<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1994
REGISTRATION NO. 33-52565
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
LEAR SEATING CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3714 13-3386776
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
21557 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(810) 746-1500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
JAMES H. VANDENBERGHE
21557 TELEGRAPH ROAD
SOUTHFIELD, MICHIGAN 48034
(810) 746-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
John L. MacCarthy David O. Brownwood
Winston & Strawn Cravath, Swaine & Moore
35 W. Wacker Drive 835 Eighth Avenue
Chicago, Illinois 60601 New York, New York 10019
(312) 558-5600 (212) 474-1000
</TABLE>
------------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after the registration statement becomes effective.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
------------------------------
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 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
LEAR SEATING CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM OF FORM S-1 PROSPECTUS CAPTION OR LOCATION
- ------------------------------------------------ --------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page; Outside Back Cover
Page; Available Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; Certain Considerations;
Selected Financial Data
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page; Prospectus
Summary; Description of Capital Stock
10. Interests of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrants............................... Outside Front Cover Page; Prospectus
Summary; Certain Considerations;
Capitalization; Selected Financial Data; Pro
Forma Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations of the
Company; Business; Management; Principal and
Selling Stockholders; Certain Transactions;
Description of Certain Indebtedness; Index
to Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
EXPLANATORY NOTES
This Registration Statement covers the registration of 10,312,500 shares of
Common Stock, $.01 par value per share (the "Common Stock"), of Lear Seating
Corporation for sale in underwritten initial public offerings (the "Offerings")
in the United States (the "U.S. Offering") and outside of the United States (the
"International Offering"). The complete Prospectus relating to the U.S. Offering
(the "U.S. Offering Prospectus") follows immediately after these Explanatory
Notes. Following the U.S. Offering Prospectus is an alternate front cover page
and alternate back cover page for the U.S. Prospectus to be used in the
International Offering (the "International Prospectus"). Otherwise, the
International Prospectus will be identical to the U.S. Prospectus.
Unless otherwise indicated, all information contained in this Registration
Statement has been adjusted to reflect a 33-for-1 stock split of the Common
Stock to be effected immediately prior to the commencement of the Offerings.
<PAGE> 4
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
Subject to Completion, dated April 1, 1994
PROSPECTUS
9,375,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
Of the 9,375,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 6,250,000 shares are
being offered by the Company and 3,125,000 shares are being offered by a
stockholder of the Company (the "Selling Stockholder"). The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Stockholder. Of the 9,375,000 shares of Common Stock being offered hereby,
7,500,000 shares are being offered initially in the United States by the U.S.
Underwriters (the "U.S. Offering") and 1,875,000 shares are being offered
initially outside the United States by the International Managers (the
"International Offering" and, together with the U.S. Offering, the "Offerings").
The initial public offering price and underwriting discounts and commissions per
share are identical for both Offerings. See "Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $15.00 and $17.00 per share. The Common Stock has been approved for
listing on the New York Stock Exchange under the symbol "LEA".
---------------------------
SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2) SELLING STOCKHOLDER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
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Total(3)....................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Lear and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters, the International Managers and certain other persons against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by Lear estimated at $ .
(3) The Company has granted the U.S. Underwriters and the International Managers
a 30-day option to purchase up to an aggregate of 937,500 additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1994.
---------------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
WERTHEIM SCHRODER & CO.
INCORPORATED
, 1994
<PAGE> 5
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), pursuant to
Section 15(d) thereof, and in accordance therewith files periodic reports and
other information with the Securities and Exchange Commission (the
"Commission"). The registration statement (the "Registration Statement") (which
term encompasses any amendments thereto) and the exhibits thereto filed by the
Company with the Commission, as well as the reports and other information filed
by the Company with the Commission, may be inspected at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and is also available for inspection and
copying at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission the Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement and the exhibits and
schedules thereto, to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement, or other document
referred to are not necessarily complete. With respect to each such contract,
agreement, or other document filed as an exhibit to the Registration Statement,
reference is hereby made to the exhibit for a more complete description of the
matter involved and each such statement shall be deemed qualified in its
entirety by such reference.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent
certified public accountants and with quarterly reports containing unaudited
condensed consolidated financial statements for each of the first three quarters
of each year.
2
<PAGE> 6
LEAR SEATING CORPORATION
______________________________________________________________________________
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______________________________________________________________________________
Lear conducts long-range product design, development and testing at its
technical centers in Southfield, Michigan (shown) and Rietberg, Germany.
____________________________ ________________________________________
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____________________________ ________________________________________
The last nine Motor Trend Lear's Integrated Restraint concept
magazine Cars of the Year seating.
were equipped with Lear
Seating Corporation products.
(PHOTOGRAPHS)
(SEE APPENDIX A)
<PAGE> 7
______________________________________________________________________________
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______________________________________________________________________________
Lear started with the Ford Mustang (Motor Trend The hand-crafted Dodge
Corvette program in 1968 1994 Car of the Year) seats Viper features Lear
and, since 1980, has been are assembled with Lear's seats designed to
providing complete seat SureBond(R) process. complement this
testing and design. innovative automobile.
(PHOTOGRAPHS)
(SEE APPENDIX A)
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere in this
Prospectus. As used in this Prospectus, unless the context otherwise requires,
the "Company" or "Lear" refers to Lear Seating Corporation and its consolidated
subsidiaries after giving effect to the Merger (as defined herein) or, with
respect to periods prior to the 1988 Acquisition (as defined herein), the
companies comprising the business of the Seating Group (as defined herein).
Unless otherwise indicated, all information contained in this Prospectus is
based on the assumption that the Underwriters' over-allotment option is not
exercised and has been adjusted to reflect a 33-for-1 stock split of the Common
Stock of the Company, par value $0.01 per share (the "Common Stock") to be
effected immediately prior to commencement of the Offerings.
THE COMPANY
The Company is the largest independent supplier of automobile and light
truck seat systems in North America and is one of the largest independent
suppliers of such systems and components worldwide. The Company's principal
products include finished automobile and light truck seat systems, automobile
and light truck seat frames, seat covers and other seat components. The
Company's seat systems, which are designed, manufactured and assembled at the
Company's manufacturing facilities, are shipped to customer assembly plants on a
just-in-time ("JIT") basis for installation in vehicles near the end of the
assembly process. This JIT process enables the Company to optimize inventory
turnover and deliver products to its customers on as little as 90 minutes
notice. In the twelve months ended December 31, 1993, approximately 70% of
Lear's net sales were generated from sales in the United States and Canada, with
the balance of sales being primarily in Europe and Mexico. The Company's present
customers include 16 original equipment manufacturers ("OEMs"), the most
significant of which are Ford, General Motors, Chrysler, Volvo, Volkswagen, Saab
and Mazda.
The Company's net sales have grown rapidly from approximately $159.8
million in the fiscal year ended June 30, 1983 to approximately $1.8 billion in
the fiscal year ended June 30, 1993, a ten-year average compound annual growth
rate of approximately 27.1%. The Company has expanded its operations to
facilitate such growth primarily through capital expenditures necessary to
construct or acquire new facilities and to enhance existing facilities. This
growth in sales is attributable primarily to the trend in the automotive
industry to "outsource" more of its requirements for automotive components,
particularly high cost components such as seat systems. Outsourcing has been
increased in response to competitive pressures on OEMs to improve quality and
reduce capital needs and the costs of labor, overhead and inventory. The
outsourced market for automobile and light truck seat systems in North America
is approximately 65% of the total North American seat systems market
(approximately 83% taking into account future seating programs that have been
awarded).
In addition to outsourcing the production of seat systems, OEMs
increasingly are transferring the primary responsibility for design, engineering
and quality control of these products to suppliers, such as Lear, with proven
design, engineering and JIT program management and manufacturing capabilities.
Suppliers that design, engineer, manufacture and conduct quality control testing
are generally referred to as "Tier I" suppliers. The Company believes that early
involvement in the design and engineering of new seating products as a Tier I
supplier affords the Company a competitive advantage in securing new business
and provides its customers with significant cost reduction opportunities through
the coordination of the design, development and manufacturing processes.
The Company has enhanced its design and engineering capabilities by
building two technical centers and making other investments to upgrade its
capabilities. The Company is continuing this process of investing to
substantially improve all aspects of its safety and functional testing and
comfort assessment capabilities. An example of the Company's design and
engineering capabilities is the development of the Company's patented SureBond
process, which bonds seat covers to foam pads, minimizing the need for sewing.
"See Business -- Manufacturing." The Company believes its enhanced design and
engineering capabilities have contributed to
3
<PAGE> 9
the increase in the Company's North American Content per Vehicle (as defined
herein) from $12 to $98 between the fiscal years ended June 30, 1983 and 1993.
As a result of the Company's demonstrated capabilities as a full-service
Tier I supplier, it has captured more than one-third of the outsourced market
for automobile and light truck seat systems and seat components in North America
and has become a leading supplier to this market in Europe. The Company's
reputation with OEMs for timely delivery, customer service and quality products
at competitive prices has resulted in many of the Company's facilities winning
recognition awards from its customers.
The Company's continued expansion as a Tier I supplier has resulted in new
business which recently has begun or will begin production over the next
eighteen months. Such business includes new passenger car and light truck
programs for the Dodge Ram Pick-up Truck, the Ford Mustang, the Ford Windstar
Minivan, the BMW 3 Series and all Jaguar models, as well as the GM Opel Omega,
the Chevrolet Cavalier and the Oldsmobile Aurora. In addition, in December 1993,
the Company was awarded the seat system assembly responsibility for the Ford
Taurus/Mercury Sable vehicle lines for seat systems scheduled to begin
production in 1995. Ford Taurus has been the best selling car line in the United
States for the past two years. As a result of this new business, the Company
expects to construct several new seat facilities, which typically involve an
upfront cost of between $6.0 million and $9.0 million per facility for owned
facilities and between $1.0 million and $6.0 million per facility for leased
facilities. See "Business -- General."
On November 1, 1993, the Company significantly expanded its operations in
North America by purchasing certain portions of Ford's North American seat cover
and seat systems business (the "NAB") for $173.4 million in cash (after giving
effect to an adjustment in the purchase price for changes in NAB working
capital) and approximately $10.5 million in notes payable to Ford or its
affiliates (the "NAB Acquisition"). The NAB consists of an integrated United
States and Mexican operation which produces seat covers for approximately 80% of
Ford's North American vehicle production and manufactures seat systems for
Ford's Crown Victoria and Grand Marquis vehicles. For the twelve months ended
December 31, 1993, and after giving effect to the pro forma adjustments related
to the NAB Acquisition, gross sales, EBITDA (as defined herein) and operating
income of the NAB were approximately $572.7 million, $49.0 million and $37.9
million, respectively.
In connection with the NAB Acquisition, the Company entered into a
five-year supply agreement with Ford covering models for which the NAB produces
seat covers and seat systems, establishing the Company as Ford's leading seat
systems supplier. In addition, the Company believes that, as a result of the NAB
Acquisition, its relationship with Ford will be enhanced, enabling Lear to be
more involved in the planning and design of seat systems and related products
for future vehicle models.
Lear believes that the same competitive pressures that contributed to the
rapid expansion of its business in North America will require auto makers in
Europe to outsource more of their seating requirements. The outsourced market
for automobile and light truck seat systems in Europe is approximately 41% of
the total European seat systems market. Over the past four years, the Company
has aggressively pursued expansion in Europe both with its existing and new
customers. As a result of its efforts, the Company has been awarded significant
business in Sweden, Germany, Austria and England from General Motors-Adam Opel,
Saab, Volvo, Chrysler, Volkswagen and Jaguar. Consequently, the Company's net
sales in Europe have grown from approximately $145.5 million in the fiscal year
ended June 30, 1991 to approximately $432.5 million in the fiscal year ended
June 30, 1993.
The Company also has positioned itself as the leading supplier of seat
systems and seat components in Mexico through its ownership of Central de
Industrias S.A. de C.V. ("CISA"), the largest independent automotive seat
systems manufacturer in Mexico serving Mexican domestic producers. As a result
of its presence in Mexico, the Company believes that it will benefit from the
growing activity of United States-based and German-based OEMs in Mexico. The
Company also believes that it will benefit from the additional business
opportunities resulting from the passage of the North American Free Trade
Agreement ("NAFTA").
4
<PAGE> 10
On December 31, 1993, Lear Holdings Corporation ("Holdings"), the parent of
the Company, merged with and into the Company (the "Merger"), and the separate
corporate existence of Holdings ceased on that date. In connection with the
Offerings, the Company's Certificate of Incorporation will be amended and
restated (as so amended and restated, the "Restated Certificate of
Incorporation") to, among other things, increase the number of authorized shares
of Common Stock to 150,000,000 shares and to authorize 15,000,000 shares of
Preferred Stock, par value $0.01 per share (the "Preferred Stock"). See
"Description of Capital Stock." Unless the context otherwise indicates, all
information contained herein is presented (i) as if the Merger had occurred as
of the date or as of the beginning of the period indicated and (ii) after giving
effect to the adoption of the Restated Certificate of Incorporation.
In February 1994, the Company also changed its fiscal year end from June 30
to December 31, effective December 31, 1993.
The Company is the successor to a seat frame manufacturing business founded
in 1917 that served as a supplier to General Motors and Ford from its inception.
Holdings was organized in August 1988 to effect the leveraged acquisition (the
"1988 Acquisition") of all of the outstanding common stock of Lear Seating
Corporation (formerly known as Lear Siegler Seating Corp.) and certain other
subsidiaries of Lear Siegler Holdings Corp. comprising its seating group (the
companies acquired being collectively referred to herein as the "Seating
Group"). IFINT S.A. ("IFINT"), through its wholly-owned subsidiary, FIMA Finance
Management Inc. ("FIMA"), which is the Selling Stockholder, first invested in
the Company in the 1988 Acquisition. IFINT is the international investment
holding company of IFI S.p.A. ("IFI"), the parent company of the Agnelli Group.
The Lehman Funds (as defined herein), which first invested in the Company in
1991, will continue to own a majority of the outstanding Common Stock upon
consummation of the Offerings and are not selling any shares of Common Stock in
the Offerings.
The Company's principal executive offices are located at 21557 Telegraph
Road, Southfield, Michigan 48034. Its telephone number at that location is (810)
746-1500. The Company was incorporated in Delaware on January 13, 1987.
5
<PAGE> 11
THE OFFERINGS
Common Stock offered by:
The Company................. 6,250,000 shares
FIMA (the "Selling
Stockholder")............. 3,125,000 shares
Total Common Stock
offered.................. 9,375,000 shares
Common Stock offered for sale in:
U.S. Offering............... 7,500,000 shares
International Offering...... 1,875,000 shares
Common Stock to be outstanding
after the Offerings........... 45,072,784 shares(1)
Use of Proceeds............... The net proceeds to the Company from the
Offerings will be used to repay a portion of
the indebtedness outstanding under the Credit
Agreement (as defined in "Description of
Certain Indebtedness") incurred to finance the
NAB Acquisition. The Company will not receive
any proceeds from the sale of Common Stock by
the Selling Stockholder.
NYSE Symbol................... LEA
- -------------------------
(1) Assumes the issuance of 3,300,000 shares issuable upon the exercise of
warrants (the "Warrants") issued in connection with the 1988 Acquisition.
The Warrants currently are exercisable without the payment of any
consideration. Excludes 3,994,815 shares of Common Stock issuable upon
exercise of options (the "Options") granted pursuant to the 1988 Stock
Option Plan (as defined herein) and the 1992 Stock Option Plan (as defined
herein) and outstanding as of January 31, 1994. Also excludes 498,750
shares issuable upon exercise of Options to be granted prior to the
consummation of the Offerings pursuant to the 1994 Stock Option Plan (as
defined herein). See "Management."
CERTAIN CONSIDERATIONS
Investment in the Company's Common Stock involves certain risks discussed
under "Certain Considerations" that should be considered by prospective
purchasers.
6
<PAGE> 12
SUMMARY FINANCIAL DATA
The following summary financial and certain other data presented below were
derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company for the nine months ended June
30, 1989, for each of the fiscal years ended June 30, 1990, 1991, 1992 and 1993
and for the twelve and six months ended December 31, 1993 have been audited by
Arthur Andersen & Co. The consolidated financial statements of the Company for
the six months ended January 2, 1993 are unaudited; however, in the Company's
opinion, such financial statements reflect all adjustments, consisting only of
normal recurring items, necessary for a fair presentation of the financial
position and results of operations of the Company for such period. The summary
financial data below should be read in conjunction with the consolidated
financial statements of the Company and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company."
<TABLE>
<CAPTION>
NINE TWELVE SIX SIX
MONTHS YEAR YEAR YEAR YEAR MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, JANUARY 2, DECEMBER 31,
1989 1990 1991 1992 1993 1993(1) 1993 1993(1)
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS(2))
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............ $807,365 $1,067,878 $1,085,319 $1,422,740 $1,756,510 $1,950,288 $811,440 $1,005,218
Gross profit......... 81,632 104,707 101,429 115,641 152,499 170,215 54,519 72,235
Selling, general and
administrative
expenses........... 18,477 28,247 41,596 50,074 61,898 62,717 26,847 27,666
Incentive stock and
other compensation
expense(3)......... 1,107 1,353 1,353 (12) -- 18,016 -- 18,016
Amortization......... 10,174 13,838 13,810 8,746 9,548 9,929 4,374 4,755
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
Operating income..... 51,874 61,269 44,670 56,833 81,053 79,553 23,298 21,798
Interest expense..... 50,982 61,184 61,676 55,158 47,832 45,656 26,943 24,767
Other expense,
net(4)............. 2,141 4,044 2,144 5,837 5,260 9,180 2,676 6,596
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
Income (loss) before
taxes on income and
extraordinary
items.............. (1,249) (3,959) (19,150) (4,162) 27,961 24,717 (6,321) (9,565)
Income taxes......... 7,409 16,630 14,019 12,968 17,847 26,864 4,450 13,467
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
Income (loss) before
extraordinary
items.............. (8,658) (20,589) (33,169) (17,130) 10,114 (2,147) (10,771) (23,032)
Extraordinary
items(5)........... -- -- -- (5,100) -- (11,684) -- (11,684)
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
Net income (loss).... $ (8,658) $ (20,589) $ (33,169) $ (22,230) $ 10,114 $ (13,831) $(10,771) $ (34,716)
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
-------- ---------- ---------- ---------- ---------- ------------ ---------- ------------
BALANCE SHEET DATA:
Current assets....... $200,002 $ 223,212 $ 213,806 $ 282,864 $ 325,199 $ 433,584 $308,464
Total assets......... 734,582 747,583 729,670 799,884 820,209 1,114,291 809,859
Current
liabilities........ 201,117 254,514 287,111 344,169 374,950 505,717 367,782
Long-term debt....... 433,336 402,800 386,655 348,331 321,116 498,324 331,930
Common stock subject
to limited
redemption rights,
net................ 1,770 1,795 1,770 3,465 3,885 12,435 3,885
Stockholders'
equity............. 48,876 35,292 4,335 49,317 75,101 43,210 53,506
OTHER DATA:
EBITDA(6)............ $ 74,826 $ 94,252 $ 81,428 $ 91,807 $ 121,707 $ 122,112 $ 43,259 $ 43,664
Capital
expenditures....... $ 11,353 $ 14,906 $ 20,892 $ 27,926 $ 31,595 $ 45,915 $ 14,669 $ 28,989
Number of
facilities(7)...... 30 33 40 45 48 61 45 61
North American
Content per
Vehicle(8)......... $ 67 $ 77 $ 84 $ 94 $ 98 $ 112 $ 100 $ 133
North American
vehicle production
(in millions)(9)... 10.8 12.4 11.2 12.2 13.6 13.7 5.9 6.1
Inventory Turnover
Ratio(10).......... 27.4 25.6 30.3 36.7 36.0
</TABLE>
- -------------------------
(1) On July 1, 1993, the Company adopted SFAS 106 (as defined herein). As a
result, the twelve months and six months ended December 31, 1993 represent
the first periods during which the Company began to incur additional
expense associated with the adoption of SFAS 106. The additional expense
for each of these periods was $3,273.
(2) Except North American Content per Vehicle.
(3) Includes a one-time charge of $18,016, of which $14,474 is non-cash, for
the twelve and six months ended December 31, 1993 for incentive stock and
other compensation expense (see Note 14, "Warrants, Stock Options and
Common Stock Subject to Redemption" in the consolidated financial
statements included elsewhere in this Prospectus).
(4) Consists of foreign currency exchange gain or loss, minority interest in
net income of subsidiaries, equity (income) loss of affiliates, state and
local taxes and other expense.
(5) The extraordinary items result from the prepayment of debt.
(6) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles.
(7) Includes facilities operated by the Company's less than majority-owned
affiliates and facilities under construction.
(8) "North American Content per Vehicle" is the Company's net sales in North
America divided by total North American vehicle production.
(9) "North American vehicle production" includes car and light truck production
in the United States, Canada and Mexico estimated from industry sources.
(10) "Inventory Turnover Ratio" is cost of goods sold divided by average
inventory. The Inventory Turnover Ratio for the twelve months ended
December 31, 1993 excludes the NAB, which was acquired by the Company on
November 1, 1993.
7
<PAGE> 13
SUMMARY PRO FORMA FINANCIAL DATA
The following unaudited summary pro forma financial and other data were
derived from and should be read in conjunction with the pro forma financial data
included elsewhere in this Prospectus. The following summary pro forma financial
data give effect to (i) the NAB Acquisition and the related incurrence of debt
to finance such acquisition, (ii) the incurrence of indebtedness under the
Credit Agreement to retire the GECC Mortgage Loan (as defined in "Certain
Transactions") and to refinance the term loans outstanding under the Company's
Original Credit Agreement (as defined in "Certain Transactions"), (iii) the
offering (the "1994 Note Offering") of the Company's 8 1/4% Subordinated Notes
due 2002 (the "8 1/4% Subordinated Notes") and the application of the net
proceeds therefrom to redeem the Company's 14% Subordinated Debentures due 2000
(the "14% Subordinated Debentures"), (iv) the Offerings of Common Stock and the
application of the net proceeds to the Company therefrom to repay indebtedness
outstanding under the Credit Agreement and (v) the elimination of a one-time
charge for incentive stock and other compensation expense (collectively, the
"Pro Forma Transactions") as if such transactions had occurred at the beginning
of the periods presented below. The following summary pro forma financial data
do not purport to represent (i) the actual historical results of operations or
financial condition of the Company, (ii) the actual results of operations or
financial condition of the Company had the Pro Forma Transactions occurred at
the beginning of the periods presented below or (iii) the results to be expected
in the future.
<TABLE>
<CAPTION>
YEAR ENDED TWELVE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993(1)
------------- ------------------- --------------------
(DOLLARS IN THOUSANDS(2))
<S> <C> <C> <C>
OPERATING DATA:
Net sales................................. $ 2,235,150 $ 2,361,422 $1,159,482
Gross profit.............................. 212,399 218,945 90,377
Selling, general and administrative
expenses............................... 80,607 79,574 33,579
Amortization.............................. 12,030 11,999 5,583
------------- ------------------- --------------------
Operating income.......................... 119,762 127,372 51,215
Interest expense, net..................... 46,512 43,169 23,147
Other expense, net(3)..................... 7,111 11,302 7,475
------------- ------------------- --------------------
Income before taxes on income............. 66,139 72,901 20,593
Income taxes.............................. 31,435 37,785 17,863
------------- ------------------- --------------------
Net income................................ $ 34,704 $ 35,116 $ 2,730
------------- ------------------- --------------------
------------- ------------------- --------------------
OTHER DATA:
EBITDA(4)................................. $ 171,677 $ 179,317 $ 76,836
Net income per share...................... $ 0.75 $ 0.74 $ 0.06
Weighted average shares outstanding(5).... 46,299,064 47,212,436 47,524,141
North American Content per Vehicle(6)..... $ 133 $ 142 $ 158
</TABLE>
- -------------------------
(1) The Company's business is seasonal in nature and the Company's results of
operations have historically been weakest in the third calendar quarter.
See Note 16, "Quarterly Financial Data," in the consolidated financial
statements included elsewhere in this Prospectus.
(2) Except per share data and North American Content per Vehicle.
(3) Consists of foreign currency exchange gain or loss, minority interest in net
income of subsidiaries, equity (income) loss of affiliates, state and local
taxes and other expense.
(4) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles.
(5) Includes (i) shares to be issued in the Offerings, (ii) shares issuable upon
exercise of the Warrants and (iii) the number of shares issuable upon
exercise of options, reduced by the number of shares which could have been
purchased with the proceeds from the exercise of such options.
(6) "North American Content per Vehicle" is the Company's net sales in North
America divided by total North American vehicle production. "North American
vehicle production" includes car and light truck production in the United
States, Canada and Mexico estimated from industry sources.
8
<PAGE> 14
CERTAIN CONSIDERATIONS
A prospective investor should consider carefully all of the information
contained in this Prospectus before deciding whether to purchase shares of
Common Stock offered hereby and, in particular, should consider the following:
CYCLICAL NATURE OF AUTOMOTIVE INDUSTRY
The Company's principal operations are related directly to domestic and
foreign automotive vehicle production. Automotive vehicle sales and production
are cyclical and can be affected by the strength of a country's general economy
and by other factors which may have an effect on the level of the Company's
sales to automobile and light truck manufacturers.
RELIANCE ON MAJOR CUSTOMERS AND SELECTED MODELS
Two of Lear's customers, General Motors and Ford, accounted for
approximately 45% and 28%, respectively, of the Company's net sales in the
twelve months ended December 31, 1993. The Company's net sales to General Motors
and Ford in the twelve months ended December 31, 1993 as a percentage of its
total net sales, after giving pro forma effect to the NAB Acquisition as if it
had occurred at the beginning of such period, were approximately equal. Although
the Company has long-term purchase orders from many of its customers, such
purchase orders generally provide for supplying the customer's annual
requirements for a particular model or assembly plant, renewable on a
year-to-year basis, rather than for manufacturing a specific quantity of
products. In addition, certain of the Company's manufacturing and assembly
plants are dedicated to a single customer vehicle assembly plant. A customer's
decision to close any such plant would require the Company to obtain alternate
supply agreements, relocate existing business to such facility or close such
facility. To date, neither model discontinuances nor plant closings have had a
material adverse effect on the Company because of the breadth of the vehicle
lines incorporating the Company's products and the ability of the Company to
relocate its manufacturing operations with minimal capital expenditures. There
can be no assurances that the Company's loss of business with respect to either
a particular vehicle model or a particular assembly plant would not have a
material adverse effect on the Company's financial condition in the future. See
"Business -- Customers."
There is substantial and continuing pressure from the major OEMs to reduce
costs, including costs associated with outside suppliers such as the Company.
Management believes that the Company's ability to develop new products and to
control its own costs, many of which are variable, will allow the Company to
remain competitive. However, there can be no assurance that the Company will be
able to improve or maintain its gross margins.
NET LOSSES
The Company has experienced net losses during two of its last three
completed fiscal years ended June 30, principally as a result of the significant
interest charges on the debt incurred in connection with the 1988 Acquisition.
The Company experienced net losses of $33.2 million and $22.2 million for the
fiscal years ended June 30, 1991 and 1992, respectively, net income of $10.1
million for the fiscal year ended June 30, 1993 and a net loss of $34.7 million
for the six months ended December 31, 1993. The Company had significant non-cash
charges to income during these periods, including (i) charges for depreciation
and amortization of goodwill of $36.8 million, $35.0 million, $40.7 million and
$21.9 million, (ii) write-offs and amortization of deferred financing fees of
$4.1 million, $5.7 million, $3.0 million and $6.0 million, in each case for the
fiscal years ended June 30, 1991, 1992, 1993 and for the six months ended
December 31, 1993, respectively and (iii) a one-time charge for incentive stock
and other compensation of $14.5 million for the six months ended December 31,
1993. See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Company" and the Company's
Statements of Cash Flows included elsewhere in this Prospectus.
9
<PAGE> 15
LEVERAGE
A significant portion of the funds needed to finance the 1988 Acquisition
and the NAB Acquisition were raised through borrowings. As a result, the Company
has debt that is substantial in relation to its stockholders' equity, and a
significant portion of the Company's cash flow from operations is and will be
required for debt service. As of December 31, 1993, after giving effect to the
1994 Note Offering, the Offerings and the application of the proceeds therefrom,
the Company would have had total long-term debt of $419.2 million and
stockholders' equity of $148.6 million, resulting in a total capitalization of
$567.8 million. See "Capitalization" and "Selected Financial Data."
CONTROL BY LEHMAN BROTHERS HOLDINGS INC.
Certain merchant banking partnerships affiliated with Lehman Brothers
Holdings Inc. (the "Lehman Funds") own an aggregate of approximately 66.9% of
Lear's Common Stock and upon the closing of the Offerings will own an aggregate
of approximately 57.6% of Lear's Common Stock (in each case assuming all
outstanding Warrants are exercised and no outstanding Options are exercised). As
a result of the stock ownership by the Lehman Funds and related arrangements,
the Lehman Funds can effectively control the affairs and policies of the
Company. The Lehman Funds are not selling any shares of Common Stock in the
Offerings. See "Certain Transactions."
SUBSTANTIAL DILUTION
Persons purchasing shares of Common Stock at the public offering price will
incur immediate dilution in net tangible book value per share of Common Stock
(the difference between the assumed per share initial public offering price of
the Common Stock of $16.00 and the deficit in net tangible book value per share
of Common Stock as of December 31, 1993, after giving pro forma effect to the
Offerings) of approximately $22.09 per share assuming all outstanding Warrants
and no outstanding Options are exercised, and a dilution of approximately $21.34
per share assuming all outstanding Warrants and Options are exercised. For
purposes of these calculations, the net tangible book value per share includes
amounts classified as Common Stock Subject to Redemption in the Company's
December 31, 1993 consolidated balance sheet included elsewhere in this
Prospectus.
RESTRICTIONS ON DIVIDENDS
The Company's ability to pay dividends to holders of Common Stock are
limited under the terms of the Credit Agreement and of the indentures governing
its 11 1/4% Senior Subordinated Notes due 2000 (the "Senior Subordinated Notes")
and its 8 1/4% Subordinated Notes (the "Indentures"). The Company does not
intend to pay any cash dividends in the foreseeable future. See "Dividend
Policy."
ANTI-TAKEOVER PROVISIONS
After the closing of the Offerings, certain provisions of the Company's
Restated Certificate of Incorporation and by-laws, as well as provisions of the
Delaware General Corporation Law, may have the effect of delaying, deterring or
preventing transactions involving a change of control of the Company, including
transactions in which stockholders might otherwise receive a substantial premium
for their shares over then current market prices, and may limit the ability of
stockholders to approve transactions that they may deem to be in their best
interests. For example, under the Restated Certificate of Incorporation, the
Board of Directors is authorized to issue one or more classes of preferred stock
having such designations, rights and preferences as may be determined by the
Board of Directors. In addition, the Board of Directors will be divided into
three classes, each having a term of three years, with the term of one class
expiring each year. A director may be removed from office only for cause. These
provisions could delay the replacement of a majority of the Board of Directors
and have the effect of making changes in the Board of Directors more difficult
than if such provisions were not in place. Further, Section 203 of the Delaware
General Corporation Law restricts certain business combinations with any
"interested stockholder" as defined in such law. The current stockholders of the
Company are not, by virtue of their current holdings, deemed to be "interested
stockholders" under this statute. This statute also may delay, deter or prevent
a change of control of the Company. See "Description of
10
<PAGE> 16
Capital Stock" for additional information regarding these and certain other
anti-takeover provisions adopted by the Company.
NO PRIOR MARKET FOR COMMON STOCK
Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active public market will develop
or be sustained after the Offerings. The initial public offering price was
determined by negotiations between the Company and the representatives of the
Underwriters. The market price of the Common Stock may be highly volatile
depending upon a number of factors. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Common Stock in the public
market following the Offerings could adversely affect the market price for the
Common Stock. There will be 45,072,784 shares of Common Stock outstanding
immediately following the Offerings assuming no exercise of the Underwriters'
over-allotment options. After the Offerings, 32,521,864 shares of Common Stock
will be restricted securities under the Securities Act of 1933, as amended (the
"Securities Act") and may only be sold pursuant to a registration statement
under the Securities Act or an applicable exemption from the registration
requirements of the Securities Act, including Rule 144 and Rule 144A. The
holders of such restricted shares will have certain registration rights with
respect to all such shares of Common Stock. However, these holders have agreed
not to sell or otherwise dispose of such shares for 180 days after the date of
this Prospectus without the prior consent of the representatives of the
Underwriters. See "Description of Capital Stock -- Shares Eligible for Future
Sale" and "-- Stockholders and Registration Rights Agreement."
USE OF PROCEEDS
All of the net proceeds to the Company from the Offerings, estimated to be
$93.0 million, will be used to repay a portion of the indebtedness outstanding
under the Credit Agreement incurred to finance the NAB Acquisition, bearing a
rate of interest as of March 1, 1994 of approximately 5%. See "Description of
Certain Indebtedness -- Credit Agreement." The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholder.
DIVIDEND POLICY
To date, the Company has paid no cash dividends on its Common Stock. The
Company currently intends to retain all future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future. The Credit Agreement and
the Indentures governing the Senior Subordinated Notes and the 8 1/4%
Subordinated Notes limit the Company's ability to pay dividends on its Common
Stock. Upon the consummation of the Offerings, the Credit Agreement will contain
the most restrictive limitation on dividends, allowing a maximum of $2.5 million
of dividends on Common Stock in the aggregate per quarter. See "Description of
Certain Indebtedness."
11
<PAGE> 17
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the capitalization of the Company at
December 31, 1993, and after giving effect to the 1994 Note Offering, the
Offerings and the application of the proceeds therefrom. See "Use of Proceeds"
and "Pro Forma Financial Data."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1993
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Short-term debt:
Short-term notes payable..................................... $ 48,155 $ 28,240(1)
Current maturities of term loans............................. 1,168 1,168
-------- -----------
Total short-term debt................................... $ 49,323 $ 29,408
-------- -----------
-------- -----------
Long-term debt, less current portion:
Term loans................................................... $ 6,424 $ 6,424
Revolving credit loans....................................... 230,700 141,553(2)
Long-term notes payable...................................... 1,200 1,200
11 1/4% senior subordinated notes due 2000................... 125,000 125,000
8 1/4% subordinated notes due 2002........................... -- 145,000(3)
14% subordinated debentures due 2000......................... 135,000 --(4)
-------- -----------
Total long-term debt, less current portion.............. 498,324 419,177
-------- -----------
Common stock subject to redemption, par value $0.01 per share;
990,033 shares issued and outstanding, net of notes
receivable from the sale of common stock..................... 12,435 --(5)
-------- -----------
Stockholders' equity:
Preferred Stock, par value $0.01 per share; 15,000,000 shares
authorized, no shares issued.............................. -- --
Common stock, par value $0.01 per share; 150,000,000 shares
authorized, issued shares of 37,809,981 actual and
45,050,014 shares after giving effect to the Offerings.... 378 451(5)
Additional paid-in capital................................... 156,551 262,978(5)
Notes receivable from sale of common stock................... -- (1,065)(5)
Warrants exercisable for common stock........................ 10,000 10,000
Treasury stock, 3,300,000 shares of common stock............. (10,000) (10,000)
Retained deficit............................................. (109,248) (109,248)
Minimum pension liability adjustment......................... (4,164) (4,164)
Cumulative translation adjustment............................ (307) (307)
-------- -----------
Total stockholders' equity.............................. 43,210 148,645
-------- -----------
Total capitalization............................... $553,969 $ 567,822
-------- -----------
-------- -----------
</TABLE>
- -------------------------
(1) Reflects the exercise of the put option related to the El Jarudo and Omega
facilities. See "Business -- Facilities."
(2) Reflects the application of the net proceeds of the Offerings to repay
indebtedness under the Credit Agreement and borrowings under the Credit
Agreement to pay a portion of the accrued and unpaid interest on the 14%
Subordinated Debentures and the fees and expenses related to the redemption
thereof. The amount reflected above does not include $21,846 in outstanding
unfunded letters of credit and $15,000 in outstanding letters of credit
backing a note payable included under short-term notes payable above.
(3) Reflects the issuance of $145,000 in aggregate principal amount of the
8 1/4% Subordinated Notes.
(4) Reflects the redemption of $135,000 in aggregate principal amount of the 14%
Subordinated Debentures.
(5) Reflects the amendment to the Stockholders and Registration Rights
Agreement, to be effected prior to the closing of the Offerings, that
eliminates certain management stockholders' limited redemption rights. See
"Certain Transactions -- Stockholders and Registration Rights Agreement."
12
<PAGE> 18
PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statements of operations
(the "Pro Forma Statements") of the Company were prepared to illustrate the
estimated effects of (i) the NAB Acquisition and the related incurrence of debt
to finance such acquisition, (ii) the incurrence of indebtedness under the
Credit Agreement to retire the GECC Mortgage Loan and to refinance the term
loans outstanding under the Company's Original Credit Agreement, (iii) the 1994
Note Offering and the application of the net proceeds therefrom to redeem the
14% Subordinated Debentures, (iv) the Offerings of Common Stock and the
application of the net proceeds to the Company therefrom to repay indebtedness
outstanding under the Credit Agreement and (v) the elimination of a one-time
charge for incentive stock and other compensation expense (collectively, the
"Pro Forma Transactions"), as if the Pro Forma Transactions had occurred as of
the beginning of each period presented.
The Pro Forma Statements do not purport to represent what the Company's
results of operations would actually have been if such transactions in fact had
occurred at the beginning of the periods indicated or to project the Company's
results of operations for any future period.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable. The Pro Forma
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Company and the NAB, including the notes
thereto, and other financial information pertaining to the Company and the NAB,
including "Capitalization" and related notes thereto included elsewhere in the
Prospectus.
