135 WEST MAPLE ROAD
TROY, MICHIGAN 48084-7186
(248) 435-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
PETER R. KOLYER, ESQ. RONALD R. SNYDER, ESQ. ANDREW R. BROWNSTEIN, ESQ.
CHADBOURNE & PARKE LLP VICE PRESIDENT, GENERAL COUNSEL WACHTELL, LIPTON, ROSEN & KATZ
30 ROCKEFELLER PLAZA AND SECRETARY 51 WEST 52ND STREET
NEW YORK, NEW YORK 10112 ARVIN INDUSTRIES, INC. NEW YORK, NEW YORK 10019-6150
(212) 408-5100 ONE NOBLITT PLAZA (212) 403-1000
COLUMBUS, INDIANA 47202-3000
(812) 379-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) AGGREGATE OFFERING PRICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $1 per share
(including the associated preferred share
purchase rights).......................... 70,979,671 shares $19.3779 $1,375,440,047
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------ ----------------------
- ------------------------------------------ ----------------------
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
- ------------------------------------------ ----------------------
<S> <C>
Common Stock, par value $1 per share
(including the associated preferred share
purchase rights).......................... $363,117
- -----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon an estimate of the maximum number of shares of common stock, par
value $1 per share (including the associated preferred share purchase
rights) (the "ArvinMeritor common stock"), of ArvinMeritor, Inc., an Indiana
corporation ("ArvinMeritor") and a wholly-owned subsidiary of Meritor
Automotive, Inc., a Delaware corporation ("Meritor"), to be issued in
connection with (i) the merger of Meritor with and into ArvinMeritor (the
"First Step Merger") and (ii) immediately thereafter, the merger of Arvin
Industries, Inc., an Indiana corporation ("Arvin"), with and into
ArvinMeritor (the "Second Step Merger" and, together with the First Step
Merger, the "Merger").
(2) Calculated in accordance with Rule 457(f) under the Securities Act of 1933,
as amended, by dividing (i) the total of (x) the product of (A) the average
of the high and low prices of Meritor common stock as reported on the New
York Stock Exchange on May 3, 2000 ($14.65625) and (B) 62,302,787,
representing the maximum number of shares of Meritor common stock expected
to be exchanged and canceled in connection with the First Step Merger, plus
(y) the product of (A) the average of the high and low prices of Arvin
common stock as reported on the New York Stock Exchange on May 3, 2000
($21.0625) and (B) 24,252,581, representing the maximum number of shares of
Arvin common stock expected to be exchanged and canceled in connection with
the Second Step Merger, minus (z) $48,505,162, the total cash consideration
expected to be paid by ArvinMeritor to holders of Arvin common stock in the
Second Step Merger, by (ii) 70,979,671, representing the estimated maximum
number of shares of ArvinMeritor common stock to be issued in connection
with the Merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[Meritor Logo] [ARVIN LOGO]
TO THE STOCKHOLDERS OF MERITOR AUTOMOTIVE, INC. AND ARVIN INDUSTRIES, INC.
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The boards of directors of Meritor Automotive, Inc. and Arvin Industries,
Inc. have each unanimously approved a "merger of equals" of the two companies.
The combined company, to be named "ArvinMeritor, Inc.", is expected to have
annual revenues of approximately $7.5 billion. To be headquartered in Troy,
Michigan, ArvinMeritor will have approximately 36,500 employees worldwide and
will hold global leadership positions in the supply of a broad range of
integrated systems, modules and components for light vehicle, commercial truck,
trailer and specialty original equipment manufacturers and related aftermarkets.
We believe that the merger will benefit the stockholders of both companies and
we ask for your support in voting for the merger proposals at our respective
special meetings.
In the merger, each share of Meritor common stock will be converted into
the right to receive 0.75 shares of common stock of ArvinMeritor, Inc. Each
share of Arvin common stock will be converted into the right to receive one
share of common stock of ArvinMeritor, Inc., plus $2.00 in cash. After
completion of the merger, the current stockholders of Meritor will own
approximately 65.8% of the combined company and the current stockholders of
Arvin will own approximately 34.2% of the combined company. The merger will be
tax-free to Meritor stockholders and Arvin stockholders, except for, in the case
of Arvin stockholders, the receipt of the aforementioned cash consideration and,
in the case of Meritor stockholders, the receipt of cash instead of fractional
shares of the combined company.
Application will be made to list the ArvinMeritor common stock on the New
York Stock Exchange under the trading symbol "ARM".
In order to complete the merger, we must obtain necessary regulatory
approvals and the approvals of the stockholders of both of our companies. Each
of us will hold a special meeting of our stockholders to consider and vote on
the merger proposal. Whether or not you plan to attend your company's special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card to us or by submitting your proxy by telephone or via the Internet.
If you sign, date and mail your proxy card without indicating how you want to
vote, your proxy will be counted as a vote FOR the merger. If you do not return
your card, or if you do not instruct your broker how to vote any shares held for
you in "street name", the effect will be a vote against the merger.
The places, dates and times of the special meetings are as follows:
<TABLE>
<S> <C>
FOR MERITOR STOCKHOLDERS: FOR ARVIN STOCKHOLDERS:
2135 West Maple Road One Noblitt Plaza
Troy, Michigan 48084-7186 Columbus, Indiana 47202-3000
July [ ], 2000, 10:00 a.m., local time July [ ], 2000, 9:00 a.m., local time
</TABLE>
THIS DOCUMENT PROVIDES YOU WITH DETAILED INFORMATION ABOUT THE SPECIAL
MEETINGS AND THE PROPOSED MERGER. WE URGE YOU TO READ THIS MATERIAL, INCLUDING
THE SECTION DESCRIBING RISK FACTORS RELATING TO THE MERGER ON PAGE 16.
We enthusiastically support this combination of two of the premier
companies in the automotive supply industry and join with all the other members
of our respective boards of directors in recommending that you vote FOR the
merger.
<TABLE>
<S> <C>
Larry D. Yost V. William Hunt
Chairman of the Board and Chief Executive Officer Chairman of the Board, President and Chief
Meritor Automotive, Inc. Executive Officer
Arvin Industries, Inc.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT-PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
JOINT PROXY STATEMENT-PROSPECTUS DATED [ ], 2000 AND FIRST MAILED TO
STOCKHOLDERS ON [ ], 2000
<PAGE> 3
ADDITIONAL INFORMATION
This joint proxy statement-prospectus incorporates important business and
financial information about Meritor and Arvin from other documents that are not
included in or delivered with this joint proxy statement-prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain the documents incorporated by reference in this joint
proxy statement-prospectus by requesting them in writing (including by e-mail
request) or by telephone from the appropriate company at one of the following
addresses:
<TABLE>
<S> <C>
MERITOR ARVIN
Investor Relations Investor Relations
Meritor Automotive, Inc. Arvin Industries, Inc.
2135 West Maple Road One Noblitt Plaza
Troy, Michigan 48084-7186 Columbus, Indiana 47202-3000
(248) 435-1000 (812) 379-3205
e-mail: [email protected] e-mail: [email protected]
</TABLE>
IF YOU WOULD LIKE TO REQUEST ANY DOCUMENTS, PLEASE DO SO BY [ ],
2000 IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETINGS.
See "Where You Can Find More Information" that begins on page 85.
<PAGE> 4
[Meritor Logo]
MERITOR AUTOMOTIVE, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY [ ], 2000
To the Stockholders
of Meritor Automotive, Inc.:
We will hold a special meeting of stockholders of Meritor Automotive, Inc.,
a Delaware corporation, on July [ ], 2000, at 10:00 a.m., local time, at 2135
West Maple Road, Troy, Michigan 48084-7186, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization, dated as of April 6, 2000 (the "merger
agreement"), by and among Meritor, ArvinMeritor, Inc., an Indiana
corporation and a wholly-owned subsidiary of Meritor, and Arvin
Industries, Inc., an Indiana corporation, and the mergers contemplated
thereby. Pursuant to the merger agreement, among other things, (i)
Meritor will merge with and into ArvinMeritor and (ii) immediately
thereafter, Arvin will merge with and into ArvinMeritor, in each case
subject to the terms and conditions of the merger agreement. This
proposal is more fully described in this joint proxy
statement-prospectus.
2. To transact any other business as may properly come before the special
meeting or any adjournments or postponements thereof.
Holders of record of Meritor common stock at the close of business on
[ ], 2000 will be entitled to notice of and to vote at the Meritor
special meeting and any adjournments or postponements thereof.
By Order of the Board of Directors
Vernon G. Baker, II
Secretary
Troy, Michigan
[ ], 2000
THE BOARD OF DIRECTORS OF MERITOR UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF MERITOR
COMMON STOCK IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER. WHETHER OR NOT YOU PLAN TO ATTEND THE MERITOR SPECIAL MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE PROMPTLY OR AUTHORIZE THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO VOTE
YOUR SHARES BY CALLING TOLL-FREE [ ] OR, IF OUTSIDE THE U.S.,
CALLING [ ] OR USING THE INTERNET (WWW.[ ]) BY
FOLLOWING THE INSTRUCTIONS INCLUDED WITH YOUR PROXY CARD. THE ENCLOSED ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MERITOR
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD OR SUBMITTED YOUR PROXY INSTRUCTIONS BY TELEPHONE OR
THE INTERNET.
<PAGE> 5
[ARVIN LOGO]
ARVIN INDUSTRIES, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY [ ], 2000
To the Stockholders
of Arvin Industries, Inc.:
We will hold a special meeting of stockholders of Arvin Industries, Inc.,
an Indiana corporation, on July [ ], 2000, at 9:00 a.m., local time, at One
Noblitt Plaza, Columbus, Indiana 47202-3000, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Reorganization, dated as of April 6, 2000 (the "merger
agreement"), by and among Meritor Automotive, Inc., a Delaware
corporation, ArvinMeritor, Inc., an Indiana corporation and a wholly-
owned subsidiary of Meritor, and Arvin, and the mergers contemplated
thereby. Pursuant to the merger agreement, among other things, (i)
Meritor will merge with and into ArvinMeritor and (ii) immediately
thereafter, Arvin will merge with and into ArvinMeritor, in each case
subject to the terms and conditions of the merger agreement. This
proposal is more fully described in this joint proxy
statement-prospectus.
2. To transact any other business as may properly come before the Arvin
special meeting or any adjournments or postponements thereof.
Holders of record of Arvin common stock at the close of business on
[ ], 2000 will be entitled to notice of and to vote at the Arvin
special meeting and any adjournments or postponements thereof.
By Order of the Board of Directors
Ronald R. Snyder
Secretary
Columbus, Indiana
[ ], 2000
THE BOARD OF DIRECTORS OF ARVIN UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF ARVIN
COMMON STOCK IS REQUIRED TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER. WHETHER OR NOT YOU PLAN TO ATTEND THE ARVIN SPECIAL MEETING IN PERSON,
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE PROMPTLY OR AUTHORIZE THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO VOTE
YOUR SHARES BY CALLING TOLL-FREE [ ] OR, IF OUTSIDE THE U.S.,
CALLING [ ] OR USING THE INTERNET (WWW.[ ]) BY
FOLLOWING THE INSTRUCTIONS INCLUDED WITH YOUR PROXY CARD. THE ENCLOSED ENVELOPE
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ARVIN
SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD OR SUBMITTED YOUR PROXY INSTRUCTIONS BY TELEPHONE OR
THE INTERNET.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
RISK FACTORS................................................ 16
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 17
MERITOR SPECIAL MEETING..................................... 18
General................................................... 18
Matters to be Considered.................................. 18
Proxies................................................... 18
Solicitation of Proxies................................... 19
Record Date and Voting Rights............................. 19
Recommendation of Meritor Board........................... 20
ARVIN SPECIAL MEETING....................................... 21
General................................................... 21
Matters to be Considered.................................. 21
Proxies................................................... 21
Solicitation of Proxies................................... 22
Record Date and Voting Rights............................. 22
Recommendation of Arvin Board............................. 23
THE MERGER.................................................. 24
General................................................... 24
Background of the Merger.................................. 24
Recommendations of the Boards of Directors of Meritor and
Arvin; Reasons for the Merger.......................... 26
Opinion of Meritor's Financial Advisor.................... 28
Opinion of Arvin's Financial Advisor...................... 35
Regulatory Approvals Required for the Merger.............. 39
Material U.S. Federal Income Tax Consequences............. 40
Accounting Treatment...................................... 42
Interests of Certain Persons in the Merger................ 42
THE MERGER AGREEMENT........................................ 46
Merger Consideration...................................... 46
Treatment of Options...................................... 46
Exchange of Certificates.................................. 46
Effective Time............................................ 47
Representations and Warranties............................ 48
Covenants................................................. 49
Conditions................................................ 53
Termination of the Merger Agreement....................... 54
Fees Payable Because of a Termination of the Merger
Agreement.............................................. 55
Amendments, Extensions and Waivers........................ 57
Restrictions on Resales by Affiliates..................... 57
MERITOR AND ARVIN OPTION AGREEMENTS......................... 58
MANAGEMENT AND OPERATIONS AFTER THE MERGER.................. 60
Board of Directors........................................ 60
Committees of the Board of Directors...................... 63
Management................................................ 64
PRICE RANGE OF COMMON STOCK AND DIVIDENDS................... 66
Meritor................................................... 66
Arvin..................................................... 66
ArvinMeritor.............................................. 66
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION ABOUT MERITOR................................... 67
General................................................... 67
Management and Additional Information..................... 67
INFORMATION ABOUT ARVIN..................................... 68
General................................................... 68
Management and Additional Information..................... 68
DESCRIPTION OF COMBINED COMPANY CAPITAL STOCK............... 69
Common Stock.............................................. 69
Preferred Stock........................................... 70
Stockholder Rights Plan................................... 70
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 73
Action by Written Consent of Stockholders................. 73
Amendment of Charter Documents............................ 73
Stockholder Voting........................................ 74
Fair Price Provision...................................... 74
Control Share Statutes.................................... 75
Anti-Takeover Laws........................................ 76
Stockholder Approval of Certain Business Combinations..... 77
Dissenters' Rights of Appraisal........................... 78
Amendment of By-Laws...................................... 78
Limitation on Directors' Liability; Indemnification of
Officers and Directors................................. 79
Classified Board of Directors............................. 80
Cumulative Voting for Directors........................... 80
Removal of Directors...................................... 80
Newly Created Directorships and Vacancies................. 81
Special Meetings.......................................... 82
Inspection Rights......................................... 82
Election of Directors..................................... 83
Dividends................................................. 83
Other Corporate Constituencies............................ 83
Preemptive Rights......................................... 84
RIGHTS OF DISSENTING STOCKHOLDERS........................... 84
LEGAL MATTERS............................................... 84
EXPERTS..................................................... 84
STOCKHOLDER PROPOSALS....................................... 84
OTHER MATTERS............................................... 85
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 85
WHERE YOU CAN FIND MORE INFORMATION......................... 85
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 88
</TABLE>
<TABLE>
<S> <C> <C>
Appendix A Agreement and Plan of Reorganization........................ A-1
Appendix B Meritor Stock Option Agreement.............................. B-1
Appendix C Arvin Stock Option Agreement................................ C-1
Appendix D Opinion of Warburg Dillon Read LLC.......................... D-1
Appendix E Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ E-1
Appendix F Restated Articles of Incorporation of ArvinMeritor, Inc..... F-1
Appendix G Amended By-Laws of ArvinMeritor, Inc........................ G-1
Appendix H Rights Agreement of ArvinMeritor, Inc....................... H-1
</TABLE>
ii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL HAPPEN IN THE MERGER?
A: We are proposing to combine our companies in a "merger of equals"
transaction in which Meritor will first merge with and into its
newly-formed, wholly-owned subsidiary ArvinMeritor, Inc. (formerly named Mu
Sub, Inc.) and, immediately thereafter, Arvin will merge with and into
ArvinMeritor. As a result of these transactions, which we refer to
collectively as the "merger", Meritor stockholders and Arvin stockholders
will have their shares of common stock in Meritor and Arvin converted into
newly-issued shares of common stock of the combined company at a rate of
0.75 shares for each share currently owned, in the case of Meritor
stockholders, and one share, plus $2 in cash, for each share currently
owned, in the case of Arvin stockholders. We expect that, after completion
of the merger, the current stockholders of Meritor will own approximately
65.8% of the combined company and the current stockholders of Arvin will own
approximately 34.2% of the combined company.
Q: WHEN ARE THE STOCKHOLDERS' MEETINGS?
A: Meritor's meeting will take place at 10:00 a.m. local time on July [ ],
2000. Arvin's special meeting will take place at 9:00 a.m. local time on
July [ ], 2000. The location of each meeting is specified on the cover page
of this document.
Q: WHAT STOCKHOLDER APPROVALS ARE NEEDED?
A: For Meritor, the affirmative vote of the holders of a majority of the
outstanding shares of Meritor's common stock is required to approve and
adopt the merger agreement and the merger.
For Arvin, the affirmative vote of the holders of a majority of the
outstanding shares of Arvin's common stock is required to approve and adopt
the merger agreement and the merger.
The Meritor board of directors and the Arvin board of directors each
recommends that you vote "FOR" the proposal to approve and adopt the merger
agreement and the merger.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
joint proxy statement-prospectus, please respond by completing, signing and
dating your proxy card or voting instructions and returning it in the
enclosed, postage-paid envelope, or, if available, by submitting your proxy
or voting instructions by telephone or through the Internet, as soon as
possible so that your shares may be represented at your special meeting.
Q: WHAT IF I DON'T VOTE?
A: - If you fail to respond, it will have the same effect as a vote against the
merger.
- If you respond and do not indicate how you want to vote, your proxy will
be counted as a vote in favor of the merger.
- If you respond and abstain from voting, your proxy will have the same
effect as a vote against the merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be permitted to vote them. You
should therefore be sure to provide your broker with
1
<PAGE> 9
instructions on how to vote your shares. Please check the voting form used
by your broker to see if it offers telephone or Internet voting.
If you do not give voting instructions to your broker, you will, in effect,
be voting against the merger unless you appear in person at your
stockholders' meeting with a valid proxy from your broker and vote in favor
of the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE DELIVERED MY PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at your
special meeting. You can do this in one of three ways. First, you can revoke
your proxy. Second, you can submit a new proxy. If you choose either of
these two methods and you are a holder of record, you must submit your
notice of revocation or your new proxy to the Secretary of Meritor or Arvin,
as appropriate, before the special meeting. However, if your shares are held
in a "street name" account at a brokerage firm or bank, you should contact
your brokerage firm or bank to change your vote. Third, if you are a holder
of record, or if your shares are held in "street name" and you receive a
valid proxy from your broker, you can attend the special meeting and vote in
person. If you submit your proxy or voting instructions by telephone or
through the Internet, you can change your vote by submitting a proxy at a
later date, using the same procedures, in which case your later submitted
proxy will be recorded and your earlier proxy revoked.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions
from the exchange agent on how to exchange your shares of Meritor common
stock or Arvin common stock (including any shares held in book-entry form)
for shares of ArvinMeritor. PLEASE DO NOT SEND IN YOUR STOCK CERTIFICATES
WITH YOUR PROXY.
Q: WHO IS THE EXCHANGE AGENT FOR THE MERGER?
A: EquiServe First Chicago Trust Company Division is the exchange agent.
Q: WHERE WILL MY SHARES OF ARVINMERITOR COMMON STOCK BE LISTED?
A: We intend to apply to list the ArvinMeritor common stock on the New York
Stock Exchange under the trading symbol "ARM".
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Meritor's current regular quarterly dividend is $0.105 per share of Meritor
common stock, or $0.42 per share on an annual basis. Arvin's current regular
quarterly dividend is $0.22 per share of Arvin common stock, or $0.88 per
share on an annual basis. Subject to the determination of its board of
directors, ArvinMeritor expects to pay a quarterly dividend of $0.22 per
share, which is consistent with Arvin's current dividend policy and
represents a 57% increase in Meritor's current dividend policy.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as quickly as practicable. We expect
to complete the merger during the quarter ending September 30, 2000.
2
<PAGE> 10
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or how to submit your proxy, or
if you need additional copies of this joint proxy statement-prospectus or
the enclosed proxy card or voting instructions, you should contact:
- if you are a Meritor stockholder:
Meritor Automotive, Inc.
Investor Relations
2135 West Maple Road
Troy, Michigan 48084-7186
Telephone: (248) 435-1000
e-mail: [email protected]
- if you are an Arvin stockholder:
Arvin Industries, Inc.
Investor Relations
One Noblitt Plaza
Columbus, Indiana 47202-3000
Telephone: (812) 379-3205
e-mail: [email protected]
3
<PAGE> 11
SUMMARY
This brief summary does not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents to which this document refers you to fully understand the merger. See
"Where You Can Find More Information".
THE COMPANIES (PAGES 67 AND 68)
MERITOR AUTOMOTIVE, INC.
2135 WEST MAPLE ROAD
TROY, MICHIGAN 48084-7186
(248) 435-1000
Meritor is a global manufacturer and supplier of a broad range of
components and systems for commercial, specialty and light vehicle original
equipment manufacturers and the aftermarket, with 68 manufacturing facilities
located in 23 countries. Meritor has approximately 19,000 employees engaged in
manufacturing, research, sales and administration activities at facilities
located around the world. In its fiscal year ended September 30, 1999, Meritor
had total sales of approximately $4.5 billion.
ARVIN INDUSTRIES, INC.
ONE NOBLITT PLAZA
COLUMBUS, INDIANA 47202-3000
(812) 379-3000
Arvin is a focused international manufacturer and supplier of automotive
parts with 53 manufacturing facilities and six technical centers located in 16
countries, excluding non-consolidated businesses. Arvin has approximately 17,500
employees worldwide. In its fiscal year ended January 2, 2000, Arvin had total
sales of approximately $3.1 billion.
ArvinMeritor is a newly formed corporation that has not, to date, conducted
any activities other than those incident to its formation and the matters
contemplated by the merger agreement, including the preparation of this joint
proxy statement-prospectus. Upon completion of the merger, the corporate
existence of each of Meritor and Arvin will terminate, and the business of
ArvinMeritor will be the combined businesses currently conducted by Meritor and
Arvin.
THE MERGER (PAGE 24)
We propose a two-step merger in which Meritor will first merge with and
into ArvinMeritor, Inc., a wholly-owned Indiana subsidiary of Meritor formerly
named Mu Sub, Inc. Immediately after this first merger, Arvin will merge with
and into ArvinMeritor, Inc. We refer to the surviving company of these mergers
in this document as "ArvinMeritor" or the "combined company". We refer to both
merger steps together in this document as the "merger". The combined company
will be an Indiana corporation with its corporate headquarters in Troy, Michigan
and operating headquarters around the world. The fiscal year of the combined
company will end on September 30 of each year. We expect to complete the merger
during the quarter ending September 30, 2000.
We have attached the merger agreement as Appendix A to this document. We
urge you to read the merger agreement. It is the legal document that governs the
merger.
REASONS FOR THE MERGER (PAGE 26)
We want to merge because we believe that by combining our companies we can
create a premier global supplier of a broad range of integrated systems, modules
and components for light vehicle, commercial truck, trailer and specialty
original equipment manufacturers and related aftermarkets. With estimated annual
sales of $7.5 billion, we believe the combined company will benefit from
enhanced financial strength and diversity of operations and product lines. We
also believe that by combining we can
4
<PAGE> 12
provide significant benefits to our stockholders and customers alike, and be
better able to take advantage of global opportunities. In addition, in a
consolidating industry, we believe that achieving economies of scale should
enable us both to improve upon and increase our strategic options and to lower
our average cost of capital. While no assurances can be made, we expect to
achieve efficiencies in the merger that by fiscal 2001 should cause earnings per
share on a combined company basis to be accretive to anticipated earnings of
each company on a stand-alone basis. We expect to achieve annual pre-tax
synergies of approximately $50 million in fiscal 2001, increasing to
approximately $100 million in fiscal 2003.
OUR RECOMMENDATIONS TO STOCKHOLDERS (PAGE 26)
Meritor stockholders. The Meritor board of directors believes that the
merger is fair to you and in your best interests, and unanimously recommends
that you vote "FOR" the proposal to approve and adopt the merger agreement and
the merger.
Arvin stockholders. The Arvin board of directors believes that the merger
is fair to you and in your best interests, and unanimously recommends that you
vote "FOR" the proposal to approve and adopt the merger agreement and the
merger.
EXCHANGE OF SHARES (PAGE 46)
When we complete the merger, your shares of Meritor common stock and Arvin
common stock will become the right to receive shares of ArvinMeritor plus, in
the case of Arvin common stock, $2.00 in cash per share, as follows:
Meritor stockholders. As a Meritor stockholder, each of your shares of
Meritor common stock will automatically become the right to receive 0.75 shares
of common stock of the combined company. We refer to this one-for-0.75 exchange
in this document as the "Meritor exchange ratio". You will be paid cash instead
of any fractional share of common stock of the combined company to which you are
otherwise entitled.
Arvin stockholders. As an Arvin stockholder, each of your shares of Arvin
common stock will automatically become the right to receive one share of common
stock of the combined company, plus $2.00 in cash. We refer to this one-for-one
exchange in the document as the "Arvin exchange ratio". We refer to the $2.00 in
cash as the "Arvin cash consideration". We also refer to the Arvin exchange
ratio and the Arvin cash consideration together as the "Arvin merger
consideration".
As soon as practicable after the effective time of the merger, a form of
transmittal letter will be mailed by the exchange agent to Meritor stockholders
and Arvin stockholders. The transmittal letter will contain instructions with
respect to the surrender of shares of Meritor common stock or Arvin common stock
(whether in certificated or book-entry form). IF YOU HOLD CERTIFICATES FOR
MERITOR OR ARVIN COMMON STOCK, YOU SHOULD NOT RETURN THE CERTIFICATES WITH THE
ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE THE LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
BOTH MERITOR STOCKHOLDERS AND ARVIN STOCKHOLDERS WILL RECEIVE SHARES OF THE
COMBINED COMPANY IN BOOK-ENTRY FORM UNLESS A PHYSICAL CERTIFICATE IS REQUESTED.
OWNERSHIP OF THE COMBINED COMPANY AFTER THE MERGER
The combined company will issue approximately 71 million shares of its
common stock in the merger. After completion of the merger, current Meritor
stockholders will own approximately 65.8% and current Arvin stockholders will
own approximately 34.2% of these shares.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 40)
Meritor stockholders. We expect that your exchange of shares of Meritor
common stock for shares of common stock of the combined company generally will
not cause you to recognize any gain or loss for U.S. federal income tax
purposes. You may, however, have to recognize taxable income, gain or loss in
connection with any cash received instead of fractional shares.
5
<PAGE> 13
Arvin stockholders. We expect that your exchange of shares of Arvin common
stock for shares of common stock of the combined company generally will not
cause you to recognize any gain or loss for U.S. federal income tax purposes.
You may, however, have to recognize taxable income or gain in connection with
the cash consideration paid to you in the merger.
Meritor and Arvin. Neither Meritor nor Arvin will recognize any gain or
loss for U.S. federal income tax purposes as a result of the merger.
We will not be obligated to complete the merger unless, among other things,
we receive legal opinions that the first step merger and the second step merger
each will be treated as a reorganization for U.S. federal income tax purposes.
If these opinions are correct, the U.S. federal income tax treatment of the
merger will be as we have described it in this document.
THIS TAX TREATMENT MAY NOT APPLY TO ALL STOCKHOLDERS. DETERMINING THE
ACTUAL TAX CONSEQUENCES OF THE MERGER TO YOU CAN BE COMPLICATED. THEY WILL
DEPEND ON YOUR SPECIFIC SITUATION AND ON VARIABLES NOT WITHIN OUR CONTROL. YOU
SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX
CONSEQUENCES OF THE MERGER TO YOU.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Stockholders can obtain quotes for shares of Meritor common stock and Arvin
common stock in newspapers, on the Internet, or from their brokers. On April 5,
2000, the last trading day before we announced the merger, Meritor common stock
closed at $15.6875 per share and Arvin common stock closed at $24.1875 per
share. On May 4, 2000, Meritor common stock closed at $14.8125 per share and
Arvin common stock closed at $21.25 per share.
The market value of the shares of ArvinMeritor common stock that will be
issued in exchange for shares of Meritor common stock and Arvin common stock in
the merger will not be known at the time stockholders of Meritor and Arvin vote
on the approval and adoption of the merger agreement and the merger, because the
shares of ArvinMeritor common stock will not trade publicly until the completion
of the merger, although it is possible that a "when-issued" trading market may
develop prior to the completion of the merger. The market price of Meritor
common stock and Arvin common stock will likely fluctuate prior to the merger,
while the Meritor exchange ratio and the Arvin merger consideration are fixed.
You should obtain current stock price quotations for Meritor common stock and
Arvin common stock.
LISTING OF COMMON STOCK OF THE COMBINED COMPANY
Application will be made to have the common stock of the combined company
listed on the New York Stock Exchange under the trading symbol "ARM".
OPINIONS THAT THE MERITOR EXCHANGE RATIO AND THE ARVIN MERGER CONSIDERATION ARE
FAIR TO STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW (PAGES 28 AND 35)
Meritor stockholders. Among other factors considered in deciding to
approve and adopt the merger agreement and the merger, the Meritor board of
directors received a written opinion from Meritor's financial advisor, Warburg
Dillon Read LLC, that as of the date of the opinion, the Meritor exchange ratio
and the Arvin merger consideration taken together were fair to the holders of
Meritor common stock from a financial point of view. We have attached the full
text of Warburg Dillon Read's written opinion dated April 6, 2000 as Appendix D
to this document. You should read this opinion completely to understand the
assumptions made, matters considered and limitations on the review undertaken by
Warburg Dillon Read in providing its opinion. WARBURG DILLON READ'S OPINION IS
DIRECTED TO THE MERITOR BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW
ANY STOCKHOLDER SHOULD VOTE WITH RESPECT TO ANY MATTER RELATING TO THE MERGER.
Arvin stockholders. Among other factors considered in deciding to approve
and adopt the merger agreement and the merger, the Arvin board of directors
received a written opinion from Arvin's financial
6
<PAGE> 14
advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated, that as of the date
of the opinion, the Arvin merger consideration was fair to the holders of Arvin
common stock from a financial point of view. We have attached the full text of
Merrill Lynch's written opinion dated April 6, 2000 as Appendix E to this
document. You should read this opinion completely to understand the assumptions
made, matters considered and limitations on the review undertaken by Merrill
Lynch in providing its opinion. MERRILL LYNCH'S OPINION IS DIRECTED TO THE ARVIN
BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW ANY STOCKHOLDER SHOULD
VOTE WITH RESPECT TO ANY MATTER RELATING TO THE MERGER.
RECORD DATE; VOTE REQUIRED (PAGES 19 AND 22)
Meritor stockholders. You can vote at the Meritor special meeting if you
owned Meritor common stock at the close of business on [ ], 2000. On
that date, there were [ ] shares of Meritor common stock outstanding
and entitled to vote. You can cast one vote for each share of Meritor common
stock that you owned on that date. In order to approve and adopt the merger
agreement and the merger, the holders of a majority of the outstanding shares of
Meritor common stock must vote in favor of doing so.
Arvin stockholders. You can vote at the Arvin special meeting if you owned
Arvin common stock at the close of business on [ ], 2000. On that
date, there were [ ] shares of Arvin common stock outstanding and
entitled to vote. You can cast one vote for each share of Arvin common stock
that you owned on that date. In order to approve and adopt the merger agreement
and the merger, the holders of a majority of the outstanding shares of Arvin
common stock must vote in favor of doing so.
DISSENTERS' RIGHTS OF APPRAISAL (PAGE 78)
Meritor stockholders. Under Delaware law, which applies to Meritor,
Meritor stockholders will not have appraisal rights as a result of the merger.
Arvin stockholders. Under Indiana law, which applies to Arvin, Arvin
stockholders will not have dissenters' rights of appraisal as a result of the
merger.
MANAGEMENT AND OPERATIONS AFTER THE MERGER (PAGE 60)
The present managements of our companies will share the responsibility of
managing the combined company. The board of directors of the combined company
will be comprised of 19 directors. Nine of the directors of the combined company
will be current Meritor directors, and nine directors will be current Arvin
directors. The remaining director will be an individual agreed upon by Meritor
and Arvin who is not currently a Meritor or Arvin director. Larry D. Yost,
currently Meritor's Chairman of the Board and Chief Executive Officer, will
serve as Chairman of the Board and Chief Executive Officer of the combined
company, and V. William Hunt, currently Arvin's Chairman of the Board, President
and Chief Executive Officer, will serve as Vice Chairman and President of the
combined company.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 53)
The completion of the merger depends on a number of conditions being met,
including approval and adoption of the merger agreement and the merger by
Meritor stockholders and Arvin stockholders and receipt of regulatory approvals.
Where the law permits, a party to the merger agreement could elect to waive
a condition to its obligation to complete the merger although that condition has
not been satisfied. We cannot be certain when (or if) the conditions to the
merger will be satisfied or waived or that the merger will be completed.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES (PAGES 54 AND 55)
We can mutually agree at any time to terminate the merger agreement without
completing the merger, even if the stockholders of both our companies have
approved and adopted it. In addition, either of us can decide, without the
consent of the other, to terminate the merger agreement in a number of
7
<PAGE> 15
situations, including the final denial of a required regulatory approval,
failure to obtain stockholder approval of the merger, specified circumstances
relating to a withdrawal or modification by the other party's board of directors
of its recommendation of the merger, or the failure to complete the merger by
October 31, 2000.
Each of Meritor and Arvin has agreed to pay a termination fee of $20
million to the other party in the event that the merger agreement is terminated
under specified circumstances relating to a competing transaction. Under the
same circumstances, an additional $5 million may become payable by either party
under the cross stock option agreements described below under "-- Meritor and
Arvin Stock Option Agreements".
MERITOR AND ARVIN EMPLOYEE STOCK OPTIONS (PAGE 46)
Meritor. Upon completion of the merger, each outstanding Meritor employee
stock option will be converted into an option to purchase a number of shares of
ArvinMeritor common stock that is equal to the product of 0.75 multiplied by the
number of shares of Meritor common stock that would have been obtained before
the merger upon the exercise of the option, rounded to the nearest whole share.
The exercise price per share will be equal to the exercise price per share of
Meritor common stock subject to the option before the conversion divided by
0.75, rounded up to the nearest whole cent. The other terms of each Meritor
employee stock option will continue to apply.
Arvin. Upon completion of the merger, each outstanding Arvin employee
stock option will be converted into an option to purchase a number of shares of
ArvinMeritor common stock equal to the number of shares of Arvin common stock
that would have been obtained before the merger upon the exercise of the option,
plus $1 for each share. The exercise price per share will be equal to the
exercise price per share of Arvin common stock subject to the option before the
conversion. The conversion of "incentive stock options" will be effected in a
manner that is consistent with Section 424(a) of the Internal Revenue Code. Upon
and as a result of the completion of the merger, all unvested Arvin employee
stock options outstanding on April 6, 2000, by their terms, will vest and become
exercisable. The other terms of each Arvin employee stock option will continue
to apply.
WAIVER AND AMENDMENT (PAGE 57)
We may jointly amend the merger agreement, and each of us may waive our
right to require the other party to adhere to the terms and conditions of the
merger agreement, to the extent legally permissible.
ACCOUNTING TREATMENT (PAGE 42)
We expect the merger to be accounted for utilizing the "purchase method" of
accounting for business combinations under U.S. generally accepted accounting
principles.
REGULATORY APPROVALS (PAGE 39)
We cannot complete the merger until, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, we submit required filings to the
Department of Justice and satisfy waiting period requirements. Meritor and Arvin
submitted the required filings on May 3, 2000, and the waiting period under this
Act is expected to expire (unless extended or earlier terminated) on June 2,
2000.
We have also made a filing to obtain approval of the merger from the
European Commission, and are also required to obtain approvals from, and give
notices to, other foreign regulatory agencies.
As of the date of this document, we have not yet received all required
approvals. While we do not know of any reason why we would not be able to obtain
the necessary approvals in a timely manner, we cannot be certain when or if we
will receive them.
8
<PAGE> 16
MERITOR AND ARVIN STOCK OPTION AGREEMENTS (PAGE 58)
Each of Meritor and Arvin, as an inducement to the other party to enter
into the merger agreement, entered into a stock option agreement granting the
other party an option to purchase, under circumstances in which the termination
fee would be payable by the issuer of the option, shares of its common stock.
The most shares that can be purchased if either option is exercised is 19.9% of
the outstanding shares of the issuer's common stock. Each option is also subject
to a profit limitation of $25 million, less any termination fee paid under the
merger agreement to the holder of the option. The purchase price under the
option granted by Meritor is $15.6875 per share and the purchase price under the
option granted by Arvin is $24.1875 per share. In addition to the option to
purchase common stock, the person holding the option, or shares purchased upon
exercise of the option, may require the issuer of the option to repurchase the
option and/or any of those shares.
We granted the options to each other in order to increase the likelihood
that we would complete the merger. The option agreements could discourage other
companies from trying or proposing to combine with either of us before we
complete the merger. If the option granted by either Meritor or Arvin becomes
exercisable, it will likely hinder other parties from attaining
pooling-of-interest accounting treatment under U.S. generally accepted
accounting principles in any merger or business combination transaction with
that company for the following two years.
INTERESTS OF CERTAIN PERSONS IN THE MERGER THAT ARE DIFFERENT FROM YOUR
INTERESTS (PAGE 42)
Certain of our officers have interests in the merger that are different
from, or in addition to, their interests as stockholders in our companies. These
interests exist principally because of employment and/or severance agreements
that the officers have entered or will enter into with Arvin and/or the combined
company. These agreements will provide these officers with severance benefits if
their employment with the combined company is terminated after the merger and
other rights in connection with the merger. These officers will not be entitled
to receive these benefits if the merger does not occur.
Also, following the merger, the combined company will indemnify, and
provide directors' and officers' insurance for, the directors and officers of
Meritor and Arvin for events occurring before the merger, including events that
are related to the merger agreement. Additional interests of some of our
directors and officers are described under "Management and Operations After the
Merger".
The members of our respective boards of directors knew about these
additional interests, and considered them, among other matters, when they
approved and adopted the merger agreement and the merger.
9
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA
We are providing the following historical financial information to help you
analyze certain financial aspects of the merger. We derived this information
from audited financial statements of each company for each of their most recent
five fiscal years and from unaudited financial statements of Meritor for the six
months ended March 31, 2000 and of Arvin for the three months ended April 2,
2000. The information should be read together with our historical financial
statements and related notes contained in the annual reports and other
information that we have filed with the Securities and Exchange Commission. See
"Where You Can Find More Information".
You should also read all of the financial information we provide in the
following tables together with the pro forma financial information we provide in
this document, which you can find beginning at page 88. Meritor's fiscal year
ends on September 30 and Arvin's fiscal year ends on the Sunday nearest to
December 31.
10
<PAGE> 18
MERITOR AUTOMOTIVE, INC.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
------------------- -------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales.......................... $2,332 $2,107 $4,450 $3,836 $3,309 $3,144 $3,125
Operating earnings............. 278(1) 168 362(1) 299 181(1) 146(1) 178
Operating earnings as a percent
of sales..................... 11.9% 8.0% 8.1% 7.8% 5.5% 4.6% 5.7%
Interest expense............... 36 30 65 43 10 10 11
Income before income taxes..... 250(1) 150 317(1) 245(1) 186(1) 182(1) 185
Net income..................... 154(1) 90 194(1) 147(1) 109(1) 114(1) 123
Basic and diluted earnings per
share(3)..................... $ 2.39(1)(2) $ 1.30 $ 2.81(1)(2) $ 2.13(1) N/A N/A N/A
Cash dividends per share(3).... $ 0.21 $ 0.21 $ 0.42 $ 0.42 N/A N/A N/A
FINANCIAL POSITION AT PERIOD
END
Working capital(4)............. $ 289 $ 271 $ 208 $ 162 $ 235 $ 240 $ 216
Property -- net................ 729 780 766 666 635 643 647
Total assets................... 2,826 2,802 2,796 2,086 2,002 1,830 1,766
Short-term debt................ 72 42 44 34 21 8 14
Long-term debt................. 865 909 802 313 465 24 31
Equity and minority
interests(5)................. 394 312 383 297 188 628 585
OTHER DATA
Depreciation and
amortization................. $ 71 $ 58 $ 131 $ 102 $ 100 $ 102 $ 97
Cash provided by operating
activities................... 17 38 254 278 208 197 203
Capital expenditures........... 74 50 170 139 126 144 119
</TABLE>
- ---------------
(1) Operating earnings, income before income taxes, net income and basic and
diluted earnings per share for the first six months of fiscal 2000 include a
one-time gain of $83 million ($51 million after-tax, or $0.79 per share)
recorded in the first quarter to reflect the sale of Meritor's seat
adjusting systems business. Operating earnings, income before income taxes,
net income and basic and diluted earnings per share for fiscal 1999 include
a one-time gain of $24 million ($18 million after-tax, or $0.27 per share)
recorded in the fourth quarter to reflect the formation of a transmission
and clutch joint venture with ZF Friedrichshafen AG and restructuring costs
of $28 million ($17 million after-tax, or $0.25 per share) recorded in the
third quarter. Income before income taxes, net income and basic and diluted
earnings per share for fiscal 1998 include a one-time charge of $31 million
($19 million after-tax, or $0.27 per share) recorded in the fourth quarter
relating to the settlement of interest rate agreements. Operating earnings,
income before income taxes and net income for fiscal 1997 include
restructuring costs of $21 million ($16 million after-tax) and spin-off
costs of $8 million ($5 million after-tax) recorded in the fourth quarter.
Operating earnings, income before income taxes and net income for fiscal
1996 include restructuring costs of $36 million ($24 million after-tax)
recorded in the fourth quarter.
(2) Basic and diluted earnings per share for the first six months of fiscal 2000
and the fiscal year ended September 30, 1999 reflect Meritor's purchase of
6.8 million and 0.3 million shares, respectively, of its outstanding common
stock, at an aggregate cost of $125 million and $6 million, respectively,
pursuant to Meritor's share repurchase programs.
(3) As Meritor began operations as a stand-alone entity on September 30, 1997,
per share data for years ending prior to September 30, 1998 are not
applicable.
(4) Working capital consists of all current assets and liabilities, including
cash and short-term debt.
(5) Equity amounts as of March 31, 2000 and September 30, 1999 include $125
million and $6 million, respectively, of treasury stock repurchased by
Meritor. Equity amounts for fiscal years ending September 30, 1996 and 1995
represent the net investment of Rockwell International Corporation prior to
the spin-off of Meritor by Rockwell on September 30, 1997.
11
<PAGE> 19
ARVIN INDUSTRIES, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
------------------ ----------------------------------------------------
4/2/00 4/4/99 1/2/00 1/3/99 12/28/97 12/29/96 12/31/95
------ ------ ------ ------ -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Sales.......................... $ 858 $ 738 $3,101 $2,499 $2,349 $2,213 $1,966
Operating earnings(1).......... 40 32 167 148 137 103 72
Operating earnings as a percent
of sales..................... 4.7% 4.3% 5.4% 5.9% 5.8% 4.7% 3.7%
Interest expense............... 14 11 51 36 40 39 43
Earnings from continuing
operations before income
taxes........................ 25 22 116 113 98 64 29
Earnings from continuing
operations................... 20 18 92 78 65 47 18(2)
Basic earnings per common
share -- continuing
operations................... $ 0.80 $ 0.76 $ 3.77 $ 3.29 $ 2.83 $ 2.10 $ 0.80
Diluted earnings per common
share -- continuing
operations................... $ 0.80 $ 0.75 $ 3.74 $ 3.23 $ 2.78 $ 2.03 $ 0.80
Cash dividends per share....... $ 0.22 $ 0.21 $ 0.85 $ 0.81 $ 0.77 $ 0.76 $ 0.76
FINANCIAL POSITION AT PERIOD
END
Working capital(3)............. $ 21 $ 120 $ 98 $ 164 $ 148 $ 86 $ 119
Property -- net................ 681 663 696 586 501 464 449
Total assets................... 2,085 1,973 2,000 1,647 1,447 1,308 1,219
Short-term debt................ 301 153 126 10 56 53 42
Long-term debt................. 324 454 412 308 222 294 361
Mandatorily redeemable
preferred capital
securities................... 89 89 89 89 99 -- --
Equity and minority
interests(4)................. 641 601 645 621 498 472 427
OTHER DATA
Depreciation and
amortization................. $ 31 $ 28 $ 112 $ 91 $ 86 $ 80 $ 76
Cash (used for) provided by
operating activities......... (41) (81) 109 164 195 159 93
Capital expenditures........... 23 24 139 123 97 79 101
Segment operating income(5).... 50 46 209 171 171 136 101
</TABLE>
- ---------------
(1) Operating earnings represents earnings from continuing operations excluding
interest expense.
(2) Earnings from continuing operations includes restructuring and special
charges of $15 million ($9 million after-tax).
(3) Working capital consists of all current assets and liabilities, including
cash and short-term debt.
(4) Excludes mandatorily redeemable preferred capital securities.
(5) Segment operating income represents income from consolidated operations
excluding corporate expenses, interest and other non-operational items and
including Arvin's share of net income or loss from unconsolidated
subsidiaries.
12
<PAGE> 20
UNAUDITED SUMMARY SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited summary selected pro forma combined statement of
operations information for ArvinMeritor for the six months ended March 31, 2000
and the twelve months ended September 30, 1999 was prepared to illustrate the
effects of the completion of the merger, as if the merger had occurred as of
October 1, 1998. The following unaudited summary selected pro forma combined
balance sheet information was prepared as if the merger had occurred as of March
31, 2000. The unaudited summary selected pro forma combined financial
information was prepared using the purchase method of accounting and is for
illustrative purposes only. The preliminary allocation of the estimated merger
consideration to Arvin's assets and liabilities is based on historical costs and
management's current estimates which may differ from the final allocation due to
appraisals of fixed assets, other fair value adjustments and the finalization of
any potential plans of restructuring. The unaudited summary selected pro forma
combined financial information should be read in connection with the unaudited
pro forma combined financial information and related notes beginning on page 88.
You should not rely on this pro forma information as being indicative of the
results that would actually have been obtained if the merger had been in effect
for the above-mentioned periods or the future results of the combined company.
See "Where You Can Find More Information" and "Unaudited Pro Forma Combined
Financial Information".
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
----------------- --------------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS INFORMATION:
Sales.................................................. $3,969 $7,460
Net income from continuing operations and before
cumulative effect of accounting change.............. 192 281
PRO FORMA EARNINGS PER COMMON SHARE:
Basic.................................................. $ 2.64 $ 3.70
Diluted................................................ 2.64 3.68
PRO FORMA AVERAGE COMMON SHARES OUTSTANDING:
Basic.................................................. 72.7 76.0
Diluted................................................ 72.8 76.3
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------
(IN MILLIONS)
<S> <C>
PRO FORMA BALANCE SHEET INFORMATION:
Cash...................................................... $ 117
Total assets.............................................. 4,900
Long-term debt............................................ 1,266
Stockholders' equity...................................... 850
</TABLE>
13
<PAGE> 21
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Meritor
and Arvin and combined per share data on an unaudited pro forma combined basis.
Pro forma cash dividends per common share represent historical cash dividends
paid by Meritor and Arvin adjusted for the pro forma average shares outstanding.
The information set forth below should be read in conjunction with the
selected historical financial data and the unaudited pro forma combined
financial information included elsewhere in this joint proxy
statement-prospectus, and the separate historical financial statements of
Meritor and Arvin and the related notes thereto, incorporated by reference in
this document. You should not rely on this unaudited pro forma data as being
indicative of the results that would actually have been obtained if the merger
had been in effect for the periods covered or the future results of the combined
company.
The unaudited pro forma combined basis amounts represent the combination of
historical consolidated financial information for the six months ended March 31,
2000 and the twelve months ended September 30, 1999 and use the purchase method
of accounting for business combinations under U.S. generally accepted accounting
principles. The preliminary allocation of the estimated merger consideration to
Arvin's assets and liabilities is based on historical costs and management's
current estimates which may differ from the final allocation due to appraisals
of fixed assets, other fair value adjustments and the finalization of any
potential plans of restructuring. Meritor's fiscal year ends on September 30 and
Arvin's fiscal year ends on the Sunday nearest to December 31.
The unaudited pro forma equivalent -- Meritor information was calculated by
multiplying the corresponding pro forma combined data by the Meritor exchange
ratio of 0.75. This information shows how the pro forma amounts are equated to
the respective values of one share of Meritor common stock. However, these
amounts do not necessarily reflect the future per share levels of basic and
diluted earnings per share, cash dividends or book value of Meritor or the
combined company.
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
---------------------- ------------------------------
MARCH 31, MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 1999 1998
--------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
HISTORICAL -- MERITOR
Basic and diluted earnings per common
share from continuing operations(1).... $2.39 $1.30 $2.81 $2.13
Cash dividends per common share........... $0.21 $0.21 $0.42 $0.42
Book value per common share (at period
end)................................... $5.55 $3.97 $5.06 $3.86
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
---------------------- ------------------------------
APRIL 2, APRIL 4, JANUARY 2, JANUARY 3,
2000 1999 2000 1999
--------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
HISTORICAL -- ARVIN
Basic earnings per common share from
continuing operations.................. $ 0.80 $ 0.76 $ 3.77 $ 3.29
Diluted earnings per common share from
continuing operations.................. $ 0.80 $ 0.75 $ 3.74 $ 3.23
Cash dividends per common share........... $ 0.22 $ 0.21 $ 0.85 $ 0.81
Book value per common share (at period
end)................................... $24.39 $22.50 $24.38 $23.38
</TABLE>
14
<PAGE> 22
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- -------------------
<S> <C> <C>
UNAUDITED PRO FORMA COMBINED
Basic earnings per common share from continuing
operations.......................................... $ 2.64 $3.70
Diluted earnings per common share from continuing
operations.......................................... $ 2.64 $3.68
Cash dividends per common share(2)..................... $ 0.33 $0.65
Book value per common share (at period end)............ $11.97 --
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- -------------------
<S> <C> <C>
UNAUDITED PRO FORMA EQUIVALENT -- MERITOR
Basic earnings per common share from continuing
operations.......................................... $1.98 $2.78
Diluted earnings per common share from continuing
operations.......................................... $1.98 $2.76
Cash dividends per common share........................ $0.25 $0.49
Book value per common share (at period end)............ $8.98 --
</TABLE>
- ---------------
(1) Basic and diluted earnings per common share for the six months ended March
31, 2000 includes a one-time gain of $0.79 per share recorded to reflect the
sale of Meritor's seat adjusting systems business. Basic and diluted
earnings per common share for the twelve months ended September 30, 1999
includes a one-time gain of $0.27 per share recorded to reflect the
formation of a transmission and clutch joint venture with ZF Friedrichshafen
AG and restructuring costs of $0.25 per share. Basic and diluted earnings
per share for the twelve months ended September 30, 1998 includes a one-time
charge of $0.27 per share relating to the settlement of interest rate
agreements.
(2) Pro forma cash dividends represents the historical cash dividends paid by
Meritor and Arvin adjusted for the pro forma average shares outstanding.
ArvinMeritor expects to pay a quarterly dividend of $0.22 per share, which
is consistent with Arvin's current dividend policy.
15
<PAGE> 23
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this joint proxy statement-prospectus, you should carefully
consider the following risk factors in deciding whether to vote for approval and
adoption of the merger agreement and the merger.
THE VALUE OF THE SHARES OF ARVINMERITOR COMMON STOCK, PLUS (IN THE CASE OF ARVIN
STOCKHOLDERS) THE ARVIN CASH CONSIDERATION, THAT YOU RECEIVE MAY BE LESS THAN
THE VALUE OF YOUR SHARES OF MERITOR COMMON STOCK OR ARVIN COMMON STOCK.
Upon completion of the merger, all shares of Meritor common stock and Arvin
common stock will be automatically converted into the right to receive shares of
ArvinMeritor common stock, plus (in the case of Arvin common stock) $2.00 per
share. The exchange ratios on which the shares will be converted are fixed, and
there will be no adjustment for changes in the market price of Meritor common
stock or Arvin common stock. Neither party is permitted to terminate the merger
agreement or to resolicit the vote of its stockholders solely because of changes
in the market price of either party's common stock. Stock price changes may
result from a variety of factors, many of which are beyond the control of
Meritor and Arvin, including changes in their businesses, operations and
prospects, regulatory considerations and general market and economic conditions.
The market value of the shares of ArvinMeritor common stock that you will
be entitled to receive in the merger in exchange for shares of Meritor common
stock and Arvin common stock will not be known at the time Meritor stockholders
and Arvin stockholders vote on the approval and adoption of the merger agreement
and the merger. That is because the shares of ArvinMeritor common stock will not
trade publicly until the completion of the merger, although a "when-issued"
trading market may develop prior to completion of the merger. Shares of Meritor
common stock or Arvin common stock you surrender in the merger may have a
greater market value than the shares of ArvinMeritor common stock (plus, in the
case of Arvin stockholders, the Arvin cash consideration) you receive in the
merger.
WE MAY BE UNABLE SUCCESSFULLY TO INTEGRATE OUR OPERATIONS AND REALIZE THE FULL
COST SAVINGS WE ANTICIPATE.
The merger involves the integration of two companies that have previously
operated independently. The difficulties of combining the operations of the
companies include:
- the necessity of coordinating geographically separate organizations; and
- integrating personnel with diverse business backgrounds.
The process of integrating operations could cause an interruption of, or
loss of momentum in, the activities of one or more of the combined company's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations or financial condition of
the combined company.
Among the factors considered by the Meritor and Arvin boards of directors
in connection with their respective approval and adoption of the merger
agreement and the merger were the opportunities for economies of scale and
operating efficiencies that could result from the merger. We cannot give you any
assurance that these savings will be realized within the time periods
contemplated or realized at all.
OBTAINING REQUIRED REGULATORY APPROVALS MAY DELAY CONSUMMATION OF THE MERGER.
Consummation of the merger is conditioned upon the receipt of all material
governmental authorizations, consents, order and approvals, including the
expiration or termination of the applicable waiting period, and any extension of
the waiting period, under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and approval by the European Commission and other foreign
regulatory agencies. We intend to pursue vigorously all required regulatory
approvals. While we do not know of any reason why we would not be able to obtain
the necessary approvals in a timely manner, the requirement for these approvals
could delay the consummation of the merger, possibly for a significant period of
time, after our stockholders have approved the proposals relating to the merger
at the special meetings. See "The Merger -- Regulatory Approvals Required for
the Merger" on page 39 for a description of the regulatory approvals necessary
in connection with the merger.
16
<PAGE> 24
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This joint proxy statement-prospectus, including information included or
incorporated by reference in this document (see "Where You Can Find More
Information"), contains certain forward-looking statements with respect to the
financial condition, results of operations, plans, objectives, future
performance and business of each of Meritor, Arvin and ArvinMeritor, as well as
certain information relating to the merger, including, without limitation,
- statements relating to the synergies and accretion to reported earnings
estimated to result from the merger,
- statements relating to revenues of the combined company after the merger,
and
- statements preceded by, followed by or that include the words "believes",
"expects", "anticipates", "estimates" or similar expressions.
These forward-looking statements involve certain risks and uncertainties.
Actual results may differ materially from those contemplated by the
forward-looking statements due to, among others, the following factors:
- expected cost savings from the merger may not be fully realized or
realized within the expected time frame,
- revenues following the merger may be lower than expected,
- costs or difficulties related to the integration of the businesses of
Meritor and Arvin may be greater than expected,
- general economic conditions, either internationally or nationally or in
the jurisdictions in which Meritor or Arvin are doing business, may be
less favorable than expected,
- legislative or regulatory changes may adversely affect the business in
which Meritor or Arvin is engaged, and
- changes may occur in the securities markets.
17
<PAGE> 25
MERITOR SPECIAL MEETING
GENERAL
This joint proxy statement-prospectus is first being mailed by Meritor to
the holders of Meritor common stock, par value $1 per share, on or about
[ ], 2000, and is accompanied by the notice of the Meritor special
meeting and a form of proxy that is solicited by the board of directors of
Meritor for use at the Meritor special meeting, to be held on July [ ], 2000,
at 10:00 a.m., local time, at our corporate headquarters located at 2135 West
Maple Road, Troy, Michigan, 48084-7186, and at any adjournments or postponements
of the meeting.
MATTERS TO BE CONSIDERED
The purpose of the Meritor special meeting is:
(a) to approve and adopt (i) the agreement and plan of reorganization,
dated as of April 6, 2000 (the "merger agreement"), by and among Meritor,
ArvinMeritor and Arvin, which provides for the merger of Meritor with and
into ArvinMeritor (the "first step merger") and, immediately thereafter,
the merger of Arvin with and into ArvinMeritor (the "second step merger",
and, together with the first step merger, the "merger"), and (ii) the
merger; and
(b) to consider any other matters that may properly come before the
meeting.
Meritor stockholders may also be asked to vote upon a proposal to adjourn
or postpone the Meritor special meeting. Meritor could use any adjournment or
postponement of the Meritor special meeting for the purpose, among others, of
allowing additional time for soliciting additional votes to approve and adopt
the merger agreement and the merger.
PROXIES
The Meritor board of directors is soliciting your proxy to give you the
opportunity to vote at the Meritor special meeting. When you deliver a valid
proxy, the shares represented by that proxy will be voted in accordance with
your instructions.
You may grant a proxy by (1) signing and mailing your proxy card, (2)
calling a toll-free telephone number and following the recorded instructions or
(3) going to a website on the Internet and following the instructions provided.
Delaware law permits a stockholder to grant a proxy in each of these ways.
However, if your shares are not registered in your own name, your bank, broker
or other institution holding your shares may not offer telephone or Internet
proxy voting. If your proxy card does not include telephone or Internet voting
instructions, please complete and return your proxy card by mail. If you are a
holder of record, or if your shares are held in street name and you have a valid
proxy from your broker, you may also cast your vote in person at the meeting.
Mail. To grant your proxy by mail, please complete your proxy card, and
sign, date and return it in the enclosed, postage-paid envelope. To be valid, a
returned proxy card must be signed and dated.
Telephone. You may use a toll-free telephone number listed on your proxy
card to grant your proxy. You must have your proxy card ready and:
1. Dial the toll-free number.
2. Enter the Control Number located on your proxy card.
3. Follow the recorded instructions.
Internet. You may also use the Internet to vote your proxy. You must have
your proxy card ready and:
1. Go to the website shown on your proxy card.
2. Enter the Control Number located on your proxy card.
18
<PAGE> 26
3. Follow the simple instructions.
In Person. If you attend the Meritor special meeting in person, you may
vote your shares by ballot at the meeting if you are a holder of record, or if
your shares are held in street name and you have a valid proxy from your broker.
You may revoke your proxy at any time prior to the closing of the polls at
the Meritor special meeting by delivering to the Secretary of Meritor a signed
notice of revocation or a later-dated signed proxy or by attending the Meritor
special meeting and voting in person. Attendance at the Meritor special meeting
will not in itself constitute the revocation of a proxy.
Written notices of revocation and other communications with respect to the
revocation of Meritor proxies should be addressed to Meritor Automotive, Inc.,
2135 West Maple Road, Troy, Michigan 48084-7186, Attention: Corporate Secretary.
All shares represented by valid proxies received pursuant to this solicitation,
and not revoked before they are exercised, will be voted in the manner specified
in the proxies. IF YOU MAKE NO SPECIFICATION, YOUR PROXY WILL BE VOTED IN FAVOR
OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
The Meritor board is currently unaware of any other matters that may be
presented for action at the Meritor special meeting. If other matters do
properly come before the Meritor special meeting, however, it is intended that
shares represented by proxies will be voted, or not voted, by the persons named
in the proxies in their discretion. No proxy that is voted against approval and
adoption of the merger agreement and the merger will be voted in favor of any
adjournment or postponement of the Meritor special meeting for the purpose of
soliciting additional proxies.
SOLICITATION OF PROXIES
Meritor will bear the entire cost of soliciting proxies from Meritor
stockholders, except that Meritor and Arvin each has agreed to pay one-half the
costs of filing, printing and mailing this joint proxy statement-prospectus and
related proxy materials. In addition to the solicitation of proxies by mail,
Meritor will request that banks, brokers and other record holders send proxies
and proxy material to the beneficial owners of the stock held by them and secure
their voting instructions if necessary. Meritor will reimburse those record
holders for their reasonable expenses in so doing. Meritor has also made
arrangements with Georgeson & Company Inc. to assist it in soliciting proxies,
and has agreed to pay customary fees plus expenses for those services. Meritor
may also use several of its regular employees, who will not be specially
compensated, to solicit proxies from stockholders, either personally or by
telephone, telegram, facsimile, Internet or special delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with the provisions of the Delaware General Corporation Law,
the Meritor By-Laws and the rules of the New York Stock Exchange, Inc., Meritor
has fixed [ ], 2000 as the record date for determining those Meritor
stockholders entitled to notice of and to vote at the Meritor special meeting.
Accordingly, only Meritor stockholders of record at the close of business on the
Meritor record date will be entitled to notice of and to vote at the Meritor
special meeting. At the close of business on the Meritor record date, there were
[ ] shares of Meritor common stock held by approximately [ ] holders of
record. The presence, in person or by proxy, of shares of Meritor common stock
representing a majority of Meritor shares outstanding and entitled to vote on
the Meritor record date is necessary to constitute a quorum at the Meritor
special meeting. Each share of Meritor common stock outstanding on the Meritor
record date entitles its holder to one vote.
Shares of Meritor common stock held by persons attending the Meritor
special meeting but not voting, and shares of Meritor common stock for which
Meritor has received proxies but with respect to which holders of those shares
have abstained from voting, will be counted as present at the Meritor special
meeting for purposes of determining the presence or absence of a quorum for the
transaction of business at the Meritor special meeting. Brokers who hold shares
of Meritor common stock in nominee or "street"
19
<PAGE> 27
name for customers who are the beneficial owners of those shares are prohibited
from giving a proxy to vote shares held for those customers on the matters to be
considered and voted upon at the Meritor special meeting without specific
instructions from those customers. These so-called "broker non-votes" will be
counted for purposes of determining whether a quorum exists.
Under applicable Delaware law and the Meritor Restated Certificate of
Incorporation, approval and adoption of the merger agreement and the merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of Meritor common stock entitled to vote at the Meritor special meeting.
BECAUSE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF MERITOR COMMON STOCK ENTITLED TO VOTE AT THE MERITOR SPECIAL MEETING,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. ACCORDINGLY, THE
MERITOR BOARD URGES MERITOR STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE
OR AUTHORIZE THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO VOTE YOUR SHARES BY
TELEPHONE OR THE INTERNET.
As of the Meritor record date, directors and executive officers of Meritor
owned [ ] shares of Meritor common stock, entitling them to exercise
approximately [ ]% of the voting power of the Meritor common stock entitled
to vote at the Meritor special meeting. As of the Meritor record date, directors
and executive officers of Arvin owned [ ] shares of Meritor common
stock.
Additional information with respect to beneficial ownership of Meritor
common stock by directors and executive officers of Meritor is incorporated by
reference to Meritor's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999. See "Where You Can Find More Information".
The following entities reported beneficial ownership of more than 5% of the
outstanding shares of Meritor common stock as of December 31, 1999. This
information is based on filings made with the Securities and Exchange Commission
on Schedule 13G pursuant to the Exchange Act:
- Wells Fargo Bank, N.A., 343 Sansome Street, San Francisco, California
94163, trustee for several employee savings plans of Rockwell
International Corporation, and its parent holding company, Wells Fargo &
Company, 420 Montgomery Street, San Francisco, California 94104, reported
beneficial ownership of 7,982,118 shares of Meritor common stock,
representing 12.14% of the Meritor shares outstanding as of December 31,
1999.
- FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109, and several
of its affiliates (Edward C. Johnson 3d, Abigail P. Johnson and Fidelity
Management & Research Company) each reported beneficial ownership of up
to 3,820,032 shares of Meritor common stock, representing up to 5.526% of
the Meritor shares outstanding as of December 31, 1999. The filing states
that various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the stock,
and that no one person's interest in Meritor common stock represents more
than 5% of the total outstanding common stock.
Shares of Meritor common stock held by the trustees of the savings plans of
Meritor and Rockwell on account of participants in such plans will be voted by
the respective trustees in accordance with instructions from the participants
(either in writing or by means of Meritor's telephone or Internet voting
procedures). Where no instructions are received, shares held in the Rockwell
plan will be voted as the trustee deems proper and shares held in Meritor's plan
will be voted in the same manner and proportion as the shares for which
instructions are received.
RECOMMENDATION OF MERITOR BOARD
The Meritor board has unanimously approved and adopted the merger agreement
and the merger. The Meritor board believes that the merger agreement and the
merger are in the best interests of Meritor and Meritor stockholders, and
recommends that Meritor stockholders vote "FOR" approval and adoption of the
merger agreement and the merger. See "The Merger -- Recommendations of the
Boards of Directors of Meritor and Arvin; Reasons for the Merger".
20
<PAGE> 28
ARVIN SPECIAL MEETING
GENERAL
This joint proxy statement-prospectus is first being mailed by Arvin to the
holders of Arvin common stock, par value $2.50 per share, on or about
[ ], 2000, and is accompanied by the notice of the Arvin special
meeting and a form of proxy that is solicited by the board of directors of Arvin
for use at the Arvin special meeting, to be held on July [ ], 2000, at 9:00
a.m., local time, at our corporate headquarters located at One Noblitt Plaza,
Columbus, Indiana 47202-3000, and at any adjournments or postponements of the
meeting.
MATTERS TO BE CONSIDERED
The purpose of the Arvin special meeting is:
(a) to approve and adopt (i) the agreement and plan of reorganization,
dated as of April 6, 2000 (the "merger agreement"), by and among Meritor,
ArvinMeritor and Arvin, which provides for the merger of Meritor with and
into ArvinMeritor (the "first step merger") and, immediately thereafter,
the merger of Arvin with and into ArvinMeritor (the "second step merger",
and, together with the first step merger, the "merger"), and (ii) the
merger; and
(b) to consider any other matters that may properly come before the
meeting.
Arvin stockholders may also be asked to vote upon a proposal to adjourn or
postpone the Arvin special meeting. Arvin could use any adjournment or
postponement of the Arvin special meeting for the purpose, among others, of
allowing additional time for soliciting additional votes to approve and adopt
the merger agreement and the merger.
PROXIES
The Arvin board of directors is soliciting your proxy to give you the
opportunity to vote at the Arvin special meeting. When you deliver a valid
proxy, the shares represented by that proxy will be voted in accordance with
your instructions.
You may grant a proxy by (1) signing and mailing your proxy card, (2)
calling a toll-free telephone number and following the recorded instructions or
(3) going to a website on the Internet and following the instructions provided.
Indiana law permits a stockholder to grant a proxy in each of these ways.
However, if your shares are not registered in your own name, your bank, broker
or other institution holding your shares may not offer telephone or Internet
proxy voting. If your proxy card does not include telephone or Internet voting
instructions, please complete and return your proxy card by mail. If you are a
holder of record, or if your shares are held in street name and you have a valid
proxy from your broker, you may also cast your vote in person at the meeting.
Mail. To grant your proxy by mail, please complete your proxy card, and
sign, date and return it in the enclosed, postage-paid envelope. To be valid, a
returned proxy card must be signed and dated.
Telephone. You may use a toll-free telephone number listed on your proxy
card to grant your proxy. You must have your proxy card ready and:
1. Dial the toll-free number.
2. Enter the Control Number located on your proxy card.
3. Follow the recorded instructions.
21
<PAGE> 29
Internet. You may also use the Internet to vote your proxy. You must have
your proxy card ready and:
1. Go to the website shown on your proxy card.
2. Enter the Control Number located on your proxy card.
3. Follow the simple instructions.
In Person. If you attend the Arvin special meeting in person, you may vote
your shares by ballot at the meeting if you are a holder of record, or if your
shares are held in street name and you have a valid proxy from your broker.
You may revoke your proxy at any time prior to the closing of the polls at
the Arvin special meeting by delivering to the Secretary of Arvin a signed
notice of revocation or a later-dated signed proxy or by attending the Arvin
special meeting and voting in person. Attendance at the Arvin special meeting
will not in itself constitute the revocation of a proxy.
Written notices of revocation and other communications with respect to the
revocation of Arvin proxies should be addressed to Arvin Industries, Inc., One
Noblitt Plaza, Columbus, Indiana 47202-3000, Attention: Corporate Secretary. All
shares represented by valid proxies received pursuant to this solicitation, and
not revoked before they are exercised, will be voted in the manner specified in
the proxies. IF YOU MAKE NO SPECIFICATION, YOUR PROXY WILL BE VOTED IN FAVOR OF
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
The Arvin board is currently unaware of any other matters that may be
presented for action at the Arvin special meeting. If other matters do properly
come before the Arvin special meeting, however, it is intended that the shares
represented by proxies will be voted, or not voted, by the persons named in the
proxies in their discretion. No proxy that is voted against approval and
adoption of the merger agreement and the merger will be voted in favor of any
adjournment or postponement of the Arvin special meeting for the purpose of
soliciting additional proxies.
SOLICITATION OF PROXIES
Arvin will bear the entire cost of soliciting proxies from Arvin
stockholders, except that Meritor and Arvin each has agreed to pay one-half the
costs of filing, printing and mailing this joint proxy statement-prospectus and
related proxy materials. In addition to the solicitation of proxies by mail,
Arvin will request that banks, brokers and other record holders send proxies and
proxy material to the beneficial owners of stock held by them and secure their
voting instructions if necessary. Arvin will reimburse those record holders for
their reasonable expenses in so doing. Arvin has also made arrangements with The
Altman Group to assist it in soliciting proxies, and has agreed to pay customary
fees plus expenses for those services. Arvin may also use several of its regular
employees, who will not be specially compensated, to solicit proxies from
stockholders, either personally or by telephone, telegram, facsimile, Internet
or special delivery letter.
RECORD DATE AND VOTING RIGHTS
In accordance with the provisions of the Indiana Business Corporation Law,
the Arvin By-Laws and the rules of the New York Stock Exchange, Inc., Arvin has
fixed [ ], 2000 as the record date for determining those Arvin
stockholders entitled to notice of and to vote at the Arvin special meeting.
Accordingly, only Arvin stockholders of record at the close of business on the
Arvin record date will be entitled to notice of and to vote at the Arvin special
meeting. At the close of business on the Arvin record date, there were [ ]
shares of Arvin common stock outstanding held by approximately [ ] holders
of record. The presence, in person or by proxy, of shares of Arvin common stock
representing a majority of Arvin shares outstanding and entitled to vote on the
Arvin record date is necessary to constitute a quorum at the Arvin special
meeting. Each share of Arvin common stock outstanding on the Arvin record date
entitles its holder to one vote.
22
<PAGE> 30
Shares of Arvin common stock held by persons attending the Arvin special
meeting but not voting, and shares of Arvin common stock for which Arvin has
received proxies but with respect to which holders of those shares have
abstained from voting, will be counted as present at the Arvin special meeting
for purposes of determining the presence or absence of a quorum for the
transaction of business at the Arvin special meeting. Brokers who hold shares of
Arvin common stock in nominee or "street" name for customers who are the
beneficial owners of those shares are prohibited from giving a proxy to vote
shares held for those customers on the matters to be considered and voted upon
at the Arvin special meeting without specific instructions from those customers.
These so-called "broker non-votes" will be counted for purposes of determining
whether a quorum exists.
Under applicable Indiana law and the Arvin Restated Articles of
Incorporation, approval and adoption of the merger agreement and the merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of Arvin common stock entitled to vote at the Arvin special meeting.
BECAUSE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF ARVIN COMMON STOCK ENTITLED TO VOTE AT THE ARVIN SPECIAL MEETING,
ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS VOTES AGAINST
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. ACCORDINGLY, THE
ARVIN BOARD URGES ARVIN STOCKHOLDERS TO COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE OR AUTHORIZE
THE INDIVIDUALS NAMED ON YOUR PROXY CARD TO VOTE YOUR SHARES BY TELEPHONE OR THE
INTERNET.
As of the Arvin record date, directors and executive officers of Arvin
owned approximately [ ] shares of Arvin common stock entitling them to
exercise approximately []% of the voting power of the Arvin stock entitled to
vote at the Arvin special meeting. As of the Arvin record date, directors and
executive officers of Meritor owned [ ] shares of Arvin common stock.
Additional information with respect to the beneficial ownership of Arvin
stock by individuals and entities owning more than 5% of that stock and more
detailed information with respect to beneficial ownership of Arvin stock by
directors and executive officers of Arvin is incorporated by reference to
Arvin's Annual Report on Form 10-K for the fiscal year ended January 2, 2000.
See "Where You Can Find More Information".
If you are a participant in an Arvin Savings Plan, your proxy card will
also serve as a voting instruction card for the trustee of that plan with
respect to the shares held in your account. The trustee will vote unallocated
and uninstructed shares of Arvin common stock in the same proportion as it votes
the shares with respect to which it has received instructions. The trustee will
act as provided above as long as it is consistent with applicable law.
If you are a participant in the Arvin Dividend Reinvestment Plan, your
proxy card will also serve as an instruction to vote the shares held for your
account under the plan in the manner indicated on the proxy. If your proxy is
not received, the shares held in your account in the Dividend Reinvestment Plan
will not be voted.
RECOMMENDATION OF ARVIN BOARD
The Arvin board has unanimously approved and adopted the merger agreement
and the merger. The Arvin board believes that the merger agreement and the
merger are in the best interests of Arvin and Arvin stockholders, and recommends
that the Arvin stockholders vote "FOR" approval and adoption of the merger
agreement and the merger. See "The Merger -- Recommendations of the Boards of
Directors of Meritor and Arvin; Reasons for the Merger".
23
<PAGE> 31
THE MERGER
GENERAL
The Meritor board and the Arvin board each has unanimously approved and
adopted the merger agreement and the merger. Pursuant to the merger agreement,
Meritor will merge with and into ArvinMeritor and, immediately thereafter, Arvin
will merge with and into ArvinMeritor. Each share of Meritor common stock issued
and outstanding at the effective time of the first step merger will be converted
into the right to receive 0.75 shares of common stock of ArvinMeritor, and each
share of Arvin common stock issued and outstanding at the effective time of the
second step merger will be converted into the right to receive one share of
common stock of ArvinMeritor, plus $2.00 in cash. Application will be made to
list the ArvinMeritor common stock on the New York Stock Exchange under the
proposed trading symbol "ARM".
BACKGROUND OF THE MERGER
The respective management groups of Meritor and Arvin review, on a
continuing basis, the strategic focus of their companies in light of the
changing competitive environment of the automotive supplier industry, with the
objective of identifying alternative strategies to enhance stockholder value.
Each company believes it has attractive future prospects on a stand-alone basis.
However, the managements of Meritor and Arvin from time to time have also
explored possible business combinations as a means of achieving economies of
scale and potentially attaining a more competitive position given the trend
toward industry consolidation.
On December 17, 1999, Larry D. Yost, Chairman of the Board and Chief
Executive Officer of Meritor, and V. William Hunt, Chairman of the Board,
President and Chief Executive Officer of Arvin, met in Indianapolis, Indiana and
discussed industry-related matters. At that meeting, Mr. Yost suggested
consideration of a potential strategic alliance between Meritor and Arvin, and
Mr. Hunt indicated that Arvin would consider such a potential alliance. Messrs.
Yost and Hunt met again on several occasions in January and February 2000 to
discuss further a possible strategic alliance between their two companies. At
these meetings they discussed, among other things, the corporate cultures of
their respective companies, possible structures of a business combination, and
the executive management team of a combined company. Mr. Yost and Mr. Hunt were
in general agreement that, in light of the respective strengths of each company,
any potential combination should appropriately be a "merger of equals". They
also agreed that a meeting including a limited number of additional members of
their respective senior management teams to continue discussions would be
appropriate.
On February 9, 2000, Mr. Yost reported to the Meritor board on his initial
discussions with Mr. Hunt regarding a potential merger of equals between Meritor
and Arvin. Mr. Yost reported that discussions with Arvin would continue.
On February 24, 2000, Meritor and Arvin entered into a mutual
confidentiality agreement covering the exchange of information in connection
with their consideration of a possible business combination. Thereafter, on
February 24 and 25, 2000, Mr. Yost, Vernon G. Baker, II, Senior Vice President,
General Counsel and Secretary of Meritor, Juan De La Riva, Senior Vice
President, Business Development of Meritor, and Thomas A. Madden, Senior Vice
President and Chief Financial Officer of Meritor, met in Chicago, Illinois with
Mr. Hunt and Larry D. Blair, Vice President, Finance and Chief Financial Officer
of Arvin, Ronald R. Snyder, Vice President, General Counsel and Secretary of
Arvin, and Wesley B. Vance, Vice President, Arvin Exhaust of Arvin. At these
meetings, there were preliminary discussions regarding each company's product
lines, historic financial results, business plans and strategic and general
management philosophies.
In conjunction with these initial discussions, the companies began
consulting with financial and legal advisers about issues raised in the
discussions. Meritor retained Warburg Dillon Read LLC as its financial advisor
and Chadbourne & Parke LLP as its legal counsel. Arvin retained Merrill Lynch,
Pierce, Fenner & Smith Incorporated as its financial adviser and Wachtell,
Lipton, Rosen & Katz as its legal counsel.
24
<PAGE> 32
Working with these advisors, Meritor and Arvin each conducted a due diligence
investigation of the other and began analyses of a possible combination. These
consultations continued throughout the remaining merger discussions.
On March 7, 2000, Mr. Yost and Mr. Hunt met in Beverly Hills, Michigan, to
discuss the outcome of the February 24 and 25 meetings and to discuss next steps
in a potential merger of equals transaction.
On March 14, 2000, Messrs. Yost and Madden and Terrence E. O'Rourke, Senior
Vice President and President, Light Vehicle Systems of Meritor, met with Messrs.
Hunt and Blair to discuss further a possible merger, as well as to discuss
additional planned meetings of the companies' respective management teams.
Also on March 14, 2000, the Meritor board of directors held a special
meeting at which senior management of Meritor briefed the board on the
preliminary discussions that had occurred with Arvin. At the conclusion of this
meeting, the Meritor board authorized senior management of Meritor to continue
discussions with Arvin about a merger of equals transaction. On the same date,
the Arvin board of directors held a special meeting at which senior management
of Arvin briefed the board on the preliminary discussions that had occurred with
Meritor. At the conclusion of this meeting, the Arvin board authorized senior
management of Arvin to continue discussions with Meritor about a merger of
equals transaction.
On March 16, 2000, representatives of the senior management teams of
Meritor and Arvin, led by Mr. Yost and Mr. Hunt, and their respective financial
and legal advisors attended a dinner meeting in Indianapolis, Indiana. On March
17, 2000, the same group participated in all-day due diligence meetings, during
which Meritor and Arvin representatives presented overviews of their respective
businesses. During the following week, Meritor and Arvin representatives and
their outside advisors exchanged financial, business and legal due diligence
materials and conducted further due diligence.
On March 23 and 24, 2000, Messrs. Yost and Baker, together with Meritor's
legal counsel and financial advisors, met in New York City with Messrs. Hunt and
Snyder, together with Arvin's legal counsel and financial advisors, to discuss
the principal terms of a proposed merger of equals transaction. At these
meetings, Messrs. Yost and Hunt and the others in attendance discussed, among
other things, the structure of a proposed merger, the form of merger
consideration, exchange ratios in the merger, combined company management, the
composition of the combined company's board of directors and committees of the
board, and the headquarters of the combined company.
On March 26, 2000, Meritor's legal counsel delivered a draft merger
agreement to legal counsel for Arvin. Meritor and Arvin and their respective
legal counsel began negotiating the merger agreement and various related
agreements on March 28, 2000.
On March 31 and April 3, 2000, Mr. Hunt had conference calls with Arvin
directors to update the Arvin board on the progress of discussions with Meritor.
The Meritor board held special meetings on each of April 3, 2000 and April
4, 2000, at which senior management and advisors of Meritor reviewed their
discussions and negotiations with Arvin regarding a merger, as well as the
results of their due diligence investigation of Arvin. Senior management and
Warburg Dillon Read reviewed with the Meritor board detailed financial
information with respect to Meritor, Arvin and the potential transaction.
Meritor's legal counsel also reviewed with the Meritor board legal due diligence
matters, the terms of the proposed merger agreement and related agreements, and
the legal standards applicable to a decision to approve and adopt the agreements
and the merger.
Also on April 4, 2000, the Arvin board held a special meeting at which
senior management and advisors of Arvin reviewed their discussions and
negotiations with Meritor regarding a merger, as well as the results of their
due diligence investigation of Meritor. Senior management and Merrill Lynch
reviewed with the Arvin board detailed financial information with respect to
Arvin, Meritor and the potential transaction. Arvin's legal counsel also
reviewed with the Arvin board legal due diligence matters, the terms of the
proposed merger agreement and related agreements, and the legal standards
applicable to a decision to approve and adopt the agreements and the merger.
25
<PAGE> 33
Discussions and negotiations regarding the merger agreement and related
agreements continued between Meritor and Arvin and their respective advisors
until April 6, 2000, when the parties reached final agreement on the forms of
the agreements, the Meritor exchange ratio and the Arvin merger consideration.
On April 6, 2000, the boards of directors of Meritor and Arvin, at their
respective special meetings, each unanimously approved and adopted the merger
agreement and related agreements. Thereafter, the merger agreement and related
agreements were executed and the transaction was publicly announced at
approximately the time of opening of financial markets in New York on April 6,
2000.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS OF MERITOR AND ARVIN; REASONS FOR THE
MERGER
THE MERITOR BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, MERITOR STOCKHOLDERS. ACCORDINGLY, THE MERITOR BOARD HAS
UNANIMOUSLY APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE MERGER AND
UNANIMOUSLY RECOMMENDS THAT MERITOR STOCKHOLDERS VOTE "FOR" APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.
THE ARVIN BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, ARVIN STOCKHOLDERS. ACCORDINGLY, THE ARVIN BOARD HAS UNANIMOUSLY
APPROVED AND ADOPTED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT ARVIN STOCKHOLDERS VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE MERGER.
Each of our boards, in reaching its decision to approve and adopt the
merger agreement and the merger, consulted with its management, as well as with
its financial and legal advisors, reviewed a significant amount of information
and considered a variety of factors, including the following:
- The business, operations, financial condition, earnings and prospects of
each of Meritor and Arvin. In making its determination, each of our
boards took into account the results of its company's due diligence
review of the other party.
- The anticipated effectiveness of the merger in allowing Meritor and Arvin
to enhance respective stockholder returns by identifying and achieving
efficiencies and cost savings.
- The fact that the automotive industry is undergoing a rapid consolidation
on a global basis that has affected both suppliers and original equipment
manufacturers ("OEMs"). Due to the capital intensive nature and overall
size of the industry, Meritor and Arvin believe that scale is an
important competitive factor, with the largest industry participants able
to maximize key resources -- manufacturing, R&D, engineering, customer
relationships and distribution. This is increasingly important in the
automotive industry, where suppliers are under continuing pressure to
take cost out of the supply chain and, in turn, to reduce overall cost to
OEMs. At the same time, successful automotive component suppliers are
being required to provide extensive
design/engineering support and, of increasing importance, to offer high
quality complete systems or modules and a portfolio of broad product
offerings.
- The scale, scope and diversity of operations, product lines, served
markets and customers that could be achieved by combining Meritor and
Arvin. Based on information available as of the date of the merger
agreement, the combined company would be a $7.5 billion global supplier
of a broad range of automotive components, with sales outside North
America aggregating approximately $2.5 billion or one-third of the total.
The expanded size and financial strength of the combined company,
together with its greater business line diversification, would improve
stability of the combined company's businesses and earnings in varying
economic and market climates and would enhance the combined company's
ability to expand addressable markets and capitalize on customer
positioning.
- The ability to achieve various revenue synergies as a combined company
such as by cross-selling the products and services of the two companies
to existing customers. For example, it is anticipated that the
transaction will improve Meritor's and Arvin's ability to supply
suspension systems and corner modules to light vehicle OEMs; there is the
potential to increase sales by cross-selling
26
<PAGE> 34
Arvin's exhaust systems, ride control and filter products to Meritor's
heavy vehicle customer base; the combined company would provide an
enhanced platform for expansion of Meritor's aperture and undercarriage
systems business; and it is anticipated that the combined company will
provide a superior environment for Arvin's ride control business.
- The expectation that the merger will result in synergies for the combined
company's operations, including an advantageous cost structure relative
to competitors and to each company on a stand-alone basis. The Meritor
board and the Arvin board each noted that, although no assurances could
be given that any particular level of synergies will be achieved, the
managements of Meritor and Arvin had identified annual net pre-tax
synergies of approximately $50 million in fiscal 2001, increasing to
approximately $100 million in fiscal 2003. See "Management and Operations
After the Merger" and "Cautionary Statement Concerning Forward-Looking
Statements".
- The market capitalization of the combined company will be significantly
increased, allowing the combined company to have increased access to debt
and equity markets.
- The combined company's anticipated future financial performance and the
belief that the transaction will provide the basis for consistent and
accelerated earnings growth, including earnings per share on a combined
company basis that by fiscal 2001 would be accretive to anticipated
earnings of each company on a stand-alone basis. The combined company's
ability to achieve these results will depend on various factors, a number
of which will be beyond its control, including economic conditions and
unanticipated changes in business conditions, and, therefore, there can
be no assurance that these results will be achieved. See "Cautionary
Statement Concerning Forward-Looking Statements".
- The belief of our respective boards and senior managements that Meritor
and Arvin share a common vision with respect to delivering stockholder
value and that the managements and employees of Meritor and Arvin possess
complementary skills and expertise.
- The belief of our respective boards that, as a result of its scale, the
combined company will have a strong foundation for future strategic
initiatives.
- The structure of the merger and the terms of the merger agreement and the
option agreements, which are reciprocal in nature, including the fact
that the fixed exchange ratios provide certainty as to the number of
shares of common stock of the combined company to be issued in the merger
and that each of the first step merger and the second step merger is
intended to qualify as a "reorganization" for U.S. federal income tax
purposes.
- The proposed arrangements with members of management of Meritor and
Arvin, including the fact that Mr. Yost will serve as Chairman of the
Board and Chief Executive Officer of the combined company and Mr. Hunt
will serve as Vice Chairman and President of the combined company, and
that certain members of management will receive employment offer letters,
as well as the arrangements reflected in the merger agreement with
respect to the composition of the board of directors of the combined
company and the committees of the board. See "Management and Operations
After the Merger" and "-- Interests of Certain Persons in the Merger".
- The respective obligations of Meritor and Arvin with respect to
non-solicitation and the payment of termination fees under the
circumstances described in the merger agreement, and the issuance of
shares to each other under the circumstances described in the stock
option agreements, and the impact that those obligations may have on
potential third-party acquirors and on the ability of Meritor and Arvin
to respond to any potential third party offer.
- The likelihood of the merger being approved by the appropriate regulatory
authorities. See "-- Regulatory Approvals Required for the Merger".
The Meritor board also considered the opinion of Warburg Dillon Read to the
Meritor board that, as of the date of the opinion and based on and subject to
the matters described in its opinion, the Meritor
27
<PAGE> 35
exchange ratio and the Arvin merger consideration taken together were fair from
a financial point of view to the holders of Meritor common stock. See
"-- Opinion of Meritor's Financial Advisor".
The Arvin board also considered the opinion of Merrill Lynch to the Arvin
board that, as of the date of the opinion and based on and subject to the
matters described in its opinion, the Arvin merger consideration was fair from a
financial point of view to the holders of Arvin common stock. See "-- Opinion of
Arvin's Financial Advisor".
This discussion of the information and factors considered by the Meritor
board and the Arvin board is not intended to be exhaustive but includes all
material factors considered by each board. Each of the Meritor board and the
Arvin board, in reaching its determination to approve and recommend the merger,
did not assign any relative or specific weights to those factors, and individual
directors may have given differing weights to different factors.
OPINION OF MERITOR'S FINANCIAL ADVISOR
Meritor's board of directors retained Warburg Dillon Read to act as its
financial advisor in connection with the board's consideration of a merger with
Arvin. At the meeting of the Meritor board of directors held on April 6, 2000,
Warburg Dillon Read delivered its oral opinion, subsequently confirmed in
writing as of the same date, to the effect that, as of the date of the opinion
and based upon and subject to the matters described in the opinion, the Meritor
exchange ratio and the Arvin merger consideration taken together were fair, from
a financial point of view, to the holders of Meritor common stock.
THE FOLLOWING SUMMARY OF THE WARBURG DILLON READ OPINION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. THE FULL TEXT OF THE
WARBURG DILLON READ OPINION SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN AND IS ATTACHED AS APPENDIX D TO THIS DOCUMENT AND INCORPORATED
HEREIN BY REFERENCE. WE ENCOURAGE YOU TO READ CAREFULLY THE WARBURG DILLON READ
OPINION IN ITS ENTIRETY.
The Warburg Dillon Read opinion:
- is directed to the Meritor board of directors;
- relates only to the fairness, from a financial point of view, of the
Meritor exchange ratio and Arvin merger consideration taken together to
the holders of Meritor common stock; and
- does not constitute a recommendation to holders of Meritor common stock
about how to vote at the special meeting.
In arriving at its opinion, Warburg Dillon Read, among other things:
- reviewed publicly available business and historical financial information
relating to Meritor and Arvin;
- reviewed the reported prices and trading activity for Meritor common
stock and Arvin common stock;
- reviewed internal financial information and other data concerning the
business and financial prospects of Meritor and Arvin, including
estimates and financial forecasts prepared by management of each company,
which were provided to Warburg Dillon Read by Meritor and Arvin;
- held discussions with members of senior management of Meritor and Arvin
regarding the business and prospects of Meritor and Arvin, as well as
other matters it believed relevant to its inquiry;
- reviewed publicly available financial and stock market data with respect
to selected companies in lines of business Warburg Dillon Read believed
to be generally comparable to those of Meritor and Arvin;
- compared the financial terms of the merger with the publicly available
financial terms of selected other transactions that Warburg Dillon Read
believed to be generally relevant;
28
<PAGE> 36
- considered a number of the pro forma effects of the merger on Meritor's
financial statements and reviewed estimates of synergies prepared by
Meritor's management;
- reviewed drafts of the merger agreement and related agreements; and
- conducted and considered other financial studies, analyses,
investigations and information that it considered necessary or
appropriate.
In connection with its review, Warburg Dillon Read:
- did not independently verify any of the information referred to above
and, with Meritor's consent, relied on it as being complete and accurate
in all material respects;
- assumed, with Meritor's consent, that the financial forecasts, estimates,
pro forma effects and calculations of synergies referred to above were
reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of each company as to the
future financial performance of their respective companies;
- assumed, with Meritor's consent, that the future financial results
referred to above will be achieved at the times and in the amounts
projected by the management of each company;
- assumed that Meritor and Arvin would comply with all material terms of
the merger agreement;
- assumed, with Meritor's consent, that each of the first step merger and
the second step merger will qualify as a reorganization for U.S. federal
income tax purposes and that the merger will be accounted for using the
purchase method;
- at Meritor's direction, did not make any independent evaluation or
appraisal of any of the assets or liabilities of Meritor or Arvin, nor
was Warburg Dillon Read furnished with any similar evaluation or
appraisal;
- was not authorized to and did not solicit indications of interest in a
business combination with Meritor from any party; and
- was not asked to and did not recommend the specific consideration payable
in the merger, which was determined through negotiation between Meritor
and Arvin.
Warburg Dillon Read's opinion:
- is necessarily based upon economic, monetary, market and other conditions
as they existed as of the date of the opinion and should be evaluated
based upon these conditions;
- does not imply any conclusion as to the prices at which the ArvinMeritor
common stock will trade subsequent to the merger, which may vary
depending upon various factors, including changes in interest rates,
dividend rates, market conditions, general economic conditions and other
factors that generally influence the price of securities; and
- does not address Meritor's underlying business decision to effect the
merger.
In preparing its opinion, Warburg Dillon Read performed a variety of
financial and comparative analyses. The material analyses are described below.
The summary of these analyses is not a complete description of the analyses
underlying Warburg Dillon Read's opinion. The preparation of a fairness opinion
is a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, is not susceptible
to partial analysis or summary descriptions. In arriving at its opinion, Warburg
Dillon Read made qualitative judgments as to the significance and relevance of
each analysis and factor considered by it. Accordingly, Warburg Dillon Read
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analyses set forth in its opinion. Meritor did not limit Warburg
Dillon Read regarding the procedures to be followed or factors to be considered
in rendering its opinion.
29
<PAGE> 37
In performing its analyses, Warburg Dillon Read made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
Meritor or Arvin. No company, transaction or business used in those analyses as
a comparison is identical to Meritor or Arvin or their businesses or the merger,
nor is an evaluation of the results entirely mathematical. Rather, the analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed.
The estimates contained in the analyses performed by Warburg Dillon Read
and the ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than suggested by
these analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which a
business might actually be sold or the prices at which any securities may trade
at the present time or at any time in the future.
In the past, Warburg Dillon Read and its predecessors have provided
investment banking services to Meritor and Arvin and received customary
compensation for the rendering of these services. In the ordinary course of its
business, Warburg Dillon Read, its successors and affiliates may trade or have
traded securities of Meritor or Arvin for their own account and, accordingly,
may at any time hold a long or short position in such securities. Warburg Dillon
Read and its affiliates, including UBS AG, may have other business relationships
with Meritor and its affiliates and Arvin and its affiliates.
The following is a summary of each of the material financial analyses
prepared and presented by Warburg Dillon Read in connection with the rendering
of its opinion. The financial analyses summarized below include information
presented in tabular format. In order to fully understand the financial
analyses, the tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the financial analyses.
Considering the data set forth below without considering the full narrative
description of the financial analyses, including the methodologies and
assumptions underlying the analyses, could create a misleading or incomplete
view of the financial analyses.
Meritor Analyses
Selected Companies Analysis. Warburg Dillon Read reviewed and compared
selected financial information and public market multiples of Meritor and the
following 11 other selected companies in the automotive components industry:
- BorgWarner Inc.
- Cummins Engine Company, Inc.
- Dana Corp.
- Detroit Diesel Corp.
- Eaton Corp.
- Federal-Mogul Corp.
- Johnson Controls Inc.
- Lear Corp.
- Magna International Inc.
- Mascotech Inc.
- Tower Automotive, Inc.
Warburg Dillon Read chose the selected companies because they were
publicly-traded companies that, for purposes of the analysis, Warburg Dillon
Read considered reasonably similar to Meritor in that
30
<PAGE> 38
these companies operate in the automotive components industry. The selected
companies may significantly differ from Meritor based on, among other things,
the size of the companies, the geographic coverage of the companies' operations,
and the particular segments of the automotive components industry on which the
companies focus.
Warburg Dillon Read reviewed, among other things, enterprise values,
calculated as the market value of fully diluted equity securities plus
indebtedness and minority interests less cash, as of April 5, 2000, as a
multiple of actual trailing 12 months and estimated calendar 2000 earnings
before interest, taxes, depreciation and amortization, commonly referred to as
EBITDA; and equity values, calculated as per share closing stock prices on April
5, 2000, as a multiple of the actual trailing 12 months and estimated calendar
2000 and 2001 earnings per share, commonly referred to as EPS. Warburg Dillon
Read then compared the implied multiples derived for the selected companies with
the implied multiples for Meritor based on the closing stock price of Meritor
shares as of April 5, 2000. Actual trailing 12 months data for Meritor and the
selected companies were based on the respective companies' 10-Ks and 10-Qs.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates. Estimated financial data for Meritor
were based on internal estimates provided by the management of Meritor. This
analysis indicated the following implied multiples for the selected companies,
as compared to the implied multiples for Meritor:
<TABLE>
<CAPTION>
IMPLIED RANGE OF MULTIPLES IMPLIED MULTIPLES OF
OF SELECTED COMPANIES: MERITOR BASED ON
----------------------------- APRIL 5, 2000
LOW MEAN MEDIAN HIGH MARKET VALUE:
--- ---- ------ ---- --------------------
<S> <C> <C> <C> <C> <C>
ENTERPRISE VALUE
Actual Trailing 12 Months EBITDA.......... 3.6x 5.0x 4.7x 6.7x 3.3x
Estimated Calendar 2000 EBITDA............ 3.6x 4.5x 4.3x 5.6x 3.1x
EQUITY VALUE
Actual Trailing 12 Months EPS............. 4.0x 8.2x 7.2x 13.6x 5.3x
Estimated Calendar 2000 EPS............... 4.1x 7.5x 6.7x 11.8x 4.5x
Estimated Calendar 2001 EPS............... 3.9x 7.0x 6.1x 10.8x 3.7x
</TABLE>
Arvin Analyses
Selected Companies Analysis. Warburg Dillon Read reviewed and compared
selected financial information and public market multiples of Arvin and the
following seven other selected companies in the automotive components industry:
- BorgWarner Inc.
- Federal-Mogul Corp.
- Johnson Controls Inc.
- Lear Corp.
- Magna International Inc.
- Mascotech Inc.
- Tower Automotive, Inc.
Warburg Dillon Read chose the selected companies because they were
publicly-traded companies that, for purposes of the analysis, Warburg Dillon
Read considered reasonably similar to Arvin in that these companies operate in
the automotive components industry. The selected companies may significantly
differ from Arvin based on, among other things, the size of the companies, the
geographic coverage of the companies' operations, and the particular segments of
the automotive components industry on which the companies focus.
31
<PAGE> 39
Warburg Dillon Read reviewed, among other things, enterprise values, as of
April 5, 2000, as a multiple of actual trailing 12 months and estimated calendar
2000 EBITDA. Warburg Dillon Read also reviewed equity values, as of April 5,
2000, as a multiple of actual trailing 12 months and estimated calendar 2000 and
2001 EPS. Warburg Dillon Read then compared the implied multiples derived for
the selected companies with the implied multiples for Arvin based on the closing
stock price of Arvin common stock on April 5, 2000, and the implied multiples
for Arvin based on the implied enterprise and equity values of Arvin in the
merger. For purposes of determining the implied enterprise and equity values of
Arvin in the merger, Warburg Dillon Read used the Meritor closing stock price as
of April 5, 2000. Actual trailing 12 months data for Arvin and the selected
companies were based on the respective companies' 10-Ks and 10-Qs. Estimated
financial data for the selected companies were based on publicly available
research analysts' estimates. Estimated financial data for Arvin were based on
internal estimates provided by the managements of Arvin and Meritor.
This analysis indicated the following implied multiples for the selected
companies, as compared to the implied multiples for Arvin:
<TABLE>
<CAPTION>
IMPLIED MULTIPLES
OF ARVIN BASED ON:
IMPLIED RANGE OF MULTIPLES ---------------------------
OF SELECTED COMPANIES: APRIL 5, IMPLIED
------------------------------- 2000 ARVIN TRANSACTION
LOW MEAN MEDIAN HIGH STOCK PRICE VALUE
---- ---- ------ ----- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
ENTERPRISE VALUE
Actual Trailing 12 Months
EBITDA......................... 4.2x 5.0x 4.7x 6.4x 4.1x 4.0x
Estimated Calendar 2000 EBITDA.... 3.6x 4.5x 4.3x 5.6x 3.6x 3.5x
EQUITY VALUE
Actual Trailing 12 Months EPS..... 4.0x 7.8x 7.2x 13.6x 6.5x 6.1x
Estimated Calendar 2000 EPS....... 4.1x 7.0x 6.7x 11.8x 5.4x 5.1x
Estimated Calendar 2001 EPS....... 3.9x 6.3x 5.8x 10.8x 4.2x 4.0x
</TABLE>
Selected Transactions Analysis. Although the proposed transaction between
Meritor and Arvin is structured as a "merger of equals", Warburg Dillon Read
reviewed and compared publicly available information relating to the following
13 selected transactions in the automotive components industry consummated since
1997:
<TABLE>
<CAPTION>
TARGET ACQUIROR
- ------ --------
<S> <C>
Citation Corporation Kelso & Company
Purolator Auto Filters Business of Mark IV Industries,
Inc. Arvin Industries, Inc.
LucasVarity plc TRW Inc.
Adwest Automotive plc Dura Automotive Systems, Inc.
Excel Industries, Inc. Dura Automotive Systems, Inc.
Kuhlman Corporation Borg-Warner Automotive, Inc.
CMI International, Inc. Hayes Lemmerz International, Inc.
Auto Parts Business of Cooper Industries, Inc. Federal-Mogul Corporation
Brake and Chassis Business of ITT Industries, Inc. Continental AG
Echlin Inc. Dana Corporation
T&N plc Federal-Mogul Corporation
Lemmerz Holding GmbH Hayes Wheels International, Inc.
Stant Corporation Tomkins plc
</TABLE>
Warburg Dillon Read chose the selected transactions because they were
business combinations that, for the purposes of the analysis, Warburg Dillon
Read considered to be reasonably similar to the merger in that these
transactions involved publicly-traded companies in the automotive components
industry. The selected transactions may significantly differ from the merger
based on, among other things, the size of the transactions, the structure of the
transactions and the date the transactions were consummated.
32
<PAGE> 40
Warburg Dillon Read reviewed, among other things, the enterprise values
implied in the relevant transactions as a multiple of actual trailing 12 months
EBITDA and actual trailing 12 months earnings before interest and taxes,
commonly referred to as EBIT. Warburg Dillon Read then compared the implied
multiples derived for the selected transactions with the multiples implied in
the merger for Arvin using Meritor's closing share price on April 5, 2000. All
multiples for the selected transactions were based on publicly available
information at the time of the announcement of the particular transaction.
Actual trailing 12 months data for Arvin was based on its applicable 10-K and
10-Qs.
This analysis indicated the following implied multiples for the selected
transactions, as compared to the implied multiples for Arvin at the terms of the
merger:
<TABLE>
<CAPTION>
IMPLIED MULTIPLES OF
SELECTED TRANSACTIONS: IMPLIED MULTIPLES OF
ENTERPRISE VALUE TO -------------------------------- ARVIN BASED ON IMPLIED
ACTUAL TRAILING 12 MONTHS: LOW MEAN MEDIAN HIGH TRANSACTION VALUE
- -------------------------- ---- ----- ------ ----- ----------------------
<S> <C> <C> <C> <C> <C>
EBITDA.................................. 5.8x 7.7x 7.1x 12.7x 4.0x
EBIT.................................... 8.6x 12.7x 11.4x 19.1x 6.4x
</TABLE>
Discounted Cash Flow Analysis. Warburg Dillon Read performed a discounted
cash flow analysis, using internal estimates of the managements of Arvin and
Meritor, in order to derive an implied equity value reference range for Arvin on
a stand-alone basis, without giving effect to the merger, both with and without
giving effect to estimated synergies. This analysis was based on:
- the present value of the estimated unlevered, after-tax free cash flows
that Arvin could generate over the five-year period 2000 through 2004;
- the future 2004 exit value of Arvin based on a range of multiples applied
to its estimated future 2004 EBITDA; and
- pre-tax synergies of approximately $50 million in the fiscal year ending
September 30, 2001, increasing to approximately $100 million in the
fiscal year ending September 30, 2003.
For purposes of this analysis, Warburg Dillon Read used discount rates of
9.0% to 11.0%, which were based on Arvin's estimated weighted average cost of
capital, including debt, and terminal 2004 EBITDA multiples of 3.8x to 4.2x,
which were derived by reference to the implied public market trading multiples
of enterprise value to actual trailing 12 months EBITDA for Arvin and the
selected publicly-traded comparable companies. This analysis implied a per share
equity value reference range for Arvin of about $43.34 to $54.39 excluding
synergies and $58.89 to $72.23 including synergies.
Pro Forma Merger Analysis
Warburg Dillon Read analyzed the potential pro forma financial effects of
the merger on Meritor's estimated EPS for 2001 through 2004, based both on
internal estimates of Meritor and Arvin managements with and without the effect
of estimated synergies; and on EPS estimates for the companies by the
Institutional Brokers Estimate System ("IBES"). IBES is a data service that
monitors and publishes compilations of earnings estimates by selected research
analysts regarding companies of interest to institutional investors. Warburg
Dillon Read did not review the methodologies or assumptions used by IBES in
compiling its earnings estimates, and IBES was not asked to consent to the use
of its name herein.
With synergies, this analysis indicated that the merger could have an
accretive effect on Meritor's EPS for 2001 through 2004. The actual results
achieved by the combined company may vary from projected results and the
variations may be material.
Relative Valuation Analyses
Contribution Analysis. Warburg Dillon Read analyzed the pro forma
contribution of each of Meritor and Arvin to, among other things, the revenue,
EBITDA, net income and net book value of the combined company assuming
completion of the merger and excluding purchase accounting adjustments, based on
33
<PAGE> 41
internal estimates of Meritor and Arvin managements for the fiscal years ending
September 30, 2000 and 2001, and actual results for the fiscal year ended
September 30, 1999, both without synergies and with 50% of estimated total
annual pre-tax synergies of $100 million and the associated estimated revenue
synergies of $390 million credited to each of Meritor and Arvin. Warburg Dillon
Read then compared the pro forma contributions to net income and net book value
to the pro forma 34.2% equity ownership by Arvin stockholders of the combined
company at the merger terms; and the pro forma contributions to revenue and
EBITDA to the pro forma 40.4% of enterprise value for Arvin stockholders at the
merger terms. For these purposes, the net income of Arvin was adjusted to
reflect the interest cost of the cash portion of the Arvin merger consideration
to be paid to Arvin stockholders and the enterprise value was based on the
merger terms and Meritor's closing stock price on April 5, 2000. This analysis
indicated the following pro forma contributions with and without synergies:
<TABLE>
<CAPTION>
ARVIN PRO FORMA
CONTRIBUTION ARVIN PRO FORMA
WITHOUT CONTRIBUTION WITH CREDIT FOR
CONTRIBUTION TO YEAR ENDING SEPTEMBER 30: CREDIT FOR SYNERGIES: 50% OF SYNERGIES TO EACH:
----------------------------------------- --------------------- ----------------------------
<S> <C> <C>
REVENUE
1999.............................................. 40.4% 40.8%
2000E............................................. 42.8% 43.1%
2001E............................................. 45.3% 45.5%
EBITDA
1999.............................................. 36.1% 37.6%
2000E............................................. 37.1% 38.3%
2001E............................................. 39.0% 40.0%
NET INCOME
1999.............................................. 31.2% 34.6%
2000E............................................. 32.8% 35.7%
2001E............................................. 35.6% 37.7%
NET BOOK VALUE 1999................................. 63.6% 63.6%
</TABLE>
Relative Discounted Cash Flow Analysis. Warburg Dillon Read compared the
results of the discounted cash flow analysis for Arvin, described above, to
those of a similar analysis for Meritor. The Meritor analysis was based on:
- the present value of the estimated unlevered, after-tax free cash flows
that Meritor could generate over the five year period 2000 through 2004;
and
- the future 2004 exit value of Meritor based on a range of multiples
applied to its estimated future 2004 EBITDA.
For the purposes of this analysis, Warburg Dillon Read used discount rates
of 9.0% to 11.0%, which were based on Meritor's estimated weighted average cost
of capital, including debt, and terminal EBITDA multiples of 3.0x to 3.4x, which
were derived by reference to the implied public market trading multiples of
enterprise value to actual trailing 12 months EBITDA for Meritor and the
selected publicly-traded comparable companies. Warburg Dillon Read then analyzed
the implied ratio of per share value of Arvin to per share value of Meritor,
derived both without synergies and with 50% and 100% credit for synergies to
Arvin. This analysis implied a ratio of 1.19 to 1.23 Meritor shares per Arvin
share without synergies; 1.40 to 1.43 with 50% credit for synergies to each; and
1.61 to 1.64 with 100% credit for synergies to Arvin.
Fee Arrangement
Pursuant to an engagement letter dated March 31, 2000 between Meritor and
Warburg Dillon Read, Meritor agreed to pay Warburg Dillon Read an initial fee of
$250,000 upon execution of the engagement letter and an additional fee of
$1,300,000 upon delivery of Warburg Dillon Read's fairness opinion to the
34
<PAGE> 42
Meritor board of directors on April 6, 2000. Meritor further agreed to pay
Warburg Dillon Read upon completion of the merger a transaction fee of
$6,500,000, against which fees previously paid to Warburg Dillon Read will be
credited. Accordingly, if the merger is consummated, Warburg Dillon Read will
receive total financial advisory fees of $6,500,000. Meritor has also agreed to
reimburse Warburg Dillon Read for expenses reasonably incurred by it in entering
into and performing services pursuant to the engagement, including the
reasonable fees and expenses of its legal counsel. Meritor also has agreed to
indemnify Warburg Dillon Read and related parties against certain losses,
claims, damages and liabilities related to or arising out of the matters
contemplated by the engagement letter.
Meritor selected Warburg Dillon Read based on its experience, expertise and
reputation. Warburg Dillon Read is an internationally recognized investment
banking firm that regularly engages in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes.
OPINION OF ARVIN'S FINANCIAL ADVISOR
On April 6, 2000, Merrill Lynch delivered its oral opinion to the Arvin
board of directors, subsequently confirmed in writing as of the same date, that,
as of that date, and based upon and subject to the various factors, assumptions
and limitations set forth in the opinion, the Arvin merger consideration
(comprised of the Arvin exchange ratio and the Arvin cash consideration) was
fair, from a financial point of view, to the holders of Arvin common stock.
The full text of Merrill Lynch's written opinion is attached as Appendix E
to this joint proxy statement-prospectus and is incorporated herein by
reference. A copy of the Merrill Lynch opinion also is available for inspection
and copying by any holder of Arvin common stock or any representative of such
holder who has been so designated in writing, at the principal executive offices
of Arvin during normal business hours. Stockholders of Arvin are urged to, and
should, read the Merrill Lynch opinion carefully in its entirety for information
with respect to the procedures followed, assumptions made, matters considered
and limits on the review undertaken by Merrill Lynch in rendering its opinion.
The Merrill Lynch opinion was for the use and benefit of the Arvin board of
directors and addresses only the fairness, from a financial point of view, of
the Arvin merger consideration to the holders of Arvin common stock. It does not
address the merits of the underlying decision by Arvin to engage in the merger,
nor does it constitute a recommendation to any stockholder of Arvin as to how
that stockholder should vote on the proposed merger or any related matters. The
following summary does not purport to be a complete description of the analyses
performed by Merrill Lynch and is qualified in its entirety by reference to the
full text of the Merrill Lynch opinion.
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed certain publicly available business and financial information
relating to Arvin and Meritor that Merrill Lynch deemed relevant;
- reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
Arvin and Meritor, as well as the amount and timing of cost savings and
related expenses and synergies expected to result from the merger,
furnished to Merrill Lynch by Arvin and Meritor;
- conducted discussions with members of senior management and
representatives of Arvin and Meritor concerning the matters described
above, as well as the respective businesses and prospects of Arvin and
Meritor before and after giving effect to the merger and the expected
synergies;
- reviewed the market prices and valuation multiples for shares of Arvin
common stock and Meritor common stock and compared them with those of
certain publicly traded companies that Merrill Lynch deemed relevant;
35
<PAGE> 43
- reviewed the results of operations of Arvin and Meritor and compared them
with those of certain publicly traded companies that Merrill Lynch deemed
relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed relevant;
- participated in certain discussions and negotiations among
representatives of Arvin and Meritor and their respective financial and
legal advisors;
- reviewed the potential pro forma impact of the merger;
- reviewed the merger agreement in substantially final form; and
- reviewed selected other financial studies and analyses and took into
account various other matters as Merrill Lynch deemed necessary,
including Merrill Lynch's assessment of general economic, market and
monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to it,
discussed with or reviewed by or for it, or publicly available, and did not
assume any responsibility for independently verifying that information or
undertake an independent evaluation or appraisal of any of Arvin's or Meritor's
assets or liabilities, nor was Merrill Lynch furnished with any such evaluation
or appraisal. In addition, Merrill Lynch did not assume any obligation to
conduct any physical inspection of Arvin's or Meritor's properties or
facilities. With respect to the financial forecast information and expected
synergies furnished to or discussed with Merrill Lynch by Arvin and Meritor,
Merrill Lynch assumed that they had been reasonably prepared and reflected the
best currently available estimates and judgment of Arvin's or Meritor's
management as to the expected future financial performance of Arvin or Meritor,
as the case may be, and the expected synergies. Merrill Lynch also assumed that
the merger would be accounted for as a purchase under generally accepted
accounting principles, that the receipt of ArvinMeritor common stock (but not
the cash consideration) by Arvin stockholders in the merger would be tax-free
for U.S. federal income tax purposes and that the final form of the merger
agreement would be substantially similar to the last draft reviewed by it.
The Merrill Lynch opinion was necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, April 6, 2000. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals for the merger, no restrictions, including any divestiture
requirements or amendments or modifications, would be imposed that would have a
material adverse effect on the contemplated benefits of the merger. In
connection with the preparation of its opinion, Merrill Lynch was not authorized
by Arvin or the Arvin board of directors to solicit, nor did Merrill Lynch
solicit, third-party indications of interest for the acquisition of all or any
part of Arvin.
The following paragraphs contain a brief summary of the material valuation,
financial and comparative analyses presented by Merrill Lynch to the Arvin board
of directors in connection with the rendering of its opinion. In presenting
these analyses, Merrill Lynch noted that the key factor typically used to
evaluate transactions of this nature is the comparison of the relative
contribution of earnings and value by each company to the combined enterprise
with the respective ownership levels of the stockholders of each company in the
combined enterprise. The summary does not purport to be a complete description
of the analyses underlying the Merrill Lynch opinion.
In performing the analyses described below, Merrill Lynch used two sets of
projections of Arvin's and Meritor's future operating performance for fiscal
years 2000 through 2004. In the first case, called the Base Case, Merrill Lynch
used the following financial projections: (i) with respect to Arvin, internal
financial projections provided by Arvin management and (ii) with respect to
Meritor, internal financial projections provided by Meritor management, adjusted
downward based on discussions with Arvin management to reflect assumptions
prepared on a more consistent basis with those used in Arvin's internal
financial projections. In the second case, called the Alternative Case, Merrill
Lynch used the following financial projections: (i) with respect to Arvin,
internal financial projections provided by Arvin management,
36
<PAGE> 44
adjusted upward based on discussions with Arvin management to reflect
assumptions prepared on a more consistent basis with those used in Meritor's
internal financial projections and (ii) with respect to Meritor, internal
financial projections provided by Meritor management. In both cases, Arvin
financial results were adjusted to reflect a September 30 fiscal year end to be
consistent with Meritor's fiscal year end and the expected fiscal year end of
ArvinMeritor.
In connection with performing the analyses described below, Merrill Lynch
calculated the pro forma equity ownership of Arvin stockholders in ArvinMeritor
and the portion of the pro forma enterprise value (equity plus net debt) of
ArvinMeritor attributable to Arvin and its stockholders. Based on (i) the
closing price of Arvin common stock as of April 5, 2000, (ii) the number of
outstanding shares of common stock of Arvin and Meritor as of December 31, 1999
(adjusted to reflect completed share repurchases), (iii) the net debt
outstanding of Arvin and Meritor as of December 31, 1999, (iv) the Meritor
exchange ratio and (v) the Arvin merger consideration, Arvin stockholders would
collectively own approximately 34% of the pro forma equity of ArvinMeritor, and
approximately 40% of the pro forma enterprise value of ArvinMeritor would be
attributable to Arvin and its stockholders.
Relative Contribution Analysis
Merrill Lynch performed an analysis of the relative contributions by each
of Arvin and Meritor to, among other things, net income, EBITDA (earnings before
interest, taxes, depreciation and amortization) and EBIT (earnings before
interest and taxes) of ArvinMeritor, in each case, before taking into account
purchase accounting adjustments and pre-tax synergies expected to result from
the merger. These comparisons were calculated based upon the actual results of
Arvin and Meritor for the fiscal year ended September 30, 1999 and the estimated
results of Arvin and Meritor for the fiscal years ended September 30, 2000, 2001
and 2002 using the Base Case and Alternative Case projections.
The following table presents the percentage contributions of Arvin to
ArvinMeritor's net income, EBITDA and EBIT resulting from this analysis:
<TABLE>
<CAPTION>
BASE CASE ALTERNATIVE CASE
--------------------------------- ---------------------------------
ACTUAL ESTIMATED ACTUAL ESTIMATED
------ ----------------------- ------ -----------------------
1999 2000 2001 2002 1999 2000 2001 2002
------ ----- ----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Income................. 32% 32% 36% 35% 32% 33% 35% 34%
EBITDA..................... 35% 35% 39% 38% 35% 36% 38% 37%
EBIT....................... 31% 32% 36% 35% 31% 32% 35% 35%
</TABLE>
Merrill Lynch compared Arvin's contribution to ArvinMeritor's net income
with the approximately 34% pro forma equity ownership in ArvinMeritor of the
Arvin stockholders. Merrill Lynch also compared Arvin's contribution to
ArvinMeritor's EBITDA and EBIT with the approximately 40% pro forma enterprise
value in ArvinMeritor attributable to Arvin and its stockholders.
Relative Discounted Cash Flow Analysis
Merrill Lynch performed a discounted cash flow analysis of the after-tax,
unlevered free cash flow of each of Arvin and Meritor based upon the Base Case
and Alternative Case projections described above for the years 2000 through 2004
before taking into account the synergies expected to result from the merger.
Using these projection cases, Merrill Lynch calculated implied equity values for
each of Arvin and Meritor by applying discount rates ranging from 9% to 11% per
year, determined by analyzing the weighted average cost of capital for selected
publicly traded companies in the automotive components industry, and terminal
EBITDA multiples ranging from 3.5x to 4.5x, determined by analyzing the trading
characteristics of the common stock of such selected companies. Based upon the
implied equity values resulting from this analysis, Merrill Lynch calculated the
relative percentage contribution of Arvin to the total combined implied equity
value of Arvin and Meritor. The following table presents the ranges resulting
from this analysis:
<TABLE>
<CAPTION>
BASE CASE ALTERNATIVE CASE
--------- ----------------
<S> <C> <C>
Arvin Contribution to Equity Value.......................... 29%-31% 27%-29%
</TABLE>
37
<PAGE> 45
Merrill Lynch compared the ranges of Arvin's contribution to the total
combined implied equity value of Arvin and Meritor with the approximately 34%
pro forma equity ownership in ArvinMeritor of the Arvin stockholders.
Valuation Analysis of Expected Synergies
Merrill Lynch performed a discounted cash flow analysis of the potential
impact of (i) the pre-tax synergies expected to result from cost-reduction
initiatives following the closing of the merger of approximately $45 million in
2001, $70 million in 2002 and $75 million in each of 2002 and 2003 (these
amounts did not include pre-tax synergies in the form of incremental revenue
opportunities of approximately $5 million in 2001, increasing to approximately
$25 million in 2003) and (ii) certain estimated transaction expenses associated
with the merger of $27 million on the pro forma after-tax, unlevered free cash
flows of ArvinMeritor. Merrill Lynch calculated the net present value of the
potential incremental free cash flows resulting from such expected cost-based
synergies (excluding revenue-based synergies) and expenses by applying discount
rates ranging from 9% to 11% per year and terminal EBITDA multiples ranging from
3.5x to 4.5x, in each case, determined as described above.
The net present value of the expected cost-based synergies (excluding
revenue-based synergies) and expenses resulting from this analysis ranged from
$241 million to $313 million, or $3.40 to $4.40 per pro forma share of
ArvinMeritor.
Pro Forma Merger Analysis
Merrill Lynch performed an analysis of the potential pro forma financial
impacts of the merger on the EPS (earnings per share) of Arvin and Meritor using
the projected EPS from the Base Case and Alternative Case projections and EPS
estimates for Arvin and Meritor published by First Call Corporation. In
performing this analysis, Merrill Lynch assumed, among other things:
- the Arvin merger consideration;
- the Meritor exchange ratio;
- pre-tax synergies expected to result from cost-reduction initiatives
following the closing of the merger as described under "Valuation
Analysis of Expected Synergies" above;
- a September 2000 closing; and
- purchase accounting treatment.
The results of this analysis indicated that, including the impact of the
expected synergies, the merger would be (i) accretive to the projected EPS of
Arvin in each fiscal year from 2001 through 2004 under the Base Case and
Alternative Case projections and the First Call estimates and (ii) accretive to
the projected EPS of Meritor in each fiscal year from 2001 through 2004 under
the Base Case and Alternative Case projections and the First Call estimates.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, is not necessarily susceptible to partial analysis
or summary description. Selecting portions of the analyses or of the summaries
set forth above, without considering the analyses as a whole, could create an
incomplete view of the processes underlying the Merrill Lynch opinion. In
arriving at its fairness determination, Merrill Lynch considered the results of
all such analyses and did not attribute any particular weight to any factor or
analysis considered by it; Merrill Lynch made its determination as to fairness
on the basis of its experience and professional judgment after considering the
results of all such analyses. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Arvin, Merrill Lynch or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, the Merrill Lynch opinion was among many factors taken into
consideration by the Arvin board of directors in making its determination to
approve the merger.
38
<PAGE> 46
Merrill Lynch is an internationally recognized investment banking and
advisory firm. As part of its investment banking business, Merrill Lynch is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. Arvin selected Merrill Lynch to
act as its exclusive financial advisor in connection with the merger based on
Merrill Lynch's qualifications, expertise and reputation.
Merrill Lynch currently provides, and in the past has provided, financial
advisory and financing services to Arvin and/or its affiliates and may continue
to do so, and Merrill Lynch has received, and may receive, fees for the
rendering of such services. In addition, in the ordinary course of its business,
Merrill Lynch may actively trade shares of Arvin common stock, Meritor common
stock and other securities of Arvin or Meritor, for its own account and the
accounts of its customers and, accordingly, may at any time hold a long or short
position in these securities.
Pursuant to an engagement letter dated March 21, 2000 between Arvin and
Merrill Lynch, Arvin has agreed to pay Merrill Lynch an initial retainer fee of
$250,000 and an additional fee of $1,000,000 upon execution of the merger
agreement. Arvin has further agreed to pay Merrill Lynch a transaction fee,
contingent upon and payable at the closing of the merger, of $6,000,000, against
which any fees previously paid to Merrill Lynch are to be credited. Accordingly,
if the merger is consummated, Merrill Lynch will receive total financial
advisory fees of $6,000,000. In addition, Arvin has agreed to reimburse Merrill
Lynch for its reasonable out-of-pocket expenses incurred in connection with its
engagement, including fees and disbursements of its legal counsel, and to
indemnify Merrill Lynch and its affiliates against certain losses, claims,
damages, liabilities and expenses related to or arising out of the performance
by Merrill Lynch of services under its engagement.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
U.S. Antitrust Approvals
Meritor and Arvin cannot complete the merger until they have filed
notifications with the Antitrust Division of the Department of Justice and the
Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the applicable rules of the Federal Trade Commission,
and specified waiting periods have expired or terminated. Meritor and Arvin
filed the required notification and report forms under the Hart-Scott-Rodino
Antitrust Improvements Act with the Federal Trade Commission and the Antitrust
Division on May 3, 2000. The waiting period under this Act is expected to expire
on June 2, 2000, unless extended or earlier terminated.
Meritor and Arvin believe that the proposed merger is compatible with U.S.
antitrust laws. Nevertheless, there can be no assurance that completion of the
merger will not be delayed or prevented because of the requirements of the U.S.
antitrust laws. In addition, at any time before or after consummation of the
merger, the Antitrust Division, the Federal Trade Commission, other governmental
authorities or private persons could take action against the merger under the
antitrust laws, including seeking to enjoin consummation of the merger, rescind
the merger or cause Meritor or Arvin to divest, in whole or in part, any of
their assets or businesses.
European Commission Approval
Both Meritor and Arvin conduct business in member states of the European
Union. European Union Council Regulation No. 4064/89 and accompanying
regulations require approval by the European Commission of specific mergers or
acquisitions involving parties with aggregate worldwide sales and individual
European Union sales exceeding specified thresholds before those mergers and
acquisitions can be implemented. Meritor and Arvin informally notified the
European Commission of the merger on April 7, 2000 and filed formal
notifications of the merger with the European Commission on May 3, 2000.
Completing a review and gaining approval under the European Commission merger
regulation is a condition to completing the merger.
39
<PAGE> 47
Other Approvals
In addition, Meritor and Arvin are required to make filings with or obtain
approvals in connection with the merger from regulatory authorities in Brazil,
Canada, Mexico and South Africa. These filings either have been or will be made
timely with the appropriate authorities.
The obligations of Meritor or Arvin to complete the merger are subject to
the conditions that:
- there not be any injunction, decree or order issued by any court or
agency of competent jurisdiction or any other legal restraint or
prohibition preventing them from completing the transactions contemplated
by the merger agreement; and
- there be obtained all consents, approvals, permits or authorizations
required to be obtained from any governmental authority, the absence of
which would reasonably be expected to have a material adverse effect on
the combined company and its subsidiaries, taken together, after the
merger.
Meritor and Arvin are not aware of any governmental approvals or actions
that are required for consummation of the merger other than as described above.
If any other governmental approval or action is required, the parties currently
contemplate that they would seek that additional approval or action. There can
be no assurance, however, that the parties will obtain these additional
approvals or actions.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to Meritor stockholders and Arvin stockholders
who hold Meritor common stock or Arvin common stock as a capital asset. The
summary is based on the Internal Revenue Code, Treasury regulations issued under
the Code, and administrative rulings and court decisions in effect as of the
date of this joint proxy statement-prospectus, all of which are subject to
change at any time, possibly with retroactive effect. This summary is not a
complete description of all of the consequences of the merger and, in
particular, may not address U.S. federal income tax considerations applicable to
Meritor stockholders and Arvin stockholders subject to special treatment under
U.S. federal income tax law. Stockholders subject to special treatment include,
for example, foreign persons, financial institutions, dealers in securities,
traders in securities who elect to apply a mark-to-market method of accounting,
insurance companies, tax-exempt entities, holders who acquired their shares
pursuant to the exercise of an employee stock option or right or otherwise as
compensation, and holders who hold Meritor common stock or Arvin common stock as
part of a "hedge", "straddle", "conversion", or "constructive sale" transaction.
In addition, no information is provided in this document with respect to the tax
consequences of the merger under applicable foreign or state or local laws.
MERITOR STOCKHOLDERS AND ARVIN STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR
TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE
EFFECTS OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Meritor and Arvin have been advised by Chadbourne & Parke LLP, counsel to
Meritor, and Wachtell, Lipton, Rosen & Katz, special counsel to Arvin,
respectively, that the material U.S. federal income tax consequences of the
first step merger and the second step merger are as follows:
- neither Meritor nor Arvin will recognize any gain or loss as a result of
the merger;
- a Meritor stockholder will recognize no gain or loss on the receipt of
shares of common stock of the combined company in exchange for such
stockholder's Meritor common stock in the merger (except with respect to
cash received in lieu of a fractional share interest in common stock of
the combined company);
- the aggregate tax basis of the shares of common stock of the combined
company received by a Meritor stockholder in the merger (including
fractional shares deemed received and redeemed as described below) will
equal the aggregate tax basis of the shares of Meritor common stock
surrendered in exchange for that stock;
40
<PAGE> 48
- the holding period of a share of common stock of the combined company
received by a Meritor stockholder in the merger (including any fractional
share deemed received and exchanged as described below) will include the
stockholder's holding period for the Meritor common stock surrendered in
exchange for that stock;
- an Arvin stockholder whose tax basis is less than the sum of the fair
market value of the combined company common stock received plus the
amount of cash received will recognize gain in an amount equal to the
lesser of (A) the amount of gain realized and (B) the amount of cash
received. The amount of gain realized will generally be calculated as the
amount by which the sum of the fair market value of the combined company
common stock received plus the amount of cash received exceeds the tax
basis of the Arvin common stock surrendered;
- any gain that an Arvin stockholder recognizes should generally be capital
gain, and should be long-term capital gain if the holding period for the
Arvin common stock surrendered is greater than one year at the effective
time of the merger. If the receipt of cash by an Arvin stockholder has
the effect of a distribution of a dividend as described below, however,
such holder may be required to treat any gain recognized as dividend
income (rather than capital gain) up to such holder's proportionate share
of Arvin's accumulated earnings and profits;
- an Arvin stockholder will not recognize any loss upon the receipt of
combined company common stock and cash;
- the aggregate tax basis of the shares of common stock of the combined
company received by an Arvin stockholder will equal the aggregate tax
basis of the shares of Arvin common stock surrendered in exchange for
that stock, decreased by the amount of cash consideration received, and
increased by the amount of gain recognized on the exchange (including any
portion of that gain that is treated as a dividend); and
- the holding period of a share of common stock of the combined company
received by an Arvin stockholder in the merger will include the
stockholder's holding period for the Arvin common stock surrendered in
exchange for that stock.
Whether the receipt of cash by an Arvin stockholder has the effect of a
distribution of a dividend to such holder depends on such holder's particular
circumstances. In particular, if the receipt of cash is deemed to result in a
meaningful reduction in such holder's actual and constructive ownership of the
combined company (as compared to the amount of combined company stock such
holder would have owned had such holder received solely combined company stock
in the merger), then the receipt of such cash will not have the effect of a
distribution of a dividend. For this purpose, a small, minority stockholder of
Arvin will be considered to have had a meaningful reduction of interest (and
therefore to have capital gain rather than dividend income) if the stockholder
experiences any reduction in interest as a result of the receipt of cash and the
stockholder exercises no control with respect to corporate affairs.
Cash received by a Meritor stockholder in lieu of a fractional share
interest in common stock of the combined company will be treated as received in
redemption of that fractional share interest, and a Meritor stockholder should
generally recognize a capital gain or loss for U.S. federal income tax purposes
measured by the difference between the amount of cash received and the portion
of the tax basis of the shares of Meritor common stock allocable to that
fractional share interest. This gain or loss should be a long-term capital gain
or loss if the holding period for the shares of Meritor common stock is greater
than one year at the effective time.
The obligations of Meritor and Arvin to consummate the merger are
conditioned upon the receipt by Meritor and Arvin of opinions of Chadbourne &
Parke LLP and Wachtell, Lipton, Rosen & Katz, respectively, in form and
substance reasonably satisfactory to Meritor and Arvin, respectively, in each
case dated the closing date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in each opinion that are
consistent with the state of facts existing at the effective time, each of the
first step merger and the second step merger will constitute a "reorganization"
under Section 368(a) of the Code. In rendering those opinions, counsel may
require and rely upon
41
<PAGE> 49
representations contained in certificates of officers of Meritor, Arvin and
others. The tax opinions to be delivered to the parties in connection with the
merger as described in this document are not binding on the Internal Revenue
Service or the courts, and the parties do not intend to request a ruling from
the Internal Revenue Service with respect to the merger.
Information Reporting and Backup Withholding. Payments in respect of
Meritor common stock and Arvin common stock may be subject to information
reporting to the IRS and to a 31% backup withholding tax. Backup withholding
will not apply, however, to a payment to a holder of Meritor common stock or
Arvin common stock or other payee if the stockholder or payee completes and
signs the substitute Form W-9 that will be included as part of the transmittal
letter provided by the exchange agent, or otherwise proves to the combined
company and the exchange agent that it is exempt from backup withholding. Any
amount withheld under these rules will be credited against the holder's U.S.
federal income tax liability.
ACCOUNTING TREATMENT
The merger is expected to be accounted for using purchase accounting with
Meritor being deemed the acquiror. The deemed purchase price will be allocated
to Arvin's assets and liabilities based on their estimated fair market values at
the date of the merger, and any excess of the purchase price over those fair
market values will be accounted for as goodwill to be amortized over a 40 year
period. The results of final valuations of property, plant and equipment, and
intangible and other assets and the finalization of any potential plans of
restructuring have not yet been completed. We may revise the allocation of the
purchase price when additional information becomes available.
The unaudited pro forma financial information contained in this joint proxy
statement-prospectus has been prepared using the purchase method to account for
the merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Meritor's and Arvin's management, the Meritor board and
the Arvin board may have interests in the merger that are in addition to their
interests as Meritor stockholders or Arvin stockholders generally. Certain
executive officers and directors of each of Meritor and Arvin will serve as
executive officers and directors of the combined company following the merger.
In addition, completion of the merger will constitute a change of control of
Arvin for purposes of determining the entitlement of certain executive officers
of Arvin to certain severance and other benefits, and will result in the
acceleration of equity awards held by certain executive officers and
non-employee directors of Arvin. Furthermore, Arvin and ArvinMeritor have
entered into an employment agreement with V. William Hunt, which will become
effective and binding on the combined company at the effective time of the
merger and which will provide employment and severance benefits following the
merger. In addition, on or before the effective time of the merger, senior
executive officers of ArvinMeritor will receive employment offer letters that
will detail, among other things, their respective titles and duties, reporting
relationships, compensation, termination payments and restrictive covenants.
The Meritor board and the Arvin board were aware of these interests and
considered them, among other matters, in approving and adopting the merger
agreement and the merger.
New Employment Agreement. As of April 6, 2000, Arvin, ArvinMeritor and V.
William Hunt entered into an employment agreement, pursuant to which Mr. Hunt
will be employed as Vice Chairman and President of the combined company for the
period commencing on the effective date of the merger and ending on October 1,
2003. As expressed in the employment agreement, it is the intention of Meritor
and Arvin to recommend to the board of the combined company that Mr. Hunt begin
serving as Chief Executive Officer of the combined company on October 1, 2002,
or upon the earlier retirement or cessation of service of Larry D. Yost from the
position of Chief Executive Officer. It is also the intention of Meritor and
Arvin to recommend to the board of the combined company that Mr. Hunt begin
serving as Chairman of the Board of the combined company on October 1, 2003, or
upon the earlier retirement or cessation of services of Mr. Yost from the
position of Chairman.
42
<PAGE> 50
In exchange for his services, Mr. Hunt will receive, among other things, an
annual base salary of no less than his year 2000 annual base salary of $800,000.
Beginning October 1, 2000, Mr. Hunt's annual base salary will be reviewed
annually, consistent with the practice for senior executives. Mr. Hunt will also
be entitled to an annual cash bonus based on a percentage of his annual base
salary, pursuant to the terms of the combined company's annual bonus plan for
senior executives. During the fiscal year beginning on October 1, 2000, the sum
of Mr. Hunt's annual base salary and annual bonus will be at least equal to 90%
of the sum of the annual base salary and annual bonus paid or payable to Mr.
Yost with respect to such fiscal year.
At the effective time of the merger, Mr. Hunt's change of control
employment agreement with Arvin will terminate, and the combined company will
grant Mr. Hunt an award of restricted shares of combined company common stock
and stock options, with a value equal to the aggregate amount that would be
payable to Mr. Hunt under such change of control employment agreement assuming
his employment was terminated other than for cause on the effective date of the
merger. Such award will be granted one-third in restricted shares and two-thirds
in stock options. These restricted shares and options will vest in three equal
annual installments on the anniversary of the effective time of the merger,
provided that Mr. Hunt continues to be employed by the combined company (except
in certain circumstances). The options will have a ten-year term (without regard
to termination of employment) and an exercise price equal to the fair market
value of the ArvinMeritor common stock on the date of grant. Mr. Hunt will also
be entitled to participate in all long-term incentive plans generally applicable
to senior executives of the combined company. With respect to the 1999 through
2001 long-term incentive period, Mr. Hunt's long-term incentive award will be at
least 90% of one-third of the stock option and the cash performance long-term
incentive plan award granted to Mr. Yost for the same award period.
In the event Mr. Hunt's employment is terminated by the combined company
without cause or by Mr. Hunt for good reason (including due to the combined
company's failure to appoint him as Chief Executive Officer and/or Chairman at
the times described above), the combined company will be obligated to pay Mr.
Hunt a lump sum equal to the aggregate of (1) unpaid base salary through the
date of termination, (2) pro rata annual bonus for the year in which termination
occurs, (3) accrued vacation and any compensation previously deferred and (4)
severance pay equal to three times base salary plus highest annual bonus paid
during any of the three completed fiscal years prior to the date of termination.
In addition, (A) Mr. Hunt's restricted stock, options and other equity based
awards will immediately vest in full, (B) all long-term incentive awards granted
to Mr. Hunt will immediately vest in full and be paid out based on the maximum
award and/or performance level, (C) Mr. Hunt will be entitled to the immediate
commencement of an annual pension benefit of not less than his annual pension
benefit calculated under the terms of Arvin's qualified and non-qualified
retirement plans as in effect immediately prior to the merger, with credit for
three additional years of age, service and compensation for purposes of
determining his pension and (D) Mr. Hunt will be entitled to continued medical
and dental benefits for three years and to lifetime retiree medical and dental
benefits thereafter. Mr. Hunt's employment agreement also contains an excise tax
gross-up provision pursuant to which he will generally be made whole after the
payment of any excise taxes under Section 4999 of the Internal Revenue Code. Mr.
Hunt has agreed that for the term of his employment and for two years thereafter
in the event his employment is terminated by the company for cause or by Mr.
Hunt without good reason, he will refrain from competing against the combined
company.
Offer Letters to Other Senior Executives of the Combined Company. The
merger agreement provides that on or before the effective time of the merger
other senior executives of the combined company (each of whom is listed under
"Management and Operations After the Merger -- Management") will receive
employment offer letters that will detail, among other things, their respective
titles and duties, reporting relationships, compensation, termination payments
and restrictive covenants. Each executive's annual compensation will consist of
a base salary that is no less than the executive's year 2000 base salary. In
addition, each executive will be entitled to annual and long-term incentive
compensation on the same basis as peer executives of the combined company as
determined by the combined company. The executive will be eligible for fringe
benefits and other benefits no less favorable than peer executives of the
combined
43
<PAGE> 51
company. If the executive is terminated by ArvinMeritor without cause, then the
executive will receive any accrued obligations; monthly severance pay for a
period of 12 to 36 months, depending on years of service; pro-rata annual
incentive bonus participation through the date of termination; benefits
continuation for the severance period; full vesting of all equity incentives
awards; payment of all vested benefits; and out-placement services. If any
payments made under the executive's offer letter or otherwise are subject to
Section 4999 of the Internal Revenue Code, then the executive will be grossed-up
to put him in the same position as if no excise tax had been imposed.
Restrictive covenants include an 18-month non-solicitation provision, perpetual
non-disclosure and confidentiality, and mandatory arbitration of any disputes
between the executive and ArvinMeritor.
In addition, at the effective time of the merger the existing change of
control agreements (which are described below) of Arvin executives who receive
and accept an offer letter will terminate, and each such Arvin executive will
receive at the effective time of the merger an award of cash and stock options
with a value equal to the aggregate amount that would be payable to the
executive under his current change of control employment agreement as a result
of the merger. The stock options will vest pro rata over a three-year period,
will have an exercise price equal to the fair market value of the ArvinMeritor
common stock on the date of grant and will have a term of ten years.
Arvin Change of Control Agreements. In its desire to retain key
executives, Arvin previously entered into change of control agreements with
twelve individuals, including Mr. Hunt and six individuals who will receive the
offer letters described above from the combined company. Consummation of the
merger will constitute a change of control under these agreements. Mr. Hunt's
new employment agreement will supersede his change of control agreement and
employment agreement with Arvin. In addition, the change of control agreements
of those other Arvin executives who accept offer letters from the combined
company will terminate upon completion of the merger.
The change of control agreements provide that upon a change of control,
Arvin will continue to employ such executive officers for three years following
the effective date of the change of control. During such time, each executive
officer will receive an annual base salary paid at a monthly rate, at least
equal to 12 times the highest monthly base salary paid or payable, including any
base salary which has been earned but deferred, in respect of the twelve-month
period immediately preceding the effective date of the change of control. The
change of control agreements also provide for an annual bonus in cash at least
equal to the executive officer's highest bonus under Arvin's annual cash bonus
incentive plan or any comparable bonus under any predecessor or successor plan,
for the last three full fiscal years prior to the effective date of the change
of control. The executive officer is entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of Arvin and its affiliated companies. The
executive officer's employment terminates automatically upon death or the
occurrence of a disability. If Arvin terminates the executive officer's
employment other than for cause or if the executive officer terminates
employment for good reason, then Arvin will pay to the executive in a lump sum
in cash within 30 days of termination of employment the aggregate of the
following amounts: (1) unpaid base salary and accrued annual bonus, and any
compensation previously deferred; (2) the amount equal to three times the
executive officer's annual base salary and highest annual bonus payable to the
executive officer during the three-year period prior to the change of control;
and (3) the amount equal to the actuarial present value of the additional
pension benefits that the executive would have accrued if he had continued to be
employed for an additional three years. In addition, Arvin will (a) provide
welfare benefits to the executive officer and his family for three years; (b)
provide out-placement services; and (c) pay or provide other required benefits.
The change of control agreements provide that a termination by the executive
officer for any reason during the 30-day period immediately following the first
anniversary of the effective date of the change of control will be deemed to be
a termination for good reason by the executive officer. If the executive
officer's employment is terminated for cause, then the change of control
agreement terminates except for the obligation to pay the executive officer's
annual base salary through the date of termination, the amount of any
compensation previously deferred, and other benefits that may be unpaid. If the
executive officer terminates employment other than for good reason, then the
change of control agreement terminates without further obligations except for
the payment of accrued obligations and
44
<PAGE> 52
the timely payment of certain other benefits. The change of control agreements
also contain an excise tax gross-up provision pursuant to which the executive
officer will generally be made whole for the payment of excise taxes under
Section 4999 of the Internal Revenue Code.
Arvin Stock-Based Rights. Upon completion of the merger, each outstanding
Arvin stock option, whether vested or unvested, will be converted into an option
to purchase a number of shares of the combined company common stock equal to the
number of shares of Arvin common stock that would have been obtained before the
merger upon the exercise of the option, plus $1.00 for each share, and the
exercise price of the converted option will be equal to the exercise price per
share of the option before the conversion. The conversion of "incentive stock
options" will be effected in a manner that is consistent with Section 424(a) of
the Internal Revenue Code.
Under Arvin's stock-based plans, upon a change of control of Arvin,
unvested stock options will become fully vested and exercisable. In addition,
upon certain terminations of employment following a change of control of Arvin,
the restrictions on restricted Arvin common stock will lapse and restricted
performance shares will become immediately distributable or payable. The
transactions contemplated by the merger agreement will constitute a change of
control under the Arvin stock-based plans. The aggregate number of unvested
stock options to acquire shares of Arvin common stock held by Mr. Hunt, David S.
Hoyte, Richard A. Smith and Wesley B. Vance that will become fully vested and
exercisable as a result of the merger is approximately 575,000. The aggregate
number of shares of restricted Arvin common stock and restricted performance
shares held by Messrs. Hunt, Hoyte and Smith that may become free of
restrictions as a result of a termination of employment following the merger is
approximately 43,100. In addition, each non-employee director of Arvin holds
unvested options to acquire 1,000 shares of Arvin common stock that will become
fully vested and exercisable as a result of the merger.
Indemnification; Directors and Officers Liability Insurance. The merger
agreement provides that, for a period of six years following the effective time,
ArvinMeritor will indemnify and hold harmless, and provide advancement of
expenses to, all past and present directors, officers or employees of Arvin,
Meritor or any of their respective subsidiaries, to the same extent such persons
are indemnified or have the right to advancement of expenses as of the date of
the merger agreement pursuant to their respective charters, by-laws or
indemnification agreements, if any, in existence on the date of the merger
agreement with any such directors, officers or employees of Arvin, Meritor or
any of their respective subsidiaries for acts or omissions occurring at or prior
to the effective time of the merger. Any claim that is asserted or made within
such six-year period and all rights in respect of such claim will continue until
the disposition of the claim. The merger agreement further provides that
ArvinMeritor will also cause current Arvin and Meritor policies of directors'
and officers' liability insurance and fiduciary liability insurance to be
maintained for a period of six years after the effective time of the merger
(provided that ArvinMeritor may substitute policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the effective time. However,
ArvinMeritor will not be required to expend more than 200% of the current
amounts expended by Meritor and Arvin for their respective policies. If the
annual premiums exceed such amount, then the combined company is obligated to
obtain a policy with the greatest coverage available for the above-mentioned
amount.
Ownership of Common Stock. As of the record date for the Meritor special
meeting, directors and executive officers of Meritor owned [ ] shares of
Meritor common stock, entitling them to exercise approximately [ ]% of the
voting power of the Meritor common stock entitled to vote at the Meritor special
meeting.
As of the record date for the Arvin special meeting, directors and
executive officers of Arvin owned approximately [ ] shares of Arvin common
stock entitling them to exercise approximately [ ]% of the voting power of
the Arvin stock entitled to vote at the Arvin special meeting.
45
<PAGE> 53
THE MERGER AGREEMENT
The following is a summary of the material terms and provisions of the
merger agreement dated as of April 6, 2000. The merger agreement is attached as
Appendix A to this joint proxy statement-prospectus and incorporated herein by
reference. We encourage you to read all of the merger agreement.
MERGER CONSIDERATION
The merger agreement provides that each share of Meritor common stock
outstanding immediately prior to the effective time of the merger will be
converted into the right to receive 0.75 shares of common stock of the combined
company.
The merger agreement provides that each share of Arvin common stock
outstanding immediately prior to the effective time of the merger will be
converted into the right to receive one share of common stock of the combined
company, plus $2.00 in cash, without interest.
TREATMENT OF OPTIONS
Upon completion of the merger, each outstanding Meritor employee stock
option will be converted into an option to purchase a number of shares of
ArvinMeritor common stock that is equal to the product of 0.75 multiplied by the
number of shares of Meritor common stock that would have been obtained before
the merger upon the exercise of the option, rounded to the nearest whole share.
The exercise price per share will be equal to the exercise price per share of
Meritor common stock subject to the option before the conversion divided by
0.75, rounded up to the nearest whole cent.
When the merger is completed, each outstanding Arvin employee stock option
will be converted into an option to purchase a number of shares of ArvinMeritor
common stock equal to the number of shares of Arvin common stock that would have
been obtained before the merger upon the exercise of the option, plus $1 for
each share. The exercise price per share will be equal to the exercise price per
share of Arvin common stock subject to the option before the conversion. The
conversion of "incentive stock options" will be effected in a manner that is
consistent with Section 424(a) of the Internal Revenue Code.
The other terms of each Meritor and Arvin option referred to above will
continue to apply.
EXCHANGE OF CERTIFICATES
From time to time, prior to or after the effective time of the merger,
ArvinMeritor will deposit, or cause to be deposited, with EquiServe First
Chicago Trust Company Division certificates representing the shares of common
stock of the combined company to be issued pursuant to the merger agreement in
exchange for outstanding shares of Meritor common stock and Arvin common stock,
as well as cash representing the cash consideration of $2.00 per share to be
paid for outstanding shares of Arvin common stock.
YOU WILL RECEIVE SHARES OF THE COMBINED COMPANY IN BOOK-ENTRY FORM UNLESS A
PHYSICAL CERTIFICATE IS REQUESTED.
As soon as practicable after the effective time, a form of transmittal
letter will be mailed by the exchange agent to Meritor stockholders and Arvin
stockholders. The transmittal letter will contain instructions with respect to
the surrender of shares of Meritor common stock or Arvin common stock (whether
in certificated or book-entry form).
IF YOU HOLD CERTIFICATES FOR MERITOR OR ARVIN COMMON STOCK, YOU SHOULD NOT
RETURN THE CERTIFICATES WITH THE ENCLOSED PROXY AND SHOULD NOT FORWARD THEM TO
THE EXCHANGE AGENT UNTIL YOU RECEIVE A LETTER OF TRANSMITTAL FOLLOWING THE
EFFECTIVE TIME OF THE MERGER.
Until holders of shares of Meritor or Arvin common stock have complied with
the exchange agent's instructions given after the effective time with respect to
the surrender of such shares for exchange and transmitted the required
documents, including share certificates if a holder's shares are in certificated
form,
46
<PAGE> 54
such holders will accrue but will not be paid dividends or other distributions
declared after the effective time with respect to common stock of ArvinMeritor
into which their shares have been converted. When such holders surrender their
shares, the combined company will pay any unpaid dividends or other
distributions, without interest. After the effective time, there will be no
transfers on the stock transfer books of Meritor or Arvin of shares of Meritor
common stock or Arvin common stock issued and outstanding immediately prior to
the effective time. If shares of Meritor or Arvin common stock are presented for
transfer after the effective time, they will be canceled and exchanged for the
applicable number of shares of common stock of the combined company (which
shares will be in book-entry form unless a physical certificate is requested).
No fractional shares of common stock of the combined company will be issued
to any holder of Meritor common stock upon consummation of the merger. For each
fractional share that would otherwise be issued, the combined company will pay
in cash an amount equal to such holder's proportionate interest in the net
proceeds from the sale or sales in the open market of the aggregate fractional
combined company shares that would have been issued in the merger. The exchange
agent will sell such aggregate fractional shares at the then prevailing prices
on the New York Stock Exchange. These sales will be executed through one or more
member firms of the New York Stock Exchange and will be executed in round lots
to the extent practicable. The combined company will pay all commissions,
transfer taxes and other out-of-pocket transaction costs of the exchange agent,
including the expenses and compensation of the exchange agent, incurred in
connection with the sale of fractional shares.
If shares of ArvinMeritor common stock are to be issued in a name other
than the name in which the surrendered shares of Meritor common stock or Arvin
common stock, as the case may be, are registered, the surrendered shares must be
properly endorsed, or accompanied by an appropriate instrument of transfer, and
in proper form for transfer. The person requesting the exchange must pay to the
exchange agent in advance any applicable transfer or other tax or establish to
the satisfaction of the exchange agent that the tax has been paid or is not
payable.
None of ArvinMeritor, Meritor, Arvin, the exchange agent or any other
person will be liable to any former holder of Meritor or Arvin common stock for
any amount delivered in good faith to a public official pursuant to applicable
abandoned property, escheat or similar laws.
If a certificate for Meritor common stock or Arvin common stock has been
lost, stolen or destroyed, the exchange agent will issue the consideration
payable under the merger agreement upon receipt of appropriate evidence as to
that loss, theft or destruction, appropriate evidence as to the ownership of
that certificate by the claimant, and appropriate and customary indemnification.
For a description of the differences between the rights of holders of
Meritor common stock, holders of Arvin common stock, and holders of common stock
of the combined company, see "Comparison of Stockholders' Rights".
EFFECTIVE TIME
The effective time of the first step merger will be the time and date set
forth in the certificate of merger that will be filed with the Secretary of
State of the State of Delaware (the state of incorporation of Meritor) and the
articles of merger that will be filed with the Secretary of State of the State
of Indiana (the state of incorporation of ArvinMeritor and Arvin) on the closing
date of the first step merger. The effective time of the second step merger will
be the time and date set forth in the articles of merger that will be filed with
the Secretary of State of the State of Indiana on the closing date of the second
step merger. The closing date of the first step merger and the second step
merger will be a date to be specified by the parties. The closing date will be
no later than three business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions precedent to the merger
set forth in the merger agreement, unless otherwise agreed by Meritor and Arvin.
Meritor and Arvin each anticipate that the merger will be consummated during the
third calendar quarter of 2000. However, consummation of the merger could be
delayed if there is a delay in obtaining the required regulatory approvals or in
satisfying other conditions to the merger. There can be no assurances as to
whether, and on what date, Meritor and
47
<PAGE> 55
Arvin will obtain those approvals or that Meritor and Arvin will consummate the
merger. If the merger is not completed on or before October 31, 2000, either
Meritor or Arvin may terminate the agreement, unless the failure to effect the
merger by that date is due to the failure of the party seeking to terminate the
merger agreement to perform or observe its covenants and agreements set forth in
the merger agreement. See "-- Conditions" and "The Merger -- Regulatory
Approvals Required for the Merger".
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by each of Meritor and Arvin to the other. The representations
and warranties relate to:
- corporate existence, qualification to conduct business and corporate
power;
- ownership of subsidiaries;
- capital structure;
- corporate authority to enter into, and carry out the obligations under,
the merger agreement and enforceability of the merger agreement;
- absence of a breach of charter documents, by-laws, laws or material
agreements as a result of the merger;
- required governmental approvals;
- filings with the SEC;
- financial statements;
- information supplied for use in this joint proxy statement-prospectus;
- board of directors approval;
- required stockholder vote;
- inapplicability to the merger of state anti-takeover laws;
- litigation;
- compliance with laws;
- absence of certain changes or events;
- environmental matters;
- intellectual property matters;
- payment of fees to finders or brokers in connection with the merger
agreement;
- opinions of financial advisors;
- tax matters;
- material contracts and restrictive contracts;
- employee benefits;
- labor relations;
- insurance; and
- absence of material liens.
Meritor and Arvin also represented to each other that their respective
stockholder rights plans are not applicable to the merger, the merger agreement
and the stock option agreements. The merger agreement also contains
representations and warranties relating to ArvinMeritor, including with respect
to due
48
<PAGE> 56
organization, capital structure, corporate authorization, non-contravention of
the articles of incorporation or by-laws of ArvinMeritor and the absence of
prior business activities.
The representations and warranties contained in the merger agreement are
subject to materiality qualifications in many respects, and they do not survive
the effective time of the merger.
COVENANTS
Each of Meritor and Arvin has undertaken to perform certain covenants in
the merger agreement. The principal covenants are as follows:
No Solicitation. The merger agreement contains detailed provisions
prohibiting Meritor and Arvin from seeking an alternative transaction. Under
these "no solicitation" provisions, each of Meritor and Arvin has agreed that
neither it nor any of its subsidiaries, officers or directors will, and that it
will use reasonable best efforts to ensure that its and its subsidiaries'
employees, agents and representatives do not, directly or indirectly:
- initiate, solicit, encourage or knowingly facilitate any inquiries or the
making of an Acquisition Proposal, as defined below;
- have any discussion with, or provide any confidential information or data
to, any person relating to an Acquisition Proposal, or engage in any
negotiations concerning an Acquisition Proposal, or knowingly facilitate
any effort or attempt to make or implement an Acquisition Proposal;
- approve or recommend, or propose publicly to approve or recommend, an
Acquisition Proposal; or
- approve or recommend, or propose to approve or recommend, or enter into,
any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement or
propose publicly or agree to do any of the foregoing related to an
Acquisition Proposal.
"Acquisition Proposal" means, with respect to either Meritor or Arvin, any
proposal or offer with respect to, or a transaction to effect:
- a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving such party or any of its significant subsidiaries;
- any purchase or sale of 20% or more of the consolidated assets of such
party, including stock of its subsidiaries, taken as a whole; or
- any purchase or sale of, or tender or exchange offer for, the equity
securities of such party that, if completed, would result in any person
beneficially owning securities representing 20% or more of the total
voting power of such party (or of the surviving parent entity in the
transaction) or any of its significant subsidiaries.
However, the merger agreement does not prevent each of Meritor or Arvin, or
its respective board of directors, from:
- engaging in any discussions with, or providing any information to, any
person in response to an unsolicited bona fide written Acquisition
Proposal (for purposes of this provision of the merger agreement
references to 20% in the definition of Acquisition Proposal are deemed to
be references to 50%) by that person in order to be informed with respect
to the Acquisition Proposal in order to make any determination to effect
a Change in Board Recommendation, as defined below, if and only to the
extent that its board of directors concludes in good faith that such
action is required by the board's fiduciary duties to stockholders as a
result of the Acquisition Proposal; or
- effecting a Change in Board Recommendation, as defined below, if and only
to the extent that it has received an unsolicited bona fide written
Acquisition Proposal (for purposes of this provision of the merger
agreement references to 20% in the definition of Acquisition Proposal are
deemed to be
49
<PAGE> 57
references to 50%) from a third party and its board of directors
concludes in good faith that such action is required by the board's
fiduciary duties to stockholders as a result of the Acquisition Proposal.
However, Meritor or Arvin may take such action only if and to the extent
that:
- the special meeting of its stockholders to vote on the approval and
adoption of the merger agreement and the merger has not occurred;
- before providing any information or data to any person in connection with
an Acquisition Proposal by that person, its board of directors receives
from that person an executed customary confidentiality agreement with
provisions at least as stringent as those contained in the
confidentiality agreement between Meritor and Arvin (but which need not
contain standstill provisions); and
- before providing any information or data to any person or entering into
discussions with any person, it promptly:
- notifies the other party of inquiries, proposals or offers received
by, any information requested from, or any discussions sought to be
initiated or continued with, any of its representatives;
- notifies the other party of the name of the person and the material
terms and conditions of any inquiries, proposals or offers; and
- provides the other party with a copy of any written inquiry, proposal
or offer.
In addition, the merger agreement does not prevent Meritor or Arvin from
disclosing to its stockholders a position with respect to a tender offer as
required by law.
"Change in Board Recommendation" means, with respect to either Meritor or
Arvin, withdrawing, modifying or qualifying, or proposing to withdraw, modify or
qualify, in any manner adverse to the other party, the recommendation of that
party's board of directors that its stockholders vote in favor of the approval
and adoption of the merger agreement and the merger.
The board of directors of Meritor or Arvin may effect a Change in Board
Recommendation only as provided in the "no solicitation" provision of the merger
agreement. Notwithstanding a Change in Board Recommendation by Meritor or Arvin,
such party is still required to convene a meeting of its stockholders to vote
upon approval and adoption of the merger agreement and the merger.
Each of Meritor and Arvin has agreed under the provisions of the merger
agreement that:
- it will promptly keep the other party informed of the status and terms of
any proposals, offers or discussions covered by the "no solicitation"
provisions of the merger agreement;
- it will, and its officers, directors and representatives will,
immediately cease and terminate any activities, discussions or
negotiations existing as of April 6, 2000, the date of the merger
agreement, with any persons conducted before that date with respect to
any Acquisition Proposal;
- it will use reasonable best efforts to promptly inform its directors,
officers, key employees, agents and representatives of the obligations
under the "no solicitation" provisions of the merger agreement; and
- it will not submit to the vote of its stockholders any Acquisition
Proposal other than the merger between Meritor and Arvin.
Nothing contained in the "no solicitation" provisions of the merger
agreement will:
- permit Meritor or Arvin to terminate the merger agreement, except as
specifically provided in the merger agreement; or
- affect any other obligation of Meritor or Arvin under the merger
agreement.
50
<PAGE> 58
Stockholders' Meetings. We have each agreed to convene meetings of our
respective stockholders to consider and vote upon approval and adoption of the
merger agreement and the merger, and to prepare appropriate proxy statements for
such meetings. We have also agreed to use our reasonable best efforts to have
the registration statement for the shares to be issued in the merger declared
effective by the SEC.
Operation of the Two Companies Pending Closing. We have each agreed to
restrictions on our activities until either the effective time of the merger or
the termination of the merger agreement. In general, we are required to conduct
our business in the usual, regular and ordinary course, in substantially the
same manner as previously conducted, and to use all reasonable efforts to
preserve intact our present business organizations, keep available the services
of our current officers and other key employees and preserve our relationships
with customers, suppliers and others having business dealings with us with the
intention that our ongoing businesses shall not be impaired. Each of us, subject
to agreed upon exceptions, has agreed to specific restrictions that prohibit us
from:
- entering into any new material lines of business or incurring or
committing to any capital expenditures or obligations or liabilities in
connection with any capital expenditures other than in the ordinary
course of business consistent with past practice;
- declaring or paying dividends in excess of $0.105 per share of Meritor
common stock per quarter and $0.22 per share of Arvin common stock per
quarter;
- splitting, combining or reclassifying our capital stock or issuing
securities in respect of, in lieu of or in substitution for our capital
stock;
- repurchasing, redeeming or otherwise acquiring our capital stock;
- issuing, delivering, selling or encumbering or entering into any
agreement to issue, deliver, sell or encumber any shares of our capital
stock or other voting securities, or any securities convertible into or
exercisable for, or any right to acquire, capital stock or other voting
securities, other than in connection with our benefit plans (subject to
specified limits) or in connection with the exercise of options or other
stock based awards, in connection with our stockholder rights agreements,
in connection with certain issuances by our subsidiaries or pursuant to
the cross option agreements described below;
- amending our charter documents, by-laws or other governing documents
(other than pursuant to the merger agreement);
- making acquisitions of other entities beyond specified amounts;
- disposing of assets, other than inventory in the ordinary course
consistent with past practice, beyond specified amounts;
- making loans, advances, capital contributions or investments in any other
person other than certain intercompany loans, employee loans, or loans
made pursuant to existing obligations or in the ordinary course of
business and not material, or loans, advances, capital contributions or
investments not in excess of specified amounts;
- incurring debt, other than under existing agreements or in the ordinary
course of business and which is not material;
- increasing the compensation or employee benefits of any director, officer
or employee, paying any pension, savings or profit-sharing allowance to
any employee that is not required by any existing plan or agreement,
entering into any employment contract, issuing additional stock options
beyond specified amounts, or adopting or amending any employee benefit
plan or making any contribution, other than regularly scheduled
contributions, to a benefit plan, other than in the ordinary course or as
required by an existing agreement or applicable law;
- entering into any change of control employment agreements;
51
<PAGE> 59
- changing our accounting methods, except as may be required by changes in
generally accepted accounting principles;
- changing our fiscal year or making any material tax election or settling
or compromising any material income tax liability other than in the
ordinary course of business consistent with past practice;
- entering into any agreement or arrangement that limits or restricts us or
the combined company from engaging or competing in any line of business
or geographic area if that resulting restriction would have a material
adverse effect on the combined company and its subsidiaries, taken
together, after the merger; and
- amending or waiving any provision of our respective stockholder rights
plans or redeeming the rights issued under those plans other than in
connection with the merger;
Reasonable Best Efforts Covenant. We have agreed to use our reasonable
best efforts to take all actions and do all things necessary or advisable under
the merger agreement or applicable laws to complete the merger and the other
transactions contemplated by the merger agreement as soon as practicable. This
cooperation may include selling, holding separate or otherwise disposing of
assets, or conducting business in a specified manner, in response to the
requirements imposed by antitrust authorities. However, neither of us will be
required for any reason to sell, hold separate or otherwise dispose of assets,
or to conduct our business in a specified manner, if such action is not
conditioned on closing the merger or would reasonably be expected to have a
material adverse effect on the combined company after the merger.
Employee Matters. We have agreed that after the effective time of the
merger, existing Meritor and Arvin benefit plans will remain in effect until
such time as the combined company otherwise determines, subject to applicable
laws and the terms of the plans.
We have agreed to cooperate in reviewing, evaluating and analyzing Meritor
and Arvin benefit plans prior to completion of the merger with a view toward
developing appropriate new benefit plans for employees of the combined company.
It is our intention, to the extent permitted by applicable law, to develop new
benefit plans that (1) treat similarly situated employees on a substantially
equivalent basis, taking into account relevant factors and (2) do not
discriminate between employees of the combined company who were covered by
Meritor or Arvin benefit plans.
It is our current intention that, for one year following completion of the
merger, the combined company will provide employee benefits substantially
comparable in the aggregate to those provided pursuant to employee benefit plans
in effect at the effective time of the merger. Notwithstanding the foregoing,
the provisions of the merger agreement will not prevent the combined company
from amending, modifying or terminating any benefit plan or other arrangement in
accordance with its terms and applicable laws.
With respect to any employee benefit plans in which any employees of the
combined company first become eligible to participate after the effective time
of the merger, and in which they did not participate prior to the merger, the
combined company will:
- waive all pre-existing conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to
employees of the combined company who may be eligible to participate,
except to the extent such pre-existing conditions, exclusions and waiting
periods would apply under the analogous Meritor or Arvin plan;
- provide each employee of the combined company with credit for any
co-payments and deductibles paid prior to the merger to the same extent
such credit was given under the analogous Meritor or Arvin employee
benefit plan before the merger; and
- recognize all service of employees of the combined company with Meritor
and Arvin for all purposes (including eligibility, vesting, entitlement,
and, except with respect to defined benefit pension plans, benefit
accrual) in any new benefit plan of the combined company in which those
52
<PAGE> 60
employees may be eligible to participate after the merger, to the extent
that service is taken into account under the applicable plan of the
combined company.
In connection with the approval of the merger, the Arvin board and pension
committee took the action necessary to provide that the execution of the merger
agreement and related documents, any change in the composition of the Arvin
board resulting from the merger, and any other actions, transactions or
consequences contemplated by or resulting from the merger, will not constitute a
"change of control" for purposes of the Restated Arvin Retirement Plan for
Salaried Employees.
Payment of Dividends Pending the Merger. We have agreed to coordinate
payment of dividends and the related record dates and payment dates so that
Meritor and Arvin stockholders do not receive two dividends, or fail to receive
one dividend, for any single calendar quarter.
New York Stock Exchange. ArvinMeritor has agreed to use its reasonable
best efforts to cause the common stock of the combined company to be listed on
the New York Stock Exchange.
Insurance and Indemnification. For a period of six years after the merger,
ArvinMeritor is obligated to:
- indemnify and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of Meritor, Arvin and
their subsidiaries, to the same extent those persons are indemnified or
have the right to advancement of expenses on April 6, 2000, for acts or
omissions occurring on or before the effective time of the merger; and
- cause to be maintained the current policies of directors' and officers'
liability insurance and fiduciary liability insurance maintained by
Meritor and Arvin, or policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured, with respect to claims arising from facts or
events that occurred on or before the effective time of the merger.
ArvinMeritor will not be required to expend in any one year an amount in
excess of 200% of the current annual premiums for this insurance.
Expenses. We have each agreed to pay our own costs and expenses incurred
in connection with the merger and the merger agreement. We will, however, share
equally the expenses incurred in connection with filing with the SEC this
document and the related registration statement and the costs associated with
printing and mailing this document.
CONDITIONS
Each of our respective obligations to complete the merger is subject to the
satisfaction or waiver of various conditions, including:
- the approval and adoption of the merger agreement and the merger by
Meritor stockholders and Arvin stockholders;
- the absence of any law, order or injunction having the effect of making
the merger illegal or otherwise prohibiting completion of the merger; and
the absence of any proceeding initiated by any governmental entity
seeking, and which is reasonably likely to result in, any such
injunction;
- the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which,
unless extended or earlier terminated, is expected to expire on June 2,
2000;
- the approval of the merger by the European Commission;
- the receipt of all other governmental and regulatory consents, approvals
and authorizations required to consummate the merger and the other
transactions contemplated by the merger agreement, unless not obtaining
those consents or approvals would not reasonably be expected to have a
material adverse effect on the combined company and its subsidiaries,
taken together, after the merger;
53
<PAGE> 61
- the approval for listing on the New York Stock Exchange of the common
stock of the combined company to be issued in the merger, subject to
official notice of issuance;
- the SEC having declared effective the ArvinMeritor registration statement
for the common stock of the combined company to be issued in the merger;
- the representations and warranties of the other party contained in the
merger agreement being true and correct in all material respects on the
date of the merger agreement and the date of the merger as if they were
made on that date, except to the extent that the representations and
warranties speak as of another date;
- the other party having performed or complied with its obligations and
covenants contained in the merger agreement;
- the receipt of an opinion of each party's counsel that the first step
merger and the second step merger each will qualify as a reorganization
for U.S. federal income tax purposes; and
- no event having occurred which would trigger certain consequences under
the other party's stockholder rights plan.