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1993
---------------------------------------------------------------------------------------------------
EXCLUDED CONSOLIDATION
COMPANY NAB NAB OPERATIONS NAB AND FINANCING
HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $1,950,288 $ 585,160 $ (46,667) $(61,995) $476,498 $ (65,364)(4) $2,361,422
Cost of sales.......... 1,780,073 437,116 (26,133) 16,785 427,768 (65,364)(4) 2,142,477
---------- ------------- ----------- -------------- -------- ------------- ----------
Gross profit........... 170,215 148,044 (20,534) (78,780) 48,730 -- 218,945
Selling, general
and administrative
expenses............. 62,717 10,473 -- 6,384 16,857 -- 79,574
Incentive stock and
other compensation
expense.............. 18,016 -- -- -- -- (18,016)(5) --
Amortization........... 9,929 -- -- 2,070 2,070 -- 11,999
---------- ------------- ----------- -------------- -------- ------------- ----------
Operating income....... 79,553 137,571 (20,534) (87,234) 29,803 18,016 127,372
Interest expense....... 45,656 2,251 -- -- 2,251 (4,738)(6) 43,169
Other expense.......... 9,180 2,122 -- -- 2,122 -- 11,302
---------- ------------- ----------- -------------- -------- ------------- ----------
Income before provision
for income taxes and
extraordinary
items................ 24,717 133,198 (20,534) (87,234) 25,430 22,754 72,901
Provision for
income taxes......... 26,864 48,218 (7,433) (31,579) 9,206 1,715 37,785
---------- ------------- ----------- -------------- -------- ------------- ----------
Income (loss) before
extraordinary
items................ (2,147) 84,980 (13,101) (55,655) 16,224 21,039 35,116
Extraordinary loss on
early extinguishment
of debt.............. 11,684 -- -- -- -- (11,684)(7) --
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)...... $ (13,831) $ 84,980 $ (13,101) $(55,655) $ 16,224 $ 32,723 $ 35,116
---------- ------------- ----------- -------------- -------- ------------- ----------
---------- ------------- ----------- -------------- -------- ------------- ----------
EBITDA(8).............. $ 122,112 $ 145,760 $ (20,534) $(86,037) $ 39,189 $ 18,016 $ 179,317
</TABLE>
13
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1993
---------------------------------------------------------------------------------------------------
EXCLUDED CONSOLIDATION
COMPANY NAB NAB OPERATIONS NAB AND FINANCING
HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $1,756,510 $ 701,901 $ (56,000) $ (98,798) $547,103 $ (68,463)(4) $2,235,150
Cost of sales.......... 1,604,011 498,648 (31,360) 19,915 487,203 (68,463)(4) 2,022,751
---------- ------------- ----------- -------------- -------- ------------- ----------
Gross Profit........... 152,499 203,253 (24,640) (118,713) 59,900 -- 212,399
Selling, general and
administrative
expenses............. 61,898 11,048 -- 7,661 18,709 -- 80,607
Amortization........... 9,548 -- -- 2,482 2,482 -- 12,030
---------- ------------- ----------- -------------- -------- ------------- ----------
Operating income....... 81,053 192,205 (24,640) (128,856) 38,709 -- 119,762
---------- ------------- ----------- -------------- -------- ------------- ----------
Interest expense....... 47,832 2,964 -- -- 2,964 (4,284)(6) 46,512
Other expense.......... 5,260 1,851 -- -- 1,851 -- 7,111
---------- ------------- ----------- -------------- -------- ------------- ----------
Income before provision
for income taxes..... 27,961 187,390 (24,640) (128,856) 33,894 4,284 66,139
Provision for income
taxes................ 17,847 66,359 (8,673) (45,615) 12,071 1,517 31,435
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)...... $ 10,114 $ 121,031 $ (15,967) $ (83,241) $ 21,823 $ 2,767 $ 34,704
---------- ------------- ----------- -------------- -------- ------------- ----------
---------- ------------- ----------- -------------- -------- ------------- ----------
EBITDA(8).............. $ 121,707 $ 202,259 $ (24,640) $ (127,649) $ 49,970 $ -- $ 171,677
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1993
---------------------------------------------------------------------------------------------------
EXCLUDED CONSOLIDATION
COMPANY NAB NAB OPERATIONS NAB AND FINANCING
HISTORICAL HISTORICAL(1) BUSINESS(2) ADJUSTMENTS(3) ADJUSTED ADJUSTMENTS PRO FORMA
---------- ------------- ----------- -------------- -------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $1,005,218 $ 226,118 $ (18,667) $(22,055) $185,396 $ (31,132)(4) $1,159,482
Cost of sales.......... 932,983 171,670 (10,453) 6,037 167,254 (31,132)(4) 1,069,105
---------- ------------- ----------- -------------- -------- ------------- ----------
Gross profit........... 72,235 54,448 (8,214) (28,092) 18,142 -- 90,377
Selling, general and
administrative
expenses............. 27,666 4,189 -- 1,724 5,913 -- 33,579
Incentive stock and
other compensation
expense.............. 18,016 -- -- -- -- (18,016)(5) --
Amortization........... 4,755 -- -- 828 828 -- 5,583
---------- ------------- ----------- -------------- -------- ------------- ----------
Operating income....... 21,798 50,259 (8,214) (30,644) 11,401 18,016 51,215
Interest expense....... 24,767 900 -- -- 900 (2,520)(6) 23,147
Other expense.......... 6,596 879 -- -- 879 -- 7,475
---------- ------------- ----------- -------------- -------- ------------- ----------
Income before provision
for income taxes and
extraordinary
items................ (9,565) 48,480 (8,214) (30,644) 9,622 20,536 20,593
Provision for income
taxes................ 13,467 17,550 (2,973) (11,093) 3,484 912 17,863
---------- ------------- ----------- -------------- -------- ------------- ----------
Income (loss) before
extraordinary
items................ (23,032) 30,930 (5,241) (19,551) 6,138 19,624 2,730
Extraordinary loss on
early extinguishment
of debt.............. 11,684 -- -- -- -- (11,684)(7) --
---------- ------------- ----------- -------------- -------- ------------- ----------
Net income (loss)...... $ (34,716) $ 30,930 $ (5,241) $(19,551) $ 6,138 $ 31,308 $ 2,730
---------- ------------- ----------- -------------- -------- ------------- ----------
---------- ------------- ----------- -------------- -------- ------------- ----------
EBITDA(8).............. $ 43,664 $ 53,535 $ (8,214) $(30,165) $ 15,156 $ 18,016 $ 76,836
</TABLE>
14
<PAGE> 20
- -------------------------
(1) The NAB historical information represents amounts derived from the unaudited
financial statements of the NAB, including an allocation of period-end
adjustments. No information is included for periods after November 1, 1993
because the Company acquired the NAB on that date.
(2) Reflects elimination of the approximate net sales and cost of sales for
periods prior to November 1, 1993 associated with a non-seating product line
of the NAB that the NAB will continue to produce until its anticipated
phase-out in the third quarter of calendar year 1994.
(3) Operations adjustments consist of pro forma adjustments to the historical
revenues and expenses of the NAB to reflect (i) the Company's estimates of
the impact of product pricing reductions negotiated as part of the NAB
Acquisition, (ii) estimated actual expenses associated with ongoing
engineering activities in support of Ford seating programs and the
reallocation of the NAB engineering expenses among financial statement
categories for consistency with the financial statements of the Company,
(iii) incremental ongoing overhead and administrative expenses associated
with the NAB Acquisition, including amounts to be paid to Ford for
continuation of certain support functions, (iv) estimated adjustments to
amortization and depreciation expense resulting from the revaluation of NAB
assets and (v) the estimated income tax effects of these items. The
adjustments include the following items:
<TABLE>
<CAPTION>
TWELVE
MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31,
1993 1993 1993
------------ -------- ------------
<S> <C> <C> <C>
Effects of product pricing agreements negotiated between the Company and
Ford in the NAB Acquisition.............................................. $ 61,995 $ 98,798 $ 22,055
Incremental ongoing NAB engineering, overhead and administrative
expenses................................................................. 24,042 28,851 8,110
Amortization of goodwill resulting from the NAB Acquisition................ 2,070 2,482 828
Decrease in NAB depreciation expense....................................... (873) (1,275) (349)
Estimated income tax effects of operations adjustments..................... (31,579) (45,615) (11,093)
------------ -------- ------------
$ 55,655 $ 83,241 $ 19,551
------------ -------- ------------
------------ -------- ------------
</TABLE>
The estimated effects of the product pricing adjustments were derived by
management through the application of agreed upon average price reductions
effective as of the date of the NAB Acquisition to the historical revenues
of the NAB by product line. The adjustment is proportionately greater for
the year ended June 30, 1993 than for the year and the six months ended
December 31, 1993 due to additional pro forma adjustments in the year ended
June 30, 1993 to reflect price reductions from the NAB to Ford which were
effective as of January 1, 1993.
(4) Reflects the elimination in consolidation of sales from the NAB to other
Lear locations.
(5) Reflects the elimination of the one-time charge for incentive stock and
other compensation expense.
(6) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
TWELVE
MONTHS YEAR SIX MONTHS
ENDED ENDED ENDED
DECEMBER 31, JUNE 30, DECEMBER 31,
1993 1993 1993
------------ -------- ------------
<S> <C> <C> <C>
Reduction of interest due to application of proceeds from the Offerings... $ (3,943) $ (4,025) $ (1,986)
Estimated interest on borrowings under the Credit Agreement to finance the
NAB Acquisition......................................................... 6,022 7,474 2,441
Interest expense on the 8 1/4% Subordinated Notes......................... 11,963 11,963 5,981
Elimination of interest expense on the 14% Subordinated Debentures........ (18,900) (18,900) (9,450)
Interest expense on short-term notes payable used to finance the NAB
Acquisition, at 8%...................................................... 1,000 1,200 400
Elimination of interest expense on Favesa note payable prepaid in
connection with the NAB Acquisition..................................... (1,230) (1,476) (492)
Difference between interest expense on Favesa note payable at 6% prior to
acquisition, 11.5% subsequent........................................... 913 1,095 365
Net reduction in interest expense due to refinancing of the Original
Credit Agreement and retirement of the GECC Mortgage Loan............... (986) (1,362) (354)
Interest on borrowings under the Credit Agreement to finance fees and
expenses related to the Pro Forma Transactions.......................... 331 337 187
Change in deferred financing fee amortization due to refinancing of the
Original Credit Agreement, issuance of the 8 1/4% Subordinated Notes,
retirement of the GECC Mortgage Loan and redemption of the 14%
Subordinated Debentures................................................. 92 (590) 388
------------ -------- ------------
$ (4,738) $ (4,284) $ (2,520)
------------ -------- ------------
------------ -------- ------------
</TABLE>
(7) Reflects the elimination of the extraordinary losses on the refinancing of
the Original Credit Agreement, the GECC Mortgage Loan and the 14%
Subordinated Debentures which were recorded in the third and fourth quarters
of the twelve months ended December 31, 1993. Such loss would have been
incurred in a prior period had the NAB Acquisition taken place at the
beginning of the periods presented.
(8) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles.
15
<PAGE> 21
SELECTED FINANCIAL DATA
The following income statement and balance sheet data were derived from the
consolidated financial statements of the Company. The consolidated financial
statements of the Company for the nine months ended June 30, 1989, for each of
the fiscal years ended June 30, 1990, 1991, 1992 and 1993 and for the twelve and
six months ended December 31, 1993 have been audited by Arthur Andersen & Co.
The consolidated financial statements of the Company for the six months ended
January 2, 1993 are unaudited; however, in the Company's opinion, reflect all
adjustments, consisting only of normal recurring items, necessary for a fair
presentation of the financial position and results of operations of the Company
for such period. In February 1994 the Company changed its fiscal year end from
June 30 to December 31 effective December 31, 1993. The results of operations
for any interim period are not necessarily indicative of results of operations
for a full year. The selected financial data below should be read in conjunction
with the consolidated financial statements of the Company and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company."
<TABLE>
<CAPTION>
NINE TWELVE SIX SIX
MONTHS YEAR YEAR YEAR YEAR MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, JANUARY 2, DECEMBER 31,
1989 1990 1991 1992 1993 1993(1) 1993 1993(1)
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
(DOLLARS IN THOUSANDS(2))
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......... $ 807,365 $1,067,878 $1,085,319 $1,422,740 $1,756,510 $1,950,288 $ 811,440 $1,005,218
Gross profit...... 81,632 104,707 101,429 115,641 152,499 170,215 54,519 72,235
Selling, general
and
administrative
expenses........ 18,477 28,247 41,596 50,074 61,898 62,717 26,847 27,666
Incentive stock
and other
compensation
expense(3)...... 1,107 1,353 1,353 (12) -- 18,016 -- 18,016
Amortization...... 10,174 13,838 13,810 8,746 9,548 9,929 4,374 4,755
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Operating
income.......... 51,874 61,269 44,670 56,833 81,053 79,553 23,298 21,798
Interest expense,
net............. 50,982 61,184 61,676 55,158 47,832 45,656 26,943 24,767
Other expense,
net(4).......... 2,141 4,044 2,144 5,837 5,260 9,180 2,676 6,596
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Income (loss)
before taxes on
income and
extraordinary
items........... (1,249) (3,959) (19,150) (4,162) 27,961 24,717 (6,321) (9,565)
Income taxes...... 7,409 16,630 14,019 12,968 17,847 26,864 4,450 13,467
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Net income (loss)
before
extraordinary
items........... (8,658) (20,589) (33,169) (17,130) 10,114 (2,147) (10,771) (23,032)
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Extraordinary
items(5)........ -- -- -- (5,100) -- (11,684) -- (11,684)
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Net income
(loss).......... $ (8,658) $ (20,589) $ (33,169) $ (22,230) $ 10,114 $ (13,831) $ (10,771) $ (34,716)
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
---------- ---------- ---------- ---------- ---------- ------------ ----------- ------------
Net income (loss)
per share before
extraordinary
items........... $ (0.50) $ (1.25) $ (2.01) $ (0.62) $ 0.25 $ (0.06) $ (0.31) $ (0.65)
Net income (loss)
per share....... $ (0.50) $ (1.25) $ (2.01) $ (0.80) $ 0.25 $ (0.39) $ (0.31) $ (0.98)
Weighted average
shares
outstanding..... 17,478,120 16,500,000 16,493,499 27,768,312 40,049,064 35,500,014 3 4,836,773 35,500,014
BALANCE SHEET DATA:
Current assets.... $ 200,002 $ 223,212 $ 213,806 $ 282,864 $ 325,199 $ 433,584 $ 308,464
Total assets...... 734,582 747,583 729,670 799,884 820,209 1,114,291 809,859
Current
liabilities..... 201,117 254,514 287,111 344,169 374,950 505,717 367,782
Long-term debt.... 433,336 402,800 386,655 348,331 321,116 498,324 331,930
Common stock
subject to
limited
redemption
rights, net..... 1,770 1,795 1,770 3,465 3,885 12,435 3,885
Stockholders'
equity.......... 48,876 35,292 4,335 49,317 75,101 43,210 53,506
OTHER DATA:
EBITDA(6)......... $ 74,826 $ 94,252 $ 81,428 $ 91,807 $ 121,707 $ 122,112 $ 43,259 $ 43,664
Capital
expenditures.... $ 11,353 $ 14,906 $ 20,892 $ 27,926 $ 31,595 $ 45,915 $ 14,669 $ 28,989
Number of
facilities(7)... 30 33 40 45 48 61 45 61
North American
Content per
Vehicle(8)...... $ 67 $ 77 $ 84 $ 94 $ 98 $ 112 $ 100 $ 133
North American
vehicle
production (in
millions)(9).... 10.8 12.4 11.2 12.2 13.6 13.7 5.9 6.1
Inventory Turnover
Ratio(10)....... 27.4 25.6 30.3 36.7 36.0
</TABLE>
- -------------------------
(1) On July 1, 1993, the Company adopted SFAS 106 (as defined herein). As a
result, the twelve months and six months ended December 31, 1993 represent
the first periods during which the Company began to incur additional
expense associated with the adoption of SFAS 106. The additional expense
for each of these periods was $3,273.
(2) Except per share data and North American Content per Vehicle.
(3) Includes a one-time charge of $18,016, of which $14,474 is non-cash, for
the twelve and six months ended December 31, 1993 for incentive stock and
other compensation expense (see Note 14 "Warrants, Stock Options and Common
Stock Subject to Redemption" in the consolidated financial statements
included elsewhere in this Prospectus).
(4) Consists of foreign currency exchange gain or loss, minority interest in
net income of subsidiaries, equity (income) loss of affiliates, state and
local taxes and other expense.
(5) The extraordinary items result from the prepayment of debt.
(6) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles.
(7) Includes facilities operated by the Company's less than majority-owned
affiliates and facilities under construction.
(8) "North American Content per Vehicle" is the Company's net sales in North
America divided by total North American vehicle production.
(9) "North American vehicle production" includes car and light truck production
in the United States, Canada and Mexico estimated from industry sources.
(10) "Inventory Turnover Ratio" is cost of goods sold divided by average
inventory. The Inventory Turnover Ratio for the twelve months ended
December 31, 1993 excludes the NAB, which was acquired by the Company on
November 1, 1993.
16
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
RESULTS OF OPERATIONS
Lear has expanded its net revenues at an annual compound growth rate of
approximately 27.1% during the period from July 1, 1983 to June 30, 1993. Since
the fiscal year ended June 30, 1990, the Company has increased its net sales by
64.5% by building upon its existing business in the United States and Canada and
significantly expanding its operations in Europe and Mexico.
As a result of significant new business added since the fiscal year ended
June 30, 1990, the Company has experienced substantial upfront costs for new
programs and new facilities. Such costs consist of administrative expenses in
Europe, engineering and design expenses for new seating programs and new
facility costs, including pre-production expenses and inefficiencies incurred
until the customer reaches normal operating levels. New business which has been
added since the fiscal year ended June 30, 1990 includes seat systems for the
GM-Suburban, Saab, Volvo, GM-Opel (2 facilities), Chrysler-Europe, Hyundai and
Volkswagen-Mexico, as well as a seat cover manufacturing facility in Mexico. The
Company expenses such non-recurring pre-production expenses as they are
incurred.
The Company's financial results in the fiscal year ended June 30, 1993
improved over prior fiscal years as a result of improved operating efficiencies
obtained at new facilities which impacted prior fiscal year results unfavorably
and strong performance at established facilities. Together these facilities
offset new program costs associated with the Dodge Ram Pick-up Truck, the Ford
Mustang, the Ford Windstar Minivan and the GM Opel Omega and facility costs
relating to new programs for BMW and Jaguar, which have begun production since
the end of the fiscal year ended June 30, 1993 or will begin production in
calendar year 1994.
The Company's financial results for the fiscal year ended June 30, 1993 do
not include the NAB Acquisition. After giving effect to the Pro Forma
Transactions, the Company's net sales, EBITDA and operating income for the
fiscal year ended June 30, 1993 were approximately $2.2 billion, $171.7 million
and $119.8 million, respectively. See "Business -- NAB Acquisition."
Results for the six months ended December 31, 1993 do not include the NAB
for periods prior to November 1, 1993 and do include additional expense due to
the adoption by the Company of the prospective method of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other than Pensions" ("SFAS 106"). The implementation of SFAS 106 had
an unfavorable impact in the six months ended December 31, 1993 on gross profit
of $2.9 million, operating income of $3.3 million and net income of $3.3
million. See the consolidated financial statements of the Company included
elsewhere in this Prospectus.
The Company's financial results for the twelve and six months ended
December 31, 1993 include a one-time charge of $18.0 million for compensation
expense for past services of certain key management employees, of which $14.5
million was non-cash. Accelerated vesting of incentive management stock options
under the 1992 Stock Option Plan and the issuance of the remaining options under
the 1992 Stock Option Plan to 66 individuals resulted in the one-time non-cash
charge of $14.5 million. Also included in the one-time charge was $3.5 million
of cash compensation expense. The $3.5 million payment was made to 28 of the
Management Investors (as defined herein) in order to assist such individuals in
achieving some liquidity, which in certain instances will enable such
individuals to repay debt incurred in connection with the 1988 Acquisition
without necessitating the sale of any Common Stock.
The Company's performance is dependent on automotive vehicle production,
which is seasonal in nature. The third calendar quarter is historically the
Company's weakest quarter due to the impact of customer plant shutdowns for
vacation and model changeover which affect automotive production in both North
America and Europe. See Note 16 to the consolidated financial statements of the
Company included elsewhere in this Prospectus.
In February 1994, the Company changed its fiscal year end from June 30 to
December 31, effective December 31, 1993.
17
<PAGE> 23
The following chart shows operating results of the Company by principal
geographic area:
GEOGRAPHIC OPERATING RESULTS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JANUARY 2, DECEMBER 31,
1991 1992 1993 1993 1993
---------- ---------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET SALES:
United States...................... $ 468,808 $ 597,160 $ 765,652 $ 335,669 $ 551,211
Canada............................. 349,931 403,351 372,045 164,861 168,613
Europe............................. 145,540 268,175 432,546 218,055 189,337
Mexico............................. 121,040 154,054 186,267 92,855 96,057
---------- ---------- ---------- ----------- ------------
Net sales..................... $1,085,319 $1,422,740 $1,756,510 $ 811,440 $1,005,218
---------- ---------- ---------- ----------- ------------
---------- ---------- ---------- ----------- ------------
OPERATING INCOME (LOSS):
United States...................... $ 6,181 $ 32,002 $ 51,752 $ 17,550 $ 27,081
Canada............................. 35,303 14,695 15,308 1,808 12,128
Europe............................. (3,667) 2,952 (3,907) (1,847) (7,608)
Mexico............................. 8,206 7,172 17,900 5,787 8,213
Unallocated corporate expense(1)... (1,353) 12 -- -- (18,016)
---------- ---------- ---------- ----------- ------------
Operating income.............. $ 44,670 $ 56,833 $ 81,053 $ 23,298 $ 21,798
---------- ---------- ---------- ----------- ------------
---------- ---------- ---------- ----------- ------------
</TABLE>
- ---------------
(1) Unallocated corporate expense consists of incentive stock option expense and
other one-time compensation expense.
Six Months Ended December 31, 1993 Compared With Six Months Ended January 2,
1993.
Net sales of $1,005.2 million in the six months ended December 31, 1993
surpassed the six months ended January 2, 1993 by $193.8 million or 23.9%
despite the effect of depressed automotive vehicle sales on existing seating
programs in Europe. Net sales benefitted from the purchase of the NAB on
November 1, 1993, new business in the United States and Europe and incremental
volume on established domestic seating programs.
Net sales in the United States of $551.2 million in the six months ended
December 31, 1993 increased by $215.5 million or 64.2% from the comparable
period in the prior year, reflecting $86.0 million in sales from the NAB
Acquisition, improved domestic car and truck production on established seating
programs, incremental sales from new seat programs, including the Dodge Ram
Pick-up Truck and the Ford Mustang, and sales generated by a new lead vendor
program under which the Company assumed management of components for a seat
program with Ford.
Net sales in Canada for the six months ended December 31, 1993 of $168.6
million exceeded sales during the comparable period in the prior year by $3.8
million or 2.3%, reflecting modest vehicle production increases on established
General Motors seat programs. Net sales were adversely impacted by downtime
associated with a General Motors plant conversion necessary for a replacement
mid-size passenger car model introduction. Production for that replacement
program is scheduled to begin in the first quarter of 1994.
Net sales in Europe of $189.3 million in the six months ended December 31,
1993 declined in relation to the six months ended January 2, 1993 by $28.7
million or 13.2% due to reduced vehicle production requirements for carryover
seating programs in Sweden and Finland and unfavorable exchange rate
fluctuations. Partially offsetting the decrease in sales was additional volume
on established seating programs in Germany and Austria.
18
<PAGE> 24
Net sales in Mexico of $96.1 million increased in the six month period
ended December 31, 1993 compared to the six month period ended January 2, 1993
due to increased production activity on existing Volkswagen and Chrysler
programs.
Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $72.2 million and 7.2% for the six month
period ended December 31, 1993 as compared to $54.5 million and 6.7% for the
prior comparable period. Gross profit and gross margin in the six month period
ended December 31, 1993 benefitted from the overall increase in North American
automotive production, productivity improvement programs, favorable Canadian
exchange rate fluctuations and the NAB Acquisition. Partially offsetting the
increase in gross profit were reduced capacity utilization in Europe, facility
pre-production costs for seating programs in Canada, England and Germany, the
devaluation of the Swedish krona and severance costs associated with the
downsizing of German component operations. The adoption of SFAS 106 had an
unfavorable impact on gross profit in the six month period ended December 31,
1993 of $2.9 million.
Selling, general and administrative expenses decreased to 2.8% of net sales
for the six months ended December 31, 1993 as compared to 3.3% for the
comparable period in the prior year. While expenditures for the more recent
period increased 3.1%, or $0.8 million, over the earlier period, an increase in
sales led to an overall decrease in these expenses as a percentage of sales.
Primarily contributing to the increase in selling, general and administrative
expenses in the six month period ended December 31, 1993 were design,
development and pre-production costs relating to a new BMW seating program
scheduled to be launched in mid-1994.
Operating income and operating margin (operating income as a percentage of
net sales), before the one-time charge of $18.0 million for incentive stock and
other compensation expense, were $39.1 million and 3.9% for the six months ended
December 31, 1993 compared to $23.3 million and 2.9% during the comparable
period in the prior year. The increase in operating income was due largely to an
overall increase in net sales in North America, including an increase in net
sales as a result of the NAB Acquisition and productivity improvements, which
offset lower margin contribution in Europe and the adoption of SFAS 106.
Non-cash depreciation and amortization charges were $21.9 million and $19.9
million for the six months ended December 31, 1993 and January 2, 1993,
respectively.
Interest expense for the six month period ended December 31, 1993 decreased
by $2.2 million from the comparable period in the prior year primarily due to
the refinancing of certain subordinated and senior debt at lower interest rates,
lower European interest rates, reduced borrowings in Canada and Europe and
reduced amortization of financing fees due to the early extinguishment of debt.
See Note 3, "1994 Refinancing -- Subsequent Event," to the Company's
consolidated financial statements included elsewhere in this Prospectus.
Other expense for the six months ended December 31, 1993, including state
and local taxes, foreign exchange loss, minority interest in income of
subsidiaries and equity in income of affiliates, increased in comparison to the
comparable period in the prior year due to the $4.0 million write-off of
equipment associated with a discontinued Volkswagen program in Germany and
non-seating related assets in the United States.
A loss of $5.0 million, before extraordinary items and the one-time charge
of $18.0 million for incentive stock and other compensation expense, was
recognized for the six months ended December 31, 1993 as compared to a net loss
of $10.8 million in the prior comparable period. The net loss in the six months
ended December 31, 1993 reflects a $13.5 million provision for national income
taxes of which approximately $8.7 million relates to foreign operations. For the
six month period ended December 31, 1993, the Company recognized a net loss of
$34.7 million after giving effect to an extraordinary item for the early
extinguishment of debt of $11.7 million and the one-time charge of $18.0 million
for incentive stock and other compensation expense. The extraordinary item was
comprised of unamortized deferred financing fees expense and a call premium
resulting from the redemption of the 14% Subordinated Debentures, net of related
tax effects.
Fiscal Year Ended June 30, 1993 Compared With Fiscal Years Ended June 30, 1992
And 1991
Net sales of $1.8 billion in the fiscal year ended June 30, 1993 represents
the Company's twelfth consecutive year of increased sales. Net sales increased
$333.8 million or 23.5% over the fiscal year ended
19
<PAGE> 25
June 30, 1992 and $671.2 million or 61.8% as compared to the fiscal year ended
June 30, 1991. Net sales in the fiscal year ended June 30, 1993 as compared to
the fiscal year ended year ended June 30, 1992 benefitted from new business in
the United States and Europe, full year production of a second facility in
Sweden for Volvo, of which the Company assumed control in November 1991, and
incremental volume on domestic and Mexican programs. In comparison to the fiscal
year ended June 30, 1991, net sales increased in the fiscal year ended June 30,
1992 by $337.4 million or 31.1% due to the contribution of new business in North
America and Europe, volume increases in domestic and foreign carryover programs,
including production of replacement programs, and the acquisition of existing
operations from Saab and Volvo to handle new programs.
Gross profit and gross margin were $152.5 million and 8.7% in the fiscal
year ended June 30, 1993, $115.6 million and 8.1% in the fiscal year ended June
30, 1992 and $101.4 million and 9.3% in the fiscal year ended June 30, 1991.
Gross profit and gross margin in the fiscal year ended June 30, 1993 surpassed
that of the prior fiscal year due to the benefit of incremental volume,
including production of new business programs, productivity improvement programs
and improved operating performance at new facilities in North America, Europe
and Mexico. Partially offsetting the increase in gross profit were participation
in customer cost reduction programs, plant shutdown costs at a dedicated
facility in Finland, nonrecurring favorable foreign exchange effect on sales and
a retroactive price increase recognized in the first and second quarters of the
fiscal year ended June 30, 1992. Gross profit in the fiscal year ended June 30,
1992 increased as compared to the fiscal year ended June 30, 1991 as the overall
growth in sales activity coupled with productivity improvements more than offset
customer cost reduction programs. Comparing the same periods, gross margin
declined as a result of the incurrence of start-up costs at several new
facilities.
Selling, general and administrative expenses as a percentage of net sales
remained unchanged at 3.5% in the fiscal year ended June 30, 1993 as compared to
the prior fiscal year. The increase in actual expenses was largely the result of
increased research and development costs for future seating programs in the
United States, Canada and Europe. Further contributing to the increase in
expenses were administrative support expenses for Mexican operations and costs
associated with the establishment of customer business units in North America.
In comparison to the fiscal year ended June 30, 1991, selling, general and
administrative expenses in the fiscal year ended June 30, 1992 increased due to
design and development costs for future seat systems and technical and
administrative support for new and existing European and Mexican operations.
Operating income and operating margin were $81.1 million and 4.6% in the
fiscal year ended June 30, 1993, $56.8 million and 4.0% in the fiscal year ended
June 30, 1992 and $44.7 million and 4.1% in the fiscal year ended June 30, 1991.
The growth in operating income in the fiscal year ended June 30, 1993 as
compared to the prior fiscal year was due to incremental volume on established
seating programs and improved performance at new seat and seat cover facilities.
Partially offsetting the increase in operating income were pre-production and
facility costs for programs to be introduced after June 30, 1993, plant shutdown
costs and nonrecurring prior fiscal year adjustments noted above. As compared to
the fiscal year ended June 30, 1991, operating income in the fiscal year ended
June 30, 1992 increased due to the benefit of vehicle production increases by
automotive manufacturers on established programs in North America and Europe
which offset customer cost reduction programs and start-up costs associated with
the introduction of new seat systems within established business programs.
Non-cash depreciation and amortization charges were $40.7 million in the fiscal
year ended June 30, 1993, $35.0 million in the fiscal year ended June 30, 1992
and $36.8 million in the fiscal year ended June 30, 1991.
Interest expense in the fiscal year ended June 30, 1993 declined in
relation to the fiscal year ended June 30, 1992 and the fiscal year ended June
30, 1991 due to lower interest rates on bank debt, refinancing of certain
subordinated debt at a lower interest rate and the application of funds received
from the capital infusions initiated on September 27, 1991 and July 30, 1992.
See Notes 4 and 5 of the consolidated financial statements of the Company
included in this Prospectus for additional information regarding these
transactions.
Other expense, including state and local taxes, foreign exchange gain or
loss, minority interests and equity in income of affiliates, decreased in the
fiscal year ended June 30, 1993 in comparison to the fiscal year ended June 30,
1992 as reduced income derived from joint ventures accounted for under the
equity method coupled with the Company's write-off of its $1.7 million
investment in Probel S.A., a Brazilian company, were more
20
<PAGE> 26
than offset by the expense portion of nonrecurring capitalization and related
costs of $3.2 million associated with the 1991 Transactions (as defined under
"Certain Transactions") which were incurred in the fiscal year ended June 30,
1992. Other expense in the fiscal year ended June 30, 1992 increased in
comparison to the fiscal year ended June 30, 1991 due to costs related to the
1991 Transactions.
Net income of $10.1 million was realized in the fiscal year ended June 30,
1993 as compared to a net loss of $22.2 million in the fiscal year ended June
30, 1992. The net income of $10.1 million in the fiscal year ended June 30, 1993
reflects an $11.9 million provision for foreign national income taxes as
compared to an $8.2 million provision in the fiscal year ended June 30, 1992. In
comparison to a net loss of $33.2 million in the fiscal year ended June 30,
1991, the net loss of $22.2 million in the fiscal year ended June 30, 1992
reflects a $13.0 million provision for national income taxes as compared to a
provision of $14.0 million in the previous fiscal year and to a $5.1 million
extraordinary loss on the early retirement of debt.
United States Operations
Net sales in the United States were $765.7 million, $597.2 million and
$468.8 million in the fiscal years ended June 30, 1993, 1992 and 1991,
respectively. Net sales in the fiscal year ended June 30, 1993 surpassed the
fiscal year ended June 30, 1992 due to improved domestic car and truck
production on established seating programs in the second half of the fiscal year
ended June 30, 1993 coupled with a new Ford passenger car program and the
attainment of targeted production levels for a General Motors truck program
introduced in the fall of 1991. Net sales in the fiscal year ended June 30, 1992
reflect vehicle production increases from the prior fiscal year's depressed
operating levels by OEMs on certain established seating programs and the launch
of a new General Motors truck program.
Operating income and operating margin were $51.8 million and 6.8% in the
fiscal year ended June 30, 1993, $32.0 million and 5.4% in the fiscal year ended
June 30, 1992 and $6.2 million and 1.3% in the fiscal year ended June 30, 1991.
The growth in operating income and operating margin was due to the benefits
derived from incremental volume on established and new seating programs,
productivity improvements and improved operating performance at new seat systems
and seat cover facilities. Partially offsetting the increase in operating income
were participation in customer cost reduction programs and preproduction costs
associated with a new seating program scheduled to begin production in mid-1994.
Operating income and operating margin in the fiscal year ended June 30, 1992
increased as compared to the fiscal year ended June 30, 1991 due to the transfer
of component production from Canada in order to benefit from lower operating
costs and incremental volume on established seating programs.
Canadian Operations
Net sales from Canadian operations were $372.0 million in the fiscal year
ended June 30, 1993, $403.4 million in the fiscal year ended June 30, 1992 and
$349.9 million in the fiscal year ended June 30, 1991. Net sales in the fiscal
year ended June 30, 1993 were adversely impacted by market demand and vehicle
inventories as General Motors announced temporary plant shutdowns and production
adjustments on existing passenger car and light truck programs. In comparison to
the fiscal year ended June 30, 1991, net sales in the fiscal year ended June 30,
1992 benefitted from incremental volume on carryover General Motors car and
truck programs and to the launch of a new Hyundai passenger car program, which
was partially offset by the transfer of component production from Canada to the
United States.
Operating income and operating margin were $15.3 million and 4.1% in the
fiscal year ended June 30, 1993, $14.7 million and 3.6% in the fiscal year ended
June 30, 1992 and $35.3 million and 10.1% in the fiscal year ended June 30,
1991. Operating income in the fiscal year ended June 30, 1993 as compared to the
prior fiscal year benefitted from productivity improvement programs, favorable
exchange rate fluctuations and improved operating performance at a new seat
facility. Partially offsetting the increase in operating income were reduced
vehicle production schedules on existing programs and engineering costs
associated with a future Ford seating program. Operating income in the fiscal
year ended June 30, 1992 declined in relation to the fiscal year ended June 30,
1991 due to a shift in component production to the Company's United States
facilities in order to take advantage of lower operating costs, participation in
customer cost reduction programs, incremental costs associated with the start-up
of a new seat facility and to design and development costs related to a future
Ford seat system.
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<PAGE> 27
European Operations
Net sales in Europe were $432.5 million in the fiscal year ended June 30,
1993, $268.2 million in the fiscal year ended June 30, 1992 and $145.5 million
in the fiscal year ended June 30, 1991. Net sales in the fiscal year ended June
30, 1993 exceeded the prior fiscal year due to the addition of new operations in
Germany and Austria, the full year impact resulting from the acquisition of
facilities in Sweden and Finland and incremental volume on carryover programs in
Germany. Partially offsetting the increase in net sales were reduced vehicle
production schedules for established seating programs in Sweden and unfavorable
exchange rate fluctuations. Net sales in the fiscal year ended June 30, 1992
surpassed net sales in the prior fiscal year due to additional volume on an
existing program in Sweden and the acquisition of facilities in Sweden and
Finland in November 1991 and January 1992, respectively, while demand for
existing programs in Germany remained essentially unchanged.
The Company's European operations sustained an operating loss of $3.9
million in the fiscal year ended June 30, 1993 as compared to operating income
of $3.0 million in the fiscal year ended June 30, 1992 and an operating loss of
$3.7 million in the fiscal year ended June 30, 1991. The $6.9 million
unfavorable variance in the fiscal year ended June 30, 1993 was the result of
lower margin products introduced at an established facility in Germany,
technical and administration costs required to support European manufacturing
facilities, a retroactive price increase recognized in the first half of the
fiscal year ended June 30, 1992 and the devaluation of the Swedish krona, which
was partially offset by the favorable impact of foreign exchange rates. Also
contributing to the decrease in operating income were reserves established by
the Company for the anticipated plant shutdown costs at a dedicated facility in
Finland due to the customer transfer of production to alternative locations in
Europe. Partially offsetting the decrease in operating income was the overall
growth in sales activity, including production from new programs in Germany and
Austria and to the full year contribution of facilities in Sweden and Finland of
which the Company assumed control in the fiscal year ended June 30, 1992.