TERMINATION OF THE MERGER AGREEMENT
Termination by Meritor or Arvin. Either one of us, by action of our
respective boards of directors, may terminate the merger agreement and abandon
the merger at any time prior to the merger if:
(a) we agree to terminate by mutual written consent;
(b) the merger has not been completed by October 31, 2000, provided
that the terminating party's failure to fulfill any obligation under the
merger agreement is not the cause of the merger not being completed;
(c) a court order or ruling of another governmental entity permanently
prohibiting the completion of the merger becomes final and non-appealable,
provided that the terminating party shall have used its reasonable best
efforts to avoid or remove such prohibition;
(d) a court or another governmental entity fails to issue an order or
ruling that is necessary to effect the merger and the denial of a request
to issue such an order or ruling becomes final and non-appealable, provided
that the terminating party shall have used its reasonable best efforts to
obtain such order or ruling; or
(e) either company's stockholders fail to approve the proposal
contained in this document at the applicable stockholders' meeting.
Termination by Meritor. Meritor, by action of its board of directors, may
terminate the merger agreement and abandon the merger at any time prior to the
merger if:
(a) Arvin's board of directors:
- fails to recommend approval and adoption of the merger agreement
and the merger to Arvin stockholders;
- withdraws (or proposes to withdraw) its recommendation to Arvin
stockholders to approve and adopt the merger agreement and the
merger; or
- modifies or qualifies (or proposes to modify or qualify), in any
manner adverse to Meritor, its recommendation to Arvin stockholders
to approve and adopt the merger agreement and the merger without
also simultaneously reaffirming its recommendation to approve and
adopt the merger agreement and the merger;
(b) Arvin breaches its obligation to call the Arvin stockholders'
meeting or to prepare and mail the joint proxy statement-prospectus;
54
<PAGE> 62
(c) Arvin breaches its representations, warranties or covenants
contained in the merger agreement such that any of the conditions described
above with respect to absence of breaches by Arvin is not capable of being
satisfied prior to October 31, 2000; or
(d) a shares acquisition date has occurred under the Arvin stockholder
rights plan, which will generally occur if a third party acquires 20% or
more of Arvin's outstanding voting stock.
Termination by Arvin. Arvin, by action of its board of directors, may
terminate the merger agreement and abandon the merger at any time prior to the
merger if:
(a) Meritor's board of directors:
- fails to recommend approval and adoption of the merger agreement
and the merger to Meritor stockholders;
- withdraws (or proposes to withdraw) its recommendation to Meritor
stockholders to approve and adopt the merger agreement and the
merger; or
- modifies or qualifies (or proposes to modify or qualify), in any
manner adverse to Arvin, its recommendation to Meritor stockholders
to approve and adopt the merger agreement and the merger without
simultaneously reaffirming its recommendation to approve and adopt
the merger agreement and the merger;
(b) Meritor breaches its obligation to call the Meritor stockholders'
meeting or to prepare and mail the joint proxy statement-prospectus;
(c) Meritor breaches its representations, warranties or covenants
contained in the merger agreement such that any of the conditions described
above with respect to absence of breaches by Meritor is not capable of
being satisfied prior to October 31, 2000; or
(d) a shares acquisition date has occurred under the Meritor
stockholder rights plan, which will generally occur if a third party
acquires 20% or more of Meritor's outstanding voting stock.
FEES PAYABLE BECAUSE OF A TERMINATION OF THE MERGER AGREEMENT
Fees Payable by Meritor Relating to Termination
Meritor has agreed to pay Arvin a termination fee of $20 million if:
- either party terminates the merger agreement because the stockholders of
Meritor have failed to approve and adopt the merger agreement and the
merger at the Meritor stockholders' meeting or because the merger has not
been completed by October 31, 2000 and the Meritor stockholders' meeting
has not occurred, and (1) at any time after the date of the merger
agreement and before such termination an Acquisition Proposal with
respect to Meritor has been publicly announced or otherwise communicated
to the senior management, board of directors or stockholders of Meritor,
and (2) within 12 months of the termination of the merger agreement,
Meritor or any of its subsidiaries enters into a definitive agreement
with respect to or consummates an Acquisition Proposal;
- Arvin terminates the merger agreement as the result of an intentional
breach by Meritor of any of its representations, warranties or covenants
under the merger agreement and (1) at any time after the date of the
merger agreement and before such termination an Acquisition Proposal with
respect to Meritor has been publicly announced or otherwise communicated
to the senior management, board of directors or stockholders of Meritor,
and (2) within 12 months of the termination of the Merger Agreement,
Meritor or any of its subsidiaries enters into a business combination or
an agreement to enter into a definitive agreement with respect to or
consummates an Acquisition Proposal;
- Arvin terminates the merger agreement as the result of Meritor's board of
directors (a) failing to recommend approval and adoption of the merger
agreement and the merger to Meritor
55
<PAGE> 63
stockholders, (b) withdrawing its recommendation to Meritor stockholders
to approve and adopt the merger agreement and the merger or (c) modifying
or qualifying, in any manner adverse to Arvin, its recommendation to
Meritor stockholders to approve and adopt the merger agreement and the
merger without simultaneously reaffirming its recommendation to approve
and adopt the merger agreement and the merger, and (1) at any time after
the date of the merger agreement and before such termination an
Acquisition Proposal with respect to Meritor has been publicly announced
or otherwise communicated to the senior management, board of directors or
stockholders of Meritor, and (2) within 12 months of the termination of
the merger agreement, Meritor or any of its subsidiaries enters into a
business combination or an agreement to enter into a definitive agreement
with respect to or consummates an Acquisition Proposal;
- Arvin terminates the merger agreement because Meritor has breached its
obligation to call the Meritor stockholders' meeting or to prepare and
mail the joint proxy statement-prospectus; or
- Arvin terminates the merger agreement because a shares acquisition date
has occurred under the Meritor stockholder rights plan.
Fees Payable by Arvin Relating to Termination
Arvin has agreed to pay Meritor a termination fee of $20 million if:
- either party terminates the merger agreement because the stockholders of
Arvin have failed to approve and adopt the merger agreement and the
merger at the Arvin stockholders' meeting or because the merger has not
been completed by October 31, 2000 and the Arvin stockholders' meeting
has not occurred, and (1) at any time after the date of the merger
agreement and before such termination an Acquisition Proposal with
respect to Arvin has been publicly announced or otherwise communicated to
the senior management, board of directors or stockholders of Arvin, and
(2) within 12 months of the termination of the merger agreement, Arvin or
any of its subsidiaries enters into a definitive agreement with respect
to or consummates an Acquisition Proposal;
- Meritor terminates the merger agreement as the result of an intentional
breach by Arvin of any of its representations, warranties or covenants
under the merger agreement and (1) at any time after the date of the
merger agreement and before such termination an Acquisition Proposal with
respect to Arvin has been publicly announced or otherwise communicated to
the senior management, board of directors or stockholders of Arvin, and
(2) within 12 months of the termination of the Merger Agreement, Arvin or
any of its subsidiaries enters into a business combination or an
agreement to enter into a definitive agreement with respect to or
consummates an Acquisition Proposal;
- Meritor terminates the merger agreement as the result of Arvin's board of
directors (a) failing to recommend approval and adoption of the merger
agreement and the merger to Arvin stockholders, (b) withdrawing its
recommendation to Arvin stockholders to approve and adopt the merger
agreement and the merger or (c) modifying or qualifying, in any manner
adverse to Meritor, its recommendation to Arvin stockholders to approve
and adopt the merger agreement and the merger without simultaneously
reaffirming its recommendation to approve and adopt the merger agreement
and the merger, and (1) at any time after the date of the merger
agreement and before such termination an Acquisition Proposal with
respect to Arvin has been publicly announced or otherwise communicated to
the senior management, board of directors or stockholders of Arvin, and
(2) within 12 months of the termination of the merger agreement, Arvin or
any of its subsidiaries enters into a definitive agreement with respect
to or consummates an Acquisition Proposal;
- Meritor terminates the merger agreement because Arvin has breached its
obligation to call the Arvin stockholders' meeting or to prepare and mail
the joint proxy statement-prospectus; or
- Meritor terminates the merger agreement because a shares acquisition date
has occurred under the Arvin stockholder rights plan.
56
<PAGE> 64
AMENDMENTS, EXTENSIONS AND WAIVERS
The merger agreement may be amended by action of the boards of directors of
the parties at any time before or after the stockholders' meetings to the extent
legally permissible. All amendments to the merger agreement must be in writing
signed by each party.
At any time prior to the effective time of the merger, any party to the
merger agreement may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
- waive any inaccuracies in the representations and warranties of the other
parties contained in the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
All extensions and waivers must be in writing and signed by the party
against whom the waiver is to be effective.
RESTRICTIONS ON RESALES BY AFFILIATES
Shares of the combined company's common stock to be issued to Meritor
stockholders and Arvin stockholders in the merger have been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Shares of the
combined company's common stock issued in the merger may be traded freely and
without restriction by those stockholders not deemed to be affiliates (as that
term is defined under the Securities Act) of Meritor or Arvin. Any subsequent
transfer of shares, however, by any person who is an affiliate of Meritor or
Arvin at the time the merger is submitted for a vote of the holders of Meritor
common stock or Arvin common stock, respectively, will, under existing law,
require:
- the further registration under the Securities Act of the shares of the
combined company's common stock to be transferred;
- compliance with Rule 145 promulgated under the Securities Act (permitting
limited sales under certain circumstances); or
- the availability of another exemption from registration.
An "affiliate" of Meritor or Arvin is a person who directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, Meritor or Arvin, respectively. These restrictions are
expected to apply to the directors and executive officers of Meritor and Arvin
and the holders of 10% or more of the Meritor common stock or the Arvin common
stock (and to certain relatives or the spouse of those persons and any trusts,
estates, corporations or other entities in which those persons have a 10% or
greater beneficial or equity interest). Stop transfer instructions will be given
by the combined company to the transfer agent with respect to the shares of its
common stock to be received by persons subject to these restrictions, and any
certificates for their shares will be appropriately legended.
Each of Meritor and Arvin has agreed in the merger agreement to use its
reasonable best efforts to cause each person who is an affiliate (for purposes
of Rule 145 under the Securities Act) of that party to deliver to the combined
company and the other party a written agreement intended to ensure such
compliance with the Securities Act.
57
<PAGE> 65
MERITOR AND ARVIN OPTION AGREEMENTS
The following summary of the Meritor and Arvin stock option agreements is
qualified by reference to the complete texts of the stock option agreements,
which are attached as Appendix B and Appendix C to this joint proxy
statement-prospectus and incorporated herein by reference.
The Stock Options. At the time we entered into the merger agreement, we
also entered into reciprocal stock option agreements. Under the terms of the
stock option granted by Meritor to Arvin, Arvin may purchase up to 12,397,833
shares of Meritor common stock (representing approximately 19.9% of the
outstanding Meritor common stock as of April 6, 2000) at an exercise price of
$15.6875 per share. Under the terms of the stock option granted by Arvin to
Meritor, Meritor may purchase up to 5,103,420 shares of Arvin common stock
(representing approximately 19.9% of the outstanding Arvin common stock as of
April 6, 2000) at an exercise price of $24.1875 per share. These exercise prices
represent our closing stock prices on April 5, 2000, the last trading day prior
to the execution of the merger agreement and the stock option agreements. The
terms of the stock option agreements are substantially identical and are
summarized below.
When the Stock Options May be Exercised. Each party can exercise the
option granted to it, in whole or in part, at any time after the occurrence of
an event pursuant to which it would be entitled to receive the $20 million
termination fee under the merger agreement and prior to termination of the
option. See "The Merger Agreement -- Fees Payable Because of a Termination of
the Merger Agreement".
The right to exercise the option terminates upon the earliest to occur of
the following circumstances:
- the merger is completed;
- six months after the option first becomes exercisable;
- termination of the merger agreement under circumstances which cannot
result in the option holder becoming entitled to receive the $20 million
termination fee from the other party;
- the option holder receives $25 million, less any termination fee received
by the option holder, for the repurchase of the option or shares issuable
upon exercise of the option; and
- twelve months after termination of the merger agreement under
circumstances which could result in the option holder becoming entitled
to receive the $20 million termination fee upon the occurrence of a
subsequent event (unless the option becomes exercisable before the end of
the twelve-month period, in which case the option will terminate six
months after the option becomes exercisable).
Election to Repurchase Options. If a stock option becomes exercisable, the
option holder may require that the issuer repurchase the option or any shares
issued under the option for a cash fee equal to the following, as applicable:
- Option Repurchase Price
-- the amount by which the higher of (1) the highest price per share
proposed to be paid by any other person in connection with an
Acquisition Proposal or (2) the average closing price of the stock
for the ten trading days preceding the date that the election to
receive cash is exercised, exceeds the exercise price, multiplied by
-- the number of shares of issuer common stock for which the option may
then be exercised.
- Share Repurchase Price
-- the higher of (1) the highest price per share proposed to be paid by
any other person in connection with an Acquisition Proposal or (2)
the average closing price of the stock for the ten trading days
preceding the date that the election to receive cash is exercised,
multiplied by
-- the number of shares of issuer common stock repurchased.
58
<PAGE> 66
Limitation on Total Profit. Each stock option agreement provides that the
total profit that a party is permitted to receive under the option agreement and
the termination fee provisions of the merger agreement cannot exceed $25 million
in the aggregate.
Adjustment. Each option agreement contains provisions governing the
procedure for exercise of the option and payment for the shares purchased upon
that exercise and other provisions that adjust the number of shares and the
exercise price of the option upon the occurrence of certain changes to the
capital structure of the issuer or certain other events or transactions.
Registration Rights. Each option agreement contains provisions granting
the option holder demand and piggyback registration rights with respect to the
shares of issuer common stock received upon exercise of the option.
Effect of Stock Option Agreements. The option agreements may have the
effect of making an acquisition or other business combination of either company
by or with a third party more costly because of the need in any transaction to
acquire any shares issued pursuant to the option agreement or because of any
cash payments made pursuant to the option agreement. Moreover, we believe that,
if the option granted by either Meritor or Arvin becomes exercisable, it is
likely to hinder other parties from attaining pooling-of-interest accounting
treatment under U.S. generally accepted accounting principles in any merger or
business combination transaction with that company for the following two years.
The option agreements may therefore discourage certain third parties from
proposing an alternative transaction to the merger proposed by us, including one
that might be more favorable from a financial point of view to the stockholders
of Meritor or Arvin, as the case may be.
59
<PAGE> 67
MANAGEMENT AND OPERATIONS AFTER THE MERGER
BOARD OF DIRECTORS
At the effective time of the merger, the combined company's board of
directors will consist of 19 persons, nine of whom will be current members of
Meritor's board and nine of whom will be current members of Arvin's board. We
have agreed that the remaining director will be Martin D. Walker, who is
currently not a member of either the Meritor board or the Arvin board. Meritor
and Arvin have agreed in the merger agreement that in the event Mr. Walker is
unavailable to serve as a director of the combined company, Mr. Yost and Mr.
Hunt will select a replacement prior to the effective time of the merger.
We have listed below biographical information for each of the 19 persons
who are expected to be members of the board of directors of the combined company
as of the effective time of the merger. We have also indicated below the term of
office to be served by each director.
It is the current intention of Meritor and Arvin to reduce the ArvinMeritor
board to approximately 12 directors within a reasonable period of time following
the effective time of the merger in such manner as the ArvinMeritor board will
determine.
Meritor Designees
JOSEPH B. ANDERSON, JR., age 57 -- Mr. Anderson has been a director of
Meritor since September 1997. He is Chairman of the Board and Chief Executive
Officer of Chivas Industries LLC (automotive components), having held that
position (including with its predecessor, Chivas Products, Ltd.) since October
1994. From December 1992 to July 1993, Mr. Anderson was President and Chief
Executive Officer of Composite Energy Management Systems, Incorporated
(automotive components). Mr. Anderson served in a variety of positions,
primarily in manufacturing, with General Motors Corporation (automotive) from
1979 until December 1992. He also served as an assistant to the U.S. Secretary
of Commerce from 1977 to 1979. Mr. Anderson is a director of Quaker Chemical
Corporation and R.R. Donnelley & Sons Co. and is a trustee of Kettering
University. He is also a director, trustee or member of a number of business,
educational and civic organizations. Mr. Anderson's term of office will expire
in 2003.
DONALD R. BEALL, age 61 -- Mr. Beall has been a director of Meritor since
May 1997. He was Chairman of the Board of Rockwell International Corporation
(electronic controls and communications) from February 1988 through February
1998, and Chief Executive Officer of Rockwell from February 1988 through
September 1997. He served nine years as President and Chief Operating Officer of
Rockwell and in a number of other increasingly responsible senior management
positions after joining Rockwell in 1968. He is a director of Rockwell and
chairman of the board's executive committee. He is also a director of The
Procter & Gamble Company, Conexant Systems, Inc. and The Times Mirror Company.
He is a trustee of the California Institute of Technology and a member of the
University of California-Irvine Foundation Board and numerous UCI support
organizations, as well as The Business Council, Hoover Institution and several
Young Presidents Organization alumni organizations. He is also a director,
trustee or member of a number of other professional, civic and entrepreneurial
organizations. Mr. Beall's term of office will expire in 2001.
RHONDA L. BROOKS, age 48 -- Ms. Brooks has been a director of Meritor since
July 1999. She has served as the President of the Roofing Systems Business of
Owens Corning, Inc. (building materials and fiberglass composites) since
December 1997. She served Owens Corning as Vice President, Investor Relations
from January to December 1997 and as Vice President - Marketing of the
Composites Division from 1995 to 1996. Prior to that time, she served as Senior
Vice President and General Manager of PlyGem Industries, Inc. from 1994 to 1995,
and as Vice President - Oral Care and New Product Strategies, and Vice
President - Marketing of Warner Lambert Company from 1990 to 1994. She is a
director of Central Vermont Public Service Corporation. Ms. Brooks' term of
office will expire in 2002.
JOHN J. CREEDON, age 75 -- Mr. Creedon has been a director of Meritor since
September 1997. He is the retired President and Chief Executive Officer of
Metropolitan Life Insurance Company (insurance). He joined Metropolitan Life in
1942 and was appointed Senior Vice President and General Counsel in
60
<PAGE> 68
1973. He became an Executive Vice President in 1976, President and a director in
1980, and served as Chief Executive Officer from 1983 through August 1989. He is
also a director of Corporate Partners and serves as a consultant to Rockwell
pursuant to a Rockwell retirement policy in effect prior to December 1995 for
former directors. He is also a director, trustee or member of a number of
business, educational and civic organizations. Mr. Creedon's term of office will
expire in 2001.
CHARLES H. HARFF, age 70 -- Mr. Harff has been a director of Meritor since
May 1997. He is a consultant to Rockwell. From June 1984, when he joined
Rockwell, until November 1994, Mr. Harff served as Senior Vice President,
General Counsel and Secretary of Rockwell. From November 1994 to February 1996,
Mr. Harff served as Senior Vice President and Special Counsel of Rockwell. He is
a director of the Fulbright Association, the Christian A. Johnson Endeavor
Foundation and several civic organizations. Mr. Harff's term of office will
expire in 2001.
VICTORIA B. JACKSON, age 45 -- Ms. Jackson has been a director of Meritor
since July 1999. She was President and Chief Executive Officer of DSS/Prodiesel,
Inc. (transportation components) from 1982 until 1998, when the company was sold
to TransCom USA. She has served as a consultant to TransCom USA since 1998. Ms.
Jackson is a director of AmSouth Bancorporation, Hussmann International and
Whitman Corporation, and is a member of various business, educational and civic
organizations. Ms. Jackson's term of office will expire in 2003.
JAMES E. MARLEY, age 64 -- Mr. Marley has been a director of Meritor since
April 1999. He is the retired Chairman of the Board of AMP Inc. (communications
components and cabling products), serving in that position from 1993 to 1998. He
joined AMP in 1963 and served in a variety of engineering and executive
positions until his retirement in 1998. He is also a director of Armstrong World
Industries Inc. and ybn.com and a number of business, educational and civic
organizations, and is a member of a number of engineering and management
professional associations. Mr. Marley's term of office will expire in 2003.
HAROLD A. POLING, age 74 -- Mr. Poling has been a director of Meritor since
September 1997. He is an investor in Metapoint Partners, an investment
partnership. He retired as Chairman of the Board and Chief Executive Officer of
Ford Motor Company (automotive) in January 1994, having joined Ford in 1951 and
served in a number of senior management positions prior to becoming President
(in 1975) and Chairman (in 1977) of Ford in Europe. Mr. Poling became President
and Chief Operating Officer of Ford in February 1985 and served as Chairman of
the Board and Chief Executive Officer from March 1990 to January 1994. He is a
director of Kellogg Company, LTV Corporation, Shell Oil Company and Thermadyne
Holdings Corporation, and an advisory director of Donaldson, Lufkin and
Jenrette, Inc. He is also a director, trustee or member of a number of business,
educational and civic organizations. Mr. Poling's term of office will expire in
2002.
LARRY D. YOST, age 62 -- Mr. Yost has been a director of Meritor since May
1997. He has been Chairman of the Board and Chief Executive Officer of Meritor
since May 1997. Mr. Yost joined Allen-Bradley Company, LLC (automation), a
subsidiary of Rockwell, as a manager in 1971 and, after serving in a number of
increasingly responsible management positions, served as Senior Vice President,
Operations, of Allen-Bradley from July 1992 until November 1994. He served as
President, Heavy Vehicle Systems of Rockwell from November 1994 until March 1997
and was Senior Vice President and President, Automotive and Acting President,
Heavy Vehicle Systems of Rockwell from March 1997 to September 1997. Mr. Yost is
a director of Kennametal Inc. and a trustee of Kettering University. Mr. Yost's
term of office will expire in 2001.
Arvin Designees
STEVEN C. BEERING, age 67 -- Dr. Beering has been a director of Arvin since
1983. He is the President of Purdue University and Purdue University
Foundations, a private support organization, positions he has held since 1983.
Dr. Beering is a director of Eli Lilly and Company, NiSource Inc., American
United Life Insurance Co. and Veridian Corporation. Dr. Beering's term of office
will expire in 2002.
JOSEPH P. FLANNERY, age 67 -- Mr. Flannery has been a director of Arvin
since 1991. He is Chairman of the Board, President and Chief Executive Officer
of Uniroyal Holding, Inc. (tires and chemical products), positions he has held
since 1987. Mr. Flannery is a director of Ingersoll-Rand Company, Kmart
61
<PAGE> 69
Corp., Newmont Mining Corporation and The Scotts Company. Mr. Flannery's term of
office will expire in 2001.
ROBERT E. FOWLER, JR., age 64 -- Mr. Fowler has been a director of Arvin
since 1999. He has served as President and Chief Operating Officer of IMC Global
Inc. (agricultural products and services) since 1996 following its merger with
The Vigoro Corporation, of which he had served as President, Chief Executive
Officer and a director since 1994. He was elected Chief Executive Officer in
1997 and Chairman in 1998 and served in these capacities until October 1999. Mr.
Fowler is also a director of Anixter International Inc. Mr. Fowler's term of
office will expire in 2002.
WILLIAM D. GEORGE, JR., age 67 -- Mr. George has been a director of Arvin
since 1994. Since 1981 he served in a variety of positions with S.C. Johnson Wax
(chemical specialty products) until he became Executive Vice President and Chief
Operating Officer, Worldwide Consumer Products, in 1988. Mr. George was elected
President of S.C. Johnson Wax in 1990, and Chief Executive Officer and a member
of the Board in 1993, positions which he held until retirement in 1997. He is
also a director of Ralcorp Holdings and Reilly Industries, Inc. and is a member
of the Board of Trustees of Carthage College. Mr. George's term of office will
expire in 2003.
IVAN W. GORR, age 70 -- Mr. Gorr has been a director of Arvin since 1994.
Mr. Gorr began his career with Cooper Tire & Rubber Company (rubber products) in
1972 as Corporate Controller and, after having served as Executive Vice
President, Treasurer and Chief Financial Officer, was elected President and
Chief Operating Officer in 1982 and Chairman and Chief Executive Officer in
1989, and served in these capacities until 1994. Mr. Gorr is a director of
Nations Rent, Inc. and Borg-Warner Automotive, Inc. Mr. Gorr's term of office
will expire in 2001.
RICHARD W. HANSELMAN, age 72 -- Mr. Hanselman has been a director of Arvin
since 1983. He is the Chairman of the Board of Foundation Health Corporation
(managed care provider), a position he has held since 1999. Mr. Hanselman began
his career with Genesco, Inc. (footwear and apparel) in 1980 and was named Chief
Executive Officer in 1981, serving in that capacity and as Chairman of the Board
until 1986. He is also a director of Bradford Funds, Inc. Mr. Hanselman's term
of office will expire in 2001.
V. WILLIAM HUNT, age 55 -- Mr. Hunt has been a director of Arvin since
1983. He is Chairman of the Board, President and Chief Executive Officer of
Arvin. Mr. Hunt joined Arvin in 1976 and was elected Vice
President -- Administration in 1980, Secretary in 1982, Executive Vice President
in 1990, President and Chief Operating Officer in 1996, Chief Executive Officer
in May 1998 and Chairman of the Board in April 1999. Mr. Hunt is also a director
of the Motor Equipment Manufacturers' Association and Chairman of its
Presidents' Council and is a director of Manufacturers' Alliance/MAPI, Inc. Mr.
Hunt's term of office will expire in 2003.
DON J. KACEK, age 63 -- Mr. Kacek has been a director of Arvin since 1982.
He is Chairman of the Board and Chief Executive Officer of Advanced Automation
Technologies, Inc. (factory automation equipment), positions he has held since
1990. Mr. Kacek has served as a director of Advanced Automation Technologies,
Inc. since 1989. Mr. Kacek's term of office will expire in 2002.
JAMES E. PERRELLA, age 64 -- Mr. Perrella has been a director of Arvin
since 1999. He is Chairman of the Board of Ingersoll-Rand Company. Mr. Perrella
has served as Chairman of Ingersoll-Rand Company (industrial components) since
1993 and as a member of its Board of Directors since 1992. Between 1993 and
October 1999, he also served as President and Chief Executive Officer of
Ingersoll-Rand. Mr. Perrella is also a director of Becton Dickinson and Company,
Bombardier Inc., Milacron Inc. and Rio Algorn Limited. Mr. Perrella's term of
office will expire in 2003.
Joint Designee
MARTIN D. WALKER, age 67 -- Mr. Walker is a principal of MORWAL Investments
(investments). He served M.A. Hanna Company (speciality chemicals, plastics, and
rubber products) as Chief Executive Officer from October 1998 until June 1999
and as Chairman of the Board from October 1998 until December 1999. He had
previously served M.A. Hanna as Chief Executive Officer from 1986 until December
1996 and as Chairman of the Board from 1986 until June 1997. Mr. Walker joined
Rockwell as a Vice President in 1972 and, after serving in a number of
increasingly responsible management positions, served as Senior Vice President,
and President, Automotive, from 1978 until 1982 and as Executive Vice
62
<PAGE> 70
President from 1982 until 1986. He is a director of Comerica, Inc., Goodyear
Tire and Rubber Co., M.A. Hanna Company, Lexmark International Group, Textron,
Inc. and The Timken Company. He is also a director, trustee or member of a
number of business, educational and civic organizations. Mr. Walker's term of
office will expire in 2002.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors of the combined company will have the following four
committees which will be comprised of and chaired by combined company directors
as follows:
- Audit Committee -- The Audit Committee will initially be comprised of
three Arvin designees, one of whom will be the chairperson, and three
Meritor designees. The Audit Committee will review the scope and
effectiveness of audits of ArvinMeritor by its independent public
accountants and by ArvinMeritor's internal auditors; select and recommend
to the board of directors the employment of independent public
accountants for ArvinMeritor, subject to approval of the stockholders;
review the audit plans of the independent public accountants and
ArvinMeritor's internal auditors; review and approve the fees charged by
the independent public accountants; review ArvinMeritor's annual
financial statements before their release and discuss with management and
the independent public accountants ArvinMeritor's quarterly financial
statements (before their release if there are pertinent substantive
issues not previously discussed or reviewed with the Audit Committee);
review the adequacy of ArvinMeritor's systems of internal controls and
recommendations of the independent public accountants with respect to
internal controls; review and act on comments and suggestions by the
independent public accountants and by ArvinMeritor's internal auditors
with respect to their audit activities; and monitor compliance by the
employees of ArvinMeritor with ArvinMeritor's standards of business
conduct policies.
- Board Composition Committee -- The Board Composition Committee will
initially be comprised of three Meritor designees, one of whom will be
the chairperson, three Arvin designees and Mr. Walker. The principal
functions of the Board Composition Committee will be to consider and
recommend to the board qualified candidates for election as directors of
ArvinMeritor and periodically to prepare and submit to the board for
adoption the Committee's selection criteria for director nominees. The
Committee will also periodically assess and report to the board of
directors on the performance of the board. After the merger, stockholders
of ArvinMeritor will be able to recommend candidates for consideration by
the Committee by writing to the Secretary of ArvinMeritor at its World
Headquarters in Troy, Michigan, giving the candidate's name, biographical
data and qualifications. A written statement from the candidate,
consenting to be named as a candidate and, if nominated and elected, to
serve as a director, should accompany any such recommendation.
- Compensation and Management Development Committee -- The Compensation and
Management Development Committee will initially be comprised of three
Meritor designees, one of whom will be the chairperson, and three Arvin
designees. The principal functions of the Compensation and Management
Development Committee will be to evaluate the performance of
ArvinMeritor's senior executives and plans for management succession and
development, to consider the design and competitiveness of ArvinMeritor's
compensation plans, to review and approve senior executive compensation
and to administer ArvinMeritor's incentive, deferred compensation, stock
option and long-term incentives plans.
- Environmental and Social Responsibility Committee -- The Environmental
and Social Responsibility Committee will initially be comprised of three
Arvin designees, one of whom will be the chairperson, and three Meritor
designees. The Environmental and Social Responsibility Committee will
review and assess ArvinMeritor's policies and practices in the following
areas: employee relations, with emphasis on equal employment opportunity
and advancement; the protection and enhancement of the environment and
energy resources; product integrity and safety; employee health and
safety; and community and civic relations, including programs for and
contributions to health, educational, cultural and other social
institutions.
63
<PAGE> 71
MANAGEMENT
After completion of the merger, Larry D. Yost, currently Chairman of the
Board and Chief Executive Officer of Meritor, will be Chairman of the Board and
Chief Executive Officer of the combined company. V. William Hunt, currently
Chairman of the Board, President and Chief Executive Officer of Arvin, will be
Vice Chairman and President of the combined company. Together, Mr. Yost and Mr.
Hunt will comprise the Office of the Chairman, which will directly oversee the
combined company's corporate staff functions, as well as the operations of its
six business groups. ArvinMeritor and Arvin have entered into a three-year
employment agreement with Mr. Hunt which will become effective at the effective
time of the merger and will be binding on the combined company following the
merger. See "The Merger -- Interests of Certain Persons in the Merger -- New
Employment Agreement".
We have listed below all of the persons expected to be executive officers
of the combined company as of the effective time of the merger.
LARRY D. YOST, age 62 -- Chairman of the Board and Chief Executive Officer.
Chairman of the Board and Chief Executive Officer of Meritor since May 1997.
Acting President, Light Vehicle Systems of Meritor from January 1998 to March
1999; Senior Vice President, President, Automotive and Acting President, Heavy
Vehicle Systems of Rockwell (electronic controls and communications) from March
1997 to September 1997; President, Heavy Vehicle Systems of Rockwell from
November 1994 to March 1997; Senior Vice President, Operations of Allen-Bradley
Company, LLC (automation), a subsidiary of Rockwell, prior to November 1994.
V. WILLIAM HUNT, age 55 -- Vice Chairman and President. Chairman of the
Board, President and Chief Executive Officer of Arvin since April 1999.
President and Chief Executive Officer of Arvin from May 1998 to April 1999;
President and Chief Operating Officer of Arvin from 1996 to May 1998; Executive
Vice President of Arvin from 1990 to 1996.
VERNON G. BAKER, II, age 46 -- Senior Vice President, General Counsel and
Secretary. Senior Vice President, General Counsel and Secretary of Meritor since
August 1999. Vice President and General Counsel, Corporate Research and
Technology of Hoechst Celanese Corporation, a subsidiary of Hoechst AG
(pharmaceuticals and industrial chemicals), from 1989 to July 1999.
GARY L. COLLINS, age 54 -- Senior Vice President, Human Resources. Senior
Vice President, Human Resources of Meritor since August 1997. Vice
President - Human Resources and Government Relations, Automotive of Rockwell
from September 1991 to September 1997.
LINDA M. CUMMINS, age 52 -- Senior Vice President, Communications. Senior
Vice President, Communications, of Meritor since April 2000. Vice President,
Communications, of Meritor from August 1999 to April 2000; Vice President of
Advanced Marketing and Worldwide Communications of United Technologies
Automotive (automotive component supplier) from August 1997 to August 1999; Vice
President of Communications and External Affairs of United Technologies
Automotive from June 1996 to August 1999; Director of Broadcast News/Global News
Department of Ford Motor Company (automotive) from 1993 to 1996.
WILLIAM K. DANIEL, age 35 -- Senior Vice President and President, Light
Vehicle Systems, Aftermarket Products. President of Arvin Replacement Products
business group since December 1999. Managing Director of Arvin Replacement
Products in Europe from January 1998 to November 1999; Managing Director of
Gabriel Europe from May 1996 to December 1997; Vice President, Sales, of Arvin
Replacement Products from 1995 to 1996; Vice President, Sales, of Maremont
Exhaust Systems, Inc. from 1993 to 1995.
JUAN L. DE LA RIVA, age 56 -- Senior Vice President, Corporate Development
and Strategy. Senior Vice President, Business Development of Meritor since
February 2000. Senior Vice President, Business Development and Communications of
Meritor from February 1999 to February 2000; Vice President, Business
Development and Communications of Meritor from September 1998 to February 1999;
Managing Director - Wheels, Light Vehicle Systems of Meritor from 1994 to
September 1998.
64
<PAGE> 72
DONALD E. EBERT, age 57 -- Senior Vice President and President,
Arvin - Roll Coater, Inc. President of Arvin - Roll Coater, Inc. and a Vice
President of Arvin since November 1990.
THOMAS A. GOSNELL, age 50 -- Senior Vice President and President, Heavy
Vehicle Systems Aftermarket Products. Senior Vice President and President,
Worldwide Aftermarket of Meritor since September 1999. Vice President and
General Manager, Aftermarket, from February 1998 to September 1999; General
Manager, Worldwide Aftermarket Services, Heavy Vehicle Systems, from November
1996 to February 1998; General Manager - North America, Aftermarket Services,
Heavy Vehicle Systems, from June 1991 to November 1996.
WILLIAM M. LOWE, age 46 -- Vice President and Controller. Vice President,
Financial Operations and Chief Accounting Officer of Arvin since June 1998.
Corporate Controller and Chief Accounting Officer of Arvin from 1994 to June
1998; Chief Tax Officer of Arvin from 1991 to 1994.
THOMAS A. MADDEN, age 46 -- Senior Vice President and Chief Financial
Officer. Senior Vice President and Chief Financial Officer of Meritor since May
1997. Vice President and Senior Vice President - Finance, Automotive of Rockwell
from March 1997 to September 1997; Vice President, Corporate Development of
Rockwell from September 1996 to March 1997; Vice President - Finance &
Administration, Light Vehicle Systems of Rockwell from May 1996 to September
1996; Vice President - Finance & Administration, Automotive of Rockwell from
October 1994 to May 1996.
PRAKASH R. MULCHANDANI, age 55 -- Senior Vice President and President,
Heavy Vehicle Systems. Senior Vice President and President, Heavy Vehicle
Systems of Meritor since January 1998. Senior Vice President and President,
Worldwide Truck and Trailer Systems of Meritor from September 1997 to December
1997; President - Worldwide Truck and Trailer Systems, Heavy Vehicle Systems of
Rockwell from April 1996 to September 1997; President - North American Truck
Systems, Automotive of Rockwell from June 1994 to April 1996.
TERRENCE E. O'ROURKE, age 53 -- Senior Vice President and President, Light
Vehicle Systems. Senior Vice President and President, Light Vehicle Systems of
Meritor since March 1999. Group Vice President and President - Ford Division of
Lear Corporation (automotive component supplier) from January 1996 to January
1999; President - Chrysler Division of Lear Corporation from October 1994 to
January 1996.
A.R. SALES, age 51 -- Vice President and Treasurer. Executive Vice
President and Chief Financial Officer of Arvin - Roll Coater, Inc. since January
1999. Vice President and Treasurer of Arvin from April 1997 to December 1998;
Treasurer of Arvin from September 1990 to April 1997.
CARL C. SODERSTROM, age 46 -- Senior Vice President, Engineering, Quality
and Procurement. Senior Vice President, Engineering, Quality and Procurement of
Meritor since February 1998. Vice President, Engineering and Quality, Heavy
Vehicle Systems of Meritor from September 1997 to February 1998; Vice President,
Engineering and Quality, Heavy Vehicle Systems of Rockwell from October 1996 to
September 1997; Director of Development - Operator Interface and Logic Division
of Allen-Bradley Company, LLC (automation), a subsidiary of Rockwell, from 1993
to October 1996.
DIANE M. STELFOX, age 43 -- Vice President, Corporate Development. Vice
President and Controller of Meritor since September 1998. Assistant Controller
of Meritor from January 1998 to September 1998; Controller - Body Systems N.A.
of ITT Automotive, Inc. (automotive component supplier) from 1995 to 1997;
Controller - Aftermarket N.A. of ITT Automotive from 1992 to 1995.
WESLEY B. VANCE, age 42 -- Senior Vice President and President, Exhaust
Systems. President of Arvin Exhaust since December 1998. President, Arvin
Exhaust Europe and Co-President, Arvin Exhaust from March 1997 to December 1998;
Vice President, Global Business Development from June 1996 to March 1997; Vice
President and General Manager, Arvin Ride Control Canada from January 1994 to
June 1996.
65
<PAGE> 73
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
MERITOR
Meritor common stock is listed on the New York Stock Exchange and traded
under the symbol "MRA". The following table sets forth, for the calendar
quarters indicated, the high and low reported prices per share of Meritor common
stock on the New York Stock Exchange Composite Transactions reporting system,
and cash dividends declared per share of Meritor common stock.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------- DIVIDENDS
CALENDAR YEAR HIGH LOW DECLARED
- ------------- ---- --- ---------
<S> <C> <C> <C>
1998
First Quarter............................................. $27 3/16 $19 1/8 $.105
Second Quarter............................................ 28 3/8 21 7/8 .105
Third Quarter............................................. 24 15 .105
Fourth Quarter............................................ 22 1/8 14 1/8 .105
1999
First Quarter............................................. 21 11/16 14 3/16 .105
Second Quarter............................................ 26 1/2 15 11/16 .105
Third Quarter............................................. 26 19 5/8 .105
Fourth Quarter............................................ 21 7/16 15 1/4 .105
2000
First Quarter............................................. 19 7/8 13 5/8 .105
Second Quarter (through May 4, 2000)...................... 16 3/4 14 5/16 .105
</TABLE>
ARVIN
Arvin common stock is listed on the New York Stock Exchange and traded
under the symbol "ARV" and is also listed on the Chicago Stock Exchange. The
following table sets forth, for the calendar quarters indicated, the high and
low reported prices per share of Arvin common stock on the New York Stock
Exchange Composite Transactions reporting system, and cash dividends declared
per share of Arvin common stock.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------- DIVIDENDS
CALENDAR YEAR HIGH LOW DECLARED
- ------------- ---- --- ---------
<S> <C> <C> <C>
1998
First Quarter............................................. $40 $31 $.20
Second Quarter............................................ 42 3/4 33 7/16 .20
Third Quarter............................................. 42 5/8 35 3/4 .20
Fourth Quarter............................................ 44 1/8 31 .21
1999
First Quarter............................................. 42 7/8 30 7/8 .21
Second Quarter............................................ 41 7/8 26 3/8 .21
Third Quarter............................................. 40 1/2 29 3/16 .21
Fourth Quarter............................................ 31 1/2 24 5/8 .22
2000
First Quarter............................................. 29 1/8 18 1/16 .22
Second Quarter (through May 4, 2000)...................... 24 13/16 20 3/4 .22
</TABLE>
ARVINMERITOR
The timing and amount of future dividends of the combined company will
depend upon earnings, cash requirements, the financial condition of the combined
company and its subsidiaries and other factors deemed relevant by the combined
company board. It is currently anticipated that the combined company will pay a
quarterly cash dividend of $0.22 per share which is consistent with Arvin's
current dividend policy, and represents a 57% increase in Meritor's current
dividend policy.
66
<PAGE> 74
INFORMATION ABOUT MERITOR
GENERAL
Meritor Automotive, Inc. is a leading global manufacturer and supplier of a
broad range of components and systems for use in commercial, specialty and light
vehicles. Meritor was incorporated in Delaware in 1997 in connection with the
spin-off of Meritor by Rockwell International Corporation on September 30, 1997.
With fiscal 1999 sales of $4.5 billion, Meritor serves a broad range of OEM
customers worldwide, including truck OEMs, light vehicle OEMs, semi-trailer
producers and off-highway and specialty vehicle manufacturers, and the related
aftermarkets. Meritor operated 68 manufacturing facilities around the world in
fiscal 1999. Sales outside the United States accounted for approximately 49% of
total sales in fiscal 1999.
Meritor serves its customers worldwide through two operating segments:
Heavy Vehicle Systems ("HVS") and Light Vehicle Systems ("LVS"). HVS supplies
drivetrain systems and components, including axles, brakes, transmissions,
clutches and drivelines, for medium- and heavy-duty trucks, trailers and
off-highway equipment and specialty vehicles, including military, bus and coach,
and fire and rescue. Within HVS, Meritor distinguishes between sales of original
equipment systems and components and sales to the aftermarket. LVS supplies
roof, door, access control and suspension systems and wheel products for
passenger cars, light trucks and sport utility vehicles. In fiscal 1999, Meritor
derived approximately 65% of its total sales from HVS and approximately 35% from
LVS.
Meritor has approximately 19,000 employees engaged in manufacturing,
research, sales and administration activities in facilities located around the
world. Its executive offices are located at 2135 West Maple Road, Troy, Michigan
48084-7186.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various
compensation plans (including stock option plans), voting securities, including
the principal holders of those securities, certain relationships and related
transactions and other matters as to Meritor is incorporated by reference or set
forth in Meritor's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999, which is incorporated in this joint proxy
statement-prospectus by reference. Stockholders desiring copies of this document
and such other documents may contact Meritor at its address or telephone number
indicated under "Where You Can Find More Information".
67
<PAGE> 75
INFORMATION ABOUT ARVIN
GENERAL
Arvin Industries, Inc. is a focused international manufacturer and supplier
of automotive parts with 53 manufacturing facilities and six technical centers
located in 16 countries, excluding non-consolidated businesses. Arvin's primary
manufacturing locations are in the United States, Europe, Canada, Brazil, Mexico
and South Africa. Arvin is a worldwide leader in automotive exhaust systems,
ride control products, and filters for original equipment and replacement
customers, with fiscal 1999 sales of $3.1 billion.
Since its founding in 1919, Arvin has grown through internal development,
acquisitions and a number of joint ventures. In recent years, Arvin's strategy
has been to strengthen Arvin's automotive parts businesses by achieving a mix of
sales to both original equipment manufacturers and replacement parts suppliers
on a global basis.
Arvin classifies its business based on the two primary customer groups it
serves: Automotive Original Equipment ("OE") and Automotive Replacement
("Replacement"). Business units whose primary focus is other than manufacturing
automotive products are classified as "Other". In fiscal 1999, Arvin derived
approximately 64% of its total revenues from OE customers and approximately 30%
from Replacement customers, with the remaining 6% from Other products.
Arvin has approximately 17,500 employees. Its executive offices are located
at One Noblitt Plaza, Box 3000, Columbus, Indiana 47202-3000.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to executive compensation, various benefit
plans (including stock option plans), voting securities, including the principal
holders of those securities, certain relationships and related transactions and
other matters as to Arvin is incorporated by reference or set forth in Arvin's
Annual Report on Form 10-K for the fiscal year ended January 2, 2000, which is
incorporated in this joint proxy statement-prospectus by reference. Stockholders
desiring copies of this document and such other documents may contact Arvin at
its address or telephone number indicated under "Where You Can Find More
Information".
68
<PAGE> 76
DESCRIPTION OF COMBINED COMPANY CAPITAL STOCK
The following description of the material terms of the capital stock of the
combined company includes a summary of certain provisions of the combined
company's restated articles of incorporation and amended by-laws that will be in
effect at or prior to the effective time of the merger. This description is
subject to the detailed provisions of, and is qualified by reference to, the
combined company's restated articles of incorporation and amended by-laws,
copies of which are attached as Appendices F and G to this joint proxy
statement-prospectus and incorporated herein by reference.
The combined company is authorized to issue (1) 500,000,000 shares of
common stock and (2) 30,000,000 shares of preferred stock, without par value, of
which 2,000,000 shares have been designated as Series A Junior Participating
Preferred Stock for issuance in connection with the exercise of the combined
company's preferred share purchase rights. For a more detailed discussion of the
combined company's preferred share purchase rights and how they relate to the
combined company's common stock, see "-- Stockholder Rights Plan". Following
completion of the merger, we anticipate that approximately 71 million shares of
ArvinMeritor common stock will be outstanding. The authorized shares of common
stock and preferred stock will be available for issuance without further action
by the combined company's stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which the combined company's securities may be listed or traded. If the
approval of the combined company's stockholders is not so required, the combined
company's board of directors may determine not to seek stockholder approval.
Certain of the provisions described under this section and under the
section entitled "Comparison of Stockholders' Rights" could have the effect of
discouraging transactions that might lead to a change of control of the combined
company. For example, the combined company's restated articles of incorporation
and amended by-laws:
- establish a classified board of directors;
- require stockholders to provide advance notice of any stockholder
nominations of directors or any proposal of new business to be considered
at any meeting of stockholders;
- require a supermajority vote to remove a director or to amend or repeal
certain provisions of the combined company's restated articles of
incorporation or by-laws; and
- preclude stockholders from calling a special meeting of stockholders.
COMMON STOCK
Holders of common stock are entitled to such dividends as may be declared
by the combined company's board of directors out of funds legally available for
such purpose. Dividends may not be paid on common stock unless all accrued
dividends on preferred stock, if any, have been paid or declared and set aside.
In the event of the combined company's liquidation, dissolution or winding up,
the holders of common stock will be entitled to share pro rata in the assets
remaining after payment to creditors and after payment of the liquidation
preference plus any unpaid dividends to holders of any outstanding preferred
stock.
Each holder of common stock will be entitled to one vote for each such
share outstanding in the holder's name. No holder of common stock will be
entitled to cumulate votes in voting for directors. The combined company's
restated articles of incorporation provide that, unless otherwise determined by
the combined company's board of directors, no holder of common stock will have
any preemptive right to purchase or subscribe for any stock of any class which
the combined company may issue or sell.
Application will be made to list the combined company common stock on the
New York Stock Exchange under the trading symbol "ARM".
EquiServe First Chicago Trust Company Division will be the transfer agent
and registrar for the combined company's common stock.
69
<PAGE> 77
PREFERRED STOCK
General. The combined company's restated articles of incorporation permit
the combined company to issue up to 30,000,000 shares of the combined company's
preferred stock in one or more series and with rights and preferences that may
be fixed or designated by the combined company's board of directors without any
further action by the combined company's stockholders. The powers, preferences,
rights and qualifications, limitations and restrictions of the preferred stock
of each series will be fixed by an amendment to the combined company's restated
articles of incorporation relating to each series adopted by the combined
company's board.
Although the combined company's board of directors has no intention at the
present time of doing so, it could issue a series of preferred stock that could,
depending on the terms of such series, impede the completion of a merger, tender
offer or other takeover attempt.
Series A Junior Participating Preferred Stock. The restated articles of
incorporation authorize the combined company to issue up to 2,000,000 shares
designated as "Series A Junior Participating Preferred Stock". Holders of Series
A Junior Participating Preferred Stock are entitled, in preference to holders of
common stock, to such dividends as the board of directors may declare out of
funds legally available for the purpose. Each share of Series A Junior
Participating Preferred Stock will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per share of common stock whenever
such dividend is declared. In the event of liquidation, the holders of Series A
Junior Participating Preferred Stock will be entitled to a minimum preferential
liquidation payment of $100 per share but will be entitled to an aggregate
payment of 100 times the payment made per share of common stock. Each share of
Series A Junior Participating Preferred Stock will have 100 votes, voting
together with common stock. In the event of any merger, consolidation or other
transaction in which shares of common stock are exchanged, each share of Series
A Junior Participating Preferred Stock will be entitled to receive 100 times the
amount received per share of common stock. These rights will be protected by
customary antidilution provisions.
STOCKHOLDER RIGHTS PLAN
Each of Meritor and Arvin has implemented a stockholder rights plan with
substantially similar terms. Both plans will terminate at the effective time of
the merger. Any material differences between the Meritor and Arvin plans and the
ArvinMeritor stockholder rights plan are included in the description below.
Prior to the effective time of the merger, ArvinMeritor will enter into the
ArvinMeritor Rights Agreement (the "ArvinMeritor Rights Agreement") with First
Chicago Trust Company of New York, as rights agent, which sets forth the
description and terms of the preferred share purchase rights. This description
of the ArvinMeritor Rights Agreement is subject to the detailed provisions of,
and is qualified by reference to, the ArvinMeritor Rights Agreement, a copy of
which is attached as Appendix H to this joint proxy statement-prospectus and
incorporated herein by reference. Under the terms of the ArvinMeritor Rights
Agreement, each outstanding share of common stock will evidence one preferred
share purchase right. Each preferred share purchase right entitles the
registered holder to purchase from the combined company one one-hundredth of a
share of Series A Junior Participating Preferred Stock, at $[ ], subject
to adjustment.
Until the earlier to occur of (1) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
common stock or (2) ten business days, or such later date as may be determined
by the combined company's board of directors prior to such time as any person or
group becomes an Acquiring Person, following the commencement of a tender offer
or exchange offer the consummation of which would result in the beneficial
ownership by a person or group of affiliated or associated persons of 15% or
more of the outstanding common stock, preferred share purchase rights will be
attached to common stock and will be owned by the registered owners of common
stock. Under each of the existing Meritor Rights
70
<PAGE> 78
Agreement, dated as of September 8, 1997, and the Arvin Rights Agreement, dated
as of May 29, 1986, as amended, the ownership threshold at which a person
becomes an Acquiring Person is 20%.
The ArvinMeritor Rights Agreement provides that, until the preferred share
purchase rights are no longer attached to the common stock, or until the earlier
redemption or expiration of the preferred share purchase rights:
- the preferred share purchase rights will be transferred with and only
with common stock;
- certificates representing common stock and statements in respect of
shares of common stock registered in book-entry or uncertificated form
will contain a notation incorporating the terms of the preferred share
purchase rights by reference; and
- the transfer of any shares of common stock will also constitute the
transfer of the associated preferred share purchase rights.
As soon as practicable following the date the preferred share purchase rights
are no longer attached to the common stock (the "Distribution Date"), separate
certificates evidencing preferred share purchase rights will be mailed to
holders of record of common stock as of the close of business on the date the
preferred share purchase rights are no longer attached to the common stock and
the separate certificates alone will evidence preferred share purchase rights.
Preferred share purchase rights will not be exercisable until the
Distribution Date. Preferred share purchase rights will expire on [ ],
2010, unless this expiration date is extended or unless preferred share purchase
rights are earlier redeemed by the combined company, in each case, as described
below.
The purchase price payable, and the number of shares of Series A Junior
Participating Preferred Stock or other securities or property issuable, upon
exercise of the preferred share purchase rights will be subject to adjustment
from time to time to prevent dilution upon the occurrence of the following
events:
- a stock dividend on, or a subdivision, combination or reclassification
of, Series A Junior Participating Preferred Stock;
- the grant to holders of shares of Series A Junior Participating Preferred
Stock of certain rights or warrants to subscribe for or purchase shares
of Series A Junior Participating Preferred Stock at a price, or
securities convertible into shares of Series A Junior Participating
Preferred Stock with a conversion price, less than the then current
market price of the shares of Series A Junior Participating Preferred
Stock; or
- the distribution to holders of shares of Series A Junior Participating
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in shares of Series A Junior
Participating Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding preferred share purchase rights and the number of
one one-hundredths of a share of Series A Junior Participating Preferred Stock
issuable upon exercise of each preferred share purchase right will also be
subject to adjustment in the event of a stock split of common stock or a stock
dividend on common stock payable in common stock or subdivisions, consolidations
or combinations of common stock occurring, in any such case, prior to the date
the preferred share purchase rights are no longer attached to the common stock.
The combined company cannot redeem shares of Series A Junior Participating
Preferred Stock purchasable upon exercise of preferred share purchase rights.
Because of the nature of the Series A Junior Participating Preferred
Stock's dividend, liquidation and voting rights, the value of the one
one-hundredth interest in a share of Series A Junior Participating Preferred
Stock purchasable upon exercise of each preferred share purchase right should
approximate the value of one share of common stock.
71
<PAGE> 79
In the event that, at any time after a person has become an Acquiring
Person, the combined company is acquired in a merger or other business
combination transaction, any person consolidates with or merges into the
combined company and the common stock of the combined company is changed or
exchanged for securities of any other person, or 50% or more of the combined
company's consolidated assets or earning power are sold, proper provision will
be made so that each holder of a preferred share purchase right will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of a preferred share purchase right, that number of shares of
common stock of the acquiring company which at the time of such transaction will
have a market value of two times the exercise price of a preferred share
purchase right. In the event that any person becomes an Acquiring Person, proper
provision shall be made so that each holder of a preferred share purchase right,
other than preferred share purchase rights beneficially owned by the Acquiring
Person (which will thereafter be void), will thereafter have the right to
receive upon exercise, in lieu of shares of Series A Junior Participating
Preferred Stock, that number of shares of common stock having a market value of
two times the exercise price of a preferred share purchase right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Person, and prior to the acquisition by such Acquiring
Person of 50% or more of the outstanding shares of common stock, the combined
company's board of directors may exchange preferred share purchase rights (other
than preferred share purchase rights owned by such Acquiring Person, which will
have become void after such person became an Acquiring Person) for common stock
or Series A Junior Participating Preferred Stock, in whole or in part, at an
exchange ratio of one share of common stock, or one hundredth of a share of
Series A Junior Participating Preferred Stock (or of a share of another series
of preferred stock having equivalent rights, preferences and privileges), per
preferred share purchase right (subject to adjustment).
With certain exceptions, no adjustment in the purchase price payable upon
exercise of the preferred share purchase rights will be required until
cumulative adjustments require an adjustment of at least 1%. No fractional
shares of Series A Junior Participating Preferred Stock will be issued, other
than fractions which are integral multiples of one one-hundredth of a share of
Series A Junior Participating Preferred Stock, which may, at the combined
company's election, be evidenced by depository receipts. Instead, an adjustment
in cash will be made based on the market price of Series A Junior Participating
Preferred Stock on the last trading day prior to the date of exercise.
At any time prior to any person becoming an Acquiring Person, the board of
directors of the combined company may redeem preferred share purchase rights in
whole, but not in part, at a price of $.01 per preferred share purchase right.
The redemption of preferred share purchase rights may be made effective at such
time, on such basis and with such conditions as the combined company's board of
directors may determine, in its sole discretion. Immediately upon any redemption
of preferred share purchase rights, the right to exercise preferred share
purchase rights will terminate and the only right of the holders of preferred
share purchase rights will be to receive the redemption price.
The terms of the preferred share purchase rights may be amended by the
combined company's board of directors without the consent of the holders of
preferred share purchase rights, including an amendment to decrease the
threshold at which a person becomes an Acquiring Person from 15% to not less
than 10%, except that from and after such time as any person becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of preferred share purchase rights.
Until a preferred share purchase right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the combined company, including,
without limitation, the right to vote or to receive dividends.
THE PREFERRED SHARE PURCHASE RIGHTS WILL HAVE CERTAIN ANTI-TAKEOVER
EFFECTS. THE PREFERRED SHARE PURCHASE RIGHTS WILL CAUSE SUBSTANTIAL DILUTION TO
A PERSON OR GROUP THAT ATTEMPTS TO ACQUIRE THE COMBINED COMPANY ON TERMS NOT
APPROVED BY THE COMBINED COMPANY'S BOARD OF DIRECTORS, EXCEPT PURSUANT TO AN
OFFER CONDITIONED ON A SUBSTANTIAL NUMBER OF THE PREFERRED SHARE PURCHASE RIGHTS
BEING ACQUIRED. THE PREFERRED SHARE PURCHASE RIGHTS SHOULD NOT INTERFERE WITH
ANY MERGER OR BUSINESS
72
<PAGE> 80
COMBINATION APPROVED BY THE COMBINED COMPANY'S BOARD OF DIRECTORS, SINCE THE
PREFERRED SHARE PURCHASE RIGHTS MAY EITHER BE REDEEMED BY THE COMBINED COMPANY
PRIOR TO THE TIME THAT A PERSON OR GROUP HAS BECOME AN ACQUIRING PERSON OR
OTHERWISE BE MADE INAPPLICABLE.
COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of Meritor stockholders are governed by Meritor's Restated
Certificate of Incorporation (the "Meritor Certificate"), its By-Laws (the
"Meritor By-Laws") and the Delaware General Corporation Law (the "DGCL"). The
rights of Arvin stockholders are governed by Arvin's Restated Articles of
Incorporation (the "Arvin Articles"), its Amended and Restated By-Laws (the
"Arvin By-Laws") and the Indiana Business Corporation Law (the "IBCL"). As a
result of the merger, Meritor stockholders and Arvin stockholders will receive
shares of common stock of the combined company in exchange for their shares of
Meritor common stock and Arvin common stock, respectively. After the merger, the
rights of the combined company stockholders will be governed by the Restated
Articles of Incorporation of ArvinMeritor (the "ArvinMeritor Articles"), the
Amended By-Laws of ArvinMeritor (the "ArvinMeritor By-Laws") and the IBCL. The
following is a summary of the material differences with respect to the rights of
holders of Meritor common stock, Arvin common stock and ArvinMeritor common
stock. These differences (in the case of Meritor and ArvinMeritor) arise in part
from the differences between the DGCL and the IBCL. Additional differences arise
from the governing instruments of Meritor or Arvin, on the one hand, and the
governing instruments of the combined company on the other hand.
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
The DGCL provides that, unless otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken at an
annual or special meeting of stockholders may be taken without such a meeting,
without prior notice and without a vote, if a consent or consents in writing
setting forth the action to be taken is signed by stockholders representing not
less than the minimum number of votes that would be necessary to authorize such
action at a meeting. The Meritor Certificate provides that any action required
or permitted to be taken at any meeting of stockholders must be effected at an
annual or special meeting of stockholders, and does not permit such action to be
effected by a consent in writing.
The IBCL provides that stockholders may act without a meeting only by
unanimous written consent. Neither the Arvin Articles nor the Arvin By-Laws
provide otherwise.
Neither the ArvinMeritor Articles nor the ArvinMeritor By-Laws provide
otherwise than as specified in the IBCL.
AMENDMENT OF CHARTER DOCUMENTS
Under the DGCL, amendments of a corporation's certificate of incorporation
require (a) the approval of the directors, (b) the vote of the holders of a
majority of the outstanding stock, and (c) the vote of a majority of each class
of stock outstanding and entitled to vote on those amendments as a class, unless
the certificate of incorporation requires a greater proportion. In addition, the
DGCL requires a class vote when, among other things, an amendment will alter or
change the powers, preferences or special rights of a class of stock so as to
affect them adversely. The Meritor Certificate requires the affirmative vote of
the holders of at least 80% of the voting power of the then outstanding shares
of capital stock of Meritor, voting together as a single class (1) to amend or
repeal the provisions of the Meritor Certificate regarding the election of
directors, the right to call a special stockholders' meeting and the right to
act by written consent; (2) to adopt any provision inconsistent with such
provisions; and (3) to amend or repeal the provisions of the Meritor By-Laws.
Under the IBCL, a corporation's board of directors may propose amendments
to the articles of incorporation for submission to the stockholders. For an
amendment to be adopted, the board of directors must recommend such amendment to
the stockholders unless, based on a conflict of interest or other special
circumstances, it can make no such recommendation. The amendment must be
approved by all
73
<PAGE> 81
voting groups entitled to vote on the amendment. If a quorum is present for such
a voting group, action on an amendment is approved by the voting group if the
votes cast within the voting group favoring the amendment exceed the votes cast
opposing the amendment, unless the articles of incorporation or the IBCL require
a greater number of affirmative votes. In addition, the amendment must be
approved by a majority of the votes entitled to be cast on the amendment by any
voting group with respect to which the amendment would create dissenters'
rights. The Arvin Articles provide that the number of directors fixed by the
Arvin Articles and the Arvin By-Laws may not be amended or repealed except by
the affirmative vote of the holders of two-thirds of the shares of Arvin then
entitled to vote at an election of directors. Sections of the Arvin Articles
relating to certain mergers, consolidations and other transactions requiring
stockholder approval and certain repurchases of common shares may not be amended
or repealed except by the affirmative vote of not less than 80% of the total
issued and outstanding shares of the corporation then entitled to vote.
The ArvinMeritor Articles require the affirmative vote of the holders of
80% of the voting power of the voting shares, voting together as a single class
(1) to amend or repeal the provisions of the ArvinMeritor Articles relating to
the election and removal of directors, the classified board, amendments to the
ArvinMeritor by-laws or the stockholder vote required for business combinations;
and (2) to adopt any provision inconsistent with such provisions.
STOCKHOLDER VOTING
The DGCL provides that, unless a greater vote of stockholders is required
by a corporation's certificate of incorporation or unless the provisions of
Delaware law relating to "business combinations" discussed below are applicable,
a sale, lease or exchange of all or substantially all of the corporation's
assets, a merger or consolidation of the corporation with another corporation or
a dissolution of the corporation requires the affirmative vote of the board of
directors, except in some limited circumstances, plus, with some exceptions, the
affirmative vote of a majority of the outstanding stock entitled to vote for
that type of proposal. Subject to the fair price provisions in the Meritor
Certificate discussed below, the foregoing provisions apply to Meritor and its
stockholders.
The IBCL requires that, before a merger or consolidation can be acted upon
by stockholders, a board of directors must by resolution adopt an agreement and
plan of merger. The IBCL further provides that the holders of at least a
majority of the outstanding shares entitled to cast their vote must approve the
agreement and the merger. The IBCL is similar to the DGCL in that, except as
described below under "Stockholder Approval of Certain Business Combinations",
(1) a sale, lease, exchange or other disposition of all or substantially all of
the corporation's assets or (2) a share exchange involving one or more classes
or series of the corporation's shares or a dissolution of the corporation must
be adopted by the board of directors plus, with some exceptions, the affirmative
vote of the holders of a majority of all shares of stock entitled to vote for
that type of proposal. The Arvin Articles provide that any merger or
consolidation requiring stockholder approval, dissolution, or any sale, lease,
exchange, mortgage, pledge or other disposition of all or substantially all of
Arvin's property and assets, other than a mortgage or other encumbrance to
secure indebtedness, must be approved by the affirmative vote of not less than
80% of the shares entitled to vote. Such stockholder approval will not be
necessary if the directors first approved of such action by the favorable vote
of at least 80% of the directors then in office.
Subject to the fair price provisions in the ArvinMeritor Articles discussed
below, the foregoing provisions of the IBCL will apply to ArvinMeritor and its
stockholders.
FAIR PRICE PROVISION
The Meritor Certificate contains a fair price provision pursuant to which a
business combination between Meritor or its subsidiaries and an interested
stockholder (a stockholder that is a beneficial owner of 10% or more of all
outstanding shares of Meritor voting stock), requires approval by the
affirmative vote of the holders of at least 80% of the voting power of the then
outstanding shares of capital stock entitled to vote generally in the election
of directors, voting together as a single class, unless the business
74
<PAGE> 82
combination is approved by at least two-thirds of the continuing directors (as
defined in the Meritor Certificate) or certain fair price criteria and
procedural requirements specified in the fair price provision are met. Any
amendment or repeal of the fair price provision, or the adoption of provisions
inconsistent therewith, must be approved by the affirmative vote of the holders
of not less than 80% of the voting power of the then outstanding shares of
capital stock entitled to vote generally in the election of directors, voting
together as a single class, unless such amendment, repeal or adoption is
approved by at least two-thirds of the continuing directors.
Under the fair price provision, the fair price criteria that must be
satisfied to avoid the 80% stockholder voting requirement include the
requirement that the consideration paid to Meritor's stockholders in a business
combination must be either cash or the same form of consideration used by the
interested stockholder in acquiring its beneficial ownership of the largest
number of shares of Meritor's capital stock acquired by the interested
stockholder. The interested stockholder would be required to meet the fair price
criteria with respect to each class of Meritor's capital stock, whether or not
the interested stockholder beneficially owned shares of that class prior to
proposing the business combination. If the business combination does not involve
any cash or other property being received by any of the other stockholders, such
as a sale of assets or an issuance of Meritor's securities to an interested
stockholder, then the fair price criteria discussed above would not apply, and
approval by the holders of 80% of the voting power would be required unless the
transaction were approved by at least two-thirds of the continuing directors.
Under the fair price provision, even if the foregoing fair price criteria
are met, the following procedural requirements must be met if the business
combination is not to require approval by at least two-thirds of the continuing
directors or approval by the holders of 80% of the voting power: (i) Meritor,
after the interested stockholder became an interested stockholder, must not have
failed to pay full quarterly dividends on Meritor preferred stock, if any, or
reduced the rate of dividends paid on Meritor common stock, unless such failure
or reduction was approved by at least two-thirds of the continuing directors;
(ii) the interested stockholder must not have acquired at any time after
becoming an interested stockholder any additional shares of Meritor's capital
stock in any transaction unless after giving effect to such acquisition there
would be no increase in the interested stockholder's percentage beneficial
ownership of any class of Meritor's capital stock; (iii) the interested
stockholder must not have received (other than proportionately as a stockholder)
at any time after becoming an interested stockholder, whether in connection with
the proposed business combination or otherwise, the benefit of any loans or
other financial assistance or any tax advantages provided by Meritor; (iv) a
proxy or information statement describing the proposed business combination and
complying with the requirements of the Exchange Act must have been mailed to all
stockholders of Meritor at least thirty (30) days prior to the consummation of
the business combination; and (v) the interested stockholder must not have made
any material change in Meritor's business or equity capital structure without
the approval of at least two-thirds of the continuing directors.
The Arvin Articles do not contain a fair price provision.
The ArvinMeritor Articles include a fair price provision substantially
similar to that in the Meritor Certificate discussed above.
CONTROL SHARE STATUTES
Pursuant to Chapter 23-1-42 of the IBCL, unless the articles or by-laws of
a corporation exempt the corporation therefrom, any person who makes a control
share acquisition (as defined in IBCL Section 23-1-42-2) may not vote the shares
acquired in the control share acquisition, except to the extent voting rights
with respect to such shares are granted by resolution approved by a vote of
disinterested stockholders. Under the IBCL, a "control share acquisition" is the
acquisition by a person either within a 90-day period or pursuant to a plan to
make a control share acquisition of ownership of (or the power to direct the
voting of) shares representing one-fifth, one-third, or one-half of the voting
power of an issuing public corporation in the election of directors. The
acquiring person may request, and the corporation must call, a special
stockholders' meeting to restore or approve voting rights upon delivery by the
acquiring
75
<PAGE> 83
person to the corporation of a statement describing the acquisition or proposed
acquisition (an "acquiring person statement") and an undertaking to pay the
expenses relating to the meeting. Shares acquired in a control share acquisition
as to which no acquiring person statement has been filed may be redeemed by the
corporation at the fair value thereof under certain circumstances. In the event
that shares acquired in a control share acquisition are accorded full voting
rights and the acquiring person has acquired shares representing a majority or
more of all voting power, the other stockholders will be entitled to dissenters'
rights of appraisal.
The Arvin Articles provide that in the event that any person (an "Acquiring
Person") (i) who is the beneficial owner, directly or indirectly, of more than
50% of the common shares outstanding becomes the beneficial owner, directly or
indirectly, of any additional common shares pursuant to a tender offer or (ii)
who becomes the beneficial owner, directly or indirectly, of more than 50% of
the common shares outstanding and any common shares were acquired pursuant to a
tender offer, each beneficial holder of common shares, other than the Acquiring
Person or a transferee or an affiliate or associate of the Acquiring Person, and
each holder of securities convertible into common shares, other than the
Acquiring Person or a transferee or an affiliate or associate of the Acquiring
Person, shall have the right to have the common shares held by such holder
repurchased by Arvin, unless a majority of the board not affiliated with the
Acquiring Person (i) within ten (10) days following the announcement or
publication of such tender offer or following an amendment of such tender offer
recommends the acceptance of the tender offer by the holders of common shares or
(ii) approves the Acquiring Person becoming a beneficial owner of 50% of the
common shares outstanding prior to the Acquiring Person becoming such 50% owner.
Pursuant to the merger agreement, Arvin has taken all action necessary to render
the provisions of Chapter 23-1-42 of the IBCL inapplicable to the merger.
The DGCL does not have a control share statute, and the governing
instruments of Meritor do not contain a comparable provision.
The ArvinMeritor By-Laws provide that control shares of ArvinMeritor
acquired in a control share acquisition (as defined in IBCL Sections 23-1-42-1
et seq.) shall have voting rights only as provided in the IBCL. Control shares
for which a required statement has not been filed may be redeemed by
ArvinMeritor at any time during the 60 day period after the last acquisition of
control shares, at the fair value of the shares pursuant to procedures
authorized by a resolution of the board of directors. ArvinMeritor may also
redeem control shares acquired in a control share acquisition which were not
granted full voting rights by the stockholders at any time after the stockholder
vote, at the fair value of the shares pursuant to procedures authorized by a
resolution of the board of directors. The Indiana control share statute applies
to an Indiana corporation with its principal place of business, its principal
office or substantial assets in Indiana, and which has a specified minimum
number of stockholders, or a specified minimum number of shares held by
stockholders resident in Indiana. We believe the combined company initially will
not meet these requirements, and that the Indiana control share statute,
therefore, will not apply to ArvinMeritor.
ANTI-TAKEOVER LAWS
The Indiana Takeover Offers Act, Indiana Code Sections 23-2-3.1-0.5 et
seq., provides that a person shall not make a takeover offer unless the
following conditions are satisfied: (i) a statement is filed with the Indiana
securities commissioner and delivered to the president of the target company
before making the takeover offer; (ii) a consent to service of process and the
requisite filing fee accompanies the statement filed with the Indiana securities
commissioner; (iii) the takeover offer is made to all offerees holding the same
class of equity securities on substantially equivalent terms; (iv) a hearing is
held within 20 business days after the statement described in clause (i) above
is filed; and (v) the Indiana securities commissioner shall have approved the
takeover offer. In addition, no offeror may acquire any equity security of any
class of a target company within two years following the conclusion of a
takeover offer with respect to that class of equity security, unless the holders
of such equity security are afforded, at the time of that acquisition, a
reasonable opportunity to dispose of such securities to the offeror upon
substantially equivalent terms. A "takeover offer" means an offer to acquire or
an acquisition of any equity security of a target company pursuant to a tender
offer or request or invitation for tenders if, after the acquisition, the
76
<PAGE> 84
offeror is directly or indirectly a record or beneficial owner of more than 10%
of any class of the outstanding equity securities of the target company. A
"target company" means an issuer of securities which is organized under the laws
of Indiana, has its principal place of business in Indiana and has substantial
assets in Indiana. The DGCL does not contain a comparable provision. We believe
ArvinMeritor initially will not meet the criteria of a "target company" under
the Indiana anti-takeover statute and that the Indiana anti-takeover statute,
therefore, will not apply to ArvinMeritor.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
Section 203 of the DGCL prohibits a corporation which has securities traded
on a national securities exchange, designated on the Nasdaq National Market or
held of record by more than 2,000 stockholders from engaging in various business
combinations, including a merger, sale of substantial assets, loan or
substantial issuance of stock, with an interested stockholder, defined generally
as a person beneficially owning 15% or more of the corporation's outstanding
voting stock, or an interested stockholder's affiliates or associates, for a
three-year period beginning on the date the interested stockholder acquires 15%
or more of the outstanding voting stock of the corporation. The restrictions on
business combinations do not apply if:
- the board of directors gives prior approval to the transaction in which
the 15% ownership level is exceeded;
- the interested stockholder acquires 85% or more of the corporation's
outstanding stock in the same transaction in which the stockholder's
ownership first exceeds 15%, excluding those shares owned by persons who
are directors and also officers as well as by employee stock plans in
which employees do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
- on or following the date on which the stockholder became an interested
stockholder, the board of directors approves the business combination and
the holders of at least two-thirds of the outstanding voting stock,
excluding shares owned by the interested stockholder, authorize the
business combination at a meeting of stockholders.
Although a Delaware corporation may elect, pursuant to its certificate or
by-laws, not to be governed by this provision, the Meritor Certificate does not
contain this election. Pursuant to the merger agreement, Meritor has taken all
action necessary to render the provisions of Section 203 of the DGCL
inapplicable to the merger.
Chapter 23-1-43 of the IBCL generally prohibits a "resident domestic
corporation" of Indiana, such as Arvin, from engaging in any business
combination, which is defined generally to include mergers, various asset or
stock sales, liquidations and other significant corporate transactions, with any
"interested stockholder", which is defined generally as any person that,
individually or with or through any of its affiliates or associates,
beneficially owns 10% or more of the outstanding voting securities of the
corporation, for a period of five years after the date the person becomes an
interested stockholder unless, before the person became an interested
stockholder, the board of directors of the corporation approved either the
business combination or the purchase of 10% or more of the corporation's voting
securities by the interested stockholder. Chapter 23-1-43 of the IBCL also
provides that a resident domestic corporation may not engage in a merger or
other business combination with an interested stockholder at any time after this
five-year period unless:
- various "fair price" criteria are satisfied, including a requirement that
the interested stockholder and its affiliates and associates have not
purchased any additional shares after first acquiring 10% of the
corporation's voting securities except at a price that meets the "fair
price" criteria; or
- the holders of a majority of the outstanding shares of the corporation,
excluding shares owned by the interested stockholder and its affiliates
or associates, approve the business combination.
77
<PAGE> 85
Although an Indiana corporation may elect not to be subject to Chapter
23-1-43 of the IBCL, ArvinMeritor has not so elected, and we believe that
Chapter 23-1-43 of the IBCL will apply to ArvinMeritor.
Pursuant to the merger agreement, Arvin has taken all action necessary to
render the provisions of Chapter 23-1-43 of the IBCL inapplicable to the merger.
DISSENTERS' RIGHTS OF APPRAISAL
Under the DGCL dissenters' rights of appraisal are limited. Rights of
appraisal are available to a stockholder of a corporation only in connection
with certain mergers or consolidations involving the corporation, or if its
certificate of incorporation provides that these rights are available as a
result of:
- an amendment to its certificate of incorporation;
- any merger or consolidation in which the corporation is a "constituent
corporation"; or
- the sale of all or substantially all of the assets of the corporation.
However, unless provided in a corporation's certificate of incorporation,
appraisal rights are not available under the DGCL in connection with a merger or
consolidation of a corporation if the corporation's stock is, on the applicable
record date, listed on a national securities exchange or on the Nasdaq National
Market or held of record by more than 2,000 stockholders; provided that
appraisal rights will be available if the merger or consolidation requires
stockholders to exchange their stock for anything other than shares of the
surviving corporation, shares of another corporation that will be listed on a
national securities exchange or on the Nasdaq National Market or held of record
by more than 2,000 stockholders, cash in lieu of fractional shares of any
corporation, or a combination of such shares and cash. The Meritor Certificate
does not provide otherwise.
Under the IBCL, there are no dissenters' rights of appraisal for
stockholders of a company which, on the record date for a meeting of
stockholders at which the merger, plan of share exchange, or sale or exchange of
property is to be acted on, has shares registered on a national securities
exchange or traded on the Nasdaq National Market, except for special dissenters'
rights under the "control share acquisition" provisions of the IBCL discussed
above under "-- Control Share Statutes". As noted above, the control share
acquisition provisions of the IBCL are not expected to apply to ArvinMeritor.
The Arvin Articles and the ArvinMeritor Articles do not provide otherwise
than the IBCL with respect to appraisal rights.
AMENDMENT OF BY-LAWS
Under the DGCL, the stockholders of a corporation entitled to vote and,
when provided in the certificate of incorporation, the directors of the
corporation, have the power to adopt, amend or repeal the by-laws of a
corporation. The Meritor Certificate grants its directors the power to make,
alter, amend and repeal the Meritor By-Laws. Any amendment or repeal by
stockholders shall require the affirmative vote of the holders of at least 80%
of the voting power of the then outstanding voting stock, voting together as a
single class.
Under the IBCL, unless a corporation's articles of incorporation provide
otherwise, only a corporation's board of directors may amend or repeal a
corporation's by-laws. The Arvin Articles provide that the Arvin board has the
exclusive power to make, alter, amend or repeal the Arvin By-Laws. The Arvin
By-Laws provide that the Arvin By-Laws may be amended, added to, rescinded or
repealed only by an affirmative vote of at least two-thirds of the directors
then in office at any meeting of the board.
The ArvinMeritor Articles grant the ArvinMeritor board the exclusive power
to make, alter, amend or repeal the ArvinMeritor By-Laws. The ArvinMeritor
By-Laws provide that the ArvinMeritor By-Laws may be amended, added to,
rescinded or repealed only by an affirmative vote of at least a majority of the
directors then in office at any meeting of the board.
78
<PAGE> 86
LIMITATION ON DIRECTORS' LIABILITY; INDEMNIFICATION OF OFFICERS AND DIRECTORS
The DGCL allows a corporation to include in its certificate of
incorporation a provision that limits or eliminates the personal liability of
directors to the corporation and its stockholders for monetary damages for
breach of fiduciary duty as a director. It does not, however, permit a
corporation to limit or eliminate the personal liability of a director for (a)
any breach of the director's duty of loyalty to the corporation or its
stockholders, (b) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) intentional or
negligent payment of unlawful dividends or unlawful stock purchases or
redemptions, or (d) any transaction from which the director derived an improper
personal benefit. The Meritor Certificate limits the liability of directors to
the extent provided under Delaware law.
The DGCL permits indemnification of officers, directors, employees and
agents against expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred in proceedings, other than an action by or in
the right of the corporation, if the person acted in good faith and in a manner
that he or she reasonably believed to be in or not opposed to the best interests
of the corporation, and with respect to any criminal actions, had no reasonable
cause to believe that the conduct was unlawful. In the case of actions by or in
the right of the corporation, indemnification is limited to expenses actually
and reasonably incurred, except that no indemnification is permitted if a person
is adjudged liable to the corporation, unless indemnification is otherwise
authorized by a court. The DGCL also provides that to the extent a director or
officer has been successful on the merits or otherwise in defense of any action,
suit or proceeding (including an action by or in the right of the corporation),
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred in connection with the matter. Statutory
indemnification is not exclusive of other rights provided in a corporation's
charter or by-laws, or through resolutions of its board of directors or
stockholders. The Meritor By-Laws provide generally for indemnification of
officers, directors and others to the extent permitted under Delaware law. In
addition, the Meritor By-Laws set forth particular procedures for submission and
determination of claims for indemnification.
The IBCL provides that a director is not liable for any action taken as a
director, or any failure to take any action, unless (i) the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 of the IBCL (which requires, among other things, that a
director discharge his duties as a director in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances and in a manner the director reasonably believes to be in the best
interests of the corporation), and (ii) the breach or failure to perform
constitutes willful misconduct or recklessness. The Arvin Articles contain a
similar provision limiting the liability of directors, members of any committee
of the board, officers, employees or agents of Arvin.
The IBCL permits indemnification of officers, directors, employees and
agents against liabilities and expenses incurred in proceedings if the person
acted in good faith and reasonably believed that (1) in the case of conduct in
the person's official capacity with the corporation, that the person's conduct
was in the corporation's best interests, and (2) in all other cases, that the
person's conduct was at least not opposed to the corporation's best interests.
In criminal proceedings, the person must either have reasonable cause to believe
the conduct was lawful or must have had no reasonable cause to believe the
conduct was unlawful. Unless the articles of incorporation provide otherwise,
indemnification is mandatory in two instances: (1) a director successfully
defends himself in a proceeding to which the director was a party because the
director is or was a director of the corporation, or (2) it is court ordered.
The Arvin Articles provide that Arvin shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil or criminal, administrative
or investigative, formal or informal (an "Action"), by reason of the fact that
such person is or was a director, officer, employee or agent of Arvin, or is or
was serving at the request of Arvin as a director, officer, employee, agent,
partner, trustee or member or in another authorized capacity of or for another
corporation, unincorporated association, business trust, estate, partnership,
trust, joint venture, individual or other legal entity, whether or not organized
or formed for profit, against expenses (including attorneys' fees) and
judgments, penalties, fines and amounts paid in
79
<PAGE> 87
settlement actually and reasonably incurred by such person in connection with
such Action. Arvin shall pay, in advance of the final disposition of an Action,
the expenses reasonably incurred in defending such action by a person who may be
entitled to indemnification and shall purchase and maintain liability insurance
on any such director, officer, employee or agent of Arvin, or any person who is
or was serving at the request of Arvin as a director, officer, employee, agent,
partner, trustee or member or in another authorized capacity of or for another
entity, acting in such capacities. Such indemnification and advance of expenses
shall (i) not be deemed exclusive of any other rights to which a person may be
entitled under any law, any resolution of the Arvin board or stockholders, or
the articles of incorporation, code or by-laws or other governing documents of
another entity (or a resolution of the governing body of such other entity);
(ii) inure to the benefit of the heirs, executors and administrators of such
person; and (iii) continue as to any such person who has ceased to be a
director, officer, employee or agent of Arvin or to be serving in an authorized
capacity of or for another entity.
The ArvinMeritor Articles contain limitation of liability and indemnity
provisions similar to those in the Arvin Articles. In addition, under the
ArvinMeritor Articles, if a covered person is not wholly successful in an
Action, but is successful on the merits or otherwise as to one or more but less
than all claims, issues or matters, then ArvinMeritor shall indemnify such
person against all expenses actually and reasonably incurred in connection with
each claim, issue or matter that is successfully resolved. ArvinMeritor will
also indemnify any covered person for all expenses actually and reasonably
incurred by being a witness, but not a party, to any Action. The ArvinMeritor
By-Laws set forth particular procedures for submission and determination of
claims for indemnification.
CLASSIFIED BOARD OF DIRECTORS
The DGCL permits, but does not require, a classified board of directors,
with staggered terms under which one-half or one-third of the directors are
elected for terms of two or three years, respectively. The Meritor By-Laws
provide that Meritor will have a classified board of directors with three
classes of directors serving three-year terms.
Under the IBCL, if the articles of incorporation authorize staggered terms,
the articles of incorporation or by-laws may divide the total number of
directors into either two groups or three groups, with each group to contain as
nearly equal a number of directors as possible. The terms of directors in the
first group expire at the first annual stockholders' meeting after their
election; the terms of the directors in the second group expire at the second
annual stockholders' meeting after their election; and if there is a third group
of directors, their terms expire at the third annual stockholders' meeting after
their election. At each annual stockholders' meeting held thereafter, directors
are chosen for a term of two years, if the board is divided into two groups, or
for three years, if the board is divided into three groups. The Arvin Articles
authorize a classified board of directors with staggered terms, and the Arvin
By-Laws provide that the directors are divided into three classes and the terms
of the directors are three years.
The ArvinMeritor Articles provide that ArvinMeritor will have a classified
board of directors with three classes of directors serving three-year terms.
CUMULATIVE VOTING FOR DIRECTORS
The DGCL permits cumulative voting for directors to the extent provided for
in a corporation's certificate of incorporation. The Meritor Certificate does
not provide for cumulative voting.
Under the IBCL, stockholders do not have the right to cumulate their votes
for directors unless the articles of incorporation so provide. The Arvin
Articles do not provide for cumulative voting for directors.
The ArvinMeritor Articles do not provide for cumulative voting for
directors.
REMOVAL OF DIRECTORS
Under the DGCL, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors, unless (a) the
80
<PAGE> 88
board is classified, in which case stockholders may effect such removal only for
cause (unless the certificate of incorporation provides otherwise), and (b) in
the case of a corporation having cumulative voting, if less than the entire
board is to be removed, no director may be removed without cause if the votes
cast against his removal would be sufficient to elect him under cumulative
voting. The Meritor Certificate provides that any director may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least 80% of the voting power of the outstanding capital stock of
Meritor entitled to vote generally in the election of directors, voting together
as a single class.
Under the IBCL, directors may be removed in any manner provided by a
corporation's articles of incorporation. In addition, the stockholders or
directors may remove one or more directors with or without cause unless the
corporation's articles of incorporation provide otherwise. If cumulative voting
is authorized by the articles of incorporation, a director may not be removed if
the number of votes sufficient to elect the director under cumulative voting is
voted against the director's removal. If cumulative voting is not authorized, a
director may be removed only if the number of votes cast to remove the director
exceeds the number of votes cast against the director's removal. The Arvin
Articles provide that, subject to the rights of the holders of any class or
series of preferred shares, no director shall be removed from office by vote or
any other stockholders' action or otherwise except for cause and only by the
affirmative vote by the holders of two-thirds of the voting power of all of the
then outstanding shares of capital stock of Arvin entitled to vote in the
election of directors.
Under the ArvinMeritor Articles, a director may not be removed from office
except for cause and only by the affirmative vote of the holders of at least 80%
of the voting power of all then outstanding shares of capital stock of
ArvinMeritor entitled to vote at an election of directors, voting together as a
single class.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
The DGCL provides that vacancies and newly created directorships may be
filled by a majority of the directors then in office (even though less than a
quorum) or a sole remaining director unless (a) otherwise provided in the
certificate of incorporation or by-laws of the corporation, or (b) the
certificate of incorporation directs that a particular class is to elect that
director, in which case any other directors elected by such class, or a sole
remaining director, shall fill that vacancy. In addition, if, at the time of
filling any vacancy or newly created directorship, the directors then in office
constitute less than a majority of the whole board, the Delaware Court of
Chancery may, upon application of stockholders holding at least 10% of the
shares outstanding at the time and entitled to vote for those directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office. Those elections are to be conducted in accordance with the procedures
provided by the DGCL. Unless otherwise provided in the certificate of
incorporation or by-laws, when one or more directors resign from the board a
majority of directors then in office, including those who have so resigned, may
vote to fill the vacancy. The Meritor Certificate provides that vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum.
Under the IBCL, unless the articles of incorporation of a corporation
provide otherwise, vacancies on the board of directors, including any vacancies
resulting from an increase in the number of directors, may be filled by the
board or, if the remaining directors constitute less than a quorum, the majority
of the remaining members may fill the vacancy. The Arvin By-Laws provide that
except to the extent the board determines otherwise, vacancies and newly-created
directorships may be filled only by the affirmative vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director.
The ArvinMeritor Articles provide that vacancies, including a vacancy
resulting from an increase in the number of directors, may be filled only by the
affirmative vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director.
81
<PAGE> 89
SPECIAL MEETINGS
Under the DGCL, special meetings of stockholders may be called by the board
of directors and by such other person or persons authorized to do so by the
corporation's certificate of incorporation or by-laws. Under the Meritor
By-Laws, a special meeting of the stockholders for any purpose or purposes shall
be called only by the board pursuant to a resolution adopted by a majority of
the whole board.
Under the IBCL, special stockholders' meetings may be called by the board
of directors or the persons specifically authorized to do so by the articles of
incorporation or by-laws. The Arvin By-Laws provide that a special meeting of
the stockholders of the corporation may be called by either (i) the Chairman or
the Secretary upon the written request of the Chairman or (ii) the board
pursuant to a resolution adopted by two-thirds of the entire board.
Under the ArvinMeritor Articles, special meetings of the stockholders may
be called only by the board pursuant to a resolution adopted by a majority of
the total number of directors which the corporation would have if there were no
vacancies.
INSPECTION RIGHTS
The DGCL provides that any stockholder, upon written demand under oath
stating the purpose of the inspection, shall have the right during the usual
hours of business to inspect for any proper purpose the corporation's stock
ledger, a list of its stockholders, and its other books and records, and to make
copies or extracts of these documents and materials. A proper purpose means a
purpose reasonably related to the person's interest as a stockholder.
The IBCL permits any stockholder who gives at least five business days'
written notice to the corporation to have the right to inspect and copy during
normal business hours, at the principal office of the corporation, the following
books and records of the corporation:
- the articles of incorporation and the by-laws;
- resolutions adopted by the board of directors with respect to one or more
classes or series of shares and fixing their relative rights, preferences
and limitations, if shares issued under the resolutions are outstanding;
- the minutes of all stockholders' meetings and executed written consents
evidencing all action taken by the stockholders without a meeting for the
past three years;
- all written communications to stockholders generally within the past
three years, including the annual financial statements furnished as
provided in IBCL Section 23-1-53-1;
- the names and business addresses of the corporation's current directors
and officers; and
- the most recent annual report of the corporation filed with the Indiana
Secretary of State.
Under the IBCL, a stockholder also has a right, subject to the limitations
described below, upon at least five business days' written notice to the
corporation, to inspect and copy, during normal business hours, at a reasonable
location specified by the corporation, the following records of the corporation:
- excerpts from minutes of any meeting of the board, records of any action
of a committee of the board while acting for the board, minutes of any
meetings of stockholders, and records of action taken by stockholders or
the board without a meeting, to the extent not subject to inspection
under the provisions described in the immediately preceding paragraph;
- accounting records of the corporation; and
- the record of stockholders.
82
<PAGE> 90
The right to inspect and copy described in this paragraph is limited to
instances where:
- the stockholder's demand is made in good faith and for a proper purpose;
- the stockholder describes with reasonable particularity the stockholder's
purpose and the records the stockholder desires to inspect; and
- the records are directly connected with the stockholder's purpose.
ELECTION OF DIRECTORS
The DGCL requires that the board consist of one or more members and that
directors shall be elected by a plurality of the votes of shares entitled to
vote and present in person or represented by proxy at the meeting. The Meritor
Certificate provides that the number of directors shall be fixed from time to
time exclusively by the board pursuant to a resolution adopted by a majority of
the whole board. The Meritor board currently consists of nine directors.
The IBCL requires that the board of directors must consist of one or more
individuals, with the number specified in or fixed in accordance with the
corporation's articles of incorporation or by-laws. The Arvin By-Laws fix the
number of directors at thirteen.
The ArvinMeritor Articles provide that the number of directors of the
corporation shall be fixed from time to time by the board pursuant to a
resolution adopted by a majority of the whole board, provided that such number
shall not be less than three. ArvinMeritor will initially have a board comprised
of 19 members.
DIVIDENDS
Under the DGCL, a corporation generally is permitted to declare and pay
dividends out of surplus, or out of net profits for the current and/or preceding
fiscal year, provided such dividends will not reduce capital below the amount of
capital represented by all classes of stock having a preference upon the
distribution of assets. Under the Meritor Certificate, holders of preferred
stock may be issued dividends from time to time, as determined by the Meritor
board. Such dividends shall be fully paid, or declared and set apart for
payment, before any dividend shall be declared or paid on Meritor common stock.
Holders of shares of Meritor common stock shall be entitled to receive such
dividends and distributions in equal amounts per share, payable in cash or
otherwise, as may be declared by the Meritor board out of assets or funds of
Meritor legally available therefor.
Under the IBCL, the payment of dividends and the repurchase or redemption
of stock are permitted if, after giving effect to the action, the corporation is
able to pay its debts as they become due in the ordinary course of business and
the corporation's total assets exceed the sum of its total liabilities plus the
amount that would be needed to satisfy preferential rights upon dissolution.
Under the ArvinMeritor Articles, holders of preferred stock may be issued
dividends from time to time, as determined by the ArvinMeritor board. Such
dividends shall be fully paid, or declared and set apart for payment, before any
dividend shall be declared or paid on ArvinMeritor common stock. Holders of
Series A Junior Participating Preferred Stock are entitled to preferential
quarterly dividend payments. Holders of shares of ArvinMeritor common stock
shall be entitled to receive such dividends and distributions in equal amounts
per share, payable in cash or otherwise, as may be declared by the ArvinMeritor
board out of assets or funds of ArvinMeritor legally available for that purpose.
OTHER CORPORATE CONSTITUENCIES
Under IBCL Sections 23-1-35-1-(d), (f), and (g), in discharging his or her
duties to the corporation and in determining what he or she believes to be in
the best interests of the corporation, a director may, in addition to
considering the effects of any action on stockholders, consider the effects of
the action on employees, suppliers, customers, the communities in which the
corporation operates and any other factors that the director considers
pertinent. The directors are not required to approve a proposed business
83
<PAGE> 91
combination or other corporate action if the directors determine in good faith
that the approval is not in the best interests of the corporation. In addition,
directors are not required to redeem any rights under, or render inapplicable, a
stockholder rights plan or to take or decline to take any action solely because
of the effect that the action might have on a proposed change of control. The
IBCL explicitly provides that any different or higher degree of scrutiny imposed
in Delaware and some other jurisdictions upon director actions taken in response
to potential changes in control will not apply.
PREEMPTIVE RIGHTS
The DGCL provides that a corporation's certificate of incorporation may
provide that stockholders have preemptive rights. The Meritor Certificate does
not provide for preemptive rights.
The IBCL provides that stockholders do not have preemptive rights except to
the extent such rights are specifically granted in a corporation's articles of
incorporation. The Arvin Articles do not grant preemptive rights.
The ArvinMeritor Articles provide that unless otherwise determined by the
board, no stockholder shall have preemptive rights.
RIGHTS OF DISSENTING STOCKHOLDERS
Under applicable Delaware and Indiana law, holders of Meritor common stock
and holders of Arvin common stock do not have any dissenters' rights of
appraisal in connection with the merger.
LEGAL MATTERS
The validity of the common stock of the combined company to be issued in
connection with the merger will be passed upon for the combined company by
Chadbourne & Parke LLP, 30 Rockefeller Plaza, New York, New York 10112, who will
rely as to matters of Indiana law upon the opinion of Ice Miller Donadio & Ryan,
One American Square, Box 82001, Indianapolis, Indiana 46282-0002.
EXPERTS
The consolidated financial statements of Meritor as of September 30, 1999
and 1998 and for each of the three years in the period ended September 30, 1999
and the related financial statement schedule incorporated by reference in this
joint proxy statement-prospectus from Meritor's Annual Report on Form 10-K for
the fiscal year ended September 30, 1999 have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Arvin as of January 2, 2000 and
January 3, 1999 and for each of the three years in the period ended January 2,
2000 incorporated by reference in this joint proxy statement-prospectus from
Arvin's Annual Report on Form 10-K for the fiscal year ended January 2, 2000
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
STOCKHOLDER PROPOSALS
Meritor and Arvin will hold 2001 Annual Meetings of Stockholders only if
the merger is not completed before the time of the meetings.
Under the rules and regulations of the SEC, stockholder proposals for
Meritor's 2001 Annual Meeting of Stockholders must be received on or before
August 29, 2000, at the Office of the Secretary at Meritor's World Headquarters
located at 2135 West Maple Road, Troy, Michigan 48084-7186, in order to be
84
<PAGE> 92
eligible for inclusion in Meritor's proxy materials for such meeting. In
addition, Meritor's By-Laws require a stockholder desiring to propose any matter
for consideration at the 2001 Annual Meeting of Stockholders to notify Meritor's
Secretary in writing at the above address on or after November 11, 2000 and on
or before December 11, 2000.
Under the rules and regulations of the SEC, stockholder proposals intended
to be presented at Arvin's 2001 Annual Meeting of Stockholders must be received
at Arvin's executive offices located at One Noblitt Plaza, Columbus, Indiana
47202-3000, no later than November 14, 2000 to be considered for inclusion in
Arvin's proxy materials for such meeting. In addition, Arvin's By-Laws require
that written notice of any stockholder nominations or proposals relating to the
2001 Annual Meeting of Stockholders must be received by the Secretary of Arvin
at its executive offices in Columbus, Indiana no earlier than January 11, 2001
and no later than February 10, 2001.
OTHER MATTERS
As of the date of this joint proxy statement-prospectus, the Meritor board
and the Arvin board know of no matters that will be presented for consideration
at the Meritor special meeting or the Arvin special meeting, respectively, other
than as described in this joint proxy statement-prospectus. If any other matters
do properly come before either special meeting or any adjournments or
postponements of those special meetings and are voted upon, the enclosed proxies
will be deemed to confer discretionary authority on the individuals named as
proxies to vote the shares represented by those proxies as to any of those other
matters.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Representatives of Deloitte & Touche LLP will be present at the Meritor
special meeting and representatives of PricewaterhouseCoopers LLP will be
present at the Arvin special meeting. In each case, those representatives will
have the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
ArvinMeritor has filed with the SEC a Registration Statement under the
Securities Act that registers the distribution to Meritor and Arvin stockholders
of the shares of the combined company's common stock to be issued in connection
with the merger. The Registration Statement, including the attached exhibits and
schedules, contains additional relevant information about Meritor, Arvin and the
combined company's common stock. The rules and regulations of the SEC allow us
to omit certain information included in the Registration Statement from this
joint proxy statement-prospectus.
In addition, Meritor and Arvin file reports, proxy statements and other
information with the SEC under the Exchange Act. You may read and copy this
information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room Northeast Regional Office Midwest Regional Office
450 Fifth Street, N.W 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Meritor and
Arvin, who file electronically with the SEC. The address of that site is
http://www.sec.gov.
85
<PAGE> 93
You can also inspect reports, proxy statements and other information about
Meritor and Arvin at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The SEC allows Meritor and Arvin to "incorporate by reference" information
into this joint proxy statement-prospectus. This means that the companies can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered
to be a part of this joint proxy statement-prospectus, except for any
information that is superseded by information that is included directly in this
document or incorporated by reference subsequent to the date of this document.
This joint proxy statement-prospectus incorporates by reference the
documents listed below that Meritor and Arvin have previously filed with the
SEC. They contain important information about our companies and their financial
condition.
(a) Meritor's Annual Report on Form 10-K for the fiscal year ended
September 30, 1999 (filing date December 20, 1999);
(b) Meritor's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1999 (filing date February 14, 2000);
(c) Meritor's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (filing date May 4, 2000);
(d) Meritor's Current Report on Form 8-K dated April 14, 2000 (filing
date April 17, 2000);
(e) Arvin's Annual Report on Form 10-K for the fiscal year ended
January 2, 2000 (filing date March 21, 2000);
(f) Arvin's Quarterly Report on Form 10-Q for the quarter ended April
2, 2000 (filing date May 4, 2000); and
(g) Arvin's Current Report on Form 8-K dated April 14, 2000 (filing
date April 17, 2000).
In addition, Meritor and Arvin incorporate by reference additional
documents that either company may file with the SEC between the date of this
joint proxy statement-prospectus and the dates of the Meritor special meeting
and the Arvin special meeting, respectively. These documents include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
Meritor has supplied all information contained or incorporated by reference
in this joint proxy statement-prospectus relating to Meritor and Arvin has
supplied all such information relating to Arvin.
You can obtain any of the documents incorporated by reference in this
document through Meritor or Arvin, as the case may be, or from the SEC through
the SEC's Internet world wide web site at the address described above. Documents
incorporated by reference are available from the companies without charge,
excluding any exhibits to those documents, unless the exhibit is specifically
incorporated by reference as an exhibit in this joint proxy
statement-prospectus. You can obtain these documents by requesting them in
writing (including by e-mail request) or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
MERITOR ARVIN
Investor Relations Investor Relations
Meritor Automotive, Inc. Arvin Industries, Inc.
2135 West Maple Road One Noblitt Plaza
Troy, Michigan 48084-7186 Columbus, Indiana 47202-3000
(248) 435-1000 (812) 379-3205
e-mail: [email protected] e-mail: [email protected]
</TABLE>
86
<PAGE> 94
If you would like to request documents, please do so by [ ],
2000 to receive them before the special meetings. If you request any
incorporated documents from us, we will mail them to you by first class mail, or
another equally prompt means, within one business day after we receive your
request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this joint proxy statement-prospectus or in any
of the materials that we have incorporated into this joint proxy
statement-prospectus. Therefore, if anyone does give you information of this
sort, you should not rely on it. If you are in a jurisdiction where offers to
exchange or sell, or solicitations of offers to exchange or purchase, the
securities offered by this document or the solicitation of proxies is unlawful,
or if you are a person to whom it is unlawful to direct these types of
activities, then the offer presented in this document does not extend to you.
The information contained in this document speaks only as of the date of this
document unless the information specifically indicates that another date
applies.
87
<PAGE> 95
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined statements of operations for
ArvinMeritor for the six months ended March 31, 2000 and the twelve months ended
September 30, 1999 were prepared to illustrate the effects of the completion of
the merger, as if the merger had occurred as of October 1, 1998. The following
unaudited pro forma combined balance sheet (collectively with the unaudited pro
forma combined statements of operations, the "pro forma statements") was
prepared as if the merger had occurred as of March 31, 2000.
The pro forma statements were prepared using the purchase method of
accounting and are for illustrative purposes only. The pro forma adjustments are
based upon available information and certain assumptions that management
believes are reasonable. The pro forma statements are not necessarily indicative
of the results of operations or financial position of ArvinMeritor that would
have been achieved if the merger had in fact occurred on such dates, or the
results of operations of ArvinMeritor for any future period or the financial
position of ArvinMeritor as of any future date. The pro forma statements do not
give effect to any potential restructuring costs or to any potential cost
savings or other synergies that could result from the merger.
The pro forma statements and accompanying notes should be read in
conjunction with the historical financial statements of Meritor and Arvin,
including the notes thereto, and the other financial information pertaining to
ArvinMeritor included elsewhere or incorporated by reference in this joint proxy
statement-prospectus.
88
<PAGE> 96
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 2000
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MERITOR ARVIN PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(1) ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales...................................... $ 2,332 $ 1,637 $ -- $ 3,969
Cost of sales.............................. (1,974) (1,449) 1(2) (3,422)
------- ------- ------ -------
Gross margin............................. 358 188 1 547
Selling, general and administrative........ (163) (109) -- (272)
Gain on sale of business................... 83 -- -- 83
Other expense -- net....................... -- (3) -- (3)
------- ------- ------ -------
Operating earnings....................... 278 76 1 355
Equity in earnings of affiliates........... 17 5 -- 22
Interest expense, net...................... (35) (27) (4)(3) (66)
------- ------- ------ -------
Income before income taxes............... 260 54 (3) 311
Provision for income taxes................. (100) (18) 1(4) (117)
Minority interests......................... (6) 4 -- (2)
------- ------- ------ -------
Net income from continuing operations and
before cumulative effect of accounting
change................................ $ 154 $ 40 $ (2) $ 192
======= ======= ====== =======
EARNINGS PER COMMON SHARE
Basic.................................... $ 2.39 $ 1.66 $ 2.64
======= ======= =======
Diluted.................................. $ 2.39 $ 1.65 $ 2.64
======= ======= =======
AVERAGE COMMON SHARES OUTSTANDING
Basic.................................... 64.5 24.3 (16.1)(5) 72.7
Diluted.................................. 64.5 24.4 (16.1)(5) 72.8
</TABLE>
See notes to unaudited pro forma combined statements of operations.
89
<PAGE> 97
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MERITOR ARVIN PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(1) ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales...................................... $ 4,450 $ 3,010 $ -- $ 7,460
Cost of sales.............................. (3,804) (2,620) 1(2) (6,423)
------- ------- ------- -------
Gross margin............................. 646 390 1 1,037
Selling, general and administrative........ (280) (222) -- (502)
Gain on sale of business................... 24 -- -- 24
Restructuring costs........................ (28) -- -- (28)
Other expense -- net....................... (3) (4) -- (7)
------- ------- ------- -------
Operating earnings....................... 359 164 1 524
Equity in earnings of affiliates........... 35 10 -- 45
Interest expense, net...................... (61) (43) (8)(3) (112)
------- ------- ------- -------
Income before income taxes............... 333 131 (7) 457
Provision for income taxes................. (129) (43) 3(4) (169)
Minority interests......................... (10) 3 -- (7)
------- ------- ------- -------
Net income from continuing operations and
before cumulative effect of accounting
change................................ $ 194 $ 91 $ (4) $ 281
======= ======= ======= =======
EARNINGS PER COMMON SHARE
Basic.................................... $ 2.81 $ 3.75 $ 3.70
======= ======= =======
Diluted.................................. $ 2.81 $ 3.71 $ 3.68
======= ======= =======
AVERAGE COMMON SHARES OUTSTANDING
Basic.................................... 69.1 24.2 (17.3)(5) 76.0
Diluted.................................. 69.1 24.5 (17.3)(5) 76.3
</TABLE>
See notes to unaudited pro forma combined statements of operations.
90
<PAGE> 98
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(1) The Arvin historical information for the twelve months ended September 30,
1999 represents amounts derived from the audited results of operations for
the year ended January 3, 1999 and the unaudited results of operations for
the nine months ended October 3, 1999 and September 27, 1998. The Arvin
historical information for the six months ended March 31, 2000 represents
amounts derived from the audited results of operations for the year ended
January 2, 2000 and the unaudited results of operations for the nine months
ended October 3, 1999 and the three months ended April 2, 2000. The results
for the year ended September 30, 1999 were derived by adding the results of
the year ended January 3, 1999 and the results of the nine months ended
October 3, 1999 and subtracting the results of the nine months ended
September 27, 1998. The results for the six months ended March 31, 2000 were
derived by adding the results of the year ended January 2, 2000 and the
results of the three months ended April 2, 2000 and subtracting the results
of the nine months ended October 3, 1999.
The Meritor historical information for the year ended September 30, 1999
represents audited amounts and the Meritor historical information for the
six months ended March 31, 2000 represents unaudited amounts. Certain
amounts in the Arvin historical information and in the Meritor historical
information have been reclassified to conform to the pro forma presentation.
(2) The adjustment to cost of sales represents the following (in millions):
<TABLE>
<CAPTION>
TWELVE
SIX MONTHS ENDED MONTHS ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
Amortization of goodwill from merger with Arvin (40
years)........................................... $ 3 $ 6
Elimination of historical goodwill amortization of
Arvin............................................ (4) (7)
--- ---
$(1) $(1)
=== ===
</TABLE>
(3) The adjustment to interest expense represents the following (in millions):
<TABLE>
<CAPTION>
TWELVE
SIX MONTHS ENDED MONTHS ENDED
MARCH 31, 2000 SEPTEMBER 30, 1999
---------------- ------------------
<S> <C> <C>
Interest at an average rate of 8.0% and
amortization of other financing costs............ $2 $4
Interest on the borrowings to fund the Arvin cash
consideration at an average rate of 8.0%......... 2 4
-- --
$4 $8
== ==
</TABLE>
(4) Reflects the income tax effects of the above adjustments.
(5) The adjustment to shares outstanding represents the exchange of one share of
Meritor common stock for 0.75 shares of ArvinMeritor common stock and one
share of Arvin common stock for one share of ArvinMeritor common stock based
on the average shares outstanding for the periods indicated.
91
<PAGE> 99
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF MARCH 31, 2000
(IN MILLIONS)
<TABLE>
<CAPTION>
MERITOR ARVIN PRO FORMA PRO FORMA
HISTORICAL(1) HISTORICAL(1) ADJUSTMENTS COMBINED
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash................................... $ 91 $ 26 $ -- $ 117
Net receivables........................ 799 534 -- 1,333
Inventories............................ 383 220 -- 603
Other current assets................... 129 126 -- 255
------ ------ ----- ------
Total current assets........... 1,402 906 -- 2,308
Net property............................. 729 681 -- 1,410
Net goodwill............................. 449 273 (23)(2)(4) 699
Other assets............................. 246 225 12(3) 483
------ ------ ----- ------
Total.......................... $2,826 $2,085 $ (11) $4,900
====== ====== ===== ======
Current liabilities:
Short-term debt........................ $ 72 $ 301 $ -- $ 373
Accounts payable....................... 649 440 -- 1,089
Other current liabilities.............. 392 144 -- 536
------ ------ ----- ------
Total current liabilities...... 1,113 885 -- 1,998
Long-term debt........................... 865 324 77(3)(4) 1,266
Other liabilities........................ 454 145 -- 599
Minority interests....................... 48 50 -- 98
Capital securities....................... -- 89 -- 89
Stockholders' equity..................... 346 592 (88)(2) 850
------ ------ ----- ------
Total.......................... $2,826 $2,085 $ (11) $4,900
====== ====== ===== ======
</TABLE>
See notes to unaudited pro forma combined balance sheet.
92
<PAGE> 100
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) The Meritor historical information represents amounts obtained from the
unaudited balance sheet of Meritor as of March 31, 2000. The Arvin
historical information represents amounts obtained from the unaudited
balance sheet of Arvin as of April 2, 2000.
(2) Reflects the initial estimate made by management in applying the purchase
method of accounting for the excess of the total merger consideration over
the net assets of Arvin deemed to be acquired, and the liabilities deemed to
be assumed, in the merger. The following is the calculation of this estimate
(in millions except per share data):
<TABLE>
<S> <C>
Value of ArvinMeritor shares to be issued to Arvin
stockholders and estimated transaction costs of $16
million................................................... $520
Cash consideration of $2 per share to Arvin stockholders.... 49
----
Total merger consideration.................................. 569
Historical Arvin stockholders' equity exchanged in the
merger at March 31, 2000 adjusted for the elimination of
existing Arvin goodwill of $273........................... 319
----
Preliminary goodwill........................................ $250
====
</TABLE>
The merger was accounted for using the purchase method of accounting and
the total estimated merger consideration was allocated first to assets and
liabilities based on their respective fair values, with the remainder
allocated to goodwill. The adjustment to stockholders' equity reflects the
elimination of Arvin's equity. The estimated merger consideration and the
preliminary allocation of the estimated merger consideration described
above is based on historical costs and management's current estimates which
may differ from the final allocation due to appraisals of fixed assets,
other fair value adjustments, the finalization of any potential plans of
restructuring and the valuation of the Arvin stock options exchanged.
(3) Reflects the recording of estimated financing and other related costs.
(4) Reflects the payment of $2 per share to be made to current Arvin
stockholders.
93
<PAGE> 101
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF APRIL 6, 2000
BY AND AMONG
MERITOR AUTOMOTIVE, INC.,
MU SUB, INC.
AND
ARVIN INDUSTRIES, INC.
<PAGE> 102
w TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I THE FIRST STEP MERGER.......................................................................2
SECTION 1.1 The First Step Merger..................................................................2
SECTION 1.2 First Effective Time...................................................................2
SECTION 1.3 Effects of the First Step Merger.......................................................2
SECTION 1.4 Conversion of Meritor Common Stock.....................................................3
SECTION 1.5 Newco Common Stock.....................................................................4
SECTION 1.6 Options ...............................................................................4
SECTION 1.7 Articles of Incorporation..............................................................5
SECTION 1.8 By-Laws ...............................................................................5
SECTION 1.9 Board of Directors; Management.........................................................5
ARTICLE II THE SECOND STEP MERGER.....................................................................5
SECTION 2.1 The Second Step Merger.................................................................5
SECTION 2.2 Closing ...............................................................................6
SECTION 2.3 Effective Time.........................................................................6
SECTION 2.4 Effects of the Second Step Merger......................................................6
SECTION 2.5 Conversion of Arvin Common Stock.......................................................6
SECTION 2.6 Newco Common Stock.....................................................................7
SECTION 2.7 Options ...............................................................................7
SECTION 2.8 Articles of Incorporation..............................................................8
SECTION 2.9 By-Laws ...............................................................................8
SECTION 2.10 Rights Agreement......................................................................8
SECTION 2.11 Tax Consequences......................................................................8
SECTION 2.12 Officers .............................................................................8
SECTION 2.13 Board of Directors....................................................................9
SECTION 2.14 Name; Corporate Offices..............................................................10
SECTION 2.15 Dividends ...........................................................................10
SECTION 2.16 Fiscal Year..........................................................................10
ARTICLE III EXCHANGE OF SHARES.......................................................................10
SECTION 3.1 Newco to Make Shares and Cash Available...............................................10
SECTION 3.2 Exchange of Shares....................................................................11
SECTION 3.3 Affiliates ...........................................................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................................16
SECTION 4.1 Representations and Warranties of Arvin...............................................16
SECTION 4.2 Representations and Warranties of Meritor.............................................30
SECTION 4.3 Representations and Warranties of Newco...............................................43
</TABLE>
i
<PAGE> 103
<TABLE>
<CAPTION>
<S> <C>
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS..................................................44
SECTION 5.1 Covenants of Arvin....................................................................44
SECTION 5.2 Covenants of Meritor and Newco........................................................49
SECTION 5.3 Governmental Filings..................................................................54
SECTION 5.4 Control of Other Party's Business.....................................................55
ARTICLE VI ADDITIONAL AGREEMENTS.....................................................................55
SECTION 6.1 Preparation of Proxy Statement; Stockholders Meetings.................................55
SECTION 6.2 Newco Board of Directors and Management...............................................58
SECTION 6.3 Access to Information.................................................................58
SECTION 6.4 Reasonable Best Efforts...............................................................59
SECTION 6.5 Acquisition Proposals.................................................................61
SECTION 6.6 Employee Benefits Matters.............................................................63
SECTION 6.7 Fees and Expenses.....................................................................65
SECTION 6.8 Directors' and Officers' Indemnification and Insurance................................66
SECTION 6.9 Public Announcements..................................................................67
SECTION 6.10 Accounting Matters...................................................................67
SECTION 6.11 Listing of Shares of Newco Common Stock..............................................68
SECTION 6.12 Dividends ...........................................................................68
SECTION 6.13 Affiliates...........................................................................68
SECTION 6.14 Section 16 Matters...................................................................69
SECTION 6.15 Takeover Statutes....................................................................69
SECTION 6.16 Advice of Changes....................................................................69
ARTICLE VII CONDITIONS PRECEDENT.....................................................................70
SECTION 7.1 Conditions to Each Party's Obligation to Effect the Merger............................70
SECTION 7.2 Additional Conditions to Obligations of Arvin.........................................71
SECTION 7.3 Additional Conditions to Obligations of Meritor and Newco.............................72
ARTICLE VIII TERMINATION AND AMENDMENT...............................................................74
SECTION 8.1 Termination...........................................................................74
SECTION 8.2 Effect of Termination.................................................................76
SECTION 8.3 Amendment ............................................................................78
SECTION 8.4 Extension; Waiver.....................................................................78
ARTICLE IX GENERAL PROVISIONS........................................................................79
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements............................79
SECTION 9.2 Notices ..............................................................................79
SECTION 9.3 Interpretation........................................................................80
</TABLE>
ii
<PAGE> 104
<TABLE>
<CAPTION>
<S> <C>
SECTION 9.4 Counterparts..........................................................................80
SECTION 9.5 Entire Agreement; No Third Party Beneficiaries........................................80
SECTION 9.6 Governing Law.........................................................................81
SECTION 9.7 Severability..........................................................................81
SECTION 9.8 Assignment ...........................................................................81
SECTION 9.9 Submission to Jurisdiction; Waivers...................................................81
SECTION 9.10 Enforcement..........................................................................82
SECTION 9.11 Definitions..........................................................................82
SECTION 9.12 Disclosure Schedule..................................................................87
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Form of Newco Articles
Exhibit B - Form of Newco By-Laws
Exhibit C - Form of Newco Rights Agreement
Exhibit D - Officers
Exhibit E - Terms of Offer Letter to Officers
Exhibit F - Form of Arvin Affiliate Agreement
Exhibit G - Form of Meritor Affiliate Agreement
</TABLE>
iii
<PAGE> 105
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 6,
2000 (this "Agreement"), by and among MERITOR AUTOMOTIVE, INC., a Delaware
corporation ("Meritor"), MU SUB, INC., an Indiana corporation and a wholly-owned
subsidiary of Meritor ("Newco"), and ARVIN INDUSTRIES, INC., an Indiana
corporation ("Arvin").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of Meritor and Arvin deem it
advisable and in the best interests of each corporation and its respective
stockholders that Meritor and Arvin enter into a "merger of equals" in order to
advance the long-term strategic business interests of Meritor and Arvin;
WHEREAS, the Boards of Directors of Meritor, Arvin and Newco
have determined to consummate such "merger of equals" by means of the business
combination transaction provided for herein in which (a) Meritor will, subject
to the terms and conditions set forth herein, merge with and into Newco (the
"First Step Merger") with Newco being the surviving corporation in the First
Step Merger, and (b) immediately thereafter, Arvin will, subject to the terms
and conditions set forth herein, merge with and into Newco (the "Second Step
Merger" and, together with the First Step Merger, the "Merger"), with Newco
being the surviving corporation (hereinafter sometimes referred to in such
capacity as the "Combined Company") in the Second Step Merger;
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, (a) as a condition and inducement to Meritor's willingness to
enter into this Agreement and the Meritor Stock Option Agreement referred to
below, Meritor and Arvin are entering into a Stock Option Agreement dated as of
the date hereof (the "Arvin Stock Option Agreement") pursuant to which Arvin is
granting to Meritor an option to purchase shares of Arvin Common Stock (as
defined in Section 2.5(a)) and (b) as a condition and inducement to Arvin's
willingness to enter into this Agreement and the Arvin Stock Option Agreement,
Arvin and Meritor are entering into a Stock Option Agreement dated as of the
date hereof (the "Meritor Stock Option Agreement", and together with the Arvin
Stock Option Agreement, the
<PAGE> 106
"Stock Option Agreements"), pursuant to which Meritor is granting to Arvin an
option to purchase shares of Meritor Common Stock (as defined in Section
1.4(a)); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth in
this Agreement and in the Stock Option Agreements, and intending to be legally
bound hereby and thereby, the parties hereto agree as follows:
ARTICLE I
THE FIRST STEP MERGER
SECTION 1.1 The First Step Merger. Upon the terms and
conditions of this Agreement, and in accordance with the General Corporation Law
of the State of Delaware (the "DGCL") and the Business Corporation Law of the
State of Indiana (the "IBCL"), at the First Effective Time (as defined in
Section 1.2), Meritor shall merge with and into Newco. Newco shall be the
surviving corporation in the First Step Merger and shall continue its corporate
existence under the laws of the State of Indiana. Upon consummation of the First
Step Merger, the separate corporate existence of Meritor shall terminate.
SECTION 1.2 First Effective Time. The First Step Merger shall
become effective as set forth in the certificate of merger that shall be filed
with the Secretary of State of the State of Delaware (the "Delaware Secretary")
and the articles of merger that shall be filed with the Secretary of State of
the State of Indiana (the "Indiana Secretary") on the Closing Date (as defined
in Section 2.2). The term "First Effective Time" shall be the date and time when
the First Step Merger becomes effective, as set forth in the certificate of
merger and articles of merger referred to in this Section 1.2.
SECTION 1.3 Effects of the First Step Merger. At and after the
First Effective Time, the First Step Merger shall have the effects set forth in
the DGCL and the IBCL.
A-2
<PAGE> 107
SECTION 1.4 Conversion of Meritor Common Stock. At the First
Effective Time, by virtue of the First Step Merger and without any action on the
part of Meritor, Newco or the holders of any capital stock of Meritor or Newco:
(a) Subject to Section 3.2(e), each share of common stock, par
value $1 per share, including the associated Meritor Right (as defined
in Section 4.2(b)(i)), of Meritor ("Meritor Common Stock") issued and
outstanding immediately prior to the First Effective Time, other than
shares of Meritor Common Stock held in Meritor's treasury or owned by
any wholly-owned Subsidiary of Meritor, shall be converted into the
right to receive .75 shares (the "Meritor Exchange Ratio") of common
stock, par value $1 per share, of Newco ("Newco Common Stock").
(b) All shares of Meritor Common Stock converted into the
right to receive Newco Common Stock pursuant to this Article I shall no
longer be outstanding and shall automatically be canceled and shall
cease to exist, and each certificate previously representing any such
shares of Meritor Common Stock (a "Meritor Certificate") shall
thereafter represent only the right to receive (i) a certificate
representing the number of whole shares of Newco Common Stock and (ii)
cash in lieu of fractional shares into which the shares of Meritor
Common Stock formerly represented by such Meritor Certificate have been
converted pursuant to this Section 1.4 and Section 3.2(e). Meritor
Certificates shall be exchanged for certificates representing whole
shares of Newco Common Stock and cash in lieu of fractional shares
issued in consideration therefor upon the surrender of such Meritor
Certificates in accordance with Section 3.2, without any interest
thereon. If, between the date hereof and the Effective Time, the
outstanding shares of Arvin Common Stock (as defined in Section 2.5(a))
or Meritor Common Stock (or, following the consummation of the First
Step Merger, the outstanding shares of Newco Common Stock) shall have
been increased, decreased, changed into or exchanged for a different
number or kind of shares or securities as a result of a reorganization,
recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in capitalization (other
than solely as a result of the First Step Merger), an
A-3
<PAGE> 108
appropriate and proportionate adjustment shall be made to the Meritor
Exchange Ratio.
(c) All shares of Meritor Common Stock held in Meritor's
treasury or owned by any wholly-owned Subsidiary of Meritor shall be
canceled and shall cease to exist and no shares of Newco Common Stock
or other consideration shall be delivered in exchange therefor.
SECTION 1.5 Newco Common Stock. At and after the First
Effective Time, each share of Newco Common Stock issued and outstanding
immediately prior to the First Effective Time shall be canceled and retired and
shall resume the status of authorized and unissued shares of Newco Common Stock,
and no shares of Newco Common Stock or other consideration shall be issued in
respect thereof.
SECTION 1.6 Options. (a) At or prior to the First Effective
Time, Meritor will take all action necessary such that each Meritor Stock Option
(as defined in Section 4.2(b)(i)) that is outstanding and unexercised
immediately prior thereto shall cease to represent a right to acquire shares of
Meritor Common Stock and shall be converted into an option to purchase shares of
Newco Common Stock in an amount and at an exercise price determined as provided
below (and otherwise subject to the terms of the appropriate Meritor Stock Plan
(as defined in Section 4.2(b)(i)) pursuant to which such option has been issued
and the agreements evidencing grants thereunder):
(i) The number of shares of Newco Common Stock to be subject
to the new option shall be equal to the product of the number of shares
of Meritor Common Stock subject to the original option multiplied by
the Meritor Exchange Ratio, provided that any fractional shares of
Newco Common Stock resulting from such multiplication shall be rounded
to the nearest whole share; and
(ii) The exercise price per share of Newco Common Stock under
the new option shall be equal to the exercise price per share of
Meritor Common Stock under the original option divided by the Meritor
Exchange Ratio, provided that such exercise price shall be rounded up
to the nearest whole cent.
(b) The adjustment provided herein with respect to any options
that are "incentive stock options" (as
A-4
<PAGE> 109
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")) shall be and is intended to be effected in a manner that is consistent
with Section 424(a) of the Code. The duration and other terms of the new option
shall be the same as the original option, except that all references to Meritor
shall be deemed to be references to Newco (but taking into account any changes
thereto, including acceleration thereof, provided for in the Meritor Stock Plans
by reason of this Agreement or the transactions contemplated hereby).
SECTION 1.7 Articles of Incorporation. Subject to the terms
and conditions of this Agreement, at the First Effective Time, the articles of
incorporation of the surviving corporation in the First Step Merger shall be
substantially in the form attached hereto as Exhibit A, with such changes
thereto as shall be mutually agreed upon by Meritor and Arvin (the "Newco
Articles"), until thereafter amended in accordance with the terms thereof and
Applicable Laws.
SECTION 1.8 By-Laws. Subject to the terms and conditions of
this Agreement, at the First Effective Time, the by-laws of the surviving
corporation in the First Step Merger shall be in substantially the form attached
hereto as Exhibit B, with such changes as may be mutually agreed upon by Meritor
and Arvin (the "Newco By-Laws"), until thereafter amended in accordance with the
terms thereof, the Newco Articles and Applicable Laws.
SECTION 1.9 Board of Directors; Management. From and after the
First Effective Time, until duly changed pursuant hereto or in accordance with
the Newco Articles, the Newco By-Laws or Applicable Laws, the directors of
Meritor shall be the directors of Newco, and the officers of Meritor shall be
the officers of Newco. At the Effective Time (as defined in Section 2.3), the
directors and officers of Newco shall be as set forth in Section 2.13 and
Section 2.12, respectively.
ARTICLE II
THE SECOND STEP MERGER
SECTION 2.1 The Second Step Merger. Upon the terms and
conditions of this Agreement, and in accordance with the IBCL, at the Effective
Time, Arvin shall merge with
A-5
<PAGE> 110
and into Newco. Newco shall be the surviving corporation in the Second Step
Merger and shall continue its corporate existence under the laws of the State of
Indiana. Upon consummation of the Second Step Merger, the separate corporate
existence of Arvin shall terminate.
SECTION 2.2 Closing. The closing of the Second Step Merger
(the "Closing") will take place as soon as practicable, but in any event within
three Business Days after the satisfaction or waiver (subject to Applicable
Laws) of the conditions (excluding conditions that, by their nature, cannot be
satisfied until the Closing Date (as defined below)) set forth in Article VII,
unless this Agreement has been theretofore terminated pursuant to its terms or
unless another time or date is agreed to in writing by the parties hereto (the
actual time and date of the Closing being referred to herein as the "Closing
Date"). The Closing shall be held at the offices of Chadbourne & Parke LLP, 30
Rockefeller Plaza, New York, New York 10112, unless another place is agreed to
in writing by the parties hereto.
SECTION 2.3 Effective Time. The Second Step Merger shall
become effective as set forth in the articles of merger (the "Articles of
Merger") that shall be filed with the Indiana Secretary on the Closing Date. The
term "Effective Time" shall be the date and time when the Second Step Merger
becomes effective, as set forth in the Articles of Merger. The Effective Time
shall occur immediately after the First Effective Time has occurred.
SECTION 2.4 Effects of the Second Step Merger. At and after
the Effective Time, the Second Step Merger shall have the effects set forth in
the IBCL.
SECTION 2.5 Conversion of Arvin Common Stock. At the Effective
Time, by virtue of the Second Step Merger and without any action on the part of
Meritor, Newco, Arvin or the holders of any capital stock of Meritor, Newco or
Arvin:
(a) Each common share, par value $2.50 per share, including
the associated Alpha Right (as defined in Section 4.1(b)(i)), of Arvin ("Arvin
Common Stock") issued and outstanding immediately prior to the Effective Time,
other than shares of Arvin Common Stock held in Arvin's treasury, owned by the
Arvin SECT (as defined in Section 4.1(f)) or owned by Newco or any wholly-owned
Subsidiary of Arvin or Newco, shall be converted into the right to receive
A-6
<PAGE> 111
(i) one share of Newco Common Stock (the "Arvin Stock Consideration") and (ii)
$2.00 in cash, without interest (the "Arvin Cash Consideration" and, together
with the Arvin Stock Consideration, the "Arvin Merger Consideration").
(b) All shares of Arvin Common Stock converted into the right
to receive the Arvin Merger Consideration pursuant to this Article II shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each certificate previously representing any such shares of Arvin
Common Stock (an "Arvin Certificate") shall thereafter represent only the right
to receive (i) a certificate representing the Arvin Stock Consideration and (ii)
the Arvin Cash Consideration into which the shares of Arvin Common Stock
formerly represented by such Arvin Certificate have been converted pursuant to
this Section 2.5. Arvin Certificates shall be exchanged for the Arvin Merger
Consideration upon the surrender of such Arvin Certificates in accordance with
Section 3.2, without any interest thereon.
(c) All shares of Arvin Common Stock held in Arvin's treasury,
owned by the Arvin SECT or owned by Newco or any wholly-owned Subsidiary of
Arvin or Newco shall be canceled and shall cease to exist, and no shares of
Newco Common Stock or other consideration shall be delivered in exchange
therefor.
SECTION 2.6 Newco Common Stock. At and after the Effective
Time, each share of Newco Common Stock issued and outstanding immediately prior
to the Effective Time shall remain an issued and outstanding share of common
stock of the Combined Company and shall not be affected by the Second Step
Merger, provided that all shares of Newco Common Stock that are owned by Arvin
shall become treasury stock of Newco.
SECTION 2.7 Options. (a) At or prior to the Effective Time,
Arvin will take all action necessary such that each Arvin Stock Option (as
defined in Section 4.1(b)(i)) that is outstanding and unexercised immediately
prior thereto shall cease to represent a right to acquire shares of Arvin Common
Stock and shall be converted into an option to purchase a number of shares of
Newco Common Stock equal to the number of shares of Arvin Common Stock subject
to such option immediately prior to the Effective Time, plus $1 for each share,
at an exercise price per share of Newco Common Stock equal to the exercise price
per share of Arvin
A-7
<PAGE> 112
Common Stock in effect immediately prior to the Effective Time (and otherwise
subject to the terms of the appropriate Arvin Stock Plan (as defined in Section
4.1(b)(i)) pursuant to which such options have been issued and the agreements
evidencing grants thereunder).
(b) The adjustment provided herein with respect to any options
that are "incentive stock options" (as defined in Section 422 of the Code) shall
be and is intended to be effected in a manner that is consistent with Section
424(a) of the Code. The duration and other terms of the new option shall be the
same as the original option, except that all references to Arvin shall be deemed
to be references to Newco (but taking into account any changes thereto,
including acceleration thereof, provided for in the Arvin Stock Plans by reason
of this Agreement or the transactions contemplated hereby).
SECTION 2.8 Articles of Incorporation. Subject to the terms
and conditions of this Agreement, at the Effective Time, the Newco Articles
shall be the articles of incorporation of the Combined Company, until thereafter
amended in accordance with the terms thereof and Applicable Laws.
SECTION 2.9 By-Laws. Subject to the terms and conditions of
this Agreement, at the Effective Time, the Newco By-Laws shall be the by-laws of
the Combined Company until thereafter amended in accordance with the terms
thereof, the Newco Articles and Applicable Laws.
SECTION 2.10 Rights Agreement. Subject to the terms and
conditions of this Agreement, as of or prior to the First Effective Time, Newco
will enter into a Rights Agreement substantially in the form attached hereto as
Exhibit C, with such changes as may be mutually agreed upon by Meritor and
Arvin.
SECTION 2.11 Tax Consequences. It is intended that each of the
First Step Merger and the Second Step Merger shall constitute a "reorganization"
within the meaning of Section 368(a) of the Code and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Sections 354 and 361
of the Code.
SECTION 2.12 Officers. At the Effective Time, Larry D. Yost
shall be Chairman of the Board and Chief Executive Officer of the Combined
Company and V. William
A-8
<PAGE> 113
Hunt shall be Vice Chairman and President of the Combined Company and otherwise
the initial officers of the Combined Company shall be those individuals set
forth in Exhibit D or as Meritor and Arvin shall otherwise agree prior to the
Effective Time, and such officers shall hold office until their respective
successors are duly elected and qualified, or their earlier death, resignation
or removal. Contemporaneously with the execution and delivery of this Agreement,
Arvin, Newco and Mr. Hunt are entering into an employment agreement dated as of
the date hereof, to be effective and binding on the Combined Company as of the
Effective Time. On or before the Effective Time, it is intended that offer
letters on substantially the terms set forth in Exhibit E will be extended by
Newco to each of the officers as set forth in the Schedule to such Exhibit E
(which Schedule lists each officer's name and position), each such offer letter
to be effective and binding on the Combined Company as of the Effective Time.
SECTION 2.13 Board of Directors. From and after the Effective
Time, until duly changed in compliance with Applicable Laws, the Newco Articles
and the Newco By-Laws:
(a) The Board of Directors of the Combined Company (the
"Board") shall consist of 19 persons, including (i) 9 persons (including Mr.
Yost) to be named by the Board of Directors of Meritor, (ii) 9 persons
(including Mr. Hunt) to be named by the Board of Directors of Arvin and (iii)
Martin D. Walker (or, if Mr. Walker is unavailable, another person to be
selected prior to the Effective Time by the Chairman and Chief Executive Officer
of Meritor and the Chairman and Chief Executive Officer of Arvin). The directors
named by Meritor and Arvin shall be allocated among the classes of the Board as
shall be agreed between Meritor and Arvin prior to the Effective Time. It is the
current intention of Meritor and Arvin that the Board shall be reduced to
approximately 12 directors within a reasonable period following the Effective
Time in such manner as the Board shall determine.
(b) The Audit Committee of the Board shall be comprised of
three members of the Board selected prior to the Effective Time by the Board of
Directors of Meritor and three members of the Board (one of whom shall be
chairman) selected prior to the Effective Time by the Board of Directors of
Arvin. The Board Composition Committee of the Board shall be comprised of three
members of the Board (one of whom shall be chairman), selected prior to the
Effective
A-9
<PAGE> 114
Time by the Board of Directors of Meritor, three members of the Board selected
prior to the Effective Time by the Board of Directors of Arvin, and Mr. Walker
(or if Mr. Walker is unavailable, another director to be selected prior to the
Effective Time by the Chairman of the Board and Chief Executive Officer of
Meritor and the Chairman and Chief Executive Officer of Arvin). The Compensation
& Management Development Committee of the Board shall be comprised of three
members of the Board (one of whom shall be chairman) selected prior to the
Effective Time by the Board of Directors of Meritor and three members of the
Board selected prior to the Effective Time by the Board of Directors of Arvin.
The Environmental & Social Responsibility Committee of the Board shall be
comprised of three members of the Board selected prior to the Effective Time by
the Board of Directors of Meritor and three members of the Board (one of whom
shall be chairman) selected prior to the Effective Time by the Board of
Directors of Arvin.
SECTION 2.14 Name; Corporate Offices. (a) At the Effective
Time, the name of the Combined Company shall be "ArvinMeritor, Inc."
(b) At the Effective Time, the location of the headquarters
and principal executive offices of the Combined Company shall be that of the
headquarters and principal executive offices of Meritor as the date of this
Agreement.
SECTION 2.15 Dividends. It is the intention of Meritor and
Arvin that the Combined Company will, subject to the determination of the Board,
declare and pay regular quarterly dividends in respect of outstanding shares of
Newco Common Stock at a level approximately equivalent to Arvin's current
regular quarterly dividend.
SECTION 2.16 Fiscal Year. It is the intention of Meritor and
Arvin that the fiscal year of the Combined Company will end on September 30 of
each year.
ARTICLE III
EXCHANGE OF SHARES
SECTION 3.1 Newco to Make Shares and Cash Available. From time
to time at, prior to or after the Effective Time, Newco shall deposit, or shall
cause to be
A-10
<PAGE> 115
deposited, with a bank or trust company reasonably acceptable to each of Meritor
and Arvin (the "Exchange Agent"), for the benefit of the holders of the Meritor
Certificates and Arvin Certificates (collectively, "Certificates"), for exchange
in accordance with this Article III (and at the times necessary to make payments
in respect of exchanges in accordance with this Article III), certificates
representing the shares of Newco Common Stock to be issued pursuant to Section
1.4 and Section 2.5 and cash representing the Arvin Cash Consideration to be
paid pursuant to Section 2.5, in each case to be paid pursuant to Section 3.2(a)
in exchange for Certificates (such certificates for shares of Newco Common
Stock, together with any dividends or distributions with respect thereto, and
cash representing the Arvin Cash Consideration to be paid pursuant to Section
2.5, the "Exchange Fund").
SECTION 3.2 Exchange of Shares. (a) As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of one or more Certificates a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, and which shall be in customary form and have such other provisions as
Newco may reasonably request) and instructions for use in effecting the
surrender of Certificates in exchange for certificates representing the shares
of Newco Common Stock (and, (i) in the case of Meritor Certificates, any cash in
lieu of fractional shares and (ii) in the case of Arvin Certificates, the Arvin
Cash Consideration) into which the shares of Meritor Common Stock or Arvin
Common Stock, as applicable, formerly represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. Upon proper
surrender of a Certificate for exchange and cancellation to the Exchange Agent,
together with such properly completed letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) the number of shares of Newco Common Stock (which shall be in
uncertificated book-entry form unless a physical certificate is requested)
representing that number of whole shares of Newco Common Stock to which such
holder shall have become entitled pursuant to the provisions of Article II and
(ii)(x) in the case of Meritor Certificates, a check representing the amount of
any cash in lieu of fractional shares that such
A-11
<PAGE> 116
holder has the right to receive in respect of the Meritor Certificate
surrendered pursuant to the provisions of this Article III and (y) in the case
of Arvin Certificates, a check representing the amount of Arvin Cash
Consideration to which such holder shall have become entitled pursuant to the
provisions of Article II, and the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or accrued on any cash in lieu of fractional
shares, Arvin Cash Consideration or on any unpaid dividends and distributions
payable to holders of Certificates.
(b) No dividends or other distributions declared or made with
respect to Newco Common Stock shall be paid to the holder of any unsurrendered
Certificate (and, (i) in the case of Meritor Certificates, no cash payment in
lieu of fractional shares of Newco Common Stock shall be paid to any such holder
pursuant to Section 3.2(e) and, (ii) in the case of Arvin Certificates, no Arvin
Cash Consideration shall be paid to any such holder) until the holder thereof
shall surrender such Certificate in accordance with this Article III. Subject to
the effect of Applicable Laws, following surrender of any Certificate, there
shall be paid to the holder of shares of Newco Common Stock issuable in exchange
therefor, without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of Newco Common Stock to
which such holder is entitled pursuant to Section 3.2(e), the amount of Arvin
Cash Consideration to which such holder is entitled pursuant to Article II and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Newco
Common Stock and (b) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such shares of Newco Common Stock.
(c) If any certificate representing shares of Newco Common
Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof (and to the payment of any cash required to be paid in exchange
for such Certificate pursuant to Section 3.2(a)) that the Certificate so
surrendered shall be properly endorsed (or accompanied by an appropriate
instrument of transfer) and otherwise in proper form for transfer, and that the
person requesting such exchange shall pay to the Exchange Agent in advance any
transfer or other taxes
A-12
<PAGE> 117
required by reason of the issuance of a certificate representing shares of Newco
Common Stock in any name other than that of the registered holder of the
Certificate surrendered (or by reason of payment of cash required to be paid in
exchange for such Certificate pursuant to Section 3.2(a) other than to the
registered holder of the Certificate surrendered), or required for any other
reason, or shall establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
(d) After the First Effective Time, there shall be no
transfers on the stock transfer books of Meritor of the shares of Meritor Common
Stock that were issued and outstanding immediately prior to the First Effective
Time. After the Effective Time, there shall be no transfers on the stock
transfer books of Arvin of the shares of Arvin Common Stock that were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented for transfer to the Exchange Agent, they shall
be canceled and exchanged for certificates representing shares of Newco Common
Stock (and (i) in case of Meritor Certificates, any cash in lieu of fractional
shares and (ii) in the case of Arvin Certificates, the applicable Arvin Cash
Consideration) as provided in this Article III.
(e) (i) Notwithstanding anything to the contrary contained
herein, no certificates or scrip representing fractional shares of Newco Common
Stock or book-entry credit of the same shall be issued upon the surrender for
exchange of Meritor Certificates, no dividend or distribution with respect to
Newco Common Stock shall be payable on or with respect to any fractional share,
and such fractional share interests shall not entitle the owner thereof to vote
or to any other rights of a stockholder of Newco. In lieu of the issuance of any
such fractional share, Newco shall pay to each holder of Meritor Certificates
who otherwise would be entitled to receive such fractional share an amount in
cash determined in the manner provided in clauses (ii) and (iii) of this Section
3.2(e).
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (x) the number of full shares
of Newco Common Stock delivered to the Exchange Agent by Newco pursuant to
Section 3.1 for issuance to holders of Meritor Certificates pursuant to Section
1.4 over (y) the aggregate number of full shares of Newco Common Stock to be
distributed to
A-13
<PAGE> 118
holders of Meritor Certificates pursuant to this Section 3.2 (such excess being
herein referred to as the "Excess Meritor Shares"). As soon after the Effective
Time as practicable, the Exchange Agent, as agent for such holders of Meritor
Certificates, shall sell the Excess Meritor Shares at then prevailing prices on
the NYSE, all in the manner provided in clause (iii) of this Section 3.2(e).
(iii) The sale of the Excess Meritor Shares by the Exchange
Agent shall be executed on the NYSE through one or more member firms of the NYSE
and shall be executed in round lots to the extent practicable. Until the net
proceeds of any such sale or sales have been distributed to the holders of
Meritor Certificates, the Exchange Agent will hold such proceeds in trust for
such holders as part of the Exchange Fund. Newco shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs of the Exchange Agent
incurred in connection with such sale or sales of Excess Meritor Shares. In
addition, Newco shall pay the Exchange Agent's compensation and expenses in
connection with such sale or sales. The Exchange Agent shall determine the
portion of such net proceeds to which each holder of Meritor Certificates shall
be entitled, if any, by multiplying the amount of the aggregate net proceeds by
a fraction, the numerator of which is the amount of the fractional share
interest to which such holder of Meritor Certificates is entitled (after taking
into account all Meritor Certificates then held by such holder) and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of Meritor Certificates are entitled. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Meritor Certificates with respect to any fractional share interests, the
Exchange Agent shall promptly pay such amounts to such holders of Meritor
Certificates subject to and in accordance with this Section 3.2.
(f) Any portion of the Exchange Fund that remains unclaimed by
holders of Certificates for twelve months after the Effective Time shall be paid
to the Combined Company, and any holders of Certificates who have not
theretofore complied with this Article III shall thereafter look only to Newco
for payment of the shares of Newco Common Stock, cash in lieu of any fractional
shares (in the case of Meritor Certificates), the Arvin Cash Consideration (in
the case of Arvin Certificates), and any unpaid dividends and distributions on
the Newco Common Stock deliverable in respect of each share of Meritor Common
Stock or Arvin
A-14
<PAGE> 119
Common Stock formerly represented by such Certificate as determined pursuant to
this Agreement, without any interest thereon. Any such portion of the Exchange
Fund remaining unclaimed by holders of Certificates five years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental Entity
(as defined in Section 4.1(c)(iii)) shall, to the extent permitted by Applicable
Laws, become the property of Newco free and clear of any claims or interest of
any Person previously entitled thereto.
(g) None of Newco, Meritor, Arvin, the Exchange Agent or any
other Person shall be liable to any holder of Certificates for any amount
delivered in good faith to a public official pursuant to applicable abandoned
property, escheat or similar Applicable Laws.
(h) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Newco, on a daily basis. Any interest and other
income resulting from such investments shall be paid to the Combined Company
promptly upon request by the Combined Company.
(i) In the event any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the posting by such
Person of a bond in such amount as Newco may determine is reasonably necessary
as indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the shares of Newco Common Stock (and (i) in the case of
Meritor Certificates, any cash in lieu of fractional shares and (ii) in the case
of Arvin Certificates, the Arvin Cash Consideration) deliverable in respect
thereof pursuant to this Agreement.
SECTION 3.3 Affiliates. Notwithstanding anything to the
contrary herein, to the fullest extent permitted by law, no certificates
representing shares of Newco Common Stock or cash shall be delivered to a Person
who may be deemed an "affiliate" of Arvin in accordance with Section 6.13(a)
hereof or Meritor in accordance with Section 6.13(b) hereof, as the case may be,
for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), until such Person has executed and delivered an Arvin
Affiliate Agreement (as defined in
A-15
<PAGE> 120
Section 6.13(a)) pursuant to Section 6.13(a) or a Meritor Affiliate Agreement
(as defined in Section 6.13(b)) pursuant to Section 6.13(b), as the case may be.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of Arvin. Except as
set forth in the Arvin Disclosure Schedule delivered by Arvin to Meritor prior
to the execution of this Agreement (the "Arvin Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant of Arvin to the extent specified therein), Arvin represents
and warrants to Meritor and Newco as follows:
(a) Organization, Standing and Power; Subsidiaries. (i) Each
of Arvin and each of its Subsidiaries is a corporation or other organization
duly organized, validly existing and in good standing (where applicable) under
the laws of its jurisdiction of incorporation or organization, has the requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and as it will be conducted through the
Effective Time, except where the failure to be so organized, existing and in
good standing or to have such power and authority, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Arvin, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such
jurisdictions where the failure so to qualify or to be in good standing,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Arvin. The copies of the articles of incorporation
and bylaws of Arvin which were previously furnished or made available to Meritor
are true, complete and correct copies of such documents as in effect on the date
of this Agreement.
(ii) Exhibit 21 to Arvin's Annual Report on Form 10-K for the
year ended January 2, 2000 includes all the Subsidiaries of Arvin which as of
the date of this Agreement are Significant Subsidiaries (as defined in Rule 1-02
of Regulation S-X of the Securities and Exchange
A-16
<PAGE> 121
Commission (the "SEC")). All the outstanding shares of capital stock of, or
other equity interests in, each such Significant Subsidiary have been validly
issued and are fully paid and nonassessable and are owned directly or indirectly
by Arvin, free and clear of all material pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively "Liens") and free of any other material restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other equity interests). None of Arvin or any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity (other than
Subsidiaries), that is or would reasonably be expected to be material to Arvin
and its Subsidiaries taken as a whole.
(b) Capital Structure. (i) The authorized capital stock of
Arvin consists of 50,000,000 shares of Arvin Common Stock and 8,978,058 shares
of preferred stock, no par value, 250,000 of which are designated as "Series C
Junior Participating Preferred Shares" and 2,300,000 of which are designated as
"$3.75 Convertible Exchangeable Preferred Shares" (collectively, the "Arvin
Preferred Stock"). As of March 31, 2000, (i) 25,645,326 shares of Arvin Common
Stock and (ii) no shares of Arvin Preferred Stock were issued and outstanding.
As of March 31, 2000, 2,148,287 shares of Arvin Common Stock were reserved for
issuance upon exercise of options outstanding under Arvin Stock Plans. As of
March 31, 2000, 1,879,621 shares of Arvin Common Stock were held as treasury
shares. Since March 31, 2000 to the date of this Agreement, no shares of the
capital stock of Arvin or any other securities of Arvin have been issued other
than shares of Arvin Common Stock (and accompanying Arvin Rights (as defined
below)) issued pursuant to options or rights outstanding as of March 31, 2000
under the Arvin Stock Plans. All issued and outstanding shares of the capital
stock of Arvin are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock is entitled to preemptive rights.
There are outstanding as of the date hereof no options, warrants or other rights
to acquire capital stock from Arvin other than (x) rights (the "Arvin Rights")
distributed to the holders of Arvin Common Stock pursuant to the Arvin Rights
Agreement (as defined in Section 4.1(l)), (y) options and other rights to
acquire Arvin Common Stock from Arvin ("Arvin Stock Options") representing in
the
A-17
<PAGE> 122
aggregate the right to purchase 2,148,287 shares of Arvin Common Stock granted
under the Arvin Industries, Inc. 1988 Stock Benefit Plan; the Arvin Industries,
Inc. 1998 Stock Benefit Plan; and the Arvin Industries, Inc. Employee Stock
Benefit Plan (collectively, the "Arvin Stock Plans") and (z) the rights set
forth in the Arvin Stock Option Agreement. Section 4.1(b) of the Arvin
Disclosure Schedule sets forth a complete and correct list as of the date hereof
of all outstanding Arvin Stock Options and the exercise price thereof.
(ii) No bonds, debentures, notes or other indebtedness of
Arvin having the right to vote on any matters on which stockholders of Arvin may
vote ("Arvin Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 4.1(b), as
of the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Arvin or any of its Subsidiaries is a party or by which any of them is
bound obligating Arvin or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of Arvin or any of its Subsidiaries or obligating Arvin
or any of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are no outstanding
obligations of Arvin or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of Arvin or any of its
Subsidiaries.
(c) Authority; No Conflicts. (i) Arvin has all requisite
corporate power and authority to enter into this Agreement and the Stock Option
Agreements and to consummate the transactions contemplated hereby and thereby,
subject, in the case of the consummation of the Merger, to the approval of this
Agreement by the Required Arvin Vote (as defined in Section 4.1(g)). The
execution and delivery of this Agreement and the Stock Option Agreements by
Arvin and the consummation by Arvin of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Arvin, subject in the case of the consummation of the Merger, to the approval
of this Agreement by the Required Arvin Vote. This Agreement and the Stock
Option Agreements have been duly
A-18
<PAGE> 123
executed and delivered by Arvin and, assuming the due authorization and valid
execution and delivery by each of Meritor and (if applicable) Newco, constitute
valid and binding agreements of Arvin, enforceable against Arvin in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar Applicable Laws
relating to or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
(ii) The execution and delivery of this Agreement and the
Stock Option Agreements by Arvin do not, and the consummation by Arvin of the
Merger and the other transactions contemplated hereby and thereby will not,
conflict with, or result in any breach or violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of, or result by its terms in the termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of a Lien, charge, "put" or "call" right or other encumbrance on, or
the loss of, any assets (any such conflict, breach, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a
"Violation") pursuant to: (A) any provision of the articles of incorporation or
bylaws or similar organizational document of Arvin or any Significant Subsidiary
of Arvin or (B) except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Arvin or, to the
Knowledge of Arvin, Newco following the Merger, subject to obtaining or making
the Arvin Necessary Consents (as defined in paragraph (iii) below), any loan or
credit agreement, note, instrument, mortgage, bond, indenture, lease, benefit
plan or other contract, agreement or obligation (a "Contract") to which Arvin or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound, or any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Arvin or any Subsidiary of Arvin or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other authority
A-19
<PAGE> 124
thereof, or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority (a
"Governmental Entity") or any other Person, is required by or with respect to
Arvin or any Subsidiary of Arvin in connection with the execution and delivery
of this Agreement and the Stock Option Agreements by Arvin or the consummation
by Arvin of the Merger and the other transactions contemplated hereby and
thereby, except for those required under or in relation to (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) state securities or "blue sky" laws, (C) the Securities Act, (D) the
Exchange Act, (E) the IBCL with respect to the filing of the applicable articles
of merger with the Indiana Secretary, (F) the rules and regulations of the NYSE,
(G) antitrust or other competition laws of other jurisdictions, and (H) such
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Arvin. Consents, approvals, orders, authorizations, registrations, declarations
and filings required under or in relation to any of the foregoing clauses (A)
through (G) are hereinafter referred to as "Arvin Necessary Consents".
(d) Reports and Financial Statements. (i) Each of Arvin and
its Subsidiaries has filed all registration statements, prospectuses, reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC since January 1, 1998 (collectively, including all exhibits thereto, the
"Arvin SEC Reports"). No Subsidiary of Arvin is required to file any form,
report, registration statement, prospectus or other document with the SEC. None
of the Arvin SEC Reports, as of their respective dates (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements (including the related notes)
included in the Arvin SEC Reports fairly presents, in all material respects, the
consolidated financial position and consolidated results of operations and cash
flows of Arvin and its consolidated Subsidiaries as of the respective dates or
for the respective periods set forth therein, all in conformity with generally
accepted
A-20
<PAGE> 125
accounting principles ("GAAP") consistently applied during the periods involved
except as otherwise noted therein, and subject, in the case of unaudited interim
financial statements, to normal and recurring year-end adjustments that have not
been and are not expected to be material in amount. All Arvin SEC Reports, as of
their respective dates (and as of the date of any amendment to the respective
Arvin SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder.
(ii) Except as disclosed in the Arvin SEC Reports filed and
publicly available prior to the date hereof (the "Arvin Filed SEC Reports"),
since January 2, 2000, Arvin and its Subsidiaries have not incurred any
liabilities that are of a nature that would be required to be disclosed on a
balance sheet of Arvin and its Subsidiaries or the footnotes thereto prepared in
conformity with GAAP, other than (A) liabilities incurred in the ordinary course
of business or (B) liabilities that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Arvin.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by Arvin for inclusion or incorporation by reference in (A)
the Form S-4 (as defined in Section 6.1(a)) will, at the time the Form S-4 is
filed with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 6.1(a)) will, on the date it is
first mailed to Meritor stockholders or Arvin stockholders or at the time of the
Meritor Stockholders Meeting or the Arvin Stockholders Meeting (each as defined
in Section 6.1), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The Form S-4 and the Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act and the rules and regulations of the SEC thereunder.
A-21
<PAGE> 126
(ii) Notwithstanding the foregoing provisions of this Section
4.1(e), no representation or warranty is made by Arvin with respect to
statements made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Meritor or Newco for
inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of Arvin, by
resolutions duly adopted by unanimous vote of those present at a meeting duly
called and held and, other than as provided for in Section 6.5, not subsequently
rescinded or modified in any way, has duly (i) determined that this Agreement
and the Merger are advisable and in the best interests of Arvin and its
stockholders, (ii) approved this Agreement, the Stock Option Agreements and the
Merger, (iii) resolved to recommend that the stockholders of Arvin adopt this
Agreement and approve the Merger and directed that the Merger and this Agreement
be submitted for consideration by Arvin's stockholders at the Arvin Stockholders
Meeting, (iv) taken all other action necessary to render (A) the limitations on
business combinations contained in Chapter 42 and Chapter 43 of the IBCL (or any
similar provision), (B) the supermajority stockholder voting requirements of
Article 11 of the articles of incorporation of Arvin and (C) the provisions of
Section 6.13(a) through (c) of the Restated Arvin Retirement Plan for Salaried
Employees inapplicable to the transactions contemplated hereby and (v) taken all
action necessary to terminate the Employee Stock Benefit Trust dated as of
December 20, 1996, as amended and restated on February 18, 1999 (the "Arvin
SECT"), between Arvin and The Northern Trust Company, as trustee, effective
immediately prior to the Effective Time, and to cause all shares of Arvin Common
Stock in the Arvin SECT to be surrendered to Arvin (solely in consideration for
repayment of amounts due under a promissory note in favor of Arvin) and canceled
so that none of such shares is issued and outstanding as of the Effective Time.
To the Knowledge of Arvin, except for the limitations on business combinations
contained in Chapter 42 and Chapter 43 of the IBCL (which have been rendered
inapplicable) and Section 203 of the DGCL, no state takeover statute is
applicable or purports to be applicable to the Merger, the Arvin Stock Option
Agreement or the other transactions contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Arvin
A-22
<PAGE> 127
Common Stock (the "Required Arvin Vote") to approve this Agreement and the
Merger is the only vote of the holders of any class or series of Arvin capital
stock necessary to approve or adopt this Agreement and the Merger and the other
transactions contemplated hereby.
(h) Litigation; Compliance with Laws. (i) Except as set forth
in the Arvin Filed SEC Reports, there is no suit, action, proceeding or
regulatory investigation pending or, to the Knowledge of Arvin, threatened,
against or affecting Arvin or any Subsidiary of Arvin or any property or asset
of Arvin or any Subsidiary of Arvin which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Arvin, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Arvin or any Subsidiary of Arvin which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Arvin.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Arvin, Arvin and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities which are necessary for the
operation of the businesses of Arvin and its Subsidiaries, taken as a whole (the
"Arvin Permits"), and no suspension or cancellation of any of the Arvin Permits
is pending or, to the Knowledge of Arvin, threatened, except for suspensions or
cancellations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Arvin. Arvin and its Subsidiaries
are in compliance with the terms of the Arvin Permits, except where the failure
so to comply, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on Arvin. None of Arvin or any of its
Subsidiaries is in violation of, and Arvin and its Subsidiaries have not
received any notices of violations with respect to, any Applicable Laws, except
for violations which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Arvin.
(i) Absence of Certain Changes or Events. Except as set forth
in the Arvin Filed SEC Reports, since January 2, 2000, Arvin and its
Subsidiaries have conducted their business only in the ordinary course,
consistent with past practice, and there has not been any change, circumstance,
A-23
<PAGE> 128
event or development which, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on Arvin. Since
January 2, 2000 through the date of this Agreement, none of Arvin or any of its
Subsidiaries has taken any action that, if taken during the period from the date
of this Agreement through the Effective Time, would constitute a breach of
Section 5.1.
(j) Environmental Matters. Except as set forth in the Arvin
Filed SEC Reports and except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Arvin, (i) the
operations of Arvin and its Subsidiaries have been and are in compliance with
all Environmental Laws (as defined below) and with all Arvin Permits required by
Environmental Laws, (ii) there are no pending or, to the Knowledge of Arvin,
threatened, actions, suits, claims, investigations or other proceedings
(collectively, "Actions") under or pursuant to Environmental Laws against Arvin
or its Subsidiaries or involving any real property currently or, to the
Knowledge of Arvin, formerly owned, operated or leased by Arvin or its
Subsidiaries and (iii) Arvin and its Subsidiaries are not subject to any
Environmental Liabilities (as defined below), and, to the Knowledge of Arvin, no
facts, circumstances or conditions relating to, arising from, associated with or
attributable to any real property currently or, to the Knowledge of Arvin,
formerly owned, operated or leased by Arvin or its Subsidiaries or operations
thereon would reasonably be expected to result in Environmental Liabilities.
As used in this Agreement, "Environmental Laws" means any and
all foreign, federal, state, local or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decisions, injunctions, orders,
decrees, requirements of any Governmental Entity, any and all common law
requirements, rules and bases of liability regulating, relating to or imposing
liability or standards of conduct concerning pollution, Hazardous Materials (as
defined below) or protection of human health, safety or the environment, as in
effect on or prior to the Closing Date and includes the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 33
U.S.C. Section 2601 et seq., the Toxic Substances Control Act,
A-24
<PAGE> 129
15 U.S.C. Section 2601 et seq., Occupational Safety and Health Act 29 U.S.C.
Section 651 et seq. and the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et
seq., as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes. As used
in this Agreement, "Environmental Liabilities" with respect to any Person means
any and all liabilities of or relating to such Person or any of its Subsidiaries
(including any entity which is, in whole or in part, a predecessor of such
Person or any of such Subsidiaries), whether vested or unvested, contingent or
fixed, actual or potential, known or unknown, which (i) arise under or relate to
matters covered or regulated by, or for which liability is imposed under,
Environmental Laws and (ii) relate to actions occurring or conditions existing
on or prior to the Closing Date. As used in this Agreement, "Hazardous
Materials" means any hazardous or toxic substances, materials or wastes,
defined, listed, classified or regulated as such in or under any Environmental
Laws and which includes petroleum, petroleum products, friable asbestos, urea
formaldehyde and polychlorinated biphenyls.
(k) Intellectual Property. Except as set forth in the Arvin
Filed SEC Reports and except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Arvin: (i) Arvin and
each of its Subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted; (ii) to the
Knowledge of Arvin, the use of any Intellectual Property by Arvin and its
Subsidiaries does not infringe on or otherwise violate the rights of any Person;
(iii) the use of the Intellectual Property is in accordance with any applicable
license pursuant to which Arvin or any Subsidiary acquired the right to use any
Intellectual Property; (iv) to the Knowledge of Arvin, no Person is challenging,
infringing on or otherwise violating any right of Arvin or any of its
Subsidiaries with respect to any Intellectual Property owned by and/or licensed
to Arvin or its Subsidiaries; and (v) neither Arvin nor any of its Subsidiaries
has any Knowledge of any pending claim, order or proceeding with respect to any
Intellectual Property used by Arvin and its Subsidiaries and, to the Knowledge
of Arvin, no Intellectual Property owned and/or licensed by Arvin or its
Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or
A-25
<PAGE> 130
unenforceability of such Intellectual Property. For purposes of this Agreement,
"Intellectual Property" shall mean trademarks, service marks, brand names,
certification marks, trade dress and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not, in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any Person; writings and
other works, whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.
(l) Arvin Rights Agreement. Arvin has taken all action
necessary or appropriate so that the execution of this Agreement and the Arvin
Option Agreement and consummation of the transactions contemplated hereby and
thereby do not and will not result in the ability of any Person to exercise any
Arvin Rights under the Rights Agreement dated as of May 29, 1986, as amended,
between Arvin and Harris Trust & Savings Bank, as Rights Agent (the "Arvin
Rights Agreement"), or enable or require such Arvin Rights to separate from the
shares of Arvin Common Stock to which they are attached or to be triggered or
become exercisable. Copies of the Arvin Rights Agreement, and all amendments
thereto, have previously been provided to Meritor.
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Arvin, except Merrill Lynch & Co., Inc. (the "Arvin Financial
Advisor") and Lehman Brothers, whose fees and expenses will be paid by Arvin in
accordance with Arvin's agreements with such firms.
A-26
<PAGE> 131
(n) Opinion of Arvin Financial Advisor. Arvin has received the
opinion of the Arvin Financial Advisor, dated the date of this Agreement, to the
effect that, as of such date, the Arvin Merger Consideration is fair, from a
financial point of view, to Arvin's stockholders.
(o) Taxes. (i) Each of Arvin and its Subsidiaries has timely
filed or has caused to be timely filed all material Tax returns or reports
required to be filed by it and all such returns and reports are complete and
correct in all material respects, or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired, except
to the extent that such failures to file, to be complete or correct or to have
extensions granted that remain in effect, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Arvin.
Arvin and each of its Subsidiaries have paid or caused to be paid all Taxes
shown as due on such returns and the most recent financial statements contained
in the Arvin Filed SEC Reports reflect an adequate reserve in accordance with
GAAP for all Taxes payable by Arvin and its Subsidiaries for all taxable periods
and portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any Taxes have been proposed,
asserted or assessed in writing against Arvin or any of its Subsidiaries that
are not adequately reserved for, except for deficiencies that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Arvin. The federal income tax returns of Arvin and each of its
Subsidiaries consolidated in such returns for tax years through 1994 have closed
by virtue of the applicable statute of limitations.
(iii) None of Arvin or any of its Subsidiaries has taken any
action, and Arvin has no Knowledge of any fact, agreement, plan or other
circumstance, that is reasonably likely to prevent either the First Step Merger
or the Second Step Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
(iv) Arvin and its Subsidiaries are not a party to any Tax
sharing or Tax indemnity agreements (other than agreements between or among
Arvin and its Subsidiaries).
(v) Within the past five years, none of Arvin or any of its
Subsidiaries has been a "distributing
A-27
<PAGE> 132
corporation" or a "controlled corporation" in a distribution intended to qualify
under Section 355(a) of the Code.
(vi) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Arvin, none of Arvin
or any of its Subsidiaries is obligated to make any payments, or is a party to
any contract that could obligate it to make any payments, that would not be
deductible by reason of Section 162(m) or 280G of the Code.
(vii) None of Arvin or any of its Subsidiaries has agreed to
make, nor is required to make, any material adjustment under Section 481(a) of
the Code or any similar provision of state, local or foreign law by reason of a
change in accounting methods or otherwise.
(p) Certain Contracts. As of the date hereof, none of Arvin or
any of its Subsidiaries is a party to or bound by (i) any "material contract"
(as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii)
any non-competition agreement or any other agreement or arrangement that limits
or otherwise restricts Arvin or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that would, after the
Effective Time, to the Knowledge of Arvin, limit or restrict Newco or any of its
affiliates or any successor thereto, from engaging or competing in any line of
business or in any geographic area, which agreement or arrangement would
reasonably be expected to have a Material Adverse Effect on Newco and its
Subsidiaries, taken together, after giving effect to the Merger, (iii) any
employee benefit plan, employee contract with a senior executive or any other
material contract, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or (iv) any Contract which would prohibit or
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement. All "material contracts" (as defined in clause
(i) above) set forth in Section 4.1(p) of the Arvin Disclosure Schedule are
valid and binding on Arvin and any of its Subsidiaries, as applicable, and in
full force and effect except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually or in
A-28
<PAGE> 133
the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Arvin. None of Arvin or any of its Subsidiaries (or, to the Knowledge
of Arvin, any other party thereto) has violated any provision of, or committed
or failed to perform any act which with or without notice, lapse of time or both
would constitute a default under the provisions of, any "material contract" (as
defined in clause (i) above) set forth in Section 4.1(p) of the Arvin Disclosure
Schedule, except in each case for those violations and defaults which,
individually or in the aggregate, would not reasonably be expected to result in
a Material Adverse Effect on Arvin.
(q) Employee Benefits. (i) With respect to each Arvin Plan,
except for Arvin Plans the liabilities under which, individually or in the
aggregate, would not have a Material Adverse Effect on Arvin, Arvin has made
available to Meritor a true, correct and complete copy of: (A) all plan
documents, trust agreements, and insurance contracts and other funding vehicles;
(B) the three most recent Annual Reports (Form 5500 Series) and accompanying
schedules and exhibits, if any; (C) the current summary plan description and any
material modifications thereto, if any (in each case, whether or not required to
be furnished under ERISA); (D) the three most recent annual financial reports,
if any; (E) the three most recent actuarial reports, if any; (F) the most recent
determination letter from the IRS, if any; and (G) the annual compliance testing
under Sections 401(a) through 416 of the Code for the three most recently
completed plan years.
(ii) With respect to each Arvin Employee Benefit Plan, Arvin
and its Subsidiaries have complied with, and are now in compliance with, all
provisions of ERISA, the Code and all other Applicable Laws and regulations
applicable to such Arvin Employee Benefit Plans and each Arvin Employee Benefit
Plan has been administered in accordance with its terms, in each case except as
would not have a Material Adverse Effect on Arvin. Each Arvin Employee Benefit
Plan that is required by ERISA to be funded is fully funded in accordance with
reasonable actuarial assumptions except as would not have a Material Adverse
Effect on Arvin.
(iii) All Arvin Employee Benefit Plans subject to the
Applicable Laws of any jurisdiction outside of the United States (A) have been
maintained in accordance with all applicable requirements, (B) if they are
intended to qualify for special tax treatment meet all requirements for
A-29
<PAGE> 134
such treatment, and (C) if they are intended to be funded and/or book-reserved
are fully funded and/or book-reserved, as appropriate, based upon reasonable
actuarial assumptions, in each case except as would not have a Material Adverse
Effect on Arvin.
(r) Labor Relations. As of the date of this Agreement, (i)
none of Arvin or any of its Subsidiaries is a party to any collective bargaining
agreement affecting a material number of employees, (ii) except as would not
have a Material Adverse Effect on Arvin, no labor organization or group of
employees of Arvin or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or, to the Knowledge of Arvin, threatened to be brought or filed, with the
National Labor Relations Board or any other domestic or foreign labor relations
tribunal or authority and (iii) except as would not have a Material Adverse
Effect on Arvin, there are no organizing activities, strikes, work stoppages,
slowdowns, lockouts, arbitrations or grievances, or other labor disputes pending
or, to the Knowledge of Arvin, threatened against or involving Arvin or any of
its Subsidiaries.
(s) Insurance. Arvin maintains insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance
with normal industry practice for companies engaged in businesses similar to
that of Arvin (taking into account the cost and availability of such insurance).
(t) Liens. No Liens exist on any assets of Arvin or any of its
Subsidiaries, except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Arvin.
SECTION 4.2 Representations and Warranties of Meritor. Except
as set forth in the Meritor Disclosure Schedule delivered by Meritor to Arvin
prior to the execution of this Agreement (the "Meritor Disclosure Schedule")
(each section of which qualifies the correspondingly numbered representation and
warranty or covenant of Meritor to the extent specified therein), Meritor
represents and warrants to Arvin as follows:
(a) Organization, Standing and Power; Subsidiaries. (i) Each
of Meritor and each of its
A-30
<PAGE> 135
Subsidiaries is a corporation or other organization duly organized, validly
existing and in good standing (where applicable) under the laws of its
jurisdiction of incorporation or organization, has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted and as it will be conducted through the Effective Time,
except where the failure to be so organized, existing and in good standing or to
have such power and authority, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Meritor, and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify or to be in good standing, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Meritor. The
copies of the certificate of incorporation and by-laws of Meritor which were
previously furnished or made available to Arvin are true, complete and correct
copies of such documents as in effect on the date of this Agreement.