Operating income of $3.0 million in the fiscal year ended June 30, 1992
increased by $6.6 million as compared to the fiscal year ended June 30, 1991 due
to improved pricing on an existing program, incremental volume on carryover
programs and improved operating performance at an established facility in Sweden
which combined to more than offset pre-production, technical and administrative
costs necessary to support new facilities opened as a result of seating programs
awarded.
Mexican Operations
Net sales in Mexico were $186.3 million in the fiscal year ended June 30,
1993, $154.1 million in the fiscal year ended June 30, 1992 and $121.0 million
in the fiscal year ended June 30, 1991. Net sales in the fiscal year ended June
30, 1993 surpassed the fiscal year ended June 30, 1992 and the fiscal year ended
June 30, 1991 due to increased production activity on established General
Motors, Ford, Volkswagen and Chrysler programs.
Operating income and operating margin in Mexico were $17.9 million and 9.6%
in the fiscal year ended June 30, 1993, $7.2 million and 4.7% in the fiscal year
ended June 30, 1992 and $8.2 million and 6.8% in the fiscal year ended June 30,
1991. The increase in operating income and operating margin in the fiscal year
ended June 30, 1993 as compared to the prior fiscal year was due to the benefit
of additional sales, productivity improvement programs and improved
manufacturing performance at a seat cover facility. Operating income and
operating margin in the fiscal year ended June 30, 1992 declined in relation to
the fiscal year ended June 30, 1991 as a result of the Company's participation
in a customer cost reduction program and incremental start-up costs associated
with a new seat cover facility.
LIQUIDITY AND FINANCIAL CONDITION
On October 25, 1993, the Company amended and restated the Original Credit
Agreement (as amended and restated, the "Credit Agreement"), increasing the
Company's total availability to $425.0 million from $150.0 million, reducing the
Company's average bank borrowing costs by approximately 150 basis points and
enabling the Company to refinance all of its then outstanding indebtedness under
the Company's Original Credit Agreement, to retire the GECC Mortgage Loan and to
finance a portion of the NAB Acquisition. As of December 31, 1993, and after
giving effect to the 1994 Note Offering, the Offerings and the application of
the net proceeds therefrom, the Company would have had $178.4 million
outstanding under the Credit Agreement
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<PAGE> 28
($36.8 million of which would have been outstanding under letters of credit),
resulting in $246.6 million unused and available. The Company also had term
loans outstanding in Germany of approximately $7.6 million.
Of the $230.7 million of borrowings actually outstanding under the Credit
Agreement as of December 31, 1993, $173.4 million related to the NAB
Acquisition. The remaining $57.3 million outstanding related to the early
retirement of term debt during the calendar year 1993.
Amounts available under the Credit Agreement will be reduced by $40.0
million every six months beginning October 31, 1996, and the Credit Agreement
will expire on October 31, 1998. Excluding amounts outstanding under the Credit
Agreement which will be due upon the expiration of the Credit Agreement, the
Company's scheduled principal payments are $1.2 million in calendar year 1994,
$2.4 million in calendar year 1995 and $1.2 million in each of the next three
calendar years.
Net cash provided by operating activities increased to $94.5 million in the
fiscal year ended June 30, 1993, compared to $48.0 million and $33.5 million in
the fiscal years ended June 30, 1992 and 1991, respectively. The increase in
cash flow in the fiscal year ended June 30, 1993 reflected higher operating
earnings and reduced working capital requirements. The reduced working capital
requirements were primarily the result of improved management of inventories,
customer tooling and accounts payable. Inventories declined by 12.0% in the
fiscal year ended June 30, 1993 despite record net sales in that year.
Net cash provided by operating activities increased to $17.1 million during
the six months ended December 31, 1993. Cash flow increases resulted from
improved operating earnings and management of accounts receivable, inventories
and accounts payable, offset by the use of proceeds necessary to finance the
working capital requirement of the NAB.
During the fiscal year ended June 30, 1993 and the six months ended
December 31, 1993, cash generated from operations and funds available under the
Original Credit Agreement were sufficient to meet the Company's debt service and
capital expenditure requirements. The Company believes that cash flows from
operations and funds available from existing credit facilities (principally the
Credit Agreement) will be sufficient to meet its future debt service
obligations, projected capital expenditures and working capital requirements.
Since July 1992, the Company has taken advantage of the favorable interest
rate environment by refinancing a substantial portion of its long-term debt to
reduce its ongoing interest expense. In February 1994, the Company refinanced
$135.0 million in aggregate principal amount of its 14% Subordinated Debentures
by issuing $145.0 million aggregate principal amount of 8 1/4% Subordinated
Notes due 2002. The additional proceeds were used to pay a 5.4% call premium and
a portion of the accrued interest due on the redemption of the 14% Subordinated
Debentures. In July 1992, the Company refinanced $85.0 million in aggregate
principal amount of its 14 1/4% Senior Subordinated Discount Notes by issuing
$125.0 million aggregate principal amount of the Senior Subordinated Notes. The
additional proceeds were used to prepay $15.0 million of term loans and
temporarily reduce outstanding revolving loans under the Original Credit
Agreement and for general corporate purposes.
In the fiscal years ended June 30, 1993 and 1992, gross proceeds of $20.4
and $75.0 million, respectively, were received from the issuance of Common
Stock. The Common Stock proceeds were used to reduce borrowings under the
Original Credit Agreement in each year, as well as fund the Company's expansion.
CAPITAL EXPENDITURES
For the fiscal year ended June 30, 1993, capital expenditures of the
Company were $31.6 million. For the fiscal years ended June 30, 1992 and June
30, 1991, capital expenditures of the Company were $27.9 million and $20.9
million, respectively. The Company estimates that it spent, in the aggregate,
between $10.0 million and $15.0 million in the fiscal years ended June 30, 1992
and 1993, respectively, for equipment replacement and refurbishment. For the six
months ended December 31, 1993, capital expenditures of the Company were $29.0
million. The Company anticipates that during the fiscal year ending December 31,
1994, capital expenditures will aggregate approximately $60.0 million, of which
approximately $35.0 million will relate to
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<PAGE> 29
the addition of new facilities and the completion of previously started
facilities required to support new seat systems programs. The remainder will be
used to establish new programs in existing facilities and for ongoing
maintenance requirements. The Company anticipates that cash generated from
operations and borrowings under the Credit Agreement will provide sufficient
funds for planned capital expenditures.
ENVIRONMENTAL MATTERS
The Company is subject to local, state, federal and foreign laws,
regulations and ordinances (i) which govern activities or operations that may
have adverse environmental effects and (ii) that impose liability for the costs
of cleaning up and certain damages resulting from sites of past spills, disposal
or other releases of hazardous substances. The Company currently is engaged in
the cleanup of hazardous substances at certain sites owned, leased or operated
by the Company, including soil and groundwater cleanup at its facility in
Mendon, Michigan. Management believes that the Company will not incur compliance
costs or cleanup costs at its facilities with known contamination that would
have a material adverse effect on the Company's consolidated financial position
or future results of operations.
The Company has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of contamination
from hazardous substances at three Superfund sites where liability has not been
determined. The Company also may incur indemnification obligations for cleanup
at two sites which are the subject of Superfund proceedings. Management believes
that the Company is, or may be, responsible for less than one percent, if any,
of the total costs at each site. The Company has set aside reserves which
management believes are adequate to cover any such potential liabilities.
Management believes that such matters will not result in liabilities that will
have a material adverse effect on the Company's consolidated financial position
or future results of operations.
INFLATION AND ACCOUNTING POLICIES
Lear's contracts with its major customers generally provide for an annual
productivity price reduction and provide for the recovery of increases in
material and labor costs in some contracts. Cost reduction through design
changes, increased productivity and similar programs with the Company's
suppliers generally have offset changes in selling prices. The Company's cost
structure is comprised of a high percentage of variable costs. The Company
believes that this structure provides it with additional flexibility during
economic cycles.
In December 1990, the Financial Accounting Standards Board issued SFAS 106,
which sets forth new standards on accounting for post-retirement benefits other
than pensions. This standard requires that the expected cost of these benefits
must be charged to expense during the years in which the employees render
service. The Company prospectively has adopted the new standard for its domestic
plans effective July 1, 1993 and will adopt the standard no later than required
for its foreign plans. The Company's actuaries have determined the domestic
transition obligation at July 1, 1993 to be approximately $25.6 million (net of
a previously recorded liability of $6.3 million) before income taxes, which will
be amortized over 20 years. The Company's results for the six months ended
December 31, 1993 reflect an increase of approximately $3.3 million for
post-retirement benefits as computed under this new standard than would have
been recorded under the Company's previous method, which recognized these costs
on a cash basis. The additional expense of $3.3 million includes approximately
$641,000 of amortization of the Company's transition obligation.
In November 1992, the Financial Accounting Standards Board issued SFAS 112,
"Employers Accounting for Post-Employment Benefits." This statement requires
that employers accrue the cost of post-employment benefits during the employees'
active service. The Company will adopt this statement effective January 1, 1994
and believes that the adoption of this statement will not have a material effect
on its financial position or results of operations.
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<PAGE> 30
BUSINESS
GENERAL
Lear is the largest independent supplier of automobile and light truck seat
systems in North America and is one of the largest independent suppliers of such
systems worldwide. The Company's principal products include finished automobile
and light truck seat systems, seat frames, seat covers and other seat
components. The Company's seat systems, which are designed, manufactured and
assembled at the Company's manufacturing facilities, are shipped to customer
assembly plants on a JIT basis for installation in vehicles near the end of the
assembly process.
Lear's sales have grown rapidly from approximately $159.8 million in the
fiscal year ended June 30, 1983 to approximately $1.8 billion in the fiscal year
ended June 30, 1993, a ten-year average compound annual growth rate of
approximately 27.1%. The Company has expanded its operations to facilitate such
growth primarily by constructing, acquiring and leasing new facilities and
expanding the output of existing facilities. Capital expenditures by the Company
during the same period averaged $23.2 million per fiscal year. Funding for this
expansion was provided by cash generated from operations and borrowings under
credit facilities.
The Company's growth in sales is attributable primarily to the trend in the
automotive industry to outsource more of its requirements for automotive
components in response to competitive pressures on OEMs to improve quality and
reduce capital needs and the costs of labor, overhead and inventory. OEMs have
outsourced increasingly larger percentages of their requirements for seat
systems, which represent the most expensive automotive component widely
outsourced. As a result of this continuing trend toward outsourcing, the Company
has been awarded the following new business which has recently begun production
or is scheduled to begin production in the next eighteen months:
<TABLE>
<CAPTION>
SCHEDULED
LOCATION OF START
PROGRAM LEAR FACILITY DATE
--------------------------------------- --------------------- --------------
<S> <C> <C>
Ford Windstar Minivan.................. Oakville, Ontario January 1994
GM Opel-Omega.......................... Gustavsburg, Germany January 1994
Jaguar (all models).................... Coventry, England January 1994
Chevrolet Monte Carlo.................. Whitby, Ontario February 1994
Buick Park Avenue...................... Fenton, MI February 1994
Oldsmobile Aurora/Buick Riviera........ Fairhaven, MI February 1994
Chevrolet Cavalier/Pontiac Sunfire..... Lordstown, OH July 1994
Ford CDW 27............................ Mexico City, Mexico August 1994
BMW 3 Series........................... Duncan, SC September 1994
Ford Explorer -- Plant II.............. St. Louis, MO January 1995
Dodge Ram Pick-up Truck................ Saltillo, Mexico March 1995
Ford Taurus/Sable...................... Atlanta, GA June 1995
Ford Taurus/Sable...................... Chicago, IL June 1995
Dodge Ram Pick-up Truck................ St. Louis, MO July 1995
GMT 600 Van............................ St. Louis, MO September 1995
</TABLE>
The principal beneficiaries of the trend to outsourcing have been
independent suppliers, such as the Company, with proven design, engineering and
JIT program management and manufacturing capabilities. The Company has captured
more than one-third of the outsourced market for automobile and light truck seat
systems and seat components in North America and has become a leading supplier
to this market in Europe based on contracts awarded during the past three years.
Lear has demonstrated its ability to substantially reduce the cost and
increase the quality of seat systems through the coordination of design,
development and manufacturing as a Tier I supplier. The Company believes that
OEMs in North America and Europe will continue to pursue outsourcing as a means
of cost reduction.
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<PAGE> 31
The Company's North American Content per Vehicle has increased from $12 in
the fiscal year ended June 30, 1983 to $98 in the fiscal year ended June 30,
1993. This increase has resulted from the Company's ability to capitalize on a
number of industry trends including outsourcing, greater design responsibility
by suppliers and the increased sophistication of seat systems as OEMs add more
advanced features and luxury items into vehicle models.
BUSINESS STRATEGY
To take advantage of additional business opportunities, the Company has
positioned itself as a global Tier I supplier of entire seat systems to OEMs.
Tier I status typically means that the supplier is awarded the seat program for
a particular vehicle in the early stages of the vehicle's design. The Tier I
supplier becomes responsible for total seat program management, including
design, development, component sourcing, quality assurance procedures,
manufacture and delivery to the OEM's assembly plant. The OEM benefits from
lower costs, improved quality, timely delivery and the administrative
convenience of being able to treat seating as a single component instead of as
numerous individual components. The Company believes that its early involvement
in the design and engineering of new seat products as a Tier I supplier affords
the Company a competitive advantage in securing new business. The Company has
become a significant Tier I supplier by implementing a strategy based upon the
following elements:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its OEM customers which allow Lear to
identify business opportunities and react to customer needs in the early stages
of vehicle design. The Company works closely with OEMs in designing and
engineering seat systems and maintains an excellent reputation with the OEMs for
timely delivery and customer service and for providing world class quality at a
competitive price. Many of the Company's facilities have won awards from OEMs
and others, including the General Motors Mark of Excellence Award, the General
Motors Supplier of the Year Award, the General Motors Top Supplier Award in
Mexico, the Ford Q-1 Award at 15 plants, the General Motors of Europe 1991 and
1992 Supplier of the Year Award, the Chrysler Quality Excellence Award, the Saab
100% Supplier Performance Award and the Mazda Most Valuable Supplier Award.
- Product Technology and Product Design Capability. Lear has made
substantial investments in product technology and product design capability to
support its products, including the building of two technical centers (one in
the United States in 1988 and one in Europe in 1991) and upgrading the Company's
computer aided design/computer aided manufacturing ("CAD/CAM") systems. In
addition, the Company is in the process of investing approximately $6.0 million
to substantially broaden its engineering capabilities, including all aspects of
safety and functional testing and comfort assessment. The Company's strong
product focus and global business base provide it access to worldwide seat
technology. The Company's participation with customers in the early phases of
product design, including participation at its ten remote engineering sites
located near customers, enables it to improve the quality of the product and to
meet target costs. Furthermore, the Company has established formal programs
which provide for an ongoing review of product design and production in order to
establish the means of obtaining additional cost improvement. An example of the
Company's product technology and product design capability is the development of
its SureBond process, which was patented in 1987. Sales of seat systems using
the SureBond process accounted for approximately 35% of the Company's net sales
for the twelve months ended December 31, 1993. See "Business -- Manufacturing."
- Lean Manufacturing Philosophy. Lear has adopted a "lean manufacturing"
philosophy that seeks to eliminate waste and inefficiency in its own operations
and in those of its customers. The Company believes that it provides superior
quality seating products at lower costs than the OEMs. The Company, whose
facilities are linked by computer directly to those of its suppliers and
customers, receives components from its suppliers, and delivers seat systems and
components to its customers on a JIT basis, which minimizes inventories and
fixed costs and enables the Company to deliver products on as little as 90
minutes notice. In the twelve months ended December 31, 1993, the Company's
overall annual inventory turnover rate was 36 times (excluding the effects of
the NAB Acquisition) and up to 150 times in the case of certain of the Company's
JIT plants. The Company also minimizes fixed costs by using the existing
suppliers to the OEMs and the OEMs themselves for certain components instead of
attempting to produce such components itself. In cases where one of the
26
<PAGE> 32
Company's manufacturing facilities is underutilized, the Company is able to
redistribute products to increase facility utilization.
Typically, the upfront cost of constructing a new seat systems facility is
between $6.0 and $9.0 million per facility for owned facilities and between $1.0
million and $6.0 million per facility for leased facilities. The principal costs
in starting a new seat systems facility arise from the acquisition of the land,
construction of the building and installation of conveyor systems. Because most
seat assembly work is manual and does not require complex equipment, capital
costs are relatively low.
Another example of the Company's "lean manufacturing" philosophy is the
establishment of a "Champion Program" in the fiscal year ended June 30, 1993
whereby individual members of management are responsible for working with a
specific vendor to aggressively reduce costs. The success of the program has
allowed the Company to negotiate on-going cost reduction agreements with many of
its customers. The Champion Program has been expanded since June 30, 1993 to
European suppliers as well as to product and manufacturing design.
NAB ACQUISITION
On November 1, 1993, Lear significantly strengthened its position in the
North American automotive seating market by purchasing the NAB from Ford for
$173.4 million in cash (after giving effect to an adjustment in the purchase
price for changes in NAB working capital) and approximately $10.5 million in
notes payable to Ford or its affiliates. The NAB Acquisition included the
machinery, equipment, real property and other assets used in the operations of
the NAB as well as the stock of Favesa S.A. de C.V. ("Favesa"), an operation
located in Juarez, Mexico.
The NAB consists of an integrated United States and Mexican operation which
produces seat covers for approximately 80% of Ford's North American vehicle
production and manufactures seat systems for Ford's Crown Victoria and Grand
Marquis vehicles. The Company's United States and Canadian revenues as a
percentage of total net sales would have been approximately 68% had the NAB
Acquisition not occurred versus 75% had the NAB Acquisition occurred on the
first day of calendar year 1993. The cost structure of the NAB is very similar
to the Company's current business in that costs are largely variable and,
therefore, responsive to demand. Prior to the NAB Acquisition, the Company
outsourced a significant portion of its seat cover requirements. The expansion
of the Company's seat cover business allows the Company better control over the
costs and quality of one of the critical components of a seat system. Because of
the Company's belief in its ability to produce seat covers and seat systems at
attractive margins, the NAB Acquisition is expected to improve the Company's
operating performance.
For the twelve months ended December 31, 1993, after giving pro forma
effect to the NAB Acquisition, gross sales, EBITDA and operating income of the
NAB were approximately $572.7 million, $49.0 million and $37.9 million,
respectively. See "Pro Forma Financial Data."
In connection with the NAB Acquisition, the Company entered into a
five-year supply agreement with Ford covering models for which the NAB currently
produces seat covers and seat systems at agreed upon prices. The Company also
assumed during the term of the supply agreement primary engineering
responsibility for a substantial portion of Ford's car models. As a result, the
NAB Acquisition establishes the Company as Ford's leading seat systems supplier
and strengthens the Company's relationship with one of its two largest customers
and the world's second largest automobile manufacturer. In addition, the Company
believes that because of the NAB Acquisition it will be further integrated by
Ford into the planning and design of seat systems and related products for
future vehicle models. On a pro forma basis, after giving effect to the NAB
Acquisition, the Company's net sales in the twelve months ended December 31,
1993 to Ford and General Motors were approximately equal. The NAB Acquisition
also provides the Company with a prototype for enhancing its relationships with
OEMs in a manner that allows OEMs to take better advantage of the Company's
engineering, design and manufacturing expertise than is currently afforded under
conventional supply agreements.
The sale of the NAB was conducted on an auction basis in which Ford
determined that the Company was one of only two qualified final bidders based
upon technical resources, capabilities and expertise in automotive
27
<PAGE> 33
and light truck seat systems. The selection of the Company as the successful
bidder highlights the Company's position as a leading supplier of quality seat
systems.
The NAB incorporates both U.S. and Mexican operations. The manufacture of
seat covers and seat systems takes place in Juarez, Mexico at the NAB's
maquiladora subsidiary, Favesa. Favesa's maquiladora status allows the NAB to
produce seat systems and seat covers in Mexico for sale in the United States
without paying import or export duties as raw materials and finished goods cross
the United States/Mexican border. To maintain its maquiladora status, Favesa
must return its production to the United States, where it is sold by the NAB.
This maquiladora arrangement is in direct contrast to the Company's other
Mexican subsidiary, CISA, a non-maquiladora operation, whose sales are almost
entirely to Mexican plants. The Company believes that the passage of NAFTA will
present additional business opportunities as current maquiladora operations are
allowed to produce product for use in Mexico.
PRODUCTS
Lear's products have evolved from the Company's many years of experience in
the seat frame market where it has been a major supplier to General Motors and
Ford since its inception in 1917. The seat frame has structural and safety
requirements which make it the basis for overall seat design and was the logical
first step to the Company's emergence as a dominant supplier of entire seat
systems.
All of the Company's products are manufactured using JIT manufacturing
techniques, and most of the Company's products, including all seat systems, are
delivered to the OEMs on a JIT basis. The JIT concept, first broadly utilized by
Japanese automobile manufacturers, is the cornerstone of the Company's
manufacturing and supply strategy. This strategy involves many of the principles
of the Japanese system, but was redeveloped for compatibility with the greater
volume requirements and geographic distances of the North American market. The
Company first developed JIT operations in the early 1980s at its seat frame
manufacturing plants in Morristown, Tennessee and Kitchener, Ontario. These
plants previously operated under traditional manufacturing practices, resulting
in relatively low inventory turnover rates, significant scrap and rework, a high
level of indirect labor costs and long production set-up times. As a result of
JIT manufacturing techniques, the Company has been able to consolidate plants,
increase capacity and significantly increase inventory turnover, quality and
productivity.
The JIT principles first developed at Lear's seat frame plants in 1983 were
next applied to the Company's growing seat systems business. The Company's
seating plants are typically no more than 30 minutes from its customers'
assembly plants and manufacture seats for delivery to the customer's facility in
as little as 90 minutes. Orders for the Company's seats are received on a weekly
basis, pursuant to blanket purchase orders for annual requirements. These orders
detail the customer's needs for the ensuing week. In addition, on each work day,
constant computer and other communication is maintained between personnel at the
Company's plants and personnel at the customer's plants to keep production
current with the customer's demand.
The following is the approximate composition by product category of the
Company's net sales in the twelve months ended December 31, 1993, after giving
pro forma effect to the NAB Acquisition: seat systems, 73%; seat covers, 14%;
seat frames, 8%; and seat components, 5%.
- Seat Systems. The seat systems business consists of the manufacture,
assembly and supply of entire seating requirements for a vehicle or assembly
plant. The Company produces seat systems for automobiles and light trucks that
are fully finished and ready to be installed in a vehicle. Included within the
Company's seat systems production are high performance seats for luxury versions
of the OEMs' specialty cars, such as the Chevrolet Corvette, the Ford Taurus
SHO, the Mercury Cougar XR7, the Ford Thunderbird Super Coupe, the Ford Mustang
GT and the Dodge Viper. High performance seats are fully assembled seats,
ergonomically designed by the Company to achieve maximum passenger comfort. They
have a wide range of manual and power comfort features such as lumbar supports,
cushion and back bolsters and leg and thigh supports that are typically used to
provide product differentiation for specialty vehicles. As OEMs continue to view
seat systems as a distinguishing marketing feature, the advanced features
incorporated initially in high performance seats are more frequently becoming
standard features in a wider variety of later production vehicles.
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<PAGE> 34
The market for seat systems developed as a result of North American
automobile manufacturers' need to restructure assembly plant methods in response
to vigorous foreign competition in the early 1980's. The Company was positioned
to take advantage of this growing market through its long standing relationships
with customers. These relationships have been fostered through the Company's
performance in seat frame manufacturing over the years and its demonstrated
ability to supply and manage total seat systems. The Company believes that its
position in the seat systems market will improve as seats with advanced features
become an increasingly important criterion for distinguishing between competing
vehicle models. Seat systems are shipped to customers in the order in which they
are installed in vehicles.
The Company's major seat systems customers include Ford, General Motors,
Chrysler, Volvo, Volkswagen, Saab and Mazda. In addition, through its joint
ventures with NHK Spring Co., Ltd., the Company supplies seat systems to SIA (a
joint venture between Fuji Heavy Industries (Subaru) and Isuzu) and to CAMI (a
joint venture between Suzuki and General Motors). The Company and its affiliates
serve assembly plants for these customers through 22 different dedicated JIT
facilities.
The Company's seat systems sales for the twelve months ended December 31,
1993 broke down into the following vehicle categories: 47% light truck, 22%
mid-size, 13% full size, 8% luxury, 6% compact and 4% sport vehicles. These
vehicles included the Chevrolet/GMC Suburban, the Chevrolet/GMC Pick-up Truck,
the Ford Explorer, the Oldsmobile Delta 88, the Buick LeSabre, the Chevrolet
Lumina, the Buick Regal, the Mercury Cougar XR7, the Saab 9000 and the Chevrolet
Corvette. As part of the NAB Acquisition, the Company has also assumed seat
systems responsibility for the Ford Crown Victoria and the Mercury Grand Marquis
and has assumed Tier I engineering responsibilities for the Ford Escort, the
Lincoln Town Car, the Mercury Tracer and the Mercury Grand Marquis.
As a result of its product technology and product design strengths, the
Company can provide ergonomic designs which offer styling flexibility at low
cost. In addition, the Company is able to incorporate many convenience features
and safety improvements into its seat designs, such as storage armrests, rear
seat fold down panels, integrated restraint systems and child restraint seats.
Lear's position as a market leader in seat systems is largely attributable
to seating programs on new vehicle models launched in the past five years. The
Company believes that supplying seating for these new vehicle models will
provide it with a long-term revenue stream throughout the lives of these models.
The Company is currently working with customers in the development of a number
of seat systems products to be introduced by automobile manufacturers in the
late 1990's, which it expects will lead to an increase in outsourcing
opportunities in the future. The Company has been awarded several new programs
which have recently begun or are scheduled to begin production in the fiscal
years ending December 31, 1994 through 1996. Such business includes new
passenger car and light truck programs for the Dodge Ram Pick-up Truck, the Ford
Mustang, the Ford Windstar Minivan, the BMW 3 Series, all Jaguar models, as well
as the GM Opel Omega, the Chevrolet Cavalier and the Oldsmobile Aurora. In
addition, in December 1993, the Company was awarded the seat system assembly
responsibility for the Ford Taurus/Mercury Sable vehicle lines for seat systems
scheduled to begin production in early 1995. Ford Taurus has been the best
selling car line in the United States for the past two years. See "Business --
General" for additional information on new business scheduled to begin
production in the next eighteen months.
- Seat Covers. Lear produces seat covers at its Fairhaven, Michigan and
Saltillo, Mexico facilities, which deliver seat covers primarily to other
Company plants. In addition, pursuant to the NAB Acquisition, the Company
acquired a portion of Ford's North American seat cover and seat systems business
and is producing approximately 80% of the seat covers for Ford's North American
vehicles. After the NAB Acquisition, the Company's major external customers for
seat covers are Ford and other independent suppliers. The expansion of the
Company's seat cover business allows the Company better control over the costs
and quality of one of the critical components of a seat system. Typically, seat
covers comprise approximately 30% of the aggregate cost of a seat system.
- Seat Frames. Lear produces steel and aluminum seat frames for passenger
cars and light and medium trucks. Seat frames are primarily manufactured using
precision stamped, tubular steel and aluminum components joined together by
highly automated, state-of-the-art welding and assembly techniques. The
manufacture of seat frames must meet strict customer specified safety standards.
29
<PAGE> 35
The Company's seat frames are either delivered to its own plants where they
become part of a completed seat that is sold to the OEM customer, to
customer-operated assembly plants or to other independent seating suppliers
where they are used in the manufacture of assembled seating systems.
The Company's product development engineers continue to advance its
technological position with such innovative material applications as aluminum
and plastic frames and new seat designs which dramatically reduce seat weight
while increasing usable automotive vehicle interior space or increasing safety.
- Seat Components. The Company designs and manufactures plastic storage
armrests for inclusion in seat systems at its plant in Mendon, Michigan.
Vehicles in which these components are found are the Dodge Ram Pick-up Truck,
the Ford F-Series Pick-up Truck, the Buick LeSabre and the Oldsmobile Delta 88.
The Company also manufactures decorative, painted and assembled injection molded
components at the Mendon facility that are used in automotive vehicle interiors.
MANUFACTURING
Lear has developed a comprehensive manufacturing philosophy for seat
systems that allows it to make optimal use of its manufacturing facilities in a
high volume market. This concept, based on JIT manufacturing techniques, was
developed in the early 1980's to meet the requirements of its customers seeking
to reduce costs and improve quality. The Company has over ten years of
experience in JIT management and manufacturing. See "Business -- Products."
Seat and component assembly techniques fall into two major categories,
traditional assembly methods (in which fabric is affixed to a frame using
velcro, wire or other material) and more advanced bonding processes. There are
two bonding techniques employed by the Company, the Company's patented SureBond
process, a technique in which fabric is affixed to the underlying foam padding
using adhesives, and the Company's licensed foam-in-place process, in which foam
is injected into a fabric cover. The SureBond process has several major
advantages when compared to traditional methods, including design flexibility,
increased quality and lower cost. The SureBond process, unlike alternative
bonding processes, results in a more comfortable seat in which air can circulate
freely. The SureBond process, moreover, is reversible, so that seat covers that
are improperly installed can be removed and repositioned properly with minimal
materials cost. In addition, the SureBond process is not capital intensive when
compared to competing technologies.
The seat assembly process begins with pulling the requisite components from
inventory. Inventory at each plant is kept at a minimum, with each component's
requirement monitored on a daily basis. This allows the plant to devote the
maximum space to production, but also requires precise forecasts of the day's
output. Seats are assembled by three or four person teams, then tested and
packaged for shipment. The Company operates its own specially designed trailer
fleet that accommodates the off-loading of vehicle seats at the assembly plant.
Lear obtains steel, aluminum and foam chemicals used in its seat systems
from various producers under various supply arrangements. Leather, fabric and
purchased components generally are purchased from various suppliers under
contractual arrangements typically lasting no longer than one year. All such
materials are readily available. Some of the purchased components are obtained
through the Company's own customers.
CUSTOMERS
Lear serves the worldwide automobile and light truck market, which produces
over 30 million vehicles annually. The outsourced market for automobile and
light truck seat systems in North America is approximately 65% of the total
North American seat systems market, which total market is estimated to have
annual revenues of approximately $6.0 billion. The outsourced market for seat
systems in Europe is approximately 41% of the total European seat systems
market, which total market is estimated to have annual revenues of approximately
$3.6 billion. The Company believes that the same competitive pressures that
contributed to the rapid expansion of its business in North America since 1983
will continue to encourage auto makers in the North American and the European
markets to outsource more of their seating requirements. Over the past three
years, the Company has aggressively pursued expansion in Europe, both with its
existing and new customers. Approximately 65%, 70% and 75% of Lear's net
revenues were from sales in the United States and Canada in the fiscal years
ended June 30, 1993, 1992 and 1991, respectively, with the balance of sales in
Europe and Mexico. On a pro forma basis, as if the NAB Acquisition had occurred
at the beginning of the twelve months ended December 31, 1993, net revenues in
the United States and Canada would have
30
<PAGE> 36
amounted to approximately 75% of the Company's total net revenues in the twelve
months ended December 31, 1993.
The Company's OEM customers currently include Ford, General Motors,
Chrysler, Volvo, Volkswagen, Saab, Mazda, BMW, Jaguar, Audi, Subaru, Isuzu,
Suzuki, Daimler-Benz, Renault and Peugeot. For additional information regarding
customers and foreign and domestic operations and sales, see Note 15,
"Geographic Segment Data," to the consolidated financial statements of the
Company included in this Prospectus.
In the past six years, in the course of retooling and reconfiguring plants
for new models and model changeovers, OEMs have eliminated seating production
from certain of their facilities, thereby committing themselves to purchasing
seat systems and components from outside suppliers. During this period, the
Company became a supplier of these products for a significant number of new
models, many on a JIT basis.
The purchase of seat systems on a JIT basis has allowed the Company's
customers to realize a competitive advantage as a result of (i) a reduction in
labor costs since suppliers like the Company generally enjoy lower direct labor
rates, (ii) the elimination of working capital and personnel costs associated
with the production of seat systems by the OEM, (iii) a reduction in net
overhead expenses and capital investment due to the availability of
approximately 60,000 to 80,000 square feet of plant space for expansion of other
manufacturing operations which was previously associated with seat production at
the OEM facilities and (iv) a reduction in transaction costs because of the
customer's ability to deal with a limited number of sophisticated system
suppliers as opposed to numerous individual component suppliers. In addition,
the Company offers improved quality and on-going cost reductions to its
customers through design improvements and its Champion Program.
The Company receives blanket purchase orders from its customers that
normally cover annual requirements for seats to be supplied for a particular
vehicle model. Such supply relationships typically extend over the life of the
model, which is generally four to seven years, and do not require the purchase
by the customer of any minimum number of seats. In order to reduce its reliance
on any one model, the Company produces complete seat systems and components for
a broad cross-section of both new and more established models. Vehicles with
seat systems sold by the Company and its affiliates in the indicated locations
include:
UNITED STATES AND CANADA:
<TABLE>
<S> <C>
OEM/MODELS OEM/MODELS
FORD: GENERAL MOTORS:
Ford Crown Victoria Buick LeSabre
Ford Explorer Sports Bucket, Buick Park Avenue
Eddie Bauer & Limited Edition Buick Regal
Ford F-Series Pick-up Truck Chevrolet Corvette
Ford Lightning Pick-up Truck Chevrolet Lumina
Ford Mustang GT & LX Chevrolet Blazer/GMC Yukon
Ford Probe Chevrolet C/K Pick-up Truck
Ford Ranger Supercab/STX Chevrolet Kodiak
Ford Taurus SHO Chevrolet Sport Van
Ford Thunderbird SC Chevrolet/GMC G-Van
Ford Windstar Minivan Chevrolet/GMC Pick-up Truck
Mercury Cougar XR7 Chevrolet/GMC Suburban
Mercury Grand Marquis GMC Rally/Vandura Van
CHRYSLER: GMC Sierra Crew Cab
Dodge Dakota Pick-up Truck GMC Sierra Pick-up Truck
Dodge Ram Charger GMC Top Kick
Dodge Ram Pick-up Truck Oldsmobile Delta 88
Dodge Viper FUJI/ISUZU:
CAMI -- GENERAL MOTORS/SUZUKI: Isuzu Trucks
Geo Metro Subaru Legacy
Geo Tracker HYUNDAI:
Suzuki Sidekick Sonata
Suzuki Swift
</TABLE>
31
<PAGE> 37
<TABLE>
<S> <C>
EUROPE:
OEM/MODELS OEM/MODELS
GENERAL MOTORS: SAAB:
Opel Astra Saab 900
Opel Calibra Saab 9000
Opel Corsa VOLVO:
Opel Omega 800 Series
Opel Senator 900 Series
Opel Vectra JAGUAR:
CHRYSLER: XJS
Eurostar Minivan XJ6
MEXICO:
OEM/MODELS OEM/MODELS
FORD: GENERAL MOTORS:
Ford Escort Chevrolet S-10 Blazer
Ford F-Series Chevrolet Cavalier
Ford Thunderbird VOLKSWAGEN:
Mercury Cougar Beetle
Mercury Grand Marquis Golf
Mercury Tracer Jetta
CHRYSLER: Vanagon Minivan
Club Cab Pick-up Truck
Dodge Ram Pick-up Truck
</TABLE>
Because of the economic benefits inherent in the JIT manufacturing process
and the costs associated with reversing a decision to purchase seat systems from
an outside supplier, the Company believes that automobile manufacturers' level
of commitment to purchasing seating from outside suppliers, particularly on a
JIT basis, will increase. However, under the contracts currently in effect in
the United States between each of General Motors, Ford and Chrysler with the
United Automobile, Aerospace and Agricultural Implement Workers of America (the
"UAW"), in order for any of such manufacturers to obtain components that it
currently produces itself from external sources, it must first notify the UAW of
such intention. If the UAW objects to the proposed outsourcing, some agreement
will have to be reached between the UAW and the OEM. Factors that will normally
be taken into account by the UAW and the OEM include whether the proposed new
supplier is technologically more advanced than the OEM, cost and whether the OEM
will be able to reassign union members whose jobs are being displaced to other
jobs within the same factories. As part of its long-term agreement with General
Motors, the Company operates its Grand Rapids, Michigan facility with General
Motors employees and reimburses General Motors for the wages of such employees
on the basis of the Company's employee wage structure. The Company is
negotiating with General Motors to expand this program to other facilities. The
Company enters into these arrangements to enhance its relationship with its
customers.
The Company's contracts with its major customers generally provide for an
annual productivity price reduction and, in some cases, provide for the recovery
of increases in material and labor costs. Cost reduction through design changes,
increased productivity and similar programs with the Company's suppliers have
generally offset changes in selling prices. The Company's cost structure is
comprised of a high percentage of variable costs. The Company believes that this
structure provides it with additional flexibility during economic cycles.
General Motors and Ford, the two largest automobile and light truck
manufacturers in the world, are also the Company's two largest customers,
accounting for 45% and 28%, respectively, of the Company's net sales during the
twelve months ended December 31, 1993. After giving pro forma effect to the NAB
Acquisition, the Company's net sales to General Motors and Ford for the twelve
months ended December 31, 1993 were approximately equal.
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<PAGE> 38
MARKETING AND SALES
Lear markets its products by maintaining strong relationships with its
customers fostered during its 76-year history through strong technical and
product development capabilities, reliable delivery of high quality products,
strong customer service, innovative new products and a competitive cost
structure. Close personal communication with automobile manufacturers from the
corporate to the plant level is an integral part of the Company's marketing
strategy. Automobile manufacturers have increasingly reduced their number of
suppliers as part of their move to purchase systems rather than discrete
components. This process favors suppliers, like the Company, with established
ties to automobile manufacturers and the demonstrated ability to adapt to the
new competitive environment in the automotive industry.