(ii) Exhibit 21 to Meritor's Annual Report on Form 10-K for
the year ended September 30, 1999 includes all the Subsidiaries of Meritor which
as of the date of this Agreement are Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X of the SEC). All the outstanding shares of capital
stock of, or other equity interests in, each such Significant Subsidiary have
been validly issued and are fully paid and nonassessable and are owned directly
or indirectly by Meritor, free and clear of all material Liens and free of any
other material restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other equity interests). None of
Meritor or any of its Subsidiaries directly or indirectly owns any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other business
association or entity (other than Subsidiaries), that is or would reasonably be
expected to be material to Meritor and its Subsidiaries taken as a whole.
(b) Capital Structure. (i) The authorized capital stock of
Meritor consists of 350,000,000 shares of Meritor Common Stock and 25,000,000
shares of preferred stock, without par value (the "Meritor Preferred Stock"),
A-31
<PAGE> 136
1,000,000 of which are designated as "Series A Junior Participating Preferred
Stock". As of March 31, 2000, (i) 62,300,673 shares of Meritor Common Stock and
(ii) no shares of Meritor Preferred Stock were issued and outstanding. As of
March 31, 2000, 4,477,438 shares of Meritor Common Stock were reserved for
issuance upon exercise of options outstanding under Meritor Stock Plans (as
defined below). As of March 31, 2000, 6,818,264 shares of Meritor Common Stock
were held as treasury shares. Since March 31, 2000 to the date of this
Agreement, no shares of the capital stock of Meritor or any other securities of
Meritor have been issued other than shares of Meritor Common Stock (and
accompanying Meritor Rights (as defined below)) issued pursuant to options or
rights outstanding as of March 31, 2000 under Meritor Stock Plans. All issued
and outstanding shares of the capital stock of Meritor are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock is
entitled to preemptive rights. There are outstanding as of the date hereof no
options, warrants or other rights to acquire capital stock from Meritor other
than (x) rights (the "Meritor Rights") distributed to the holders of Meritor
Common Stock pursuant to the Meritor Rights Agreement (as defined in Section
4.2(l)), (y) options and other rights to acquire Meritor Common Stock from
Meritor ("Meritor Stock Options") representing in the aggregate the right to
purchase 4,477,438 shares of Meritor Common Stock under the Meritor Automotive,
Inc. 1997 Long-Term Incentives Plan and the Directors Stock Plan of Meritor
Automotive, Inc., as each such plan has been amended (collectively, the "Meritor
Stock Plans") and (z) the rights set forth in the Meritor Stock Option
Agreement. Section 4.2(b) of the Meritor Disclosure Schedule sets forth a
complete and correct list as of the date hereof of all outstanding Meritor Stock
Options and the exercise price thereof.
(ii) No bonds, debentures, notes or other indebtedness of
Meritor having the right to vote on any matters on which stockholders of Meritor
may vote ("Meritor Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 4.2(b), as
of the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which Meritor or any of its Subsidiaries is a party or by which any of them
is bound obligating Meritor or any of its Subsidiaries to issue, deliver or
sell, or cause to
A-32
<PAGE> 137
be issued, delivered or sold, additional shares of capital stock or other voting
securities of Meritor or any of its Subsidiaries or obligating Meritor or any of
its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are no outstanding obligations of
Meritor or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of Meritor or any of its Subsidiaries.
(c) Authority; No Conflicts. (i) Meritor has all requisite
corporate power and authority to enter into this Agreement and the Stock Option
Agreements and to consummate the transactions contemplated hereby and thereby,
subject, in the case of the consummation of the Merger, to the approval of this
Agreement by the Required Meritor Vote (as defined in Section 4.2(g)). The
execution and delivery of this Agreement and the Stock Option Agreements by
Meritor and the consummation by Meritor of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Meritor, subject, in the case of the consummation of the Merger, to the
approval of this Agreement by the Required Meritor Vote. This Agreement and the
Stock Option Agreements have been duly executed and delivered by Meritor and,
assuming the due authorization and valid execution and delivery by Arvin,
constitute valid and binding agreements of Meritor, enforceable against Meritor
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar Applicable Laws relating to or affecting creditors generally or by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement and the
Stock Option Agreements by Meritor do not, and the consummation by Meritor of
the Merger and the other transactions contemplated hereby and thereby will not
result in a Violation pursuant to: (A) any provision of the certificate of
incorporation or by-laws or similar organizational document of Meritor or any
Significant Subsidiary of Meritor or (B) except as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Meritor or, to the Knowledge of Meritor, Newco following the Merger, subject to
obtaining or making the Meritor Necessary Consents (as defined in
A-33
<PAGE> 138
paragraph (iii) below), any Contract to which Meritor or any of its Subsidiaries
is a party or by which any of them or any of their respective properties or
assets is bound, or any permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Meritor or any
Subsidiary of Meritor or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
Person, is required by or with respect to Meritor or any Subsidiary of Meritor
in connection with the execution and delivery of this Agreement and the Stock
Option Agreements by Meritor or the consummation by Meritor of the Merger and
the other transactions contemplated hereby and thereby, except for those
required under or in relation to (A) the HSR Act, (B) state securities or "blue
sky" laws, (C) the Securities Act, (D) the Exchange Act, (E) the DGCL and the
IBCL with respect to the filing of the applicable articles or certificate of
merger with the Delaware Secretary or the Indiana Secretary, (F) the rules and
regulations of the NYSE, including with respect to authorization for inclusion
of the shares of Newco Common Stock to be issued in the Merger and the
transaction contemplated hereby on the NYSE, subject to official notice of
issuance, (G) antitrust or other competition laws of other jurisdictions, and
(H) such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Meritor. Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of the foregoing
clauses (A) through (G) are hereinafter referred to as the "Meritor Necessary
Consents".
(d) Reports and Financial Statements. (i) Each of Meritor and
its Subsidiaries has filed all registration statements, prospectuses, reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC since December 19, 1997 (collectively, including all exhibits thereto,
the "Meritor SEC Reports"). No Subsidiary of Meritor is required to file any
form, report, registration statement, prospectus or other document with the SEC.
None of the Meritor SEC Reports, as of their respective dates (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contained any untrue statement of a material
A-34
<PAGE> 139
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements
(including the related notes) included in the Meritor SEC Reports fairly
presents, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of Meritor and its
consolidated Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently applied
during the periods involved except as otherwise noted therein, and subject, in
the case of unaudited interim financial statements, to normal and recurring
year-end adjustments that have not been and are not expected to be material in
amount. All Meritor SEC Reports, as of their respective dates (and as of the
date of any amendment to the respective Meritor SEC Report), complied as to form
in all material respects with the applicable requirements of the Securities Act
and the Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Meritor SEC Reports filed and
publicly available prior to the date hereof (the "Meritor Filed SEC Reports"),
since December 31, 1999, Meritor and its Subsidiaries have not incurred any
liabilities that are of a nature that would be required to be disclosed on a
balance sheet of Meritor and its Subsidiaries or the footnotes thereto prepared
in conformity with GAAP, other than (A) liabilities incurred in the ordinary
course of business or (B) liabilities that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Meritor.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by Meritor or Newco for inclusion or incorporation by
reference in (A) the Form S-4 will, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and (B) the Joint Proxy
Statement/Prospectus will, on the date it is first mailed to Meritor
stockholders or Arvin stockholders or at the time of the Meritor Stockholders
Meeting or the Arvin Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required
A-35
<PAGE> 140
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Form
S-4 and the Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
4.2(e), no representation or warranty is made by Meritor with respect to
statements made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by Arvin for inclusion or
incorporation by reference therein.
(f) Board Approval. The Board of Directors of Meritor, by
resolutions duly adopted by unanimous vote of those present at a meeting duly
called and held and, other than as set forth in Section 6.5, not subsequently
rescinded or modified in any way, has duly (i) determined that this Agreement
and the Merger are advisable and in the best interests of Meritor and its
stockholders, (ii) approved this Agreement, the Stock Option Agreements and the
Merger, (iii) resolved to recommend that the stockholders of Meritor adopt this
Agreement and approve the Merger and directed that the Merger and this Agreement
be submitted for consideration by Meritor's stockholders at the Meritor
Stockholders Meeting and (iv) taken all other action necessary to render (A) the
limitations on business combinations contained in Section 203 of the DGCL (or
any similar provision) and (B) the supermajority stockholder voting requirements
of Article Eleventh of the certificate of incorporation of Meritor inapplicable
to the transactions contemplated hereby. To the Knowledge of Meritor, except for
the limitations on business combinations contained in Section 203 of the DGCL
(which have been rendered inapplicable) and Chapter 42 and Chapter 43 of the
IBCL, no state takeover statute is applicable or purports to be applicable to
the Merger, the Meritor Stock Option Agreement or the other transactions
contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Meritor Common Stock (the "Required
Meritor Vote") to approve this Agreement and the Merger is the only vote of the
holders of any class or series of Meritor capital stock necessary to approve or
adopt this Agreement and the Merger and the other transactions contemplated
hereby.
A-36
<PAGE> 141
(h) Litigation; Compliance with Laws. (i) Except as set forth in the
Meritor Filed SEC Reports, there is no suit, action, proceeding or regulatory
investigation pending or, to the Knowledge of Meritor, threatened, against or
affecting Meritor or any Subsidiary of Meritor or any property or asset of
Meritor or any Subsidiary of Meritor which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on Meritor, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Meritor or any Subsidiary of Meritor
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Meritor.
(ii) Except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Meritor, Meritor and
its Subsidiaries hold all permits, licenses, franchises, variances, exemptions,
orders and approvals of all Governmental Entities which are necessary for the
operation of the businesses of Meritor and its Subsidiaries, taken as a whole
(the "Meritor Permits"), and no suspension or cancellation of any of the Meritor
Permits is pending or, to the Knowledge of Meritor, threatened, except for
suspensions or cancellations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Meritor. Meritor and
its Subsidiaries are in compliance with the terms of the Meritor Permits, except
where the failure so to comply, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Meritor. None of
Meritor or any of its Subsidiaries is in violation of, and Meritor and its
Subsidiaries have not received any notices of violations with respect to, any
Applicable Laws, except for violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Meritor.
(i) Absence of Certain Changes or Events. Except as set forth in the
Meritor Filed SEC Reports, since December 31, 1999, Meritor and its Subsidiaries
have conducted their business only in the ordinary course, consistent with past
practice, and there has not been any change, circumstance, event or development
which, individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect on Meritor. Since December 31, 1999
through the date of this Agreement, none of Meritor or any of its Subsidiaries
has
A-37
<PAGE> 142
taken any action that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 5.2.
(j) Environmental Matters. Except as set forth in the Meritor Filed
SEC Reports and except as, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Meritor, (i) the
operations of Meritor and its Subsidiaries have been and are in compliance with
all Environmental Laws and with all Meritor Permits required by Environmental
Laws, (ii) there are no pending or, to the Knowledge of Meritor, threatened,
Actions under or pursuant to Environmental Laws against Meritor or its
Subsidiaries or involving any real property currently or, to the Knowledge of
Meritor, formerly owned, operated or leased by Meritor or its Subsidiaries and
(iii) Meritor and its Subsidiaries are not subject to any Environmental
Liabilities and, to the Knowledge of Meritor, no facts, circumstances or
conditions relating to, arising from, associated with or attributable to any
real property currently or, to the Knowledge of Meritor, formerly owned,
operated or leased by Meritor or its Subsidiaries or operations thereon would
reasonably be expected to result in Environmental Liabilities.
(k) Intellectual Property. Except as set forth in the Meritor Filed
SEC Reports and except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Meritor: (i) Meritor
and each of its Subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property used in or necessary for the
conduct of its business as currently conducted; (ii) to the Knowledge of
Meritor, the use of any Intellectual Property by Meritor and its Subsidiaries
does not infringe on or otherwise violate the rights of any Person; (iii) the
use of the Intellectual Property is in accordance with any applicable license
pursuant to which Meritor or any Subsidiary acquired the right to use any
Intellectual Property; (iv) to the Knowledge of Meritor, no Person is
challenging, infringing on or otherwise violating any right of Meritor or any of
its Subsidiaries with respect to any Intellectual Property owned by and/or
licensed to Meritor or its Subsidiaries; and (v) neither Meritor nor any of its
Subsidiaries has any Knowledge of any pending claim, order or proceeding with
respect to any Intellectual Property used by Meritor and its Subsidiaries and,
to the Knowledge of Meritor, no Intellectual Property owned and/or licensed by
Meritor or
A-38
<PAGE> 143
its Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of such
Intellectual Property.
(l) Meritor Rights Agreement. Meritor has taken all action necessary
or appropriate so that the execution of this Agreement and the Meritor Option
Agreement and consummation of the transactions contemplated hereby and thereby
do not and will not result in the ability of any Person to exercise any Meritor
Rights under the Rights Agreement dated as of September 8, 1997 between Meritor
and First Chicago Trust Company of New York, as Rights Agent (the "Meritor
Rights Agreement"), or enable or require such Meritor Rights to separate from
the shares of Meritor Common Stock to which they are attached or to be triggered
or become exercisable. Copies of the Meritor Rights Agreement, and all
amendments thereto, have previously been provided to Arvin.
(m) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Meritor, except Warburg Dillon Read LLC (the "Meritor Financial
Advisor") and Bear, Stearns & Co. Inc., whose fees and expenses will be paid by
Meritor in accordance with Meritor's agreements with such firms.
(n) Opinion of Meritor Financial Advisor. Meritor has received the
opinion of the Meritor Financial Advisor, dated the date of this Agreement, to
the effect that, as of such date, the Meritor Exchange Ratio and the Arvin
Merger Consideration taken together are fair, from a financial point of view, to
Meritor's
stockholders.
(o) Taxes. (i) Each of Meritor and its Subsidiaries has timely filed
or has caused to be timely filed all material Tax returns or reports required to
be filed by it and all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, except to the extent that
such failures to file, to be complete or correct or to have extensions granted
that remain in effect, individually or in the aggregate, would not reasonably be
expected to
A-39
<PAGE> 144
have a Material Adverse Effect on Meritor. Meritor and each of its Subsidiaries
have paid or caused to be paid all Taxes shown as due on such returns and the
most recent financial statements contained in the Meritor Filed SEC Reports
reflect an adequate reserve in accordance with GAAP for all Taxes payable by
Meritor and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(ii) No deficiencies for any Taxes have been proposed, asserted or
assessed in writing against Meritor or any of its Subsidiaries that are not
adequately reserved for, except for deficiencies that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
Meritor. No federal income tax returns of Meritor and each of its Subsidiaries
consolidated in such returns have closed by virtue of the applicable statute of
limitations.
(iii) None of Meritor or any of its Subsidiaries has taken any action,
and Meritor has no Knowledge of any fact, agreement, plan or other circumstance,
that is reasonably likely to prevent either the First Step Merger or the Second
Step Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(iv) Meritor and its Subsidiaries are not a party to any Tax sharing
or Tax indemnity agreements (other than agreements between or among Meritor and
its Subsidiaries).
(v) Within the past five years, none of Meritor or any of its
Subsidiaries has been a "distributing corporation" or a "controlled corporation"
in a distribution intended to qualify under Section 355(a) of the Code.
(vi) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Meritor, none of
Meritor or any of its Subsidiaries is obligated to make any payments, or is a
party to any contract that could obligate it to make any payments, that would
not be deductible by reason of Section 162(m) or 280G of the Code.
(vii) None of Meritor or any of its Subsidiaries has agreed to make,
nor is required to make, any material adjustment under Section 481(a) of the
Code or any similar provision of state, local or foreign law by reason of a
change in accounting methods or otherwise.
A-40
<PAGE> 145
(p) Certain Contracts. As of the date hereof, none of Meritor or any
of its Subsidiaries is a party to or bound by (i) any "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) any
non-competition agreement or any other agreement or arrangement that limits or
otherwise restricts Meritor or any of its Subsidiaries or any of their
respective affiliates or any successor thereto, or that would, after the
Effective Time, to the Knowledge of Meritor, limit or restrict Newco or any of
its affiliates or any successor thereto, from engaging or competing in any line
of business or in any geographic area, which agreement or arrangement would
reasonably be expected to have a Material Adverse Effect on Newco and its
Subsidiaries, taken together, after giving effect to the Merger, (iii) any
employee benefit plan, employee contract with a senior executive or any other
material contract, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or (iv) any Contract which would prohibit or
materially delay the consummation of the Merger or any of the transactions
contemplated by this Agreement. All "material contracts" (as defined in clause
(i) above) set forth in Section 4.2(p) of the Meritor Disclosure Schedule are
valid and binding on Meritor and any of its Subsidiaries, as applicable, and in
full force and effect except to the extent they have previously expired in
accordance with their terms or if the failure to be in full force and effect,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Meritor. None of Meritor or any of its Subsidiaries
(or, to the Knowledge of Meritor, any other party thereto) has violated any
provision of, or committed or failed to perform any act which with or without
notice, lapse of time or both would constitute a default under the provisions
of, any "material contract" (as defined in clause (i) above) set forth in
Section 4.2(p) of the Meritor Disclosure Schedule, except in each case for those
violations and defaults which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect on Meritor.
(q) Employee Benefits. (i) With respect to each Meritor Plan, except
for Meritor Plans the liabilities under which, individually or in the aggregate,
would not have a Material Adverse Effect on Meritor, Meritor has made
A-41
<PAGE> 146
available to Arvin a true, correct and complete copy of: (A) all plan documents,
trust agreements, and insurance contracts and other funding vehicles; (B) the
three most recent Annual Reports (Form 5500 Series) and accompanying schedules
and exhibits, if any; (C) the current summary plan description and any material
modifications thereto, if any (in each case, whether or not required to be
furnished under ERISA); (D) the three most recent annual financial reports, if
any; (E) the three most recent actuarial reports, if any; (F) the most recent
determination letter from the IRS, if any; and (G) the annual compliance testing
under Sections 401(a) through 416 of the Code for the three most recently
completed plan years.
(ii) With respect to each Meritor Employee Benefit Plan, Meritor and
its Subsidiaries have complied with, and are now in compliance with, all
provisions of ERISA, the Code and all other Applicable Laws and regulations
applicable to such Meritor Employee Benefit Plans and each Meritor Employee
Benefit Plan has been administered in accordance with its terms, in each case
except as would not have a Material Adverse Effect on Meritor. Each Meritor
Employee Benefit Plan that is required by ERISA to be funded is fully funded in
accordance with reasonable actuarial assumptions, except as would not have a
Material Adverse Effect on Meritor.
(iii) All Meritor Employee Benefit Plans subject to the Applicable
Laws of any jurisdiction outside of the United States (A) have been maintained
in accordance with all applicable requirements, (B) if they are intended to
qualify for special tax treatment meet all requirements for such treatment, and
(C) if they are intended to be funded and/or book-reserved are fully funded
and/or book-reserved, as appropriate, based upon reasonable actuarial
assumptions, in each case except as would not have a Material Adverse Effect on
Meritor.
(r) Labor Relations. As of the date of this Agreement, (i) none of
Meritor or any of its Subsidiaries is a party to any collective bargaining
agreement affecting a material number of employees, (ii) except as would not
have a Material Adverse Effect on Meritor, no labor organization or group of
employees of Meritor or any of its Subsidiaries has made a pending demand for
recognition or certification, and there are no representation or certification
proceedings or petitions seeking a representation proceeding presently pending
or, to the Knowledge of Meritor, threatened to be
A-42
<PAGE> 147
brought or filed, with the National Labor Relations Board or any other domestic
or foreign labor relations tribunal or authority and (iii) except as would not
have a Material Adverse Effect on Meritor, there are no organizing activities,
strikes, work stoppages, slowdowns, lockouts, arbitrations or grievances, or
other labor disputes pending or, to the Knowledge of Meritor, threatened against
or involving Meritor or any of its Subsidiaries.
(s) Insurance. Meritor maintains insurance coverage with reputable
insurers in such amounts and covering such risks as are in accordance with
normal industry practice for companies engaged in businesses similar to that of
Meritor (taking into account the cost and availability of such insurance).
(t) Liens. No Liens exist on any assets of Meritor or any of its
Subsidiaries, except as would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Meritor.
SECTION 4.3 Representations and Warranties of Newco. Newco
represents and warrants to Meritor and Arvin as follows:
(a) Organization. Newco is a corporation duly incorporated, validly
existing and in good standing under the laws of Indiana. Newco is a direct
wholly-owned subsidiary of Meritor. Meritor, as the sole stockholder of Newco,
has duly approved this Agreement and the transactions contemplated hereby.
(b) Capital Structure. On the date hereof, the authorized capital
stock of Newco consists of 1,000 shares of Newco Common Stock. All shares of
Newco Common Stock to be issued in connection with the Merger will be duly
authorized, validly issued, fully paid and nonassessable, and free of preemptive
rights.
(c) Corporate Authorization. Newco has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Newco and
the consummation by Newco of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Newco. This
Agreement has been duly executed and delivered by Newco and constitutes a valid
and binding agreement of Newco,
A-43
<PAGE> 148
enforceable against Newco in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and
similar Applicable Laws relating to or affecting creditors generally and by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) Non-Contravention. The execution, delivery and performance by
Newco of this Agreement and the consummation by Newco of the transactions
contemplated hereby will not contravene or conflict with the Newco Articles or
the Newco By-Laws.
(e) No Business Activities. Newco has not conducted any activities
other than in connection with the organization of Newco, the negotiation,
execution and performance of this Agreement and the consummation of the
transactions contemplated hereby. As of the date hereof, Newco has no
Subsidiaries.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.1 Covenants of Arvin. During the period from the date of
this Agreement and continuing until the Effective Time, Arvin agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement, the Stock Option Agreements or Section 5.1 (including its
subsections) of the Arvin Disclosure Schedule or as required by a Governmental
Entity or to the extent that Meritor and Newco shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course. (i) Other than as set forth in Section 5.1(a)
of the Arvin Disclosure Schedule, Arvin and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted, and shall use all
reasonable efforts to preserve intact their present business organizations, keep
available the services of their current officers and other key employees and
preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their ongoing businesses shall not
be impaired at the
A-44
<PAGE> 149
Effective Time; provided, however, that no action by Arvin or its Subsidiaries
with respect to matters specifically addressed by any other provision of this
Section 5.1 shall be deemed a breach of this Section 5.1(a)(i) unless such
action would constitute a breach of one or more of such other provisions.
(ii) Other than as set forth in Section 5.1(a) of the Arvin
Disclosure Schedule and other than in connection with acquisitions permitted by
Section 5.1(e) or investments permitted by Section 5.1(g), Arvin shall not, and
shall not permit any of its Subsidiaries to, (A) enter into any new material
line of business or (B) incur or commit to any capital expenditures or any
obligations or liabilities in connection with any capital expenditures other
than capital expenditures and obligations or liabilities in connection therewith
incurred or committed to in the ordinary course of business consistent with past
practice.
(b) Dividends; Changes in Share Capital. Arvin shall not, and shall
not permit any of its Subsidiaries to, and shall not propose to, (i) declare or
pay any dividends on or make other distributions (whether in cash, stock or
property) in respect of any of its capital stock, except (A) the declaration and
payment of regular quarterly cash dividends not in excess of $0.22 per share of
Arvin Common Stock with usual record and payment dates for such dividends in
accordance with past dividend practice and (B) for dividends by any direct or
indirect wholly-owned Subsidiaries of Arvin, (ii) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly-owned Subsidiary of
Arvin which remains a wholly-owned Subsidiary after consummation of such
transaction or (iii) repurchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into or exercisable for any shares
of its capital stock.
(c) Issuance of Securities. Arvin shall not, and shall not permit
any of its Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber,
or authorize or propose the issuance, delivery, sale, pledge or encumbrance of,
any shares of its capital stock of any class, any Arvin Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants, calls
or options to acquire, any such shares or Arvin Voting Debt, or enter into any
A-45
<PAGE> 150
commitment, arrangement, undertaking or agreement with respect to any of the
foregoing, other than (i) the issuance of Arvin Common Stock (and the associated
Arvin Rights) upon the exercise of Arvin Stock Options outstanding on the date
hereof in accordance with their present terms or pursuant to Arvin Stock Options
or other stock based awards granted pursuant to clause (ii) below, (ii) the
granting of Arvin Stock Options or other stock based awards of or to acquire not
more than 100,000 shares of Arvin Common Stock granted under Arvin Plans
outstanding on the date hereof in the ordinary course of business consistent
with past practice, (iii) issuances by a wholly-owned Subsidiary of Arvin of
capital stock of such Subsidiary to such Subsidiary's parent or another
wholly-owned Subsidiary of Arvin, (iv) issuances in accordance with the Arvin
Rights Agreement or (v) issuances pursuant to the Arvin Stock Option Agreement.
(d) Governing Documents. Except to the extent required to comply
with its obligations hereunder or with Applicable Laws, Arvin shall not amend or
propose to so amend its articles of incorporation, bylaws or other governing
documents.
(e) No Acquisitions. Other than (i) pursuant to the Meritor Stock
Option Agreement, (ii) acquisitions disclosed in Section 5.1(e) of the Arvin
Disclosure Schedule and (iii) acquisitions for cash in existing or related lines
of business of Arvin the fair market value of the total consideration (including
the value of indebtedness acquired or assumed) for which does not exceed the
amount specified in the aggregate for all such acquisitions in Section
5.1(e)(iii) of the Arvin Disclosure Schedule and none of which acquisitions
referred to in this clause (iii) presents a material risk of making it
materially more difficult to obtain any approval or authorization required in
connection with the Merger under Applicable Laws, Arvin shall not, and shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, limited liability entity, joint venture,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any material assets (excluding the acquisition of
assets used in the operations of the business of Arvin and its Subsidiaries in
the ordinary course consistent with past practice, which assets do not
constitute a business unit, division or all or substantially
A-46
<PAGE> 151
all of the assets of the transferor); provided, however, that the foregoing
shall not prohibit (x) internal reorganizations or consolidations involving
existing Subsidiaries of Arvin or (y) the creation of new direct or indirect
wholly-owned Subsidiaries of Arvin organized to conduct or continue activities
otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Arvin, (ii) as may be required
by or in conformance with Applicable Laws in order to permit or facilitate the
consummation of the transactions contemplated hereby or (iii) as disclosed in
Section 5.1(f) of the Arvin Disclosure Schedule, Arvin shall not, and shall not
permit any of its Subsidiaries to, sell, lease, license or otherwise encumber or
subject to any Lien or otherwise dispose of, or agree to sell, lease, license or
otherwise encumber or subject to any Lien or otherwise dispose of, any of its
assets (including capital stock of Subsidiaries of Arvin but excluding inventory
in the ordinary course of business consistent with past practice), if the fair
market value of the total consideration (including the value of the indebtedness
acquired or assumed) therefor exceeds the amount specified in the aggregate for
all such dispositions in Section 5.1(f) of the Arvin Disclosure Schedule.
(g) Investments; Indebtedness. Arvin shall not, and shall not permit
any of its Subsidiaries to, other than in connection with the consummation of
acquisitions permitted by Section 5.1(e), (i) make any loans, advances or
capital contributions to, or investments in, any other Person, other than (A)
loans or investments by Arvin or a Subsidiary of Arvin to or in Arvin or a
Subsidiary of Arvin, (B) pursuant to any contract or other legal obligation of
Arvin or any of its Subsidiaries as in effect at the date of this Agreement, (C)
employee loans or advances for travel, business, relocation or other
reimbursable expenses made in the ordinary course of business, (D) loans,
advances, capital contributions or investments which in the aggregate do not
exceed the amount specified in Section 5.2(g) of the Arvin Disclosure Schedule
or (E) in the ordinary course of business which are not, individually or in the
aggregate, material to Arvin and its Subsidiaries taken as a whole or (ii)
create, incur, assume or suffer to exist any indebtedness, issuances of debt
securities, guarantees, loans or advances not in existence as of the date of
this Agreement except in the ordinary course of business which
A-47
<PAGE> 152
are not, individually or in the aggregate, material to Arvin and its
Subsidiaries taken as a whole.
(h) Tax-Free Qualification. Arvin shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of
its Subsidiaries to, take any action (including any action otherwise permitted
by this Section 5.1) that would prevent or impede the First Step Merger or the
Second Step Merger from qualifying as a "reorganization" under Section 368(a) of
the Code; provided, however, that nothing hereunder shall limit the ability of
Arvin to exercise its rights and/or fulfill its obligations under the Stock
Option Agreements.
(i) Compensation. Except (x) as set forth in Section 5.1(c) or
Section 5.1(i) of the Arvin Disclosure Schedule, (y) as required by Applicable
Laws or by the terms of any collective bargaining agreement or other agreement
currently in effect between Arvin or any Subsidiary of Arvin and any executive
officer or employee thereof or (z) in the ordinary course of business, Arvin
shall not increase the amount of compensation or employee benefits of any
director, officer or employee of Arvin or any Subsidiary or business unit of
Arvin, pay any pension, retirement, savings or profit-sharing allowance to any
employee that is not required by any existing plan or agreement, enter into any
Contract with any of its employees regarding his or her employment, compensation
or benefits, increase or commit to increase any employee benefits, issue any
additional Arvin Stock Options, adopt or amend or make any commitment to adopt
or amend any Arvin Plan or make any contribution, other than regularly scheduled
contributions, to any Arvin Plan. Arvin shall not accelerate the vesting of, or
the lapsing of restrictions with respect to, any stock options or other
stock-based compensation, except as required by Applicable Laws or in the
ordinary course of business or in accordance with this Agreement, and any option
committed to be granted or granted after the date hereof shall not accelerate as
a result of the approval or consummation of any transaction contemplated by this
Agreement. Subject to the provisions of Section 2.12, Arvin shall not enter into
any change of control employment agreements.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
Arvin Filed SEC Reports, or as required by a Governmental Entity, Arvin shall
not change its methods of accounting in effect at December 31, 1999, except as
required by changes in GAAP as concurred in by
A-48
<PAGE> 153
Arvin's independent public accountants. Arvin shall not (i) change its fiscal
year or (ii) make any material Tax election or settle or compromise any material
income Tax liability, other than in the ordinary course of business consistent
with past practice.
(k) Certain Agreements and Arrangements. Except as disclosed in
Section 5.1(k) of the Arvin Disclosure Schedule, Arvin shall not, and shall not
permit any of its Subsidiaries to, enter into any Contracts that limit or
otherwise restrict Arvin or any of its Subsidiaries or any of their respective
affiliates or any successor thereto, or that would, after the Effective Time,
limit or restrict Newco or any of its affiliates or any successor thereto, from
engaging or competing in any line of business or in any geographic area which
agreements or arrangements, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Newco and its Subsidiaries,
taken together, after giving effect to the Merger.
(l) Arvin Rights Agreement. Other than in connection with the Merger
and the Arvin Stock Option Agreement, Arvin shall not amend, modify or waive any
provision of the Arvin Rights Agreement, and shall not take any action to redeem
the Arvin Rights or render the Arvin Rights inapplicable to any transaction.
(m) No Related Actions. Arvin will not, and will not
permit any of its Subsidiaries to, agree or commit to do any of the
foregoing.
SECTION 5.2 Covenants of Meritor and Newco. During the period from
the date of this Agreement and continuing until the Effective Time, Meritor
agrees as to itself and its Subsidiaries and Newco agrees that (except as
expressly contemplated or permitted by this Agreement, the Stock Option
Agreements or Section 5.2 (including its subsections) of the Meritor Disclosure
Schedule or as required by a Governmental Entity or to the extent that Arvin
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed):
(a) Ordinary Course. (i) Other than as set forth in Section 5.2(a)
of the Meritor Disclosure Schedule, Meritor and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted, and
A-49
<PAGE> 154
shall use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their current officers and other
key employees and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their ongoing
businesses shall not be impaired at the Effective Time; provided, however, that
no action by Meritor or its Subsidiaries with respect to matters specifically
addressed by any other provision of this Section 5.2 shall be deemed a breach of
this Section 5.2(a)(i) unless such action would constitute a breach of one or
more of such other provisions.
(ii) Other than as set forth in Section 5.2(a) of the Meritor
Disclosure Schedule and other than in connection with acquisitions permitted by
Section 5.2(e) or investments permitted by Section 5.2(g), Meritor shall not,
and shall not permit any of its Subsidiaries to, (A) enter into any new material
line of business or (B) incur or commit to any capital expenditures or any
obligations or liabilities in connection with any capital expenditures other
than capital expenditures and obligations or liabilities in connection therewith
incurred or committed to in the ordinary course of business consistent with past
practice.
(b) Dividends; Changes in Share Capital. Meritor shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions (whether in cash,
stock or property) in respect of any of its capital stock, except (A) the
declaration and payment of regular quarterly cash dividends not in excess of
$.105 per share of Meritor Common Stock with usual record and payment dates for
such dividends in accordance with past dividend practice and (B) for dividends
by any direct or indirect wholly-owned Subsidiaries of Meritor, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly-owned Subsidiary of Meritor which remains a wholly-owned Subsidiary
after consummation of such transaction or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock.
(c) Issuance of Securities. Meritor shall not, and shall not permit
any of its Subsidiaries to, issue,
A-50
<PAGE> 155
deliver, sell, pledge or otherwise encumber, or authorize or propose the
issuance, delivery, sale, pledge or encumbrance of, any shares of its capital
stock of any class, any Meritor Voting Debt or any securities convertible into
or exercisable for, or any rights, warrants, calls or options to acquire, any
such shares or Meritor Voting Debt, or enter into any commitment, arrangement,
undertaking or agreement with respect to any of the foregoing, other than (i)
the issuance of Meritor Common Stock (and the associated Meritor Rights) upon
the exercise of Meritor Stock Options outstanding on the date hereof in
accordance with their present terms or pursuant to Meritor Stock Options for or
other stock based awards granted pursuant to clause (ii) below, (ii) the
granting of Meritor Stock Options or other stock based awards of or to acquire
not more than 200,000 shares of Meritor Common Stock granted under Meritor Plans
outstanding on the date hereof in the ordinary course of business consistent
with past practice, (iii) issuances by a wholly-owned Subsidiary of Meritor of
capital stock of such Subsidiary to such Subsidiary's parent or another
wholly-owned Subsidiary of Meritor, (iv) issuances in accordance with the
Meritor Rights Agreement or (v) issuances pursuant to the Meritor Stock Option
Agreement.
(d) Governing Documents. Except to the extent required to comply
with its obligations hereunder or with Applicable Laws, Meritor shall not amend
or propose to so amend its certificate of incorporation, by-laws or other
governing documents.
(e) No Acquisitions. Other than (i) pursuant to the Arvin Stock
Option Agreement, (ii) acquisitions disclosed in Section 5.2(e) of the Meritor
Disclosure Schedule and (iii) acquisitions for cash in existing or related lines
of business of Meritor the fair market value of the total consideration
(including the value of indebtedness acquired or assumed) for which does not
exceed the amount specified in the aggregate for all such acquisitions in
Section 5.2(e)(iii) of the Meritor Disclosure Schedule and none of which
acquisitions referred to in this clause (iii) presents a material risk of making
it materially more difficult to obtain any approval or authorization required in
connection with the Merger under Applicable Laws, Meritor shall not, and shall
not permit any of its Subsidiaries to, acquire or agree to acquire by merger or
consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation,
A-51
<PAGE> 156
partnership, limited liability entity, joint venture, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any material assets (excluding the acquisition of assets used in the
operations of the business of Meritor and its Subsidiaries in the ordinary
course consistent with past practice, which assets do not constitute a business
unit, division or all or substantially all of the assets of the transferor);
provided, however, that the foregoing shall not prohibit (x) internal
reorganizations or consolidations involving existing Subsidiaries of Meritor or
(y) the creation of new direct or indirect wholly-owned Subsidiaries of Meritor
organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Meritor, (ii) as may be
required by or in conformance with Applicable Laws in order to permit or
facilitate the consummation of the transactions contemplated hereby or (iii) as
disclosed in Section 5.2(f) of the Meritor Disclosure Schedule, Meritor shall
not, and shall not permit any of its Subsidiaries to, sell, lease, license or
otherwise encumber or subject to any Lien or otherwise dispose of, or agree to
sell, lease, license or otherwise encumber or subject to any Lien or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of
Meritor but excluding inventory in the ordinary course of business consistent
with past practice), if the fair market value of the total consideration
(including the value of the indebtedness acquired or assumed) therefor exceeds
the amount specified in the aggregate for all such dispositions in Section
5.2(f) of the Meritor Disclosure Schedule.
(g) Investments; Indebtedness. Meritor shall not, and shall not
permit any of its Subsidiaries to, other than in connection with the
consummation of acquisitions permitted by Section 5.2(e), (i) make any loans,
advances or capital contributions to, or investments in, any other Person, other
than (A) loans or investments by Meritor or a Subsidiary of Meritor to or in
Meritor or a Subsidiary of Meritor, (B) pursuant to any contract or other legal
obligation of Meritor or any of its Subsidiaries as in effect at the date of
this Agreement, (C) employee loans or advances for travel, business, relocation
or other reimbursable expenses made in the ordinary course of business, (D)
loans, advances, capital contributions or investments which in the aggregate do
not exceed the amount
A-52
<PAGE> 157
specified in Section 5.2(g) of the Meritor Disclosure Schedule or (E) in the
ordinary course of business which are not, individually or in the aggregate,
material to Meritor and its Subsidiaries taken as a whole or (ii) create, incur,
assume or suffer to exist any indebtedness, issuances of debt securities,
guarantees, loans or advances not in existence as of the date of this Agreement
except in the ordinary course of business which are not, individually or in the
aggregate, material to Meritor and its Subsidiaries taken as a whole.
(h) Tax-Free Qualification. Meritor shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of
its Subsidiaries to, take any action (including any action otherwise permitted
by this Section 5.2) that would prevent or impede the First Step Merger or the
Second Step Merger from qualifying as a "reorganization" under Section 368(a) of
the Code; provided, however, that nothing hereunder shall limit the ability of
Meritor to exercise its rights and/or fulfill its obligations under the Stock
Option Agreements.
(i) Compensation. Except (x) as set forth in Section 5.2(c) or
Section 5.2(i) of the Meritor Disclosure Schedule, (y) as required by Applicable
Laws or by the terms of any collective bargaining agreement or other agreement
currently in effect between Meritor or any Subsidiary of Meritor and any
executive officer or employee thereof or (z) in the ordinary course of business,
Meritor shall not increase the amount of compensation or employee benefits of
any director, officer or employee of Meritor or any Subsidiary or business unit
of Meritor, pay any pension, retirement, savings or profit-sharing allowance to
any employee that is not required by any existing plan or agreement, enter into
any Contract with any of its employees regarding his or her employment,
compensation or benefits, increase or commit to increase any employee benefits,
issue any additional Meritor Stock Options, adopt or amend or make any
commitment to adopt or amend any Meritor Plan or make any contribution, other
than regularly scheduled contributions, to any Meritor Plan. Meritor shall not
accelerate the vesting of, or the lapsing of restrictions with respect to, any
stock options or other stock-based compensation, except as required by
Applicable Laws or in the ordinary course of business or in accordance with this
Agreement, and any option committed to be granted or granted after the date
hereof shall not accelerate as a result of the approval or consummation of any
transaction contemplated
A-53
<PAGE> 158
by this Agreement. Meritor shall not enter into any change of control employment
agreements.
(j) Accounting Methods; Income Tax Elections. Except as disclosed in
Meritor Filed SEC Reports, or as required by a Governmental Entity, Meritor
shall not change its methods of accounting in effect at December 31, 1999,
except as required by changes in GAAP as concurred in by Meritor's independent
public accountants. Meritor shall not (i) change its fiscal year or (ii) make
any material Tax election or settle or compromise any material income Tax
liability, other than in the ordinary course of business consistent with past
practice.
(k) Certain Agreements and Arrangements. Except as disclosed in
Section 5.2(k) of the Meritor Disclosure Schedule, Meritor shall not, and shall
not permit any of its Subsidiaries to, enter into any Contracts that limit or
otherwise restrict Meritor or any of its Subsidiaries or any of their respective
affiliates or any successor thereto, or that would, after the Effective Time,
limit or restrict Newco or any of its affiliates or any successor thereto, from
engaging or competing in any line of business or in any geographic area which
agreements or arrangements, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Newco and its Subsidiaries,
taken together, after giving effect to the Merger.
(l) Meritor Rights Agreement. Other than in connection with the
Merger and the Meritor Stock Option Agreement, Meritor shall not amend, modify
or waive any provision of the Meritor Rights Agreement and shall not take any
action to redeem the Meritor Rights or render the Meritor Rights inapplicable to
any transaction.
(m) No Newco Business Activities. Newco will not conduct any
activities other than in connection with the organization of Newco, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby.
(n) No Related Actions. Meritor will not, and will not permit any
of its Subsidiaries to, agree or commit to do any of the foregoing.
SECTION 5.3 Governmental Filings. Each of Meritor and Newco, on the
one hand, and Arvin, on the other
A-54
<PAGE> 159
hand, shall (a) confer on a regular and frequent basis with the other and (b)
report to the other (to the extent permitted by law or regulation or any
applicable confidentiality agreement) on operational matters. Each party shall
file all reports required to be filed by each of them with the SEC (and all
other Governmental Entities) between the date of this Agreement and the
Effective Time and shall (to the extent permitted by law or regulation or any
applicable confidentiality agreement) deliver to the other parties copies of all
such reports, announcements and publications promptly after the same are filed.
SECTION 5.4 Control of Other Party's Business. Nothing contained in
this Agreement shall give Meritor, directly or indirectly, the right to control
or direct Arvin's operations prior to the Effective Time. Nothing contained in
this Agreement shall give Arvin, directly or indirectly, the right to control or
direct Meritor's operations prior to the Effective Time. Prior to the Effective
Time, each of Meritor and Arvin shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of Proxy Statement; Stockholders Meetings.
(a) As promptly as reasonably practicable following the date hereof, Arvin and
Meritor shall prepare and file with the SEC proxy materials which shall
constitute the Joint Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and Newco shall prepare and file with the SEC a
registration statement on Form S-4 with respect to the issuance of Newco Common
Stock in the Merger (the "Form S-4"). The Joint Proxy Statement/Prospectus will
be included in and will constitute a part of the Form S-4 as Newco's prospectus.
Each of Arvin, Meritor and Newco shall use reasonable best efforts to have the
Joint Proxy Statement/Prospectus cleared by the SEC and the Form S-4 declared
effective by the SEC as promptly as reasonably practicable after filing with the
SEC and to keep the Form S-4 effective as long as is necessary to consummate the
Merger and the transactions contemplated thereby. Arvin and
A-55
<PAGE> 160
Meritor shall, as promptly as practicable after receipt thereof, provide the
other party copies of any written comments and advise the other party of any
oral comments, with respect to the Joint Proxy Statement/Prospectus received
from the SEC. Meritor and Newco shall provide Arvin with a reasonable
opportunity to review and comment on any amendment or supplement to the Form S-4
prior to filing such with the SEC, and with a copy of all such filings made with
the SEC. Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by reference) to the Joint
Proxy Statement/Prospectus or the Form S-4 shall be made without the approval of
both Meritor and Arvin, which approval shall not be unreasonably withheld or
delayed; provided that with respect to documents filed by a party which are
incorporated by reference in the Form S-4 or Joint Proxy Statement/Prospectus,
this right of approval shall apply only with respect to information relating to
the other party or its business, financial condition or results of operations.
Arvin will use reasonable best efforts to cause the Joint Proxy
Statement/Prospectus to be mailed to Arvin's stockholders, and Meritor will use
reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be
mailed to Meritor's stockholders, in each case as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Newco shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of Newco Common Stock in the Merger and Arvin and
Meritor shall furnish all information concerning Arvin and Meritor and the
holders of Arvin Common Stock and Meritor Common Stock as may be reasonably
requested in connection with any such action. Each of Meritor and Newco, on the
one hand, and Arvin, on the other hand, will advise the other, promptly after it
receives notice thereof of the time when the Form S-4 has become effective, the
issuance of any stop order with respect to the Form S-4, the suspension of the
qualification of the Newco Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement/Prospectus or the Form S-4. If at any
time prior to the Effective Time any information relating to Arvin, Meritor or
Newco, or any of their respective affiliates, officers or directors, should be
discovered by Arvin, Meritor or Newco which should be set forth in an amendment
or supplement to the Form S-4 or the Joint Proxy
A-56
<PAGE> 161
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and, to the extent required by Applicable Laws,
an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and disseminated to the stockholders of Arvin and
Meritor.
(b) Arvin shall duly take all lawful action to call, give notice of,
convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of Arvin and Meritor (the "Arvin
Stockholders Meeting") for the purpose of obtaining the Required Arvin Vote with
respect to the transactions contemplated by this Agreement and shall take all
lawful action to solicit the approval of this Agreement and the Merger by the
Required Arvin Vote; and the Board of Directors of Arvin shall recommend
approval of this Agreement and the Merger by the stockholders of Arvin to the
effect as set forth in Section 4.1(f) (the "Arvin Recommendation"), and shall
not withdraw, modify or qualify (or propose to withdraw, modify or qualify) in
any manner adverse to Meritor such recommendation (a "Change in the Arvin
Recommendation"); provided, however, that the Board of Directors of Arvin may
make a Change in the Arvin Recommendation pursuant to Section 6.5.
Notwithstanding any Change in the Arvin Recommendation, this Agreement shall be
submitted to the stockholders of Arvin at the Arvin Stockholders Meeting for the
purpose of approving this Agreement and nothing contained herein shall be deemed
to relieve Arvin of such obligation.
(c) Meritor shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its stockholders on a date determined in
accordance with the mutual agreement of Meritor and Arvin (the "Meritor
Stockholders Meeting") for the purpose of obtaining the Required Meritor Vote
with respect to the transactions contemplated by this Agreement and shall take
all lawful action to solicit the approval of this Agreement and the Merger by
the Required Meritor Vote, and the Board of Directors of Meritor shall recommend
approval of this Agreement and the Merger by the stockholders of Meritor to the
effect as set forth in Section 4.2(f) (the "Meritor Recommendation"), and shall
not withdraw, modify or qualify
A-57
<PAGE> 162
(or propose to withdraw, modify or qualify) in any manner adverse to Arvin such
recommendation (a "Change in the Meritor Recommendation"); provided, however,
that the Board of Directors of Meritor may make a Change in the Meritor
Recommendation pursuant to Section 6.5. Notwithstanding any Change in the
Meritor Recommendation, this Agreement shall be submitted to the stockholders of
Meritor at the Meritor Stockholders Meeting for the purpose of approving this
Agreement and nothing contained herein shall be deemed to relieve Meritor of
such obligation.
SECTION 6.2 Newco Board of Directors and Management. At or prior to
the Effective Time, the parties will take all action necessary to effectuate the
provisions of Sections 2.12 and 2.13.
SECTION 6.3 Access to Information. Upon reasonable notice, each of
Meritor and Arvin shall (and shall cause its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the other reasonable access during normal business hours,
during the period prior to the Effective Time, to all its books, records,
properties, plants and personnel and, during such period, such party shall (and
shall cause its Subsidiaries to) furnish promptly to the other party (a) a copy
of each report, schedule, registration statement and other document filed,
published, announced or received by it during such period pursuant to the
requirements of Federal or state securities laws, as applicable (other than
documents which such party is not permitted to disclose under Applicable Laws),
and (b) all other information concerning it and its business, properties and
personnel as such other party may reasonably request; provided, however, that
either party may restrict the foregoing access to the extent that (i) any
Applicable Laws or Contract requires such party or its Subsidiaries to restrict
or prohibit access to any such properties or information or (ii) the information
is subject to confidentiality obligations to a third party. The parties will
hold any such information obtained pursuant to this Section 6.3 in confidence in
accordance with, and will otherwise be subject to, the provisions of the
confidentiality letter dated February 24, 2000 between Meritor and Arvin (as it
may be amended or supplemented, the "Confidentiality Agreement"). Any
investigation by either Arvin or Meritor shall not affect the representations
and warranties of the other or the conditions to the respective obligations of
the parties to consummate the Merger.
A-58
<PAGE> 163
SECTION 6.4 Reasonable Best Efforts. (a) Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, and to
assist and cooperate with the other parties in doing or causing to be done, all
things necessary, proper or advisable under this Agreement and Applicable Laws
to consummate the Merger and the other transactions contemplated by this
Agreement as soon as practicable after the date hereof, including (i) preparing
and filing as promptly as practicable all documentation to effect all necessary
applications, notices, petitions, filings and tax ruling requests and to obtain
as promptly as practicable all Necessary Consents and all other consents,
waivers, licenses, orders, registrations, approvals, permits, rulings,
authorizations and clearances necessary or advisable to be obtained from any
third party and/or any Governmental Entity in order to consummate the Merger or
any of the other transactions contemplated by this Agreement (collectively, the
"Required Approvals") and (ii) taking all reasonable steps as may be necessary
to obtain all Required Approvals. In furtherance and not in limitation of the
foregoing, each party hereto agrees to make (i) an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable after the date
hereof, (ii) appropriate filings, if any are required, with the European
Commission and/or other foreign regulatory authorities in accordance with
applicable competition, merger control, antitrust, investment or similar
Applicable Laws, and (iii) all other necessary filings with other Governmental
Entities relating to the Merger, and, in each case, to supply as promptly as
practicable any additional information and documentary material that may be
requested pursuant to such Applicable Laws or by such authorities and to use
reasonable best efforts to cause the expiration or termination of the applicable
waiting periods under the HSR Act and the receipt of the Required Approvals
under such other Applicable Laws or from such authorities as soon as
practicable. Notwithstanding the foregoing, nothing in this Section 6.4 shall
require any of Arvin and its Subsidiaries, Meritor and its Subsidiaries or Newco
and its Subsidiaries to sell, hold separate or otherwise dispose of any assets
of Arvin, Meritor, Newco or their respective Subsidiaries (including the capital
stock of any Subsidiary) or conduct their business in a specified manner, or
agree to do so, whether as a condition to obtaining any approval from a
Governmental Entity or any other Person or for any other
A-59
<PAGE> 164
reason, if such sale, holding separate or other disposition or the conduct of
their business in a specified manner is not conditioned on the Closing or would
reasonably be expected to have a Material Adverse Effect on Newco and its
Subsidiaries, taken together, after giving effect to the Merger.
(b) Each of Arvin, on the one hand, and Meritor and Newco, on the
other hand, shall, in connection with the efforts referenced in Section 6.4(a)
to obtain all Required Approvals, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party, (ii) promptly inform the other
party of any communication received by such party from, or given by such party
to, the Antitrust Division of the Department of Justice (the "DOJ"), the Federal
Trade Commission (the "FTC") or any other Governmental Entity and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by it
to, and consult with each other in advance of any meeting or conference with,
the DOJ, the FTC or any such other Governmental Entity or, in connection with
any proceeding by a private party, with any other Person, and to the extent
appropriate or permitted by the DOJ, the FTC or such other applicable
Governmental Entity or other Person, give the other party the opportunity to
attend and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Section 6.4(a) and Section 6.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Applicable Laws, or if any
statute, rule, regulation, executive order, decree, injunction or administrative
order is enacted, entered, promulgated or enforced by a Governmental Entity
which would make the Merger or the other transactions contemplated hereby
illegal or would otherwise prohibit or materially impair or delay the
consummation of the Merger or the other transactions contemplated hereby, each
of Meritor and Arvin shall cooperate in all respects with each other and use its
respective reasonable best efforts, including, subject to the last sentence of
A-60
<PAGE> 165
Section 6.4(a), selling, holding separate or otherwise disposing of any assets
of Meritor, Arvin, or their respective Subsidiaries (including the capital stock
of any Subsidiary) or conducting their business in a specified manner, or
agreeing to do so, to contest and resist any such action or proceeding and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the Merger or the other
transactions contemplated by this Agreement and to have such statute, rule,
regulation, executive order, decree, injunction or administrative order
repealed, rescinded or made inapplicable so as to permit consummation of the
transactions contemplated by this Agreement. Notwithstanding the foregoing or
any other provision of this Agreement, nothing in this Section 6.4 shall limit a
party's right to terminate this Agreement pursuant to Section 8.1(b) or Section
8.1(c) so long as such party has complied with its obligations under this
Section 6.4.
(d) Each of Arvin and Meritor shall cooperate with each other in
obtaining opinions of Wachtell, Lipton, Rosen & Katz, counsel to Arvin, and
Chadbourne & Parke LLP, counsel to Meritor, to satisfy the conditions set forth
in Section 7.2(c) and Section 7.3(c). In connection therewith, each of Arvin and
Meritor shall deliver to such counsel customary representation letters in form
and substance reasonably satisfactory to such counsel.
SECTION 6.5 Acquisition Proposals. (a) Without limiting any party's
other obligations under this Agreement (including under Article V hereof), each
of Arvin and Meritor agrees that neither it nor any of its Subsidiaries nor any
of the officers and directors of it or its Subsidiaries shall, and that it shall
use its reasonable best efforts to cause its and its Subsidiaries' employees,
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, (i) initiate, solicit, encourage or knowingly facilitate (including
by way of furnishing information) any inquiries or the making of any proposal or
offer with respect to, or a transaction to effect, a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it or any of its
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC),
or any purchase or
A-61
<PAGE> 166
sale of 20% or more of the consolidated assets (including without limitation
stock of its Subsidiaries) of such party and its Subsidiaries, taken as a whole,
or any purchase or sale of, or tender or exchange offer for, the equity
securities of such party that, if consummated, would result in any Person (or
the stockholders of such Person) beneficially owning securities representing 20%
or more of the total voting power of such party (or of the surviving parent
entity in such transaction) or any of its Significant Subsidiaries (any such
proposal, offer or transaction, including any single or multi-step transaction
or series of related transactions (other than a proposal or offer made by the
other party or an Affiliate thereof) being hereinafter referred to as an
"Acquisition Proposal"), (ii) have any discussion with or provide any
confidential information or data to any Person relating to an Acquisition
Proposal, or engage in any negotiations concerning an Acquisition Proposal, or
knowingly facilitate any effort or attempt to make or implement an Acquisition
Proposal, (iii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal or (iv) approve or recommend, or propose to
approve or recommend, or execute or enter into, any letter of intent, agreement
in principle, merger agreement, acquisition agreement, option agreement or other
similar agreement or propose publicly or agree to do any of the foregoing
related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary, each
of Arvin and Meritor or its respective Board of Directors shall be permitted to
(A) to the extent applicable, comply with Rule 14d-9 and Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal, (B) effect a
Change in the Arvin Recommendation or a Change in the Meritor Recommendation, as
the case may be, or (C) engage in any discussions with, or provide any
information to, any Person in response to an unsolicited bona fide written
Acquisition Proposal by any such Person in order to be informed with respect
thereto in order to make any determination permitted in clause (B), if and only
to the extent that, in any such case referred to in clause (B) or (C), (i) its
Stockholders Meeting shall not have occurred, (ii) it has received an
unsolicited bona fide written Acquisition Proposal (for purposes of this clause
(ii), references to 20% in the definition of "Acquisition Proposal" shall be
deemed to be references to 50%) from a third party and its Board of Directors
concludes in good faith that such action is required by the Board of Directors'
fiduciary duties to stockholders as a result of
A-62
<PAGE> 167
such Acquisition Proposal, (iii) prior to providing any information or data to
any Person in connection with an Acquisition Proposal by any such Person, its
Board of Directors receives from such Person an executed customary
confidentiality agreement containing terms at least as stringent as those
contained in the Confidentiality Agreement (but which need not contain
standstill provisions) and (iv) prior to providing any information or data to
any Person or entering into discussions with any Person, such party notifies the
other parties promptly of such inquiries, proposals or offers received by, any
such information requested from, or any such discussions sought to be initiated
or continued with, such party or any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any inquiries, proposals or offers, and furnishes to the other
parties a copy of any such written inquiry, proposal or offer. Each of Arvin and
Meritor agrees that it will promptly keep the other parties informed of the
status and terms of any such proposals or offers and the status and terms of any
such discussions. Each of Arvin and Meritor agrees that it will, and will cause
its officers, directors and representatives to, immediately cease and cause to
be terminated any activities, discussions or negotiations existing as of the
date of this Agreement with any Persons conducted heretofore with respect to any
Acquisition Proposal, and request the return or destruction of all non-public
information furnished in connection therewith. Each of Arvin and Meritor agrees
that it will use reasonable best efforts to promptly inform its directors,
officers, key employees, agents and representatives of the obligations
undertaken in this Section 6.5. Nothing in this Section 6.5 shall (x) permit
Arvin or Meritor to terminate this Agreement (except as specifically provided in
Article VIII) or (y) affect any other obligation of Arvin or Meritor under this
Agreement. Neither Arvin nor Meritor shall submit to the vote of its
stockholders any Acquisition Proposal other than the Merger.
SECTION 6.6 Employee Benefits Matters. (a) Continuation and
Comparability of Benefits. From and after the Effective Time, the Meritor Plans
and the Arvin Plans in effect as of the date of this Agreement and at the
Effective Time shall remain in effect with respect to employees and former
employees of Meritor or Arvin and their Subsidiaries (the "Newco Employees"),
respectively, covered by such plans at the Effective Time, until such time as
the Combined Company shall otherwise determine, subject to
A-63
<PAGE> 168
Applicable Laws and the terms of such plans. Prior to the Closing Date, Meritor
and Arvin shall cooperate in reviewing, evaluating and analyzing the Meritor
Plans and the Arvin Plans with a view towards developing appropriate new benefit
plans for Newco Employees. It is the intention of Meritor and Arvin, to the
extent permitted by Applicable Laws, to develop new benefit plans, as soon as
reasonably practicable after the Effective Time, which, among other things, (i)
treat similarly situated employees on a substantially equivalent basis, taking
into account all relevant factors, including duties, geographic location,
tenure, qualifications and abilities and (ii) do not discriminate between Newco
Employees who were covered by Meritor Benefit Plans, on the one hand, and those
covered by Arvin Benefit Plans, on the other, at the Effective Time. It is the
current intention of Meritor and Arvin that, for one year following the
Effective Time, the Combined Company shall provide employee benefits under
employee benefit plans to Newco Employees that are substantially comparable in
the aggregate to those provided to such persons pursuant to the employee benefit
plans of Meritor or Arvin (or their Subsidiaries), respectively, in effect on
the date hereof and at the Effective Time. Nothing herein shall prohibit any
changes to the Meritor Employee Benefit Plans or Arvin Employee Benefit Plans
that may be (i) required by Applicable Laws (including any applicable
qualification requirements of Section 401(a) of the Code), (ii) necessary as a
technical matter to reflect the transactions contemplated hereby or (iii)
required for the Combined Company to provide for or permit investment in its
securities. Nothing in this Section 6.6 shall be interpreted as preventing the
Combined Company from amending, modifying or terminating any Meritor Plan or
Arvin Plan or other contract, arrangement, commitment or understanding, in
accordance with its terms and Applicable Laws.
(b) Pre-Existing Limitations; Deductibles; Service Credit. With
respect to any employee benefit plans in which any Newco Employees who were
employees of Meritor or Arvin (or their Subsidiaries) prior to the Effective
Time first become eligible to participate on or after the Effective Time, and in
which the Newco Employees did not participate prior to the Effective Time (the
"New Newco Plans"), the Combined Company shall: (A) waive all pre-existing
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the Newco Employees and their eligible
A-64
<PAGE> 169
dependents under any New Newco Plans in which such employees may be eligible to
participate after the Effective Time, except to the extent such pre-existing
conditions, exclusions or waiting periods would apply under the analogous
Meritor Employee Benefit Plan or Arvin Employee Benefit Plan, as the case may
be; (B) provide each Newco Employee and their eligible dependents with credit
for any co-payments and deductibles paid prior to the Effective Time under a
Meritor Plan or an Arvin Plan (to the same extent such credit was given under
the analogous employee benefit plan prior to the Effective Time) in satisfying
any applicable deductible or out-of-pocket requirements under any New Newco
Plans in which such employees may be eligible to participate after the Effective
Time; and (C) recognize all service of the Newco Employees with Meritor and
Arvin, and their respective Affiliates, for all purposes (including, without
limitation, purposes of eligibility to participate, vesting credit, entitlement
to benefits, and, except with respect to defined benefit pension plans, benefit
accrual) in any New Newco Plan in which such employees may be eligible to
participate after the Effective Time, to the extent such service is taken into
account under the applicable New Newco Plan; provided that the foregoing shall
not apply to the extent it would result in duplication of benefits.
SECTION 6.7 Fees and Expenses. Subject to Section 8.2(d), whether or
not the Merger is consummated, all Expenses (as defined below) incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such Expenses, except Expenses incurred in
connection with the filing, printing and mailing of the Form S-4 and the Joint
Proxy Statement/Prospectus, which shall be shared equally by Arvin and Meritor.
As used in this Agreement, "Expenses" means all out-of-pocket expenses
(including all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a
party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the Stock
Option Agreements and the transactions contemplated hereby and thereby,
including the preparation, printing, filing and mailing of the Form S-4 and the
Joint Proxy Statement/Prospectus and the solicitation of stockholder approvals
and all other matters related to the transactions contemplated hereby and
thereby.
A-65
<PAGE> 170
SECTION 6.8 Directors' and Officers' Indemnification and Insurance.
(a) Newco shall (i) for a period of six years from the Effective Time, indemnify
and hold harmless, and provide advancement of expenses to, all past and present
directors, officers and employees of Arvin and its Subsidiaries (in all of their
capacities as such), to the same extent such persons are indemnified or have the
right to advancement of expenses as of the date of this Agreement by Arvin
pursuant to Arvin's articles of incorporation, bylaws and indemnification
agreements, if any, in existence on the date hereof with any such directors,
officers and employees of Arvin and its Subsidiaries for acts or omissions
occurring at or prior to the Effective Time (including for acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby), provided that in the event any claim
is asserted or made within such six year period, all rights hereunder in respect
of such claim shall continue until disposition thereof, and (ii) cause to be
maintained for a period of six years after the Effective Time the current
policies of directors' and officers' liability insurance and fiduciary liability
insurance maintained by Arvin (provided that Newco may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured)
with respect to claims arising from facts or events that occurred on or before
the Effective Time; provided, however, that in no event shall Newco be required
to expend in any one year an amount in excess of 200% of the annual premiums
currently paid by Arvin for such insurance; and, provided, further, that if the
annual premiums of such insurance coverage exceed such amount, Newco shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(b) Newco shall (i) for a period of six years from the Effective
Time, indemnify and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of Meritor and its
Subsidiaries (in all of their capacities as such), to the same extent such
persons are indemnified or have the right to advancement of expenses as of the
date of this Agreement by Meritor pursuant to Meritor's certificate of
incorporation, by-laws and indemnification agreements, if any, in existence on
the date hereof with any such directors, officers and employees of Meritor and
its Subsidiaries for acts or omissions occurring at or prior to
A-66
<PAGE> 171
the Effective Time (including for acts or omissions occurring in connection with
the approval of this Agreement and the consummation of the transactions
contemplated hereby), provided that in the event any claim is asserted or made
within such six year period, all rights hereunder in respect of such claim shall
continue until disposition thereof, and (ii) cause to be maintained for a period
of six years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Meritor (provided that Newco may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured) with respect to claims arising
from facts or events that occurred on or before the Effective Time; provided,
however, that in no event shall Newco be required to expend in any one year an
amount in excess of 200% of the annual premiums currently paid by Meritor for
such insurance; and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, Newco shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
SECTION 6.9 Public Announcements. Arvin and Meritor each shall use
reasonable best efforts to develop a joint communications plan and each party
shall use reasonable best efforts (i) to ensure that all press releases and
other public statements with respect to the transactions contemplated hereby
shall be consistent with such joint communications plan, and (ii) unless
otherwise required by Applicable Laws or by obligations pursuant to any listing
agreement with or rules of any securities exchange, to consult with each other
before issuing any press release or, to the extent practicable, otherwise making
any public statement with respect to this Agreement or the transactions
contemplated hereby.
SECTION 6.10 Accounting Matters. (a) Arvin shall use reasonable best
efforts to cause to be delivered to Meritor and Newco two letters from Arvin's
independent public accountants, one dated approximately the date on which the
Form S-4 shall become effective and one dated the Closing Date, each addressed
to Arvin, Meritor and Newco, in form and substance reasonably satisfactory to
Meritor and Newco and reasonably customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
A-67
<PAGE> 172
(b) Meritor shall use reasonable best efforts to cause to be
delivered to Arvin two letters from Meritor's independent public accountants,
one dated approximately the date on which the Form S-4 shall become effective
and one dated the Closing Date, each addressed to Meritor, Newco and Arvin, in
form and substance reasonably satisfactory to Arvin and reasonably customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 6.11 Listing of Shares of Newco Common Stock. Newco shall
use reasonable best efforts to cause the shares of Newco Common Stock to be
issued in the Merger and the shares of Newco Common Stock to be reserved for
issuance upon exercise of the Meritor Stock Options and the Arvin Stock Options
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
SECTION 6.12 Dividends. After the date of this Agreement, each of
Arvin and Meritor shall coordinate with the other the payment of dividends with
respect to the Arvin Common Stock and Meritor Common Stock and the record dates
and payment dates relating thereto, it being the intention of the parties hereto
that holders of Arvin Common Stock and Meritor Common Stock shall not receive
two dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their shares of Arvin Common Stock and/or Meritor Common Stock
and any shares of Newco Common Stock that any such holder receives in exchange
for such shares of Arvin Common Stock and/or Meritor Common Stock in the Merger.
SECTION 6.13 Affiliates. (a) Arvin Affiliate Agreements. Not less
than 45 days prior to the Effective Time, Arvin shall deliver to Meritor and
Newco a letter identifying all persons who, in the judgment of Arvin, may be
deemed at the time this Agreement is submitted for approval by the stockholders
of Arvin, "affiliates" of Arvin for purposes of Rule 145 under the Securities
Act and applicable SEC rules and regulations, and such list shall be updated as
necessary to reflect changes from the date hereof. Arvin shall use reasonable
best efforts to cause each person identified on such list to deliver to Meritor
and Newco not less than 30 days prior to the Effective Time, a written agreement
substantially in the form attached as Exhibit F hereto (an "Arvin Affiliate
Agreement").
A-68
<PAGE> 173
(b) Meritor Affiliate Agreements. Not less than 45 days prior to the
Effective Time, Meritor shall deliver to Arvin and Newco a letter identifying
all persons who, in the judgment of Meritor, may be deemed at the time this
Agreement is submitted for approval by the stockholders of Meritor, "affiliates"
of Meritor for purposes of Rule 145 under the Securities Act and applicable SEC
rules and regulations, and such list shall be updated as necessary to reflect
changes from the date hereof. Meritor shall use reasonable best efforts to cause
each person identified on such list to deliver to Arvin and Newco not less than
30 days prior to the Effective Time, a written agreement substantially in the
form attached as Exhibit G hereto (an "Meritor Affiliate Agreement").
SECTION 6.14 Section 16 Matters. Prior to the Effective Time, Arvin
and Meritor shall take all such steps as may be required to cause any
dispositions of Meritor Common Stock or Arvin Common Stock (including derivative
securities with respect to Meritor Common Stock or Arvin Common Stock) or
acquisitions of Newco Common Stock (including derivative securities with respect
to Newco Common Stock) resulting from the transactions contemplated by this
Agreement by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Arvin, Meritor or Newco to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
SECTION 6.15 Takeover Statutes. If any "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, each of
Meritor, Arvin and Newco and their respective Boards of Directors shall use all
reasonable efforts to grant such approvals and take such actions as are
reasonably necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the transactions contemplated hereby.
SECTION 6.16 Advice of Changes. Each of Meritor, Newco and Arvin
shall as promptly as reasonably practicable after becoming aware thereof advise
the other parties of (a) any representation or warranty made by it contained in
this Agreement that is qualified as to materiality becoming untrue or inaccurate
in any respect or any such representation or warranty that is not so qualified
becoming
A-69
<PAGE> 174
untrue or inaccurate in any material respect, (b) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement or (c) any change or
event (i) having, or which, insofar as can reasonably be foreseen, would have,
in the case of Arvin, a Material Adverse Effect on Arvin, and, in the case of
Meritor or Newco, a Material Adverse Effect on Meritor, or (ii) which has
resulted, or which, insofar as can reasonably be foreseen, would result, in any
of the conditions set forth in Article VII not being satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Second Step
Merger, and of Meritor and Newco to effect the First Step Merger, are subject to
the satisfaction or waiver prior to the Effective Time (and the First Effective
Time, in the case of consummation of the First Step Merger) of the following
conditions:
(a) Stockholder Approval. (i) Meritor shall have obtained the
Required Meritor Vote in connection with the approval of this Agreement by the
stockholders of Meritor and (ii) Arvin shall have obtained the Required Arvin
Vote in connection with the approval of this Agreement by the stockholders of
Arvin.
(b) No Injunctions or Restraints, Illegality. No Applicable Laws
shall have been adopted, promulgated or enforced by any Governmental Entity, and
no temporary restraining order, preliminary or permanent injunction or other
order issued by a court or other Governmental Entity of competent jurisdiction
(an "Injunction") shall be in effect, having the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(c) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking, and
A-70
<PAGE> 175
which is reasonably likely to result in the granting of, an Injunction shall be
pending.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(e) EU Antitrust. Arvin and Meritor shall have received in respect
of the Merger and any matters arising therefrom confirmation by way of a
determination from the European Commission under Regulation 4064/89 (with or
without the initiation of proceedings under Article 6(1)(c) thereof) that the
Merger and any matters arising therefrom are compatible with the common market.
(f) Governmental and Regulatory Approvals. Other than the filings
provided for under Section 1.2 and Section 2.3 and filings pursuant to the HSR
Act and the EC Merger Regulation (which are addressed in Section 7.1(d) and
Section 7.1(e)), all consents, approvals, orders or authorizations of, actions
of, filings and registrations with and notices to any Governmental Entity (i)
set forth in Section 7.1(f) of the Arvin Disclosure Schedule or Section 7.1(f)
of the Meritor Disclosure Schedule or (ii) required of Arvin, Meritor, Newco or
any of their Subsidiaries to consummate the Merger and the other transactions
contemplated hereby, the failure of which to be obtained or taken would
reasonably be expected to have a Material Adverse Effect on Newco and its
Subsidiaries, taken together after giving effect to the Merger, shall have been
obtained and shall be in full force and effect.
(g) NYSE Listing. The shares of Newco Common Stock to be issued in
the Merger and to be reserved for issuance in connection with the Merger shall
have been approved for listing on the NYSE, subject to official notice of
issuance.
(h) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 shall then be in effect and no
proceedings for that purpose shall be pending before or threatened by the SEC.
SECTION 7.2 Additional Conditions to Obligations of Arvin. The
obligation of Arvin to effect the Second Step Merger is subject to the
satisfaction or waiver by Arvin
A-71
<PAGE> 176
prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Meritor and Newco set forth in this Agreement that is qualified as
to materiality or Material Adverse Effect shall be true and correct in all
respects, and each of the representations and warranties of Meritor and Newco
set forth in this Agreement that is not so qualified shall be true and correct
in all material respects, in each case as of the date of this Agreement and
(except to the extent that such representations and warranties speak as of
another date) as of the Closing Date as though made on and as of the Closing
Date, and Arvin shall have received a certificate of Meritor executed by an
executive officer of Meritor to such effect.
(b) Performance of Obligations of Meritor and Newco. Each of Meritor
and Newco shall have performed or complied with all agreements and covenants
required to be performed by it under this Agreement at or prior to the Closing
Date that are qualified as to materiality or Material Adverse Effect and shall
have performed or complied in all material respects with all other agreements
and covenants required to be performed by it under this Agreement at or prior to
the Closing Date that are not so qualified, and Arvin shall have received a
certificate of Meritor executed by an executive officer of Meritor to such
effect.
(c) Tax Opinion. Arvin shall have received an opinion from Wachtell,
Lipton, Rosen & Katz, dated the Closing Date, to the effect that, on the basis
of facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the First Effective Time and the
Effective Time, each of the First Step Merger and the Second Step Merger will
constitute a reorganization under Section 368(a) of the Code.
(d) Meritor Rights Agreement. (i) No Distribution Date shall have
occurred pursuant to the Meritor Rights Agreement unless all Meritor Rights have
thereafter been redeemed and (ii) no Shares Acquisition Date shall have occurred
pursuant to the Meritor Rights Agreement.
SECTION 7.3 Additional Conditions to Obligations of Meritor and
Newco. The obligations of Meritor and Newco
A-72
<PAGE> 177
to effect the First Step Merger, and the obligation of Newco to effect the
Second Step Merger, are subject to the satisfaction or waiver by Meritor and
Newco prior to the Effective Time of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Arvin set forth in this Agreement that is qualified as to
materiality or Material Adverse Effect shall be true and correct in all
respects, and each of the representations and warranties of Arvin set forth in
this Agreement that is not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and (except to
the extent that such representations and warranties speak as of another date) as
of the Closing Date as though made on and as of the Closing Date, and Meritor
shall have received a certificate of Arvin executed by an executive officer of
Arvin to such effect.
(b) Performance of Obligations of Arvin. Arvin shall have performed
or complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as to
materiality or Material Adverse Effect and shall have performed or complied in
all material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
not so qualified, and Meritor shall have received a certificate of Arvin
executed by an executive officer of Arvin to such effect.
(c) Tax Opinion. Meritor shall have received an opinion from
Chadbourne & Parke LLP, dated the Closing Date, to the effect that, on the basis
of facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing at the First Effective Time and the
Effective Time, each of the First Step Merger and the Second Step Merger will
constitute a reorganization under Section 368(a) of the Code.
(d) Arvin Rights Agreement. (i) No Distribution Date shall have
occurred pursuant to the Arvin Rights Agreement unless all Arvin Rights have
thereafter been redeemed and (ii) no Shares Acquisition Date shall have occurred
pursuant to the Arvin Rights Agreement.
A-73
<PAGE> 178
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided below,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Meritor or Arvin:
(a) by mutual written consent of Meritor and Arvin;
(b) by either Meritor or Arvin if the Effective Time shall not have
occurred on or before October 31, 2000 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including such party's obligations set forth in Section
6.4) has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) by either Meritor or Arvin if any Governmental Entity (i) shall
have issued an order, decree or ruling or taken any other action (which such
party shall have used its reasonable best efforts to resist, resolve or lift, as
applicable, in accordance with Section 6.4) permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable or (ii) shall have failed to issue an order, decree or ruling, or
to take any other action, necessary to fulfill any conditions set forth in
subsections 7.1(d), (e) and (f), and the failure to issue such order, decree,
ruling or take such action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section 8.1(c)
shall not be available to any party whose failure to comply with Section 6.4 has
been the cause of, or resulted in, such action or inaction;
(d) by either Meritor or Arvin if (i) the approval by the
stockholders of Meritor required for the consummation of the Merger shall not
have been obtained by
A-74
<PAGE> 179
reason of the failure to obtain the Required Meritor Vote or (ii) the approval
by the stockholders of Arvin required for the consummation of the Merger shall
not have been obtained by reason of the failure to obtain the Required Arvin
Vote, in each case upon the taking of such vote at a duly held meeting of
stockholders of Meritor or Arvin, as the case may be, or at any adjournment
thereof;
(e) by Meritor, if (i) Arvin's Board of Directors shall have (A)
failed to make the Arvin Recommendation, (B) withdrawn the Arvin Recommendation
or (C) modified or qualified, in any manner adverse to Meritor, the Arvin
Recommendation without also simultaneously reaffirming the Arvin Recommendation
(or resolved or proposed to take any such action referred to in clause (A), (B)
or (C)), in each case whether or not permitted by the terms hereof, or (ii)
Arvin shall have breached its obligations under this Agreement by reason of a
failure to call the Arvin Stockholders Meeting in accordance with Section 6.1(b)
or a failure to prepare and mail to its stockholders the Joint Proxy
Statement/Prospectus in accordance with Section 6.1(a);
(f) by Arvin, if (i) Meritor's Board of Directors shall have (A)
failed to make the Meritor Recommendation, (B) withdrawn the Meritor
Recommendation or (C) modified or qualified, in any manner adverse to Arvin, the
Meritor Recommendation without also simultaneously reaffirming the Meritor
Recommendation (or resolved or proposed to take any such action referred to in
clause (A), (B) or (C)), in each case whether or not permitted by the terms
hereof or (ii) Meritor shall have breached its obligations under this Agreement
by reason of a failure to call the Meritor Stockholders Meeting in accordance
with Section 6.1(c) or a failure to prepare and mail to its stockholders the
Joint Proxy Statement/Prospectus in accordance with Section 6.1(a);
(g) by Meritor, if Arvin shall have breached or failed to perform
any of its representations, warranties, covenants or other agreements contained
in this Agreement, such that the conditions set forth in Section 7.3(a) or
Section 7.3(b) are not capable of being satisfied on or before the Termination
Date;
(h) by Arvin, if either Meritor or Newco shall have breached or
failed to perform any of its representations, warranties, covenants or other
agreements
A-75
<PAGE> 180
contained in this Agreement, such that the conditions set forth in Section
7.2(a) or Section 7.2(b) are not capable of being satisfied on or before the
Termination Date;
(i) by Meritor, if a Shares Acquisition Date shall have occurred
pursuant to the Arvin Rights Agreement; or
(j) by Arvin, if a Shares Acquisition Date shall have occurred
pursuant to the Meritor Rights Agreement.
SECTION 8.2 Effect of Termination. (a) In the event of termination
of this Agreement by either Meritor or Arvin as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Arvin, Meritor or Newco or their respective officers
or directors under this Agreement, except that the provisions of Section 4.1(m),
Section 4.2(m), the second sentence of Section 6.3, Section 6.7, this Section
8.2 and Article IX which provisions shall survive such termination, and except
that, notwithstanding anything to the contrary contained in this Agreement, none
of Arvin, Meritor or Newco shall be relieved or released from any liabilities or
damages arising out of its willful breach of any provision of this Agreement.
(b) If (A) (I) either Meritor or Arvin shall terminate this
Agreement pursuant to Section 8.1(d) (provided that the basis for such
termination is the failure of Arvin's stockholders to approve the transactions
contemplated hereby) or pursuant to Section 8.1(b) without the Arvin Stockholder
Meeting having occurred or Meritor shall terminate this Agreement pursuant to
Section 8.1(g) as a result of any intentional breach or failure to perform by
Arvin (unless covered by clause (B) below) or pursuant to Section 8.1(e)(i),
(II) at any time after the date of this Agreement and before such termination an
Acquisition Proposal with respect to Arvin shall have been publicly announced or
otherwise communicated to the senior management, Board of Directors or
stockholders of Arvin and (III) within twelve months of such termination Arvin
or any of its Subsidiaries enters into any definitive agreement with respect to,
or consummates, any Acquisition Proposal or (B) Meritor shall terminate this
Agreement pursuant to Section 8.1(e)(ii) or Section 8.1(i); then Arvin shall
promptly, but in no event later than the date of such termination (or in the
case of clause (A), if later, the date Arvin or its Subsidiary enters into such
agreement with
A-76
<PAGE> 181
respect to or consummates such Acquisition Proposal), pay Meritor an amount
equal to $20,000,000, by wire transfer of immediately available funds.
(c) If (A) (I) either Meritor or Arvin shall terminate this
Agreement pursuant to Section 8.1(d) (provided that the basis for such
termination is the failure of Meritor's stockholders to approve the transactions
contemplated hereby) or pursuant to Section 8.1(b) without the Meritor
Stockholders Meeting having occurred or Arvin shall terminate this Agreement
pursuant to Section 8.1(h) as a result of any intentional breach or failure to
perform by Meritor or Newco (unless covered by clause (B) below) or pursuant to
Section 8.1(f)(i), (II) at any time after the date of this Agreement and before
such termination an Acquisition Proposal with respect to Meritor shall have been
publicly announced or otherwise communicated to the senior management, Board of
Directors or stockholders of Meritor and (III) within twelve months of such
termination Meritor or any of its Subsidiaries enters into any definitive
agreement with respect to, or consummates, any Acquisition Proposal or (B) Arvin
shall terminate this Agreement pursuant to Section 8.1(f)(ii) or Section 8.1(j);
then Meritor shall promptly, but in no event later than the date of such
termination (or in the case of clause (A), if later, the date Meritor or its
Subsidiary enters into such agreement with respect to or consummates such
Acquisition Proposal), pay Arvin an amount equal to $20,000,000, by wire
transfer of immediately available funds.
(d) The parties acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither party would enter into
this Agreement; accordingly, if either party fails promptly to pay any amount
due pursuant to this Section 8.2, and, in order to obtain such payment, the
other party commences a suit which results in a judgment against such party for
the fee set forth in this Section 8.2, such party shall pay to the other party
its costs and expenses (including attorneys' fees and expenses) in connection
with such suit, together with interest on the amount of the fee from the date
such payment is required to be made until the date such payment is actually made
at the prime rate of Citibank, N.A. in effect on the date such payment was
required to be made. The parties agree that any remedy or amount payable
pursuant to this Section 8.2 shall not preclude any other remedy or amount
payable hereunder, and shall not be an exclusive
A-77
<PAGE> 182
remedy, for any willful breach of any provision of this Agreement.
(e) (i) Nothing in this Section 8.2 shall limit or affect Meritor's
rights under the Arvin Stock Option Agreement; provided that Meritor's Total
Profit (as defined in the Arvin Stock Option Agreement) shall not exceed
$25,000,000.
(ii) Nothing in this Section 8.2 shall limit or affect Arvin's rights
under the Meritor Stock Option Agreement; provided that Arvin's Total Profit (as
defined in the Meritor Stock Option Agreement) shall not exceed $25,000,000.
SECTION 8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of Meritor and Arvin, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 8.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
A-78
<PAGE> 183
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time.
SECTION 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the fifth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Meritor or Newco to
Meritor Automotive, Inc.
2135 West Maple Road
Troy, Michigan 48084-7186
Fax: (248) 435-2184
Attention: Vernon G. Baker, II, Esq.
with a copy to
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Fax: (212) 541-5369
Attention: Peter R. Kolyer, Esq.
A-79
<PAGE> 184
(b) if to Arvin to
Arvin Industries, Inc.
One Noblitt Plaza
Columbus, Indiana 47202-3000
Fax: (812) 379-3688
Attention: Ronald R. Snyder, Esq.
with a copy to
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
Attention: Andrew R. Brownstein, Esq.
SECTION 9.3 Interpretation. When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation".
SECTION 9.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
the parties need not sign the same counterpart.
SECTION 9.5 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement, the Stock Option Agreements, the Confidentiality Agreement and the
exhibits and schedules hereto and the other agreements and instruments of the
parties delivered in connection herewith constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit
A-80
<PAGE> 185
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 6.8 (which is intended to be for the benefit of the Persons covered
thereby).
SECTION 9.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (without giving
effect to choice of law principles thereof); provided that the First Step Merger
shall be governed by the laws of the State of Delaware and the State of Indiana
and the Second Step Merger shall be governed by the laws of the State of Indiana
(in each case, without giving effect to choice of law principles thereof); and
provided further that the fiduciary duties of the Boards of Directors of the
parties shall be governed by the laws of their respective states of
incorporation.
SECTION 9.7 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon any such determination, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
SECTION 9.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto, in whole or in part (whether by operation of law or otherwise),
without the prior written consent of the other parties, and any attempt to make
any such assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.9 Submission to Jurisdiction; Waivers. Each of Arvin,
Meritor and Newco irrevocably agrees that any legal action or proceeding with
respect to this Agreement or for recognition and enforcement of any judgment in
respect hereof brought by another party hereto or its successors or
A-81
<PAGE> 186
permitted assigns may be brought and determined in any federal or state court
located in the State of Delaware or the State of Indiana, and each of Arvin,
Meritor and Newco hereby irrevocably submits with regard to any such action or
proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of Arvin, Meritor and Newco hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by Applicable Laws, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
SECTION 9.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
SECTION 9.11 Definitions. As used in this Agreement:
(a) "affiliate" means (except as specifically otherwise defined), as
to any person, any other person which, directly or indirectly, controls, or is
controlled by, or is under common control with, such person. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
and "under common control with") means the possession, directly or indirectly,
of the power to direct or cause the direction of management or policies of a
person, whether through the ownership of securities or partnership or other
ownership interests, by contract or otherwise.
A-82
<PAGE> 187
(b) "Applicable Laws" means all applicable laws, statutes, orders,
rules, regulations, policies or guidelines promulgated, or judgments, decisions
or orders entered, by any Governmental Entity.
(c) An "Arvin Employee Benefit Plan" means any employee benefit
plan, program, policy, practice, or other arrangement providing benefits to any
current or former employee, officer or director of Arvin or any of its
Subsidiaries or any beneficiary or dependent thereof that is sponsored or
maintained by Arvin or any of its Subsidiaries or to which Arvin or any of its
Subsidiaries contributes or is obligated to contribute, whether or not written,
including any employee benefit plan within the meaning of Section 3(3) of ERISA
(whether or not such plan is subject to ERISA) and any bonus, incentive,
deferred compensation, vacation, stock purchase, stock option, severance,
employment, change of control or fringe benefit plan, program or agreement.
(d) An "Arvin Plan" means any Arvin Employee Benefit Plan other than
a Multiemployer Plan.
(e) "beneficial ownership" or "beneficially own" shall have the
meaning under Section 13(d) of the Exchange Act and the rules and regulations
thereunder.
(f) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(g) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(h) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(i) "Known" or "Knowledge" means, with respect to any party, the
knowledge of such party's executive officers after reasonable inquiry.
(j) "Material Adverse Effect" means, with respect to any entity, any
event, change, circumstance or effect that is or is reasonably likely to be
materially adverse to (i) the business, financial condition or results of
operations of such entity and its Subsidiaries taken as a whole, other than any
event, change, circumstance or effect
A-83
<PAGE> 188
relating (x) to the economy or financial markets in general, (y) in general to
the industries in which such entity operates and not specifically relating to
such entity or (z) to any action or omission of Meritor, Arvin or Newco or any
Subsidiary of either of any of them taken with the express prior written consent
of the other parties hereto or (ii) the ability of such entity to consummate the
transactions contemplated by this Agreement.
(k) A "Meritor Employee Benefit Plan" means any employee benefit
plan, program, policy, practice, or other arrangement providing benefits to any
current or former employee, officer or director of Meritor or any of its
Subsidiaries or any beneficiary or dependent thereof that is sponsored or
maintained by Meritor or any of its Subsidiaries or to which Meritor or any of
its Subsidiaries contributes or is obligated to contribute, whether or not
written, including any employee benefit plan within the meaning of Section 3(3)
of ERISA (whether or not such plan is subject to ERISA) and any bonus,
incentive, deferred compensation, vacation, stock purchase, stock option,
severance, employment, change of control or fringe benefit plan, program or
agreement.
(l) A "Meritor Plan" means any Meritor Employee Benefit Plan other
than a Multiemployer Plan.
(m) A "Multiemployer Plan" means any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA.
(n) "NYSE" means the New York Stock Exchange, Inc.
(o) "Person" means an individual, corporation, limited liability
entity, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act), including any Governmental
Entity.
(p) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, at
least a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or
A-84
<PAGE> 189
by any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(q) "Tax" (and, with correlative meaning, "Taxes" and "Taxable")
shall mean (i) any federal, state, local or foreign net income, gross income,
receipts, windfall profit, severance, property, production, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add-on
minimum, ad valorem, transfer, stamp, or environmental tax, or any other tax,
customs, duty or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, addition to tax or additional amount
imposed by any governmental authority; (ii) any liability for payments of a type
described in clause (i) as a result of being a member of an affiliated,
consolidated, combined or unitary group; and (iii) any liability for the payment
of any amounts as a result of being party to a tax sharing arrangement or as a
result of any express or implied obligation to indemnify any Person with respect
to the payment of amounts of the type described in clause (i) or clause (ii).
Each of the following terms is defined in the Section of this
Agreement set forth opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition Proposal 6.5(a)
Actions 4.1(j)
Agreement Preamble
Articles of Merger 2.3
Arvin Preamble
Arvin Affiliate Agreement 6.13(a)
Arvin Cash Consideration 2.5(a)
Arvin Certificate 2.5(b)
Arvin Common Stock 2.5(a)
Arvin Disclosure Schedule 4.1
Arvin Filed SEC Reports 4.1(d)(ii)
Arvin Financial Advisor 4.1(m)
Arvin Merger Consideration 2.5(a)
Arvin Necessary Consents 4.1(c)(iii)
Arvin Permits 4.1(h)(ii)
Arvin Preferred Stock 4.1(b)(i)
Arvin Recommendation 6.1(b)
Arvin Rights 4.1(b)(i)
Arvin Rights Agreement 4.1(l)
Arvin SEC Reports 4.1(d)(i)
Arvin SECT 4.1(f)
Arvin Stock Consideration 2.5(a)
</TABLE>
A-85
<PAGE> 190
<TABLE>
<S> <C>
Arvin Stock Option Agreement Recitals
Arvin Stock Options 4.1(b)(i)
Arvin Stock Plans 4.1(b)(i)
Arvin Stockholders Meeting 6.1(b)
Arvin Voting Debt 4.1(b)(ii)
Board 2.13(a)
Certificates 3.1
Change in the Arvin Recommendation 6.1(b)
Change in the Meritor Recommendation 6.1(c)
Closing 2.2
Closing Date 2.2
Code 1.6
Combined Company Recitals
Confidentiality Agreement 6.3
Contract 4.1(c)(ii)
Delaware Secretary 1.2
DGCL 1.1
DOJ 6.4(b)
Effective Time 2.3
Environmental Laws 4.1(j)
Environmental Liabilities 4.1(j)
Excess Meritor Shares 3.2(e)(ii)
Exchange Agent 3.1
Exchange Fund 3.1
Expenses 6.7
First Effective Time 1.2
First Step Merger Recitals
Form S-4 6.1(a)
FTC 6.4(b)
GAAP 4.1(d)(i)
Governmental Entity 4.1(c)(iii)
Hazardous Materials 4.1(j)
HSR Act 4.1(c)(iii)
IBCL 1.1
Indiana Secretary 1.2
Injunction 7.1(b)
Intellectual Property 4.1(k)
Joint Proxy Statement/Prospectus 6.1(a)
Liens 4.1(a)(ii)
Merger Recitals
Meritor Preamble
Meritor Affiliate Agreement 6.13(b)
Meritor Certificate 1.4(b)
Meritor Common Stock 1.4(a)
Meritor Disclosure Schedule 4.2
Meritor Exchange Ratio 1.4(a)
Meritor Filed SEC Reports 4.2(d)(ii)
Meritor Financial Advisor 4.2(m)
</TABLE>
A-86
<PAGE> 191
<TABLE>
<S> <C>
Meritor Necessary Consents 4.2(c)(iii)
Meritor Permits 4.2(h)(ii)
Meritor Preferred Stock 4.2(b)(i)
Meritor Recommendation 6.1(c)
Meritor Rights 4.2(b)(i)
Meritor Rights Agreement 4.2(l)
Meritor SEC Reports 4.2(d)(i)
Meritor Stock Option Agreement Recitals
Meritor Stock Options 4.2(b)(i)
Meritor Stock Plans 4.2(b)(i)
Meritor Stockholders Meeting 6.1(c)
Meritor Voting Debt 4.2(b)(ii)
Newco Preamble
Newco Articles 1.7
Newco By-Laws 1.8
Newco Common Stock 1.4(a)
Newco Employees 6.6(a)
New Newco Plans 6.6(b)
Required Arvin Vote 4.1(g)
Required Approvals 6.4(a)
Required Meritor Vote 4.2(g)
SEC 4.1(a)(ii)
Second Step Merger Recitals
Securities Act 3.3
Stock Option Agreements Recitals
Termination Date 8.1(b)
Violation 4.1(c)(ii)
</TABLE>
SECTION 9.12 Disclosure Schedule. The mere inclusion of an item in
the relevant Disclosure Schedule as an exception to a representation, warranty
or covenant shall not be deemed an admission by a party that such item
represents a material exception or material fact, event or circumstance or that
such item has had or would have a Material Adverse Effect with respect to
Meritor, Arvin or Newco, as applicable.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
A-87
<PAGE> 192
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of the
date first written above.
MERITOR AUTOMOTIVE, INC.
By: /s/ Larry D. Yost
------------------------------------
Name: Larry D. Yost
Title: Chairman of the Board and
Chief Executive Officer
MU SUB, INC.
By: /s/ Larry D. Yost
------------------------------------
Name: Larry D. Yost
Title: Chairman of the Board and
Chief Executive Officer
ARVIN INDUSTRIES, INC.
By: /s/ V. William Hunt
------------------------------------
Name: V. William Hunt
Title: Chairman, President and
Chief Executive Officer
A-88
<PAGE> 193
APPENDIX B
MERITOR AUTOMOTIVE, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 6, 2000 (the
"Agreement"), by and between MERITOR AUTOMOTIVE, INC., a Delaware corporation
("Issuer"), and ARVIN INDUSTRIES, INC., an Indiana corporation ("Grantee").
WHEREAS, Issuer, Mu Sub, Inc., an Indiana corporation and a
wholly-owned subsidiary of Issuer ("Newco"), and Grantee propose to enter into
an Agreement and Plan of Reorganization, dated as of the date hereof (the
"Merger Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), providing for, among other things,
a merger of Issuer with and into Newco, followed immediately by a merger of
Grantee with and into Newco, with Newco being the surviving corporation;
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Merger Agreement and the Arvin Stock Option
Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
WHEREAS, as a condition and inducement to Issuer's willingness
to enter into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's common stock under the Arvin Stock Option Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, in the Merger Agreement and in the Arvin Stock Option Agreement, and
intending to be legally bound hereby, Issuer and Grantee agree as follows:
SECTION 1. Grant of Options. Subject to the terms and
conditions set forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 12,397,833 shares (the "Option Shares")
of common stock, par value $1 per share, of Issuer (the "Shares") (which Option
Shares represent 19.9% of the number of Shares outstanding as of the date
hereof), together with the
<PAGE> 194
associated purchase rights (the "Rights") under the Meritor Rights Agreement, at
a purchase price of $15.6875 per Option Share (such price, as adjusted if
applicable, the "Purchase Price"). The number of Option Shares that may be
received upon the exercise of the Option and the Purchase Price are subject to
adjustment as set forth in Section 6.
SECTION 2. Exercise of Option. (a) Grantee may exercise the
Option, in whole or in part, at any time or from time to time following the
occurrence of a Purchase Event (as defined below); provided that, except as
otherwise provided herein, the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time, (ii) six months
after the first occurrence of a Purchase Event (or if, at the expiration of such
six months after the first occurrence of a Purchase Event, the Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed), (iii) termination of the Merger Agreement under circumstances which do
not and cannot result in Grantee's becoming entitled to receive termination fees
from Issuer pursuant to Section 8.2(c) of the Merger Agreement, (iv) unless a
Purchase Event occurs on or before such date, 12 months after the termination of
the Merger Agreement under circumstances which could result in Grantee's
becoming entitled to receive termination fees from Issuer pursuant to clause (A)
of Section 8.2(c) of the Merger Agreement, (v) the date Issuer shall have paid
(and Grantee shall have received) a Total Repurchase Amount equal to the Maximum
Repurchase Price pursuant to Section 7 and (vi) the date Grantee shall have
received Total Profit equal to the Maximum Profit. The termination of the Option
shall not affect any rights hereunder which by their terms extend beyond the
date of such termination.
(b) As used herein, a "Purchase Event" means an event the
result of which is that a termination fee is required to be paid by Issuer to
Grantee pursuant to Section 8.2(c) of the Merger Agreement.
(c) In the event Grantee wishes to exercise the Option, it
shall send to Issuer a written notice (the "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 10 business
days from such
B-2
<PAGE> 195
Notice Date for the closing of such purchase (a "Closing"; and the date of such
Closing, a "Closing Date"); provided that such closing shall be held only if (A)
such purchase would not otherwise violate or cause the violation of applicable
law (including the HSR Act), (B) no law, rule or regulation shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order, decree or ruling issued by a court or other
governmental authority of competent jurisdiction shall be in effect, which
prohibits delivery of such Option Shares (and the parties hereto shall use their
reasonable best efforts to have any such order, injunction, decree or ruling
vacated or reversed) and (C) any prior notification to or approval of any other
regulatory authority in the United States or elsewhere required in connection
with such purchase shall have been made or obtained, other than those which if
not made or obtained would not reasonably be expected to result in a significant
detriment to Grantee and its Subsidiaries taken as a whole or Issuer and its
Subsidiaries taken as a whole. If the Closing cannot be consummated by reason of
a restriction set forth in clause (A), (B) or (C) above, notwithstanding the
provisions of Section 2(a), one or more Closings shall be held from time to time
in respect of that number of Option Shares the purchase of which is no longer
restricted, each such Closing to be held within five business days after the
elimination of the applicable restriction.
Section 3. Payment and Delivery of Certificates. (a) On each
Closing Date, Grantee shall pay to Issuer in immediately available funds by wire
transfer to a bank account designated by Issuer an amount equal to the Purchase
Price multiplied by the Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer shall deliver to
Grantee a certificate or certificates representing the Option Shares to be
purchased at such closing, which Option Shares shall be free and clear of all
liens, charges or encumbrances ("Liens"), and if the Option should be exercised
in part only, a new Option evidencing the rights of Grantee to purchase the
balance of the Option Shares purchasable hereunder, and Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable law or the provisions
of this Agreement.
B-3
<PAGE> 196
(c) Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 6, 2000.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to
restrictions arising under the Securities Act in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if
Grantee shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do not
require the retention of such reference.
(d) Upon the giving by Grantee to Issuer of an Exercise Notice
provided for in Section 2(c) and the tender of the applicable purchase price in
immediately available funds, Grantee shall be deemed to be the holder of record
of the Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such Option Shares shall not then be actually delivered to Grantee. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of certificates representing the Option Shares under Section 3 in
the name of Grantee or its assignee, transferee or designee.
SECTION 4. Authorized Stock. Issuer hereby represents and
warrants to Grantee that Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, at all times from the
B-4
<PAGE> 197
date hereof until the obligation to deliver Shares upon the exercise of the
Option terminates, and will have reserved for issuance, upon exercise of the
Option, Shares necessary for issuance to Grantee upon exercise of the Option,
and Issuer will take all necessary corporate action to authorize and reserve for
issuance all additional Shares or other securities which may be issued pursuant
to Section 6 upon exercise of the Option. The Shares to be issued upon due
exercise of the Option, including all additional Shares or other securities
which may be issuable upon exercise of the Option pursuant to Section 6, upon
issuance pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, including any
preemptive rights of any stockholder of Issuer.
SECTION 5. Purchase Not for Distribution. Grantee hereby
represents and warrants to Issuer that any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act.
SECTION 6. Adjustment upon Changes in Capitalization, etc. (a)
In the event of any change in Shares by reason of reclassification,
recapitalization, stock split, split-up, combination, exchange of shares, stock
dividend, dividend payable in any other securities or property (other than
quarterly cash dividends in the ordinary course of business), or any similar
event, the type and number of Shares or securities subject to the Option, and
the Purchase Price therefor (including for purposes of repurchase thereof
pursuant to Section 7), shall be adjusted appropriately, and proper provisions
shall be made in the agreements governing such transaction, so that Grantee
shall receive upon exercise of the Option the number and class of shares or
other securities or property that Grantee would have received in respect of
Shares if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable. If any additional Shares are issued after
the date of this Agreement or, if after the date of this Agreement, any Shares
are redeemed, repurchased or retired by Issuer or otherwise cease to be
outstanding (other than pursuant to an event described in the immediately
preceding sentence or otherwise pursuant to this Agreement), the number of
Shares subject to the Option shall be adjusted so that immediately after such
issuance,
B-5
<PAGE> 198
redemption, repurchase, retirement or other event, it equals 19.9% of the number
of Shares then issued and outstanding. In no event shall the number of Shares
subject to the Option exceed 19.9% of the number of Shares issued and
outstanding at the time of exercise (without giving effect to any shares subject
or issued pursuant to the Option).
(b) Without limiting the foregoing, whenever the number of
Option Shares purchasable upon exercise of the Option is adjusted as provided in
the first sentence of Section 6(a), the Purchase Price per Option Share shall be
adjusted by multiplying the Purchase Price by a fraction, the numerator of which
is equal to the number of Option Shares purchasable prior to the adjustment and
the denominator of which is equal to the number of Option Shares purchasable
after the adjustment.
(c) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than Grantee,
Newco or one of their respective Subsidiaries, and Issuer will not be the
continuing or surviving corporation in such consolidation or merger, (ii) to
permit any person, other than Grantee, Newco or one of their respective
Subsidiaries, to merge into Issuer and Issuer will be the continuing or
surviving corporation, but in connection with such merger, the shares of Common
Stock outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of Issuer or any other
Person or cash or any other property, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any Person, other than Grantee, Newco or
one of their respective Subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Option
Shares had the Option been exercised immediately prior to such consolidation,
merger, sale or transfer or the record date therefor, as applicable; and the
Applicable Price (as defined in Section 7(c)) will be computed with respect to
such shares, securities or property. Issuer shall take such steps in connection
with such consolidation, merger, sale, transfer or other such transaction as may
be reasonably
B-6
<PAGE> 199
necessary to assure that the provisions hereof shall thereafter apply as nearly
as possible to any securities or property thereafter deliverable upon exercise
of the Option.
SECTION 7. Repurchase of Option and Option Shares. (a)
Notwithstanding the provisions of Section 2, at any time commencing upon the
first occurrence of a Purchase Event and ending upon termination of this Option
in accordance with Section 2, Issuer (or any successor entity thereof) shall:
(i) at the written request of Grantee (any such request, a "Cash Exercise
Notice"), repurchase from Grantee the Option or a portion thereof (if and to the
extent not previously exercised or terminated) at a price which, subject to
Section 10 below, is equal to the excess, if any, of (x) the Applicable Price
(as defined below) as of the Section 7 Request Date (as defined below) for a
Share over (y) the Purchase Price (subject to adjustment pursuant to Section 6),
multiplied by all or such portion of the Option Shares subject to the Option as
Grantee shall specify in the Cash Exercise Notice (the "Option Repurchase
Price") and (ii) at the written request of Grantee (any such request, an "Option
Shares Notice"), repurchase from Grantee such number of the Option Shares that
have been issued upon exercise of the Option as Grantee shall specify in the
Option Shares Notice at a price which, subject to Section 10 below, is equal to
the Applicable Price as of the Section 7 Request Date for a Share multiplied by
the number of Option Shares so specified (the "Option Share Repurchase Price").
(b) In connection with any exercise of rights under this
Section 7, Issuer shall, within five business days after the Section 7 Request
Date, pay the Option Repurchase Price or the Option Share Repurchase Price, as
the case may be, in immediately available funds, and Grantee or such owner of
the Option or Option Shares, as the case may be, shall surrender to Issuer the
Option or Option Shares, as applicable. Upon receipt by Grantee of the Option
Repurchase Price, the obligations of Issuer to deliver Option Shares pursuant to
Section 3 of this Agreement shall be terminated with respect to the number of
Option Shares specified in the Cash Exercise Notice for which payment of the
Option Repurchase Price has been received.
(c) For purposes of this Agreement, the following terms have
the following meanings:
B-7
<PAGE> 200
(i) "Applicable Price", as of any date, means the highest of
(A) the highest price per Share paid or proposed to be paid by any
third party for Shares or the consideration per Share received or to be
received by holders of Shares, in each case pursuant to any Acquisition
Proposal for or with Issuer made on or prior to such date or (B) the
average closing price per Share as reported on the NYSE Composite Tape
or if the Shares are not listed on the NYSE, the highest bid price per
Share as quoted on the National Association of Securities Dealers
Automated Quotation System or, if the Shares are not quoted thereon, on
the principal trading market on which such Shares are traded as
reported by a recognized source, during the 10 trading days preceding
such date. If the consideration to be offered, paid or received
pursuant to the foregoing clause (A) shall be other than in cash, the
value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by
Grantee and reasonably acceptable to Issuer.
(ii) "Section 7 Request Date" means the date on which Grantee
delivers to Issuer a Cash Exercise Notice or an Option Shares Notice,
as the case may be.
(d) In no event shall (i) the aggregate Option Repurchase
Price paid pursuant to this Section 7 for the Option (or portion thereof), plus
(ii) any excess of (A) the Option Share Repurchase Price paid pursuant to this
Section 7 for Option Shares over (B) Grantee's aggregate purchase price for such
repurchased Option Shares (the sum of (i) plus (ii), the "Total Repurchase
Amount") be in excess of the Maximum Profit less any termination fee paid by
Issuer and received by Grantee pursuant to Section 8.2(c) of the Merger
Agreement (the "Maximum Repurchase Price").
SECTION 8. Registration Rights. Issuer shall, if requested by
Grantee or any permitted assignee of Grantee which is the owner of Option Shares
(collectively with Grantee, the "Owners") at any time and from time to time
within two years of the first exercise of the Option, as expeditiously as
possible prepare and file up to two registration statements under the Securities
Act if such registration is necessary in order to permit the sale or other
disposition of any or all shares or other securities that have been acquired by
or are issuable to such Owners upon exercise of the Option in accordance with
the intended
B-8
<PAGE> 201
method of sale or other disposition stated by such Owners, including a "shelf"
registration statement under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use all reasonable efforts to qualify such shares or
other securities under any applicable state securities laws. Issuer shall use
all reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective for such period at
least 120 days from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to maintain
its effectiveness may be postponed or suspended for a period of time not
exceeding 120 days in the aggregate if the Board of Directors of Issuer shall
have determined in its good faith reasonable judgment that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely affect
Issuer (but in no event shall Issuer exercise such postponement or suspension
right more than twice). Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at Issuer's expense except
underwriting discounts or commissions, brokers' fees and the reasonable fees and
disbursements of Owners' counsel related thereto. The Owners shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If during the time period referred to in the
first sentence of this Section 8 Issuer effects a registration under the
Securities Act of Shares for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it shall
allow the Owners the right to participate in such registration, and such
participation shall not affect the obligation of Issuer to effect two
registration statements for the Owners under this Section 8; provided that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of Shares requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the offering price, Issuer and the Owners shall each reduce on a pro
rata basis the Shares to be included therein on their respective behalf. In
connection with any registration pursuant to this Section 8, Issuer and the
Owners shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants,
B-9
<PAGE> 202
indemnification and contribution in connection with such registration.
SECTION 9. Additional Covenants of Issuer. (a) If Shares or
any other securities to be acquired upon exercise of the Option are then listed
on the NYSE or any other securities exchange or market, Issuer, upon the request
of any Owner, will promptly file an application to list the Shares or other
securities to be acquired upon exercise of the Option on the NYSE or such other
securities exchange or market and will use its reasonable best efforts to obtain
approval of such listing as soon as practicable.
(b) Issuer will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to permit
the exercise of the Option in accordance with the terms and conditions hereof,
as soon as practicable after the date hereof, including making any appropriate
filing pursuant to the HSR Act and any other applicable law, supplying as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and any other applicable law, and
taking all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(c) Issuer agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by it.
(d) The periods during which Grantee may exercise its rights
under Section 2, Section 3 and Section 7 hereof shall be extended in each case
at the request of Grantee to the extent necessary (i) to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods, and (ii) to avoid liability by Grantee under Section
16(b) of the Exchange Act by reason of such exercise.
SECTION 10. Limitation of Grantee Profit. (a) Notwithstanding
any other provision in this Agreement and the Merger Agreement, in no event
shall Grantee's Total Profit (as defined below) exceed $25,000,000 (the "Maximum
Profit") and, if Grantee's Total
B-10
<PAGE> 203
Profit otherwise would exceed such amount, Grantee, at its sole discretion,
shall either (i) reduce the number of Shares subject to the Option, (ii) deliver
to Issuer for cancellation Shares (or other securities into which Option Shares
are converted or exchanged) previously purchased by Grantee, (iii) pay cash to
Issuer, or (iv) any combination of the foregoing, so that Grantee's actually
realized Total Profit shall not exceed the Maximum Profit after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of any
Notice Date, result in a Notional Total Profit (as defined below) of more than
the Maximum Profit and, if exercise of the Option otherwise would result in the
Notional Total Profit exceeding such amount, Grantee, at its discretion, may (in
addition to any of the actions specified in Section 10(a) above) (i) reduce the
number of Shares subject to the Option or (ii) increase the Purchase Price for
that number of Option Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed the Maximum Profit; provided that nothing
in this sentence shall restrict any exercise of the Option permitted hereby on
any subsequent date at the Purchase Price set forth in Section 1.
(c) For purposes of this Agreement, "Total Profit" shall mean:
(i) the aggregate amount (before taxes) of (A) any excess of (x) the net cash
amounts or fair market value of any property received by Grantee pursuant to a
sale of Option Shares (or securities into which such shares are converted or
exchanged) to any unaffiliated party over (y) Grantee's aggregate purchase price
for such Option Shares (or other securities), plus (B) any amounts received by
Grantee on the repurchase of the Option by Issuer pursuant to Section 7, plus
(C) (x) any amounts received by Grantee on repurchase of Option Shares by Issuer
pursuant to Section 7, less (y) Grantee's aggregate purchase price for such
Option Shares, plus (D) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party, plus (E) any
termination fee paid by Issuer and received by Grantee pursuant to Section
8.2(c) of the Merger Agreement, minus (ii) the amounts of any cash previously
paid by Grantee to Issuer pursuant to this Section 10 plus the value of the
Option Shares (or other
B-11
<PAGE> 204
securities) previously delivered by Grantee to Issuer for cancellation pursuant
to this Section 10.
(d) For purposes of this Agreement, "Notional Total Profit"
with respect to any number of Option Shares as to which Grantee may propose to
exercise the Option shall mean the Total Profit determined as of the Notice Date
assuming that the Stock Option was exercised on such date for such number of
Option Shares and assuming that such Option Shares, together with all other
Option Shares previously acquired upon exercise of the Option and held by
Grantee and its affiliates as of such date, were sold for cash at the closing
price per Share on the NYSE as of the close of business on the preceding trading
day (less customary brokerage commissions).
(e) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of Grantee to receive, nor
relieve Issuer's obligation to pay, any termination fee provided for in Section
8.2(c) of the Merger Agreement; provided that if and to the extent the Total
Profit received by Grantee would exceed the Maximum Profit following receipt of
such payment, Grantee shall be obligated to promptly comply with the terms of
Section 10(a).
(f) For purposes of Section 10(a) and clause (ii) of Section
10(c), the value of any Option Shares delivered by Grantee to Issuer shall be
the Applicable Price of such Option Shares.
SECTION 11. Loss, Theft, Etc. of Agreement (and the Option
Granted Hereby). This Agreement is exchangeable, without expense, at the option
of Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of Shares purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date.
B-12
<PAGE> 205
Any such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.
SECTION 12. Miscellaneous. (a) Expenses. Except as otherwise
provided in Section 8 or in the Merger Agreement, each of the parties hereto
shall bear and pay all expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may
be waived in writing at any time by the party that is entitled to the benefits
of such provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
Severability. Except as otherwise set forth in the Merger Agreement, this
Agreement, together with the Merger Agreement and the Arvin Stock Option
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to acquire,
or does not require Issuer to repurchase, the full number of Shares as provided
in Sections 2 and 7, as adjusted pursuant to Section 6, it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of Shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law; Submission to Jurisdiction. (i) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
B-13
<PAGE> 206
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO
CHOICE OF LAW PRINCIPLES THEREOF); PROVIDED THAT THE FIDUCIARY DUTIES OF THE
BOARD OF DIRECTORS OF THE PARTIES SHALL BE GOVERNED BY THE LAWS OF THEIR
RESPECTIVE STATES OF INCORPORATION (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF).
(ii) Each of Issuer and Grantee irrevocably agrees that any
legal action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by the other party hereto
or its successors or permitted assigns may be brought and determined in any
federal or state court located in the State of Delaware or the State of Indiana,
and each of Issuer and Grantee hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of Issuer and Grantee hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by Applicable Laws, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(e) Headings. The headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given as set forth in Section 9.2 of the
Merger Agreement.
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two or more counterparts, each of which shall be considered one
and the
B-14
<PAGE> 207
same agreement and shall become effective when counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred prior to
termination of the Option, Grantee, subject to and in compliance with the
express provisions hereof, may assign in whole or in part its rights and
obligations hereunder following such Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(i) Representations and Warranties. The representations and
warranties contained in Sections 4.1(a)(i) and 4.2(a)(i) of the Merger
Agreement, and, to the extent they relate to this Stock Option Agreement, in
Sections 4.2(b), (c), (f) and (g) and Section 4.1(c) of the Merger Agreement,
are incorporated herein by reference.
(j) Further Assurances. In the event of any exercise of the
Option by Grantee or the issuance of any Cash Exercise Notice by Grantee, Issuer
and Grantee shall execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(k) Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity. Both parties further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such equitable
relief and that this provision is without prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement.
B-15
<PAGE> 208
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first above written.
MERITOR AUTOMOTIVE, INC.
By: /s/ Larry D. Yost
-------------------------------------------
Name: Larry D. Yost
Title: Chairman of the Board and
Chief Executive Officer
ARVIN INDUSTRIES, INC.
By: /s/ V. William Hunt
-------------------------------------------
Name: V. William Hunt
Title: Chairman, President and
Chief Executive Officer
B-16
<PAGE> 209
APPENDIX C
ARVIN INDUSTRIES, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 6, 2000 (the
"Agreement"), by and between ARVIN INDUSTRIES, INC., an Indiana corporation
("Issuer"), and MERITOR AUTOMOTIVE, INC., a Delaware corporation ("Grantee").
WHEREAS, Issuer, Mu Sub, Inc., an Indiana corporation and a
wholly-owned subsidiary of Grantee ("Newco"), and Grantee propose to enter into
an Agreement and Plan of Reorganization, dated as of the date hereof (the
"Merger Agreement"; capitalized terms used but not defined herein shall have the
meanings set forth in the Merger Agreement), providing for, among other things,
a merger of Grantee with and into Newco, followed immediately by a merger of
Issuer with and into Newco, with Newco being the surviving corporation;
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Merger Agreement and the Meritor Stock Option
Agreement, Grantee has requested that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below); and
WHEREAS, as a condition and inducement to Issuer's willingness
to enter into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's common stock under the Meritor Stock Option Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, in the Merger Agreement and in the Meritor Stock Option Agreement, and
intending to be legally bound hereby, Issuer and Grantee agree as follows:
SECTION 1. Grant of Options. Subject to the terms and
conditions set forth herein, Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase up to 5,103,420 shares (the "Option Shares")
of common shares, par value $2.50 per share, of Issuer (the "Shares") (which
Option Shares represent 19.9% of the number of Shares outstanding as of the date
hereof), together with the
<PAGE> 210
associated purchase rights (the "Rights") under the Arvin Rights Agreement, at a
purchase price of $24.1875 per Option Share (such price, as adjusted if
applicable, the "Purchase Price"). The number of Option Shares that may be
received upon the exercise of the Option and the Purchase Price are subject to
adjustment as set forth in Section 6.
SECTION 2. Exercise of Option. (a) Grantee may exercise the
Option, in whole or in part, at any time or from time to time following the
occurrence of a Purchase Event (as defined below); provided that, except as
otherwise provided herein, the Option shall terminate and be of no further force
and effect upon the earliest to occur of (i) the Effective Time, (ii) six months
after the first occurrence of a Purchase Event (or if, at the expiration of such
six months after the first occurrence of a Purchase Event, the Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed), (iii) termination of the Merger Agreement under circumstances which do
not and cannot result in Grantee's becoming entitled to receive termination fees
from Issuer pursuant to Section 8.2(b) of the Merger Agreement, (iv) unless a
Purchase Event occurs on or before such date, 12 months after the termination of
the Merger Agreement under circumstances which could result in Grantee's
becoming entitled to receive termination fees from Issuer pursuant to clause (A)
of Section 8.2(b) of the Merger Agreement, (v) the date Issuer shall have paid
(and Grantee shall have received) a Total Repurchase Amount equal to the Maximum
Repurchase Price pursuant to Section 7 and (vi) the date Grantee shall have
received Total Profit equal to the Maximum Profit. The termination of the Option
shall not affect any rights hereunder which by their terms extend beyond the
date of such termination.
(b) As used herein, a "Purchase Event" means an event the
result of which is that a termination fee is required to be paid by Issuer to
Grantee pursuant to Section 8.2(b) of the Merger Agreement.
(c) In the event Grantee wishes to exercise the Option, it
shall send to Issuer a written notice (the "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of Option Shares it intends to purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 10 business
days from such
C-2
<PAGE> 211
Notice Date for the closing of such purchase (a "Closing"; and the date of such
Closing, a "Closing Date"); provided that such closing shall be held only if (A)
such purchase would not otherwise violate or cause the violation of applicable
law (including the HSR Act), (B) no law, rule or regulation shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order, decree or ruling issued by a court or other
governmental authority of competent jurisdiction shall be in effect, which
prohibits delivery of such Option Shares (and the parties hereto shall use their
reasonable best efforts to have any such order, injunction, decree or ruling
vacated or reversed) and (C) any prior notification to or approval of any other
regulatory authority in the United States or elsewhere required in connection
with such purchase shall have been made or obtained, other than those which if
not made or obtained would not reasonably be expected to result in a significant
detriment to Grantee and its Subsidiaries taken as a whole or Issuer and its
Subsidiaries taken as a whole. If the Closing cannot be consummated by reason of
a restriction set forth in clause (A), (B) or (C) above, notwithstanding the
provisions of Section 2(a), one or more Closings shall be held from time to time
in respect of that number of Option Shares the purchase of which is no longer
restricted, each such Closing to be held within five business days after the
elimination of the applicable restriction.
Section 3. Payment and Delivery of Certificates. (a) On each
Closing Date, Grantee shall pay to Issuer in immediately available funds by wire
transfer to a bank account designated by Issuer an amount equal to the Purchase
Price multiplied by the Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer shall deliver to
Grantee a certificate or certificates representing the Option Shares to be
purchased at such closing, which Option Shares shall be free and clear of all
liens, charges or encumbrances ("Liens"), and if the Option should be exercised
in part only, a new Option evidencing the rights of Grantee to purchase the
balance of the Option Shares purchasable hereunder, and Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or otherwise
dispose of such Option Shares in violation of applicable law or the provisions
of this Agreement.
C-3
<PAGE> 212
(c) Certificates for the Option Shares delivered at each
Closing shall be endorsed with a restrictive legend which shall read
substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF APRIL 6, 2000.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to
restrictions arising under the Securities Act in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if
Grantee shall have delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do not
require the retention of such reference.
(d) Upon the giving by Grantee to Issuer of an Exercise Notice
provided for in Section 2(c) and the tender of the applicable purchase price in
immediately available funds, Grantee shall be deemed to be the holder of record
of the Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such Option Shares shall not then be actually delivered to Grantee. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the preparation, issue
and delivery of certificates representing the Option Shares under Section 3 in
the name of Grantee or its assignee, transferee or designee.
SECTION 4. Authorized Stock. Issuer hereby represents and
warrants to Grantee that Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, at all times from the
C-4
<PAGE> 213
date hereof until the obligation to deliver Shares upon the exercise of the
Option terminates, and will have reserved for issuance, upon exercise of the
Option, Shares necessary for issuance to Grantee upon exercise of the Option,
and Issuer will take all necessary corporate action to authorize and reserve for
issuance all additional Shares or other securities which may be issued pursuant
to Section 6 upon exercise of the Option. The Shares to be issued upon due
exercise of the Option, including all additional Shares or other securities
which may be issuable upon exercise of the Option pursuant to Section 6, upon
issuance pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, including any
preemptive rights of any stockholder of Issuer.
SECTION 5. Purchase Not for Distribution. Grantee hereby
represents and warrants to Issuer that any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be taken with a view to
the public distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from registration under
the Securities Act.
SECTION 6. Adjustment upon Changes in Capitalization, etc. (a)
In the event of any change in Shares by reason of reclassification,
recapitalization, stock split, split-up, combination, exchange of shares, stock
dividend, dividend payable in any other securities or property (other than
quarterly cash dividends in the ordinary course of business), or any similar
event, the type and number of Shares or securities subject to the Option, and
the Purchase Price therefor (including for purposes of repurchase thereof
pursuant to Section 7), shall be adjusted appropriately, and proper provisions
shall be made in the agreements governing such transaction, so that Grantee
shall receive upon exercise of the Option the number and class of shares or
other securities or property that Grantee would have received in respect of
Shares if the Option had been exercised immediately prior to such event or the
record date therefor, as applicable. If any additional Shares are issued after
the date of this Agreement or, if after the date of this Agreement, any Shares
are redeemed, repurchased or retired by Issuer or otherwise cease to be
outstanding (other than pursuant to an event described in the immediately
preceding sentence or otherwise pursuant to this Agreement), the number of
Shares subject to the Option shall be adjusted so that immediately after such
issuance,
C-5
<PAGE> 214
redemption, repurchase, retirement or other event, it equals 19.9% of the number
of Shares then issued and outstanding. In no event shall the number of Shares
subject to the Option exceed 19.9% of the number of Shares issued and
outstanding at the time of exercise (without giving effect to any shares subject
or issued pursuant to the Option).
(b) Without limiting the foregoing, whenever the number of
Option Shares purchasable upon exercise of the Option is adjusted as provided in
the first sentence of Section 6(a), the Purchase Price per Option Share shall be
adjusted by multiplying the Purchase Price by a fraction, the numerator of which
is equal to the number of Option Shares purchasable prior to the adjustment and
the denominator of which is equal to the number of Option Shares purchasable
after the adjustment.
(c) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than Grantee,
Newco or one of their respective Subsidiaries, and Issuer will not be the
continuing or surviving corporation in such consolidation or merger, (ii) to
permit any person, other than Grantee, Newco or one of their respective
Subsidiaries, to merge into Issuer and Issuer will be the continuing or
surviving corporation, but in connection with such merger, the shares of Common
Stock outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of Issuer or any other
Person or cash or any other property, or (iii) to sell or otherwise transfer all
or substantially all of its assets to any Person, other than Grantee, Newco or
one of their respective Subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option will,
upon the consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option with identical
terms appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Option
Shares had the Option been exercised immediately prior to such consolidation,
merger, sale or transfer or the record date therefor, as applicable; and the
Applicable Price (as defined in Section 7(c)) will be computed with respect to
such shares, securities or property. Issuer shall take such steps in connection
with such consolidation, merger, sale, transfer or other such transaction as may
be reasonably
C-6
<PAGE> 215
necessary to assure that the provisions hereof shall thereafter apply as nearly
as possible to any securities or property thereafter deliverable upon exercise
of the Option.
SECTION 7. Repurchase of Option and Option Shares. (a)
Notwithstanding the provisions of Section 2, at any time commencing upon the
first occurrence of a Purchase Event and ending upon termination of this Option
in accordance with Section 2, Issuer (or any successor entity thereof) shall:
(i) at the written request of Grantee (any such request, a "Cash Exercise
Notice"), repurchase from Grantee the Option or a portion thereof (if and to the
extent not previously exercised or terminated) at a price which, subject to
Section 10 below, is equal to the excess, if any, of (x) the Applicable Price
(as defined below) as of the Section 7 Request Date (as defined below) for a
Share over (y) the Purchase Price (subject to adjustment pursuant to Section 6),
multiplied by all or such portion of the Option Shares subject to the Option as
Grantee shall specify in the Cash Exercise Notice (the "Option Repurchase
Price") and (ii) at the written request of Grantee (any such request, an "Option
Shares Notice"), repurchase from Grantee such number of the Option Shares that
have been issued upon exercise of the Option as Grantee shall specify in the
Option Shares Notice at a price which, subject to Section 10 below, is equal to
the Applicable Price as of the Section 7 Request Date for a Share multiplied by
the number of Option Shares so specified (the "Option Share Repurchase Price").
(b) In connection with any exercise of rights under this
Section 7, Issuer shall, within five business days after the Section 7 Request
Date, pay the Option Repurchase Price or the Option Share Repurchase Price, as
the case may be, in immediately available funds, and Grantee or such owner of
the Option or Option Shares, as the case may be, shall surrender to Issuer the
Option or Option Shares, as applicable. Upon receipt by Grantee of the Option
Repurchase Price, the obligations of Issuer to deliver Option Shares pursuant to
Section 3 of this Agreement shall be terminated with respect to the number of
Option Shares specified in the Cash Exercise Notice for which payment of the
Option Repurchase Price has been received.
(c) For purposes of this Agreement, the following terms have
the following meanings:
C-7
<PAGE> 216
(i) "Applicable Price", as of any date, means the highest of
(A) the highest price per Share paid or proposed to be paid by any
third party for Shares or the consideration per Share received or to be
received by holders of Shares, in each case pursuant to any Acquisition
Proposal for or with Issuer made on or prior to such date or (B) the
average closing price per Share as reported on the NYSE Composite Tape
or if the Shares are not listed on the NYSE, the highest bid price per
Share as quoted on the National Association of Securities Dealers
Automated Quotation System or, if the Shares are not quoted thereon, on
the principal trading market on which such Shares are traded as
reported by a recognized source, during the 10 trading days preceding
such date. If the consideration to be offered, paid or received
pursuant to the foregoing clause (A) shall be other than in cash, the
value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm selected by
Grantee and reasonably acceptable to Issuer.
(ii) "Section 7 Request Date" means the date on which Grantee
delivers to Issuer a Cash Exercise Notice or an Option Shares Notice,
as the case may be.
(d) In no event shall (i) the aggregate Option Repurchase
Price paid pursuant to this Section 7 for the Option (or portion thereof), plus
(ii) any excess of (A) the Option Share Repurchase Price paid pursuant to this
Section 7 for Option Shares over (B) Grantee's aggregate purchase price for such
repurchased Option Shares (the sum of (i) plus (ii), the "Total Repurchase
Amount") be in excess of the Maximum Profit less any termination fee paid by
Issuer and received by Grantee pursuant to Section 8.2(b) of the Merger
Agreement (the "Maximum Repurchase Price").
SECTION 8. Registration Rights. Issuer shall, if requested by
Grantee or any permitted assignee of Grantee which is the owner of Option Shares
(collectively with Grantee, the "Owners") at any time and from time to time
within two years of the first exercise of the Option, as expeditiously as
possible prepare and file up to two registration statements under the Securities
Act if such registration is necessary in order to permit the sale or other
disposition of any or all shares or other securities that have been acquired by
or are issuable to such Owners upon exercise of the Option in accordance with
the intended
C-8
<PAGE> 217
method of sale or other disposition stated by such Owners, including a "shelf"
registration statement under Rule 415 under the Securities Act or any successor
provision, and Issuer shall use all reasonable efforts to qualify such shares or
other securities under any applicable state securities laws. Issuer shall use
all reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor and to keep such registration statement effective for such period at
least 120 days from the day such registration statement first becomes effective
as may be reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to maintain
its effectiveness may be postponed or suspended for a period of time not
exceeding 120 days in the aggregate if the Board of Directors of Issuer shall
have determined in its good faith reasonable judgment that the filing of such
registration statement or the maintenance of its effectiveness would require
disclosure of nonpublic information that would materially and adversely affect
Issuer (but in no event shall Issuer exercise such postponement or suspension
right more than twice). Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at Issuer's expense except
underwriting discounts or commissions, brokers' fees and the reasonable fees and
disbursements of Owners' counsel related thereto. The Owners shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If during the time period referred to in the
first sentence of this Section 8 Issuer effects a registration under the
Securities Act of Shares for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it shall
allow the Owners the right to participate in such registration, and such
participation shall not affect the obligation of Issuer to effect two
registration statements for the Owners under this Section 8; provided that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of Shares requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the offering price, Issuer and the Owners shall each reduce on a pro
rata basis the Shares to be included therein on their respective behalf. In
connection with any registration pursuant to this Section 8, Issuer and the
Owners shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants,
C-9
<PAGE> 218
indemnification and contribution in connection with such registration.
SECTION 9. Additional Covenants of Issuer. (a) If Shares or
any other securities to be acquired upon exercise of the Option are then listed
on the NYSE or any other securities exchange or market, Issuer, upon the request
of any Owner, will promptly file an application to list the Shares or other
securities to be acquired upon exercise of the Option on the NYSE or such other
securities exchange or market and will use its reasonable best efforts to obtain
approval of such listing as soon as practicable.
(b) Issuer will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to permit
the exercise of the Option in accordance with the terms and conditions hereof,
as soon as practicable after the date hereof, including making any appropriate
filing pursuant to the HSR Act and any other applicable law, supplying as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and any other applicable law, and
taking all other actions necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(c) Issuer agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by it.
(d) The periods during which Grantee may exercise its rights
under Section 2, Section 3 and Section 7 hereof shall be extended in each case
at the request of Grantee to the extent necessary (i) to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods, and (ii) to avoid liability by Grantee under Section
16(b) of the Exchange Act by reason of such exercise.
SECTION 10. Limitation of Grantee Profit. (a) Notwithstanding
any other provision in this Agreement and the Merger Agreement, in no event
shall Grantee's Total
C-10
<PAGE> 219
Profit (as defined below) exceed $25,000,000 (the "Maximum Profit") and, if
Grantee's Total Profit otherwise would exceed such amount, Grantee, at its sole
discretion, shall either (i) reduce the number of Shares subject to the Option,
(ii) deliver to Issuer for cancellation Shares (or other securities into which
Option Shares are converted or exchanged) previously purchased by Grantee, (iii)
pay cash to Issuer, or (iv) any combination of the foregoing, so that Grantee's
actually realized Total Profit shall not exceed the Maximum Profit after taking
into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of any
Notice Date, result in a Notional Total Profit (as defined below) of more than
the Maximum Profit and, if exercise of the Option otherwise would result in the
Notional Total Profit exceeding such amount, Grantee, at its discretion, may (in
addition to any of the actions specified in Section 10(a) above) (i) reduce the
number of Shares subject to the Option or (ii) increase the Purchase Price for
that number of Option Shares set forth in the Exercise Notice so that the
Notional Total Profit shall not exceed the Maximum Profit; provided that nothing
in this sentence shall restrict any exercise of the Option permitted hereby on
any subsequent date at the Purchase Price set forth in Section 1.
(c) For purposes of this Agreement, "Total Profit" shall mean:
(i) the aggregate amount (before taxes) of (A) any excess of (x) the net cash
amounts or fair market value of any property received by Grantee pursuant to a
sale of Option Shares (or securities into which such shares are converted or
exchanged) to any unaffiliated party over (y) Grantee's aggregate purchase price
for such Option Shares (or other securities), plus (B) any amounts received by
Grantee on the repurchase of the Option by Issuer pursuant to Section 7, plus
(C) (x) any amounts received by Grantee on repurchase of Option Shares by Issuer
pursuant to Section 7, less (y) Grantee's aggregate purchase price for such
Option Shares, plus (D) any amounts received by Grantee on the transfer of the
Option (or any portion thereof) to any unaffiliated party, plus (E) any
termination fee paid by Issuer and received by Grantee pursuant to Section
8.2(b) of the Merger Agreement, minus (ii) the amounts of any cash previously
paid by Grantee to Issuer pursuant to this Section 10 plus the value of the
Option Shares (or other
C-11
<PAGE> 220
securities) previously delivered by Grantee to Issuer for cancellation pursuant
to this Section 10.
(d) For purposes of this Agreement, "Notional Total Profit"
with respect to any number of Option Shares as to which Grantee may propose to
exercise the Option shall mean the Total Profit determined as of the Notice Date
assuming that the Stock Option was exercised on such date for such number of
Option Shares and assuming that such Option Shares, together with all other
Option Shares previously acquired upon exercise of the Option and held by
Grantee and its affiliates as of such date, were sold for cash at the closing
price per Share on the NYSE as of the close of business on the preceding trading
day (less customary brokerage commissions).
(e) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall affect the ability of Grantee to receive, nor
relieve Issuer's obligation to pay, any termination fee provided for in Section
8.2(b) of the Merger Agreement; provided that if and to the extent the Total
Profit received by Grantee would exceed the Maximum Profit following receipt of
such payment, Grantee shall be obligated to promptly comply with the terms of
Section 10(a).
(f) For purposes of Section 10(a) and clause (ii) of Section
10(c), the value of any Option Shares delivered by Grantee to Issuer shall be
the Applicable Price of such Option Shares.
SECTION 11. Loss, Theft, Etc. of Agreement (and the Option
Granted Hereby). This Agreement is exchangeable, without expense, at the option
of Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of Shares purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date.
C-12
<PAGE> 221
Any such new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by anyone.
SECTION 12. Miscellaneous. (a) Expenses. Except as otherwise
provided in Section 8 or in the Merger Agreement, each of the parties hereto
shall bear and pay all expenses incurred by it or on its behalf in connection
with the transactions contemplated hereunder, including fees and expenses of its
own financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may
be waived in writing at any time by the party that is entitled to the benefits
of such provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary;
Severability. Except as otherwise set forth in the Merger Agreement, this
Agreement, together with the Merger Agreement and the Meritor Stock Option
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to acquire,
or does not require Issuer to repurchase, the full number of Shares as provided
in Sections 2 and 7, as adjusted pursuant to Section 6, it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of Shares as may be permissible without any
amendment or modification hereof.
(d) Governing Law; Submission to Jurisdiction. (i) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
C-13
<PAGE> 222
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO
CHOICE OF LAW PRINCIPLES THEREOF); PROVIDED THAT THE FIDUCIARY DUTIES OF THE
BOARD OF DIRECTORS OF THE PARTIES SHALL BE GOVERNED BY THE LAWS OF THEIR
RESPECTIVE STATES OF INCORPORATION (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PRINCIPLES THEREOF).
(ii) Each of Issuer and Grantee irrevocably agrees that any
legal action or proceeding with respect to this Agreement or for recognition and
enforcement of any judgment in respect hereof brought by the other party hereto
or its successors or permitted assigns may be brought and determined in any
federal or state court located in the State of Delaware or the State of Indiana,
and each of Issuer and Grantee hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of Issuer and Grantee hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by Applicable Laws, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
(e) Headings. The headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given as set forth in Section 9.2 of the
Merger Agreement.
(g) Counterparts. This Agreement and any amendments hereto may
be executed in two or more counterparts, each of which shall be considered one
and the
C-14
<PAGE> 223
same agreement and shall become effective when counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
(h) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written consent of the other
party, except that in the event a Purchase Event shall have occurred prior to
termination of the Option, Grantee, subject to and in compliance with the
express provisions hereof, may assign in whole or in part its rights and
obligations hereunder following such Purchase Event. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns.
(i) Representations and Warranties. The representations and
warranties contained in Sections 4.1(a)(i) and 4.2(a)(i) of the Merger
Agreement, and, to the extent they relate to this Stock Option Agreement, in
Sections 4.1(b), (c), (f) and (g) and Section 4.2(c) of the Merger Agreement,
are incorporated herein by reference
(j) Further Assurances. In the event of any exercise of the
Option by Grantee or the issuance of any Cash Exercise Notice by Grantee, Issuer
and Grantee shall execute and deliver all other documents and instruments and
take all other action that may be reasonably necessary in order to consummate
the transactions provided for by such exercise.
(k) Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity. Both parties further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such equitable
relief and that this provision is without prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement.
C-15
<PAGE> 224
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first above written.
ARVIN INDUSTRIES, INC.
By: /s/ V. William Hunt
-------------------------------------------
Name: V. William Hunt
Title: Chairman, President and
Chief Executive Officer
MERITOR AUTOMOTIVE, INC.
By: /s/ Larry D. Yost
-------------------------------------------
Name: Larry D. Yost
Title: Chairman of the Board and
Chief Executive Officer
C-16
<PAGE> 225
APPENDIX D
[Letterhead of Warburg Dillon Read LLC]
April 6, 2000
The Board of Directors
Meritor Automotive, Inc.
2135 West Maple Road
Troy, MI 48084
Dear Members of the Board:
We understand that Meritor Automotive, Inc., a Delaware corporation ("Meritor",
or the "Company") is considering a transaction (the "Transaction") whereby the
Company will enter into a business combination with Arvin Industries, Inc., an
Indiana corporation ("Arvin"). Pursuant to the terms of an Agreement and Plan of
Reorganization, dated as of April 6, 2000 (the "Merger Agreement"), by and among
Meritor, Mu Sub, Inc., an Indiana corporation ("Newco") and a wholly owned
subsidiary of Meritor, and Arvin, among other things, (i) Meritor will be merged
with and into Newco (the "First Step Merger"), (ii) immediately after the First
Step Merger, Arvin will be merged with and into Newco ("the Second Step
Merger"), (iii) in connection with the First Step Merger, each issued and
outstanding share of common stock, par value $1 per share, together with each
associated right (collectively, "Meritor Common Stock"), of Meritor (other than
shares held in Meritor's treasury or owned by any wholly-owned subsidiary of
Meritor) will be converted into the right to receive 0.75 shares (the "Meritor
Exchange Ratio") of common stock, par value $1 per share ("Newco Common Stock"),
of Newco, and (iv) in connection with the Second Step Merger, each issued and
outstanding share of common stock, par value $2.50 per share, together with each
associated right (collectively, "Arvin Common Stock"), of Arvin (other than
shares held in Arvin's treasury or owned by any wholly-owned subsidiary of
Arvin) will be converted into the right to receive one share of Newco Common
Stock and $2.00 in cash (together the "Arvin Merger Consideration"). The terms
and conditions of the Transaction are more fully set forth in the Merger
Agreement.
You have requested our opinion as to the fairness to the holders of Meritor
Common Stock from a financial point of view of the Meritor Exchange Ratio and
the Arvin Merger Consideration taken together.
Warburg Dillon Read LLC ("WDR") has acted as financial advisor to the Board of
Directors of Meritor in connection with the Transaction and will receive a fee
upon the consummation thereof. In the past, WDR and its predecessors have
provided investment banking services to Meritor and Arvin and received customary
compensation for the rendering of such services. In the ordinary course of
business, WDR, its successors and affiliates may trade or have traded securities
of Meritor and Arvin for their own accounts and, accordingly, may at any time
hold a long or short position in such securities.
Our opinion does not address Meritor's underlying business decision to effect
the Transaction or constitute a recommendation to any shareholder of Meritor as
to how such shareholder should vote with respect to the Transaction. At your
direction, we have not been asked to, nor do we, offer any opinion as to the
material terms of the Merger Agreement or the form of the Transaction. In
<PAGE> 226
Page 2 of 3
rendering this opinion, we have assumed, with your consent, that the final
executed form of the Merger Agreement will not differ in any material respect
from the drafts that we have examined, and that Meritor, Arvin and Newco will
comply with all the material terms of the Merger Agreement. We have not been
authorized to and have not solicited indications of interest in a business
combination with Meritor from any party. In addition, WDR is not expressing any
opinion as to the prices at which the Newco Common Stock may trade subsequent to
the Transaction.
In arriving at our opinion, we have, among other things: (i) reviewed certain
publicly available business and historical financial information relating to
Meritor and Arvin, (ii) reviewed the reported prices and trading activity for
Meritor Common Stock and Arvin Common Stock, (iii) reviewed certain internal
financial information and other data relating to the business and financial
prospects of Meritor, including estimates and financial forecasts prepared by
the management of Meritor, that were provided to us by Meritor and not publicly
available, (iv) reviewed certain internal financial information and other data
relating to the business and financial prospects of Arvin, including estimates
and financial forecasts prepared by the management of Arvin and not publicly
available, (v) conducted discussions with members of the senior managements of
Meritor and Arvin, (vi) reviewed publicly available financial and stock market
data with respect to certain other companies in lines of business we believe to
be generally comparable to those of Meritor and Arvin, (vii) compared the
financial terms of the Transaction with the publicly available financial terms
of certain other transactions which we believe to be generally relevant, (viii)
considered certain pro forma effects of the Transaction on Meritor's financial
statements and reviewed certain estimates of synergies prepared by Meritor
management, (ix) reviewed drafts of the Merger Agreement and related agreements,
and (x) conducted such other financial studies, analyses, and investigations,
and considered such other information as we deemed necessary or appropriate.
In connection with our review, at your direction, we have not assumed any
responsibility for independent verification of any of the information reviewed
by us for the purpose of this opinion and have, at your direction, relied on its
being complete and accurate in all material respects. In addition, at your
direction, we have not made any independent evaluation or appraisal of any of
the assets or liabilities (contingent or otherwise) of Meritor or Arvin, nor
have we been furnished with any such evaluation or appraisal. With respect to
the financial forecasts, estimates, pro forma effects and calculations of
synergies referred to above, we have assumed, at your direction, that they have
been reasonably prepared on a basis reflecting the best currently available
estimates and judgments of the management of each company as to its future
performance. In addition, we have assumed with your approval that the future
financial results referred to above will be achieved at the times and in the
amounts projected by management. Our opinion is necessarily based on economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In rendering our opinion, we have assumed, with your consent, that the
Transaction will qualify as a tax-free reorganization, and will be accounted for
using the purchase method.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Meritor Exchange Ratio and the Arvin Merger Consideration taken
together are fair, from a financial point of view, to the holders of Meritor
Common Stock.
Very truly yours,
WARBURG DILLON READ LLC
D-2
<PAGE> 227
Page 3 of 3
<TABLE>
<CAPTION>
<S> <C>
/s/ Andrew Horrocks /s/ Kevin Knight
- ----------------------- -----------------------
Andrew Horrocks Kevin Knight
Executive Director Executive Director
</TABLE>
D-3
<PAGE> 228
APPENDIX E
[Letterhead of Merrill Lynch]
April 6, 2000
Board of Directors
Arvin Industries, Inc.
One Noblitt Plaza
Columbus, IN 47201
Members of the Board of Directors:
Arvin Industries, Inc. (the "Company"), and Meritor Automotive, Inc. (the
"Merger Partner") and Mu Sub, Inc., a newly formed, wholly owned subsidiary of
the Merger Partner (the "Merger Newco"), propose to enter into an Agreement and
Plan of Reorganization dated as of April 6, 2000 (the "Agreement") pursuant to
which (a) Merger Partner will be merged with Merger Newco in a transaction (the
"First Step Merger") in which each outstanding share of the Merger Partner's
common stock, par value $1 per share (the "Merger Partner Shares"), other than
any Merger Partner Shares held in Merger Partner's treasury or owned by any
wholly owned subsidiary of Merger Partner, will be converted into the right to
receive 0.750 shares of Merger Newco common stock, par value $1 per share (the
"Merger Newco Stock"), and (b) the Company will be merged with Merger Newco in a
transaction (the "Second Step Merger" and together with the First Step Merger,
the "Merger") in which each outstanding share of the Company's common stock, par
value $2.50 per share (the "Company Shares"), other than any Company Shares held
in the Company's treasury or owned by any wholly owned subsidiary of the
Company, will be converted into the right to receive one share of Merger Newco
Stock (the "Stock Consideration") plus $2.00 in cash without interest ("Cash
Consideration", and together with the Stock Consideration, the "Merger
Consideration").
You have asked us whether, in our opinion, the Merger Consideration is
fair from a financial point of view to the holders of the Company Shares. In
arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Merger Partner
that we deemed to be relevant;
(2) Reviewed certain information, including financial
forecasts, relating to the business, earnings, cash
flow, assets, liabilities and prospects of the Company
and the Merger Partner, as well as the amount and timing
of the cost savings and related expenses and synergies
expected to result from the Merger (the "Expected
Synergies") furnished to us by the Company and the Merger
Partner, respectively;
(3) Conducted discussions with members of senior management
and representatives of the Company and the Merger Partner
concerning the matters described in clauses 1 and 2 above,
as well as their respective businesses and prospects before
and after giving effect to the Merger and the Expected
Synergies;
(4) Reviewed the market prices and valuation multiples for
the Company Shares and the
<PAGE> 229
Merger Partner Shares and compared them with those of
certain publicly traded companies that we deemed to be
relevant;
(5) Reviewed the results of operations of the Company and the
Merger Partner and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with
the financial terms of certain other transactions that we
deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Merger Partner and
their financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement in substantially final form; and
(10) Reviewed such other financial studies and analyses and
took into account such other matters as we deemed
necessary, including our assessment of general economic,
market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Merger Partner or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Merger Partner. With respect to the financial forecast information and
the Expected Synergies furnished to or discussed with us by the Company or the
Merger Partner, we have assumed that they have been reasonably prepared and
reflect the best currently available estimates and judgment of the Company's or
the Merger Partner's management as to the expected future financial performance
of the Company or the Merger Partner, as the case may be, and the Expected
Synergies. We have further assumed that the Merger will be accounted for as a
purchase under generally accepted accounting principles and that the receipt of
the Stock Consideration in the merger will be tax-free for U.S. federal income
tax purposes. We have also assumed that the final form of the Agreement will be
substantially similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the information made
available to us as of, the date hereof. We have assumed that in the course of
obtaining the necessary regulatory or other consents or approvals (contractual
or otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We are currently and have, in the past, provided financial
advisory and financing services to the Company and/or its affiliates and may
continue to do so and have received, and may receive, fees for the rendering of
such services. In addition, in the ordinary course of our business,
E-2
<PAGE> 230
we may actively trade the Company Shares and other securities of the Company, as
well as the Merger Partner Shares and other securities of the Merger Partner,
for our own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Merger Partner Shares will trade between the announcement
and the consummation of the Merger, and we are not expressing any opinion herein
as to the prices at which the Merger Newco Stock will trade following
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Merger Consideration is fair from a financial point
of view to the holders of the Company Shares.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner & Smith
Incorporated
--------------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
E-3
<PAGE> 231
APPENDIX F
RESTATED
ARTICLES OF INCORPORATION
OF
ARVINMERITOR, INC.
ARTICLE 1
IDENTIFICATION
The name of the corporation is ArvinMeritor, Inc. (the "Corporation" or
the "Company").
ARTICLE 2
PURPOSE, POWERS AND DURATION
Section 2.01. Purpose. The purpose for which the Corporation is formed is
the transaction of any or all lawful business for which corporations may be
incorporated under the Indiana Business Corporation Law, as the same may, from
time to time, be amended (the "Act").
Section 2.02. Powers. The Corporation, subject to any limitations or
restrictions imposed by the Act, other law or these Articles of Incorporation,
as the same may, from time to time, be amended (these "Articles"), shall have
the same powers as an individual to do all things necessary or convenient to
carry out its business and affairs, including without limitation all powers
enumerated in the Act as examples of corporate powers.
Section 2.03. Duration. The Corporation is to have perpetual existence.
ARTICLE 3
REGISTERED OFFICE AND REGISTERED AGENT
The street address of the registered office of the Corporation is:
251 East Ohio Street
Suite 500
Indianapolis, Indiana 46204
<PAGE> 232
and the name and business office of its registered agent in charge of such
office are:
Corporation Service Company
251 East Ohio Street
Suite 500
Indianapolis, Indiana 46204
ARTICLE 4
NUMBER OF AUTHORIZED SHARES
The Corporation shall have authority to issue a total of Five Hundred
Thirty Million (530,000,000) shares of the Corporation ("Shares").
ARTICLE 5
GENERAL PROVISIONS REGARDING SHARES
Section 5.01. Common Stock.
(a) Five Hundred Million (500,000,000) of the Shares that the
Corporation has authority to issue constitute a separate and single class of
Shares designated as "Common Stock", which shall have a par value of One Dollar
($1.00) per share and shall not be issued in series, with all shares of Common
Stock having identical rights, preferences and limitations.
(b) The Common Stock shall have the following voting powers,
designations, preferences and relative, participating, optional and other
special rights, and qualifications, limitations or restrictions thereof:
(i) Dividends. Whenever the full dividends upon any outstanding
Preferred Stock for all past dividend periods shall have been paid and the
full dividends thereon for the then current respective dividend periods
shall have been paid, or declared and a sum sufficient for the respective
payments thereof set apart, the holders of shares of the Common Stock shall
be entitled to receive such dividends and distributions in equal amounts
per share, payable in cash or otherwise, as may be declared thereon by the
Board of Directors of the Corporation (the "Board") from time to time out
of assets or funds of the Corporation legally available therefor.
(ii) Rights on Liquidation. In the event of any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or
involuntary, after the
F-2
<PAGE> 233
payment or setting apart for payment to the holders of any outstanding
Preferred Stock of the full preferential amounts to which such holders are
entitled as herein provided or referred to, all of the remaining assets of
the Corporation shall belong to and be distributable in equal amounts per
share to the holders of the Common Stock. For purposes of this Section
5.01(b)(ii), a consolidation or merger of the Corporation with any other
corporation, or the sale, transfer or lease of all or substantially all its
assets shall not constitute or be deemed a liquidation, dissolution or
winding-up of the Corporation.
(iii) Voting. Subject to the rights of holders of Preferred
Stock of any series, the holders of Common Stock shall have the right to
cast one vote for each duly authorized, issued and outstanding share of
Common Stock held by them upon each question or matter submitted generally
to the Shareholders.
Section 5.02. Preferred Stock. Thirty Million (30,000,000) of
the Shares that the Corporation has authority to issue constitute a separate and
single class of Shares designated as "Preferred Stock", which shall be without
par value, shall rank prior to and be preferred over Common Stock as to assets
and dividends, and may be issued in series as follows, with all shares of
Preferred Stock of the same series having identical rights, preferences and
limitations:
(a) Two Million (2,000,000) shares of Preferred Stock (or such
greater or lesser number as may be established pursuant to Section 6.01 of these
Articles) constitute a separate and single series designated as "Series A Junior
Participating Preferred Stock", which shall have the relative rights,
preferences and limitations set forth in this Article 5 and in Article 6 of
these Articles.
(b) The remainder of the Preferred Stock ("Other Preferred
Stock") may be issued in one or more series. Subject to the rights of the
holders of any then outstanding Preferred Stock, the Board is vested with
authority to determine and state the designations and the relative rights
(including voting rights, if any), preferences and limitations of any such
series of Other Preferred Stock by the adoption and filing in accordance with
the Act, before the issuance of any Shares of such series, of an amendment or
amendments to these Articles determining the terms of such series (a "Preferred
Stock Amendment"). The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(1) the designation of the series, which may be by distinguishing
number, letter or title;
(2) the number of shares of the series, which number the
Board of Directors may thereafter (except where otherwise
provided in the Preferred Stock Amendment) increase or decrease
(but not below the number of shares thereof then outstanding);
F-3
<PAGE> 234
(3) whether dividends, if any, shall be cumulative or
noncumulative and the dividend rate of the series;
(4) the dates at which dividends, if any, shall be payable;
(5) the redemption rights and price or prices, if any, for
shares of the series;
(6) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(7) the amounts payable on shares of the series in the event of
any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation;
(8) whether the shares of the series shall be convertible into
shares of any other class or series, or any other security,
of the Corporation or any other corporation, and, if so,
the specification of such other class or series or such
other security, the conversion price or prices or rate or
rates, any adjustments thereof, the date or dates as of
which such shares shall be convertible and all other terms
and conditions upon which such conversion may be made;
(9) restrictions on the issuance of shares of the same series
or of any other class or series; and
(10) the voting rights, if any, of the holders of shares of the
series.
Except as may be provided in these Articles or in a Preferred Stock Amendment,
the Common Stock shall have the exclusive right to vote for the election of
directors and for all other purposes, and except as may be required by the Act,
holders of Preferred Stock shall not be entitled to receive notice of any
meeting of Shareholders at which they are not entitled to vote. Subject to the
requirements of the Act, the number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding Common Stock.
Section 5.03. Issuance of Shares. Subject to the rights of any then
outstanding Preferred Stock, the Board has authority to authorize and direct the
issuance by the Corporation of Shares on such terms and conditions as it may,
from time to time, determine, subject only to the restrictions, limitations,
conditions and requirements imposed by the Act, other applicable laws and these
Articles.
Section 5.04. Distributions Upon Shares. Subject to the rights of any
then outstanding Preferred Stock, the Board has authority to authorize and
direct in respect of the issued and outstanding shares of Common Stock and
Preferred Stock (i) the payment of dividends and the making of other
distributions by the Corporation at such times, in
F-4
<PAGE> 235
such amounts and forms, from such sources and upon such terms and conditions as
it may, from time to time, determine upon, subject only to the restrictions,
limitations, conditions and requirements imposed by the Act, other applicable
laws and these Articles, and (ii) the making by the Corporation of Share
dividends and Share splits, pro rata and without consideration, in Shares of the
same class or series or in Shares of any other class or series, and without
obtaining the affirmative vote or the written consent of the holders of the
Shares of the class or series in which the payment or distribution is to be
made.
Section 5.05. Preemptive Rights. Unless otherwise determined by the
Board, no holder of Shares shall, as such holder, have any right to purchase or
subscribe for any Shares of any class which the Corporation may issue or sell,
whether or not exchangeable for any Shares of any class or classes and whether
out of unissued shares authorized by these Articles as originally filed or by
any amendment thereof or out of Shares acquired by it after the issue thereof.
Section 5.06. Acquisition of Shares. Subject to the rights of any then
outstanding Preferred Stock, the Board has authority to authorize and direct the
acquisition by the Corporation of the issued and outstanding shares of Common
Stock and Preferred Stock, in such amounts, from such persons, for such
considerations, from such sources and upon such terms and conditions as it may,
from time to time, determine, subject only to the restrictions, limitations,
conditions and requirements imposed by the Act, other applicable laws and these
Articles.
Section 5.07. Issuance of Rights, Options and Warrants. Subject to the
rights of any then outstanding Preferred Stock, the Board has authority to
create and to authorize and direct the issuance (on either a pro rata or a
non-pro rata basis) by the Corporation of rights, options and warrants for the
purchase of Shares, other securities of the Corporation, or shares or other
securities of any successor in interest of the Corporation (a "Successor"), at
such times, in such amounts, to such persons, for such consideration (if any),
with such form and content (including without limitation the consideration for
which any Shares, other securities of the Corporation, or shares or other
securities of any Successor are to be issued) and upon such terms and conditions
as it may, from time to time, determine upon, subject only to the restrictions,
limitations, conditions and requirements imposed by the Act, other applicable
laws and these Articles.
Section 5.08. Record Ownership of Shares. The Corporation shall be
entitled to treat the holder of record (according to the books of the
Corporation) of any Share or Shares (including any holder registered in a
book-entry or direct registration system maintained by the Corporation or a
transfer agent or a registrar designated by the Board of Directors) as the
holder in fact thereof and owner for all purposes and shall not be bound to
recognize any equitable or other claim to, or interest in, such Share or Shares
on the part of any other person, whether or not the Corporation shall have
express or other notice thereof, except as expressly provided by applicable law.
F-5
<PAGE> 236
Section 5.09. Recognition Procedure for Beneficial Ownership of Shares.
The Board may establish a recognition procedure, which may be included in the
By-Laws of the Corporation (as the same may be amended from time to time, the
"By-Laws"), by which the beneficial owner of any Share registered on the books
of the Corporation in the name of a nominee is recognized by the Corporation, to
the extent provided in any such recognition procedure, as the owner thereof.
Section 5.10. Disclosure Procedure for Beneficial Ownership of Shares.
The Board may establish a disclosure procedure, which may be included in the
By-Laws, by which the name of the beneficial owner of any Share registered on
the books of the Corporation in the name of a nominee shall, to the extent not
prohibited by the Act or other applicable laws, be disclosed to the Corporation.
Any disclosure procedure established by the Board may include reasonable
sanctions to ensure compliance therewith, including without limitation (i)
prohibiting the voting of, (ii) providing for mandatory or optional
reacquisition by the Corporation of, and (iii) the withholding or payment into
escrow of any dividend or other distribution in respect of, any Share of which
the name of the beneficial owner is not disclosed to the Corporation as required
by such disclosure procedure.
Section 5.11 Liability of Shareholders. The private property of the
Shareholders of the Corporation shall not be subject to the payment of corporate
debts to any extent whatever.
ARTICLE 6
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
The Series A Junior Participating Preferred Stock shall have the
designation and the relative rights, preferences and limitations set forth in
this Article 6.
Section 6.01. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be Two Million (2,000,000). Such number of shares may be increased
or decreased by resolution of the Board; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 6.02. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series A Preferred
F-6
<PAGE> 237
Stock with respect to dividends, the holders of shares of Series A Preferred
Stock, in preference to the holders of Common Stock, and of any other junior
stock of the Corporation, shall be entitled to receive, when, as and if declared
by the Board out of funds legally available for the purpose, quarterly dividends
payable in cash on the [second Monday] of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (ii)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in Section 6.02(a) immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which
F-7
<PAGE> 238
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
Section 6.03. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in any other Preferred
Stock Amendment creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 6.04. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section
6.02 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not
F-8
<PAGE> 239
declared, on shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Section
6.04(a)(iii), purchase or otherwise acquire such shares at such time and in such
manner.
Section 6.05. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth in these
Articles, or in any Preferred Stock Amendment creating a series of Preferred
Stock or any similar stock or as otherwise required by law.
F-9
<PAGE> 240
Section 6.06. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Series A
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (b) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (a) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 6.07. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
F-10
<PAGE> 241
Section 6.08. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 6.09. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.
Section 6.10. Amendment. These Articles shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
ARTICLE 7
DIRECTORS, BY-LAWS AND ARTICLES OF INCORPORATION
Section 7.01 Number of Directors. The number of Directors of the
Corporation shall be fixed from time to time by the Board pursuant to a
resolution adopted by a majority of the whole Board, provided that such number
shall not be less than three (3). A director need not be a Shareholder. The
election of directors need not be by ballot unless the By-Laws so require.
Section 7.02 Classified Board.
(a) The Directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock,
as provided herein or in any Preferred Stock Amendment, shall be divided, with
respect to the time for which they severally hold office, into three classes,
each class being (and shall be) as nearly equal as possible. One class of
Directors shall be initially elected for a term expiring at the annual meeting
of Shareholders to be held in 2001, another class shall be initially elected for
a term expiring at the annual meeting of Shareholders to be held in 2002, and
another class shall be initially elected for a term expiring at the annual
meeting of Shareholders to be held in 2003. Members of each class shall hold
office until their successors are duly elected and qualified. At each annual
meeting of Shareholders commencing with the 2001 annual meeting, Directors
elected to succeed those Directors whose terms then expire shall be elected for
a term of office to expire at the third succeeding annual meeting of
Shareholders after their election, with each Director to hold office until his
or her successor shall have been duly elected and qualified.
(b) Subject to the rights of the holders of any series of
Preferred Stock, and unless the Board otherwise determines, newly created
directorships resulting from any increase in the authorized number of Directors
or any vacancies on the Board resulting from death, resignation, retirement,
disqualification, removal from office or
F-11
<PAGE> 242
other cause may be filled only by a majority vote of the Directors then in
office, though less than a quorum, and Directors so chosen shall hold office for
a term expiring at the annual meeting of Shareholders at which the term of
office of the class to which they have been elected expires and until such
Director's successor shall have been duly elected and qualified. No decrease in
the number of authorized Directors constituting the whole Board shall shorten
the term of any incumbent Director.
Section 7.03 By-Laws. The power to make, alter, amend or repeal the
By-Laws of the Corporation shall be vested exclusively in the Board, and
Shareholders shall have no power to make, alter, amend or repeal the By-Laws.
Section 7.04 Removal for Cause. Subject to the rights of the holders of
any series of Preferred Stock or any other series or class of Shares, as
provided in these Articles or in any Preferred Stock Amendment, to elect
additional directors under specific circumstances, no Director of the
Corporation shall be removed from his office as a Director by vote or other
action of Shareholders or otherwise except for cause and in no event without the
affirmative vote of 80 percent of the voting power of the Shares of the
Corporation then entitled to vote at an election of Directors (the "Voting
Shares"), voting together as a single class.
Section 7.05 Articles of Incorporation. From time to time any of the
provisions of these Articles may be amended, altered or repealed, and other
provisions authorized by the statutes of the State of Indiana at the time in
force may be added or inserted in the manner at the time prescribed by said
statutes, and all rights at any time conferred upon the Shareholders of the
Corporation by its Articles of Incorporation are granted subject to the
provisions of this Section 7.05. Notwithstanding anything contained in these
Articles to the contrary, neither this Article 7 nor Article 9 may be amended or
repealed, and no provision inconsistent with this Article 7 or Article 9 may be
adopted, except by the affirmative vote of the holders of 80 percent of the
voting power of the Voting Shares, voting together as a single class.
ARTICLE 8
PROVISIONS FOR REGULATIONS OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
Section 8.01. Meetings of Shareholders. Meetings of the Shareholders
shall be held at such place, within or without the State of Indiana, as may be
provided in the By-Laws or in the respective notices, or waivers of notice,
thereof. In the absence of any such provision, all Shareholders' meetings shall
be held at the principal office of the Corporation. Special meetings of the
Shareholders for any purpose or purposes shall be called only by the Board
pursuant to a resolution adopted by a majority of the total number of Directors
which the Corporation would have if there were no vacancies.
F-12
<PAGE> 243
Section 8.02. Action by Directors. Meetings of the Board or any committee
of the Board (a "Committee") shall be held at such place, within or without the
State of Indiana, as may be specified in the By-Laws or in the respective
notices, or waivers of notice, thereof and shall be conducted in such manner as
may be specified in the By-Laws or permitted by the Act. Any action required or
permitted to be taken at any meeting of the Board or a Committee may be taken
without a meeting if a consent in writing setting forth the action so taken is
signed by all members of the Board or such Committee, and such written consent
is filed with the minutes of the proceedings of the Board or such Committee.
Section 8.03. Board Committees. Unless the By-Laws otherwise provide, the
Board may, by resolution adopted by a majority of the whole Board of Directors,
designate from among its members one or more Committees, each of which shall, to
the extent provided in the resolution or By-Laws and not prohibited by the Act
and other applicable laws, have and exercise all of the authority of the Board
in the management of the Corporation.
Section 8.04. Places of Keeping of Corporate Records. The Corporation
shall keep at its principal office a copy of (i) these Articles, and all
amendments thereto currently in effect; (ii) the By-Laws, and all amendments
thereto currently in effect; (iii) minutes of all meetings of the Shareholders
("Shareholders Minutes") for the prior three years; (iv) all written
communications by the Corporation to the Shareholders, including the financial
statements furnished by the Corporation to the Shareholders for the prior three
years; (v) a list of the names and business addresses of the current Directors
and the current officers of the Corporation ("Officers"); and (vi) the most
recent Annual Report of the Corporation as filed with the Secretary of State of
Indiana. The Corporation shall also keep and maintain at its principal office,
or at such other place or places within or without the State of Indiana as may
be provided, from time to time, in the By-Laws, (i) minutes of all meetings of
the Board and of each Committee, and records of all actions taken by the Board
and by each Committee without a meeting; (ii) appropriate accounting records of
the Corporation; (iii) a record of the Shareholders in a form that permits
preparation of a list of the names and addresses of all the Shareholders, in
alphabetical order by class of Shares, stating the number and class of Shares
held by each Shareholder; and (iv) Shareholders Minutes for periods preceding
the prior three years. All of the records of the Corporation described in this
Section 8.04 (collectively, the "Corporate Records") shall be maintained in
written form or in another form capable of conversion into written form within a
reasonable time.
Section 8.05. Limitation of Liability of Directors, Officers and Others.
(a) No Director, member of any Committee, member of another
committee appointed by the Board (an "Appointed Committee"), Officer, employee
or agent of the Corporation (collectively, "Corporate Person") shall be liable
for any loss or damage suffered on account of any action taken or omitted to be
taken by him if, in taking or omitting to take any action causing such loss or
damage, either (i) such
F-13
<PAGE> 244
Corporate Person acted (A) in good faith, (B) with the care an ordinarily
prudent person in a like position would have exercised under similar
circumstances, and (C) in a manner such Corporate Person reasonably believed was
in the best interests of the Corporation, or (ii) such Corporate Person's breach
of or failure to act in accordance with the standards of conduct set forth in
clause (i) above (the "Standards of Conduct") did not constitute willful
misconduct or recklessness.
(b) Any Corporate Person shall be fully protected, and shall be
deemed to have complied with the Standards of Conduct, in relying in good faith,
with respect to any information contained therein, upon (i) the Corporate
Records, or (ii) information, opinions, reports or statements (including
financial statements and other financial data) prepared or presented by (A) one
or more other Corporate Persons whom such Corporate Person reasonably believes
to be competent in the matters presented, (B) legal counsel, public accountants
or other persons as to matters that such Corporate Person reasonably believes
are within such person's professional or expert competence, (C) a Committee or
an Appointed Committee, of which such Corporate Person is not a member, if such
Corporate Person reasonably believes such Committee or Appointed Committee
merits confidence, or (D) the Board, if such Corporate Person is not a Director
and reasonably believes that the Board merits confidence.
(c) No repeal or modification of this Section 8.05, directly or
by adoption of an inconsistent provision of these Articles, by the Shareholders
of the Corporation shall be effective with respect to any cause of action, suit,
claim or other matter that, but for this Section 8.05, would accrue or arise
prior to such repeal or modification.
Section 8.06. Indemnification of Directors, Officers and Others. To the
extent permitted by the Act and the By-Laws, the Corporation shall:
(a) indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil or criminal, administrative or investigative, formal
or informal (an "Action"), by reason of the fact that he is or was a Corporate
Person, or is or was serving at the request of the Corporation as a director,
officer, employee, agent, partner, trustee or member or in another authorized
capacity (collectively, an "Authorized Capacity") of or for another corporation,
unincorporated association, business trust, estate, partnership, trust, joint
venture, individual or other legal entity, whether or not organized or formed
for profit (collectively, "Another Entity"), against expenses (including
attorneys' fees) ("Expenses") and judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
Action;
(b) pay, in advance of the final disposition of an Action, the
Expenses reasonably incurred in defending such action by a person who may be
entitled to indemnification by the Corporation; and
F-14
<PAGE> 245
(c) purchase and maintain insurance on behalf of any person who
is or was a Corporate Person, or is or was serving at the request of the
Corporation in an Authorized Capacity of or for Another Entity, against any
liability asserted against and incurred by him in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him against such liability.
The indemnification and advance of Expenses authorized by this Section 8.06
shall (i) not be deemed exclusive of any other rights to which a person may be
entitled under any law, any resolution of the Board or the Shareholders, any
other authorization, whenever adopted, after notice, by a majority vote of all
then outstanding Shares entitled to vote generally in the election of Directors,
or the articles of incorporation, code of by-laws or other governing documents,
or any resolution of or other authorization by the directors, shareholders,
partners, trustees, members, owners or governing body, of Another Entity; (ii)
inure to the benefit of the heirs, executors and administrators of such person;
and (iii) shall continue as to any such person who has ceased to be a Corporate
Person or to be serving in an Authorized Capacity of or for Another Entity.
Section 8.07. Compensation of Directors. The Board is hereby specifically
authorized, in and by the By-Laws, or by resolution duly adopted by the Board,
to make provision for reasonable compensation to its members for their services
as Directors, and to fix the basis and conditions upon which such compensation
shall be paid. Any Director may also serve the Corporation in any other capacity
and receive compensation therefor in any form.
Section 8.08. Direction of Purposes and Exercise of Powers by Directors.
The Board, subject to any specific limitations or restrictions imposed by the
Act or these Articles, shall direct the carrying out of the purposes and
exercise the powers of the Corporation, without previous authorization or
subsequent approval by the Shareholders.
ARTICLE 9
SHAREHOLDER VOTE REQUIRED FOR
BUSINESS COMBINATIONS
Section 9.01. Higher Vote for Business Combinations. In addition to any
affirmative vote required by law, these Articles or the By-Laws of the
Corporation, and except as otherwise expressly provided in Section 9.02, a
Business Combination shall not be consummated without the affirmative vote of
the holders of at least 80 percent of the Voting Shares, voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage or separate class vote
may be specified, by law or in any agreement with any national securities
exchange or otherwise.