The Company's sales are originated almost entirely by its sales staff. This
marketing effort is augmented by design and manufacturing engineers who work
closely with automobile manufacturers from the preliminary design to the
manufacture and supply of a seating system. Manufacturers have increasingly
looked to suppliers like the Company to assume responsibility for the
introduction of product innovation, shorten the development cycle of new models,
decrease tooling investment and labor costs, reduce the number of costly design
changes in the early phases of production and improve seat comfort and
functionality. Once the Company is engaged to develop the design for the seating
of a specific vehicle model, it is also generally engaged to supply the vehicle
with seating when it goes into production. The Company has responded to this
trend by improving its engineering and technical capabilities and building
technical centers in the United States in 1988 and in Europe in 1991 at a cost
of approximately $8.0 million in the aggregate. The Company is also currently in
the process of investing approximately $6.0 million in developing full-scope
engineering capabilities, including all aspects of safety and functional testing
and comfort assessment. In addition, the Company has established ten remote
engineering sites in close proximity to several of its OEM customers to enhance
customer relationships and design activity. As part of the NAB Acquisition, the
Company is assuming, during the five-year term of the supply agreement entered
into in connection with the NAB Acquisition, responsibility for a substantial
portion of Ford's seat systems design capability and, accordingly, is building a
75,000 square foot dedicated engineering facility in Dearborn, Michigan to
service Ford products.
TECHNOLOGY
Lear conducts advanced product design and development at its technical
centers in Southfield, Michigan and Rietberg, Germany. At the technical centers,
the Company tests its products to determine compliance with applicable safety
standards, the products' quality and durability, response to environmental
conditions and user wear and tear. In the past, the Company has developed a
number of designs for innovative seat features which it has patented, including
ergonomic features such as adjustable lumbar supports and bolster systems and
adjustable thigh supports. In addition, the Company incorporates many
convenience, comfort and safety features into its seat designs, including
storage armrests, rear seat fold down panels, integrated restraint systems and
child restraint seats. The Company has recently invested to further upgrade its
CAD/CAM systems including three-dimensional color graphics, customer
telecommunications and direct interface with customer CAD systems. Research and
development costs incurred in connection with the development of new products
and manufacturing methods (not including additional research and development
costs paid for by the customer) amounted to approximately $16.2 million, $18.2
million, $11.4 million, $7.9 million for the twelve months ended December 31,
1993 and the fiscal years ended June 30, 1993, 1992 and 1991, respectively.
Lear uses its patented SureBond process (the patent for which has
approximately 10 years remaining) in bonding seat cover materials to the foam
pads used in certain of its seats. The SureBond process is used to bond a
pre-shaped cover to the underlying foam to minimize the need for sewing and
achieve new seating shapes, such as concave shapes, which were previously
difficult to manufacture.
The Company, through its wholly-owned subsidiary, Progress Pattern Corp.
("Progress Pattern"), produces patterns and tooling for use in the automotive
casting industry. Its capabilities include foundry and vacuum form tooling,
porous mold design and lost foam tooling production. The pattern operation is
also integral to the Company's seating design programs, including independent
product design and development, contract design, engineering services,
manufacturing feasibility and engineering cost studies. Progress Pattern
33
<PAGE> 39
also manufactures production tooling for the Company's plastic and foam molding
operations. In addition to providing support for the Company's continuing seat
design, Progress Pattern provides services to its own customers, including Ford
and General Motors. It produced the casting tooling for the General Motors
Saturn engine.
The Company holds a number of mechanical and design patents covering its
automotive seating products and has numerous applications for patents currently
pending. In addition, the Company holds several trademarks relating to various
manufacturing processes. The Company also licenses its technology to a number of
seating manufacturers.
The Company has and will continue to dedicate resources to research and
development to maintain its position as a leading developer of technology in the
automotive seating industry.
JOINT VENTURES AND MINORITY INTERESTS
Lear conducts a portion of its business through joint ventures in order to
facilitate the exchange of technical information and the establishment of
business relationships with foreign automakers. The joint ventures in which the
Company participates include: (i) General Seating of America, a joint venture
with NHK Spring Co., Ltd. of Japan in which the Company has a 35% interest,
which supplies trimmed seating to SIA (a joint venture between Fuji Heavy
Industries (Subaru) and Isuzu) and (ii) General Seating of Canada Limited, a
joint venture with NHK Spring Co., Ltd. of Japan in which the Company has a 35%
interest, which supplies trimmed seating from a plant in Woodstock, Ontario to
CAMI (a joint venture between Suzuki and General Motors). In addition, the
Company has a 31% interest in Probel, S.A., a Brazilian automotive seat
component and furniture manufacturer, and a 20% interest in Pacific Trim Corp.
Ltd., a Thai manufacturer of automotive vehicle seat systems and seat covers.
See Note 7, "Investments in Affiliates," to the consolidated financial
statements of the Company included in this Prospectus.
COMPETITION
Lear is one of the two primary suppliers in the outsourced North American
seat systems market. The Company's main independent competitor is Johnson
Controls, Inc., and it competes, to a lesser extent, with Douglas & Lomason
Company and Magna International, Inc. The Company's major independent
competitors in Europe, besides Johnson Controls, Inc., are Bertrand Faure
(headquartered in France) and Keiper Recaro (headquartered in Germany). The
Company also competes with the OEMs' in-house seating suppliers. The Company
competes on the basis of technical expertise, reliability, quality and price.
The Company believes its technical resources, product design capabilities and
customer responsiveness are the key factors that allow it to compete
successfully in the seat system market.
SEASONALITY
Lear's principal operations are directly related to the automotive
industry. Consequently the Company may experience seasonal fluctuation to the
extent automotive vehicle production slows, including times such as the summer
months when plants close for model year changeovers and vacation and around
Christmas when plants close for approximately 1.5 weeks. Historically, the
Company's sales have been the strongest in the second calendar quarter. However,
in the twelve months ended December 31, 1993, net sales in the fourth calendar
quarter exceeded the second calendar quarter due to the NAB Acquisition and new
programs which the Company began during 1993. Net sales for the twelve months
ended December 31, 1993 by calendar quarter broke down as follows: first
quarter, 23.4%; second quarter, 25.0%; third quarter, 20.5%; and fourth quarter,
31.1%. Operating profit of the Company has historically been strongest in the
second calendar quarter and the weakest in the third calendar quarter. See Note
16, "Quarterly Financial Data," in the consolidated financial statements
included elsewhere in this Prospectus.
EMPLOYEES
After giving effect to the NAB Acquisition, the Company employs
approximately 4,600 persons in the United States, 10,000 in Mexico, 1,500 in
Canada, 1,400 in Germany, 800 in Sweden, 90 in Austria and 80 in France. Of
these, about 2,700 are salaried employees and the balance are paid on an hourly
basis.
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<PAGE> 40
Approximately 9,600 of the Company's employees are members of unions. The
Company has collective bargaining agreements with several unions including the
UAW; National Automobile, Aerospace and Agricultural Implement Workers Union of
Canada; the Textile Workers of Canada; the Confederation of Mexican Workers; the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of
America; and the International Association of Machinists and Aerospace Workers,
AFL-CIO, and its Local Lodge PM 2811 of Detroit and vicinity. Each of the
Company's facilities has a separate contract with the union which represents the
workers employed there, with each such contract having an expiration date
independent of the Company's other labor contracts. The Company has experienced
some labor disputes at its plants, none of which has significantly disrupted
production or had a materially adverse effect on its operations. The Company has
been able to resolve all such labor disputes and believes its relations with its
employees are good.
FACILITIES
The Company's operations are conducted through 60 facilities, including
four facilities acquired as part of the NAB Acquisition and six facilities
operated by the Company's less than majority-owned affiliates. The Company's
management is headquartered in Southfield, Michigan. The headquarters building,
which accommodates both the main office and the technical center, was completed
in June 1988. Twenty-two of the plants are dedicated to providing seat systems
to nearby assembly plants. The others focus on the production for a combination
of seat systems and other seating products. Substantially all owned facilities
secure borrowings under the Company's various debt agreements. See "Description
of Certain Indebtedness."
The Company's facilities are located in appropriately designed buildings
which are kept in good repair with sufficient capacity to handle present
volumes. The Company has designed its facilities to provide for efficient JIT
manufacturing of its products. No facility is materially underutilized.
Management believes substantially all of the Company's property and equipment is
in good condition and that it has sufficient capacity to meet its current and
expected manufacturing and distribution needs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company --
Capital Expenditures."
The following table provides certain information regarding the Company's 60
operating facilities, including five facilities currently under construction:
<TABLE>
<CAPTION>
BUILDING
OWNED/ SQUARE LEASE
FACILITY LEASED FEET FUNCTION EXPIRATION
- ----------------------------------- ------ -------- ------------------------------- ---------------
<S> <C> <C> <C> <C>
UNITED STATES:
Southfield, MI..................... O 70,000 administrative offices and --
technical center
Detroit, MI........................ O 156,800 manufacture of seat systems --
Romulus I, MI...................... O 89,600 manufacture of seat systems --
Romulus II, MI..................... O 88,200 manufacture of seat systems --
Fenton, MI......................... O 75,800 manufacture of seat systems --
Morristown, TN..................... O 235,900 manufacture of seat components --
Lorain, OH......................... L 42,100 manufacture of seat systems July 1998
Mendon, MI......................... O 168,500 manufacture of seat components --
and other plastic products
Southfield, MI..................... O 65,000 manufacture of seat tooling --
Grand Rapids, MI................... (1) 66,560 manufacture of seat frames --
Southfield, MI..................... O 19,000 technical center --
Louisville, KY..................... L 72,000 manufacture of seat systems January 1995
Janesville, WI..................... O 120,000 manufacture of seat systems --
Fairhaven, MI...................... L 68,603 manufacture of seat covers July 1995
Dearborn, MI....................... L 22,250 engineering offices July 1997
Flint, MI.......................... L 10,083 engineering offices August 1996
Warren, MI......................... L 17,500 engineering offices March 1997
Dearborn, MI....................... L(2) 23,483 engineering offices March 1995
Duncan, SC......................... L(3) 38,926 manufacture of seat systems 10 years from
completion
</TABLE>
35
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
Lordstown, OH...................... O(3) 96,000 manufacture of seat systems --
Pontiac, MI........................ L(3) 101,600 manufacture of seat systems August 1997
CANADA:
Kitchener, Ontario................. O 343,044 manufacture of seat frames --
Ajax, Ontario...................... O 120,000 manufacture of seat systems --
Whitby, Ontario.................... O 187,400 manufacture of seat systems --
Cowansville, Quebec................ L 50,750 manufacture of seat systems (4)
Oakville, Ontario.................. O 90,000 manufacture of seat systems --
St. Thomas, Ontario................ L(3) 100,000 manufacture of seat systems January 2005
EUROPE:
Meaux, France...................... O 48,300 manufacture of seat components --
Paris, France...................... L 2,500 administrative offices January 1995
Blere, France...................... O 14,300 manufacture of wire components --
Rietberg, Germany.................. O 193,143 manufacture of seat components --
Rietberg, Germany.................. O 17,635 technical center --
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Quakenbruck, Germany............... O 139,500 manufacture of seat components --
Gustavsburg, Germany............... L 177,000 manufacture of seat systems June 2002
Eisenach, Germany.................. O 77,500 manufacture of seat systems --
Schwalbach, Germany................ L 10,500 administrative offices October 1996
Koflach, Austria................... L 63,307 manufacture of seat systems January 1995
Trollhattan, Sweden................ L 135,102 manufacture of seat systems December 1996
Bengtsfors, Sweden................. L 246,726 manufacture of seat systems September 2007
Coventry, England.................. L(5) 22,000 manufacture of seat systems May 1994
MEXICO:
Saltillo I......................... L 91,025 manufacture of seat covers January 1998
Saltillo II........................ L(3) 43,000 manufacture of seat systems July 1994
Mexico City........................ L 6,880 administrative offices June 1997
Tlahuac............................ O 339,000 manufacture of seat components --
L 8,900 warehouse June 1997
Naucalpan.......................... L 66,000 manufacture of seat systems August 1994
Cuautitlan......................... L 75,000 manufacture of seat systems (4)
Puebla............................. L 81,000 manufacture of seat systems (4)
Hermosillo......................... O 121,000 manufacture of seat systems --
Atoto.............................. L 18,275 manufacture of seat systems June 1996
Rio Bravo.......................... O(6) 202,700 manufacture of seat covers --
San Lorenzo........................ O(6) 287,000 manufacture of seat covers --
La Cuesta.......................... O(6) 392,500 manufacture of seat covers --
Omega.............................. L(7) 270,000 manufacture of seat systems November 1994
AFFILIATES OR MINORITY INTERESTS:
Woodstock, Ontario; Canada......... O(8) 120,000 manufacture of seat systems --
Frankfort, Indiana................. O(8) 82,000 manufacture of seat systems --
Khorat; Thailand................... L(8) 30,000 manufacture of seat covers and --
seat systems
Suzano, Sao Paulo; Brazil.......... O(8) 344,448 manufacture of seat components --
Ipiranga, Sao Paulo; Brazil........ L(8) 355,212 manufacture of seat components --
Jaguare, Sao Paulo; Brazil......... L(8) 96,876 manufacture of seat components --
</TABLE>
- -------------------------
(1) This facility is operated for General Motors.
(2) A new 75,000 square foot engineering facility is currently under
construction.
(3) Facility currently under construction.
(4) Currently leased on a month-to-month basis pending agreement on a longer
lease term.
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<PAGE> 42
(5) A new 42,000 square foot manufacturing facility is currently under
construction, which will be dedicated to the manufacture of seat systems.
(6) Acquired as part of the NAB Acquisition.
(7) On March 15, 1994, the Company exercised an option to cause Ford to purchase
this facility along with a facility in El Jarudo, Mexico in consideration of
Ford cancelling $19.9 million of indebtedness owed by Favesa to Ford. At
that time, the Company vacated the El Jarudo facility and entered into a
lease of the Omega facility which expires on the earlier of November 30,
1994 or the date the Company vacates the Omega facility.
(8) Owned or leased by affiliates or minority interests of the Company.
LITIGATION
Management of the Company does not believe that any of the litigation in
which the Company is currently engaged, either individually or in the aggregate,
will have a material effect on the Company's consolidated financial position or
future results of operations.
ENVIRONMENTAL
The Company is subject to various laws, regulations and ordinances which
govern activities such as discharges to the air and water, as well as handling
and disposal practices for solid and hazardous wastes and which impose costs and
damages associated with spills, disposal or other releases of hazardous
substances. The Company believes that it is in substantial compliance with such
requirements. Management does not believe that it will incur compliance costs
pursuant to such requirements that would have a material adverse effect on the
Company's consolidated financial position or future results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company -- Environmental Matters."
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<PAGE> 43
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the individuals who will
be directors and executive officers of the Company upon the closing of the
Offerings.
<TABLE>
<CAPTION>
YEARS WITH THE
NAME AGE POSITION COMPANY
- ------------------------------ --- ------------------------------------------- --------------
<S> <C> <C> <C>
Kenneth L. Way................ 54 Chairman of the Board and Chief Executive 28(1)
Officer
Robert E. Rossiter............ 48 President, Chief Operating Officer and 22(1)
Director
James H. Vandenberghe......... 44 Executive Vice President and Chief 21
Financial Officer
James A. Hollars.............. 49 Senior Vice President -- International 20
Operations
Barthold H. Hoemann........... 54 Senior Vice President -- North American JIT 13
Operations
Theodore E. Melson............ 50 Senior Vice President -- Manufacturing 6
Planning
Donald J. Stebbins............ 36 Vice President, Treasurer and Assistant 2
Secretary
Joseph F. McCarthy............ 50 Vice President, Secretary and General --
Counsel
Larry W. McCurdy.............. 58 Director (1)
Jeffrey P. Hughes............. 53 Director (2)
David P. Spalding............. 39 Director (2)
James A. Stern................ 43 Director (3)
Eliot Fried................... 61 Director (3)
Robert W. Shower.............. 56 Director (4)
Gian Andrea Botta............. 40 Director (5)
Alan Washkowitz............... 53 Director (6)
</TABLE>
- -------------------------
(1) Member of the Board of Directors of the Company since 1988.
(2) Member of the Board of Directors of the Company since September 1991.
(3) Member of the Board of Directors of the Company since the Merger and
Director of Holdings from September 1991 until the Merger.
(4) Member of the Board of Directors of the Company since the Merger and
Director of Holdings from November 1991 until the Merger.
(5) Member of the Board of Directors of the Company since the Merger and
Director of Holdings from July 1993 until the Merger.
(6) Mr. Washkowitz will become a member of the Board of Directors of the Company
immediately prior to the consummation of the Offerings.
38
<PAGE> 44
Set forth below is a description of the business experience of each
director and executive officer of the Company.
Kenneth L. Way. Mr. Way was elected to and has held the position of
Chairman of the Board and Chief Executive Officer of the Company since 1988.
Prior to this he served as Corporate Vice President, Automotive Group of Lear
Siegler, Inc. ("LSI") since October 1984. During the previous six years, Mr. Way
was President of LSI's General Seating Division. Prior to this, he was President
of LSI's Metal Products Division in Detroit for three years. Other positions
held by Mr. Way during his 28 years with LSI include Manufacturing Manager of
the Metal Products Division and Manager of Production Control for the Automotive
Division in Detroit. Mr. Way also serves as a director of Hayes Wheels
International Incorporated.
Robert E. Rossiter. Mr. Rossiter became President of the Company in 1984
and a Director and the Chief Operating Officer of the Company in 1988. He joined
LSI in 1971 in the Material Control Department at the Automotive Division, then
joined the Metal Products Division of LSI as Production Control Manager, and
subsequently moved into sales and sales management. In 1979, he joined the
General Seating Division as Vice President of Sales and worked in that position,
as well as Vice President of Operations, until 1984.
James H. Vandenberghe. Mr. Vandenberghe was appointed Senior Vice President
- -- Finance, Secretary and Chief Financial Officer of the Company in 1988. He was
appointed Executive Vice President of the Company in 1993. He joined LSI's
Automotive Division in 1973 as a financial analyst and was promoted to positions
at the Metal Products Division and the Automotive Group office, and in 1978 was
named the Vice President -- Finance for the Plastics Division. In 1983, Mr.
Vandenberghe was appointed Vice President -- Finance for the General Seating
Division. Prior to 1988, Mr. Vandenberghe had been responsible for project
management, United States operations, and international operations of the
Company.
James A. Hollars. Mr. Hollars is currently Senior Vice President --
International Operations of the Company. He was promoted to Vice President --
International upon the sale of LSI's Power Equipment Division to Lucas
Industries in 1988. Mr. Hollars joined LSI's Metal Products Division in 1973 as
the Manufacturing Manager and later served as Vice President -- Manufacturing
for No-Sag Spring Division. In 1979, he was named President of the Foam Products
Division and was subsequently promoted to President at the Anchorlok Division in
1985 and the Power Equipment Division in 1986.
Barthold H. Hoemann. Mr. Hoemann is Senior Vice President -- North American
JIT Operations of the Company. He was promoted to this position in 1993.
Previously he served as Vice President -- Component Operations for Seating in
1992 and 1993 and as Vice President and General Manager of Lear's subsidiary,
Lear Plastics Corporation, in 1991 and 1992. From 1988 until 1991, Mr. Hoemann
was the Chief Executive Officer of Peerless Corporation. Mr. Hoemann has over 30
years experience as a senior manager and officer in manufacturing companies such
as the AC Spark Plug Division of General Motors and the Plastics and Peerless
Divisions of LSI.
Theodore E. Melson. Mr. Melson is Senior Vice President -- Manufacturing
Planning of the Company. Mr. Melson was promoted to Senior Vice President in
1992, before which he was responsible for all North American JIT Operations of
the Company. Mr. Melson joined the Seating Group in 1987 after 25 years with
General Motors. His latest assignment at General Motors was as Director of
Materials Management at the Willow Run assembly plant. During his General Motors
career, he worked for Fisher Body Division, Chevrolet Division, General Motors
Assembly Division and Buick-Olds-Cadillac Division. He held positions in many
areas of Materials, Manufacturing Systems Development, Forward Planning and
Industrial Engineering.
Donald J. Stebbins. Mr. Stebbins is currently Vice President and Treasurer
of the Company. He joined the Company in June 1992 from Bankers Trust Company,
New York, where he was Vice President for four years. Prior to his tenure at
Bankers Trust Company, Mr. Stebbins held positions at Citibank, N.A. and The
First National Bank of Chicago.
Joseph F. McCarthy. Mr. McCarthy was elected Vice President, Secretary and
General Counsel of Lear effective April 1, 1994. Prior to joining Lear, Mr.
McCarthy served as Vice President -- Legal and Secretary for both Hayes Wheels
International, Inc. and Kelsey-Hayes Company. Prior to joining Hayes Wheels
39
<PAGE> 45
International, Inc. and Kelsey-Hayes Company, Mr. McCarthy was a partner in the
law firm of Kreckman & McCarthy from 1973 to 1983.
Larry W. McCurdy. Mr. McCurdy became a Director of the Company in 1988. Mr.
McCurdy has been the President and Chief Executive Officer of Moog Automotive,
Inc. since November 1985, and prior thereto President and Chief Operating
Officer of Echlin, Inc. ("Echlin"), since August 1983, after serving as Vice
President of Finance from February 1983. Prior to joining Echlin, he served in
various material positions with Tenneco, Inc. He was formerly Chairman of the
Board of Directors of the Motor and Equipment Manufacturing Association (MEMA).
At the present time he serves as a director of Mohawk Industries, Inc., Breed
Technologies, Inc. and as a trustee of Millikin University.
Jeffrey P. Hughes. Mr. Hughes became a Director of the Company in September
1991. He has been a Managing Director of Lehman Brothers Inc. for more than five
years, and is a Director of Sun Distributors, L.P. and Parisian, Inc.
David P. Spalding. Mr. Spalding became a Director of the Company in
September 1991. He has been a Managing Director of Lehman Brothers Inc. since
February 1991. Previously, he held the position of Senior Vice President of
Lehman Brothers Inc. from September 1988 to February 1991. From April 1987 to
September 1988, he was Senior Vice President of General Electric Capital
Corporation Corporate Finance Group, Inc. Prior to 1987 he was Vice President of
The First National Bank of Chicago. Mr. Spalding is a Director of Parisian,
Inc., American Marketing Industries Holdings Inc. and SLB/GP Inc.
James A. Stern. Mr. Stern became a Director of the Company on December 31,
1993 upon consummation of the Merger. From September 1991 until the Merger, Mr.
Stern was a Director of Holdings. He has been a Managing Director of Lehman
Brothers Inc. for more than five years. He is also a director of K&F Industries
Inc., American Marketing Industries Holdings Inc., Infinity Broadcasting
Corporation, R.P. Scherer Corporation and Noel Group, Inc.
Eliot Fried. Mr. Fried became a Director of the Company on December 31,
1993 upon consummation of the Merger. From September 1991 until the Merger, Mr.
Fried was a Director of Holdings. He has been a Managing Director of Lehman
Brothers Inc. for more than five years. Mr. Fried is a director of Bridgeport
Machines, Inc., Energy Ventures Corporation and American Marketing Industries
Holdings Inc.
Robert W. Shower. Mr. Shower became a Director of the Company on December
31, 1993 upon consummation of the Merger. From November 1991 until the Merger,
Mr. Shower was a Director of Holdings. Mr. Shower was appointed Senior Vice
President and Chief Financial Officer of Seagull Energy Corporation in March
1992, elected a director in May 1992, and recently named Executive Vice
President. Prior thereto, he served as Senior Vice President of Corporate
Development at Albert Fisher, Inc. in 1991 and 1992, Vice President of Finance
and CFO at AmeriServ in 1990 and 1991 and as a Managing Director of Corporate
Finance with Lehman Brothers Inc. from 1986 to 1990. From 1964 to 1986, Mr.
Shower served in a variety of financial executive positions with The Williams
Companies where he was a member of the Board of Directors and Executive Vice
President of Finance and Administration from 1977 to 1986.
Gian Andrea Botta. Mr. Botta became a Director of the Company on December
31, 1993 upon consummation of the Merger. Prior to the Merger, Mr. Botta was a
Director of Holdings. Mr. Botta has been President of IFINT-USA Inc., an
affiliate of FIMA, since 1993 and was Vice President of Acquisitions of
IFINT-USA Inc. for more than five years prior thereto. Mr. Botta is a member of
the Board of Directors of Kendall International, ICF International, and
Chartwell Re Corporation.
Alan Washkowitz. Mr. Washkowitz has been a Managing Director of Lehman
Brothers Inc. or its predecessors since 1978. Mr. Washkowitz also serves as a
director of K & F Industries, Inc. and Illinois Central Corporation.
Pursuant to the Company's Restated Certificate of Incorporation, which will
be in effect upon the closing of the Offerings, the Board of Directors will be
divided into three classes of directors serving staggered three-year terms. The
Company anticipates that Messrs. Way, McCurdy and Fried will be in the class of
directors whose terms will expire in 1995; Messrs. Rossiter, Shower and
Washkowitz will be in the class of directors
40
<PAGE> 46
whose terms will expire in 1996; and Messrs. Botta, Spalding, Hughes and Stern
will be in the class of directors whose terms will expire in 1997. All directors
of each class will hold their positions until the annual meeting of stockholders
at which the terms of the directors in such class expire, or until their
respective successors are elected and qualified. The Lehman Funds have agreed
with FIMA to elect Gian Andrea Botta as a director of the Company with a term
expiring in 1997. Mr. Botta is President of IFINT-USA Inc., an affiliate of
FIMA.
The Board of Directors has established permanent executive, audit and
compensation committees. The membership of each of these committees is
determined from time to time by the Board of Directors. The current members of
the Executive Committee of the Board of Directors are Messrs. Hughes, Spalding,
Stern, Way and Rossiter. The current members of the Audit Committee of the Board
of Directors are Messrs. Shower and McCurdy. The current members of the
Compensation Committee of the Board of Directors are Messrs. Hughes, Spalding
and McCurdy.
Directors of the Company who are not currently receiving compensation as
officers or employees of the Company or Lehman Brothers Inc. receive an annual
fee of $20,000 and a fee of $1,000 for each meeting of the Board of Directors or
any committee thereof that they attend, provided that directors are not paid a
fee for any additional meetings which are held on the same day. Directors are
also reimbursed for their expenses incurred in attending meetings. In addition,
directors of the Company are eligible to receive grants of stock options under
the 1994 Stock Option Plan. See "Management -- 1994 Stock Option Plan." Prior to
the commencement of the Offerings, Messrs. Shower and McCurdy will each receive
options to purchase 10,000 shares of Common Stock under the 1994 Stock Option
Plan.
Officers of the Company are elected by the Board of Directors and serve at
the discretion of the Board. Messrs. Way, Rossiter, Vandenberghe, Hollars,
Hoemann, Melson, Stebbins and McCarthy have employment agreements with the
Company. See "Management -- Employment Agreements."
EXECUTIVE COMPENSATION
The following table summarizes information concerning annual and long-term
cash and non-cash compensation paid to or accrued for the benefit of the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (collectively, the "named executive officers") for all
services rendered in all capacities to the Company for the six months ended
December 31, 1993 and for each of the Company's fiscal years ending June 30,
1993, 1992 and 1991. In February 1994, the Company changed its fiscal year end
from June 30 to December 31, effective December 31, 1993.
41
<PAGE> 47
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION(4)
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------- -------
OTHER RESTRICTED
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITIONS PERIOD(1) ($) ($)(2) ($)(3) (#) (#) ($) ($)(5)
- ---------------------------- ---------- -------- -------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kenneth L. Way.............. 6 months $237,000 $237,500 $830,000 $5,000
Chairman of the Board and FY1993 462,000 450,000 181,500 9,000
Chief Executive Officer FY1992 452,000 315,000
FY1991 415,000 205,000
Robert E. Rossiter.......... 6 months 173,000 172,500 830,000 3,000
President, Chief Operating FY1993 335,000 325,000 115,500 5,000
Officer and Director FY1992 325,000 220,000
FY1991 300,000 145,000
James H. Vandenberghe....... 6 months 123,000 127,500 277,000 3,000
Executive Vice President FY1993 223,000 175,000 85,800 5,000
and Chief Financial Officer FY1992 218,000 120,000
FY1991 200,000 82,000
James A. Hollars............ 6 months 127,000 68,000 277,000 3,000
Senior Vice President -- FY1993 230,000 125,000 66,000 3,000
International Operations FY1992 208,000 100,000
FY1991 198,000 60,000
Theodore E. Melson.......... 6 months 109,000 54,000 277,000 3,000
Senior Vice President -- FY1993 212,000 102,000 66,000 5,000
Manufacturing Planning FY1992 211,000 90,000
FY1991 200,000 60,000
</TABLE>
- -------------------------
(1) The six month period listed is the six months ended December 31, 1993 and
the fiscal years are the fiscal years ended June 30, 1993, 1992 and 1991.
(2) Pursuant to the Company's Senior Executive Incentive Compensation Plan, the
Company awards annual bonuses to its executive officers based on the
attainment of financial and nonfinancial objectives. All bonuses set forth
in this column were awarded pursuant to the Senior Executive Incentive
Compensation Plan. For a description of the Senior Executive Incentive
Compensation Plan and the criteria used for the determination of awards
thereunder, see "Management -- Senior Executive Incentive Compensation
Plan."
(3) Consists of one-time payments for past services to the named executive
officers.
(4) The Company does not have restricted stock award plans or long-term
incentive plans and has not granted stock appreciation rights ("SARs").
(5) Includes 401(k) contributions made and life insurance premiums paid by the
Company on behalf of the named executive officers.
42
<PAGE> 48
The following table provides information, with respect to the named
executive officers of the Company, concerning the grants of stock options during
the fiscal year ended June 30, 1993 and the potential value of unexercised
options on an aggregated basis. No stock options were granted to any such
officers during the six months ended December 31, 1993.
OPTION GRANTS IN THE FISCAL YEAR ENDED JUNE 30, 1993
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM
GRANTED IN FISCAL BASE PRICE EXPIRATION -------------------------------
NAME (#)(1) YEAR ($/SHARE) DATE 5%($) 10%($)
------ --------- ---------- ----------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth L. Way................. 181,500 13.2% $5.00 6-1-2002 $ 501,000 $1,232,000
Robert E. Rossiter............. 115,500 8.4% 5.00 6-1-2002 319,000 784,000
James H. Vandenberghe.......... 85,800 6.2% 5.00 6-1-2002 237,000 582,000
James A. Hollars............... 66,000 4.8% 5.00 6-1-2002 182,000 448,000
Theodore E. Melson............. 66,000 4.8% 5.00 6-1-2002 182,000 448,000
</TABLE>
- -------------------------
(1) For a discussion of the options granted, see "Management -- 1992 Stock
Option Plan" below.
The following table provides information, with respect to the named
executive officers, concerning the exercise or settlement of stock options
during the fiscal year ended June 30, 1993 and the six months ended December 31,
1993 and unexercised stock options held as of December 31, 1993.
AGGREGATED OPTION EXERCISES IN THE FISCAL YEAR ENDED JUNE 30, 1993
AND THE SIX MONTHS ENDED DECEMBER 31, 1993 AND
OPTION VALUES AT DECEMBER 31, 1993
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
1993 1993(1)
SHARES --------------- ---------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
------- ----------- ----------- --------------- ---------------
<S> <C> <C> <C> <C>
Kenneth L. Way........................... -- -- 388,245/181,500 $4,794,826/$1,568,160
Robert E. Rossiter....................... -- -- 232,947/115,500 2,876,895/ 997,920
James H. Vandenberghe.................... -- -- 147,543/85,800 1,822,156/ 741,312
James A. Hollars......................... -- -- 147,543/66,000 1,822,156/ 570,240
Theodore E. Melson....................... -- -- 147,543/66,000 1,822,156/ 570,240
</TABLE>
- -------------------------
(1) Based on a Common Stock valuation of $13.64 per share as of December 31,
1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Merger, the Company's compensation policies were determined
and executive officer compensation decisions were made by Holdings' Board of
Directors and its Compensation Committee (the "Holdings Compensation
Committee"). The Holdings Compensation Committee was comprised of three
non-employee directors: Messrs. Hughes, McCurdy and Spalding. Messrs. Hughes and
Spalding are both Managing Directors of Lehman Brothers Inc., an affiliate of
the Lehman Funds. The Lehman Funds beneficially own approximately 66.9% of the
Common Stock of the Company and, upon closing of the Offerings, will
beneficially own approximately 57.6% of the Common Stock of the Company (in each
case assuming all outstanding Warrants are exercised and no outstanding Options
are exercised). For periods after the Merger, the Board of Directors of the
Company has appointed a compensation committee (the "Compensation Committee")
comprised of the same individuals who served on the Holdings Compensation
Committee prior to the Merger.
43
<PAGE> 49
During the six months ended December 31, 1993 and the fiscal year ended
June 30, 1993, the Holdings Compensation Committee and the Compensation
Committee authorized the remuneration plans for senior management. In addition,
the Holdings Compensation Committee and the Compensation Committee exercised
administrative power with respect to the Company's remuneration plans. Neither
the Board of Directors of Holdings or the Company rejected or modified any
action taken by the Holdings Compensation Committee or the Compensation
Committee, respectively.
No member of the Holdings Compensation Committee or the Compensation
Committee was, during the fiscal year ended June 30, 1993 or the six months
ended December 31, 1993, an officer, former officer or employee of Holdings, the
Company or any of their subsidiaries. No executive officer of Holdings or the
Company served as a member of (i) the compensation committee of another entity
in which one of the executive officers of such entity served on the Holdings
Compensation Committee, (ii) the Board of Directors of another entity in which
one of the executive officers of such entity served on the Holdings Compensation
Committee or (iii) the compensation committee of another entity in which one of
the executive officers of such entity served as a member of Holdings' or the
Company's Board of Directors.
Lehman Brothers Inc., an affiliate of the Lehman Funds, acted as an
underwriter in connection with the Company's public offering of the Senior
Subordinated Notes and the 8 1/4% Subordinated Notes and is acting as an
underwriter in the Offerings contemplated hereby. Lehman Brothers Inc. also
provided advisory services to the Company in connection with the Equity
Investment (as defined herein) and the consummation of the Credit Agreement, for
which it received fees. In addition, Lehman Commercial Paper Inc., an affiliate
of the Lehman Funds, is a managing agent and a lender under the Credit
Agreement. See "Certain Transactions."
SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN
Lear has established a Senior Executive Incentive Compensation Plan
effective July 1, 1989 (the "Senior Executive Incentive Plan"). The Senior
Executive Incentive Plan provides for the assignment of target annual awards
expressed as a percentage of a participant's annual salary, and the actual
award, unless modified by the Board of Directors, will vary from 0% to 167% of
the target award opportunity based on attainment of financial and nonfinancial
objectives. The financial criteria, representing 60% of the bonus potential, are
based on achievement of a targeted level of pre-tax operating income and cash
flow for the overall Company based on the approved operating budget. An overall
average threshold is calculated, based on the ratio that the actual pre-tax
operating income and actual cash flow bear to the budget pre-tax operating
income and the budget cash flow. No payments are made unless 85% of that
threshold is attained, and a maximum attainment is set at 120% of that
threshold. The nonfinancial criteria, representing 40% of the bonus potential,
are based on the achievement of specific individual objectives that are
determined by the Chief Executive Officer and approved by the Board of Directors
of Lear. Participants in the Senior Executive Incentive Plan were selected from
executives who were in positions to materially influence the annual financial
results of Lear in the targeted areas. In the twelve month period ending
December 31, 1994, the target award opportunities under the Senior Executive
Incentive Plan for each of Messrs. Way, Rossiter, Vandenberghe, Hollars and
Melson are $285,000, $207,000, $153,000, $115,000 and $112,500, respectively.
MANAGEMENT INCENTIVE COMPENSATION PLAN
Lear has established a Management Incentive Compensation Plan effective
July 1, 1989 (the "Management Incentive Plan") for certain individuals who are
not participants in the Senior Executive Incentive Plan. The Management
Incentive Plan provides for the assignment of target annual awards expressed as
a percentage of a participant's annual salary, and the actual award will vary
from 0% to 140% of the target award opportunity based on attainment of financial
and nonfinancial objectives. The financial criteria, representing 50% of the
bonus potential, are based on achievement of a targeted level of pre-tax
operating income and cash flow for the overall Company based on the approved
operating budget. An overall average threshold is calculated, based on the ratio
that the actual pre-tax operating income and actual cash flow bear to the budget
pre-tax operating income and the budget cash flow. No payments are made unless
85% of that threshold is attained, and a maximum attainment is set at 120% of
that threshold. The nonfinancial criteria, representing 50% of the bonus
potential, are based on the achievement of specific individual objectives that
are determined
44
<PAGE> 50
by the senior management and approved by the Chief Executive Officer of Lear.
Participants in the Management Incentive Plan were selected from managers who
were in positions to materially influence the annual financial results of Lear
in the targeted areas.
PENSION PLAN AND BENEFITS
The executive officers (as well as other employees of Lear) participate in
the Lear Seating Corporation (LSC) Pension Plan (the "Pension Plan"). The
Pension Plan is a qualified pension plan under the Internal Revenue Code, which
is integrated with Social Security benefits. Any active employee of Lear who was
a participant in the Lear Siegler Diversified Holding Corp. Pension Plan on
September 29, 1988, is eligible to participate, and each other eligible employee
(non-union employees not covered by another pension plan and certain union
employees) becomes a participant on the July 1st or January 1st following
completion of one year of service. The benefits are funded by employer
contributions that are determined under accepted actuarial principles and
applicable Federal tax law.