F-15
<PAGE> 246
Section 9.02. When Higher Vote Is Not Required. The provisions of Section
9.01 shall not be applicable to a Business Combination if the conditions
specified in either of the following paragraphs (a) or (b) are met.
(a) Approval by Continuing Directors. The Business Combination
shall have been approved by at least two-thirds of the Continuing Directors (as
hereinafter defined), whether such approval is made prior to or subsequent to
the date on which the Interested Shareholder (as hereinafter defined) became an
Interested Shareholder (the "Determination Date").
(b) Price and Procedure Requirements. Each of the seven
conditions specified in the following subparagraphs (i) through (vii) shall have
been met:
(i) The aggregate amount of the cash and the Fair Market
Value (as hereinafter defined) as of the date of the consummation of
the Business Combination (the "Consummation Date") of any
consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be an amount at
least equal to the higher amount determined under clauses (A) and
(B) below (the requirements of this paragraph (b)(i) shall be
applicable with respect to all shares of Common Stock outstanding,
whether or not the Interested Shareholder has previously acquired
any shares of the Common Stock): (A) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Shareholder
for any shares of Common Stock acquired beneficially by it (1)
within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Shareholder, whichever is higher, plus interest
compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of Morgan Guaranty
Trust Company of New York (or of such other major bank headquartered
in New York City selected by at least two-thirds of the Continuing
Directors) from time to time in effect in New York City, less the
aggregate amount of any cash dividends paid, and the Fair Market
Value of any dividends paid in other than cash, per share of Common
Stock from the Determination Date through the Consummation Date in
an amount up to but not exceeding the amount of such interest
payable per share of Common Stock; and (B) the Fair Market Value per
share of Common Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(ii) The aggregate amount of the cash and the Fair Market
Value as of the Consummation Date of any consideration other than
cash to be received per share by holders of outstanding Shares of
any class or series, other than the Common Stock, in such Business
Combination shall be an amount at least equal to the highest amount
determined under clauses (A), (B) and (C) below (the requirements of
this paragraph (b)(ii) shall be applicable with respect to all
outstanding Shares of every class or series, other than the Common
Stock,
F-16
<PAGE> 247
whether or not the Interested Shareholder has previously acquired any Shares of
a particular class or series):
(A) the highest per share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf of
the Interested Shareholder for any Shares of such class or series
acquired beneficially by it (1) within the two-year period immediately
prior to the Announcement Date or (2) in the transaction in which it
became an Interested Shareholder, whichever is higher, plus interest
compounded annually from the Determination Date through the
Consummation Date at the prime rate of interest of Morgan Guaranty
Trust Company of New York (or of such other major bank headquartered
in New York City selected by at least two-thirds of the Continuing
Directors) from time to time in effect in New York City, less the
aggregate amount of any cash dividends paid, and the Fair Market Value
of any dividends paid in other than cash, per share of such class or
series of Shares from the Determination Date through the Consummation
Date in an amount up to but not exceeding the amount of such interest
payable per share of such class or series of Shares; and
(B) the Fair Market Value per share of such class or series of Shares
on the Announcement Date or on the Determination Date, whichever is
higher; and
(C) the highest preferential amount per share to which the holders of
shares of such class or series of Shares would be entitled in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, regardless of whether
the Business Combination to be consummated constitutes such an event.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Shares (including Common Stock) shall be in cash
or in the same form as previously has been paid by or on behalf of the
Interested Shareholder in its direct or indirect acquisition of beneficial
ownership of Shares of such class or series. If the consideration so paid for
Shares of any class or series varied as to form, the form of consideration for
such class or series of Shares shall be either cash or the form used to acquire
beneficial ownership of the largest number of Shares of such class or series
previously acquired by the Interested Shareholder.
(iv) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination, such
Interested Shareholder shall not have become the beneficial owner of any
additional Shares except as part of the transaction that results in such
Interested Shareholder becoming an Interested Shareholder and except in a
transaction that,
F-17
<PAGE> 248
after giving effect thereto, would not result in any increase in the
Interested Shareholder's percentage beneficial ownership of any class
or series of Shares; and, except as approved by at least two-thirds of
the Continuing Directors: (A) there shall have been no failure to
declare and pay at the regular date therefor any full quarterly
dividends (whether or not cumulative) payable in accordance with the
terms of any outstanding Shares; (B) there shall have been no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any stock split, stock dividend or
subdivision of the Common Stock); and (C) there shall have been an
increase in the annual rate of dividends paid on the Common Stock as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of
Common Stock.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a
Shareholder of the Corporation), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or
in connection with such Business Combination or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all Shareholders of the Corporation at
least 30 days prior to the consummation of such Business Combination
(whether or not such proxy or information statement is required to be
mailed pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a
prominent place, any statement as to the advisability of the Business
Combination that the Continuing Directors, or any of them, may choose
to make and, if deemed advisable by at least two-thirds of the
Continuing Directors, the opinion of an investment banking firm
selected for and on behalf of the Corporation by at least two-thirds
of the Continuing Directors as to the fairness of the terms of the
Business Combination from a financial point of view to the holders of
the outstanding Shares other than the Interested Shareholder and its
Affiliates or Associates (as hereinafter defined).
(vii) Such Interested Shareholder shall not have made any
material change in the Corporation's business or equity capital
structure without the approval of at least two-thirds of the
Continuing Directors.
Any Business Combination to which Section 9.01 shall not apply by
reason of this Section 9.02 shall require only such affirmative vote
as is required by law, any other provision of these Articles, the
By-Laws of the Corporation or any agreement with any national
securities exchange.
F-18
<PAGE> 249
Section 9.03. Certain Definitions. For the purposes of this
Article 9:
(a) A "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (A) any Interested
Shareholder or (B) any other corporation (whether or not itself an
Interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested
Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series of
transactions) to or with any Interested Shareholder or any Affiliate
or Associate of any Interested Shareholder involving any assets or
securities of the Corporation, any Subsidiary or any Interested
Shareholder or any Affiliate or Associate of any Interested
Shareholder having an aggregate Fair Market Value of $25,000,000 or
more; or
(iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on
behalf of an Interested Shareholder or any Affiliate or Associate of
any Interested Shareholder; or
(iv) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or into
or otherwise involving an Interested Shareholder) that has the
effect, directly or indirectly, of increasing the proportionate
share of any class or series of Shares, or any securities
convertible into Shares or into equity securities of any Subsidiary,
that is beneficially owned by any Interested Shareholder or any
Affiliate or Associate of any Interested Shareholder; or
(v) any agreement, contract, arrangement or other
understanding providing for any one or more of the actions specified
in clauses (i) through (iv) above.
(b) A "person" shall mean any individual, firm, corporation or
other entity and shall include any group composed of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Shares.
(c) "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the Corporation, any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who or which:
F-19
<PAGE> 250
(i) is the beneficial owner of Voting Shares having 10
percent or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Shares; or
(ii) is an Affiliate or Associate of the Corporation and at
any time within the two-year period immediately prior to the date
in question was the beneficial owner of Voting Shares having 10
percent or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Shares; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Shares which were at any time within the two-year
period immediately prior to the date in question beneficially
owned by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(d) A person shall be a "beneficial owner" of any Shares:
(i) which such person or any Affiliate or Associate of
such person beneficially owns, directly or indirectly; or
(ii) which such person or any Affiliate or Associate of
such person has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or only after the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly,
by any other person with which such person or any Affiliate or
Associate of such person has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any Shares.
(e) For the purposes of determining whether a person is an
Interested Shareholder pursuant to Section 9.03(c), the number of Shares deemed
to be outstanding shall include shares deemed owned by the Interested
Shareholder through application of Section 9.03(d) but shall not include any
other Shares that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
(f) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on [ ], 2000
(the term "registrant" in such Rule 12b-2 meaning in this case the Corporation).
F-20
<PAGE> 251
(g) "Subsidiary" means any corporation of which a majority of
any class of equity security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Shareholder set
forth in Section 9.03(c), the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is beneficially owned by the
Corporation.
(h) "Continuing Director" means any member of the Board who is
not an Affiliate or Associate or representative of the Interested Shareholder
and was a member of the Board prior to the time that the Interested Shareholder
became an Interested Shareholder, and any successor of a Continuing Director who
is not an Affiliate or Associate or representative of the Interested Shareholder
and is recommended or elected to succeed a Continuing Director by at least
two-thirds of the Continuing Directors then members of the Board.
(i) "Fair Market Value" means: (i) in the case of cash, the
amount of such cash; (ii) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of a share
of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks,
or, if such stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 on which such stock is listed, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect to a share of such
stock during the 30-day period immediately preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations System or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined in good
faith by at least two-thirds of the Continuing Directors; and (iii) in the case
of property other than cash or stock, the fair market value of such property on
the date in question as determined in good faith by at least two-thirds of the
Continuing Directors.
(j) In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in paragraphs Section 9.02(b)(i) and (ii) shall include the shares of
Common Stock and/or the shares of any other class or series of Shares retained
by the holders of such shares.
Section 9.04. Powers of Continuing Directors. Any determination as to
compliance with this Article 9, including without limitation (a) whether a
person is an Interested Shareholder, (b) the number of Shares or other
securities beneficially owned by any person, (c) whether a person is an
Affiliate or Associate of another, (d) whether the requirements of Section
9.02(b)(ii) have been met with respect to any Business Combination, and (e)
whether the assets that are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $25,000,000 or more shall be made only upon action by not less
than two-thirds of the Continuing Directors of the Corporation; and the good
faith
F-21
<PAGE> 252
determination of at least two-thirds of the Continuing Directors on such matters
shall be conclusive and binding for all the purposes of this Article 9.
Section 9.05. No Effect on Fiduciary Obligations. Nothing contained in
this Article 9 shall be construed to relieve the Board or any Interested
Shareholder from any fiduciary obligation imposed by law.
Section 9.06. Amendment, Repeal, etc. Notwithstanding any other provisions
of these Articles or the By-Laws of the Corporation (and notwithstanding the
fact that a lesser percentage or separate class vote may be specified by law,
these Articles or the By-Laws of the Corporation), the affirmative vote of the
holders of at least 80 percent of the voting power of the then outstanding
shares of Voting Shares, voting together as a single class, shall be required to
amend or repeal, or adopt any provisions inconsistent with, this Article 9;
provided, however, that the preceding provisions of this Section 9.06 shall not
apply to any amendment to this Article 9, and such amendment shall require only
such affirmative vote as is required by law and any other provisions of these
Articles or the By-Laws of the Corporation, if such amendment shall have been
approved by at least two-thirds of the members of the Board who are persons who
would be eligible to serve as Continuing Directors.
F-22
<PAGE> 253
APPENDIX G
AMENDED BYLAWS
OF
ARVINMERITOR, INC.
ARTICLE I
OFFICE
SECTION 1.1. Registered Office. The registered office of ArvinMeritor,
Inc. (the "Corporation") in the State of Indiana shall be in the City of
Indianapolis, County of Marion.
SECTION 1.2. Principal Business Office. The principal office of the
Corporation shall be in the City of Troy, County of Oakland, in the State of
Michigan.
SECTION 1.3. Other Offices. The Corporation may also have an office or
offices at such other place or places either in or outside the State of Indiana
as the Board of Directors may from time to time determine or the business of the
Corporation requires.
ARTICLE 2
MEETING OF SHAREHOLDERS
SECTION 2.1. Place of Meetings. Each meeting of shareholders of the
Corporation shall be held at such place, in or outside of the State of Indiana,
as the Board of Directors may designate in the notice of such meeting, but if no
such designation is made, then at the principal business office of the
Corporation.
SECTION 2.2. Annual Meetings. An annual meeting of shareholders for the
purpose of electing directors and transacting such other business as may
properly be brought before the meeting notice of which was given in the notice
of meeting, shall be held on a date and time as the Board of Directors may
determine.
If for any reason any annual meeting shall not be held at the time herein
provided, the same may be held at any time thereafter, upon notice as
hereinafter provided, or the business thereof may be transacted at any special
meeting of shareholders called for that purpose.
The Board of Directors may, upon public notice given prior to the scheduled
meeting date, postpone, for as long as and to the extent permitted by the
Indiana Business Corporation Law, as amended (the "Act"), any previously
scheduled annual or special meeting of shareholders.
<PAGE> 254
SECTION 2.3. Special Meetings. Special meetings of shareholders, unless
otherwise required by statute and subject to the rights of holders of any class
of Preferred Stock of the Corporation, may be called only by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
directors which the Corporation would have if there were no vacancies (the
"Whole Board"). Business transacted at any special meeting shall be confined to
the purpose or purposes stated in the notice of such special meeting. Meetings
may be held without notice if all shareholders entitled to vote are present or
if notice is waived by those not present.
SECTION 2.4. Notice of Shareholders' Meetings. Notice of each meeting of
shareholders, whether annual or special, stating the date, time and place, and,
in the case of special meetings, the purpose or purposes for which such meeting
is called, shall be mailed, postage prepaid, to each shareholder entitled to
vote thereat, at the Shareholder's address as it appears on the records of the
Corporation, not less than 10 nor more than 60 days before the date of the
meeting unless otherwise prescribed by statute. Notice of any adjourned meeting
of the shareholders shall not be required to be given, except when expressly
required by law.
SECTION 2.5. Record Dates.
(a) In order that the Corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of shares or for the purpose of any other lawful
action, the Board of Directors may designate a date as the record date which,
for purposes of a meeting of shareholders or other event requiring shareholder
action, shall not be more than 70 nor less than 10 days before the date of such
meeting or event.
(b) If a record date has not been fixed as provided in preceding subsection
(a), then:
(i) The record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders of the Corporation shall be at the close
of business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; and
(ii) The record date for determining shareholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(c) Only those who shall be shareholders of record on the record date so
fixed as aforesaid shall be entitled to such notice of, and to vote at, such
meeting and any
G-2
<PAGE> 255
adjournment thereof, or to receive payment of such dividend or other
distribution, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding the transfer of any shares on the
books of the Corporation after the applicable record date, provided, however,
the Board of Directors may fix a new record date for any adjourned meeting and
shall fix a new record date if a meeting is adjourned to a date more than 120
days after the date originally fixed for the meeting.
SECTION 2.6. List of Shareholders. The Secretary of the Corporation shall,
from information obtained from the transfer agent, prepare and make, before each
meeting of shareholders, an alphabetical list of shareholders entitled to vote
thereat, arranged by voting group, showing the address of and number of shares
registered in the name of each shareholder. Such list shall be open to the
examination of any such shareholder or such shareholder's agent or attorney
authorized in writing ("shareholder agent"), for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 5 days prior
to the meeting for which the list was prepared and continuing through the
meeting, either at a place in the city where the meeting is being held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where said meeting is to be held. Such list shall be produced and
kept at the time and place of meeting during the whole time thereof for
inspection by any such shareholder or shareholder agent who is present. The
stock ledger shall be the only evidence as to who are the shareholders entitled
to examine the stock ledger, the list referred to in this section or the books
of the Corporation, or to vote in person or by proxy at any meeting of
shareholders.
SECTION 2.7. Quorum and Adjournments. At each meeting of Shareholders, the
holders of a majority of the voting power of the shares of the Corporation
entitled to vote, present in person or by proxy, shall constitute a quorum of
shareholders for all purposes unless the presence of a larger proportion is
required by statute or by the Corporation's Articles of Incorporation (the
"Articles of Incorporation"), and, in such cases, the presence of the proportion
so required shall constitute a quorum. Whether or not there is such a quorum,
the Chairman of the meeting or the shareholders present in person or by proxy
constituting a majority of the shares present may adjourn the meeting from time
to time without notice other than an announcement at the meeting. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting, and only
those shareholders entitled to vote at the meeting as originally called shall be
entitled to vote at any adjournment or adjournments thereof. The absence from
any meeting of the number of shareholders required by law or by the Articles of
Incorporation or by these By-Laws for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting, if the number of shareholders required in
respect of such other matter or matters shall be present.
SECTION 2.8. Voting by Shareholders; Proxies. Except as otherwise provided
by law, the Articles of Incorporation or these By-Laws, each shareholder
entitled to vote shall at every meeting of the shareholders have one vote for
each share entitled to vote
G-3
<PAGE> 256
held by such shareholder. Any vote on shares may be given by the shareholder
entitled thereto in person or by proxy appointed by an instrument in writing,
subscribed (or transmitted by electronic means and authenticated as provided by
law) by such shareholder or by the shareholder's attorney thereunto authorized,
and delivered to the Secretary; provided, however, that no proxy shall be voted
after 11 months from its date unless the proxy provides for a shorter or longer
period. Except as otherwise set forth in the Articles of Incorporation with
respect to the right of the holders of any class or series of Preferred Stock to
elect additional directors under specified circumstances, election of directors
at all meetings of the shareholders at which directors are to be elected a
plurality of the votes cast for the election of directors thereat shall elect.
If a quorum exists, action on a matter (other than the election of directors)
submitted to shareholders entitled to vote thereon at any meeting shall be
approved if the votes cast favoring the action exceed the votes cast opposing
the action, unless a greater number of affirmative votes is required by law, the
Articles of Incorporation or these By-Laws.
SECTION 2.8A. Participation in Meetings by Means of Conference or Similar
Communications. Any shareholder may participate in an annual or special meeting
of shareholders by or through use of any means of communications by which all
shareholders participating may simultaneously hear each other during the
meeting. A shareholder participating in such a meeting by this means is deemed
to be present at the meeting.
SECTION 2.9. Conduct of Business.
(a) Presiding Officer. The Chairman of the Board of Directors shall
preside as Chairman of shareholder meetings and shall determine the order and
conduct of business and all matters of procedure at such meetings. The Chairman
shall fix and announce at the meeting the date and time of the opening and the
closing of the polls for each matter upon which the shareholders will vote at
the meeting. In the absence of the Chairman, the Vice Chairman of the Board of
Directors (the "Vice Chairman"), or if the Vice Chairman is also absent, the
President, shall assume the duties of the Chairman specified in this paragraph
(a) of Section 2.9. If each of the Chairman, the Vice Chairman and the President
is absent, a director or an officer of the Corporation chosen by the Board of
Directors shall assume the duties of the Chairman specified in this paragraph
(a) of Section 2.9.
(b) Secretary. The Secretary, or, in his or her absence, an Assistant
Secretary, shall act as Secretary at all meetings of the shareholders. In the
absence from any such meeting of the Secretary and the Assistant Secretaries,
the Chairman may appoint any person to act as Secretary of the meeting.
(c) Annual Meetings of Shareholders.
(i) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
shareholders may be
G-4
<PAGE> 257
made at an annual meeting of shareholders (A) pursuant to the Corporation's
notice of meeting, (B) by or at the direction of the Board of Directors or (C)
by any shareholder of the Corporation who was a shareholder of record at the
time of giving of notice provided for in this Section 2.9, who is entitled to
vote at the meeting and who complies with the notice procedures set forth in
this Section 2.9.
(ii) For nominations or other business to be properly brought before
any annual meeting by a shareholder pursuant to clause (C) of paragraph (c)(i)
of this Section 2.9, the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for shareholder action. To be timely, a
shareholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than 90 days nor more than 120
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the shareholder to be timely must be so delivered
not earlier than the 120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a shareholder's notice as described above. Such shareholder's
notice shall set forth (A) as to each person whom the shareholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); (B) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such shareholder and the beneficial
owner, if any, on whose behalf the proposal is made; (C) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (x) the name and address of such shareholder, as
they appear on the Corporation's books, and of such beneficial owner and (y) the
class and number of shares of the Corporation which are owned beneficially and
of record by such shareholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of paragraph
(c)(ii) of this Section 2.9 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the Corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a shareholder's notice required by this Section 2.9 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it is delivered to the Secretary at the
principal executive
G-5
<PAGE> 258
offices of the Corporation not later than the close of business on the 10th day
following the day on which public announcement is first made by the Corporation.
(iv) Notwithstanding anything in the second sentence of paragraph (c)
(ii) of this Section 2.9 to the contrary, in the event that any person nominated
by the Board of Directors for election as a director (other than a person
nominated to fill a vacancy created by the death of a director) was not a
director or nominee named (A) in the Corporation's proxy statement for the
preceding annual meeting or (B) in a public announcement made by the Corporation
at least 70 days prior to the first anniversary of the preceding year's annual
meeting (a "New Nominee"), a shareholder's notice required by this Section 2.9
shall also be considered timely if it is delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which public announcement is first
made by the Corporation of the election or nomination of such New Nominee to the
Board of Directors.
(d) Special Meetings of Shareholders. Only such business shall be conducted
at a special meeting of shareholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
shareholders at which directors are to be elected pursuant to the Corporation's
notice of meeting (A) by or at the direction of the Board of Directors or (B)
provided that the Board of Directors has determined that directors shall be
elected at such meeting, by any shareholder of the Corporation who is a
shareholder of record at the time of giving of notice provided for in this
Section 2.9, who shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in this Section 2.9. Nominations by shareholders
of persons for election to the Board of Directors may be made at such a special
meeting of shareholders if the shareholder's notice required by paragraph
(c)(ii) of this Section 2.9 shall be delivered to the Secretary at the principal
executive offices of the Corporation not earlier than the 120th day prior to
such Special Meeting and not later than the close of business on the later of
the 90th day prior to such special meeting or the 10th day following the date on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a shareholder's
notice as described above.
(e) General.
(i) Except where the terms of any class or series of Preferred Stock
of the Corporation require the election of one or more directors by the holders
of such Preferred Stock voting as a single class and except a provided in
Section 3.2 of these By-Laws, only such persons who are nominated in accordance
with the procedures set forth in this Section 2.9 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in
G-6
<PAGE> 259
accordance with the procedures set forth in this Section 2.9. Except as
otherwise provided by law, the Articles of Incorporation of these By-Laws, the
person presiding at the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed in accordance with the procedures set forth in this Section
2.9 and, if any nomination or business proposed is not in compliance with this
Section 2.9, to declare that such defective nomination or proposal shall be
disregarded.
(ii) For purposes of this Section 2.9, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 2.9,
a shareholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 2.9. Nothing in this Section 2.9 shall be deemed to affect
any rights of (x) shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(y) of holders of any series of Preferred Stock to elect directors under
specified circumstances.
SECTION 2.10. Inspectors. There shall be appointed by the Board of
Directors, before each meeting of the shareholders, two inspectors of the vote.
Such inspectors shall first take and subscribe an oath or affirmation faithfully
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of their ability. If two inspectors are not appointed in
advance of any such meeting by the Board of Directors or one or both appointed
inspectors fail or refuse to act, then one or both inspectors, as the case may
be, shall be appointed for the meeting by the person presiding thereat. Such
inspectors shall be responsible for tallying and certifying the vote taken on
any matter at each meeting which is required to be tallied and certified by them
in the resolution of the Board of Directors appointing them or the appointment
of the person presiding at such meeting as the case may be. Except as otherwise
provided by these By-Laws or the laws of the State of Indiana, such inspectors
shall also decide all questions touching upon the qualification of voters, the
validity of proxies and ballots, and the acceptance and rejection of votes. In
the case of a tie vote by the inspectors on any question, the person presiding
at the meeting shall decide such question. The Board of Directors shall have the
authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.
G-7
<PAGE> 260
ARTICLE 3
DIRECTORS
SECTION 3.1. Number. Subject to the rights of the holders of any class or
series of Preferred Stock to elect additional directors under specified
circumstances, the number of directors shall be set, and from time to time may
be increased or decreased to the extent provided for in the Articles of
Incorporation, exclusively by the Board of Directors pursuant to a resolution
adopted by a majority of the Whole Board. A director need not be a shareholder.
SECTION 3.2. Vacancies. Except where the terms of any class or series of
Preferred Stock of the Corporation require the election of one or more directors
by the holders of such Preferred Stock voting as a single class and except to
the extent the Board of Directors determines otherwise, vacancies occurring on
the Board of Directors and newly-created directorships resulting from any
increase in the number of directors may be filled only by the affirmative vote
of a majority of the directors then in office, although less than a quorum, or
by a sole remaining director, and any director so chosen shall hold office for a
term expiring at the annual meeting of shareholders at which the term of office
of the class of directors to which such director has been elected expires and
until his or her successor is duly elected and qualified or until the earlier of
his or her death, resignation or removal in a manner permitted by statute or
these By-Laws. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.
SECTION 3.3. Powers. The property, affairs and business of the Corporation
shall be managed by the Board of Directors which may exercise all powers of the
Corporation and do all lawful acts and things not by statute or by the Articles
of Incorporation or these By-Laws directed or required to be exercised or done
by the shareholders.
SECTION 3.4. Place of Meetings. The place of any meeting of the Board of
Directors may be either in or outside the State of Indiana as the Board may from
time to time determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
SECTION 3.5. Annual Meetings. Annual meetings of the Board of Directors
shall be held each year on the same day as the shareholder's annual meeting for
such year, at the time and place determined by the Board of Directors. Notice of
such meeting need not be given. Such meeting may be held at any other time or
place which shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors.
SECTION 3.6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at the dates, times and places designated by the Board of
Directors from
G-8
<PAGE> 261
time to time. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. Notice of regular meetings need not
be given.
SECTION 3.7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman; and shall be called by the Chairman or the
Secretary upon the written request of three directors of the Corporation.
SECTION 3.8. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given to each director. The notice shall state
the principal purpose or purposes of the meeting.
SECTION 3.9. Quorum. Except as provided in Section 3.2, a whole number of
directors equal to at least a majority of the Whole Board shall constitute a
quorum for the transaction of business at all meetings of the Board of
Directors, and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors unless
otherwise provided by law, the Articles of Incorporation or these By-Laws.. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present. Notice of any
adjourned meeting need not be given. The directors shall act only as a board and
the individual directors shall have no power as such.
SECTION 3.10. Informal Action. Unless otherwise restricted by statute, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
directors or by all members of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board of
Directors or of such committee.
SECTION 3.11. Attendance by Conference Telephone. Members of the Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of such Board of Directors or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
SECTION 3.12. Order of Business. At all meetings of the Board of
Directors, business shall be transacted in the order determined by the Board.
SECTION 3.13. Resignations. Any director of the Corporation may resign at
any time by giving written notice to the Chairman of the Board or the Secretary
of the Corporation. The resignation of any director shall take effect at the
time of the receipt of
G-9
<PAGE> 262
such notice or at any later time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 3.14. Committees.
(a) The Board of Directors may from time to time, in its discretion,
by resolution passed by a majority of the Whole Board, designate, and appoint,
from the directors, committees of one or more persons which shall have and may
exercise such lawfully delegable powers and duties conferred or authorized by
the resolutions of designation and appointment.
(b) Each member of a committee shall continue in office until a director to
succeed him or her shall have been elected and shall have qualified, or until he
or she ceases to be a director or until he or she shall have resigned or shall
have been removed in the manner hereinafter provided. Any vacancy in a committee
shall be filled by the vote of a majority of the Whole Board at any regular or
special meeting thereof.
(c) The Board of Directors may, by resolution passed by a majority of the
Whole Board, designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee.
(d) Unless otherwise provided by the Board of Directors, each committee
shall appoint a chairman. Each committee shall keep a record of its acts and
proceedings and report the same from time to time to the Board of Directors.
(e) Any regular or alternate member of a committee may resign at any time by
giving written notice to the Chairman of the Board or the Secretary of the
Corporation. Such resignation shall take effect at the time of the receipt of
such notice or at any later time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
(f) Any regular or alternate member of a committee may be removed with or
without cause at any time by resolution passed by a majority of the Whole Board
at any regular or special meeting.
(g) Regular meetings of each committee, of which no notice shall be
necessary, shall be held on such days and at such places as the chairman of the
committee shall determine or as shall be fixed by a resolution passed by a
majority of all the members of such committee. Special meetings of each
committee will be called by the Secretary at the request of any two members of
such committee (or the sole member, if a committee of one), or in such other
manner as may be determined by the committee. Notice of each special meeting of
a committee shall be mailed to each member thereof at least two days before the
meeting or shall be given personally or by telephone or other electronic
transmission at least one day before the meeting. Every such notice shall state
G-10
<PAGE> 263
the time and place, but need not state the purposes of the meeting. No notice of
any meeting of a committee shall be required to be given to any alternate.
(h) Unless the Board of Directors shall provide otherwise, the presence of a
majority of the total membership of any committee of the Board of Directors
shall constitute a quorum for the transaction of business at any meeting of such
committee and the act of a majority of those present shall be necessary and
sufficient for the taking of any action thereat.
SECTION 3.16. Compensation of Directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and at each meeting of a committee of the Board of Directors of which they are
members. Unless otherwise provided in these By- Laws, the Board of Directors
shall have the authority to fix compensation of all directors for their services
to the Corporation as directors and for their services to the Corporation as
regular or alternate members of committees of the Board of Directors.
SECTION 3.17. Removal. Subject to the rights of the holders of any class or
series of Preferred Stock, any director or the entire Board of Directors may be
removed from office at any time, but only for cause and only by the affirmative
vote by the holders of at least 80 percent of the voting power of all of the
then outstanding shares of capital stock of the Corporation entitled to vote at
an election of directors, voting together as a single class.
ARTICLE 4
NOTICES
SECTION 4.1. Notices. Notices to directors and shareholders shall be in
writing and delivered personally or mailed to their addresses appearing on the
records of the Corporation or, if to directors, by telegram, cable, telephone,
telecopy, facsimile, other electronic transmission, wireless or a nationally
recognized overnight delivery service or personally. Notice to directors by mail
shall be given at least five days before the meeting. Notice to directors by
telegram, cable, telephone, telecopy, facsimile, other electronic transmission,
wireless or personal delivery, shall be given a reasonable time before the
meeting, but in no event less than two days before the meeting. Notice by mail
shall be deemed to be given when mailed to the director at his or her address
appearing on the records of the Corporation. Notice by telegram or cable shall
be deemed to be given when the telegram or cable addressed to the director at
his or her address appearing on the records of the Corporation is delivered to
the telegraph company. Notice by telephone, telecopy, facsimile, other
electronic transmission or wireless shall be deemed to be given when transmitted
by telephone, telecopy, facsimile, other electronic transmission or wireless to
the number, electronic address or wireless call designation appearing on the
records of the Corporation for the director (regardless of whether the
G-11
<PAGE> 264
director shall have personally received such telephone call or wireless
message), provided confirmation of transmission shall be made promptly by
telegram or cable in the manner specified above.
SECTION 4.2. Waiver of Notice. Whenever any notice is required, a waiver
thereof signed by the person entitled to such notice and filed with the minutes
or corporate records, whether before or after the time stated therein, shall be
deemed equivalent thereto. Attendance of any person at any meeting of
shareholders or directors shall constitute a waiver of notice of such meeting,
except when such person attends only for the express purpose of objecting, at
the beginning of the meeting (or in the case of a director's meeting, promptly
upon such director's arrival), to the transaction of any business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
ARTICLE 5
OFFICERS
SECTION 5.1. Designation; Number; Election. The Board of Directors shall
elect the officers of the Corporation. Such officers shall be a chairman of the
Board of Directors, a vice chairman of the Board of Directors, a president, one
or more vice presidents as the Board of Directors shall determine from time to
time, a controller, a treasurer, and a secretary. The Chairman, Vice Chairman
and the President shall be chosen from the directors.
In addition to any officer elected by the Board of Directors, the Board of
Directors or the Chairman, at any time, may appoint and remove such additional
officers and agents as the Board of Directors or the Chairman may determine from
time to time. Such persons shall have such authority, and perform such duties as
provided in these By-Laws or as the Board of Directors or the Chairman may from
time to time prescribe. The Board of Directors or the Chairman may from time to
time authorize any officer to appoint and remove agents and employees and to
prescribe their powers and duties.
One person may hold more than one office at the same time provided the
duties of such officers as prescribed by these By-Laws may be properly and
consistently performed by one person.
SECTION 5.2. Term of Office; Removal; Resignations; Vacancies. The term of
each officer shall be for one year and continue until his or her successor is
chosen and qualified or until the earlier of his or her death, resignation or
removal, except that any such officer elected by the Board of Directors,
excluding the Chairman, the Vice Chairman and the President, at any time, may be
suspended by the Chairman, the Vice Chairman or the President until the Board of
Directors convenes, and any such officer,
G-12
<PAGE> 265
including the Chairman, the Vice Chairman and the President, may be removed at
any time by the affirmative vote of a majority of the members of the Whole
Board.
All appointed officers, agents and representatives of the Corporation shall
hold office only during the pleasure of the Board of Directors or the officer
appointing them.
Any officer elected by the Board of Directors may resign at any time by
giving written notice to the Chairman of the Board or the Secretary. Any other
officer may resign at any time by giving written notice to the Chairman of the
Board. Any such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
A vacancy in any office because of death, resignation, removal or otherwise,
shall be filled for the unexpired portion of the term in the manner provided in
these By-Laws for regular election or appointment to such office.
SECTION 5.3. Compensation of Officers. The Board of Directors or the
compensation committee of the Board of Directors shall have the authority to fix
compensation of all officers elected by the Board. The Chairman and/or such
officer as the Chairman may designate shall have the authority to fix
compensation of all other officers of the Corporation.
SECTION 5.4. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall, subject to the Board of Directors, have general management
and oversight of the administration and operation of the Corporation's business
and general supervision of its policies and affairs. He or she shall see that
all orders and resolutions of the Board of Directors and of any committee
thereof are carried into effect.
He or she shall (a) preside at all meetings of the shareholders and of the
Board of Directors, and shall have plenary power to set the agenda, determine
the procedure and rules of order and make definitive rulings at meetings of
shareholders; (b) be ex-officio a member of all committees except the audit
committee and the stock option committee; (c) have power to appoint officers for
any division who, as such, shall not be officers of the Corporation; (d) subject
to the Board of Directors, be in general and active charge of the entire
business and all the affairs of the Corporation; and (e) have such other powers
and perform such other duties as may be prescribed by the Board of Directors or
provided in these By-Laws.
SECTION 5.5. Vice Chairman of the Board of Directors. The Vice Chairman
shall have such powers and duties prescribed in these By-Laws or assigned to him
or her by the Board of Directors. In the absence or disability of the Chairman,
the Vice Chairman shall preside at meetings of the Board of Directors and shall
perform such other duties of the Chairman as may be assigned to him or her by
the Board of Directors.
G-13
<PAGE> 266
SECTION 5.6. President. The President shall have such powers and duties
prescribed in these By-Laws or assigned to him or her by the Board of Directors.
In the absence or disability of the Chairman and the Vice Chairman, the
President shall preside at meetings of the Board of Directors and shall perform
such other duties of the Chairman as may be assigned to him or her by the Board
of Directors. In the absence or disability of the Chairman, the Vice Chairman
and the President, on assembling for a regular or special meeting of the Board
of Directors, the directors shall choose one of the Vice Presidents in
attendance to preside at such meeting.
SECTION 5.7. Vice Presidents. Each Vice President shall have the powers and
duties prescribed in these By-Laws or assigned to him or her by the Board of
Directors, the Chairman or the President. The Board of Directors and/or the
President may designate one or more of such vice presidents, as executive,
senior or assistant vice presidents.
SECTION 5.8. Controller. Subject to control and supervision by the President
or such officer as the President may designate and by the Board of Directors,
the Controller shall be in charge of the accounts of the Corporation and its
subsidiaries; maintain adequate records of all assets, liabilities and business
transactions; and have such other powers and duties prescribed by these By- Laws
or by the Board of Directors, the President or such officer as the President may
designate, and the usual powers and duties pertaining to his or her office.
SECTION 5.9. Assistant Controllers. The Assistant Controllers shall have the
powers and duties prescribed by these By-Laws or assigned by the Controller. In
the absence or disability of the Controller, they shall have all his other
powers and duties.
SECTION 5.10. Treasurer. Subject to control and supervision by the President
or such officer as the President may designate and by the Board of Directors,
the Treasurer shall have charge of and shall be responsible for the receipt,
disbursement and safekeeping of all funds and securities of the Corporation (and
shall deposit all such funds in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected in accordance with the
provisions of these By-Laws), propose financial policies, negotiate loans, be
responsible for the maintenance of proper insurance coverages and from time to
time and whenever requested to do so, render statements of the condition of the
finances of the Corporation to the Board of Directors; and have such other
powers and duties prescribed by these By-Laws or by the Board of Directors, the
President or such officer as the President may designate, and the usual powers
and duties pertaining to his or her office.
SECTION 5.11. Assistant Treasurers. The Assistant Treasurers shall have
the powers and duties prescribed by these By-Laws or assigned by the Treasurer.
In the absence of the Treasurer, they shall have all his other powers and
duties.
G-14
<PAGE> 267
SECTION 5.12. Secretary. Subject to control and supervision by the
Board of Directors and the Chairman of the Board of Directors, the secretary
shall attend, record proceedings of meetings of shareholders, the Board of
Directors and any committee of the Board of Directors, keep or cause to be kept
in books provided for such purpose such records of proceedings and have such
other powers and duties prescribed by these By-Laws or by the Board of
Directors, the President or such officer as the President may designate, and the
usual powers and duties pertaining to his or her office, including having
custody of the corporate seal, if any, and affixing it to all documents as
required to attest the same.
SECTION 5.13. Assistant Secretaries. The Assistant Secretaries shall have
the powers and duties prescribed by these By-Laws or assigned by the Secretary.
In the absence or disability of the Secretary, they shall have all his or her
powers and duties.
SECTION 5.12. Certain Agreements. The Board of Directors shall have power to
authorize or direct the proper officers of the Corporation, on behalf of the
Corporation, to enter into valid and binding agreements in respect of
employment, incentive or deferred compensation, stock options, and similar or
related matters, notwithstanding the fact that a person with whom the
Corporation so contracts may be a member of its Board of Directors. Any such
agreement may validly and lawfully bind the Corporation for a term of more than
one year, in accordance with its terms, notwithstanding the fact that one of the
elements of any such agreement may involve the employment by the Corporation of
an officer, as such, for such term.
ARTICLE 6
CONDUCT OF BUSINESS
SECTION 6.1. Contracts; Loans. The Board of Directors, except as in these
By-Laws otherwise provided, may authorize any officer, employee or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
No loan shall be contracted on behalf of the Corporation and no negotiable
paper shall be issued in its name, unless authorized by the Board of Directors.
SECTION 6.2. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, employee or employees,
of the Corporation as shall from time to time be determined in accordance with
authorization of the Board of Directors.
G-15
<PAGE> 268
SECTION 6.3. Banking. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositories as the Board of Directors may from time to time designate, or
as may be designated by any officer or officers of the Corporation to whom such
power may be delegated by the Board, and for the purpose of such deposit the
officers and employees who have been authorized to do so in accordance with the
determinations of the Board may endorse, assign and deliver checks, drafts, and
other orders for the payment of money which are payable to the order of the
Corporation.
SECTION 6.4. Voting of Stock. Except as otherwise provided in these By-Laws
or in the Articles of Incorporation, and unless otherwise provided by resolution
of the Board of Directors, the Chairman of the Board or any other officer may
from time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation to cast the votes
which the Corporation may be entitled to cast as a shareholder or otherwise in
any other corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporations, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such vote or giving such consent, and may execute or cause to
be executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE 7
SHARE CERTIFICATES AND THEIR TRANSFER
SECTION 7.1. Share Certificates. Certificates for shares of the Corporation
shall in such form as shall be approved by the Board of Directors and shall be
signed by the Chairman, the Vice Chairman, the President, any [Executive Vice
President or the Vice President-Finance,] and by the Secretary or any Assistant
Secretary, and shall not be valid unless so signed. Such certificates shall be
appropriately numbered in order of issue, by class and series, and contain the
name of the registered holder, the number of shares and the date of issue. If
such certificates is countersigned (a) by a transfer agent other than the
Corporation or its employee, or (b) by a registrar other than the Corporation or
its employee, any other signature on the certificate may be a facsimile.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he, she or it were
such officer, transfer agent, or registrar at the date of issue.
The Board of Directors may by resolution or resolutions provide that some
or all of any or all classes or series of the shares of stock of the Corporation
shall be
G-16
<PAGE> 269
uncertificated shares. Notwithstanding the preceding sentence, every holder of
uncertificated shares, upon request, shall be entitled to receive from the
Corporation a certificate representing the number of shares registered in such
shareholder's name on the books of the Corporation.
During any period when more than one class of shares of the Corporation is
authorized, there shall be set forth on the face or back of certificates issued
to represent each class or series of shares, a statement that the Corporation
will furnish without charge to each shareholder who so requests, the
designation, preferences and relative, participating, optional or other special
rights of each class of shares or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 7.2. Transfer of Shares. Upon surrender to the Corporation or a
transfer agent of the Corporation by the holder of record or by such person's
attorney or other duly constituted representative of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, as the Corporation may reasonably require, it shall be
the duty of the Corporation and such transfer agent to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction on the books of the Corporation. No certificate shall be issued in
exchange for any certificate until the former certificate for the same number of
shares of the same class and series shall have been surrendered and canceled,
except as provided in Section 7.4.
SECTION 7.3. Regulations. The Board of Directors shall have authority to
make rules and regulations concerning the issue, transfer and registration of
certificates for shares of the Corporation and concerning the registration of
pledges of uncertificated shares.
SECTION 7.4. Lost, Stolen and Destroyed Certificates. The Corporation may
issue a new certificate or certificates for shares or may register
uncertificated shares, if then authorized by the Board of Directors, in place of
any issued certificate alleged to have been lost, stolen or destroyed upon such
terms and conditions as the Board of Directors may prescribe.
SECTION 7.5. Record Ownership; Registered Shareholders. A record of the name
and address of each holder of the shares of the Corporation, the number of
shares held by such shareholder, the number or numbers of any share certificate
or certificates issued to such shareholder and the number of shares represented
thereby, and the date of issuance of the shares held by such shareholder shall
be made on the Corporation's books. The Corporation shall be entitled to treat
the holder of record (according to the books of the Corporation) of any share or
shares (including any holder registered in a book-entry or direct registration
system maintained by the Corporation or a transfer agent or a registrar
designated by the Board of Directors) as the holder in fact thereof and owner
for all purposes and shall not be bound to recognize any equitable or other
claim to, or interest in, such share or shares on the part of any other person,
whether or not the
G-17
<PAGE> 270
Corporation shall have express or other notice thereof, except as expressly
provided by applicable law.
SECTION 7.6. Transfer Agents and Registrars. The Board of Directors may from
time to time appoint a transfer agent and a registrar in one or more cities, may
require all certificates evidencing shares of the Corporation to bear the
signatures of a transfer agent and a registrar, may provide that such
certificates shall be transferable in more than one city, and may provide for
the functions of transfer agent and registrar to be combined in one agency.
ARTICLE 8
INDEMNIFICATION
SECTION 8.1. Litigation Brought By Third Parties. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, formal or informal (other than
an action by or in the right of the Corporation) (an "Action") by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation (a "Corporate Person"), or is or was serving at the request of the
Corporation as a director, officer, employee, agent, partner, trustee or member
or in another authorized capacity (except in each of the foregoing situations to
the extent any agreement, arrangement or understanding of agency contains
provisions that supersede or abrogate indemnification under this Section 8.1)
(collectively, an "Authorized Capacity") of or for another corporation,
unincorporated association, business trust, state, partnership, joint venture,
individual, trust, employee benefit plan, or other legal entity, whether or not
organized or formed for profit (collectively, "Another Entity"), against
expenses (including attorneys' fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred by him or her in connection
with such Action ("Expenses") if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any Action by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe his or her conduct was unlawful.
SECTION 8.2. Litigation by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any Action by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a Corporate
Person, or is or was serving at the request of the Corporation in an Authorized
Capacity of or for Another Entity against Expenses actually and reasonably
incurred by him or her in connection with that defense
G-18
<PAGE> 271
or settlement of such Action if he or she acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or willful misconduct in the performance of his duty to
the Corporation unless and only to the extent that a court of equity or the
court in which such Action was pending shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court of equity or other court shall deem proper.
SECTION 8.3. Successful Defense. To the extent that a person who is or was
a Corporate Person or serving at the request of the Corporation in an Authorized
Capacity for Another Entity has been successful on the merits or otherwise in
defense of any Action, referred to in Section 8.1 and 8.2 of this Article, or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against Expenses actually and reasonably incurred by or on behalf of him or her
in connection therewith. If any such person is not wholly successful in any such
Action but is successful, on the merits or otherwise, as to one or more but less
than all claims, issues or matters therein, the Corporation shall indemnify such
person against all Expenses actually and reasonably incurred by or on behalf of
such person in connection with each claim, issue or matter that is successfully
resolved. For purposes of this Section 8.3 and without limitation, the
termination of any claim, issue or matter by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
Notwithstanding any other provision of this section, to the extent any
person is a witness in, but not a party to, any Action, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a Corporate Person or serving at the request of the Corporation in an
Authorized Capacity for Another Entity, he or she shall be indemnified against
all Expenses actually and reasonably incurred by or on behalf of him or her in
connection therewith.
SECTION 8.4. Determination of Conduct.
(a) Any indemnification under Section 8.1 or 8.2 of this Article (unless
ordered by a court) shall be made by the Corporation only upon a determination
that indemnification of the person is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in said Sections 8.1 or
8.2. Such determination shall be made (1) if a Change of Control (as hereinafter
defined shall not have occurred, (A) by the Board of Directors by a majority
vote of a quorum consisting of the Disinterested Directors (as hereinafter
defined) or, if such a quorum cannot be obtained, by majority vote of a
committee duly designated by the Board of Directors consisting solely of two (2)
or more Disinterested Directors or (B) if there are no Disinterested Directors
or, even if there are Disinterested Directors and a majority of such
Disinterested Directors so directs, by (i) Independent Counsel (as hereinafter
defined) in a written opinion to the Board of Directors, a copy of which shall
be delivered to the
G-19
<PAGE> 272
claimant, or (ii) the shareholders of the Corporation, provided, however, that
shares owned by or voted under the control of directors who are at the time not
Disinterested Directors may not be voted on the determination; or (2) if a
Change of Control shall have occurred, by Independent Counsel in a written
opinion to the Board of Directors, a copy of which shall be delivered to the
claimant, unless the claimant shall request that such determination be made by
or at the direction of the Board of Directors, in which case it shall be made in
accordance with clause (1) of this sentence. Any claimant shall be entitled to
be indemnified against the Expenses actually and reasonably incurred by such
claimant in cooperating with the person or entity making the determination of
entitlement to indemnification (irrespective of the determination as to the
claimant's entitlement to indemnification) and, to the extent successful, in
connection with any litigation or arbitration with respect to such claim or the
enforcement thereof.
(b) If a Change of Control shall not have occurred, or if a Change of
Control shall have occurred and a director, officer, employee or agent requests
pursuant to clause (2) of the second sentence in Section 8.4(a) that the
determination whether the claimant is entitled to indemnification be made by or
at the direction of the Board of Directors, the claimant shall be conclusively
presumed to have been determined pursuant to Section 8.4(a) to be entitled to
indemnification if (1)(a) within fifteen days after the next regularly scheduled
meeting of the Board of Directors following receipt by the Corporation of the
request therefor, the Board of Directors shall not have resolved by majority
vote of the Disinterested Directors to submit such determination to (i)
Independent Counsel for its determination or (ii) the shareholders for their
determination at the next annual meeting, or any special meeting that may be
held earlier, after such receipt, and (b) within sixty days after receipt by the
Corporation of the request therefor (or within ninety days after such receipt if
the Board of Directors in good faith determines that additional time is required
by it for the determination and, prior to expiration of such sixty-day period,
notifies the claimant thereof), the Board of Directors shall not have made the
determination by a majority vote of the Disinterested Directors, or (2) after a
resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii)
above, to submit the determination to the shareholders, the shareholders meeting
at which the determination is to be made shall not have been held on or before
the date prescribed (or on or before a later date, not to exceed sixty days
beyond the original date, to which such meeting may have been postponed or
adjourned on good cause by the Board of Directors acting in good faith);
provided, however, that this sentence shall not apply if the claimant has
misstated or failed to state a material fact in connection with his or her
request for indemnification. Such presumed determination that a claimant is
entitled to indemnification shall be deemed to have been made (I) at the end of
the sixty-day or ninety-day period (as the case may be) referred to in clause
(1)(b) of the immediately preceding sentence or (II) if the Board of Directors
has resolved on a timely basis to submit the determination to the shareholders,
on the last date within the period prescribed by law for holding such
shareholders meeting (or a postponement or adjournment thereof as permitted
above).
G-20
<PAGE> 273
SECTION 8.5. Advance Payment. Expenses incurred in defending an Action shall
be paid by the Corporation in advance of the final disposition of such Action to
a director or officer, promptly after receipt of a request therefor stating in
reasonable detail the expenses incurred, and to an employee or agent as
authorized by the Board of Directors; provided that in each case the Corporation
shall have received an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the Corporation hereunder,
provided, further, that if (a) the indemnitee furnishes the Corporation a
written affirmation of his or her good faith belief that he or she has satisfied
the standard of conduct in Section 8.1 or 8.2 and (b) a determination is made by
those making the decision pursuant to Section 8.4 that the facts then known
would not preclude indemnification under these By-Laws.
SECTION 8.6. Procedures for Determination. The Board of Directors shall
establish reasonable procedures for the submission of claims for indemnification
hereunder, determination of the entitlement of any person thereto and review of
any such determination. Such procedures shall be set forth in an appendix to
these By-Laws and shall be deemed for all purposes to be a part hereof.
SECTION 8.7. By-Law Not Exclusive. The indemnification provided by this
Article 8 shall not be deemed exclusive of any other rights to which any person
may be entitled under any by-law, agreement, vote of shareholders or
Disinterested Directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee, agent or participant and shall inure to the benefit of the heirs,
executors and administrators of such a person. Notwithstanding any amendment,
alteration or repeal of this section or any of its provisions, or of any of the
procedures established by the Board of Directors pursuant to Section 8.6, any
person who is or was a Corporate Person or in an Authorized Capacity of Another
Entity shall be entitled to indemnification in accordance with the provisions
hereof and thereof with respect to any action taken or omitted prior to such
amendment, alteration or repeal except to the extent otherwise required by law.
SECTION 8.8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a Corporate Person or is or was serving at
the request of the Corporation in an Authorized Capacity of or for Another
Entity against any liability asserted against him or her and incurred by him or
her in any such capacity, or arising out of his or her status as such, whether
or not the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article or the Business Corporation Law
of the State of Indiana.
SECTION 8.9. Effect of Invalidity. The invalidity or unenforceability of any
provision of this Article 8 shall not affect the validity or enforceability of
the remaining provisions of this Article 8.
G-21
<PAGE> 274
SECTION 8.10. Definitions. For purposes of this Article 8:
(a) "Change of Control" means a change of control of the Corporation at any
time after the effective time of the merger of Arvin Industries, Inc. with and
into the Corporation of a nature that would be required to be reported in a
proxy statement pursuant to Section 14(a) of the Exchange Act or in a Form 8-K
pursuant to Section 13 of the Exchange Act (or in any similar form or schedule
under either of those provisions or any successor provision), whether or not the
Corporation is then subject to such reporting requirement; provided, however,
that, without limitation, a Change of Control shall be deemed to have occurred
if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 20% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such person attaining such percentage interest; (ii) the Corporation is a
party to a merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board of Directors in
office immediately prior to such transaction or event constitute less than a
majority of the Board of Directors immediately thereafter; or (iii) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any director
whose election became effective prior to or at the time of the Distribution and
any new director whose election or nomination for election by the Corporation's
shareholders was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board of Directors.
(b) "the Corporation" shall include, in addition to the surviving or
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify a
director, officer, employee or agent of such constituent corporation, or any
director, officer, employee or agent of such constituent corporation who is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of Another Entity shall stand in the same position
under the provisions of this Article 8 with respect to the surviving or
resulting corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
(c) "Disinterested Director" means a director of the Corporation who is not
and was not a party to an action, suit or proceeding in respect of which
indemnification is sought by a director, officer, employee or agent.
(d) "Independent Counsel" means a law firm, or a member of a law firm, that
(i) is experienced in matters of corporation law; (ii) neither presently is, nor
in the past five years has been, retained to represent the Corporation, the
director, officer, employee
G-22
<PAGE> 275
or agent claiming indemnification or any other party to the Action giving rise
to a claim for indemnification under this section, in any matter material to the
Corporation, the claimant or any such other party; and (iii) would not, under
applicable standards of professional conduct then prevailing, have a conflict of
interest in representing either the Corporation or such director, officer,
employee or agent in an action to determine the Corporation's or such person's
rights under this Article 8.
SECTION 8.11. Actions Against the Corporation. No indemnification shall be
payable pursuant to this Article 8 with respect to any action against the
Corporation commenced by an officer, director, employee or agent unless the
Board of Directors shall have authorized the commencement thereof or unless and
to the extent that this Article 8 or the procedures established pursuant to
Section 8.6 shall specifically provide for indemnification of expenses relating
to the enforcement of rights under this Article 8 and such procedures.
SECTION 8.12. Change in Law. Notwithstanding the foregoing provisions of
Article 8, the Corporation shall indemnify any person who is or was a Corporate
Person or is or was serving at the request of the Corporation in an Authorized
Capacity of or for Another Entity to the full extent permitted by the Act or by
any other applicable law, as may from time to time be in effect.
ARTICLE 9
GENERAL
SECTION 9.1. Dividends. Subject to any provisions of any applicable statute
or of the Articles of Incorporation, dividends may be declared upon the capital
stock of the Corporation by the Board of Directors at any regular or special
meeting thereof; and such dividends may be paid in cash, property or shares of
the Corporation.
SECTION 9.2. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of October of each year.
SECTION 9.3. Severability. If any provision of these By-Laws, or its
application thereof to any person or circumstances, is held invalid, the
remainder of these By- Laws and the application of such provision to other
persons or circumstances shall not be affected thereby.
SECTION 9.4. Amendments. These By-Laws may be amended, added to, rescinded
or repealed only by an affirmative vote of at least a majority of the directors
then in office at any meeting of the Board of Directors.
SECTION 9.5. Control Shares. The terms "control shares" and "control share
acquisition" used in this Section 9.5 shall have the meanings set forth in
Section 23-1-42-
G-23
<PAGE> 276
1 et seq. of the Act. Control shares of the Corporation acquired in a control
share acquisition shall have only such voting rights as are conferred by the
Act.
Control shares of the Corporation acquired in a control share acquisition
with respect to which the acquiring person has not filed with the Corporation
the Statement required by the Act may, at any time during the period ending
sixty days after the last acquisition of control shares by the acquiring person,
be redeemed by the Corporation at the fair value thereof pursuant to procedures
authorized by a resolution of the Board of Directors. Such authority may be
exercised generally or confined to specific instances.
Control shares of the Corporation acquired in a control share acquisition
with respect to which the acquiring person was not granted full voting rights by
the shareholders as provided in the Act may, at any time after the shareholder
vote required by the Act, be redeemed by the Corporation at the fair value
thereof pursuant to procedures authorized by a resolution of the Board of
Directors. Such authority may be exercised generally or confined to specific
instances.
G-24
<PAGE> 277
APPENDIX
PROCEDURES FOR SUBMISSION AND
DETERMINATION OF CLAIMS FOR INDEMNIFICATION
PURSUANT TO ARTICLE 8 OF THE BY-LAWS.
SECTION 1. PURPOSE. The Procedures for Submission and Determination of
Claims for Indemnification Pursuant to Article 8 of the By-Laws (the
"Procedures") are to implement the provisions of Article 8 of the By-Laws of the
Corporation (the "By-Laws") in compliance with the requirement of Section 8.6
thereof.
SECTION 2. DEFINITIONS. For purposes of these Procedures:
(A) All terms that are defined in Article 8 of the By-Laws shall have the
meanings ascribed to them therein when used in these Procedures unless otherwise
defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in, a Proceeding; and shall
also include such retainers as counsel may reasonably require in advance of
undertaking the representation of an indemnitee in a Proceeding.
(C) "Indemnitee" includes any person who was or is, or is threatened to be
made, a witness in or a party to any Proceeding by reason of the fact that such
person is or was a director, officer, employee or agent of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions that
supersede or abrogate indemnification under Article 8 of the By-Laws) of another
corporation or of any partnership, joint venture, trust, employee benefit plan
or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee unless the Board of Directors shall have authorized
the commencement thereof.
SECTION 3. SUBMISSION AND DETERMINATION OF CLAIMS.
(A) To obtain indemnification or advancement of Expenses under Article 8 of
the By-Laws, an Indemnitee shall submit to the Secretary of the Corporation a
G-25
<PAGE> 278
written request therefor, including therein or therewith such documentation and
information as is reasonably available to the Indemnitee and is reasonably
necessary to permit a determination as to whether and what extent the Indemnitee
is entitled to indemnification or advancement of Expenses, as the case may be.
The Secretary shall, promptly upon receipt of a request for indemnification,
advise the Board of Directors thereof in writing if a determination in
accordance with Section 8.4 of the By-Laws is required.
(B) Upon written request by an Indemnitee for indemnification pursuant to
Section 3(A) hereof, a determination with respect to the Indemnitee's
entitlement thereto in the specific case, if required by the By-Laws, shall be
made in accordance with Section 8.4 of the By-Laws, and, if it is so determined
that the Indemnitee is entitled to indemnification, payment to the Indemnitee
shall be made within ten days after such determination. The Indemnitee shall
cooperate with the person, persons or entity making such determination, with
respect to the Indemnitee's entitlement to indemnification, including providing
to such person, persons or entity upon reasonable advance request any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to the Indemnitee and reasonably
necessary to such determination.
(C) If entitlement to indemnification is to be made by Independent Counsel
pursuant to Section 8.4 of the By-Laws, the Independent Counsel shall be
selected as provided in this Section 3(C). The Independent Counsel shall be
selected by the Board of Directors by majority vote of a quorum consisting of
Disinterested Directors, or, if such a quorum cannot be obtained, by majority
vote of a committee duly designated by the Board of Directors consisting solely
of two or more Disinterested Directors, or, if such a quorum cannot be obtained
and such a committee cannot be designated, by a majority vote of the full Board
of Directors (in which selection Directors who are not Disinterested Directors
may participate), and the Corporation shall give written notice to the
Indemnitee advising the Indemnitee of the identity of the Independent Counsel so
selected. The Indemnitee may, within seven days after such written notice of
selection shall have been given, deliver to the Corporation a written objection
to such selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Article 8 of the By-Laws, and the objection shall set
forth with particularity the factual basis of such assertion. If such written
objection is made, the Independent Counsel so selected may not serve as
Independent Counsel unless and until a court has determined that such objection
is without merit. If, within twenty days after the next regularly scheduled
Board of Directors meeting following submission by the Indemnitee of a written
request for indemnification pursuant to Section 3(A) hereof, no Independent
Counsel shall have been selected and not objected to, either the Corporation or
the Indemnitee may petition a court of competent jurisdiction for resolution of
any objection which shall have been made by the Indemnitee to the selection of
Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to
G-26
<PAGE> 279
whom an objection is favorably resolved or the person so appointed shall act as
Independent Counsel under Section 8.4 of the By-Laws. The Corporation shall pay
any and all reasonable fees and expenses (including without limitation any
advance retainers reasonably required by counsel) of Independent Counsel
incurred by such Independent Counsel in connection with acting pursuant to
Section 8.4 of the By-Laws, and the Corporation shall pay all reasonable fees
and expenses (including without limitation any advance retainers reasonably
required by counsel) incident to the procedures of Section 8.4 of the By-Laws
and this Section 3(C), regardless of the manner in which Independent Counsel was
selected or appointed. Upon the delivery of its opinion pursuant to Article 8 of
the By-Laws or, if earlier, the due commencement of any judicial proceeding or
arbitration pursuant to Section 4(A)(3) of these Procedures, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a determination
with respect to entitlement to indemnification under the By-Laws, the person,
persons or entity making such determination shall presume that an Indemnitee is
entitled to indemnification under the By-Laws if the Indemnitee has submitted a
request for indemnification in accordance with Section 3(A) hereof, and the
Corporation shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any determination
contrary to that presumption.
SECTION 4. REVIEW AND ENFORCEMENT OF DETERMINATION.
(A) In the event that (1) advancement of Expenses is not timely made
pursuant to Section 8.5 of the By-Laws, (2) payment of indemnification is not
made pursuant to Section 8.3 of the By-Laws within ten days after receipt by the
Corporation of written request therefor, (3) a determination is made pursuant to
Section 8.4 of the By-Laws that an Indemnitee is not entitled to indemnification
under the By-Laws, (4) the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8.4 of the By-Laws and such
determination shall not have been made and delivered in a written opinion within
ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Section 8.4 of the By-Laws that
an Indemnitee is entitled to indemnification or within ten days after such
determination is deemed to have been made pursuant to Section 8.4 of the
By-Laws, the Indemnitee shall be entitled to an adjudication in an appropriate
court of the State of Delaware, or in any other court of competent jurisdiction,
of the Indemnitee's entitlement to such indemnification or advancement of
Expenses. Alternatively, the Indemnitee, at his or her option, may seek an award
in arbitration to be conducted by a single arbitrator pursuant to the rules of
the American Arbitration Association. The Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one year
following the date on which the Indemnitee first has the right to commence such
proceeding pursuant to this Section 4(A). The Corporation shall not oppose the
Indemnitee's right to seek any such adjudication or award in arbitration.
G-27
<PAGE> 280
(B) In the event that a determination shall have been made pursuant to
Section 8.4 of the By-Laws that an Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 4 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and the Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change of Control shall have occurred, the
Corporation shall have the burden of proving in any judicial proceeding or
arbitration commenced pursuant to this Section 4 that the Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been made
pursuant to Section 8.4 of the By-Laws that an Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 4, absent
(1) a misstatement or omission of a material fact in connection with the
Indemnitee's request for indemnification, or (2) a prohibition of such
indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall stipulate in any such judicial proceeding or arbitration
that the Corporation is bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to
enforce the Indemnitee's rights under, or to recover damages for breach of,
Article 8 of the By-Laws or these Procedures in a judicial proceeding or
arbitration, the Indemnitee shall be entitled to recover from the Corporation,
and shall be indemnified by the Corporation against, any and all expenses (of
the types described in the definition of Expenses in Section 2 of these
Procedures) actually and reasonably incurred in such judicial proceeding or
arbitration, but only if the Indemnitee prevails therein. If it shall be
determined in such judicial proceeding or arbitration that the Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the expenses incurred by the Indemnitee in connection with such
judicial proceeding or arbitration shall be appropriately prorated.
SECTION 5. AMENDMENTS. These Procedures may be amended at any time and
from time to time in the same manner as any By-Law of the Corporation in
accordance with the Articles of Incorporation, the By-Laws and the Act;
provided, however, that notwithstanding any amendment, alteration or repeal of
these Procedures or any provision hereof, any Indemnitee shall be entitled to
utilize these Procedures with respect to any claim for indemnification arising
out of any action taken or omitted prior to such amendment, alteration or repeal
except to the extent otherwise required by law.
G-28
<PAGE> 281
APPENDIX H
- --------------------------------------------------------------------------------
ARVINMERITOR, INC.
And
[Rights Agent]
Rights Agreement
Dated as of ________, 2000
- --------------------------------------------------------------------------------
<PAGE> 282
TABLE OF CONTENTS
-----------------
PAGE
NUMBER
-------
Section 1. Definitions............................ 1
Section 2. Appointment of Rights Agent............ 7
Section 3. Issue of Right Certificates............ 7
Section 4. Form of Right Certificates............. 11
Section 5. Countersignature and Registration...... 12
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right
Certificates........................... 13
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.............. 14
Section 8. Cancellation and Destruction of Right
Certificates........................... 16
Section 9. Availability of Preferred Shares....... 16
Section 10. Preferred Shares Record Date........... 17
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights............. 18
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares.................... 29
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power.... 30
Section 14. Fractional Rights and Fractional
Shares................................. 31
Section 15. Rights of Action....................... 33
Section 16. Agreement of Right Holders............. 34
Section 17. Right Certificate Holder Not Deemed a
Shareholder............................ 35
Section 18. Concerning the Rights Agent............ 35
Section 19. Merger or Consolidation or Change of
Name of Rights Agent................... 36
-i-
<PAGE> 283
PAGE
NUMBER
-------
Section 20. Duties of Rights Agent................. 37
Section 21. Change of Rights Agent................. 40
Section 22. Issuance of New Right Certificates..... 42
Section 23. Redemption............................. 42
Section 24. Exchange............................... 43
Section 25. Notice of Certain Events............... 45
Section 26. Notices................................ 47
Section 27. Supplements and Amendments............. 48
Section 28. Successors............................. 49
Section 29. Benefits of this Agreement............. 49
Section 30. Severability........................... 49
Section 31. Governing Law.......................... 49
Section 32. Counterparts........................... 50
Section 33. Descriptive Headings................... 50
Signatures........................................... 47
Exhibit A - Form of Right Certificate
Exhibit B - Summary of Rights to Purchase Preferred Shares
-ii-
<PAGE> 284
Agreement, dated as of _______________, 2000, between ArvinMeritor, Inc.,
an Indiana corporation (the "Company"), and First Chicago Trust Company of New
York, as rights agent (the "Rights Agent").
The Board of Directors of the Company has authorized and directed the
issuance of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company to be issued in the Merger (as
hereinafter defined), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Merger Effective Time (the "Record Date") and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which on or after the
Record Date, together with all Affiliates and Associates of such Person, shall
be the Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding, but shall not include the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding Common Shares for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as
the result of an acquisition of Common Shares by the Company which,
<PAGE> 285
by reducing the number of Common Shares of the Company outstanding, increases
the proportionate number of Common Shares of the Company beneficially owned by
such Person to 15% or more of the Common Shares of the Company then outstanding;
provided, however, that, if a Person shall become the Beneficial Owner of 15% or
more of the Common Shares of the Company then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Shares of the Company
(other than an acquisition that does not directly or indirectly increase the
proportional share of the Common Shares of the Company beneficially owned by
such Person), then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in effect
on the date of this Agreement.
(c) "Associate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act as in effect
on the date of this Agreement.
H-2
<PAGE> 286
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to have "Beneficial Ownership" of and to "beneficially own" any
securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately
or only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights,
rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to
a public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations promulgated under the Exchange
Act and (2) is not also then reportable on Schedule 13D under the Exchange
Act (or any comparable or successor report); or
H-3
<PAGE> 287
(iii) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) for the purpose
of acquiring, holding, voting (except to the extent contemplated by the
proviso to Section 1(d)(ii)(B) hereof) or disposing of any securities of the
Company.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the State of [the Rights Agent] are
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., [City of
Rights Agent] time, on such date; provided, however, that, if such date is not a
Business Day, it shall mean 5:00 P.M., [City of Rights Agent] time, on the next
succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
the shares of common stock, par value $1.00 per share, of the Company. "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock (or
H-4
<PAGE> 288
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(i) "Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b) hereof.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(l) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(m) "Merger" shall mean, collectively, the First Step Merger and the
Second Step Merger, as both such terms are defined in the Merger Agreement.
(n) "Merger Agreement" shall mean the Agreement and Plan of
Reorganization, dated as of April 6, 2000, by and among Meritor Automotive,
Inc., Arvin Industries, Inc. and Mu Sub, Inc.
(o) "Merger Effective Time" shall mean the Effective Time of the Second
Step Merger, as both such terms are defined in the Merger Agreement.
H-5
<PAGE> 289
(p) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
(q) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(r) "Preferred Shares" shall mean shares of Series A Junior Participating
Preferred Stock, without par value, of the Company having the rights and
preferences set forth in the Company's Restated Articles of Incorporation.
(s) "Purchase Price" shall have the meaning set forth in Section 4
hereof.
(t) "Record Date" shall have the meaning set forth in the second
paragraph of the Preamble hereof.
(u) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
(v) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(w) "Reduced Threshold" shall have the meaning set forth in Section 27
hereof.
(x) "Right" shall have the meaning set forth in the second paragraph of
the Preamble hereof.
H-6
<PAGE> 290
(y) "Right Certificate" shall have the meaning set forth in Section 3(a)
hereof.
(z) "Security" shall have the meaning set forth in Section 11(d)(i)
hereof.
(aa) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(bb) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(cc) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
(dd) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Shares of the Company) in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates. (a) From the Record Date until
the earlier of (i) the tenth day after the Shares Acquisition Date or (ii) the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors of the Company prior to
H-7
<PAGE> 291
such time as any Person becomes an Acquiring Person) after the date of the
commencement by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company or any entity holding Common Shares of the Company for or pursuant to
the terms of any such plan) of a tender or exchange offer the consummation of
which would result in any Person becoming the Beneficial Owner of Common Shares
of the Company aggregating 15% or more of the then outstanding Common Shares of
the Company (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be attached to
(subject to the provisions of Section 3(b) hereof) the Common Shares of the
Company (whether in book-entry or certificated form) issued and outstanding and
the Rights will be owned by the registered holders of the Common Shares of the
Company and will not be evidenced by separate Right Certificates, and (y) any
transfer of Common Shares of the Company (or any interest therein, including the
creation of a security interest) will also effect a transfer of the associated
Rights (or the equivalent interest therein) and neither the Rights nor any
interest therein may be transferred otherwise than by transfer of the associated
Common Shares of the Company (or the equivalent interest therein). As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares of the Company as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit A hereto (a "Right Certificate"), evidencing one Right for each
Common Share so held, subject, in the case of Common Shares of the Company held
in book-entry form on the
H-8
<PAGE> 292
Distribution Date, to the rights provided by law to a registered pledgee whose
security interest has been duly registered with the Company. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit B hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares of the
Company as of the Close of Business on the Record Date, at the address of such
holder shown on the records of the Company or, in the case of Common Shares of
the Company held in book-entry form, in accordance with the procedures of the
depository for such shares. With respect to certificates for Common Shares of
the Company outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares of the Company outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Shares of the Company represented thereby.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:
H-9
<PAGE> 293
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth (and as defined) in an Agreement between
ArvinMeritor, Inc. and [Rights Agent], dated as of___ , 2000, as it
may be amended from time to time (the "Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of
which is on file at the principal executive offices of ArvinMeritor,
Inc. Under certain circumstances, as set forth in the Agreement,
such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. ArvinMeritor, Inc. will
mail to the holder of this certificate a copy of the Agreement
without charge after receipt of a written request therefor. As set
forth in the Agreement, Rights beneficially owned by any Person (as
defined in the Agreement) who becomes an Acquiring Person (as
defined in the Agreement) become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby. In the event that the Company purchases or acquires any
Common Shares of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares of the Company shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares of the Company which are
no longer outstanding.
(d) Until the earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date, confirmations and account statements sent to holders
of Common Shares of the Company in book-entry form and initial transaction
statements relating to the registration, pledge or release from pledge of Common
Shares of the Company in book-entry form shall have impressed on, printed on,
written on or otherwise affixed to them substantially the following legend:
H-10
<PAGE> 294
The shares of the Common Stock, par value $1 per share, of
ArvinMeritor, Inc. to which this statement relates also evidence and
entitle the holder thereof to certain Rights as set forth (and as
defined) in an Agreement between ArvinMeritor, Inc. and [Rights
Agent], dated as of _______, 2000, as it may be amended from time to
time (the "Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
executive offices of ArvinMeritor, Inc. Under certain circumstances,
as set forth in the Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by the shares
to which this statement relates. ArvinMeritor, Inc. will mail to the
holder of the shares to which this statement relates and any
registered pledgee of shares in book-entry form a copy of the
Agreement without charge after receipt of a written request
therefor. As set forth in the Agreement, Rights beneficially owned
by any Person (as defined in the Agreement) who becomes an Acquiring
Person (as defined in the Agreement) become null and void.
With respect to Common Shares of the Company in book-entry form for which there
has been sent a confirmation or account statement or an initial transaction
statement containing the foregoing legend, until the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date, the Rights
associated with such Common Shares shall be evidenced by such Common Shares
alone, and the registration of transfer or pledge, or the release from pledge,
of any such Common Shares shall also constitute the registration of transfer or
pledge, or the release from pledge, as the case may be, of the Rights associated
with such Common Shares.
Section 4. Form of Right Certificates. Subject to the provisions of
Section 22 hereof, the Right Certificates (and the forms of election to purchase
Preferred Shares and of assignment to be printed on the reverse thereof) shall
be substantially the same as Exhibit A hereto, and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any applicable rule or regulation made pursuant thereto
or with any applicable rule or
H-11
<PAGE> 295
regulation of any stock exchange or the National Association of Securities
Dealers, Inc., or to conform to usage.
Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Company by its Chairman of the Board, its
Vice Chairman of the Board, its Chief Executive Officer, its President, any of
its Vice Presidents or its Treasurer, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a facsimile thereof, and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the individual who signed such Right Certificates had not ceased to be such
officer of the Company; and any Right Certificate may be signed on behalf of the
Company by any individual who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
individual was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right
H-12
<PAGE> 296
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 14 hereof, at any time after the Close of Business
on the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent. Thereupon the Rights Agent shall countersign and deliver to the
Person entitled thereto a Right Certificate or Right Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case
H-13
<PAGE> 297
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon surrender
to the Rights Agent and cancellation of the Right Certificate if mutilated, the
Company will make and deliver a new Right Certificate of like tenor to the
Rights Agent for delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein), in whole or in part, at
any time after the Distribution Date, upon surrender of the Right Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal office of the Rights Agent, together with
payment of the Purchase Price for each one one-hundredth of a Preferred Share as
to which the Rights are exercised, at or prior to the earliest of (i) the Close
of Business on ________, 2010 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the "Redemption
Date"), or (iii) the time at which such Rights are exchanged as provided in
Section 24 hereof.
(b) The Right Certificates shall entitle the holders thereof to purchase
such number of one one-hundredths of a Preferred Share as shall be set forth
therein at the price per one one-hundredth of a Preferred Share set forth
therein (the "Purchase Price"), but the number of such one one-hundredths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided in Section 11 or 13 hereof. The Purchase Price for each one
one-hundredth of a Preferred Share purchasable pursuant to the exercise of a
Right shall initially
H-14
<PAGE> 298
be $___, and shall be subject to adjustment from time to time as provided in
Section 11 or 13 hereof, and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased and the
Company hereby irrevocably authorizes any such transfer agent to comply with all
such requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares represented by
such receipts shall be deposited by the transfer agent of the Preferred Shares
with such depositary agent) and the Company hereby directs such depositary agent
to comply with such request; (ii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 hereof; (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder; and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.
H-15
<PAGE> 299
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to registered holder of such Right Certificate or to such holder's
duly authorized assigns, subject to the provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Preferred Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any Preferred Shares held in its
treasury the number of Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7 hereof.
The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Preferred Shares delivered upon exercise of Rights
shall, at the time
H-16
<PAGE> 300
of delivery of the certificates for such Preferred Shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose name any
Preferred Shares (whether in book-entry or certificated form) are issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Shares on, and the date of issuance of such
Preferred Shares and the date of any certificate for such Preferred Shares shall
be, the date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that, if the date of such surrender and
payment is a date upon which the Preferred Shares transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares on, and the date of issuance of such Preferred
H-17
<PAGE> 301
Shares and the date of any such certificate shall be, the next succeeding
Business Day on which the Preferred Shares transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a holder of Preferred
Shares for which the Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Shares payable in Preferred
Shares, (B) subdivide the outstanding Preferred Shares, (C) combine the
outstanding Preferred Shares into a smaller number of Preferred Shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been
H-18
<PAGE> 302
exercised immediately prior to such date and at a time when the Preferred Shares
transfer books of the Company were open, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) Subject to Section 24 hereof, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Preferred Shares, such number of Common Shares of the
Company as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Common Shares of the Company
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
From and after the occurrence of such event, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be void, and any holder of such Rights
shall thereafter have no right to exercise such Rights under any provision of
this Agreement. No Right Certificate shall be issued
H-19
<PAGE> 303
pursuant to Section 3 hereof that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof and any Right Certificate evidencing
Rights beneficially owned by any such Acquiring Person shall be void. No Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the second preceding
sentence or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to the second preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares of
the Company issued but not outstanding or authorized but unissued to permit the
exercise in full of the Rights in accordance with subparagraph (ii) above, the
Company shall take all such action as may be necessary to authorize additional
Common Shares of the Company for issuance upon exercise of the Rights. In the
event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional Common Shares of the
Company, the Company shall substitute, for each Common Share of the Company that
would otherwise be issuable upon exercise of a Right, a number of Preferred
Shares or fraction thereof such that the current per share market price of one
Preferred Share multiplied by such number or fraction is equal to the current
per share market price of one Common Share of the Company as of the date of
issuance of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within
H-20
<PAGE> 304
45 calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares having the same rights, privileges and preferences as the
Preferred Shares, ("Equivalent Preferred Shares") or securities convertible into
Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share
or equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or Equivalent Preferred Shares) less
than the then current per share market price of the Preferred Shares (as defined
in Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or Equivalent Preferred Shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price and the denominator
of which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or Equivalent Preferred
Shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. In case such subscription price may be paid
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and holders
of the Rights. Preferred Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such
H-21
<PAGE> 305
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and, in the event that such rights, options or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then-current per share market price of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and holders of the Rights) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
then-current per share market price of the Preferred Shares on such record date;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed;
and, in the event that such distribution is not so made, the Purchase Price
H-22
<PAGE> 306
shall again be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
immediately prior to such date; provided, however, that, in the event that the
current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or Securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security; and
provided, further, that in the event that the current per share market price of
the Common Shares of the Company is determined as of a date prior to the
expiration of 30 Trading Days following the Record Date, the current per share
market price of the Common Shares of the Company shall be deemed to be the
average of the daily closing prices per share of Common Shares of the Company
for the period of Trading Days commencing with the Record Date and ending
immediately prior to such date. The closing price for each day shall be the last
sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or, in
case no such sale takes place on such day, the average of the bid and asked
prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as
reported in the principal consolidated
H-23
<PAGE> 307
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price reported at or prior to
4:00 P.M. Eastern time or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported as of 4:00 P.M. Eastern
time by NASDAQ or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business, or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Preferred Shares are not publicly
traded, the "current per share market price" of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares of the Company as determined pursuant to Section 11(d)(i) hereof
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one hundred. If
neither the Common Shares of the Company nor the Preferred Shares are publicly
held or so listed or traded, "current per share market price"
H-24
<PAGE> 308
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c) hereof, inclusive, and
the provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted
H-25
<PAGE> 309
Purchase Price, the number of one one-hundredths of a Preferred Share
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-hundredths of a Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect, on or after the date of any adjustment of the
Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the
H-26
<PAGE> 310
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least 10 days later than
the date of the public announcement. If Right Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein, and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or in
the number of one one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-hundredths of a
Preferred Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Shares
H-27
<PAGE> 311
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Preferred
Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to in Section 11(b) hereof, hereafter made by the Company to
holders of the Preferred Shares shall not be taxable to such shareholders.
H-28
<PAGE> 312
(n) In the event that, at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares, or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then, in any such case, (A)
the number of one one-hundredths of a Preferred Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Shares outstanding immediately before such event and the denominator of
which is the number of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such event shall have
issued with respect to it that number of Rights which each Common Share
outstanding immediately prior to such event had issued with respect to it. The
adjustments provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) if such adjustment occurs at
any time after the Distribution Date, mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25 hereof.
H-29
<PAGE> 313
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. In the event, directly or indirectly, at any time after a Person
has become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each registered holder of a Right (except as otherwise provided herein)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal the result
obtained by (A) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or
H-30
<PAGE> 314
transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
issuer; and (iv) such issuer shall take such steps (including, but not limited
to, the reservation of a sufficient number of its Common Shares in accordance
with Section 9 hereof) in connection with such consummation as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to the Common Shares of the Company thereafter
deliverable upon the exercise of the Rights. The Company shall not consummate
any such consolidation, merger, sale or transfer unless, prior thereto, the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
Section 14. Fractional Rights and Fractional Shares. (a) The Company
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale
H-31
<PAGE> 315
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred Share
may, at the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided that such agreement shall provide that the holders of
such depositary receipts shall have all the rights,
H-32
<PAGE> 316
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share (as determined
pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically
H-33
<PAGE> 317
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement, and will be entitled to specific performance
of the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificate or any certificate for the
associated Common Shares made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary, except as otherwise provided by
law.
H-34
<PAGE> 318
Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder,
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
H-35
<PAGE> 319
The Rights Agent shall be protected and shall incur no liability for, or
in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Shares or Common Shares or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, instruction, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto; provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Right Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Right Certificates so countersigned;
and, in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the
H-36
<PAGE> 320
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and, in all such cases, such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and, in all such cases, such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless
H-37
<PAGE> 321
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by any
one of the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24 hereof, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
H-38
<PAGE> 322
with respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Secretary or the
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it
H-39
<PAGE> 323
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided that reasonable care was exercised in the
selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares of the Company or the Preferred Shares by registered or
certified mail, and to the registered holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares or Preferred Shares by registered or certified mail, and to the
registered holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the registered
holder of a Right Certificate (which holder shall, with such notice, submit such
holder's Right Certificate for inspection by the Company),
H-40
<PAGE> 324
then the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation (or an Affiliate thereof) organized and doing business under the
laws of the United States or of the State of [State of Rights Agent] (or of any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the State of [State of Rights Agent]), in
good standing, having an office in the State of [State of Rights Agent], which
is authorized under such laws to exercise corporate trust or stock transfer
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
H-41
<PAGE> 325
Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by the Board of Directors of the Company to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Board of Directors of the Company may be
made effective at such time, on such basis and with such conditions as the Board
of Directors of the Company, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors of the Company
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the registered
H-42
<PAGE> 326
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Shares. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made. Neither
the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares of the Company at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any adjustment in the
number of Rights pursuant to Section 11(i) (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors of the Company shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Shares of the Company for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares of the Company
then outstanding.
H-43
<PAGE> 327
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares of the Company equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Common Shares of the Company for Rights will
be effected, and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares of the
Company issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights. In the event the Company
shall, after good faith effort, be unable to take all such action as may be
necessary to authorize such additional Common Shares, the Company shall
substitute,
H-44
<PAGE> 328
for each Common Share that would otherwise be issuable upon exchange of a Right,
a number of Preferred Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number or fraction is
equal to the current per share market price of one Common Share of the Company
as of the date of issuance of such Preferred Shares or fraction thereof.
(d) The Company shall not be required to issue fractions of Common Shares
of the Company or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share of the
Company. For the purposes of this paragraph (d), the current market value of a
whole Common Share of the Company shall be the closing price of a Common Share
(as determined pursuant to the second sentence of Section 11(d)(i) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events. (a) In case the Company shall, at
any time after the Distribution Date, propose (i) to pay any dividend payable in
stock of any class to the holders of the Preferred Shares or to make any other
distribution to the holders of the Preferred Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of the Preferred Shares
rights or warrants to subscribe for or to purchase any additional Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of the Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or
H-45
<PAGE> 329
with, or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes of such action,
and, in the case of any such other action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall, as soon as practicable thereafter, give to each
registered holder of a Right Certificate, in accordance with Section 26 hereof,
a notice of the occurrence of such event, which notice shall describe such event
and the consequences of such event to holders of Rights under Section 11(a)(ii)
hereof.
H-46
<PAGE> 330
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
ArvinMeritor, Inc.
______________________________
______________________________
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
First Chicago Trust Company of New York
____________________
____________________
Attention: ________________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry books of the
Company or the registry books of the holders of the Rights maintained by the
Rights Agent after the Distribution Date as herein provided. Any notice or
demand given prior to the Distribution Date by the Company or the Rights Agent
to the holders of the Rights shall also be given to any registered pledgee of
any Common Share of the Company in book-
H-47
<PAGE> 331
entry form by first-class mail, postage prepaid, addressed to such registered
pledgee at the address of such registered pledgee as shown on the registry books
of the Company.