The Pension Plan contains three sets of benefit provisions: the Lear
provisions, the Fabricated Products Operations ("FPO") provisions, and the
Progress Pattern provisions. The Lear provisions are the principal provisions of
the Pension Plan (see below). The FPO and Progress Pattern provisions are
grandfathering provisions carried forward from the Lear Siegler Diversified
Holdings Corp. Pension Plan, and apply to those participants who were covered by
such provisions of that plan.
Under the Lear formula, pension benefits are based on a participant's
"final average earnings," which is the average compensation for the highest five
consecutive calendar year earnings of the last 15 years of employment.
Compensation includes all cash compensation reported for federal income tax
purposes excluding sales incentive bonuses. Assuming retirement at age 65, the
annual retirement benefit (based on a life annuity) is equal to the greater of:
a. 1.10% times final average earnings times years of credited service
(to a maximum of 25 years) plus 0.65% times final average earnings in
excess of covered compensation times credited service (to a maximum
of 25 years), or
b. $177.00 times years of credited service.
Covered compensation is a 35 year average of the Social Security Taxable
Wage Base as defined in I.R.S. Notice 89-70.
Participants who are former FPO employees (as of December 31, 1985), or are
former employees of Progress Pattern Corporation (as of November 30, 1984), are
eligible to have their pension determined through the application of a floor
provision, which guarantees a minimum pension benefit. Pension benefits will be
calculated in two ways, using first the new Pension Plan formula, and then using
the floor provision. If the pension benefits are greater by applying the floor
provision, then the participants will receive benefits under the floor
provision.
Assuming retirement at age 65, by applying the floor provision the benefit
will be:
a. 0.8% times final average earnings times years of credited service
plus
b. 0.65% times final average earnings in excess of $10,000 times years
of credited service (to a maximum of 35 years).
Participants formerly covered by the Progress Pattern provisions were
covered by the FPO provisions on and after October 1, 1989.
The benefits under the Pension Plan become vested if a participant was
fully vested in the Lear Siegler Diversified Holdings Corp. Pension Plan, or
upon the attainment of five years of combined vesting service under the Lear
Siegler Diversified Holdings Corp. Pension Plan, and the Pension Plan, or upon
completion of five years of service.
45
<PAGE> 51
The following table indicates estimated annual benefits payable upon normal
retirement at age 65, based on a life annuity for various compensation levels
and years of service classification, under the Lear provisions:
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS
OF SERVICE INDICATED*
ANNUAL COVERED -------------------------------------------
COMPENSATION COMPENSATION 10 15 20 25
- ------------ ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$200,000 $ 55,500 $31,393 $47,089 $62,785 $78,481
250,000 55,500 36,443 54,665 72,886 91,108
300,000 55,500 36,443 54,665 72,886 91,108
350,000 55,500 36,443 54,665 72,886 91,108
400,000 55,500 36,443 54,665 72,886 91,108
450,000 55,500 36,443 54,665 72,886 91,108
500,000 55,500 36,443 54,665 72,886 91,108
and over
</TABLE>
- -------------------------
* The maximum annual retirement benefit under the Pension Plan for 1993 is
$91,108 and the maximum average compensation which can be considered in the
determination of annual compensation for 1993 is $228,860.
The following table indicates estimated annual benefits payable upon normal
retirement at age 65, based on a life annuity for various compensation levels
and years of service classifications under FPO provisions:
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS
OF SERVICE INDICATED*
-------------------------------------------
ANNUAL SALARY 10 15 20 25
- ------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 200,000 $28,350 $42,525 $56,700 $70,875
250,000 32,535 48,802 65,069 81,337
300,000 32,535 48,802 65,069 81,337
350,000 32,535 48,802 65,069 81,337
400,000 32,535 48,802 65,069 81,337
450,000 32,535 48,802 65,069 81,337
500,000 32,535 48,802 65,069 81,337
and over
</TABLE>
- -------------------------
* The maximum annual retirement benefit under the Pension Plan for 1993 is
$81,337 and the maximum average compensation which can be considered in the
determination of annual compensation for 1993 is $228,860.
Kenneth L. Way, Theodore E. Melson, and James A. Hollars are covered by the
Lear provisions, and Robert E. Rossiter and James H. Vandenberghe are covered by
the FPO provisions. At age 65, it is estimated that Kenneth L. Way will have 15
years of service with Lear; Robert E. Rossiter will have 21 years; Theodore E.
Melson will have 19 years; James H. Vandenberghe will have 25 years; and James
A. Hollars will have 20 years. The average annual compensation for participants
covered by the Lear provisions is substantially similar to the compensation
reported in the Summary Compensation Table. The compensation covered under the
Pension Plan for the fiscal year ending June 30, 1993 was $228,860 for Robert E.
Rossiter and James H. Vandenberghe, both of whom are covered under the FPO
provisions.
The Pension Plan grants credit for all years of pension service with Lear
Siegler Diversified Holdings Corp. and with Lear, and offsets the retirement
benefit payable by the Lear Siegler Diversified Holdings Corp. Pension Plan
against the benefit payable by the Pension Plan.
As an option to normal retirement, a participant who is age 55 or older
with 10 years of service may elect to receive an early retirement benefit
commencing at age 55 or older.
46
<PAGE> 52
401(K) SAVINGS PLAN
Lear adopted a plan effective February 1, 1989 pursuant to Section 401(k)
of the Internal Revenue Code (the "401(k) Plan") for non-union employees who
have completed a three month period of service and attained the age of
twenty-one. Under the 401(k) Plan, each eligible employee may elect to defer a
portion of his or her salary each year. The portion deferred will be paid by the
Company to the trustee under the 401(k) Plan. Lear makes a matching contribution
to the plan each month on behalf of each participant in an amount equal to 50%
of such participant's salary deferral contributions which are not in excess of
4% of such participant's compensation, provided however, that the matching
contribution for a participant in any year may not exceed $1,150. Matching
contributions become vested under the 401(k) Plan at a rate of 20% for each full
year of service. For the period ending June 30, 1993, each of the Chief
Executive Officer and the named executive officers of the Company received the
maximum matching contribution under the plan of $1,150.
1988 STOCK OPTION PLAN
Under a stock option plan dated September 29, 1988 (the "1988 Stock Option
Plan"), the Company has outstanding options to purchase 2,080,815 shares of
Common Stock, which are held by the Management Investors. All of these
outstanding options are fully vested and are exercisable at $1.29 per share.
SUPPLEMENTAL PENSION PLAN
Lear has maintained a supplemental pension plan (the "Supplemental Pension
Plan") originally established for officers of Lear Siegler, Inc. The
Supplemental Pension Plan provides supplemental retirement benefits in excess of
those provided by the Lear and FPO plans previously discussed pursuant to a
formula based on final average compensation and credited years of service.
Employees of Lear who were participants in the Supplemental Pension Plan for
officers of Lear Siegler, Inc. at September 30, 1988 are eligible to participate
in the Supplemental Pension Plan. Mr. Way is the only officer of Lear who is a
participant in the Supplemental Pension Plan. At age 65, Mr. Way will have 25
credited years of service under the Supplemental Pension Plan.
The following table indicates estimated supplemental annual benefits
payable upon normal retirement at age 65 based on a life annuity for various
compensation levels and years of service classifications under the Supplemental
Pension Plan provisions:
<TABLE>
<CAPTION>
ANNUAL BENEFIT FOR YEARS
OF SERVICE INDICATED
-----------------------------------------------
ANNUAL SALARY 10 15 20 25
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 300,000 $ 12,450 $ 18,674 $ 24,899 $ 31,124
400,000 29,950 44,924 59,899 74,874
500,000 47,450 71,174 94,899 118,624
600,000 64,950 94,424 129,899 162,374
700,000 82,450 123,674 164,899 206,124
800,000 99,950 149,924 199,899 219,874
900,000 117,450 176,174 234,899 293,624
1,000,000 134,950 202,424 269,899 337,374
</TABLE>
1992 STOCK OPTION PLAN
The Company has adopted the 1992 Stock Option Plan (the "1992 Stock Option
Plan"), pursuant to which management employees are eligible to receive awards of
stock options. The 1992 Stock Option Plan is administered by the Compensation
Committee of the Company's Board of Directors. Subject to the terms of the 1992
Stock Option Plan, the Committee selects the management employees eligible to
receive awards under the 1992 Stock Option Plan, determines the size of the
awards granted thereunder, and administers and interprets the plan.
Under the 1992 Stock Option Plan, the Company has outstanding options to
purchase 1,914,000 shares of Common Stock, which are held by certain management
personnel. All of these outstanding options are fully
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<PAGE> 53
vested and generally become exercisable at $5.00 per share as of September 28,
1996. However, if an option holder's employment with the Company terminates
prior to September 28, 1996, other than by reason of retirement, death or
disability, such holder's options will not become exercisable until September 1,
2001. Options held by a holder retiring prior to September 28, 1996 will become
exercisable on the earlier of two years from the date of retirement or September
28, 1996. If an option holder's employment terminates due to death or disability
prior to September 28, 1996, such holder's options will become exercisable on
September 28, 1996 and remain so for 90 days thereafter.
1994 STOCK OPTION PLAN
The Company has adopted the 1994 Stock Option Plan (the "1994 Stock Option
Plan"), pursuant to which directors, officers and employees of the Company and
other individuals who are primarily responsible for the management and success
of the Company are entitled to receive awards of options. Each option granted
pursuant to the 1994 Stock Option Plan shall be designated at the time of grant
as either an "incentive stock option" or as a "non-qualified stock option."
The 1994 Stock Option Plan is administered by the Compensation Committee of
the Company's Board of Directors. Subject to the terms of the 1994 Stock Option
Plan, the Committee determines who among those eligible will be granted options,
the time or times at which options will be granted, the number of shares to be
subject to options, the duration of options, any conditions to the exercise of
options, and the manner in and price at which options may be exercised.
Under the 1994 Stock Option Plan, the Company may grant options with
respect to a total of 625,000 shares of Common Stock. The Compensation Committee
will award options to purchase 498,750 shares of Common Stock (of which 173,500
will be granted to senior officers and directors of the Company) prior to the
consummation of the Offerings, each having an exercise price equal to the per
share public offering price in the Offerings.
Any key employee shall be eligible to receive incentive stock options or
non-qualified stock options granted under the 1994 Stock Option Plan. Any
employee, any director of the Company, whether or not an employee, and any other
individual who in the judgment of the Compensation Committee performs valuable
and important services for the Company shall be eligible to receive
non-qualified stock options.
The exercise price of each option issued under the 1994 Stock Option Plan
is determined by the Compensation Committee of the Company's Board of Directors,
provided that in the case of incentive stock options, the exercise price may not
be less than 100% of the grant date fair market value of the shares of Common
Stock covered by such options. If an incentive stock option is granted to an
employee who owns more than 10% of the total combined voting power of all
classes of the Company's outstanding capital stock, then the exercise price
thereof may not be less than 110% of the grant date fair market value of the
Common Stock covered by such option.
Options granted under the 1994 Stock Option Plan may not be transferred
other than by will or the laws of descent and distribution and, during the
lifetime of the option holder, may be exercised solely by him. The aggregate
fair market value (determined at the time the option is granted) of the shares
as to which an employee may first exercise incentive stock options in any one
calendar year may not exceed $100,000. The Compensation Committee may impose any
other conditions to exercise it deems appropriate.
EMPLOYMENT AGREEMENTS
Lear has entered into employment agreements with the individuals named in
the Summary Compensation Table. The employment agreements, as amended, expire on
October 1, 1995, and provide for, among other things, rates of compensation and
bonuses. Each of Messrs. Way's, Rossiter's and Vandenberghe's employment
agreement provides for an annual base salary of $475,000, $345,000, and
$255,000, respectively. Messrs. Hollars' and Melson's employment agreements
provide for an annual base salary of $265,000 and
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<PAGE> 54
$225,000, respectively. Increases in these salaries, as well as bonuses, are at
the sole discretion of the Board of Directors of the Company.
Each employment agreement provides that (i) upon the death of the employee,
Lear will pay to his estate or designated beneficiary his full base salary for
an additional 12 months; (ii) upon termination for disability, the employee will
receive all compensation payable under Lear's disability and medical plans and
programs plus an additional payment from Lear so that the aggregate amount of
salary continuation from all sources equals his base salary through the
remaining term of the agreement; and (iii) upon termination for good reason, the
employee will receive his full base salary to the end of the term of agreement.
If the employment agreement is terminated for cause, the employee is only
entitled to receive unpaid salary and benefits, if any, accrued through the
effective date of the employee's termination.
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<PAGE> 55
PRINCIPAL AND SELLING STOCKHOLDERS
The following table and accompanying footnotes set forth certain
information regarding beneficial ownership of the Company's Common Stock as of
January 31, 1994 prior to the Offerings and as adjusted to reflect the sale of
6,250,000 shares of Common Stock by the Company and 3,125,000 shares of Common
Stock by the Selling Stockholder in the Offerings, (i) by the Selling
Stockholder, (ii) by each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock, (iii) by each director
of the Company, (iv) by each named executive officer of the Company and (v) by
all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
PRIOR TO OFFERINGS AFTER OFFERINGS
------------------------------- -------------------------------
NUMBER OF NUMBER OF
SHARES SHARES OF SHARES
OF COMMON STOCK PERCENTAGE COMMON STOCK OF COMMON STOCK PERCENTAGE
OWNED OF BEING OWNED OF
BENEFICIALLY(1) COMMON STOCK OFFERED BENEFICIALLY(1) COMMON STOCK
--------------- ------------ ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Lehman Funds(2).................. 25,958,724 72.9% -- 25,958,724 62.0%
FIMA Finance
Management Inc.(3)............. 8,635,044 24.3 3,125,000 5,510,044 13.2
Management Investors as a
group(4)....................... 3,133,911(5) 8.3 -- 3,133,911(5) 7.1
Kenneth L. Way(6)(7)............. 573,969(8) 1.6 -- 573,969(8) 1.4
Robert E. Rossiter(6)(7)......... 338,877(9) * -- 338,877(9) *
James H. Vandenberghe(7)......... 220,572(10) * -- 220,572(10) *
Thomas E. Melson(7).............. 210,243(11) * -- 210,243(11) *
James A. Hollars(7).............. 210,243(11) * -- 210,243(11) *
Total Executive Officers and
Directors as a group
(8 individuals)................ 1,587,069(12) 4.3 -- 1,587,069(12) 3.7
</TABLE>
- -------------------------
* Less than 1%
(1) As of January 31, 1994 notices of exercise had been delivered to the
warrant agent with respect to Warrants exercisable for 1,360,491 shares of
Common Stock but no shares had been issued in exchange for such Warrants.
(2) The number of shares beneficially owned by the Lehman Funds includes
9,293,955 shares of Common Stock and 30,096 Warrants owned by Lehman
Brothers Merchant Banking Portfolio Partnership L.P. and 6,317,124 shares
of Common Stock and 20,460 Warrants owned by Lehman Brothers Capital
Partners II, L.P. (each located at Three World Financial Center, New York,
New York 10285); 2,555,157 shares of Common Stock and 8,283 Warrants owned
by Lehman Brothers Offshore Investment Partnership L.P. and 7,708,701
shares of Common Stock and 24,948 Warrants owned by Lehman Brothers
Offshore Investment Partnership-Japan L.P. (each located at Clarendon
House, Church Street, Hamilton HMCX, Bermuda). Lehman Brothers Merchant
Banking Partners Inc. and Lehman Brothers II Investment Inc. are the
general partners of Lehman Brothers Merchant Banking Portfolio Partnership
L.P and Lehman Brothers Capital Partners II, L.P., respectively, and Lehman
Brothers Offshore Partners Ltd. is the general partner of Lehman Brothers
Offshore Investment Partnership-Japan L.P. and Lehman Brothers Offshore
Investment Partnership L.P. Each such general partner may be deemed to own
beneficially the shares directly owned by the entity of which it is the
general partner. Each such general partner is an indirect wholly-owned
subsidiary of Lehman Brothers Group Inc., which is a wholly owned
subsidiary of Lehman Brothers Holdings Inc. Each of the partnerships may be
deemed to share with Lehman Brothers Merchant Banking Partners Inc. the
power to vote and the power to dispose of the shares owned by such
partnership. The address of Lehman Brothers Merchant Banking Partners Inc.
is Three World Financial Center, New York, New York 10285.
(3) FIMA is a wholly-owned subsidiary of IFINT. IFINT, a Luxembourg
corporation, is the international investment holding company of IFI, the
parent company of the Agnelli Group. The address of FIMA is Wickam's Cay,
Road Town, Tortola, British Virgin Islands.
(4) The Management Investors (the "Management Investors") include thirty-four
individuals who are directors, officers, managers, employees or former
employees of the Company. None of the Management Investors beneficially
owns more than 5% of the Company's Common Stock.
(5) The number of shares of Common Stock beneficially owned by the Management
Investors includes 2,080,815 shares issuable under currently exercisable
options and 40,293 Warrants. Excludes 1,194,600 shares of Common Stock
issuable upon exercise of options that will generally become exercisable on
September 28, 1996.
(6) The individual is a director of the Company.
(7) The individual is a named executive officer of the Company.
(8) Includes 388,245 shares of Common Stock issuable under currently
exercisable options and 3,894 Warrants.
(9) Includes 232,947 shares of Common Stock issuable under currently
exercisable options.
(10) Includes 147,543 shares of Common Stock issuable under currently
exercisable options and 3,366 Warrants.
(11) Includes 147,543 shares of Common Stock issuable under currently
exercisable options.
(12) Excludes 726,000 shares of Common Stock issuable upon exercise of options
that will generally become exercisable on September 28, 1996.
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<PAGE> 56
CERTAIN TRANSACTIONS
THE 1988 ACQUISITION
At the closing of the 1988 Acquisition on September 30, 1988, Kidder,
Peabody Group Inc. ("KPG"), certain Management Investors, and certain other
investors purchased an aggregate of 19,758,750 shares of Common Stock. On
October 6, 1988, FIMA first acquired an ownership interest in the Company by
purchasing 6,435,000 shares of Common Stock of the Company from KPG.
THE 1991 TRANSACTIONS
On September 27, 1991, the Company engaged in a series of related
transactions (the "1991 Transactions") for the purpose of raising additional
capital to repay a portion of the Company's outstanding indebtedness under its
credit agreement (the "Original Credit Agreement") and to fund the acquisition
of Lear Seating Sweden, AB ("LS Sweden"). A portion of the payments made under
the Company's Original Credit Agreement increased availability thereunder, which
was used to finance expansion of the Company's operations. As part of the 1991
Transactions, (i) the Company sold an aggregate of 14,999,985 additional shares
of the Company's Common Stock to the Lehman Funds and FIMA at a price of $5.00
per share for an aggregate amount of approximately $75.0 million (the "Stock
Sale"); (ii) the Lehman Funds purchased all of the Company's outstanding Common
Stock and Warrants owned by GECC and all of the Company's outstanding Common
Stock owned by INVEST; (iii) the Lehman Funds and FIMA purchased the Company's
outstanding Common Stock held by MH Capital Partners, Inc.; (iv) the Company
entered into certain amendments to the Original Credit Agreement; and (v) the
Company borrowed $20.0 million from GECC, which was secured by a First Mortgage
and Security Agreement covering certain of Lear's domestic facilities, machinery
and equipment (the "GECC Mortgage Loan"), the entire proceeds of which were used
to repay permanently a portion of the term loans outstanding under the Original
Credit Agreement.
After giving effect to the 1991 Transactions (i) the Lehman Funds owned a
total of 22,874,940 shares of the Company's Common Stock and Warrants
exercisable for an additional 83,787 shares of the Company's Common Stock, or
approximately 62.3% of the Company's outstanding Common Stock (assuming the
exercise of all outstanding Warrants and Options) for an aggregate consideration
of approximately $114.8 million and (ii) FIMA acquired an additional 1,200,045
shares of the Company's Common Stock at an aggregate consideration of
approximately $6.0 million, for a total of 7,635,045 shares of the Company's
Common Stock, or approximately 20.7% of the Company's outstanding Common Stock
(assuming the exercise of all outstanding Warrants and Options). For additional
information regarding the 1991 Transactions, see the consolidated financial
statements of the Company included elsewhere in this Prospectus.
Proceeds from the Stock Sale and the GECC Mortgage Loan were utilized to
purchase the stock of LS Sweden from GECC for $100,000, to repay GECC's
financing to LS Sweden of approximately $7.3 million, to pay down term loans
under the Original Credit Agreement by $48.5 million, to pay down borrowings
under the Original Credit Agreement by $32.0 million, and to pay fees and
expenses of approximately $7.7 million related to the 1991 Transactions.
Included in the $7.7 million in fees and expenses is $4.5 million paid to Lehman
Brothers Inc. for fees related to the above transactions. The remainder of the
fees related to legal and administrative expenses incurred by the Company,
Lehman Brothers Inc., FIMA and GECC related to the Stock Sale and the GECC
Mortgage Loan which were paid by the Company.
Subsequent to the 1991 Transactions, on June 1, 1992 a new Bank Act (the
"Bank Act") was enacted in Canada requiring an order of the Minister of Finance
(Canada) to permit the Lehman Funds to continue to hold their existing indirect
investment in Lear's Canadian operations. An application for an order has been
made and, based upon advice of their Canadian counsel, the Lehman Funds
anticipate receipt of such order. Should the application for the order be
denied, Lear could, among other things, move its operations out of Canada or
divest such operations or the Lehman Funds could, among other things, reduce
their indirect ownership of the voting shares of Lear's Canadian companies below
10% to comply with the Bank Act.
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<PAGE> 57
SENIOR SUBORDINATED NOTE OFFERING AND EQUITY INVESTMENT
In order to support the Company's future expansion in North America and
Europe, in July 1992, the Company entered into an agreement to sell $20.0
million of Common Stock to its major stockholders, the Lehman Funds and FIMA
(the "Equity Investment"). Simultaneous with the Equity Investment, the Company
effected a public offering of $125.0 million of the Senior Subordinated Notes.
Lehman Brothers Inc., an affiliate of the Lehman Funds, acted as an underwriter
in connection with the offering and received underwriting fees of approximately
$2.2 million. Lehman Brothers Inc. and IFINT received fees of approximately
$450,000 and $150,000, respectively, for advisory services rendered to the
Company in connection with the Equity Investment and the public offering of the
Senior Subordinated Notes. Mr. Botta is an officer of an affiliate of FIMA and
serves as a director of the Company. Messrs. Hughes, Spalding, Stern, Fried and
Washkowitz, each a Managing Director of Lehman Brothers Inc., serve as directors
of the Company.
Shortly after the Equity Investment, the Company sold 84,183 shares of
Common Stock to eighteen employees of the Company for approximately $421,000 in
cash.
THE NAB ACQUISITION AND THE CREDIT AGREEMENT
In connection with the NAB Acquisition and the consummation of the Credit
Agreement, Lehman Brothers Inc., an affiliate of the Lehman Funds, provided
certain advisory and valuation services to the Company for which it received
aggregate fees of approximately $1.0 million. In addition, Lehman Commercial
Paper Inc., an affiliate of the Lehman Funds, is a managing agent and a lender
under the Credit Agreement for which it received and will continue to receive
its proportionate share of payments made by the Company under the Credit
Agreement.
8 1/4% SUBORDINATED NOTE OFFERING
On February 3, 1993 the Company effected a public offering of $145.0
million of its 8 1/4% Subordinated Notes and applied the net proceeds therefrom
to redeem $135.0 million of its 14% Subordinated Debentures, together with
premiums and accrued interest thereon. Lehman Brothers Inc., an affiliate of the
Lehman Funds, acted as an underwriter in connection with the offering and
received underwriting fees of approximately $2.4 million.
THE OFFERINGS
Lehman Brothers Inc. is an Underwriter for the Offerings and will receive
compensation in such capacity. See "Underwriting."
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
The Amended and Restated Stockholders and Registration Rights Agreement,
dated as of September 27, 1991 (the "Stockholders and Registration Rights
Agreement"), among the Company, the Lehman Funds, FIMA and the Management
Investors was entered into in connection with the 1991 Transactions. Upon
consummation of the Offerings, the Stockholders and Registration Rights
Agreement will be amended in order, among other things, to relax certain
restrictions on transfers of Common Stock owned by the parties thereto and to
remove the rights of each Management Investor to require the Company to purchase
his or her shares upon death, disability and certain events of termination. Upon
consummation of the Offerings, the Stockholders and Registration Rights
Agreement will provide, among other things, that (i) if FIMA desires to sell
more than 5% of the fully diluted shares of Common Stock of the Company in a
transaction or series of related transactions to a single third party (a
"Substantial Sale") prior to September 27, 1995 or such later date prior to
September 27, 2001 to which the right of the Lehman Funds to compel the transfer
of the Company (described in clause (iii) below) is extended, FIMA must offer
such shares to the Lehman Funds prior to offering them to such third party; (ii)
the Lehman Funds, FIMA and, to a limited extent after September 27, 1996, the
Management Investors will have the right to include their shares of Common Stock
in Substantial Sales by the Lehman Funds and FIMA until September 27, 2001; and
(iii) the Lehman Funds
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<PAGE> 58
may compel all stockholders party to the Stockholders and Registration Rights
Agreement to sell their shares of Common Stock, or otherwise cause the transfer
thereof, in a sale of the Company prior to September 27, 1995 or such later date
prior to September 27, 2001 selected by the Lehman Funds.
The Stockholders and Registration Rights Agreement will continue (i) to
place significant restrictions on the Management Investors' rights to transfer
their shares to a third party prior to September 27, 1996 and (ii) to include
certain registration rights. See "Description of Capital Stock -- Stockholders
and Registration Rights Agreement."
MANAGEMENT EQUITY PARTICIPATION
The Management Investors entered into Management Subscription Agreements
with the Company dated as of September 29, 1988 (collectively, the "Management
Equity Agreement") pursuant to which each of the Management Investors purchased
Common Stock at $3.03 per share for consideration consisting of cash and/or
recourse or non-recourse promissory notes (the "Management Notes"). As of
December 31, 1993, the outstanding balance of the Management Notes of each of
Messrs. Way and Rossiter was approximately $498,000 and the outstanding balance
of the Management Notes of each of Messrs. Vandenberghe, Hollars and Melson was
approximately $166,000. Each of the Management Notes, including accrued
interest, matures on January 25, 1997 and bears interest at a rate of 4.51% per
annum.
In addition, pursuant to the 1988 Stock Option Plan, as of January 31,
1993, the Company granted to the Management Investors options to acquire an
aggregate of up to 2,080,815 authorized but unissued shares of the Company's
Common Stock. These options of the Management Investors vested over the course
of three years and are exercisable for $1.29 per share, in cash, which is lower
than the $3.03 per share paid in connection with the 1988 Acquisition. These
options must be exercised within ten years of the date of grant. See "Management
- -- 1988 Stock Option Plan."
Under the 1992 Stock Option Plan, the Company may grant up to 1,914,000
options to certain management personnel. As of December 31, 1993, all of these
options have been granted and are vested. All options under the 1992 Stock
Option Plan become exercisable at $5.00 per share as of September 28, 1996 or
sooner in the case of certain triggering events.
In addition, under the 1994 Stock Option Plan, directors, officers and
employees of the Company may receive awards of stock options, and such awards
for options to purchase 498,750 shares of Common Stock will be made prior to the
consummation of the Offerings. See "Management -- 1994 Stock Option Plan."
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<PAGE> 59
DESCRIPTION OF CERTAIN INDEBTEDNESS
CREDIT AGREEMENT
The Company is party to the Amended and Restated Credit Agreement, dated as
of October 25, 1993 (as amended from time to time, the "Credit Agreement"), by
and among the Company, as borrower, the financial institutions party thereto,
Chemical Bank, as Agent (the "Agent"), and Bankers Trust Company, The Bank of
Nova Scotia, Citicorp USA, Inc. and Lehman Commercial Paper Inc., as Managing
Agents.
General. The Credit Agreement currently provides for (i) borrowings in a
principal amount of up to $425.0 million at any one time outstanding, (ii) swing
line loans in a maximum aggregate amount of $30.0 million, the commitment for
which is part of the aggregate Credit Agreement commitment, and (iii) Letters of
Credit in an aggregate face amount of up to $75.0 million, the commitment for
which is part of the aggregate Credit Agreement commitment. Commitments under
the Credit Agreement will be permanently reduced by $40.0 million every six
months beginning October 31, 1996, and the Credit Agreement will expire on
October 31, 1998. Commitments under the Credit Agreement also will be
permanently reduced by a percentage of the fair market value of certain accounts
receivable sold pursuant to a permitted receivables financing program.
Borrowings under the Credit Agreement, including the swing line loans, are
collectively referred to herein as the "Loans." See "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company."
Interest. For purposes of calculating interest, the Loans can be, at the
election of Lear, ABR Loans or Eurodollar Loans or a combination thereof. ABR
Loans bear interest at the ABR (which is basically the prime rate) plus between
0% and 0.50%, depending on whether Lear satisfies certain financial ratios.
Eurodollar Loans bear interest at the Eurodollar Rate plus between 0.75% and
1.50%, depending on whether Lear satisfies certain financial ratios.
Repayment. Subject to the provisions of the Credit Agreement, Lear may,
from time to time, borrow, repay and reborrow under the Credit Agreement. The
entire unpaid balance under the Credit Agreement is payable on October 31, 1998.
Security and Guarantees. The Loans are guaranteed by all of the Company's
direct and indirect domestic subsidiaries. The Loans and such guarantees are
variously secured by (i) a pledge to the Agent for the ratable benefit of the
banks party to the Credit Agreement of all of the capital stock of each of the
Company's domestic subsidiaries, and a pledge of certain stock of the Company's
foreign subsidiaries; (ii) a grant of a security interest in substantially all
of the assets of the Company and its domestic subsidiaries; and (iii) mortgages
on substantially all of the property of the Company and its domestic
subsidiaries.
Covenants. The Credit Agreement contains financial covenants relating to
maintenance of consolidated net worth, of ratios of consolidated operating
profit to consolidated cash interest expense and of consolidated operating
profit. The Credit Agreement also contains restrictive covenants pertaining to
the management and operation of the Company. The covenants include, among
others, significant limitations on indebtedness, guarantees, mergers,
acquisitions, fundamental corporate changes, capital expenditures, asset sales,
leases, investments, loans and advances, liens, dividends and other stock
payments, transactions with affiliates, optional payments and modification of
debt instruments, issuance of stock and sale and leaseback transactions. The
limitations on dividends on Common Stock include a provision allowing a maximum
of $2.5 million of such dividends in the aggregate per quarter, but only to the
extent permitted by the indentures for the Senior Subordinated Notes and the
8 1/4% Subordinated Notes. The Company does not intend to pay any cash dividends
in the foreseeable future. See "Dividend Policy."
Events of Default. The Credit Agreement provides for events of default
customary in facilities of this type, including: (i) failure to make payments
when due; (ii) breach of covenants; (iii) breach of representations or
warranties in any material respect when made; (iv) default under any agreement
relating to debt for borrowed money in excess of $5.0 million in the aggregate;
(v) bankruptcy defaults; (vi) judgments in excess of $5.0 million; (vii) ERISA
defaults; (viii) any security document or guarantee ceasing to be in full force
and effect; (ix) the subordination provisions in the instruments pursuant to
which the Senior Subordinated Notes and the 8 1/4% Subordinated Notes (or any
refinancings thereof) were created ceasing to
54
<PAGE> 60
be in full force and effect or enforceable to the same extent purported to be
created thereby; and (x) the failure of certain stockholders to continue to own
or control sufficient number of shares of capital stock of the Company to elect
a majority of the Board of Directors of the Company.
While the Company intends to use proceeds from the Offerings to repay
indebtedness outstanding under the Credit Agreement, the Company does not intend
to request a reduction in commitments thereunder.
FOREIGN CREDIT FACILITIES
Certain of the Company's foreign subsidiaries have outstanding credit
facilities in Canada and Germany. In Canada, there is an outstanding revolving
credit facility of up to 10.0 million Canadian dollars (or the approximate
equivalent of U.S. $7.5 million) which bears interest at the prime lending rate
and matures in September 1995 (the "Canadian Loan"). The Canadian Loan is
guaranteed by a letter of credit issued under the Credit Agreement.
In Germany, there is an outstanding term loan (the "German Term Loan") of
13.0 million deutschemarks (or the approximate equivalent of U.S. $7.6 million),
which bears interest at an effective annual rate of 9.125%, is payable in
deutschemarks in quarterly installments of 500,000 deutschemarks through March
2000, and is collateralized by certain assets held by a German subsidiary. The
agreements relating to the Canadian Loan and the German Term Loan also contain
certain covenants.
Two of the Company's European subsidiaries factor their accounts receivable
with a bank subject to limited recourse provisions and are charged a discount
fee equal to the current LIBOR rate plus 1%. The amount of such factored
receivables, which are not included in accounts receivable in the Company's
consolidated balance sheet at December 31, 1993, was approximately $38.5
million.
In addition, certain of the Company's other foreign subsidiaries are
parties to informal lines of credit.
SENIOR SUBORDINATED NOTES
In July 1992, the Company issued $125.0 million of the Senior Subordinated
Notes in a public offering. The Senior Subordinated Notes are subordinated in
right of payment to all existing and future senior indebtedness of Lear and are
senior in right of payment to the 8 1/4% Subordinated Notes. Interest of 11 1/4%
per annum is payable in arrears on January 15 and July 15.
The indenture relating to the Senior Subordinated Notes (the "Senior
Subordinated Note Indenture") limits among other things: (i) the making of any
Restricted Payment (as defined in the Senior Subordinated Note Indenture); (ii)
the incurrence of indebtedness with certain exceptions, including among other
things, the indebtedness under the Credit Agreement, the 8 1/4% Subordinated
Notes, indebtedness existing on the date of the Senior Subordinated Note
Indenture and certain indebtedness of foreign subsidiaries; (iii) the creation
of liens; (iv) the incurrence of payment restrictions affecting subsidiaries;
(v) entering into transactions with stockholders and affiliates; (vi) the sale
of assets; (vii) the issuance of preferred stock; and (viii) the merger,
consolidation or sale of substantially all of the assets of the Company. The
Senior Subordinated Note Indenture also provides that a holder of the Senior
Subordinated Notes may, under certain circumstances, have the right to require
that Lear repurchase such holder's Senior Subordinated Notes upon a change of
control of the Company.
"Restricted Payments" as defined in the Senior Subordinated Note Indenture
include dividends on Common Stock and are generally not permitted unless (i) no
Default or Event of Default (as such terms are defined in the Senior
Subordinated Note Indenture) has occurred and is continuing at the time or will
occur as a consequence of such Restricted Payment; (ii) after giving effect to
such Restricted Payment, the aggregate amount expended for all Restricted
Payments subsequent to March 28, 1992 does not exceed the sum of (x) 25% of
Consolidated Net Income (as defined in the Senior Subordinated Note Indenture)
of the Company (or in the case such Consolidated Net Income shall be a deficit,
minus 100% of such deficit) during the period (treated as one accounting period)
subsequent to March 28, 1992 and ending on the last day of the fiscal quarter
immediately preceding such Restricted Payment and (y) the aggregate net proceeds
received by the Company during such period from any person other than a
subsidiary of the Company as a result of the
55
<PAGE> 61
issuance of capital stock of the Company (other than any Disqualified Stock (as
defined in the Senior Subordinated Note Indenture)) or warrants, rights or
options to purchase or acquire such capital stock and any contributions to the
capital of the Company received by the Company from any such person less the
amount of such net proceeds actually applied to purchase, redeem, acquire or
otherwise retire shares of the Company's capital stock as permitted by the
Senior Subordinated Note Indenture; and (iii) at the time of such Restricted
Payment and after giving effect thereto, the Company or any subsidiary of the
Company shall be able to incur an additional $1.00 of Indebtedness pursuant to
the general indebtedness test of the Senior Subordinated Note Indenture. The net
proceeds of the Offerings would be included in calculating the amount described
in clause (y) of clause (ii) above, and after giving pro forma effect to the
Offerings, the amount available for Restricted Payments under the Senior
Subordinated Note Indenture as of December 31, 1993 would be $ . The
Company does not anticipate paying any cash dividends in the foreseeable future.
See "Dividend Policy."
The Senior Subordinated Notes mature on July 15, 2000 and may not be
redeemed prior to July 15, 1997. On or after July 15, 1997, Lear may, at its
option, redeem the Senior Subordinated Notes in whole or in part, on at least 30
days but not more than 60 days notice to each holder of the Senior Subordinated
Notes to be redeemed, at 100% of their principal amount together with accrued
and unpaid interest (if any) to the redemption date. The Senior Subordinated
Notes are not subject to mandatory redemption prior to maturity.
8 1/4% SUBORDINATED NOTES
On February 3, 1994 the Company issued $145.0 million of the 8 1/4%
Subordinated Notes in a public offering. The 8 1/4% Subordinated Notes are
subordinated in right of payment to all existing and future senior indebtedness
of Lear, including indebtedness under the Credit Agreement and the Senior
Subordinated Notes. Interest of 8 1/4% per annum is payable in arrears on
February 1 and August 1.