Section 27. Supplements and Amendments. The Company may from time to time
supplement or amend this Agreement without the approval of any holders of Right
Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that, from and after such time as any Person becomes
an Acquiring Person, this Agreement shall not be amended in any manner which
would adversely affect the interests of the holders of Rights. Without limiting
the foregoing, the Company may at any time prior to such time as any Person
becomes an Acquiring Person amend this Agreement to lower the thresholds set
forth in Section 1(a) and 3(a) hereof to not less than 10% (the "Reduced
Threshold"); provided, however, that no Person who beneficially owns a number of
Common Shares equal to or greater than the Reduced Threshold shall become an
Acquiring Person unless such Person shall, after the public announcement of the
Reduced Threshold, increase its beneficial ownership of the then outstanding
Common Shares (other than as a result of an acquisition of Common Shares by the
Company) to an amount equal to or greater than the greater of (x) the Reduced
Threshold or (y) the sum of (i) the lowest beneficial ownership of such Person
as a percentage of the outstanding Common Shares as of any date on or after the
date of the public announcement of such Reduced Threshold plus (ii) .001%.
H-48
<PAGE> 332
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares of the Company) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares
of the Company).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Indiana and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.
H-49
<PAGE> 333
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
H-50
<PAGE> 334
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: ArvinMeritor, Inc.
By By
---------------- -----------------------
Name: Name:
Title: Title
Attest: First Chicago Trust Company
of New York
By By
---------------- -----------------------
Name: Name:
Title: Title
H-51
<PAGE> 335
Exhibit A
Form of Right Certificate
Certificate No. R- __Rights
NOT EXERCISABLE AFTER __________, 2010 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE AGREEMENT.
Right Certificate
ArvinMeritor, Inc.
This certifies that______________ , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Agreement, dated as of ____ , 2000 (the "Agreement"), between ArvinMeritor,
Inc., an Indiana corporation (the "Company"), and First Chicago Trust Company of
New York (the "Rights Agent"), to purchase from the Company at any time after
the Distribution Date (as such term is defined in the Agreement) and prior to
5:00 P.M., [City of Rights Agent] time, on ___, 2010 at the principal office of
the Rights Agent, or at the office of its successor as Rights Agent, one
one-hundredth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $___ per share, of the Company (the
"Preferred Shares"), at a purchase price of $___ per one one-hundredth of a
Preferred Share (the "Purchase Price"), upon presentation and surrender of this
Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of one
one-hundredths of a Preferred Share which may be purchased upon exercise hereof)
set forth above, and the Purchase Price set forth above, are the number and
Purchase Price as of ____ , 2000, based on the Preferred Shares as constituted
at such date. As provided in the Agreement, the Purchase Price and the number of
one one-hundredths of a Preferred Share which may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Right Certificates. Copies of the Agreement are
on file at the principal executive offices of the Company and the offices of the
Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right
A-1
<PAGE> 336
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Preferred Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Agreement, the Rights evidenced by this
Right Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for Preferred Shares
or shares of the Company's Common Stock, par value $1.00 per share.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but, in lieu thereof, a
cash payment will be made, as provided in the Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in the Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate shall have been exercised as provided
in the Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
A-2
<PAGE> 337
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of ____, ____.
ATTEST: ArvinMeritor, Inc.
By
- ------------------ --------------------
Name: Name:
Title: Title:
Countersigned:
First Chicago Trust Company of New York
By
--------------------
Name:
Title:
A-3
<PAGE> 338
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and transfers
unto____________________________________________________________________________
______________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ____________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated:
-----------
----------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).
----------------------------
Signature
- --------------------------------------------------------------------------------
A-4
<PAGE> 339
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: ArvinMeritor, Inc.
The undersigned hereby irrevocably elects to exercise_____________ Rights
represented by this Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certificates for such
Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:
--------
----------------------------
Signature
A-5
<PAGE> 340
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).
-----------------
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement) and such Assignment or Election
to Purchase will not be honored.
A-6
<PAGE> 341
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
Introduction
On _________, 2000, the Board of Directors of our Company, ArvinMeritor,
Inc., an Indiana corporation, authorized and directed the issuance of one
preferred share purchase right (a "Right") for each outstanding share of common
stock, par value $1.00 per share, to be issued in connection with the Agreement
and Plan of Reorganization, dated as of April 6, 2000, by and among Meritor
Automotive, Inc., Arvin Industries, Inc. and our Company, pursuant to which
Meritor Automotive, Inc., a Delaware corporation, will merge with and into our
Company, and immediately thereafter, Arvin Industries, Inc. will merge with and
into our Company, which will be the surviving corporation in both mergers.
Our Board has adopted a Rights Agreement providing for these Rights to
protect shareholders from coercive or otherwise unfair takeover tactics. In
general terms, it works by imposing a significant penalty upon any person or
group which acquires 15% or more of our outstanding common stock without the
approval of our Board. The Rights Agreement should not interfere with any merger
or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement as
made between our Company and [Rights Agent], as the Rights Agent, on ______ __,
2000, we provide the following summary description. Please note, however, that
this description is only a summary, and is not complete, and should be read
together with the entire Rights Agreement, which has been filed with the
Securities and Exchange Commission as an exhibit to a Registration Statement on
Form S-4 dated _________ __, 2000. A copy of the agreement is available free of
charge from our Company.
Summary of Rights
The Rights. Our Board authorized the issuance of a Right with respect to each
issued and outstanding share of common stock on _________ __, 2000. The Rights
will initially trade with, and will be inseparable from, the common stock. The
Rights are evidenced only by certificates that represent shares of common stock.
New Rights will accompany any new shares of common stock we issue after
_________ __, 2000 until the Distribution Date described below.
Exercise Price. Each Right will allow its holder to purchase from our Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock
("Preferred Share") for $___, once the Rights become exercisable. This portion
of a Preferred Share will give the shareholder approximately the same dividend,
voting, and liquidation rights as would one share of common stock. Prior to
exercise, the Right does not give its holder any dividend, voting, or
liquidation rights.
Exercisability. The Rights will not be exercisable until
B-1
<PAGE> 342
- - 10 days after the public announcement that a person or group has become an
"Acquiring Person" by obtaining beneficial ownership of 15% or more of our
outstanding common stock, or, if earlier,
- - 10 business days (or a later date determined by our Board before any person or
group becomes an Acquiring Person) after a person or group begins a tender or
exchange offer which, if consummated, would result in that person or group
becoming an Acquiring Person.
We refer to the date when the Rights become exercisable as the
"Distribution Date." Until that date, the common stock certificates will also
evidence the Rights, and any transfer of shares of common stock will constitute
a transfer of Rights. After that date, the Rights will separate from the common
stock and be evidenced by book-entry credits or by Rights certificates that we
will mail to all eligible holders of common stock. Any Rights held by an
Acquiring Person are void and may not be exercised.
Our Board may reduce the threshold at which a person or group becomes an
Acquiring Person from 15% to not less than 10% of the outstanding common stock.
Consequences of a Person or Group Becoming an Acquiring Person.
- - Flip In. If a person or group becomes an Acquiring Person, all holders of
Rights except the Acquiring Person may, for $__, purchase shares of our common
stock with a market value of $__, based on the market price of the common
stock prior to such acquisition.
- - Flip Over. If our Company is later acquired in a merger or similar transaction
after the Rights Distribution Date, all holders of Rights except the Acquiring
Person may, for $___, purchase shares of the acquiring corporation with a
market value of $___ based on the market price of the acquiring corporation's
stock, prior to such merger.
Preferred Share Provisions.
Each one one-hundredth of a Preferred Share, if issued:
- - will not be redeemable.
- - will entitle holders to quarterly dividend payments of $.01 per share, or an
amount equal to the dividend paid on one share of common stock, whichever is
greater.
- - will entitle holders upon liquidation either to receive $1.00 per share or an
amount equal to the payment made on one share of common stock, whichever is
greater.
- - will have the same voting power as one share of common stock.
- - if shares of our common stock are exchanged via merger, consolidation, or a
similar transaction, will entitle holders to a per share payment equal to the
payment made on one share of common stock.
B-2
<PAGE> 343
The value of one one-hundredth interest in a Preferred Share should approximate
the value of one share of common stock.
Expiration. The Rights will expire on _____, 2010.
Redemption. Our Board may redeem the Rights for $.01 per Right at any time
before any person or group becomes an Acquiring Person. If our Board redeems any
Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only
right of the holders of Rights will be to receive the redemption price of $.01
per Right. The redemption price will be adjusted if we have a stock split or
stock dividends of our common stock.
Exchange. After a person or group becomes an Acquiring Person, but before an
Acquiring Person owns 50% or more of our outstanding common stock, our Board may
extinguish the Rights by exchanging one share of common stock or an equivalent
security for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution Provisions. Our Board may adjust the purchase price of the
Preferred Shares, the number of Preferred Shares issuable and the number of
outstanding Rights to prevent dilution that may occur from a stock dividend, a
stock split, a reclassification of the Preferred Shares or common stock. No
adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights Agreement may be amended by our Board
without the consent of the holders of the Rights. However, our Board may not
amend the Rights Agreement to lower the threshold at which a person or group
becomes an Acquiring Person to below 10% of our outstanding common stock. In
addition, the Board may not cause a person or group to become an Acquiring
Person by lowering this threshold below the percentage interest that such person
or group already owns. After a person or group becomes an Acquiring Person, our
Board may not amend the agreement in a way that adversely affects holders of the
Rights.
B-3
<PAGE> 344
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Indiana Business Corporation Law permits indemnification of officers,
directors, employees and agents against liabilities and expenses incurred in
proceedings if the person acted in good faith and reasonably believed that (1)
in the case of conduct in the person's official capacity with the corporation,
that the person's conduct was in the corporation's best interests, and (2) in
all other cases, that the person's conduct was at least not opposed to the
corporation's best interests. In criminal proceedings, the person must either
have reasonable cause to believe the conduct was lawful or must have had no
reasonable cause to believe the conduct was unlawful. Unless the articles of
incorporation provide otherwise, indemnification is mandatory in two instances:
(1) a director successfully defends himself in a proceeding to which the
director was a party because the director is or was a director of the
corporation, or (2) it is court ordered.
Section 8.06 of ArvinMeritor's Restated Articles of Incorporation will, at
the effective time of the merger, provide for indemnification of directors and
officers. Section 8.06 provides that to the extent permitted under the Indiana
Business Corporation Law and the ArvinMeritor By-Laws, ArvinMeritor shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil or criminal, administrative or investigative, formal or informal (an
"Action"), by reason of the fact that such person is or was a director, officer,
employee or agent of ArvinMeritor, or is or was serving at the request of
ArvinMeritor as a director, officer, employee, agent, partner, trustee or member
or in another authorized capacity of or for another corporation, unincorporated
association, business trust, estate, partnership, trust, joint venture,
individual or other legal entity, whether or not organized or formed for profit,
against expenses (including attorneys' fees) and judgments, penalties, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such Action. ArvinMeritor shall pay, in advance of the final
disposition of an Action, the expenses reasonably incurred in defending such
action by a person who may be entitled to indemnification.
ArvinMeritor's directors and officers are insured against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<C> <S>
2.01 Agreement and Plan of Reorganization, dated as of April 6,
2000, by and among Meritor, ArvinMeritor and Arvin, included
as Appendix A to the joint proxy statement-prospectus
included as part of this Registration Statement.
2.02 Stock Option Agreement, dated as of April 6, 2000, by and
between Meritor, as issuer, and Arvin, as grantee, included
as Appendix B to the joint proxy statement-prospectus
included as part of this Registration Statement.
2.03 Stock Option Agreement, dated as of April 6, 2000, by and
between Arvin, as issuer, and Meritor, as grantee, included
as Appendix C to the joint proxy statement-prospectus
included as part of this Registration Statement.
3.01 Articles of Incorporation of ArvinMeritor.
3.02 By-Laws of ArvinMeritor.
4.01 Form of Restated Articles of Incorporation of ArvinMeritor
to be effective prior to the effective time of the merger,
included as Appendix F to the joint proxy
statement-prospectus included as part of this Registration
Statement.
</TABLE>
II-1
<PAGE> 345
<TABLE>
<S> <C>
4.02 Form of Amended By-Laws of ArvinMeritor, to be adopted prior to the effective time of the merger,
included as Appendix G to the joint proxy statement-prospectus included as part of this Registration
Statement.
4.03 Form of Rights Agreement to be entered into between ArvinMeritor and First Chicago Trust Company of New
York, as rights agent, included as Appendix H to the joint proxy statement-prospectus included as part of
this Registration Statement.
5.01 Opinion of Chadbourne & Parke LLP as to the legality of the shares being issued.
5.02 Opinion of Ice Miller Donadio & Ryan as to the legality of the shares being issued.
*8.01 Opinion of Chadbourne & Parke LLP as to certain tax matters.
*8.02 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.
10.01 Employment Agreement, dated as of April 6, 2000, among Arvin, ArvinMeritor and V. William Hunt.
23.01 Consent of Deloitte & Touche LLP relating to the audited financial statements of Meritor.
23.02 Consent of PricewaterhouseCoopers LLP relating to the audited financial statements of Arvin.
23.03 Consent of Chadbourne & Parke LLP (included in Exhibit 5.01).
23.04 Consent of Ice Miller Donadio & Ryan (included in Exhibit 5.02).
*23.05 Consent of Chadbourne & Parke LLP (included in Exhibit 8.01).
*23.06 Consent of Wachtell, Lipton, Rosen & Katz (included in Exhibit 8.02).
24.01 Power of Attorney authorizing certain persons to sign this Registration Statement on behalf of certain
officers and directors of ArvinMeritor.
99.01 Form of Proxy to be used by Meritor.
99.02 Form of Proxy to be used by Arvin.
99.03 Consent of Warburg Dillon Read LLC.
99.04 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
99.05 Consents of Joseph B. Anderson, Jr., Donald R. Beall, Rhonda L. Brooks, John J. Creedon, Charles H.
Harff, Victoria B. Jackson, James E. Marley, Harold A. Poling, Steven C. Beering, Joseph P. Flannery,
Robert E. Fowler, Jr., William D. George, Jr., Ivan W. Gorr, Richard W. Hanselman, V. William Hunt, Don
J. Kacek, James E. Perrella and Martin D. Walker to be named as persons about to become directors of
ArvinMeritor.
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules. Not Applicable.
(c) Report, Opinion or Appraisal. See Exhibits 5.01, 5.02, 8.01 and 8.02.
The opinions of Warburg Dillon Read LLC and Merrill Lynch, Pierce, Fenner &
Smith Incorporated are included as Appendices D and E, respectively, to the
joint proxy statement-prospectus included as part of this Registration
Statement.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in
II-2
<PAGE> 346
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in the documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 347
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Troy, State of Michigan,
on May 5, 2000.
ARVINMERITOR, INC.
By: /s/ LARRY D. YOST
------------------------------------
Larry D. Yost
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on May 5, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LARRY D. YOST Chairman of the Board and Chief Executive
- --------------------------------------------------- Officer (principal executive officer) and Director
Larry D. Yost
/s/ THOMAS A. MADDEN Senior Vice President, Chief Financial Officer
- --------------------------------------------------- and Treasurer (principal accounting and
Thomas A. Madden financial officer) and Director
/s/ VERNON G. BAKER, II Senior Vice President, General Counsel and
- --------------------------------------------------- Secretary and Director
Vernon G. Baker, II
</TABLE>
II-4
<PAGE> 348
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
2.01 Agreement and Plan of Reorganization, dated as of April 6,
2000, by and among Meritor, ArvinMeritor and Arvin, included
as Appendix A to the joint proxy statement-prospectus
included as part of this Registration Statement.
2.02 Stock Option Agreement, dated as of April 6, 2000, by and
between Meritor, as issuer, and Arvin, as grantee, included
as Appendix B to the joint proxy statement-prospectus
included as part of this Registration Statement.
2.03 Stock Option Agreement, dated as of April 6, 2000, by and
between Arvin, as issuer, and Meritor, as grantee, included
as Appendix C to the joint proxy statement-prospectus
included as part of this Registration Statement.
3.01 Articles of Incorporation of ArvinMeritor.
3.02 By-Laws of ArvinMeritor.
4.01 Form of Restated Articles of Incorporation of ArvinMeritor
to be effective prior to the effective time of the merger,
included as Appendix F to the joint proxy
statement-prospectus included as part of this Registration
Statement.
4.02 Form of Amended By-Laws of ArvinMeritor, to be adopted prior
to the effective time of the merger, included as Appendix G
to the joint proxy statement-prospectus included as part of
this Registration Statement.
4.03 Form of Rights Agreement to be entered into between
ArvinMeritor and First Chicago Trust Company of New York, as
rights agent, included as Appendix H to the joint proxy
statement-prospectus included as part of this Registration
Statement.
5.01 Opinion of Chadbourne & Parke LLP as to the legality of the
shares being issued.
5.02 Opinion of Ice Miller Donadio & Ryan as to the legality of
the shares being issued.
*8.01 Opinion of Chadbourne & Parke LLP as to certain tax matters.
*8.02 Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax
matters.
10.01 Employment Agreement, dated as of April 6, 2000, among
Arvin, ArvinMeritor and V. William Hunt.
23.01 Consent of Deloitte & Touche LLP relating to the audited
financial statements of Meritor.
23.02 Consent of PricewaterhouseCoopers LLP relating to the
audited financial statements of Arvin.
23.03 Consent of Chadbourne & Parke LLP (included in Exhibit
5.01).
23.04 Consent of Ice Miller Donadio & Ryan (included in Exhibit
5.02).
*23.05 Consent of Chadbourne & Parke LLP (included in Exhibit
8.01).
*23.06 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8.02).
24.01 Power of Attorney authorizing certain persons to sign this
Registration Statement on behalf of certain officers and
directors of ArvinMeritor.
99.01 Form of Proxy to be used by Meritor.
99.02 Form of Proxy to be used by Arvin.
99.03 Consent of Warburg Dillon Read LLC.
99.04 Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
99.05 Consents of Joseph B. Anderson, Jr., Donald R. Beall, Rhonda
L. Brooks, John J. Creedon, Charles H. Harff, Victoria B.
Jackson, James E. Marley, Harold A. Poling, Steven C.
Beering, Joseph P. Flannery, Robert E. Fowler, Jr., William
D. George, Jr., Ivan W. Gorr, Richard W. Hanselman, V.
William Hunt, Don J. Kacek, James E. Perrella and Martin D.
Walker to be named as persons about to become directors of
ArvinMeritor.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.01
ARTICLES OF INCORPORATION
OF
ARVINMERITOR, INC.
(FORMERLY NAMED MU SUB, INC.)
The undersigned incorporator, desiring to form a corporation
(hereinafter referred to as the "Corporation") pursuant to the provisions of
the Indiana Business Corporation Law, as amended (hereinafter referred to as
the "Act"), executes the following Articles of Incorporation.
ARTICLE I
NAME
The name of the Corporation is ArvinMeritor, Inc.
ARTICLE II
PURPOSES
The purpose for which the Corporation is formed is to transact any and
all lawful business for which corporations may be incorporated under the Act.
ARTICLE III
SHARES
Section 3.1. Number. The total number of shares which the
Corporation is authorized to issue is one thousand (1,000) shares, par value
$1.00 per share.
Section 3.2. Class. There shall be one class of shares of the
Corporation, which shall be designated as "Common Stock".
Section 3.3. Relative Rights, Preferences, Limitations and
Restrictions of Common Stock. All Common Stock shall have the same rights,
preferences, limitations and restrictions.
<PAGE> 2
Section 3.4. Voting Rights of Common Stock. Each holder of Common
Stock shall be entitled to one vote for each share owned of record on the books
of the Corporation on each matter submitted to a vote of the holders of Common
Stock.
ARTICLE IV
REGISTERED OFFICE AND REGISTERED AGENT
Section 4.1. Registered Office. The street address of the
Corporation's initial registered office is 251 East Ohio Street, Suite 500,
Indianapolis, Indiana 46204.
Section 4.2. Registered Agent. The name of the Corporation's initial
registered agent at such registered office is Corporation Service Company.
ARTICLE V
INCORPORATOR
The name and address of the incorporator of the Corporation are Gary
L. Stage, One American Square, Box 82001, Indianapolis, Indiana 46282.
ARTICLE VI
BOARD OF DIRECTORS AND BY-LAWS
Section 6.1. Number. The total number of directors shall be that
number specified in or fixed in accordance with the By-Laws.
Section 6.2. By-Laws. The power to make, alter, amend or repeal the
By-Laws of the Corporation shall be vested exclusively in the Board of
Directors of the Corporation and the shareholders of the Corporation shall have
no power to make, alter, amend or repeal the By-Laws.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Rights to Indemnification and Advancement of Expenses.
(a) The Corporation shall indemnify as a matter of right every
person made a party to a proceeding because such person is or was
(i) a member of the Board of Directors of the
Corporation,
2
<PAGE> 3
(ii) an officer of the Corporation, or
(iii) while a director or officer of the Corporation,
serving at the Corporation's request as a director,
officer, partner, member, manager, trustee, employee,
or agent of another foreign or domestic corporation,
partnership, limited liability company, joint
venture, trust, employee benefit plan, or other
enterprise, whether for profit or not,
(each an "Indemnitee") against all liability incurred by such person in
connection with the proceeding; provided that it is determined in the specific
case that indemnification of such person is permissible in the circumstances
because such person has met the standard of conduct for indemnification
specified in the Act. The Corporation shall pay for or reimburse the reasonable
expenses incurred by an Indemnitee in connection with any such proceeding in
advance of final disposition thereof in accordance with the procedures and
subject to the conditions specified in the Act. The Corporation shall
indemnify as a matter of right an Indemnitee who is wholly successful, on the
merits or otherwise, in the defense of any such proceeding, against reasonable
expenses incurred by the Indemnitee in connection with the proceeding without
the requirement of a determination as set forth in the first sentence of this
paragraph.
(b) Upon demand by a person for indemnification or advancement of
expenses, as the case may be, the Corporation shall expeditiously determine
whether the person is entitled thereto in accordance with this Article and the
procedures specified in the Act.
(c) The indemnification provided under this Article shall apply to
any proceeding arising from acts or omissions occurring before or after the
adoption of this Article.
Section 7.2. Other Rights Not Affected. Nothing contained in this
Article shall limit or preclude the exercise or be deemed exclusive of any
right under the law, by contract or otherwise, relating to indemnification of
or advancement of expenses to any individual who is or was a director, officer,
employee or agent of the Corporation, or the ability of the Corporation to
otherwise indemnify or advance expenses to any such individual. It is the
intent of this Article to provide indemnification to directors and officers to
the fullest extent now or hereafter permitted by law consistent with the terms
and conditions of this Article. Therefore, indemnification shall be provided
in accordance with this Article irrespective of the nature of the legal or
equitable theory upon which a claim is made, including without limitation
negligence, breach of duty, mismanagement, corporate waste, breach of contract,
breach of warranty, strict liability, violation of federal or state securities
laws, violation of the Employee Retirement Income Security Act of 1974, as
amended, or violation of any other state or federal laws.
Section 7.3. Definitions. For purposes of this Article:
(a) The term "director" means an individual who is or was a member
of the Board of Directors of the Corporation or an individual who, while a
director of the Corporation, is or was serving at the Corporation's request as
a director, officer, partner, member, manager, trustee,
3
<PAGE> 4
employee, or agent of another foreign or domestic corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan, or
other enterprise, whether for profit or not. A director is considered to be
serving an employee benefit plan at the Corporation's request if the director's
duties to the Corporation also impose duties on, or otherwise involve services
by, the director to the plan or to participants in or beneficiaries of the
plan. The term "director" includes, unless the context requires otherwise, the
estate or personal representative of a director.
(b) The term "expenses" includes all direct and indirect costs
(including without limitation counsel fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses) actually incurred in
connection with the investigation, defense, settlement or appeal of a
proceeding or establishing or enforcing a right to indemnification under this
Article, applicable law or otherwise.
(c) The term "liability" means the obligation to pay a judgment,
settlement, penalty, fine, excise tax (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expenses incurred with
respect to a proceeding.
(d) The term "party" includes an individual who was, is or is
threatened to be made a named defendant or respondent in a proceeding.
(e) The term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and whether formal or informal.
IN WITNESS WHEREOF, the undersigned incorporator designated in Article
V executes these Articles of Incorporation and hereby verifies subject to
penalties of perjury that the facts contained herein are true.
Dated this 31st day of March, 2000.
/s/ Gary L. Stage
---------------------------------------
Gary L. Stage
This instrument was prepared by Gary L. Stage, Attorney at Law, ICE MILLER
DONADIO & RYAN, One American Square, Box 82001, Indianapolis, Indiana 46282.
4
<PAGE> 1
EXHIBIT 3.02
BY-LAWS
OF
ARVINMERITOR, INC.
(FORMERLY NAMED MU SUB, INC.)
ARTICLE I
RECORDS PERTAINING TO SHARE OWNERSHIP
Section 1. Recognition of Shareholders. ArvinMeritor, Inc. (the
"Corporation") is entitled to recognize a person registered on its books as the
owner of shares of the Corporation as having the exclusive right to receive
dividends and to vote those shares, notwithstanding any other person's
equitable or other claim to, or interest in, those shares.
Section 2. Transfer of Shares. Shares are transferable only on the
books of the Corporation, subject to any transfer restrictions imposed by the
Articles of Incorporation, these By-Laws, or an agreement among shareholders
and the Corporation. Shares may be so transferred upon presentation of the
certificate representing the shares, endorsed by the appropriate person or
persons, and accompanied by (a) reasonable assurance that those endorsements
are genuine and effective, and (b) a request to register the transfer.
Transfers of shares are otherwise subject to the provisions of the Indiana
Business Corporation Law (the "Act") and Article 8 of the Indiana Uniform
Commercial Code.
Section 3. Certificates. Each shareholder is entitled to a
certificate signed (manually or in facsimile) by the Chairman of the Board, the
President or a Vice President and the Secretary or an Assistant Secretary,
setting forth (a) the name of the Corporation and that it was organized under
Indiana law, (b) the name of the person to whom issued, and (c) the number and
class of shares represented. The Board of Directors shall prescribe the form
of the certificate.
Section 4. Lost or Destroyed Certificates. A new certificate may be
issued to replace a lost or destroyed certificate. Unless waived by the Board
of Directors, the shareholder in whose name the certificate was issued shall
make an affidavit or affirmation of the fact that his certificate is lost or
destroyed, shall advertise the loss or destruction in such manner as the Board
of Directors may require, and shall give the Corporation a bond of indemnity in
the amount and form which the Board of Directors may prescribe.
<PAGE> 2
ARTICLE II
MEETINGS OF THE SHAREHOLDERS
Section 1. Annual Meetings. Annual meetings of the shareholders
shall be held on the second Wednesday in February of each year, or on such
other date as may be designated by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders
may be called by the Chairman of the Board, by the President or by the Board of
Directors. Special meetings of the shareholders shall be called upon delivery
to the Secretary of the Corporation of one or more written demands for a
special meeting of the shareholders describing the purposes of that meeting and
signed and dated by the holders of at least 25% of all the votes entitled to be
cast on any issue proposed to be considered at that meeting.
Section 3. Notice of Meetings. The Corporation shall deliver or mail
written notice stating the date, time, and place of any shareholders' meeting
and, in the case of a special shareholders' meeting or when otherwise required
by law, a description of the purposes for which the meeting is called, to each
shareholder of record entitled to vote at the meeting, at such address as
appears in the records of the Corporation and at least 10, but no more than 60,
days before the date of the meeting. A shareholders' meeting shall be held at
such place, either in or out of the State of Indiana, as may be specified by
the Board of Directors in the respective notice for such meeting.
Section 4. Waiver of Notice. A shareholder may waive notice of any
meeting, before or after the date and time of the meeting as stated in the
notice, by delivering a signed waiver to the Corporation for inclusion in the
minutes. A shareholder's attendance at any meeting, in person or by proxy (a)
waives objection to lack of notice or defective notice of the meeting, unless
the shareholder at the beginning of the meeting objects to holding the meeting
or transacting business at the meeting, and (b) waives objection to
consideration of a particular matter at the meeting that is not within the
purposes described in the meeting notice, unless the shareholder objects to
considering the matter when it is presented.
Section 5. Record Date. The Board of Directors may fix a record
date, which may be a future date, for the purpose of determining the
shareholders entitled to notice of a shareholders' meeting, to demand a special
meeting, to vote, or to take any other action. A record date may not exceed 70
days before the meeting or action requiring a determination of shareholders.
If the Board of Directors does not fix a record date, the record date shall be
the 10th day prior to the date of the meeting or other action.
Section 6. Voting by Proxy. A shareholder may appoint a proxy to
vote or otherwise act for the shareholder pursuant to a written appointment
form executed by the shareholder or the shareholder's duly authorized
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. The general proxy of a fiduciary is given the same effect as the
general proxy of any other
<PAGE> 3
shareholder. A proxy appointment is valid for 11 months unless otherwise
expressly stated in the appointment form.
Section 7. Voting Lists. After a record date for a shareholders'
meeting has been fixed, the Secretary shall prepare an alphabetical list of all
shareholders entitled to notice of the meeting, showing the address and number
of shares held by each shareholder. The list shall be kept on file at the
principal office of the Corporation or at a place identified in the meeting
notice in the city where the meeting will be held. The list shall be available
for inspection and copying by any shareholder entitled to vote at the meeting,
or by the shareholder's agent or attorney authorized in writing, at any time
during regular business hours, beginning five (5) business days before the date
of the meeting through the meeting. The list shall also be made available to
any shareholder, or to the shareholder's agent or attorney authorized in
writing, at the meeting and any adjournment thereof. Failure to prepare or
make available a voting list with respect to any shareholder's meeting shall
not affect the validity of any action taken at such meeting.
Section 8. Quorum; Approval. At any meeting of shareholders, a
majority of the votes entitled to be cast on a matter at the meeting
constitutes a quorum. If a quorum is present when a vote is taken, action on a
matter is approved if the votes cast in favor of the action exceed the votes
cast in opposition to the action, unless a greater number is required by law,
the Articles of Incorporation, or these By-Laws.
Section 9. Action by Consent. Any action required or permitted to be
taken at a shareholders' meeting may be taken without a meeting if the action
is taken by all the shareholders entitled to vote on the action. The action
must be evidenced by one or more written consents describing the action taken,
signed by all the shareholders entitled to vote on the action, and delivered to
the Corporation for inclusion in the minutes. If not otherwise determined
pursuant to Section 5 of this Article II, the record date for determining
shareholders entitled to take action without a meeting is the date the first
shareholder signs the consent to such action.
Section 10. Presence. Any or all shareholders may participate in any
annual or special shareholders' meeting by, or through the use of, any means of
communication by which all shareholders participating may simultaneously hear
each other during the meeting. A shareholder so participating is deemed to be
present in person at the meeting.
Section 11. Place of Meetings. Meetings of the shareholders of the
Corporation shall be held at such place, either in or out of the State of
Indiana, as may be specified by the Board of Directors.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers and Duties. All corporate powers are exercised by
or under the authority of, and the business and affairs of the Corporation are
managed under the direction of, the Board of Directors, unless otherwise
provided in the Articles of Incorporation.
<PAGE> 4
Section 2. Number and Terms of Office; Qualifications. The
Corporation shall have three (3) directors. Directors are elected at each
annual shareholders' meeting and serve for a term expiring at the following
annual shareholders' meeting. A director who has been removed pursuant to
Section 3 of this Article III ceases to serve immediately upon removal;
otherwise, a director whose term has expired continues to serve until a
successor is elected and qualifies or until there is a decrease in the number
of directors. A person need not be a shareholder or an Indiana resident to
qualify to be a director.
Section 3. Removal. Any director may be removed with or without
cause by action of the shareholders taken at any meeting the notice of which
states that one of the purposes of the meeting is removal of the director.
Section 4. Vacancies. If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of directors, the
Board of Directors may fill the vacancy. If the directors remaining in office
constitute fewer than a quorum of the Board, the directors remaining in office
may fill the vacancy by the affirmative vote of a majority of those directors.
Any director elected to fill a vacancy holds office until the next annual
meeting of the shareholders and until a successor is elected and qualifies.
Section 5. Annual Meetings. Unless otherwise agreed by the Board of
Directors, the annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place
where the meeting of shareholders was held, for the purpose of electing
officers and considering any other business which may be brought before the
meeting. Notice is not necessary for any annual meeting.
Section 6. Regular and Special Meetings. Regular meetings of the
Board of Directors may be held pursuant to a resolution of the Board of
Directors establishing a method for determining the date, time, and place of
those meetings. Notice is not necessary for any regular meeting. Special
meetings of the Board of Directors may be held upon the call of the Chairman of
the Board, the President or of any two (2) directors and upon 24 hours' written
or oral notice specifying the date, time, and place of the meeting. Notice of
a special meeting may be waived in writing before or after the time of the
meeting. The waiver must be signed by the director entitled to the notice and
filed with the minutes of the meeting. Attendance at or participation in a
meeting waives any required notice of the meeting, unless at the beginning of
the meeting (or promptly upon the director's arrival) the director objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Section 7. Quorum. A quorum for the transaction of business at any
meeting of the Board of Directors consists of a majority of the number of
directors specified in Section 2 of this Article III. If a quorum is present
when a vote is taken, action on a matter is approved if the action receives the
affirmative vote of a majority of the directors present.
Section 8. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting
if the action is taken by all
<PAGE> 5
directors then in office. The action must be evidenced by one or more written
consents describing the action taken, signed by each director, and included in
the minutes. Action of the Board of Directors taken by consent is effective
when the last director signs the consent, unless the consent specifies a prior
or subsequent effective date.
Section 9. Committees. The Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them.
Each committee may have one or more members, who serve at the pleasure of the
Board of Directors. The creation of a committee and appointment of members to
it must be approved by the greater of (i) a majority of all the directors in
office when the action is taken, or (ii) the number of directors required under
Section 7 of this Article III to take action. All rules applicable to action
by the Board of Directors apply to committees and their members. The Board of
Directors may specify the authority that a committee may exercise; however, a
committee may not (a) authorize distributions, except a committee may authorize
or approve a reacquisition of shares if done according to a formula or method
prescribed by the Board of Directors, (b) approve or propose to shareholders
action that must be approved by shareholders, (c) fill vacancies on the Board
of Directors or on any of its committees, (d) amend the Articles of
Incorporation, (e) adopt, amend, or repeal these By-Laws, (f) approve a plan of
merger not requiring shareholder approval, or (g) authorize or approve the
issuance or sale or a contract for the sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares, except the Board of Directors may authorize a committee to so
act within limits prescribed by the Board of Directors.
Section 10. Presence. The Board of Directors may permit any or all
directors to participate in any annual, regular, or special meeting by any
means of communication by which all directors participating may simultaneously
hear each other during the meeting. A director so participating is deemed to
be present in person at the meeting.
Section 11. Compensation. Each director shall receive such
compensation for service as a director as may be fixed by the Board of
Directors.
ARTICLE IV
OFFICERS
Section 1. Officers. The Corporation shall have a Chairman of the
Board, a President, one or more Vice Presidents, a Secretary, a Treasurer, and
such assistant officers as the Board of Directors designates. The Corporation
may also have such other officers as the Board of Directors may determine and
designate from time to time. The same individual may simultaneously hold more
than one office.
Section 2. Terms of Office. Officers are elected at each annual
meeting of the Board of Directors and serve for a term expiring at the
following annual meeting of the Board of Directors. An officer who has been
removed pursuant to Section 4 of this Article IV ceases to serve as an officer
immediately upon removal; otherwise, an officer whose term has expired
continues to serve until a successor is elected and qualifies.
<PAGE> 6
Section 3. Vacancies. If a vacancy occurs among the officers, the
Board of Directors may fill the vacancy. Any officer elected to fill a vacancy
holds office until the next annual meeting of the Board of Directors and until
a successor is elected and qualifies.
Section 4. Removal. Any officer may be removed by the Board of
Directors at any time with or without cause.
Section 5. Compensation. Each officer shall receive such
compensation for service in office as may be fixed by the Board of Directors.
Section 6. Chairman of the Board of Directors. The Chairman of the
Board of Directors (the "Chairman of the Board") shall, subject to the Board of
Directors, have general management and oversight of the administration and
operation of the Corporation's business and general supervision of its policies
and affairs. The Chairman of the Board shall serve as Chief Executive Officer
of the Corporation and shall see that all orders and resolutions of the Board
of Directors and of any committee thereof are carried into effect. The
Chairman of the Board also shall: (a) preside at all meetings of the
shareholders and of the Board of Directors, and shall have plenary power to set
the agenda, determine the procedure and rules of order and make definitive
rulings at meetings of shareholders; (b) be ex-officio a member of all
committees except the audit committee and the stock option committee; (c) have
power to appoint officers for any division who, as such, shall not be officers
of the Corporation; (d) subject to the Board of Directors, be in general and
active charge of the entire business and all the affairs of the Corporation;
and (e) have such other powers and perform such other duties as may be
prescribed by the Board of Directors or provided in these By-Laws.
Section 7. President. The President shall have such powers and
duties prescribed in these By-Laws or assigned to him by the Board of
Directors. In the absence or disability of the Chairman of the Board, the
President shall preside at meetings of the Board of Directors and shall perform
such other duties of the Chairman of the Board as may be assigned to him by the
Board of Directors. In the absence or disability of the Chairman of the Board
and the President, on assembling for a regular or special meeting of the Board
of Directors, the directors shall choose one of the Vice Presidents in
attendance to preside at such meeting.
Section 8. Vice Presidents. Each Vice President shall have the
powers and duties prescribed in these By-Laws or assigned to him by the Board
of Directors, the Chairman of the Board or the President. The Board of
Directors and/or the President may designate one or more of such Vice
Presidents as Executive, Senior or Assistant vice presidents.
Section 9. Secretary. The Secretary is responsible for (a) attending
all meetings of the shareholders and the Board of Directors, (b) preparing true
and complete minutes of the proceedings of all meetings of the shareholders,
the Board of Directors, and all committees of the Board of Directors, (c)
maintaining and safeguarding the books (except books of account) and records of
the Corporation, and (d) authenticating the records of the Corporation. If
required, the Secretary attests the execution of deeds, leases, agreements,
powers of attorney, certificates
<PAGE> 7
representing shares of the Corporation, and other official documents by the
Corporation. The Secretary serves all notices of the Corporation required by
law, the Board of Directors, or these By-Laws. The Secretary has such other
duties as the Board of Directors may from time to time prescribe.
Section 10. Treasurer. The Treasurer is responsible for (a) keeping
correct and complete books of account which show accurately at all times the
financial condition of the Corporation, (b) safeguarding all funds, notes,
securities, and other valuables which may from time to time come into the
possession of the Corporation, and (c) depositing all funds of the Corporation
with such depositories as the Board of Directors shall designate. The
Treasurer shall furnish at meetings of the Board of Directors, or when
otherwise requested, a statement of the financial condition of the Corporation.
The Treasurer has such other duties as the Board of Directors may from time to
time prescribe.
Section 11. Assistant Officers. The Board of Directors or the
President may from time to time designate and elect assistant officers who
shall have such powers and duties as the officers whom they are elected to
assist specify and delegate to them, and such other powers and duties as the
Board of Directors or the President may from time to time prescribe. An
Assistant Secretary may, during the absence or disability of the Secretary,
discharge all responsibilities imposed upon the Secretary of the Corporation,
including, without limitation, attest the execution of all documents by the
Corporation.
ARTICLE V
MISCELLANEOUS
Section 1. Records. The Corporation shall keep as permanent records
minutes of all meetings of the shareholders, the Board of Directors, and all
committees of the Board of Directors, and a record of all actions taken without
a meeting by the shareholders, the Board of Directors, and all committees of
the Board of Directors. The Corporation or its agent shall maintain a record
of the shareholders in a form that permits preparation of a list of the names
and addresses of all shareholders, in alphabetical order showing the number of
shares held by each. The Corporation shall maintain its records in written
form or in a form capable of conversion into written form within a reasonable
time. The Corporation shall keep a copy of the following records at its
principal office: (a) the Articles of Incorporation then currently in effect,
(b) the By-Laws then currently in effect, (c) minutes of all shareholders'
meetings, and records of all actions taken by shareholders without a meeting,
for the past three (3) years, (d) all written communications to shareholders
generally during the past three (3) years, including annual financial
statements furnished upon request of the shareholders, (e) a list of the names
and business addresses of the current directors and officers, and (f) the most
recent annual report filed with the Indiana Secretary of State.
Section 2. Execution of Contracts and Other Documents. Unless
otherwise authorized or directed by the Board of Directors, all written
contracts and other documents entered into by the
<PAGE> 8
Corporation shall be executed on behalf of the Corporation by the Chairman of
the Board, the President or a Vice President, and, if required, attested by the
Secretary or an Assistant Secretary.
Section 3. Accounting Year. The accounting year of the Corporation
begins on October 1 of each year and ends on the September 30 immediately
following.
Section 4. Corporate Seal. The Corporation has no seal.
ARTICLE VI
AMENDMENT
These By-Laws may be amended or repealed only by the Board of
Directors. The affirmative vote of a majority of all the directors is
necessary to amend or repeal these By-Laws.
/s/ V.G.B. II
--------------------------------------
Secretary's Initials
4-6-2000
--------------------------------------
Date
<PAGE> 1
Exhibit 5.01
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
(212) 408-5100
May 5, 2000
ArvinMeritor, Inc.
2135 West Maple Road
Troy, Michigan 48084-7186
Dear Sirs:
In connection with the registration by ArvinMeritor, Inc., an Indiana
corporation ("ArvinMeritor") formerly named Mu Sub, Inc. and a wholly-owned
subsidiary of Meritor Automotive, Inc. ("Meritor"), under the Securities Act of
1933, as amended (the "Act"), of 70,979,671 shares of Common Stock, par value $1
per share, of ArvinMeritor (the "ArvinMeritor Common Stock"), including the
preferred share purchase rights associated with the ArvinMeritor Common Stock,
to be issued by ArvinMeritor in connection with a merger transaction in which
Meritor will merge with and into ArvinMeritor (the "First Step Merger") and,
immediately thereafter, Arvin Industries, Inc., an Indiana corporation
("Arvin"), will merge with and into ArvinMeritor (the "Second Step Merger" and
together with the First Step Merger, the "Merger") pursuant to the terms of the
Agreement and Plan of
<PAGE> 2
ArvinMeritor, Inc. 2 May 5, 2000
Reorganization dated as of April 6, 2000 by and among Meritor, ArvinMeritor and
Arvin (the "Merger Agreement"), we advise as follows:
As counsel for ArvinMeritor, we have reviewed (i) the Articles of
Incorporation of ArvinMeritor, as amended to date, (ii) the By-Laws of
ArvinMeritor, (iii) the Registration Statement on Form S-4 of ArvinMeritor under
the Act with respect to the ArvinMeritor Common Stock (the "Registration
Statement"), (iv) the form of Restated Articles of Incorporation of ArvinMeritor
(the "ArvinMeritor Articles") to be approved and adopted by ArvinMeritor and
filed with the Secretary of State of the State of Indiana prior to the Merger,
(v) the form of amended By-Laws of ArvinMeritor (the "ArvinMeritor By-Laws") to
be adopted by ArvinMeritor prior to the Merger and (vi) evidence of the
corporate proceedings taken by ArvinMeritor in connection with the authorization
and issuance of the ArvinMeritor Common Stock. We have also examined originals,
or copies certified or otherwise authenticated to our satisfaction, of such
corporate records of ArvinMeritor and such other instruments, certificates of
public officials and representatives of ArvinMeritor and documents as we have
deemed necessary as a basis for the opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all
<PAGE> 3
ArvinMeritor, Inc. 3 May 5, 2000
documents submitted to us as originals and the conformity with the originals of
all documents submitted to us as copies. As to questions of fact material to
this opinion, we have, when relevant facts were not independently established,
relied upon certificates of officers of ArvinMeritor and appropriate public
officials.
On the basis of the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that upon (i) the
effectiveness of the ArvinMeritor Articles, (ii) the effectiveness of the
ArvinMeritor By-Laws, (iii) the effectiveness of the Registration Statement,
(iv) the approval and adoption of the Merger Agreement and the Merger by the
requisite vote of Meritor stockholders, (v) the approval and adoption of the
Merger Agreement and the Merger by the requisite vote of Arvin stockholders,
(vi) the filing with the Secretary of State of the State of Delaware of a
certificate of merger in respect of the First Step Merger, (vii) the filing with
the Secretary of State of the State of Indiana of (a) articles of merger in
respect of the First Step Merger and (b) articles of merger in respect of the
Second Step Merger and (viii) the issuance of the ArvinMeritor Common Stock in
accordance with the terms of the Merger Agreement, the ArvinMeritor Common Stock
will be legally and validly issued, fully paid and nonassessable.
<PAGE> 4
ArvinMeritor, Inc. 4 May 5, 2000
We express no opinion herein as to any laws other than the laws of the
State of New York, the General Corporation Law of the State of Delaware (as well
as the applicable provisions of the Delaware Constitution and applicable
reported judicial decisions) and the Federal laws of the United States. As to
matters governed by Indiana law, we have, with your consent, relied solely upon
the opinion of Ice Miller Donadio & Ryan, a copy of which is enclosed herewith.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. We also hereby consent to the reference to this firm
under the caption "Legal Matters" in the Joint Proxy Statement-Prospectus
constituting a part of the Registration Statement. In giving such consents, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act and the Rules and Regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
Chadbourne & Parke LLP
<PAGE> 1
Exhibit 5.02
[Ice Miller Donadio & Ryan Letterhead]
May 5, 2000
ArvinMeritor, Inc.
2135 West Maple Road
Troy, Michigan 48084-7186
Dear Sirs:
In connection with the registration by ArvinMeritor, Inc., an Indiana
corporation ("ArvinMeritor") formerly named Mu Sub, Inc. and a wholly-owned
subsidiary of Meritor Automotive, Inc. ("Meritor"), under the Securities Act of
1933, as amended (the "Act"), of 70,979,671 shares of Common Stock, par value $1
per share, of ArvinMeritor (the "ArvinMeritor Common Stock"), including the
preferred share purchase rights associated with the ArvinMeritor Common Stock,
to be issued by ArvinMeritor in connection with a merger transaction in which
Meritor will merge with and into ArvinMeritor (the "First Step Merger") and,
immediately thereafter, Arvin Industries, Inc., an Indiana corporation
("Arvin"), will merge with and into ArvinMeritor (the "Second Step Merger" and,
together with the First Step Merger, the "Merger") pursuant to the terms of the
Agreement and Plan of Reorganization dated as of April 6, 2000 by and among
Meritor, ArvinMeritor and Arvin (the "Merger Agreement"), we advise as follows:
As special Indiana counsel for ArvinMeritor, we have reviewed (i) the
Articles of Incorporation of ArvinMeritor as amended to date, (ii) the By-Laws
of ArvinMeritor, (iii) the form of Restated Articles of Incorporation of
ArvinMeritor (the "ArvinMeritor Articles") to be approved and adopted by
ArvinMeritor and filed with the Secretary of State of the State of Indiana prior
to the Merger, (iv) the form of amended By-Laws of ArvinMeritor (the
"ArvinMeritor By-Laws") to be adopted by ArvinMeritor prior to the Merger and
(v) evidence of the corporate proceedings taken by ArvinMeritor in connection
with the authorization and issuance of the ArvinMeritor Common Stock. In
addition, we have reviewed the following portions of the Registration Statement
on Form S-4 of ArvinMeritor under the Act with respect to the ArvinMeritor
Common Stock (the "Registration Statement"): the sections under the captions
"Description of Combined Company Capital Stock", "Comparison of Stockholders'
Rights", "Rights of Dissenting Stockholders" and "Legal Matters" in the Joint
Proxy Statement - Prospectus constituting a part of the Registration Statement
and Item 20, captioned "Indemnification of Directors and Officers", in Part II
of the Registration Statement. We have also examined originals, or copies
certified or otherwise authenticated to our satisfaction, of such corporate
records of ArvinMeritor and such other instruments, certificates of public
officials and representatives of ArvinMeritor and documents as we have deemed
necessary as a basis
<PAGE> 2
May 5, 2000
Page 2
for the opinion hereinafter expressed. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies. As to questions of fact material to this opinion, we have, when
relevant facts were not independently established, relied upon certificates of
officers of ArvinMeritor and appropriate public officials.
On the basis of the foregoing, and having regard for such legal
considerations as we deem relevant, we are of the opinion that upon (i) the
effectiveness of the ArvinMeritor Articles, (ii) the effectiveness of the
ArvinMeritor By-Laws, (iii) the effectiveness of the Registration Statement,
(iv) the approval and adoption of the Merger Agreement and the Merger by the
requisite vote of Meritor stockholders, (v) the approval and adoption of the
Merger Agreement and the Merger by the requisite vote of Arvin stockholders,
(vi) the filing with the Secretary of State of the State of Delaware of a
certificate of merger in respect of the First Step Merger, (vii) the filing
with the Secretary of State of the State of Indiana of (a) articles of merger
in respect of the First Step Merger and (b) articles of merger in respect of
the Second Step Merger, (viii) the consummation of the transactions
contemplated by the Merger Agreement, and (ix) the issuance of the ArvinMeritor
Common Stock in accordance with the terms of the Merger Agreement, the
ArvinMeritor Common Stock will be legally and validly issued, fully paid and
nonassessable.
We express no opinion herein as to any laws other than the laws of the
State of Indiana.
Chadbourne & Parke LLP may rely on this opinion as though it were
addressed to them on the date of this letter.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. We also hereby consent to the reference to this firm
under the caption "Legal Matters" in the Joint Proxy Statement-Prospectus
constituting a part of the Registration Statement. In giving such consents, we
do not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act and the Rules and Regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
ICE MILLER DONADIO & RYAN
<PAGE> 1
EXHIBIT 10.01
EMPLOYMENT AGREEMENT
AGREEMENT by and among Mu Sub, Inc., an Indiana corporation
(the "Company"), Arvin Industries, Inc., an Indiana corporation ("Arvin"), and
V. William Hunt (the "Executive") dated as of the 6th day of April, 2000.
The Boards of Directors of the Company and Arvin have
determined that it is in their best interests to assure that Arvin will have the
continued dedication of the Executive pending the consummation of the
transactions contemplated among Meritor, Inc., a Delaware corporation
("Meritor"), the Company, a wholly owned subsidiary of Meritor, and Arvin (the
"Merger") pursuant to the Agreement and Plan of Reorganization dated as of April
6th, 2000 (the "Merger Agreement") and to provide the Company with continuity of
management following the Merger. Therefore, in order to accomplish these
objectives Arvin and the Company have each entered into this Agreement with the
Executive.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean the
Effective Time as defined in the Merger Agreement.
2. Employment Period. Subject to the terms and conditions of
this Agreement, the Company hereby agrees to employ the Executive, and the
Executive hereby agrees to remain in the employ of the Company, for the period
commencing on the Effective Date and ending on October 1, 2003 (the "Employment
Period").
3. Terms of Employment. (a) Position and Duties. (i) (A)
During the Employment Period, the Executive shall initially serve as the
President of the Company and as Vice Chairman of the Board of Directors of the
Company (the "Board"), and it is the intention of the parties hereto and of
Meritor to recommend to the Board that the Executive shall serve in the
positions set forth in the following sentence commencing at the times set forth
in the following sentence hereof, in each case, with such duties and
responsibilities as may be assigned to the Executive by the Chief Executive
Officer of Meritor as of the date hereof (the "Current CEO") (while the
Executive is serving as President) and/or by the Board, and as are commensurate
and consistent with such positions, and with the authority as is commensurate
and consistent with such positions, and (B) the Executive, who shall reside in
the Detroit, Michigan area, shall be based at the Company's headquarters. It is
the intention of the parties hereto and of Meritor to recommend to the Board
that, upon the earlier of (x) the retirement or cessation of service of the
Current CEO from the position of Chief Executive Officer of the Company or (y)
October 1, 2002, and subject to the approval of the Board, the Executive shall
commence serving as the Chief Executive Officer of the Company, and, upon the
earlier of (x) the retirement or cessation of service of the Current CEO from
the position of Chairman of the Board or (y) October 1, 2003, and subject to the
approval of the Board, the Executive shall commence serving as the Chairman of
the Board. While the Executive is serving as President of the Company during the
Employment Period, the Executive shall report directly to the Current CEO.
During the
<PAGE> 2
Employment Period, it is intended that the Executive shall serve as a member of
the Board, subject to the Executive's earlier resignation from the Board or
removal from the Board pursuant to the terms of the Company's By-laws.
(i) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote his full time and attention to the business and
affairs of the Company and to use his reasonable best efforts to perform
faithfully and efficiently the responsibilities assigned to the Executive
hereunder. During the Employment Period, the Executive will not serve on
corporate boards without the prior approval of the Board. The Executive may also
manage personal investments, so long as such activities do not interfere with
the performance of the Executive's responsibilities to the Company in accordance
with this Agreement. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior to the
Effective Date and disclosed in Arvin's Definitive Proxy Statement, dated March
13, 2000, the continued conduct of such activities subsequent to the Effective
Date shall not thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary (the "Annual Base
Salary") of no less than the Executive's year 2000 annual base salary
($800,000). Beginning October 1, 2000, the Annual Base Salary shall be reviewed,
consistent with the Company's practice for senior executives. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" and "affiliates" shall include any
company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. Beginning October 1, 2000, the
Executive shall be entitled to receive an annual cash bonus (the "Annual
Bonus"), based on a percentage of the Executive's Annual Base Salary, pursuant
to the terms of the Company's annual bonus plan for senior executives, including
the Current CEO, as in effect from time to time. With respect to each fiscal
year during the Employment Period, the Executive's target bonus opportunity
shall be determined by the Compensation and Management Development Committee of
the Board (the "Compensation Committee"). Notwithstanding anything contained
herein to the contrary, with respect to the annual bonus period occurring during
the fiscal year beginning on October 1, 2000, the sum of the Executive's Annual
Base Salary and Annual Bonus shall be at least equal to 90% of the sum of the
annual base salary and annual bonus paid or payable to the Current CEO with
respect to such fiscal year. For the period from the Effective Date through
September 30, 2000, the Executive shall receive a pro rata share of the bonus
for the period from January 1, 2000 through September 30, 2000, determined in
accordance with the Arvin Annual Incentive Plan.
(iii) Initial Equity Award. On the Effective Date,
the Company shall grant the Executive an award of restricted shares (the
"Restricted Stock") of the Company's common stock (the "Common Stock") and a
stock option to acquire a number of shares of
-2-
<PAGE> 3
Common Stock (the "Option" and together with the Restricted Stock, the "Initial
Equity Award"), with the "value" of the Initial Equity Award to be equal to the
aggregate of the amounts payable to the Executive, assuming that he were
terminated other than for Cause on the Effective Date, under Section 6(a) of the
Employment Agreement between Arvin and the Executive in the form publicly filed
as an Exhibit to Arvin's Form 10-K filed for the year ended December 28, 1997
(the "Prior Agreement"). For purposes hereof, the "value" of the Initial Equity
Award will be determined on the same basis as the value of the initial equity
awards of Common Stock for the other senior executives of Arvin is determined,
as mutually agreed upon (including, without limitation, the assumptions to be
used for purposes of the Black Scholes valuation methodology), as soon as
reasonably practicable following the date hereof, by the Executive and the
Current CEO. The Initial Equity Award will be granted one-third (1/3) in
restricted shares and two-thirds (2/3) in stock options. The Option will have an
exercise price equal to the fair market value of the Common Stock subject
thereto on the date of grant and a term of ten years from the date of grant
(without regard to the Executive's earlier termination of employment for any
reason). Except as otherwise provided herein, the Restricted Stock and the
Option shall vest in three equal annual installments on each of the first,
second and third anniversaries of the Effective Date, subject to accelerated
vesting upon a "change of control" of the Company (as defined in the stock
incentive plan pursuant to which the Initial Equity Award is granted).
(iv) Long-Term Incentive Awards. Beginning October 1,
2000, the Executive shall be entitled to participate in all long-term incentive
plans and programs generally applicable to senior executives of the Company,
including the Current CEO, on a basis and with terms and conditions, including
any applicable performance goals, that are as favorable as the basis and terms
and conditions of the long-term incentive awards of any other senior executive
of the Company, with respect to the same period, provided that, except as
provided below, the Executive's level of participation need not be equal to that
of the Current CEO's level of participation. Notwithstanding anything contained
herein to the contrary, with respect to the 1999 through 2001 long-term
incentive award period, the Executive's long-term incentive award shall be (I)
at least equal to 90% of one-third (1/3) of the cash performance plan long-term
incentive award granted to the Current CEO with respect to such award period and
(II) an award to the Executive on the Effective Date of an option to purchase a
number of shares of Common Stock such that the option will have a Black Scholes
value (determined on the same basis as the Current CEO's long-term incentive
plan award) on the Effective Date that is equal to 90% of one-third (1/3rd) of
the Black Scholes value of the option granted to the Current CEO in respect to
such award period. With respect to the 2000 through 2002 long-term incentive
award period, the Executive's long-term incentive award amount shall be such
amount as the Board, with the advice of the Compensation Committee, may
determine.
(v) Other Employee Benefit Plans. During the
Employment Period, except as otherwise expressly provided herein, the Executive
shall be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs generally applicable to senior
executives of the Company, including the Current CEO, on a basis no less
favorable than that provided to any other senior executive of the Company,
provided that the Executive's level of participation need not be equal to that
of the Current CEO's level of participation.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits and perquisites, generally
applicable to senior executives of the Company, including the Current CEO, on a
basis no less favorable than that provided to any
-3-
<PAGE> 4
other senior executive of the Company, provided that the Executive's level of
fringe benefits and perquisites need not be equal to that of the Current CEO's
level of fringe benefits and perquisites.
(vii) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the Company's policies.
(viii) Office. During the Employment Period, the
Executive shall be entitled to an office at the Company's headquarters of a size
and with furnishings and other appointments as provided generally with respect
to the senior executives of the Company.
(ix) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company as in effect with respect to the
senior executives of the Company, including the Current CEO.
4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), unless within the 30 days after such receipt, the Executive shall have
furnished to the Company a written determination by a physician selected by the
Company or its insurers and reasonably acceptable to the Executive or the
Executive's legal representative that he has fully recovered from the illness or
condition that led to his absence from his duties and that he is fit to resume
them on a full-time basis. For purposes of this Agreement, "Disability" shall
mean the absence of the Executive from the Executive's duties with the Company
on a full-time basis for an aggregate of 180 calendar days in any consecutive
12-month period or for a period of 120 consecutive calendar days, as a result of
incapacity due to mental or physical illness.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) any failure by the Executive to comply with any
of the provisions of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Executive promptly after receipt of notice thereof given by the Company; or
(ii) the continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of its
affiliated companies (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board which specifically
identifies
-4-
<PAGE> 5
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; or
(iii) the willful engaging by the Executive in
illegal conduct or gross misconduct that is materially and demonstrably
injurious to the Company; or
(iv) (A) conviction of a felony, or guilty or nolo
contendere plea by the Executive with respect thereto or (B) conviction of
another crime, or guilty or nolo contendere plea by the Executive with respect
thereto that is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than a majority of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i), (ii), (iii) or (iv) above, and specifying the
particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean in the absence of a written consent of the Executive:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's positions (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or any other
action by the Company which results in a diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the failure to appoint the Executive as Chief
Executive Officer of the Company upon the earlier of (A) the retirement or
cessation of service from such position of the Current CEO or (B) October 1,
2002;
-5-
<PAGE> 6
(iv) the failure to appoint the Executive as Chairman
of the Company upon the earlier of (A) the retirement or cessation of service
from such position of the Current CEO or (B) October 1, 2003;
(v) the Company's requiring the Executive to be based
at any office or location other than the Company's headquarters;
(vi) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(vii) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason (subject to the cure provisions in Sections 4(c)(i)
and (ii)), the date of receipt of the Notice of Termination or any later date
specified therein within 30 days of such notice, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause, Death or Disability. If, during the Employment
Period, the Company shall terminate the Executive's employment other than for
Cause, death or Disability or the Executive shall terminate employment for Good
Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
-6-
<PAGE> 7
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the highest annual bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year
consisting of less than twelve full months), to the Executive
for any of the three completed fiscal years immediately prior
to the Date of Termination (the "Recent Annual Bonus") and (y)
a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs
through the Date of Termination, and the denominator of which
is 365, and (3) any compensation previously deferred by the
Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described
in clauses (1), (2) and (3), shall be hereinafter referred to
as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Recent Annual Bonus; and
(ii) the Executive shall be entitled to the immediate
commencement of an annual pension benefit of not less than the Executive's
annual pension benefit calculated under the terms of Arvin's qualified and
non-qualified retirement plans as in effect immediately prior to the Effective
Date, as if the Executive had attained the age and received the service credit
under such plans that the Executive would have attained and received if he had
remained in the employ of the Company for an additional three years after the
Date of Termination and had earned the compensation payable pursuant to Section
5(a)(i) evenly over such three-year period (the "Enhanced Retirement Benefit").
Upon the Executive's death, his spouse as of the date hereof, should she survive
the Executive, shall be paid an annual benefit of 50% of the Enhanced Retirement
Benefit for her life (the "Survivor Retirement Benefit"); and
(iii) the Executive and his spouse as of the date
hereof shall continue to be provided with medical and dental benefits pursuant
to the terms of the plans and policies of the Company in effect for active
executive officers of the Company for the three-year period following the Date
of Termination, and thereafter, the Executive and his spouse as of the date
hereof shall be provided with retiree medical and dental benefits for the
remainder of each of their lives, on terms and conditions no less favorable than
the retirement medical and dental programs of Meritor, as in effect immediately
prior to the Effective Date (collectively referred to herein as the
"Post-Employment Medical Benefits"); and
(iv) the Restricted Stock and the Option and all
other equity-based awards granted to the Executive shall immediately vest in
full, and, for purposes of the post-termination exercise period of any such
awards, the Executive shall be treated as a retiree (to the extent such
treatment provides him with a longer post-termination exercise period than
otherwise required); and
-7-
<PAGE> 8
(v) all long-term incentive awards granted to the
Executive shall immediately vest in full and be paid out based on the maximum
award and/or performance level; and
(vi) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company through the Date of Termination (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. In addition,
the Restricted Stock, the Options and all other equity-based awards granted to
the Executive shall immediately vest in full, and all long-term incentive awards
granted to the Executive shall immediately vest in full and be paid out to the
Executive's estate at the time such amount would otherwise have been payable to
the Executive in an amount that is based on the performance level achieved by
the Company for the fiscal year (in the case of annual incentive awards) and for
the cycle (in the case of long-term incentive awards). The amount of such
long-term incentive awards shall be pro rated through the Executive's date of
death. Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 5(b) shall include death benefits as in
effect on the date of the Executive's death with respect to senior executives of
the Company, including the Current CEO (but not necessarily the same level of
benefits as the Current CEO), and their beneficiaries and the immediate
commencement of the Survivor Retirement Benefit and the Post-Employment Medical
Benefits for the remainder of the life of the Executive's spouse as of the date
hereof.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. In addition, the Restricted Stock and the Option and all other
equity-based awards granted to the Executive shall immediately vest in full, and
all long-term incentive awards granted to the Executive shall immediately vest
in full and be paid out based on the maximum award and/or performance level.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits as in effect at any time thereafter
generally with respect to the senior executives of the Company, including the
Current CEO (but not necessarily the same level of benefits as the Current CEO),
and their beneficiaries and the immediate commencement of the Enhanced
Retirement Benefit and the Post-Employment Medical Benefits.
(d) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated for Cause or the Executive terminates his
employment without Good Reason during the Employment Period, this Agreement
shall terminate without further obligations to the
-8-
<PAGE> 9
Executive other than the obligation to pay to the Executive (i) the Accrued
Obligations (less the amount described in Section 5(a)(i)(A)(2) and any
compensation deferred following the Effective Date, solely to the extent the
applicable deferred compensation plan requires forfeiture as a result of such
termination without exception) and (ii) Other Benefits. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
5(d) shall include, and the Executive shall be entitled after the Date of
Termination to receive, the retirement benefits, including, without limitation,
post-retirement medical and dental benefits, as in effect on the Date of
Termination with respect to the senior executives of the Company, including the
Current CEO (but not necessarily the same level of benefits as the Current CEO).
6. Non-exclusivity of Rights. Except as specifically provided,
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies and for which the Executive may
qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest including arbitration (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
8. Certain Additional Payments by the Company. (a) Anything in
this Agreement to the contrary notwithstanding and except as set forth below, in
the event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
8) (a "Payment") would be subject to the excise tax imposed by Section 4999
-9-
<PAGE> 10
of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 8(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit of at least
$50,000 (taking into account both income taxes and any Excise Tax) as compared
to the net after-tax proceeds to the Executive resulting from an elimination of
the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a nationally recognized certified public accounting firm reasonably
acceptable to the Executive as may be designated by the Company (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Company
and the Executive within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Executive within five days of (i) the later
of the due date for the payment of any Excise Tax, and (ii) the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that
-10-
<PAGE> 11
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 8(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together
-11-
<PAGE> 12
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
9. Confidential Information/Non-Competition/Non-Solicitation.
(a) The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
(b) The Executive agrees that, (i) while the Executive is
employed during the Employment Period or (ii) for a period of two years
following the date on which the Executive's employment hereunder is terminated
by the Company for Cause or by the Executive without Good Reason, whichever
period in (i) or (ii) is applicable the Executive will not, without the written
consent of the Company, engage in any business of, or enter the employ of, or
have any interest in, directly or indirectly, any other person, firm,
corporation or other entity engaged in a business that is in substantial and
direct competition with the Company as of the Date of Termination. Nothing
herein shall restrict the Executive from owning 2% or less of the outstanding
securities of any corporation or other entity whose securities are listed on any
national securities exchange or traded over-the-counter, if the Executive has no
other connection or relationship with the issuer of such securities.
(c) The Executive agrees that, during the Employment Period
and for a period of two years following the date on which the Executive's
employment hereunder is terminated by the Company for Cause or by the Executive
without Good Reason, the Executive will not, directly or indirectly, on behalf
of the Executive or any other person, solicit for employment by other than the
Company any person employed by the Company at the Effective Date, nor will the
Executive, directly or indirectly, on behalf of the Executive or any other
person, solicit for employment by other than the Company any person known by the
Executive to be employed at the time by the Company.
(d) In the event of a breach or threatened breach of this
Section 9, the Executive agrees that the Company shall be entitled to injunctive
relief in a court of appropriate jurisdiction to remedy any such breach or
threatened breach, the Executive acknowledges that damages would be inadequate
and insufficient. The termination of the Executive's employment hereunder shall
have no effect on the continuing operation of this Section 9. In no event shall
an
-12-
<PAGE> 13
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
10. Resolution of Disputes. Any controversy or claim arising
out of or relating to this Agreement shall at the request of either party be
determined by arbitration. The arbitration shall be held in Indiana and
conducted in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association. The dispute shall be submitted
to a single arbitrator to be mutually agreed upon by the parties. If the parties
cannot agree on a single arbitrator, each party shall appoint one arbitrator who
shall then jointly appoint a single arbitrator. Judgment upon the arbitration
award may be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief. The Company agrees to
pay the costs of the arbitration and to reimburse the Executive for reasonable
expenses incurred as a result of such arbitration.
11. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) 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 assume
expressly 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 such succession
had taken place. As used in this Agreement, "Company" and "Arvin" shall mean the
Company and Arvin as hereinbefore defined and any successor to their respective
businesses and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
-13-
<PAGE> 14
If to the Executive: At the most recent address on file at
Arvin.
If to the Company: Mu Sub, Inc.
c/o Meritor, Inc.
2135 West Maple Road
Troy, Michigan 48084
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(vii) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) Subject to compliance with the terms hereof as of the
Effective Date, from and after the Effective Date this Agreement shall supersede
any other employment, severance or change of control agreement between the
Executive and Arvin with respect to the subject matter hereof. This Agreement
shall be of no force and effect if the "Effective Time" (as defined in the
Merger Agreement) of the Merger does not occur.
(g) This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from their respective Boards
of Directors, Arvin has caused these presents to be executed in its name on its
behalf, and Meritor has cause these presents to be executed by Mu Sub, all as of
the day and year first above written.
/s/ V. William Hunt
----------------------------------------
V. William Hunt
ARVIN INDUSTRIES, INC.
/s/ Larry D. Blair
----------------------------------------
Name: Larry D. Blair
Title: Vice President, Finance and
Chief Financial Officer
MU SUB, INC.
/s/ Larry D. Yost
----------------------------------------
Name: Larry D. Yost
Title: Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
ArvinMeritor, Inc. on Form S-4 of our reports dated November 9, 1999, appearing
in and incorporated by reference in the Annual Report on Form 10-K of Meritor
Automotive, Inc. for the year ended September 30, 1999 and to the reference to
us under the heading "Experts" in the joint proxy statement-prospectus, which is
part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Detroit, Michigan
May 5, 2000
<PAGE> 1
Exhibit 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of ArvinMeritor, Inc. of our report dated January
28, 2000 relating to the financial statements and financial statement schedule,
which appears in Arvin Industries, Inc.'s Annual Report on Form 10-K for the
year ended January 2, 2000. We also consent to the reference to us under the
heading "Experts" in the joint proxy statement-prospectus, which is part of this
Registration Statement.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
May 4, 2000
<PAGE> 1
EXHIBIT 24.01
POWER OF ATTORNEY
We, the undersigned directors and officers of ArvinMeritor,
Inc., an Indiana corporation (the "Company"), hereby severally constitute VERNON
G. BAKER, II, BONNIE WILKINSON and PETER R. KOLYER, and each of them singly, our
true and lawful attorneys with full power to them and each of them to sign for
us, and in our names and in the capacities indicated below, the Registration
Statement on Form S-4 and any and all amendments (including post-effective
amendments) and supplements to such Registration Statement to be filed by the
Company with the Securities and Exchange Commission (the "Commission") for the
purpose of registering under the Securities Act of 1933, as amended, shares of
Common Stock, par value of $1 per share, and the associated preferred share
purchase rights, of the Company to be issued pursuant to the Agreement and Plan
of Reorganization dated as of April 6, 2000 by and among Meritor Automotive,
Inc., the Company and Arvin Industries, Inc.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Larry D. Yost Chairman of the Board May 5, 2000
- ----------------------- and Chief Executive Officer (principal
Larry D. Yost executive officer) and Director
/s/ Thomas A. Madden Senior Vice President, May 5, 2000
- ----------------------- Chief Financial Officer and Treasurer
Thomas A. Madden (principal accounting and financial officer)
and Director
/s/ Vernon G. Baker, II Senior Vice President, General Counsel and May 5, 2000
- ----------------------- Secretary and Director
Vernon G. Baker, II
</TABLE>
<PAGE> 1
EXHIBIT 99.01
[Front Side of Proxy]
PROXY
MERITOR AUTOMOTIVE, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIRECTION CARD TO T. ROWE PRICE TRUST COMPANY, TRUSTEE
AND/OR WELLS FARGO BANK, N.A., TRUSTEE
The undersigned hereby appoints [Larry D. Yost, John J. Creedon
and Charles H. Harff], jointly and severally, proxies, with full power
of substitution, to vote shares of capital stock of the Company owned
of record by the undersigned and which the undersigned is entitled to
vote, at the Special Meeting of Shareowners to be held at the
Company's World Headquarters, 2135 West Maple Road, Troy, Michigan, on
July [ ], 2000, or any adjournment or postponement thereof, as
specified on the reverse side of this card, and to vote in accordance
with their discretion on such other matters as may properly come
before the meeting.
The undersigned also provides directions to T. Rowe Price Trust
Company, Trustee, and to Wells Fargo Bank, N.A., Trustee, to vote
shares of capital stock of the Company allocated, respectively, to
accounts of the undersigned under the Meritor Automotive, Inc. Savings
Plan and various Rockwell International Corporation Savings Plans
(Rockwell Salaried Retirement Savings Plan, Rockwell Non-Represented
Hourly Retirement Savings Plan, Rockwell Employee Savings and
Investment Plan for Represented Hourly Employees, Rockwell Retirement
Savings Plan for Represented Hourly Employees and Rockwell Retirement
Savings Plan for Certain Employees), and which are entitled to be
voted at the aforesaid Special Meeting or any adjournment or
postponement thereof, as specified on the reverse side of this card.
The undersigned also provides directions to Wells Fargo Bank,
N.A. as Trustee, to vote all such shares allocated to Rockwell Savings
Plan accounts of the undersigned as it deems proper on such other
matters as may properly come before the meeting.
IF NO SPECIFICATION IS MADE ON THE REVERSE SIDE OF THIS CARD:
- ALL SUCH SHARES OWNED OF RECORD BY THE UNDERSIGNED WILL BE
VOTED FOR PROPOSAL (a).
<PAGE> 2
- ALL SUCH SHARES ALLOCATED TO THE MERITOR SAVINGS PLAN
ACCOUNTS OF THE UNDERSIGNED WILL BE VOTED IN THE SAME MANNER
AND PROPORTION AS THE SHARES FOR WHICH INSTRUCTIONS ARE
RECEIVED WITH RESPECT TO PROPOSAL (a).
- ALL SUCH SHARES ALLOCATED TO THE ROCKWELL SAVINGS PLAN
ACCOUNTS OF THE UNDERSIGNED WILL BE VOTED AS THE TRUSTEE
DEEMS PROPER.
----------------------------------------------------------------
SEE REVERSE
SIDE
----------------------------------------------------------------
(continued, and to be signed and dated, on the other side)
* FOLD AND DETACH HERE *
TO PARTICIPANTS IN THE ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLANS:
Please vote in accordance with the instructions on the reverse side of this card
by July [ ], 2000. If you do not properly vote by that date, Wells Fargo Bank,
N.A., as Trustee for the Rockwell Savings Plans, will vote the shares allocated
to your Rockwell Savings Plan accounts as it deems proper.
2
<PAGE> 3
[Reverse Side of Proxy]
[X] PLEASE MARK YOUR VOTE AS INDICATED IN THIS EXAMPLE.
[Control Number]
WHERE A VOTE IS NOT SPECIFIED:
- - THE PROXIES WILL VOTE THE SHARES FOR PROPOSAL (a) AND WILL VOTE IN
ACCORDANCE WITH THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING;
- - WELLS FARGO, AS TRUSTEE, WILL VOTE THE SHARES AS IT DEEMS PROPER ON
PROPOSAL (a) AND ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING; AND
- - T. ROWE PRICE, AS TRUSTEE, WILL VOTE THE SHARES ON PROPOSAL (a) IN THE SAME
MANNER AND PROPORTION AS THE SHARES FOR WHICH INSTRUCTIONS ARE RECEIVED.
- ---------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (a).
- ---------------------------------------------------------------------------
(a) Proposal to approve and adopt the Agreement and Plan of Reorganization.
Adoption of the Agreement and Plan of Reorganization will also constitute
approval of the merger and the other transactions contemplated by the
Agreement.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I will attend the special meeting. [ ]
SIGNATURE(S)_______________________________________ DATE ____________
NOTE: Please sign, date and return the proxy card promptly using the enclosed
envelope. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such, and if signing for a
corporation, please give your title. When shares are in the name of more
than one person, each should sign the proxy/direction card.
* FOLD AND DETACH HERE *
3
<PAGE> 4
[MERITOR LOGO]
AFTER YOU READ THE PROXY/DIRECTION CARD AND THE ACCOMPANYING JOINT PROXY
STATEMENT-PROSPECTUS, YOU CAN VOTE IN ONE OF THREE WAYS:
TELEPHONE VOTING:
1. Call 1-800-[PRX-VOTE] (1-800-[779-8683]), toll-free, from a touchtone
telephone (outside the US and Canada, call [201-536-8073].
2. Enter your control number, located in the box above, just below the
perforation.
3. Follow the recorded instructions.
INTERNET VOTING:
1. Log onto Internet and type: http://www.eproxyvote.com/mra.
2. Enter your control number, located in the box above, just below the
perforation.
3. Follow the on-line instructions.
PROXY/DIRECTION CARD:
1. Mark, sign and date your proxy/direction card and return it promptly in
the enclosed return envelope.
4
<PAGE> 1
EXHIBIT 99.02
[FRONT OF PROXY]
FORM OF PROXY CARD
FOR HOLDERS OF SHARES OF ARVIN COMMON STOCK
ARVIN INDUSTRIES, INC.
-------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING TO BE HELD ON JULY [ ], 2000
The undersigned hereby appoints V. William Hunt and Ronald R. Snyder, or
either of them, the true and lawful proxies of the undersigned, with full power
of substitution, for and on behalf of the undersigned to vote all of the shares
of ARVIN INDUSTRIES, INC. registered in the name of the undersigned, or with
respect to which the undersigned may be entitled to vote, at the Special Meeting
of Shareholders to be held at One Noblitt Plaza, Columbus, Indiana 47202-3000,
on July [ ], 2000 at 9:00 a.m., local time, and at any adjournment or
postponements thereof, upon the matters set forth on the reverse side hereof.
If the undersigned is a participant in an Arvin Savings Plan, then this
card also provides voting instructions to the trustee of that plan to vote at
the Special Meeting, and any adjournments or postponements thereof, all of the
shares of ARVIN INDUSTRIES, INC. held in the undersigned's plan account as
specified upon the matters indicated on the reverse side of this proxy card and
in its discretion upon such other matters as may properly come before the
meeting. If the undersigned is a participant in a Savings Plan and does not
instruct the trustee, then the trustee will vote the undersigned's plan account
shares in proportion to the votes of the other participants in that plan. In
addition, the trustee will vote unallocated shares in the plan in direct
proportion to voting by allocated shares for which instructions have been
received. The trustee will act as provided above as long as it is consistent
with applicable law.
If the undersigned is a participant in the Arvin Dividend Reinvestment
Plan, then this card also serves as an instruction to vote the shares held for
your account under the plan in the manner indicated on the reverse of this
proxy. If the undersigned is a participant in the Arvin Dividend Reinvestment
Plan and does not provide instructions, the shares held in the undersigned's
account in the Dividend Reinvestment Plan will not be voted.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED IF MAILED IN U.S.A.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 2
[REVERSE OF PROXY]
ARVIN INDUSTRIES, INC.
-------------------------------------
PLEASE MARK VOTE IN OVAL USING DARK INK ONLY
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2.
This proxy, as properly executed, will be voted in the manner directed herein by
the shareholder(s). If no direction is given, this proxy will be voted "FOR"
Items 1 and 2.
1. Approve and adopt the Agreement and Plan of Reorganization, dated as of
April 6, 2000 (the "merger agreement"), by and among Meritor Automotive,
Inc., a Delaware corporation, ArvinMeritor, Inc., an Indiana corporation
and a wholly-owned subsidiary of Meritor and Arvin, and the mergers
contemplated thereby.
For Withhold Abstain
/__/ /__/ /__/
2. To transact any other business as may properly come before the Arvin
special meeting or any adjournments or postponements thereof.
Dated: ______________, 2000
Signature(s)_____________________________________
The shareholder's signature above should correspond with the name of the
shareholder as it appears here. A proxy executed by a corporation should be
signed in its name by a duly authorized officer. If the proxy is to be signed by
an attorney, executor, administrator, trustee, guardian or in any other
representative capacity, the title of the person signing should be given in
full. When shares are held by joint tenants, both should sign.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE UNLESS YOU VOTE BY TELEPHONE OR INTERNET.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 3
ARVIN INDUSTRIES, INC.
[CONTROL NUMBER]
Arvin Industries, Inc. encourages you to vote your shares electronically either
by telephone or via the Internet. This will eliminate the need to return your
proxy card. You will need your proxy card when voting your shares
electronically. The Control Number that appears in the box above, must be used
in order to vote by telephone or via the Internet.
You can vote by telephone or via the Internet 24-hours a day, seven days a week
[up until the day prior to the meeting.]
To Vote by Telephone:
1. Using a touch-tone phone call Toll-free: [___]
From outside the United States, call direct: [___]
2. Enter the Control Number located above.
3. Follow the recorded instructions.
To Vote by Internet:
1. Log onto the Internet and type: [http://www.__________.com]
2. Enter the information requested on your computer screen, including your
Control Number located above.
3. Follow the voting instructions on the screen.
Note: If you vote over the Internet, you may incur costs such as
telecommunication and Internet access charges for which you will be responsible.
THANK YOU FOR VOTING YOUR SHARES
YOUR VOTE IS IMPORTANT!
Do Not Return this Proxy Card if you are Voting by Telephone or the Internet.
<PAGE> 1
EXHIBIT 99.03
[Warburg Dillon Read LLC Letterhead]
CONSENT OF WARBURG DILLON READ LLC
We hereby consent to the use of our opinion letter dated April 6, 2000
to the Board of Directors of Meritor Automotive, Inc. in the joint proxy
statement-prospectus constituting a part of this Registration Statement on Form
S-4 of ArvinMeritor, Inc., and to the references to our firm in such joint proxy
statement-prospectus. In giving this consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
WARBURG DILLON READ LLC
/s/ Kevin C. Knight /s/ Richard G. Bingman
- ------------------- ----------------------
Kevin C. Knight Richard G. Bingman
New York, New York
May 5, 2000
<PAGE> 1
EXHIBIT 99.04
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated April 6, 2000 to
the Board of Directors of Arvin Industries, Inc. in the joint proxy
statement-prospectus constituting a part of the Registration Statement on Form
S-4 of ArvinMeritor, Inc., and to the references to our firm in such joint proxy
statement-prospectus. In giving this consent, we do not admit and we hereby
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
nor do we thereby admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
/s/ Merrill Lynch, Pierce, Fenner & Smith
Incorporated
----------------------------------------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Chicago, Illinois
May 5, 2000
<PAGE> 1
EXHIBIT 99.05
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Joseph B. Anderson, Jr.
-----------------------------
Name: Joseph B. Anderson, Jr.
May 5, 2000
<PAGE> 2
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Donald R. Beall
----------------------
Name: Donald R. Beall
May 5, 2000
2
<PAGE> 3
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Rhonda L. Brooks
-----------------------
Name: Rhonda L. Brooks
May 5, 2000
3
<PAGE> 4
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ John J. Creedon
----------------------
Name: John J. Creedon
May 5, 2000
4
<PAGE> 5
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Charles H. Harff
-----------------------
Name: Charles H. Harff
May 5, 2000
5
<PAGE> 6
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Victoria B. Jackson
--------------------------
Name: Victoria B. Jackson
May 5, 2000
6
<PAGE> 7
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ James E. Marley
-----------------------
Name: James E. Marley
May 5, 2000
7
<PAGE> 8
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Harold A. Poling
-----------------------
Name: Harold A. Poling
May 5, 2000
8
<PAGE> 9
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Steven C. Beering
------------------------
May 5, 2000
9
<PAGE> 10
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Joseph P. Flannery
-------------------------
May 5, 2000
10
<PAGE> 11
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Robert E. Fowler, Jr.
-----------------------------------
May 5, 2000
11
<PAGE> 12
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ William D. George, Jr.
-----------------------------------
May 3, 2000
12
<PAGE> 13
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Ivan W. Gorr
-------------------
May 3, 2000
13
<PAGE> 14
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Richard W. Hanselman
------------------------------
May 5, 2000
14
<PAGE> 15
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ V. William Hunt
-------------------------
May 5, 2000
15
<PAGE> 16
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Don J. Kacek
----------------------
May 3, 2000
16
<PAGE> 17
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ James E. Perrella
---------------------------
May 3, 2000
17
<PAGE> 18
CONSENT OF PERSON NAMED
TO BECOME A DIRECTOR
I hereby consent to my being named in the Registration Statement on Form
S-4 of ArvinMeritor, Inc. (the "Company") as a person who will become a director
of the Company upon consummation of the transactions contemplated therein.
/s/ Martin D. Walker
-----------------------
Name: Martin D. Walker
May 5, 2000
18