The indenture relating to the 8 1/4% Subordinated Notes (the "Subordinated
Note Indenture") limits among other things: (i) the making of any Restricted
Payment (as defined in the Subordinated Note Indenture); (ii) the incurrence of
indebtedness with certain exceptions, including among other things, the
indebtedness under the Credit Agreement, the Senior Subordinated Notes,
indebtedness existing on the date of the Subordinated Note Indenture and certain
indebtedness of foreign subsidiaries; (iii) the creation of liens; (iv) the
incurrence of payment restrictions affecting subsidiaries; (v) entering into
transactions with stockholders and affiliates; (vi) the sale of assets; (vii)
the issuance of preferred stock; and (viii) the merger, consolidation or sale of
substantially all of the assets of the Company. The Subordinated Note Indenture
also provides that a holder of the 8 1/4% Subordinated Notes may, under certain
circumstances, have the right to require that Lear repurchase such holder's
8 1/4% Subordinated Notes upon a change of control of the Company.
"Restricted Payments" as defined in the Subordinated Note Indenture include
dividends on Common Stock and are generally not permitted unless (i) no Default
or Event of Default (as such terms are defined in the Subordinated Note
Indenture) has occurred and is continuing at the time or will occur as a
consequence of such Restricted Payment; (ii) after giving effect to such
Restricted Payment, the aggregate amount expended for all Restricted Payments
subsequent to December 31, 1993 does not exceed the sum of (x) 50% of
Consolidated Net Income (as defined in the Subordinated Note Indenture) of the
Company (or in the case such Consolidated Net Income shall be a deficit, minus
100% of such deficit) during the period (treated as one accounting period)
subsequent to December 31, 1993 and ending on the last day of the fiscal quarter
immediately preceding such Restricted Payment and (y) the aggregate net proceeds
received by the Company during such period from any person other than a
subsidiary of the Company as a result of the issuance of capital stock of the
Company (other than any Disqualified Stock (as defined in the Subordinated Note
Indenture)) or warrants, rights or options to purchase or acquire such capital
stock and any contributions to the capital of the Company received by the
Company from any such person less the amount of such net proceeds actually
applied to purchase, redeem, acquire or otherwise retire shares of the Company's
capital stock as permitted by the Subordinated Note Indenture; and (iii) at the
time of such Restricted Payment and after giving effect thereto, the Company or
any subsidiary of the company shall be able to incur an additional $1.00 of
Indebtedness pursuant to the general indebtedness test of the Subordinated Note
Indenture. The net
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<PAGE> 62
proceeds of the Offerings would be included in calculating the amount described
in clause (y) of clause (ii) above, and after giving pro forma effect to the
Offerings the amount available for Restricted Payments under the Subordinated
Note Indenture as of December 31, 1993 would have been $ . The Company
does not anticipate paying any cash dividends in the foreseeable future. See
"Dividend Policy."
The 8 1/4% Subordinated Notes mature on February 1, 2002 and may not be
redeemed prior to February 1, 1998. On or after February 1, 1998, Lear may, at
its option, redeem the 8 1/4% Subordinated Notes in whole or in part, on at
least 15 days' but not more than 60 days' notice to each holder of the 8 1/4%
Subordinated Notes to be redeemed, at 101.65% of their principal amount prior to
February 1, 1999 and 100% of their principal amount thereafter, in each case
together with accrued and unpaid interest (if any) to the redemption date. The
8 1/4% Subordinated Notes are not subject to mandatory redemption prior to
maturity.
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the Offerings, the authorized capital stock of the
Company will consist of 150,000,000 shares of Common Stock, par value $0.01 per
share, and 15,000,000 shares of Preferred Stock, par value $0.01 per share.
COMMON STOCK
As of December 31, 1993, there were 38,800,014 shares of Common Stock
outstanding (assuming the exercise of all outstanding Warrants). Holders of
Common Stock are entitled to one vote per share on all matters to be voted upon
by the stockholders. Cumulative voting is not permitted. Subject to preferences
of any Preferred Stock that may be issued in the future, the holders of Common
Stock are entitled to receive such dividends as may be declared by the Board of
Directors. The Company is currently restricted under the terms of the Credit
Agreement and of the Indentures governing the Senior Subordinated Notes and the
8 1/4% Subordinated Notes from paying dividends to holders of Common Stock. See
"Description of Certain Indebtedness." In the event of a liquidation,
dissolution or winding up of the Company, and subject to preferences of any
Preferred Stock that may be issued in the future, the Common Stock is entitled
to receive pro rata all of the assets of the Company available for distribution
to its stockholders. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and non-assessable, and the shares of Common Stock to be outstanding upon
the closing of the Offerings will be fully paid and non-assessable.
PREFERRED STOCK
Upon the closing of the Offerings the Board of Directors will have the
authority to issue up to 15,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rates, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, which may
be superior to those of the Common Stock, without further vote or action by the
stockholders. Although it presently has no intention to do so, the Board of
Directors, without stockholder approval, can issue Preferred Stock with rights
that could adversely affect the Common Stock. The issuance of Preferred Stock
may have the effect of delaying, deferring or preventing a change in control of
the Company. There will be no shares of Preferred Stock outstanding upon the
closing of the Offerings and the Company has no present plans to issue any
Preferred Stock.
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
All of the current stockholders of the Company, other than holders who
acquired shares of Common Stock upon the exercise of Warrants, and the Company
are parties to the Stockholders and Registration Rights Agreement, which
contains certain provisions as to the voting and transfer of Common Stock held
by those stockholders. See "Certain Transactions -- Stockholders and
Registration Rights Agreement."
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<PAGE> 63
Under the Stockholders and Registration Rights Agreement, the parties
thereto who hold Common Stock have the following registration rights. On or
prior to September 28, 1996, the holders of at least 20% of the fully diluted
shares of Common Stock held by parties to the Stockholders and Registration
Rights Agreement that have not been transferred pursuant to an effective
registration statement or an exemption from the registration requirements of the
Securities Act and that continue to bear a legend referencing such agreement
("Registrable Securities") may require the Company, subject to certain
conditions, to effect the registration under the Securities Act of not less than
15% of the Registrable Securities. After September 28, 1996, the holders of at
least 10% of the Registrable Securities may require the Company, subject to
certain conditions, to effect the registration of not less than 10% of the
Registrable Securities. Upon receipt of a valid registration request, the
Company is required to notify other parties to the Stockholders and Registration
Rights Agreement of such request, and those parties may, subject to certain
conditions, require the Company to include any of their Registrable Securities
in any registration statement filed pursuant to such request.
Unless the holders of Common Stock making a registration request otherwise
consent in writing, no other person, other than a holder of Common Stock who is
a party to the Stockholders and Registration Rights Agreement and who requests
that its shares be included in such registration and, in the case of an
underwritten offering, the Company, would be permitted to offer any securities
pursuant to such registration. Subject to certain exceptions, the Company is
required to pay all expenses incurred in connection with up to a maximum of four
valid registration requests and, if any requested registration is in the form of
an underwritten offering, the Stockholders and Registration Rights Agreement
requires the Company to designate Lehman Brothers Inc. as the managing
underwriter of the offering.
In addition to the demand registration rights summarized above, the parties
to the Stockholders and Registration Rights Agreement also may, subject to
certain limitations, require the Company to register their shares of Common
Stock whenever the Company registers any of its equity securities under the
Securities Act, whether for sale for its own account or not. The Stockholders
and Registration Rights Agreement provides for, in the case of underwritten
offerings, certain registration priorities in the event that the managing
underwriter advises the Company that the number of shares of Common Stock
proposed to be included in any registration under the Securities Act exceeds the
largest number of shares which can be sold without having an adverse effect on
the offering. In addition, the Company and the other parties to the Stockholders
and Registration Rights Agreement are subject to certain holdback provisions
during the registration and sale of shares of Common Stock. Under the
Stockholders and Registration Rights Agreement, the Company has agreed to
indemnify selling stockholders against certain liabilities.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
45,072,784 shares of Common Stock, assuming exercise of all outstanding
Warrants. Of these shares, the 9,375,000 shares sold in the Offerings
(10,312,500 shares if the Underwriters' over-allotment option is exercised in
full) and any of the 3,300,000 shares of Common Stock issued and issuable upon
exercise of the Warrants will be freely tradeable without restriction or further
registration under the Securities Act except for shares purchased by
"affiliates" of the Company, as such term is defined in Rule 144 under the
Securities Act (which may generally be sold only in compliance with Rule 144 or
Rule 701 under the Securities Act or pursuant to a subsequent registration).
Upon completion of the Offerings, 32,521,864 shares of Common Stock outstanding
upon completion of the Offerings (assuming no exercise of the Underwriters'
over-allotment option) will be deemed "restricted securities" as defined in Rule
144 under the Securities Act and may not be resold without registration under
the Securities Act or pursuant to an exemption from such registration, including
exemptions provided by Rule 144 under the Securities Act.
In general, Rule 144 provides that, subject to its provisions and other
applicable federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned "restricted securities"
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or the average weekly trading volume of the
same class during the four calendar weeks preceding the sale. A person who is
not deemed to have been
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<PAGE> 64
an "affiliate" of the Company at any time during the 90 days preceding the sale
and who has beneficially owned "restricted securities" for at least three years
is entitled to sell such shares under Rule 144 without regard to any of the
limitations described above.
The holders of substantially all of the shares of the Company's Common
Stock deemed to be "restricted securities" will have registration rights which
would permit such holders to sell their shares without regard to the
restrictions imposed by Rule 144. See "Description of Capital Stock --
Stockholders and Registration Rights Agreement."
The holders of 32,540,674 shares of Common Stock, including all of the
Company's executive officers, have agreed that they will not offer, sell or
otherwise dispose of any shares for a period of 180 days from the date of this
Prospectus. See "Underwriting."
CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND
RESTATED BY-LAWS
The by-laws of the Company provide that the Company shall indemnify each
officer and director of the Company to the fullest extent permitted by
applicable law. The Restated Certificate of Incorporation also provides that, to
the fullest extent permitted by the Delaware General Corporation Law, the
directors of the Company shall be indemnified by the Company and shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director.
Certain provisions of the Company's Restated Certificate of Incorporation
and by-laws may have the effect of preventing, discouraging or delaying any
change in control of the Company and may maintain the incumbency of the Board of
Directors and management. The authorization of undesignated Preferred Stock will
make it possible for the Board of Directors to issue Preferred Stock without
voting or other rights or preferences that could impede the success of any
attempt to change control of the Company. The Company's Restated Certificate of
Incorporation provides that the Board of Directors of the Company will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for Cause (as defined below) and only by the
affirmative vote of the holders of a majority of the then-outstanding shares of
capital stock entitled to vote generally in an election of directors. Vacancies
on the Board of Directors may be filled only by the remaining directors and not
by the stockholders. "Cause" is defined as the willful and continuous failure
substantially to perform one's duties to the Company or the willful engaging in
gross misconduct materially and demonstrably injurious to the Company.
The by-laws provide that special meetings of stockholders may be called by
the chairman, the president, any vice president, the secretary or any assistant
secretary of the Company and must be called by any such officer at the request
in writing of a majority of the Board of Directors or at the request in writing
of stockholders owning at least a majority of the capital stock of the Company
issued and outstanding and entitled to vote. The by-laws establish an advance
notice procedure for the nomination, other than by or at the direction of the
Board of Directors, of candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of stockholders. In
general, notice of intent to nominate a director must be received by the
secretary of the Company not less than 60 nor more than 90 days prior to the
date of the annual meeting, and must contain certain specified information
concerning the person to be nominated. Notice of intent to raise business at
such meeting must be received by the secretary of the Company not less than 120
nor more than 150 days prior to the first anniversary of the date of the
Company's consent solicitation or proxy statement released in connection with
the previous year's meeting.
DELAWARE ANTI-TAKEOVER LAW
Upon the closing of the Offerings, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law (the
"Anti-Takeover Law") regulating corporate takeovers. The Anti-Takeover Law
prevents certain Delaware corporations, including those whose securities are
listed on the New York Stock Exchange, from engaging, under certain
circumstances, in a "business combination" (which includes a merger or sale of
more than 10% of the corporation's assets) with any "interested stockholder" (a
stockholder who acquired 15% or more of a corporation's outstanding voting stock
without the prior approval
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<PAGE> 65
of the corporation's board of directors) for three years following the date that
such stockholder became an "interested stockholder." The current stockholders of
the Company will not, by virtue of their current holdings, be deemed to be
"interested stockholders" under this statute. A Delaware corporation may "opt
out" of the Anti-Takeover Law with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or bylaws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares. The Company has not "opted
out" of the provisions of the Anti-Takeover Law.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The Bank
of New York, located in New York, New York.
LISTING
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "LEA".
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
holder that is not a "U.S. person" (a "non-U.S. holder"). A "U.S. person" is a
person or entity that, for U.S. federal income tax purposes, is a citizen or
resident of the United States, a corporation or partnership created or organized
in the United States or under the laws of the United States or of any political
subdivision thereof, or an estate or trust whose income is includible in gross
income for United States federal income tax purposes regardless of its source.
An individual may be deemed to be a resident of the United States for U.S.
federal income tax purposes either by reason of an election or by being present
in the United States on at least 31 days in the calendar year and for an
aggregate of 183 days taken into account during the three-year period ending
with the current calendar year. For purposes of that determination, all of the
days present in the United States during the current year, one-third of the days
present during the immediately preceding year and one-sixth of the days present
during the second preceding year are taken into account. A special definition of
U.S. resident applies for U.S. federal estate tax purposes. Resident aliens are
subject to U.S. federal tax as if they were U.S. citizens.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code") and administrative and judicial interpretations as of the date
hereof, all of which may be changed either retroactively or prospectively. This
discussion does not address all the aspects of U.S. federal income and estate
taxation that may be relevant to non-U.S. holders in light of their particular
circumstances. Nor does it address tax consequences under the laws of any U.S.
state, municipality or other taxing jurisdiction or under the laws of any
jurisdiction other than the United States.
Prospective holders should consult their own tax advisors about the
particular United States federal tax consequences to them of holding and
disposing of Common Stock, as well as any tax consequences that may arise under
the laws of any state, municipality or other taxing jurisdiction.
DIVIDENDS
In the event that dividends are paid to a non-U.S. holder, such dividends
will be subject to United States federal withholding tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. Under current
U.S. Treasury regulations, dividends paid to an address outside the United
States are presumed to be paid to a resident of the country of address for
purposes of the withholding tax. Under the current interpretation of U.S.
Treasury regulations, the same presumption generally applies to determine the
applicability of a reduced rate of withholding under a U.S. tax treaty. Thus,
non-U.S. holders receiving dividends at addresses outside the United States
generally are not yet required to file tax forms to obtain the
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<PAGE> 66
benefit of an applicable treaty rate. If there is excess withholding on a person
eligible for a treaty benefit, the person can file for a refund with the U.S.
Internal Revenue Service (the "IRS").
Under U.S. Treasury regulations which were proposed in 1984 and which have
not yet been put into effect, to claim the benefits of a tax treaty a non-U.S.
holder of Common Stock would have to file certain forms accompanied by
statements from a competent authority of the treaty country attesting to the
holder's eligibility to claim treaty benefits.
Generally, upon the filing of a Form 4224 with the Company, there is no
withholding tax on dividends that are effectively connected with the non-U.S.
holder's conduct of a trade or business within the United States. Instead, the
effectively connected dividends are subject to the United States federal income
tax on net income applicable to U.S. persons. Effectively connected dividends
received by a foreign corporation may be subject to an additional "branch
profits tax" at a 30% rate (or a lower rate under an applicable income tax
treaty) when such dividends are deemed repatriated from the United States.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless (i) the
gain is effectively connected with the conduct of a trade or business of the
non-U.S. holder in the United States, (ii) in the case of a non-U.S. holder who
is an individual and holds the Common Stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year of the
disposition and either (x) has a "tax home" in the United States (as specially
defined for U.S. federal income tax purposes) or (y) maintains an office or
other fixed place of business in the United States and the income from the sale
of the stock is attributable to such office or other fixed place of business,
(iii) in the case of a non-resident individual who is a partner in a foreign
partnership holding the Common Stock, such non-resident individual is present in
the United States for 183 or more days in the taxable year of the disposition or
the gain is effectively connected with a trade or business conducted by such
partnership in the United States, (iv) the non-U.S. holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain United States
expatriates or (v) the Company is or has been a "U.S. real property holding
corporation" for federal income tax purposes. The Company is not currently, has
not been and does not anticipate becoming a "U.S. real property holding
corporation" for U.S. federal income tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the IRS and to each non-U.S. holder the
amount of dividends paid to, and the tax withheld with respect to, such holder,
regardless of whether tax was actually withheld. That information may also be
made available to the tax authorities of the country in which the non-U.S.
holder resides.
United States federal backup withholding (which generally is withholding
imposed at the rate of 31% on certain payments to persons not otherwise exempt
who fail to furnish certain identifying information to the IRS) will generally
not apply to dividends paid to a non-U.S. holder that are subject to withholding
at the 30% rate (or would be so subject but for a reduced rate under an
applicable treaty). In addition, the payor of dividends may rely on the payee's
foreign address in determining that the payee is exempt from backup withholding,
unless the payor has knowledge that the payee is a U.S. person.
The backup withholding and information reporting requirements also apply to
the gross proceeds paid to a non-U.S. holder upon the disposition of Common
Stock by or through a United States office of a United States or foreign broker,
unless the holder certifies to the broker under penalty of perjury as to its
name, address and status as a non-U.S. holder or the holder otherwise
establishes an exemption. Information reporting requirements (but not backup
withholding) will apply to a payment of the proceeds of a disposition of Common
Stock by or through a foreign office of (i) a United States broker, (ii) a
foreign broker 50% or more of whose gross income for certain periods is
effectively connected with the conduct of a trade or business in the United
States or (iii) a foreign broker that is a "controlled foreign corporation" for
United States federal income tax purposes, unless the broker has documentary
evidence in its records that the holder is a non-U.S. holder and certain other
conditions are met, or the holder otherwise establishes an exemption.
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<PAGE> 67
Neither backup withholding nor information reporting will generally apply to a
payment of the proceeds of a disposition of Common Stock by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the non-U.S. holder's United States federal income tax
liability, provided that required information is furnished to the IRS.
The backup withholding and information reporting rules are currently under
review by the Treasury Department, and their application to the Common Stock is
subject to change.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is neither a
citizen nor a resident of the United States for federal estate tax purposes at
the date of death will be included in such individual's estate for U.S. federal
estate tax purposes and may be subject to U.S. federal estate tax unless an
applicable estate tax treaty provides otherwise. Estates of nonresident aliens
are generally allowed a statutory credit that is the equivalent of an exclusion
of $60,000 of assets from the estate for U.S. estate tax purposes. Estate tax
treaties may permit a larger credit. A special definition of U.S. resident
applies for U.S. federal estate purposes.
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the U.S.
Underwriting Agreement, the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the underwriters
named below (the "U.S. Underwriters"), for whom Lehman Brothers Inc., Kidder,
Peabody & Co. Incorporated, Morgan Stanley & Co. Incorporated and Wertheim
Schroder & Co. Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Stockholder, and the Company and the Selling Stockholder have agreed to
sell to each U.S. Underwriter, the aggregate number of shares of Common Stock
set forth opposite the name of each such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers Inc. ..............................................
Kidder, Peabody & Co. Incorporated.................................
Morgan Stanley & Co. Incorporated..................................
Wertheim Schroder & Co. Incorporated...............................
---------
Total......................................................... 7,500,000
---------
---------
</TABLE>
Under the terms of, and subject to the conditions contained in, the
International Underwriting Agreement, the form of which is filed as an exhibit
to the Registration Statement, the managers named below of the concurrent
offering of the Common Stock outside the United States (the "International
Managers" and together with the U.S. Underwriters, the "Underwriters"), for whom
Lehman Brothers International (Europe), Kidder, Peabody International Limited,
Morgan Stanley & Co. International Limited and Wertheim Schroder International
Limited are acting as lead managers (the "Lead Managers"), have severally agreed
to purchase from the Company and the Selling Stockholder, and the Company and
the
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<PAGE> 68
Selling Stockholder have agreed to sell to each International Manager, the
aggregate number of shares of Common Stock set forth opposite the name of each
such International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers International (Europe).............................
Kidder, Peabody International Limited..............................
Morgan Stanley & Co. International Limited.........................
Wertheim Schroder International Limited............................
---------
Total......................................................... 1,875,000
---------
---------
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the U.S. Underwriters and the International Managers to purchase
shares of Common Stock are subject to certain conditions, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to their respective Underwriting Agreements must be
so purchased. The offering price and underwriting discounts and commissions for
the U.S. Offering and the International Offering are identical. The closing of
the U.S. Offering is a condition to the closing of the International Offering,
and the closing of the International Offering is a condition to the closing of
the U.S. Offering.
The Company has been advised that the U.S. Underwriters and the
International Managers propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain selected dealers (who may include the U.S.
Underwriters and the International Managers) at such public offering price less
a selling concession not in excess of $ per share. The selected dealers may
reallow a concession not in excess of $ per share to certain brokers and
dealers. After the initial public offering, the public offering price, the
concession to select dealers and reallowance may be changed by the U.S.
Underwriters and the International Managers.
The Company and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the U.S. Underwriters and the International Managers may be required to
make in respect thereof.
The Company has granted to the U.S. Underwriters and the International
Managers an option to purchase up to an aggregate of 750,000 and 187,500
additional shares of Common Stock, respectively, exercisable solely to cover
over-allotments, at the offering price to the public less the underwriting
discounts and commissions shown on the cover page of this Prospectus. All of the
shares of Common Stock sold upon any exercise of this over-allotment option will
be sold by the Company. Such option may be exercised at any time until 30 days
after the date of the U.S. Underwriting Agreement and the International
Underwriting Agreement, respectively. To the extent that the option is
exercised, each U.S. Underwriter or International Manager, as the case may be,
will be committed, subject to certain conditions, to purchase a number of the
additional shares of Common Stock proportionate to such U.S. Underwriter's or
International Manager's initial commitment as indicated in the preceding tables.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price has been negotiated between the Company
and the Underwriters. Among the factors considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions,
63
<PAGE> 69
were the Company's historical performance and capital structure, estimates of
business potential and earnings prospects of the Company, an assessment of the
Company, an assessment of the Company's management and the consideration of the
above factors in relation to market valuation of companies in related
businesses.
The Company, the Selling Stockholder and certain other existing
stockholders, including all of the executive officers of the Company, have
agreed that they will not, subject to certain limited exceptions, for a period
of 180 days from the date of this Prospectus, directly or indirectly, offer,
sell or otherwise dispose of any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for any such shares.
At the request of the Company, the Underwriters have reserved up to 300,000
shares of Common Stock being offered by the Company for sale at the initial
public offering price to certain directors, officers, employees and other
persons associated with the Company. The number of shares available to the
general public will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares that are not so purchased by such persons will be
offered by the Underwriters to the general public on the same terms as the other
shares offered by this Prospectus.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers pursuant to which
each U.S. Underwriter has agreed that, as part of the distribution of the shares
of Common Stock offered in the U.S. Offering, (i) it is not purchasing any such
shares for the account of anyone other than a U.S. person (as defined below) and
(ii) it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of such shares or distribute any prospectus relating
to the U.S. Offering to anyone other than a U.S. person. In addition, pursuant
to such agreement each International Manager has agreed that, as part of the
distribution of the shares of Common Stock offered in the International
Offering, (i) it is not purchasing any such shares for the account of a U.S.
Person and (ii) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of such shares or distribute any prospectus
relating to the International Offering to any U.S. Person. Each International
Manager has also agreed that it will offer to sell shares only in compliance
with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, (a) the term "United
States" means the United States of America (including the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction, and (b) the term "U.S. Person" means any resident or national of
the United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States or any estate or trust the
income of which is subject to United States income taxation regardless of the
source of its income (other than the foreign branch of any U.S. Person), and
includes any United States branch of a Person other than a U.S. Person.
The Company and each International Manager (i) have not offered or sold,
and will not offer or sell, in the United Kingdom, by means of any document, any
shares of Common Stock other than to persons whose ordinary business it is to
buy or sell shares or debentures, whether as principal or agent (except under
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985); (ii) have complied and will comply with all
applicable provisions of the Financial Services Act 1986 (the "1986 Act") with
respect to anything done by it in relation to the shares of Common Stock in,
from or otherwise involving the United Kingdom; and (iii) have only issued or
passed on, and will only issue or pass on to any person in the United Kingdom,
any investment advertisement (within the meaning of the 1986 Act) relating to
the shares of Common Stock if that person falls within Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988.
64
<PAGE> 70
The shares of Common Stock may not be offered or sold directly or
indirectly in Hong Kong by means of this document or any other offering material
or document other than to persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or as agent. Unless permitted to do
so by the securities laws of Hong Kong, no person may issue or cause to be
issued in Hong Kong this document or any amendment or supplement thereto or any
other information, advertisement or document relating to the shares of Common
Stock other than with respect to shares of Common Stock intended to be disposed
of to persons outside Hong Kong or to persons whose business involves the
acquisition, disposal or holding of securities, whether as principal or as
agent.
The shares of Common Stock have not been registered under the Securities
and Exchange Law of Japan and are not being offered and may not be offered or
sold directly or indirectly in Japan or to residents of Japan, except pursuant
to applicable Japanese laws and regulations.
No action has been taken or will be taken in any jurisdiction by the
Company or the International Managers that would permit a public offering of the
shares offered pursuant to the Offerings in any jurisdiction where action for
that purpose is required, other than the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
International Managers to inform themselves about and to observe any
restrictions as to the offering of the shares offered pursuant to the Offerings
and the distribution of this Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
After giving effect to the Offerings, the Lehman Funds, each an affiliate
of Lehman Brothers Inc., beneficially own, in the aggregate, approximately 57.6%
of the outstanding Common Stock of the Company (assuming all outstanding
Warrants are exercised and no outstanding Options are exercised). Therefore, the
underwriting arrangements for the Offerings will comply with the requirements of
Schedule E to the Bylaws of the National Association of Securities Dealers, Inc.
("NASD") regarding an NASD member firm's participation in distributing its
affiliate's securities. In connection therewith, Morgan Stanley & Co.
Incorporated is acting as a qualified independent underwriter for purposes of
the determination of the initial public offering price of the shares of Common
Stock offered hereby and has conducted due diligence in connection with its
responsibilities of acting as a qualified independent underwriter. The initial
public offering price of the shares of Common Stock is no lower than that
recommended by Morgan Stanley & Co. Incorporated. The Company has agreed to
reimburse Morgan Stanley & Co. Incorporated for its out-of-pocket expenses
incurred in connection with its services as a qualified independent underwriter.
In accordance with Schedule E, the Underwriters will not make sales of shares of
Common Stock offered hereby to customers' discretionary accounts without the
prior specific written approval of such customers.
Lehman Brothers Inc. has from time to time provided investment banking,
financial advisory and other services to the Company, for which services it has
received fees. Upon the closing of the Offerings, the Lehman Funds will be able
to elect all directors on the Company's Board of Directors. See "Management --
Directors and Executive Officers."
LEGAL MATTERS
The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Company by Winston & Strawn, Chicago, Illinois. Certain
legal matters in connection with the Offerings will be passed upon for the U.S.
Underwriters and the International Managers by Cravath, Swaine & Moore, New
York, New York. Cravath, Swaine & Moore has performed, and continues to perform,
services for the Lehman Funds from time to time.
65
<PAGE> 71
EXPERTS
The consolidated balance sheets as of June 30, 1992 and 1993 and the
related consolidated statements of operations, stockholders' equity, cash flows
and schedules for the years ended June 30, 1991, 1992 and 1993 and for the
twelve months and six months ended December 31, 1993 of the Company included in
the Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen & Co., independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports. In addition, the
balance sheets of the NAB as of September 30, 1993 and December 31, 1992 and the
statements of income and cash flows of the NAB for the nine months ended
September 30, 1993 and the years ended December 31, 1992 and 1991, have been
audited by Coopers & Lybrand, independent public accountants, as indicated in
their report with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
66
<PAGE> 72
INDEX TO FINANCIAL STATEMENTS
LEAR SEATING CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................. F-2
Consolidated Balance Sheets as of June 30, 1992, 1993 and December 31, 1993.......... F-3
Consolidated Statements of Operations for the years ended June 30, 1991, 1992 and 1993
and for the twelve months and six months ended December 31, 1993................... F-4
Consolidated Statements of Stockholders' Equity for the years ended June 30, 1991,1992
and 1993 and for the twelve months and six months ended December 31, 1993.......... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1991, 1992 and 1993
and for the twelve months and six months ended December 31, 1993................... F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................. F-28
Balance Sheet as of September 30, 1993 and December 31, 1992......................... F-29
Statement of Income for the nine months ended September 30, 1993 and for the years
ended December 31, 1992 and 1991................................................... F-30
Statement of Cash Flows for the nine months ended September 30, 1993 and for the
years ended December 31, 1992 and 1991............................................. F-31
Notes to the Financial Statements.................................................... F-32
</TABLE>
F-1
<PAGE> 73
After the Stock Split transaction discussed in Note 18 to Lear Seating
Corporation's consolidated financial statements is effected, we expect to be in
a position to render the following audit report.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
February 10, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lear Seating Corporation:
We have audited the accompanying consolidated balance sheets of LEAR
SEATING CORPORATION AND SUBSIDIARIES ("the Company") as of June 30, 1992, June
30, 1993 and December 31, 1993 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended June 30,
1991, 1992 and 1993 and for the twelve months and six months ended December 31,
1993. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of June 30,
1992, June 30, 1993 and December 31, 1993 and the results of its operations and
its cash flows for the years ended June 30, 1991, 1992 and 1993 and for the
twelve months and six months ended December 31, 1993, in conformity with
generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, as of
July 1, 1993, the Company changed its method of accounting for post-retirement
benefits other than pensions.
Detroit, Michigan,
February 10, 1994 (Except with
respect to the matters discussed in
Note 18, as to which the date is
[ ], 1994).
F-2
<PAGE> 74
LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, 1992 JUNE 30, 1993 DECEMBER 31, 1993
------------- ------------- -----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................... $ 33,217 $ 53,787 $ 55,034
Accounts receivable, less allowance for doubtful accounts of $239 at
June 30, 1992, $516 at June 30, 1993 and $644 at December 31,
1993.............................................................. 178,070 215,745 272,421
Inventories......................................................... 46,427 40,877 71,731
Unbilled customer tooling........................................... 10,741 8,565 19,441
Other............................................................... 14,409 6,225 14,957
------------- ------------- -----------------
282,864 325,199 433,584
------------- ------------- -----------------
PROPERTY, PLANT AND EQUIPMENT:
Land................................................................ 13,718 13,405 31,289
Buildings and improvements.......................................... 79,252 73,015 114,514
Machinery and equipment............................................. 160,123 180,208 210,654
Construction in progress............................................ 3,144 2,094 5,030
------------- ------------- -----------------
256,237 268,722 361,487
Less -- Accumulated depreciation................................ (76,732) (103,527) (110,530)
------------- ------------- -----------------
179,505 165,195 250,957
------------- ------------- -----------------
OTHER ASSETS:
Goodwill, less accumulated amortization of $36,568 at June 30, 1992,
$46,116 at June 30, 1993 and $50,871 at December 31, 1993......... 317,913 309,165 403,694
Deferred financing fees, net........................................ 7,765 9,825 14,377
Investments in affiliates and other................................. 11,837 10,825 11,679
------------- ------------- -----------------
337,515 329,815 429,750
------------- ------------- -----------------
$ 799,884 $ 820,209 $ 1,114,291
------------- ------------- -----------------
------------- ------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................... $ 11,982 $ 1,211 $ 48,155
Cash overdrafts..................................................... 8,324 17,317 19,769
Accounts payable.................................................... 204,865 248,454 298,326
Accrued liabilities................................................. 81,716 106,707 138,299
Financing lease obligation.......................................... 10,296 -- --
Current portion of long-term debt................................... 26,986 1,261 1,168
------------- ------------- -----------------
344,169 374,950 505,717
------------- ------------- -----------------
LONG-TERM LIABILITIES:
Deferred national income taxes...................................... 26,392 15,536 15,889
Long-term debt...................................................... 348,331 321,116 498,324
Other............................................................... 28,210 29,621 38,716
------------- ------------- -----------------
402,933 366,273 552,929
------------- ------------- -----------------
COMMITMENTS AND CONTINGENCIES
COMMON STOCK SUBJECT TO REDEMPTION:
Common stock subject to limited rights of redemption, $.01 par
value, 905,850 shares at June 30, 1992, 990,033 shares at June 30,
1993 and December 31, 1993, at estimated maximum redemption price
of $5.00 per share at June 30, 1992 and 1993 and $13.64 per share
at December 31, 1993.............................................. 4,530 4,950 13,500
Notes receivable from sale of common stock.......................... (1,065) (1,065) (1,065)
------------- ------------- -----------------
3,465 3,885 12,435
------------- ------------- -----------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 15,000,000 shares authorized, no
shares issued..................................................... -- -- --
Common stock, $.01 par value, 49,500,000 shares authorized at June
30, 1992 and 1993 and 150,000,000 shares authorized at December
31, 1993, 33,894,168 shares issued at June 30, 1992, 37,809,981
shares issued at June 30, 1993 and December 31, 1993, net of
shares subject to redemption...................................... 10 12 378
Additional paid-in capital.......................................... 131,650 150,993 156,551
Warrants exercisable for common stock............................... 10,000 10,000 10,000
Less -- Common stock held in treasury, 3,384,183 shares at June 30,
1992, 3,300,000 shares at June 30, 1993 and December 31, 1993, at
cost.............................................................. (10,255) (10,000) (10,000)
Retained deficit.................................................... (84,646) (74,532) (109,248)
Minimum pension liability adjustment................................ (2,858) (3,240) (4,164)
Cumulative translation adjustment................................... 5,416 1,868 (307)
------------- ------------- -----------------
49,317 75,101 43,210
------------- ------------- -----------------
$ 799,884 $ 820,209 $ 1,114,291
------------- ------------- -----------------
------------- ------------- -----------------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE> 75
LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------------------------ DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
---------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales........................... $1,085,319 $1,422,740 $1,756,510 $ 1,950,288 $1,005,218
Cost of sales....................... 983,890 1,307,099 1,604,011 1,780,073 932,983
Selling, general and administrative
expenses.......................... 41,596 50,074 61,898 62,717 27,666
Incentive stock and other
compensation expense (Note 14).... 1,353 (12) -- 18,016 18,016
Amortization of goodwill and other
intangible assets................. 13,810 8,746 9,548 9,929 4,755
---------- ---------- ---------- ------------- ------------
Operating income.................. 44,670 56,833 81,053 79,553 21,798
Interest expense.................... 61,676 55,158 47,832 45,656 24,767
Foreign currency exchange (gain)
loss.............................. 1,717 300 470 49 (193)
Other expense, net.................. 1,574 7,859 4,331 7,750 6,520
---------- ---------- ---------- ------------- ------------
Income (loss) before provision for
national income taxes, minority
interests in net income of
subsidiaries, equity income of
affiliates and extraordinary
item........................... (20,297) (6,484) 28,420 26,098 (9,296)
Provision for national income
taxes............................. 14,019 12,968 17,847 26,864 13,467
Minority interests in net income of
subsidiaries...................... 1,770 691 470 349 88
Equity (income) loss of
affiliates........................ (2,917) (3,013) (11) 1,032 181
---------- ---------- ---------- ------------- ------------
Income (loss) before extraordinary
item........................... (33,169) (17,130) 10,114 (2,147) (23,032)
Extraordinary loss on early
extinguishment of debt............ -- 5,100 -- 11,684 11,684
---------- ---------- ---------- ------------- ------------
Net income (loss)................... $ (33,169) $ (22,230) $ 10,114 $ (13,831) $ (34,716)
---------- ---------- ---------- ------------- ------------
---------- ---------- ---------- ------------- ------------
Net income (loss) per common share,
as adjusted (Note 18):
Income (loss) before extraordinary
item........................... $ (2.01) $ (.62) $ .25 $ (.06) $ (.65)
Extraordinary loss................ -- (.18) -- (.33) (.33)
---------- ---------- ---------- ------------- ------------
$ (2.01) $ (.80) $ .25 $ (.39) $ (.98)
---------- ---------- ---------- ------------- ------------
---------- ---------- ---------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 76
LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
WARRANTS MINIMUM
ADDITIONAL EXERCISABLE PENSION CUMULATIVE
COMMON PAID-IN INTO TREASURY RETAINED LIABILITY TRANSLATION
STOCK CAPITAL COMMON STOCK STOCK DEFICIT ADJUSTMENT ADJUSTMENT TOTAL
------ ---------- ------------ -------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1990............ $ 6 $ 59,454 $ 10,000 $(10,000) $ (29,247) $ -- $ 5,079 $ 35,292
Net loss........................ -- -- -- -- (33,169) -- -- (33,169)
Stock option compensation....... -- 1,353 -- -- -- -- -- 1,353
Re-acquisition of 21,450 shares
of common stock subject to
redemption from management
investors, at cost............ -- 65 -- (65) -- -- -- --
Foreign currency translation.... -- -- -- -- -- -- 859 859
------ ---------- ------------ -------- --------- ---------- ---------- --------
BALANCE, JUNE 30, 1991............ 6 60,872 10,000 (10,065) (62,416) -- 5,938 4,335
Net loss........................ -- -- -- -- (22,230) -- -- (22,230)
Stock option compensation....... -- (12) -- -- -- -- -- (12)
Re-acquisition of 62,700 shares
of common stock subject to
redemption from management
investors, at cost............ -- 190 -- (190) -- -- -- --
Sale of additional 14,999,985
shares of common stock, net of
transaction expenses.......... 4 72,384 -- -- -- -- -- 72,388
Recognize minimum pension
liability adjustment.......... -- -- -- -- -- (2,858) -- (2,858)
Foreign currency translation.... -- -- -- -- -- -- (522) (522)
Restate common stock subject to
redemption to estimated
maximum redemption value...... -- (1,784) -- -- -- -- -- (1,784)
------ ---------- ------------ -------- --------- ---------- ---------- --------
BALANCE, JUNE 30, 1992............ 10 131,650 10,000 (10,255) (84,646) (2,858) 5,416 49,317
Net loss........................ -- -- -- -- (10,771) -- -- (10,771)
Sale of additional 3,999,996
shares of common stock, net of
transaction expenses.......... 2 19,598 -- -- -- -- -- 19,600
Sale of 84,183 shares of
treasury stock to management
investors..................... -- (255) -- 255 -- -- -- --
Foreign currency translation.... -- -- -- -- -- -- (4,640) (4,640)
------ ---------- ------------ -------- --------- ---------- ---------- --------
BALANCE, JANUARY 2, 1993.......... 12 150,993 10,000 (10,000) (95,417) (2,858) 776 53,506
Net income...................... -- -- -- -- 20,885 -- -- 20,885
Minimum pension liability
adjustment.................... -- -- -- -- -- (382) -- (382)
Foreign currency translation.... -- -- -- -- -- -- 1,092 1,092
------ ---------- ------------ -------- --------- ---------- ---------- --------
BALANCE, JUNE 30, 1993............ 12 150,993 10,000 (10,000) (74,532) (3,240) 1,868 75,101
Net loss........................ -- -- -- -- (34,716) -- -- (34,716)
Incentive stock option
compensation.................. -- 14,474 -- -- -- -- -- 14,474
Minimum pension liability
adjustment.................... -- -- -- -- -- (924) -- (924)
Foreign currency translation.... -- -- -- -- -- -- (2,175) (2,175)
Restate common stock subject to
redemption to estimated
maximum redemption value...... -- (8,550) -- -- -- -- -- (8,550)
Thirty-three-for-one stock
split......................... 366 (366) -- -- -- -- -- --
------ ---------- ------------ -------- --------- ---------- ---------- --------
BALANCE, DECEMBER 31, 1993........ $378 $156,551 $ 10,000 $(10,000) $(109,248) $ (4,164) $ (307) $ 43,210
------ ---------- ------------ -------- --------- ---------- ---------- --------
------ ---------- ------------ -------- --------- ---------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 77
LEAR SEATING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE SIX
MONTHS MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
-------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................... $(33,169) $(22,230) $ 10,114 $ (13,831) $ (34,716)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Depreciation and amortization of goodwill and other
intangible assets...................................... 36,758 34,974 40,654 42,559 21,866
Incentive stock option compensation...................... 1,353 (12) -- 14,474 14,474
Accreted interest on Senior Subordinated Discount
Notes.................................................. 10,322 4,738 -- -- --
Amortization of deferred financing fees.................. 4,096 3,198 2,972 2,594 1,065
Deferred national income taxes........................... (6,987) (1,672) (10,856) (12,342) (90)
Post-retirement benefits accrued......................... -- -- -- 3,273 3,273
Loss on retirement of property, plant and equipment...... 316 82 374 6,752 6,373
Extraordinary loss....................................... -- 5,100 -- 11,684 11,684
Other, net............................................... (3,103) (2,932) 482 (294) 583
Net change in working capital items...................... 23,921 26,801 50,760 58,388 (7,368)
-------- -------- --------- ------------ ------------
Net cash provided by operating activities.............. 33,507 48,047 94,500 113,257 17,144
-------- -------- --------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment................. (20,892) (27,926) (31,595) (45,915) (28,989)
Acquisitions (Note 6)...................................... (7,527) (650) -- (172,065) (172,065)
Proceeds from sale of property, plant and equipment........ 2,860 996 1,044 968 133
Other, net................................................. (1,862) 1,593 (170) 2,226 2,207
-------- -------- --------- ------------ ------------
Net cash used by investing activities.................. (27,421) (25,987) (30,721) (214,786) (198,714)
-------- -------- --------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term revolving credit borrowings, net (Note 9)........ 8,952 (10,284) (24,130) 225,512 230,700
Additions to other long-term debt.......................... -- 20,000 125,000 -- --
Reductions in other long-term debt......................... (26,699) (69,209) (154,055) (103,618) (54,150)
Short-term borrowings, net................................. 21,653 (15,270) (10,771) 12,828 17,729
Proceeds from sale of common stock, net.................... -- 72,388 20,020 -- --
Deferred financing fees.................................... -- (1,839) (5,032) (10,508) (10,508)
Increase (decrease) in cash overdrafts..................... (2,205) (10,867) 8,993 3,321 2,452
Other, net................................................. (25) (190) -- -- --
-------- -------- --------- ------------ ------------
Net cash provided (used) by financing activities....... 1,676 (15,271) (39,975) 127,535 186,223
-------- -------- --------- ------------ ------------
Effect of foreign currency translation..................... 2,423 540 (3,234) (2,507) (3,406)
-------- -------- --------- ------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS...................... 10,185 7,329 20,570 23,499 1,247
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............. 15,703 25,888 33,217 31,535 53,787
-------- -------- --------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................... $ 25,888 $ 33,217 $ 53,787 $ 55,034 $ 55,034
-------- -------- --------- ------------ ------------
-------- -------- --------- ------------ ------------
CHANGES IN WORKING CAPITAL, NET OF EFFECTS OF ACQUISITIONS:
Accounts receivable, net................................... $ 21,061 $(42,334) $ (42,564) $ (83,475) $ (60,319)
Inventories................................................ (2,682) (6,081) 4,219 2,947 (4,225)
Accounts payable........................................... 4,346 62,128 49,605 93,950 56,465
Accrued liabilities and other.............................. 1,196 13,088 39,500 44,966 711
-------- -------- --------- ------------ ------------
$ 23,921 $ 26,801 $ 50,760 $ 58,388 $ (7,368)
-------- -------- --------- ------------ ------------
-------- -------- --------- ------------ ------------
SUPPLEMENTARY DISCLOSURE:
Cash paid for interest..................................... $ 47,304 $ 47,584 $ 41,130 $ 42,088 $ 20,235
-------- -------- --------- ------------ ------------
-------- -------- --------- ------------ ------------
Cash paid for income taxes................................. $ 22,900 $ 12,135 $ 21,843 $ 15,685 $ 4,255
-------- -------- --------- ------------ ------------
-------- -------- --------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 78
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Lear Seating
Corporation ("the Company"), a Delaware corporation, and its wholly-owned and
majority-owned subsidiaries. Investments in less than majority-owned businesses
are generally accounted for under the equity method (Note 7).
Prior to December 31, 1993, the Company was a wholly-owned subsidiary of
Lear Holdings Corporation ("Holdings"). On December 31, 1993, Holdings was
merged with and into the Company and the separate corporate existence of
Holdings ceased (the "Merger"). Prior to the Merger, Holdings had several other
wholly-owned subsidiaries, including LS Acquisition No. 14 ("LS No. 14"), Lear
Seating Holdings Corp. No. 50 ("LS No. 50") and Lear Seating Sweden, AB
("LS-Sweden"). In conjunction with the Merger, these companies became
subsidiaries of the Company. The Merger has been accounted for and reflected in
the accompanying financial statements as a merger of companies under common
control. As such, the financial statements of the Company have been restated as
if the current structure (post-Merger) had existed for all periods presented.
In February 1994, the Company changed its fiscal year end from June 30 to
December 31, effective December 31, 1993. Accordingly, the twelve months ended
December 31, 1993 does not constitute a fiscal year.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
Transactions and balances among the Company and its subsidiaries have been
eliminated in the consolidated financial statements.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
principally using the first-in, first-out method. Finished goods and
work-in-process inventories include material, labor and manufacturing overhead
costs.
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1992 1993 1993
-------- -------- ------------
<S> <C> <C> <C>
Raw materials................................... $ 29,931 $ 29,005 $ 42,470
Work-in-process................................. 9,849 8,331 23,394
Finished goods.................................. 6,647 3,541 5,867
-------- -------- ------------
$ 46,427 $ 40,877 $ 71,731
-------- -------- ------------
-------- -------- ------------
</TABLE>
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciable property is
depreciated over the estimated useful lives of the assets, using principally the
straight-line method as follows:
<TABLE>
<S> <C>
Buildings and improvements..................................... 20 to 25 years
Machinery and equipment........................................ 5 to 15 years
</TABLE>
Goodwill and Other Intangible Assets
Goodwill consists of purchase price and related acquisition costs in excess
of the fair value of identifiable assets acquired. Goodwill is amortized on a
straight-line basis over 40 years. The Company evaluates the
F-7
<PAGE> 79
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
carrying value of goodwill for potential impairment on an ongoing basis. Such
evaluations compare operating income before amortization of goodwill of the
operations to which goodwill relates to the amortization recorded. The Company
also considers future anticipated operating results, trends and other
circumstances in making such evaluations.
Other intangible assets, consisting of a license agreement, were amortized
over the two-year term of the agreement, which expired in September 1990.
Deferred Financing Fees
Costs incurred in connection with the issuance of debt are amortized over
the term of the related indebtedness using the effective interest method.
Research and Development
Costs incurred in connection with the development of new products and
manufacturing methods are charged to operations as incurred. Such costs amounted
to $7,923,000, $11,387,000, $18,229,000, $16,177,000 and $7,062,000 for the
years ended June 30, 1991, 1992 and 1993 and for the twelve and six months ended
December 31, 1993, respectively.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are generally translated
into U.S. dollars at the exchange rates in effect at the end of the period.
Revenue and expense accounts are translated using a weighted average of exchange
rates in effect during the period. Translation adjustments that arise from
translating a foreign subsidiary's financial statements from functional currency
to U.S. dollars are reflected as cumulative translation adjustment in the
consolidated balance sheets.
Until December 31, 1992, non-monetary assets and liabilities of a foreign
subsidiary operating in Mexico were translated using historical rates, while
monetary assets and liabilities were translated at the exchange rates in effect
at the end of the period, with the U.S. dollar effects of exchange rate changes
included in the results of operations. As of January 1, 1993, Mexico's economy
was no longer deemed to be highly inflationary, and since then, the accounts of
the subsidiary operating in Mexico have been translated consistent with other
foreign subsidiaries.
Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency,
except those transactions which operate as a hedge of a foreign currency
investment position, are included in the results of operations as incurred.
Income Taxes
The consolidated financial statements reflect the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes", for
all periods presented. Since the twelve months ended December 31, 1993 does not
constitute a fiscal year, the consolidated national income tax provision for
this period was determined based upon the provisions of APB Opinion No. 28,
"Interim Financial Reporting."
Deferred national income taxes represent the effect of cumulative temporary
differences between income and expense items reported for financial statement
and tax purposes, and between the bases of various assets and liabilities for
financial statement and tax purposes. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of evidence, it is deemed more
likely than not that the asset will not be realized.
F-8
<PAGE> 80
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Industry Segment Reporting
The Company is principally engaged in the design and manufacture of
automotive seating and, therefore, separate industry segment reporting is not
applicable.
Reclassifications
Certain items in prior years' financial statements have been reclassified
to conform with the presentation used in the periods ended December 31, 1993.
(3) 1994 REFINANCING -- SUBSEQUENT EVENT
On February 3, 1994, the Company completed a public offering of
$145,000,000 of 8 1/4% Subordinated Notes, due 2002 (the "8 1/4% Notes"). The
8 1/4% Notes require interest payments semi-annually on February 1 and August 1.
Fees and expenses related to the issuance of the 8 1/4% Notes are expected to be
approximately $5,000,000, including underwriting fees of $2,400,000 paid to
Lehman Brothers Inc.
The net proceeds from the sale of the 8 1/4% Notes were used to finance the
redemption of the 14% Subordinated Debentures. Simultaneous with the sale of
8 1/4% Notes, the Company called the 14% Subordinated Debentures for redemption
on March 4, 1994, at a redemption price equal to 105.4% of the outstanding
principal amount of $135,000,000, plus accrued interest to the redemption date.
The premium for early extinguishment of the 14% Subordinated Debentures and the
accelerated amortization of deferred financing fees totaled approximately
$10,718,000. This amount has been reflected as an extraordinary loss in the
periods ending December 31, 1993. The deferred tax benefit related to this
extraordinary loss was offset by a valuation allowance.
(4) 1992 REFINANCING AND SALE OF COMMON STOCK
On July 30, 1992, the Company sold $125,000,000 of 11 1/4% Senior
Subordinated Notes (the "11 1/4% Notes") (Note 9). Fees and expenses related to
issuance of the 11 1/4% Notes were approximately $5,032,000, including
consulting and underwriting fees of $2,200,000 paid to Lehman Brothers Inc. and
$50,000 paid to FIMA Finance Management, Inc., an affiliate of IFINT-USA Inc.
("FIMA"), for consulting fees.
Simultaneous with the sale of the 11 1/4% Notes, the Company issued
3,999,996 shares of common stock to the four merchant banking partnerships
affiliated with Lehman Brothers Inc. ("Lehman Funds") and FIMA, for total
proceeds of approximately $20,000,000. Fees and expenses related to the sale
were $400,000, paid to the Lehman Funds and FIMA. Certain management investors
also purchased 84,183 shares of common stock previously held in treasury for
approximately $421,000.
On August 14, 1992, the Company redeemed the 14 1/4% Senior Subordinated
Discount Notes (the "Discount Notes") at a redemption price equal to 103% of the
outstanding principal amount of $85,000,000 plus accrued interest. The
prepayment premium for early extinguishment of these notes and the accelerated
amortization of deferred financing fees totaled approximately $4,686,000 and
have been reflected as an extraordinary loss in the year ended June 30, 1992.
The deferred tax benefit related to this extraordinary loss was offset by a
valuation allowance.
A portion of the net proceeds from the sale of the 11 1/4% Notes and common
stock described above were used to finance the redemption of the Discount Notes
and to prepay $15,000,000 of the Domestic Term Loan. The balance of the proceeds
was designated for temporary reduction of outstanding borrowings on the Domestic
Revolving Credit Loan, expansion of the Company's operations and for general
corporate purposes.
F-9
<PAGE> 81
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) 1991 CAPITALIZATION AND RELATED TRANSACTIONS
Capitalization
Pursuant to a Stock Purchase Agreement dated September 27, 1991 (the "1991
Agreement"), the Company issued 14,999,985 shares of common stock to the Lehman
Funds and FIMA, for total proceeds of approximately $75,000,000. Fees and
expenses related to the sale and the transactions described below approximated
$7,700,000, of which approximately $3,200,000 was charged to other expense and
approximately $1,800,000 was capitalized as deferred financing fees. Such fees
and expenses included $4,500,000 paid to Lehman Brothers. The Lehman Funds and
FIMA also purchased all of the outstanding common stock and warrants owned by
the Company's former majority owner, General Electric Capital Corporation
("GECC"), and certain other stockholders.
Simultaneous with the sale of common stock, the Company obtained a
$20,000,000 real estate mortgage from GECC.
The net proceeds from the sale of common stock and the real estate mortgage
were used to reduce outstanding borrowings on the Domestic Revolving Credit Loan
by $32,000,000, to prepay the Domestic Term Loan by $48,500,000, and to purchase
LS-Sweden (see discussion below). A write-off of deferred financing fees of
$414,000 related to the prepayment of the Domestic Term Loan was recognized as
an extraordinary loss in the consolidated statement of operations for the year
ended June 30, 1992. The deferred tax benefit related to this extraordinary loss
was offset by a valuation allowance.
Assuming the sale of common stock and the retirement of debt had taken
place on July 1, 1990, the Company's unaudited pro forma net loss per common
share for the year ended June 30, 1991 would have been $(.99). The pro forma
results and the weighted average shares outstanding used to calculate the pro
forma net loss per common share give effect to the reduced interest expense, net
of related income taxes, and the increased number of shares that would have been
outstanding from July 1, 1990 through June 30, 1991, respectively.
The 1991 Agreement required the Company to make certain representations and
warranties prior to the sale with respect to its tax position and title to the
new shares. The Company is required to indemnify the parties to the Agreement
for any aggregate losses, liabilities, claims or expenses arising from a breach
of the aforementioned representations and warranties. Management is not
currently aware of any information or condition which will require
indemnification under the terms of the Agreement.
Lear Seating Sweden, AB
In October 1990, the Company entered into an agreement with Saab Automobile
AB ("Saab") in which, effective January 1991, Saab agreed to purchase, and the
Company agreed to supply, completely assembled seat modules on a just-in-time
basis to Saab's production facilities located in Trollhattan, Sweden. The
Company then established a Swedish subsidiary, Lear Seating Sweden, AB
("LS-Sweden").
In February 1991, the Company sold its investment in the common stock of
LS-Sweden to GECC, then a major shareholder of the Company, for $100,000. The
Company entered into an agreement with GECC to continue to manage the operations
of LS-Sweden. GECC agreed to provide sufficient funds to LS-Sweden to finance
the purchase of inventory and equipment from Saab at estimated book value of
approximately $3,900,000 and to fund working capital requirements. In addition,
GECC agreed to provide the Company with the right of first refusal in the event
of sale, assignment, or transfer of substantially all of the assets or common
stock of LS-Sweden.
F-10
<PAGE> 82
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On September 27, 1991, and as part of the capitalization, the Company
reacquired all common stock of LS-Sweden from GECC for $100,000. In addition,
the Company repaid cumulative advances from GECC to LS-Sweden and related
expenses in the aggregate amount of approximately $7,300,000.
The sale and purchase transactions described above related to LS-Sweden's
common stock are accounted for as transactions between entities under common
control. Accordingly, the Company's consolidated financial statements include
the balance sheet accounts and results of operations of LS-Sweden as if it were
a subsidiary of the Company since its inception in January 1991.
(6) ACQUISITIONS
Acquisition of Certain Assets of the North American Seating Business of Ford
Motor Company ("NAB")
On November 1, 1993, the Company purchased certain assets of the Plastics
and Trim Products Division of Ford Motor Company ("Ford") consisting of (i) the
U.S. operations that supply seat trim and trimmed seat assemblies to Ford which
are manufactured by Favesa, S.A. de C.V. ("Favesa"); (ii) all of the shares of
Favesa, a maquiladora company located in Juarez, Mexico; and (iii) certain
inventories and assets employed in the operation of Favesa (collectively
referred as the "NAB"). In connection with this transaction, the Company and
Ford entered into a long-term supply agreement for certain products produced by
these operations at agreed upon prices.
This acquisition was accounted for as a purchase, and accordingly, the
operating results of the NAB have been included in the accompanying financial
statements since the date of acquisition. The purchase price, after giving
effect to an adjustment related to changes in NAB working capital, was financed
and allocated to the purchased assets as follows (in thousands):
<TABLE>
<S> <C>
Cash consideration paid to seller, net of cash acquired of
$2,671........................................................... $170,727
Execution of promissory notes (Notes 8 and 9)...................... 10,500
Fees and expenses (including $500 paid to Lehman Brothers Inc.).... 1,338
--------
Total purchase price.......................................... $182,565
--------
--------
Property, Plant and Equipment...................................... $ 85,565
Net non-cash working capital....................................... 773
Other assets purchased and liabilities assumed, net................ (3,057)
Goodwill........................................................... 99,284
--------
Total purchase price allocation............................... $182,565
--------
--------
</TABLE>
The cash portion of the purchase price was financed with borrowings under
the Company's domestic credit agreement (Note 9). The purchase price and related
allocation may be revised in the next year based on revisions of preliminary
estimates of fair values made at the date of purchase. Such changes are not
expected to be significant.
As part of the NAB Acquisition, the Company has exercised an option to
cause Ford to purchase two facilities in consideration of Ford cancelling a
$19,915,000 note payable (Note 8). The Company has exercised this option, and
the sale of these facilities is scheduled to occur on March 15, 1994. The
Company will lease one of these facilities until the earlier of March 15, 1996
or the date it vacates this facility.
Assuming the acquisition had taken place as of the beginning of each period
presented, the consolidated pro forma results of operations of the Company would
have been as follows, after giving effect to certain adjustments, including
certain operations adjustments consisting principally of managements' estimates
of the effects of product pricing adjustments negotiated in connection with the
acquisition and incremental ongoing
F-11
<PAGE> 83
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NAB engineering, overhead and administrative expenses, increased interest
expense and goodwill amortization and the related income tax effects (Unaudited;
in thousands, except per share data):
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
JUNE 30, 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales........................................ $ 2,235,150 $ 2,361,422 $ 1,159,482
Income (loss) before extraordinary item.......... 26,580 5,058 (19,582)
Net income (loss)................................ 26,580 (6,626) (31,266)
Income per common share before extraordinary
item........................................... .66 .12 (.55)
Net income (loss) per common share............... .66 (.16) (.88)
</TABLE>
The pro forma information above does not purport to be indicative of the
results that actually would have been obtained if the operations were combined
during the periods presented, and is not intended to be a projection of future
results or trends.
Acquisition of Central de Industrias, S.A. de C.V. ("CISA")
From April 1991 through October 1991, the Company, through LS No. 50,
acquired approximately 4,514,600 shares of the common stock of CISA for an
aggregate purchase price of approximately $8,177,000, including related
expenses. These shares represented approximately 38% of CISA's outstanding
common stock. Prior to this purchase, the Company had owned approximately 61% of
CISA's common stock, resulting in a total ownership interest of over 99%. These
acquisitions were accounted for as purchases and the aggregate purchase price
approximated the fair value of net assets acquired.
Acquisition of Fair Haven Industries, Inc.
In July 1990, the Company, through a subsidiary, acquired 9,600 newly
issued shares of the common stock of Fair Haven Industries, Inc. ("FHI") for
approximately $750,000, plus related expenses. The shares acquired represented
approximately 49% of FHI's outstanding common stock. The Company also received
an option to acquire an additional 2% of FHI common stock for nominal additional
consideration and an irrevocable proxy to vote those shares, resulting in a
controlling interest. The 2% option was exercised in December 1991.
The acquisition was accounted for as a purchase. The excess of the purchase
price over the fair value of net assets acquired was approximately $3,801,000
with the minority interest valued at zero. Subsequently, the Company determined
that the excess purchase price of $3,801,000 was not realizable and recorded the
amount as a charge against operating income in the year ended June 30, 1991. FHI
has been included in the Company's consolidated financial statements for all
periods presented.
In August 1993, the Company reached a settlement with the former owners of
FHI in which the Company agreed to purchase the remaining 49% of FHI's common
stock and release all claims against the former owners arising from the July
1990 purchase. The settlement amount, plus related legal costs, was not
significant and was charged to operating income in the year ended June 30, 1993.
F-12
<PAGE> 84
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) INVESTMENTS IN AFFILIATES
The investments in affiliates are as follows:
<TABLE>
<CAPTION>
PERCENT BENEFICIAL OWNERSHIP
-----------------------------------
JUNE 30,
-------------------- DECEMBER 31,
1991 1992 1993 1993
---- ---- ---- -----------
<S> <C> <C> <C> <C>
General Seating of America, Inc.................. 35% 35% 35% 35%
General Seating of Canada, Ltd................... 35 35 35 35
Pacific Trim Corporation Ltd. (Thailand)......... 20 20 20 20
Probel, S.A. (Brazil)............................ 31 31 31 31
Moldeados Interiores, S.A. de C.V................ 38 -- -- --
</TABLE>
The above businesses are generally involved in the manufacture of
automotive seating and seating components.
Investments in General Seating of America, Inc., General Seating of Canada,
Ltd., and Pacific Trim Corporation Ltd. are accounted for using the equity
method. In June 1993, the Company revalued its investment in Probel, which was
previously accounted for using the cost method, to zero due to continued
operating losses and other factors impacting its potential recoverability. A
charge of approximately $1,700,000 was recorded and is reflected in equity
income of affiliates in the consolidated statement of operations in the year
ended June 30, 1993 and the twelve months ended December 31, 1993.
The investment in Moldeados Interiores, S.A. de C.V. was accounted for
using the equity method until its sale in July 1991. The gain recognized on this
sale was not material.
The aggregate investment in affiliates was $6,379,000, $4,756,000 and
$4,593,000 as of June 30, 1992, June 30, 1993 and December 31, 1993,
respectively.
Dividends of approximately $930,000 and $985,000 were received by the
Company in the years ended June 30, 1992 and 1993, respectively, from General
Seating of Canada, Ltd. No other dividends were received by the Company from
affiliates during 1991, 1992 or 1993.
F-13
<PAGE> 85
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized group financial information for affiliates accounted for under
the equity method is as follows (unaudited, in thousands):
<TABLE>
<CAPTION>
JUNE JUNE DECEMBER
30, 30, 31,
1992 1993 1993
------- ------- -----------
<S> <C> <C> <C>
Balance sheet data:
Current assets................................ $19,032 $17,004 $18,277
Non-current assets............................ 15,154 13,717 14,081
Current liabilities........................... 18,847 16,757 14,478
Non-current liabilities....................... 5,700 5,700 5,700
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
-------------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
-------- -------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Income statement data:
Net sales.......................... $114,705 $129,220 $119,837 $ 122,448 $ 58,399
Gross profit....................... 17,541 19,335 13,001 12,593 4,915
Income before provision for income
taxes........................... 8,491 11,643 10,833 7,317 2,347
Net income......................... 7,926 8,246 6,566 5,031 1,409
</TABLE>
The Company had sales to affiliates of approximately $10,393,000,
$11,787,000, $10,711,000, $11,123,000 and $5,315,000 for the years ended June
30, 1991, 1992 and 1993, and for the twelve and six months ended December 31,
1993, respectively. Included in the Company's accounts receivable are trade
receivables from affiliates of approximately $1,056,000, $878,000 and $936,000
at June 30, 1992, June 30, 1993 and December 31, 1993, respectively.
The Company has guaranteed certain obligations of its affiliates. The
Company's share of amounts outstanding under guaranteed obligations as of June
30, 1992, June 30, 1993 and December 31, 1993 amounted to $3,484,000, $3,224,000
and $6,253,000, respectively.
(8) SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1992 JUNE 30, 1993 DECEMBER 31, 1993
------------- ------------- -----------------
<S> <C> <C> <C>
Lines of credit..................................... $11,982 $ 1,211 $18,152
Unsecured notes payable --
Ford Motor Company, non-interest bearing.......... -- -- 9,300
Ford Motor Company, 11 1/2% (Note 6).............. -- -- 19,915
Trade acceptance payable, 7 1/4%.................... -- -- 788
------------- ------------- -----------------
$11,982 $ 1,211 $48,155
------------- ------------- -----------------
------------- ------------- -----------------
</TABLE>
At December 31, 1993, the Company has lines of credit available with banks
of approximately $69,190,000, subject to certain restrictions imposed by the
credit agreement (Note 9). Short-term bank
F-14
<PAGE> 86
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowings, in U.S. dollar equivalents, based on the amounts outstanding at the
end of each month were as follows for the indicated period (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, TWELVE MONTHS SIX MONTHS
----------------------------- ENDED ENDED
1991 1992 1993 DECEMBER 31, 1993 DECEMBER 31, 1993
------- ------- ------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Maximum amount outstanding at any
month-end....................... $21,119 $18,092 $16,260 $18,152 $18,152
Average amount outstanding........ 12,540 15,394 8,198 6,908 7,362
Weighted average interest rate at
end of period................... 16.9% 8.7% 8.6% 6.3% 6.3%
Weighted average interest rate
during the period............... 16.3% 13.2% 9.9% 6.0% 6.9%
</TABLE>
(9) LONG-TERM DEBT
Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1992 JUNE 30, 1993 DECEMBER 31, 1993
------------- ------------- -----------------
<S> <C> <C> <C>
Senior Debt:
Term loans --
Domestic....................................... $ 51,300 $ 33,550 $ --
Canadian....................................... 50,000 -- --
German......................................... 9,887 8,827 7,592
------------- ------------- -----------------
111,187 42,377 7,592
------------- ------------- -----------------
Revolving credit loans --
Domestic....................................... 16,662 -- 230,700
Canadian....................................... 7,468 -- --
------------- ------------- -----------------
24,130 -- 230,700
------------- ------------- -----------------
Mortgage payable.................................. 20,000 20,000 --
------------- ------------- -----------------
155,317 62,377 238,292
Less -- Current portion................... (26,986) (1,261) (1,168)
------------- ------------- -----------------
128,331 61,116 237,124
------------- ------------- -----------------
Subordinated Debt:
14 1/4% Senior Subordinated Discount Notes (Note
4)............................................. 85,000 -- --
11 1/4% Senior Subordinated Notes (Note 4)........ -- 125,000 125,000
14% Subordinated Debentures (Note 3).............. 135,000 135,000 135,000
------------- ------------- -----------------
220,000 260,000 260,000
------------- ------------- -----------------
Note Payable........................................ -- -- 1,200
------------- ------------- -----------------
$ 348,331 $ 321,116 $ 498,324
------------- ------------- -----------------
------------- ------------- -----------------
</TABLE>
In October 1993, the Company amended and restated its existing credit
agreement with a syndicate of banks. The new $425 million revolving credit
facility (the "Credit Agreement") enabled the Company to replace the existing
Domestic Term Loan and Domestic Revolving Credit Facility, finance the cash
portion of the NAB Acquisition (Note 6) and retire an existing $20 million
mortgage payable. The accelerated amortization of deferred financing fees
related to the previous Domestic Term Loan and Domestic Revolving Credit
Facility and the mortgage payable totaled approximately $1,464,000. This amount,
net of the related tax benefit of $498,000, has been reflected as an
extraordinary loss in the periods ending December 31, 1993.
F-15
<PAGE> 87
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with this transaction, the Company paid $500,000 to Lehman
Brothers for consulting fees. In addition, Lehman Commercial Paper, Inc., an
affiliate of the Lehman Funds, is a managing agent of the Credit Agreement and
received fees of $666,000.
Loans under the Credit Agreement bear interest at the Eurodollar rate plus
3/4% to 1 1/2% or prime rate plus 0% to 1/2%, depending on the satisfaction of
certain financial ratios. The Company pays a commitment fee on the unused
balance of the facility of 3/8% to 1/2%, depending on certain ratios. At
December 31, 1993, interest was being charged at the Eurodollar rate plus 1 1/2%
and the commitment fee is 1/2%. Amounts available to be drawn under the Credit
Agreement will decrease by $40 million on each of October 31, 1996, April 29,
1997, October 31, 1997 and April 29, 1998. The facility expires on October 31,
1998.
The German Term Loan bears interest at a stated rate of 9.125%, is payable
in Deutschemarks in quarterly installments of approximately $292,000 through
March 2000, and is collateralized by certain assets of a German subsidiary.
The Canadian Revolving Credit Loan bears interest at the prime rate plus
1/2%, is payable in September 1994, with an option to extend through September
1995 with the consent of the lending banks, and is guaranteed by letters of
credit issued under the Credit Agreement.
The Company had available unused long-term revolving credit commitments of
$157,454,000 at December 31, 1993, net of $36,846,000 of outstanding letters of
credit. Borrowings on revolving credit loans were $665,594,000, $737,839,000,
$549,208,000, $986,308,000 and $820,519,000 for the years ended June 30, 1991,
1992 and 1993 and the twelve and six months ended December 31, 1993,
respectively. Repayments on revolving credit loans were $656,642,000,
$748,123,000, $573,338,000, $760,796,000 and $589,819,000 for the years ended
June 30, 1991, 1992 and 1993 and the twelve and six months ended December 31,
1993, respectively.
The weighted average interest rates on the Senior Debt as of June 30, 1992,
June 30, 1993 and December 31, 1993 were 7.3%, 7.5% and 5.1%, respectively.
The 11 1/4% Senior Subordinated Notes, due in 2000, require payments of
interest semi-annually.
The 14% Subordinated Debentures were redeemed subsequent to December 31,
1993 in connection with the refinancing (Note 3).
The Credit Agreement and Subordinated Debt Agreements contain numerous
restrictive covenants. The most restrictive of these covenants are financial
covenants related to maintenance of certain levels of net worth, operating
profit and interest coverage. The financial covenants generally become more
restrictive with the passage of time. These agreements also, among other things,
significantly restrict the Company's ability to incur additional indebtedness,
declare dividends, make investments and advances, sell assets and limit capital
expenditures to specified amounts. The German Term Loan agreement also contains
certain restrictive covenants.
As of December 31, 1993, the Company is unable to declare dividends. Loans
under the Credit Agreement and the German Term Loan are collectively
collateralized by substantially all assets of the Company.
The scheduled maturities of long-term debt at December 31 for the five
succeeding years before consideration of the refinancing described in Note 3 are
as follows (in thousands):
<TABLE>
<S> <C>
1994............................................................... $ 1,168
1995............................................................... 2,368
1996............................................................... 1,168
1997............................................................... 1,168
1998............................................................... 265,618
</TABLE>
F-16
<PAGE> 88
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) NATIONAL INCOME TAXES
A summary of income (loss) before provision for national income taxes and
components of the provision for national income taxes for the indicated periods
is as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE SIX
MONTHS MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
-------- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Income (loss) before
provision for national
income taxes, minority
interests in net income
of subsidiaries, equity
income of affiliates
and extraordinary item:
Domestic............ $(47,302) $(19,964) $ 6,759 $ (3,433) $(15,105)
Foreign............. 27,005 13,480 21,661 29,531 5,809
-------- -------- ------- ------------ ------------
$(20,297) $ (6,484) $28,420 $ 26,098 $ (9,296)
-------- -------- ------- ------------ ------------
-------- -------- ------- ------------ ------------
Domestic provision for
national income taxes:
Current provision... $ -- $ 2,146 $ 6,873 $ 7,442 $ 5,404
-------- -------- ------- ------------ ------------
Deferred --
Deferred
provision...... 958 2,603 1,481 904 943
Tax benefit of net
operating
losses carried
back........... (6,119) -- -- -- --
Benefit of
previously
unbenefitted
net operating
loss
carryforwards... -- -- (2,446) (2,953) (1,613)
-------- -------- ------- ------------ ------------
(5,161) 2,603 (965) (2,049) (670)
-------- -------- ------- ------------ ------------
Foreign provision for
national income taxes:
Current provision... 21,006 12,494 17,449 22,477 9,739
-------- -------- ------- ------------ ------------
Deferred --
Deferred
provision...... 242 (2,123) (1,725) (1,006) (1,006)
Adjustment due to
changes in
enacted tax
rates.......... -- -- (993) -- --
Tax benefit of
operating
losses......... (2,068) (2,152) (2,792) -- --
-------- -------- ------- ------------ ------------
(1,826) (4,275) (5,510) (1,006) (1,006)
-------- -------- ------- ------------ ------------
Provision for national
income taxes........... $ 14,019 $ 12,968 $17,847 $ 26,864 $ 13,467
-------- -------- ------- ------------ ------------
-------- -------- ------- ------------ ------------
</TABLE>
F-17
<PAGE> 89
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between the United States Federal statutory income tax rate
of 35% for the periods ended December 31, 1993 and 34% for the years ended June
30, 1991, 1992 and 1993 and the consolidated effective national income tax rate
for the periods indicated are summarized as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
----------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Income (loss) before provision for
national income taxes, minority
interests in net income of
subsidiaries, equity income of
affiliates and extraordinary item
multiplied by the United States Federal
statutory rate......................... $(6,901) $(2,205) $ 9,663 $ 9,135 $ (3,254)
Utilization of domestic net operating
loss carryforwards..................... -- -- (2,446) (2,953) (1,613)
Differences between domestic and
effective foreign tax rates............ 9,999 3,636 901 3,664 2,420
Operating losses not tax benefitted...... 6,663 8,562 3,674 4,850 4,280
Increase in valuation allowance.......... -- -- 426 8,775 10,850
Domestic income taxes provided on foreign
earnings............................... -- -- 1,564 875 70
Amortization of goodwill................. 4,259 2,974 3,246 3,344 1,531
Other, net............................... (1) 1 819 (826) (817)
------- ------- ------- ------------- ------------
$14,019 $12,968 $17,847 $26,864 $ 13,467
------- ------- ------- ------------- ------------
------- ------- ------- ------------- ------------
</TABLE>
Deferred national income taxes represent temporary differences in the
recognition of certain items for income tax and financial reporting purposes.
The components of the net deferred national income tax liability are summarized
as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1992 1993 1993
-------- -------- ------------
<S> <C> <C> <C>
Deferred national income tax liabilities:
Depreciation and basis difference........... $ 28,165 $ 18,837 $ 13,788
Financing and intercompany transactions..... 9,348 9,855 9,663
Taxes provided on unremitted foreign
earnings................................. 2,346 1,930 6,054
Benefit plans............................... -- 1,234 1,264
Other....................................... 1,440 1,740 2,646
-------- -------- ------------
$ 41,299 $ 33,596 $ 33,415
-------- -------- ------------
-------- -------- ------------
</TABLE>
F-18
<PAGE> 90
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31,
1992 1993 1993
-------- -------- ------------
<S> <C> <C> <C>
Deferred national income tax assets:
Tax credit carryforwards.................... $(18,105) $(18,105) $(23,671)
Tax loss carryforwards...................... (7,187) (13,203) (17,082)
Benefit plans............................... (3,676) (4,645) (6,153)
Accruals.................................... (3,306) (3,654) (5,435)
Deferred financing fees..................... (2,922) (1,640) (4,742)
Minimum pension liability adjustment........ (1,563) (1,962) (1,784)
Alternative minimum tax carryforward........ (1,242) (1,053) (432)
Deferred compensation....................... (1,324) (1,324) (7,640)
Other....................................... (413) (1,398) (1,290)
-------- -------- ------------
(39,738) (46,984) (68,229)
Valuation allowance........................... 24,209 30,108 51,454
-------- -------- ------------
(15,529) (16,876) (16,775)
-------- -------- ------------
Net deferred national income tax liability.... $ 25,770 $ 16,720 $ 16,640
-------- -------- ------------
-------- -------- ------------
</TABLE>
The net deferred national income tax liability includes deferred tax assets
of $2,173,000, $81,000 and $58,000 as of June 30, 1992, June 30, 1993 and
December 31, 1993, respectively, and a deferred tax liability of $1,551,000,
$1,265,000 and $1,561,000 as of June 30, 1992, June 30, 1993 and December 31,
1993, respectively, which have been classified as current in the consolidated
balance sheets and a deferred tax asset of $752,000 as of December 31, 1993,
which has been classified as long-term in the consolidated balance sheet.
Deferred national income taxes and withholding taxes have been provided on
earnings of the Company's Canadian subsidiary to the extent it is anticipated
that the earnings will be remitted in the form of future dividends. Deferred
national income taxes and withholding taxes have not been provided on the
undistributed earnings of the Company's European and Mexican subsidiaries as
such amounts are deemed to be permanently reinvested. The cumulative
undistributed earnings at December 31, 1993 on which the Company had not
provided additional national income taxes and withholding taxes were
approximately $19,942,000.
In June 1993, the Company settled with the Canadian taxing authorities on
the open issues relating to its Canadian tax returns through 1989. In addition,
a settlement was reached with Revenue Canada regarding treatment of certain
items relating to the Company's financing subsidiaries. The expense related to
these settlements was provided by the Company prior to the year ended June 30,
1993, and did not have a material effect on the Company's results of operations
or financial position.
As of December 31, 1993 the Company had a net operating loss carryforward
for United States income tax return purposes of approximately $1,039,000,
subject to certain limitations, expiring in the year 2006. In addition, two
European subsidiaries had net operating loss carryforwards for tax return
purposes totalling approximately $31,500,000, which have no expiration date, and
FHI had a net operating loss carryforward of approximately $7,200,000, expiring
in 2007. The foreign tax credit carryforwards expire in 1994 through 1996.
(11) RETIREMENT PLANS
The Company has noncontributory defined benefit pension plans covering
substantially all domestic employees and certain employees in foreign countries.
The Company's salaried plans provide benefits based on a career average earnings
formula. Hourly pension plans provide benefits under flat benefit formulas. The
Company also has a contractual arrangement with a key employee which provides
for supplemental retirement benefits. In general, the Company's policy is to
fund these plans based on legal requirements, tax considerations, and local
practices.
F-19
<PAGE> 91
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of the Company's pension expense include the following for the
periods indicated (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
----------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
------- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Service cost...................................... $ 2,229 $ 2,921 $ 3,096 $ 3,466 $ 1,918
Interest cost on projected benefit obligation..... 5,309 6,211 5,908 6,142 3,188
Actual return on assets........................... (2,942) (4,894) (6,618) (7,847) (4,538)
Net amortization and deferral..................... (1,886) 471 1,785 3,131 2,238
------- ------- ------- ------------- ------------
Net pension expense............................... $ 2,710 $ 4,709 $ 4,171 $ 4,892 $ 2,806
------- ------- ------- ------------- ------------
------- ------- ------- ------------- ------------
</TABLE>
The following table sets forth a reconciliation of the funded status of the
Company's defined benefit pension plans to the related amounts recorded in the
consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1992 JUNE 30, 1993 DECEMBER 31, 1993
---------------------------- ---------------------------- ----------------------------
PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE PLANS WHOSE
ASSETS EXCEED ABO EXCEEDS ASSETS EXCEED ABO EXCEEDS ASSETS EXCEED ABO EXCEEDS
ABO ASSETS ABO ASSETS ABO ASSETS
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation.... $11,393 $47,570 $13,946 $48,001 $11,938 $ 58,076
Non-vested benefit
obligation................. 42 2,171 809 1,908 77 3,139
------------- ----------- ------------- ----------- ------------- -----------
Accumulated benefit obligation
(ABO)........................ 11,435 49,741 14,755 49,909 12,015 61,215
Effects of anticipated future
compensation increases....... 983 8,366 9,135 883 1,075 10,097
------------- ----------- ------------- ----------- ------------- -----------
Projected benefit obligation... 12,418 58,107 23,890 50,792 13,090 71,312
Plan assets at fair value...... 16,952 36,674 21,942 36,034 18,317 42,833
------------- ----------- ------------- ----------- ------------- -----------
Projected benefit obligation in
excess of (less than) plan
assets....................... (4,534) 21,433 1,948 14,758 (5,227) 28,479
Unamortized net loss........... (3,027) (6,838) (2,946) (4,943) (1,270) (12,461)
Unrecognized prior service
cost......................... -- 165 641 (2,041) (20) (1,065)
Unamortized net asset
(obligation) at transition... 5,047 (1,922) 4,039 (1,413) 4,001 (1,580)
Adjustment required to
recognize minimum
liability.................... -- 6,545 -- 7,601 -- 11,105
------------- ----------- ------------- ----------- ------------- -----------
Accrued pension (asset)
liability recorded in the
consolidated balance
sheets....................... $(2,514) $19,383 $ 3,682 $13,962 $(2,516) $ 24,478
------------- ----------- ------------- ----------- ------------- -----------
------------- ----------- ------------- ----------- ------------- -----------
</TABLE>
F-20
<PAGE> 92
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The actuarial assumptions used in determining pension expense and the
funded status information shown above were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
--------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
---- ---- ---- ------------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate:
Domestic plans.............................. 8% 8% 8% 7.5-8% 7.5-8%
Foreign plans............................... 10% 9% 7-9% 7-9% 7-8%
Rate of salary progression:
Domestic plans.............................. 6% 6% 6% 6% 6%
Foreign plans............................... 4% 1-5% 3-5% 3-5% 3-5%
Long-term rate of return on assets:
Domestic plans.............................. 9% 9% 9% 9% 9%
Foreign plans............................... 10% 9% 9% 8-9% 8%
</TABLE>
Plan assets include cash equivalents, common and preferred stock, and
government and corporate debt securities.
Statement of Financial Accounting Standards No. 87, "Employers' Accounting
for Pensions," required the Company to record a minimum liability as of June 30,
1992, June 30, 1993 and December 31, 1993. As of December 31, 1993, the Company
recorded a long-term liability of $11,105,000, an intangible asset of
$5,157,000, which is included with other assets, and a reduction in
stockholders' equity of $4,164,000, net of income taxes of $1,784,000.
The Company also sponsors defined contribution plans and participates in
Government sponsored programs in certain foreign countries. Contributions are
determined as a percentage of each covered employee's salary. The Company also
participates in multi-employer pension plans for certain of its hourly employees
and contributes to those plans based on collective bargaining agreements. The
aggregate cost of the defined contribution and multi-employer pension plans
charged to operations was $1,001,000, $1,093,000, $1,335,000, $1,712,000 and
$1,002,000 for the years ended June 30, 1991, 1992 and 1993 and the twelve and
six months ended December 31, 1993, respectively.
(12) POST-RETIREMENT BENEFITS
On July 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers Accounting for Post-retirement Benefits Other Than
Pensions" for its domestic plans. This standard, which must be adopted for
foreign plans no later than 1995, requires that the expected cost of post-
retirement benefits be charged to expense during the years in which the
employees render service to the Company.
The Company's domestic post-retirement plans generally provide for the
continuation of medical benefits for all employees who complete 10 years of
service after age 45 and retire from the Company at age 55 or older. The Company
does not fund its post-retirement benefit obligation. Rather, payments are made
as costs are incurred by covered retirees.
As of July 1, 1993, the Company's accumulated post-retirement benefit
obligation was approximately $31,925,000. Because the Company had previously
recorded a liability of $6,277,000 related to these benefits, the net transition
obligation, which will be amortized over 20 years, was $25,648,000. The
following table sets forth a reconciliation of the funded status of the accrued
post-retirement benefits liability to the related
F-21
<PAGE> 93
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amounts recorded in the financial statements as of December 31, 1993, excluding
the amounts related to the acquisition of the NAB as discussed below (in
thousands):
<TABLE>
<S> <C>
Accumulated Post-retirement Benefit Obligation ("APBO"):
Retirees......................................................... $ 10,776
Fully eligible active plan participants.......................... 4,051
Other active participants........................................ 19,783
Unamortized Transition Obligation.................................. (25,007)
--------
Liability Recorded in the Balance Sheet (includes current liability
of $675)......................................................... $ 9,603
--------
--------
</TABLE>
Components of the Company's post-retirement benefit expense based upon an
adoption date of July 1, 1993 for the indicated periods were as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1993 1993
------------ ------------
<S> <C> <C>
Service cost......................................... $1,719 $1,719
Interest cost on APBO................................ 1,313 1,313
Amortization of transition obligation................ 641 641
------------ ------------
Net post-retirement benefit expense.................. $3,673 $3,673
------------ ------------
------------ ------------
</TABLE>
The APBO as of December 31, 1993 was calculated using an assumed discount
rate of 7.5%. Health care costs were assumed to rise 13.8% in 1994, with the
assumed rate increase decreasing by 1% per year to a minimum of 6.4% in 2008. To
illustrate the significance of these assumptions, a rise in the assumed rate of
health care cost increases of 1% each year would increase the APBO as of
December 31, 1993 by $4,702,000 and increase the net post-retirement benefit
expense by $577,000 for the six months ended December 31, 1993.
In connection with the acquisition of the NAB (Note 6) the Company assumed
certain post-retirement obligations. Accordingly, a liability for the estimated
APBO of $965,000 was recorded in purchase accounting.
Prior to July 1, 1993, post-retirement benefit costs were expensed as
incurred. Benefit payments were approximately $1,076,000, $883,000, $826,000,
$758,000 and $400,000 for the years ended June 30, 1991, 1992 and 1993 and for
the twelve and six months ended December 31, 1993.
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers Accounting for
Post-Employment Benefits." This statement requires that employers accrue the
cost of post-employment benefits during the employees' active service. The
Company will adopt this statement effective January 1, 1994. The Company
believes that the adoption of this statement will not have a material effect on
its financial position of results of operations.
(13) COMMITMENTS AND CONTINGENCIES
The Company is the subject of various lawsuits, claims and environmental
contingencies. In addition, the Company has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("Superfund"), for the cleanup of
contamination from hazardous substances at three Superfund sites, and may incur
indemnification obligations for cleanup at two additional sites. In the opinion
of management, the expected liability resulting from these matters is adequately
covered by amounts accrued, and will not have a material adverse effect on the
Company's consolidated financial position or future results of operations.
Two of the Company's European subsidiaries factor their accounts receivable
with a bank subject to limited recourse provisions and is charged a discount fee
equal to the current LIBOR rate plus 1%. The
F-22
<PAGE> 94
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount of such factored receivables, which was not included in accounts
receivable in the consolidated balance sheet at December 31, 1993, was
approximately $38,485,000.
Lease commitments at December 31, 1993 under noncancelable operating leases
with terms exceeding one year are as follows (in thousands):
<TABLE>
<S> <C>
1994................................................................ $15,802
1995................................................................ 13,300
1996................................................................ 8,987
1997................................................................ 7,666
1998................................................................ 6,905
1999 and thereafter................................................. 41,233
-------
Total............................................................. $93,893
-------
-------
</TABLE>
The Company's operating leases cover principally buildings and
transportation equipment. Rent expense incurred under all operating leases and
charged to operations was $4,760,000, $8,598,000, $11,573,000, $12,599,000 and
$6,529,000 for the years ended June 30, 1991, 1992 and 1993 and the twelve and
six months ended December 31, 1993, respectively.
In January 1992, the Company entered into an agreement with Volvo
Personvagnar AB ("Volvo") to either purchase or cause a third party to purchase
certain real property from Volvo. From January 1, 1992 until September 1992, the
Company accounted for the transaction as a financing lease. In September 1992,
the City of Bengtsfors, Sweden purchased this property from Volvo and
subsequently leased it to LS-Sweden for a term of 15 years. The lease with the
City of Bengtsfors requires quarterly lease payments of approximately $500,000,
and is accounted for as an operating lease. These payments are included in the
table above.
(14) WARRANTS, STOCK OPTIONS AND COMMON STOCK SUBJECT TO REDEMPTION
Warrants
In 1988, the Company sold warrants exercisable into 3,300,000 shares of
common stock. The warrants, which entitle the holder to receive one share of
common stock for no additional consideration, became exercisable on December 1,
1993. None of the warrants have been exercised as of December 31, 1993.
1988 Stock Option Plan
At December 31, 1993, 2,131,272 options granted under a stock option plan
dated September 29, 1988 were issued and outstanding. The options vested over a
three-year period and are currently exercisable at $1.29 per share. The
difference between the exercise price and the market value at the date of grant
was amortized to expense over the vesting period.
1992 Stock Option Plan
Under the 1992 stock option plan, the Company may grant up to 1,914,000
stock options to the management investors and certain other management
personnel. During fiscal 1993, the Company granted 1,376,100 of these options.
On December 31, 1993, the remaining 537,900 options under this plan were
granted. Pursuant to a plan amendment effective December 31, 1993, all of the
options became immediately vested and will generally become exercisable at $5
per share on September 28, 1996.
Stock option expense for the six months and twelve months ended December
31, 1993 was approximately $14,474,000, and is included in incentive stock and
other compensation expense in the accompanying statements of operations. The
expense recognized reflects the immediate vesting of the previously unvested
F-23
<PAGE> 95
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
options on December 31, 1993, based on the estimated market value of the common
stock of the Company of $13.64 per share.
In addition to the stock option expense, incentive stock and other
compensation expense in the accompanying statements of operations includes
$3,542,000 in special management bonuses approved by the Board of Directors as
of December, 1993.
The changes in the number of options outstanding for the periods indicated
are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
--------------------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
--------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period.... 2,232,186 2,309,868 2,131,272 3,507,372 3,507,372
Options Granted........ 97,086 -- 1,376,100 537,900 537,900
Options Revoked........ 19,404 178,596 -- -- --
--------- --------- --------- ------------- ------------
Options outstanding at
end of period.......... 2,309,868 2,131,272 3,507,372 4,045,272 4,045,272
--------- --------- --------- ------------- ------------
--------- --------- --------- ------------- ------------
</TABLE>
Under the terms of the Stockholders' and Registration Rights Agreement,
shares of common stock held by certain management investors are subject to
redemption at the option of the holder in the event of death, disability and
certain events of termination, as defined in the agreement. In such event, the
redemption price is the higher of cost or fair market value, as defined, as of
the date of the exercise of the option. Shares subject to such a redemption
option at December 31, 1993 total 990,033, distributed among 33 investors (Note
18).
Because no public market exists for the common stock of the Company and no
fair market value appraisal of the common stock had been performed, shares
subject to limited rights of redemption were stated at cost of $3.03 per share
as of June 30, 1991. At June 30, 1992 and June 30, 1993, these shares are stated
at $5 per share, representing the maximum estimated fair market value of the
stock based on the price per share in the September 1991 capitalization
transaction (Note 5) and the sale of common stock in July 1992 (Note 4). At
December 31, 1993, the shares are stated at $13.64 per share, representing an
estimated market value of the common stock of the Company. In the accompanying
consolidated balance sheets, common stock subject to redemption is stated net of
the related notes receivable from sale of common stock.
F-24
<PAGE> 96
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(15) GEOGRAPHIC SEGMENT DATA
Worldwide operations are divided into four geographic segments -- United
States, Canada, Europe and Mexico. The European geographic segment includes
operations in Austria, Finland, France, Germany, Sweden and the United Kingdom.
Geographic segment information is as follows (in thousands):
<TABLE>
<CAPTION>
TWELVE SIX
MONTHS MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
------------------------------------ DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales:
United States....... $ 490,611 $ 684,979 $ 847,133 $1,060,555 $ 587,064
Canada.............. 360,705 427,457 389,924 397,488 179,695
Europe.............. 145,540 268,175 434,146 407,488 191,844
Mexico.............. 128,880 173,383 203,218 208,647 106,410
Intersegment
sales............ (40,417) (131,254) (117,911) (123,890) (59,795)
---------- ---------- ---------- ------------ ------------
$1,085,319 $1,422,740 $1,756,510 $1,950,288 $1,005,218
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
Operating Income:
United States....... $ 6,181 $ 32,002 $ 51,752 $ 61,283 $ 27,081
Canada.............. 35,303 14,695 15,308 25,628 12,128
Europe.............. (3,667) 2,952 (3,907) (9,668) (7,608)
Mexico.............. 8,206 7,172 17,900 20,326 8,213
Unallocated(a)...... (1,353) 12 -- (18,016) (18,016)
---------- ---------- ---------- ------------ ------------
$ 44,670 $ 56,833 $ 81,053 $ 79,553 $ 21,798
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
Identifiable Assets:
United States....... $ 341,676 $ 350,694 $ 369,982 $ 679,686 $ 679,686
Canada.............. 209,813 197,371 200,195 180,144 180,144
Europe.............. 112,982 179,482 181,077 170,838 170,838
Mexico.............. 53,525 64,572 59,130 68,249 68,249
Unallocated(b)...... 11,674 7,765 9,825 14,377 14,377
---------- ---------- ---------- ------------ ------------
$ 729,670 $ 799,884 $ 820,209 $1,113,294 $1,113,294
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
</TABLE>
- -------------------------
(a) Unallocated Operating Income consists of incentive stock and other
compensation expense (Note 14).
(b) Unallocated Identifiable Assets consist of deferred financing fees.
The net assets of foreign subsidiaries were $169,461,000, $236,019,000,
$215,255,000 and $231,691,000 at June 30, 1991, 1992 and 1993 and December 31,
1993, respectively. The Company's share of foreign net income (loss) was
$8,438,000, $7,544,000, $8,508,000, $6,034,000 and $(2,412,000) for the years
ended June 30, 1991, 1992 and 1993 and for the twelve and six months ended
December 31, 1993, respectively.
A majority of the Company's sales are to automobile manufacturing
companies. The following is a summary of the percentage of net sales to major
customers:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED JUNE 30, ENDED ENDED
-------------------- DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
---- ---- ---- ------------- ------------
<S> <C> <C> <C> <C> <C>
General Motors Corporation.......... 51% 52% 48% 45% 42%
Ford Motor Company.................. 26 22 22 28 33
</TABLE>
F-25
<PAGE> 97
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, a significant portion of remaining sales are to the above
automobile manufacturing companies through various other automotive suppliers or
to affiliates of these automobile manufacturing companies. The majority of the
Company's accounts receivable are due from the customers listed above.
(16) QUARTERLY FINANCIAL DATA (UNAUDITED)(A)
<TABLE>
<CAPTION>
THIRTEEN
WEEKS THIRTEEN WEEKS THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED ENDED ENDED
SEPTEMBER 28, DECEMBER 28, MARCH 28, JUNE 30,
1991 1991 1992 1992
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales................ $ 284,431 $359,725 $339,233 $439,351
Gross profit............. 17,761 27,164 25,244 45,472
Income (loss) before
extraordinary item..... (14,689) 926 (4,667) 1,300
Net income (loss)........ (15,103) 926 (4,667) (3,386)
Income (loss) before
extraordinary item per
common share........... $ (.88) $ .03 $ (.15) $ .04
Net income (loss) per
common share........... $ (.90) $ .03 $ (.15) $ (.11)
</TABLE>
<TABLE>
<CAPTION>
FOURTEEN WEEKS THIRTEEN WEEKS THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED ENDED ENDED
OCTOBER 3, JANUARY 2, APRIL 3, JUNE 30,
1992(B) 1993(B) 1993 1993
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales............... $359,136 $452,304 $458,022 $487,048
Gross profit............ 21,415 33,104 40,224 57,756
Income (loss) before
extraordinary item.... (12,291) 1,520 6,120 14,765
Net income (loss)....... (12,291) 1,520 6,120 14,765
Income (loss) before
extraordinary item per
common share.......... $ (.36) $ .04 $ .15 $ .37
Net income (loss) per
common share.......... $ (.36) $ .04 $ .15 $ .37
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS THIRTEEN WEEKS
ENDED ENDED
OCTOBER 2, DECEMBER 31,
1993 1993
-------------- --------------
<S> <C> <C>
Net sales.......................................... $399,066 $606,152
Gross profit....................................... 21,827 50,408
Income (loss) before extraordinary item............ (10,829) (12,203)
Net income (loss).................................. (11,364) (23,352)
Income (loss) before extraordinary item per common
share............................................ $ (.31) $ (.34)
Net income (loss) per common share................. $ (.32) $ (.66)
</TABLE>
- -------------------------
(a) Dollar amounts are in thousands, except per share data.
(b) The provision for national income taxes for the fourteen weeks ended October
3, 1992 and the thirteen weeks ended January 2, 1993 were approximately
$1,687,000 and $2,763,000, respectively.
F-26
<PAGE> 98
LEAR SEATING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(17) FINANCIAL INSTRUMENTS
The Company hedges certain foreign currency risks through the use of
forward foreign exchange contracts and options. Such contracts are deemed as and
are effective as hedges of the related transactions. As such, gains and losses
from these contracts are deferred and are recognized on the settlement date,
consistent with the related transactions. As of December 31, 1993, the Company
and its subsidiaries have contracted to exchange up to $107,000,000 U.S. for
fixed amounts of Canadian dollars. In addition, the Company and its subsidiaries
have contracted to purchase 4,000,000 British Pounds for fixed amounts of German
Marks. The contracts mature during 1994.
The historical cost of certain of the Company's financial instruments
varies from the fair values of these instruments. The instruments listed below
have fair values which differ significantly from their carrying values. The
carrying values of all other financial instruments approximate the fair values
of such instruments.
<TABLE>
<CAPTION>
ITEM CARRYING VALUE FAIR VALUE
-------------------------------------------------- -------------- ------------
<S> <C> <C>
German Term Loan.................................. $ 7,592,000 $ 8,869,000
Senior Subordinated Notes......................... 125,000,000 136,250,000
Subordinated Debentures........................... 135,000,000 143,100,000
</TABLE>
Fair values of financial instruments were determined as follows:
Cash, Accounts Receivable, Accounts Payable and Notes Payable -- Fair
values were estimated to be equal to carrying values because of the
short-term, highly liquid nature of these instruments.
Senior Indebtedness -- Fair values were determined based on rates
currently available to the Company for similar borrowings of the same
maturities.
Subordinated Debt -- Fair values were determined by reference to
market prices of the securities in recent public transactions.
(18) STOCK SPLIT, INITIAL PUBLIC OFFERING AND AMENDMENT TO STOCKHOLDERS AND
REGISTRATION RIGHTS AGREEMENT -- SUBSEQUENT EVENTS
On March 2, 1994, the Company's Board of Directors approved a 33 to 1 split
of the common stock of the Company to be effective on [ ], 1994. All
references to the numbers of shares of common stock, stock options and income
(loss) per share in the accompanying financial statements and notes thereto have
been adjusted to give effect to the split as though it had already occurred.
The weighted average number of common shares outstanding for the years
ended June 30, 1991, 1992 and 1993 and for the twelve and six months ended
December 31, 1993 were 16,493,499; 27,768,312; 40,049,064; 35,500,014; and
35,500,014, respectively. Shares exercisable under the 1988 Stock Option Plan,
1992 Stock Option Plan, and the warrants (Note 14) are included in the weighted
average share calculation for the year ended June 30, 1993. These shares are not
included in the calculation of weighted average common shares outstanding in
other periods as their impact would be anti-dilutive.
The Board of Directors also approved an initial public offering of the
Company's common stock. Upon consummation of the offering, the Stockholders and
Registration Rights Agreement will be amended in order to, among other things,
relax certain restrictions on transfers of common stock owned by the parties to
the agreement and remove the rights of certain management investors to require
the Company to redeem their stock upon death, disability and certain events of
termination.
F-27
<PAGE> 99
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Ford Motor Company:
We have audited the balance sheet of The North American Business (an
operating component of Ford Motor Company, as described in Note 1 to the
financial statements) at September 30, 1993 and December 31, 1992, and the
related statements of income and cash flows for the nine months ended September
30, 1993 and the years ended December 31, 1992 and 1991. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The North American Business
(an operating component of Ford Motor Company, as described in Note 1 to the
financial statements) at September 30, 1993 and December 31, 1992, and the
results of its operations and its cash flows for the nine months ended September
30, 1993 and the years ended December 31, 1992 and 1991, in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the financial statements, the company changed its
method of accounting for postretirement benefits other than pensions in 1992. As
discussed in Notes 1 and 11 to the financial statements, Ford Motor Company has
entered into an agreement for the sale of The North American Business.
/s/ COOPERS & LYBRAND
COOPERS & LYBRAND
Detroit, Michigan
November 18, 1993
F-28
<PAGE> 100
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 2,743,000 $ 2,074,000
Accounts receivable, net of allowance of $4,500,000 and
$7,770,000, respectively....................................... 30,037,000 52,865,000
Inventories (Note 3)............................................. 36,864,000 42,574,000
Deferred income taxes (Note 6)................................... 1,995,000 3,138,000
Other current assets............................................. 691,000 1,067,000
------------ ------------
Total current assets...................................... 72,330,000 101,718,000
------------ ------------
Property, plant and equipment, net (Note 4)...................... 79,334,000 83,854,000
Deferred income taxes (Note 6)................................... 1,597,000 779,000
------------ ------------
Total assets.............................................. $153,261,000 $186,351,000
------------ ------------
------------ ------------
LIABILITIES AND EQUITY
Accounts payable, principally trade.............................. $ 32,401,000 $ 28,874,000
Accrued liabilities:
Salaries and wages............................................. 519,000 808,000
Vacations and holidays......................................... 653,000 928,000
Employee benefit programs...................................... 3,021,000 2,118,000
Other.......................................................... 779,000 704,000
Note payable to Ford Motor Company S.A. de C.V. (Note 7)......... 44,529,000 44,529,000
Income taxes payable............................................. 42,266,000 79,973,000
------------ ------------
Total current liabilities................................. 124,168,000 157,934,000
------------ ------------
Postretirement benefits other than pensions and other (Note 5)... 3,562,000 3,347,000
------------ ------------
Total liabilities......................................... 127,730,000 161,281,000
Equity and advances account (Note 8)............................. 25,531,000 25,070,000
------------ ------------
Total liabilities and equity.............................. $153,261,000 $186,351,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE> 101
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
NINE MONTH
PERIOD ENDED YEAR ENDED DEC. 31,
SEPT. 30, ----------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.......................................... $515,102,000 $677,260,000 $547,040,000
Costs of sales..................................... 384,138,000 442,243,000 381,616,000
Selling, administrative and other expenses......... 9,426,000 9,529,000 8,932,000
------------ ------------ ------------
Total costs and expenses...................... 393,564,000 451,772,000 390,548,000
------------ ------------ ------------
Operating income................................... 121,538,000 225,488,000 156,492,000
Interest expense................................... (2,026,000) (3,227,000) (3,556,000)
Other expenses..................................... (1,910,000) (1,144,000) (685,000)
------------ ------------ ------------
Income before income taxes and cumulative
effect
of a change in accounting principle......... 117,602,000 221,117,000 152,251,000
Provision for income taxes (Note 6)................ 42,591,000 76,842,000 54,184,000
------------ ------------ ------------
Income before cumulative effect of a change in
accounting principle........................ 75,011,000 144,275,000 98,067,000
Cumulative effect of a change in accounting
principle (Note 5)............................... -- (1,490,000) --
------------ ------------ ------------
Net income.................................... $ 75,011,000 $142,785,000 $ 98,067,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE> 102
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
AND FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
NINE MONTH YEAR ENDED DEC. 31,
PERIOD ENDED -----------------------------
SEPT. 30, 1993 1992 1991
-------------- ------------- ------------
<S> <C> <C> <C>
Net Income........................................ $ 75,011,000 $ 142,785,000 $ 98,067,000
Adjustments to reconcile net income to cash flows
from operating activities:
Cumulative effect of a change in accounting
principle.................................... -- 1,490,000 --
Depreciation.................................... 7,370,000 10,225,000 8,847,000
Foreign currency translation adjustment......... 1,659,000 1,030,000 825,000
Provision for deferred income taxes............. 325,000 (3,131,000) (1,274,000)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable... 22,828,000 (1,313,000) (27,754,000)
Decrease (increase) in inventory............. 5,710,000 (3,560,000) (4,252,000)
Increase (decrease) in accounts payable...... 3,527,000 (6,847,000) 6,759,000
Increase (decrease) in accrued liabilities... 414,000 780,000 1,143,000
Increase (decrease) in income taxes
payable.................................... (37,707,000) 24,515,000 (4,698,000)
Other........................................... 231,000 60,000 211,000
-------------- ------------- ------------
Net cash provided by operating
activities.............................. 79,368,000 166,034,000 77,874,000
-------------- ------------- ------------
Cash flows from investing activities:
Capital expenditures, net....................... (2,850,000) (13,246,000) (22,696,000)
Capital contributions........................... -- 10,000,000 --
-------------- ------------- ------------
Net cash (used in) investing activities.... (2,850,000) (3,246,000) (22,696,000)
Cash flows from financing activities:
Net funds transferred to Ford................... (76,230,000) (151,342,000) (59,929,000)
Changes in short-term debt...................... -- (12,600,000) 6,350,000
-------------- ------------- ------------
Net cash (used in) financing activities.... (76,230,000) (163,942,000) (53,579,000)
Effect of exchange rate changes on cash........... 381,000 (529,000) (152,000)
-------------- ------------- ------------
Net increase (decrease) in cash and cash
equivalents..................................... 669,000 (1,683,000) 1,447,000
Cash and cash equivalents, beginning of period.... 2,074,000 3,757,000 2,310,000
-------------- ------------- ------------
Cash and cash equivalents, end of period.......... $ 2,743,000 $ 2,074,000 $ 3,757,000
-------------- ------------- ------------
-------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-31
<PAGE> 103
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The North American Business ("NAB") is an operating component of Ford Motor
Company ("Ford") and is not a separate legal entity. NAB consists of a portion
of the operations of Ford's Plastic and Trim Products Division, which
constitutes an integrated U.S. and Mexican maquiladora operation that provides
and supplies built-up seats and seat covers for Ford's North American vehicle
production. These financial statements include the results of identifiable
operating activities, transactions and assets and liabilities associated with
the business of NAB in the United States and Mexico.
The entity as described above is referred to as "NAB" or "the Company" in
the notes to the financial statements.
The financial statements have been prepared on a historical accounting
basis and do not reflect adjustments which may arise related to the transaction
described in Note 11.
The financial statements reflect an allocation of certain expenses from
Ford based upon the services provided by Ford. However, the financial position
and results of operations of the Company, as presented herein, may not be the
same as would have occurred had the Company been an entity independent of Ford.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Inventory Valuation
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out ("FIFO") method.
Foreign Currency Translation
The majority of the assets and liabilities of NAB's Mexican operations are
translated at current exchange rates with the exception of property, plant and
equipment which is translated at historical exchange rates. Translation gains
and losses are included in income.
Depreciation
Assets placed in service after January 1, 1993 are depreciated using the
straight-line method of depreciation. Assets placed in service prior to January
1, 1993 are depreciated using an accelerated method that results in accumulated
depreciation of approximately two-thirds of asset cost during the first half of
the asset's estimated useful life. On average, buildings and land improvements
are depreciable based on a 30-year life, and machinery, equipment and office
furniture are depreciated based on a 14-year life.
When plant and equipment are retired, the general policy is to charge the
cost of such assets, reduced by net salvage proceeds, to accumulated
depreciation. All maintenance, repairs and rearrangement costs are expensed as
incurred. Expenditures that increase the value or productive capacity of assets
are capitalized.
Revenue Recognition
Sales to outside customers are recognized when the product is shipped.
Prior to May 1993, sales to Ford and its affiliates were recognized when the
product was received by the customer. Subsequent to that date,
F-32
<PAGE> 104
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
sales to Ford and its affiliates are recognized when the product is shipped,
with the exception of sales to Ford's Canadian subsidiary, which are recognized
when the product is received by the customer in Canada.
(3) INVENTORIES:
The major classes of inventories were as follows:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
----------- -----------
<S> <C> <C>
Raw materials and work in progress......................... $24,918,000 $25,758,000
Finished goods............................................. 10,133,000 15,848,000
Nonproduction materials and supplies....................... 1,813,000 968,000
----------- -----------
Total................................................. $36,864,000 $42,574,000
----------- -----------
----------- -----------
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment is stated at cost, net of accumulated
depreciation, and consisted of the following:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 30,
1993 1992
------------ ------------
<S> <C> <C>
Land..................................................... $ 7,119,000 $ 7,119,000
Buildings and land improvements.......................... 49,616,000 49,712,000
Machinery, equipment and other........................... 75,360,000 72,705,000
Construction in progress................................. 620,000 1,805,000
------------ ------------
Total property, plant and equipment................. 132,715,000 131,341,000
Accumulated depreciation................................. (53,381,000) (47,487,000)
------------ ------------
Property, plant and equipment, net.................. $ 79,334,000 $ 83,854,000
------------ ------------
------------ ------------
</TABLE>
NAB's Mexican maquiladora has beneficial ownership of the land and
buildings through trust agreements with Banca Serfin, Institucion de Banca
Multiple, Grupos Financiero Serfin, Division Fiduciara. Substantially all other
assets are owned by the U.S. operations.
(5) EMPLOYEE RETIREMENT BENEFITS:
Employee Retirement Plans
Retirement benefits are provided to certain salaried employees of NAB under
the Ford General Retirement Plan (the "Plan"). Ford allocated to the Company the
costs associated with employees who participated in this Plan. The amount of
expense allocated to NAB from Ford was $178,000 during the nine months ended
September 30, 1993 and $177,000 and $165,000 during the years ended December 31,
1992 and 1991, respectively.
Post-Employment Health Care and Life Insurance Benefits
The same employees who receive the aforementioned retirement benefits are
also eligible to receive health care and insurance benefits upon retirement
through various Ford programs if they reach retirement age while still working
for Ford.
F-33
<PAGE> 105
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Prior to 1992, Ford recognized the expense for these post-retirement health
care benefits based on actual expenditures for the year. Beginning in 1992, the
estimated cost for post-retirement health care benefits was accrued on an
actuarially determined basis, in accordance with Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions." Ford elected to recognize the prior year unaccrued
accumulated post-retirement benefit obligation of this accounting change as a
cumulative adjustment to income in the first quarter of 1992. Ford has allocated
$2,258,000 of the cumulative adjustment, on a pre-tax basis, to NAB as of
January 1, 1992. Ford has allocated $245,100 and $388,900 for current period
expense to NAB for the periods ended September 30, 1993 and December 31, 1992,
respectively. The effect of the post-retirement benefits on 1991 income was not
material.
The components of the September 30, 1993 and December 30, 1992 obligation
consist of the following:
<TABLE>
<CAPTION>
SEPT. 30, DEC. 31,
1993 1992
---------- ----------
<S> <C> <C>
Health................................................ $2,739,000 $2,795,000
Life.................................................. 678,000 549,000
Other................................................. 145,000 3,000
---------- ----------
$3,562,000 $3,347,000
---------- ----------
---------- ----------
</TABLE>
(6) INCOME TAXES:
NAB adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), as of January 1, 1991. The
effect of this change in accounting principle was not material. Prior to the
adoption of SFAS No. 109, NAB's method of accounting for income taxes was the
deferred method under Accounting Principles Board Opinion No. 11.
NAB's provision for income taxes was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTH PERIOD --------------------------
ENDED DEC. 31, DEC. 31,
SEPT. 30, 1993 1992 1991
----------------- ----------- -----------
<S> <C> <C> <C>
Currently payable
U.S.............................................. $41,779,000 $79,400,000 $54,723,000
Mexican.......................................... 487,000 573,000 735,000
----------------- ----------- -----------
Total currently payable....................... $42,266,000 $79,973,000 $55,458,000
Deferred
U.S.............................................. 355,000 (2,762,000) (980,000)
Mexican.......................................... (30,000) (369,000) (294,000)
----------------- ----------- -----------
Total deferred................................ 325,000 (3,131,000) (1,274,000)
----------------- ----------- -----------
Total provision............................... $42,591,000 $76,842,000 $54,184,000
----------------- ----------- -----------
----------------- ----------- -----------
</TABLE>
F-34
<PAGE> 106
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the estimated future tax effect of a
temporary differences between the amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws and
regulations. The components of deferred income tax assets and liabilities as of
September 30, 1993 and December 31, 1992 are as follows:
<TABLE>
<CAPTION>
SEPT. 30, 1993 DEC. 31, 1992
------------------------ ------------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSET LIABILITY ASSET LIABILITY
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Depreciation.......................... $1,520,000 -- $ 836,000 --
Receivable allowance.................. 1,575,000 -- 2,642,000 --
Employee benefit plans................ 1,622,000 -- 1,580,000 --
Inventory valuation................... -- $1,125,000 -- $1,141,000
---------- ---------- ---------- ----------
Total deferred taxes............. $4,717,000 $1,125,000 $5,058,000 $1,141,000
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
The effective tax rate differs from the U.S. statutory rates for all years
because of the effect of Mexican taxes.
The Company's income before taxes and cumulative effect of a change in
accounting principle for its U.S. and Mexican operations were as follows:
<TABLE>
<CAPTION>
NINE MONTH YEAR ENDED
PERIOD ENDED ----------------------------
SEPT. 30, DEC. 31, DEC. 31,
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
United States.............................. $120,638,000 $225,403,000 $158,068,000
Mexico..................................... (3,036,000) (4,286,000) (5,817,000)
------------ ------------ ------------
$117,602,000 $221,117,000 $152,251,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
(7) NOTE PAYABLE TO FORD MOTOR COMPANY S.A. DE C.V.:
Interest rates on the note payable to Ford Motor Company S.A. de C.V.
("Ford of Mexico") ranged from 5.5 percent to 6.5 percent and 5.5 percent to 7.0
percent at September 30, 1993 and December 31, 1992, respectively.
Interest paid on the Ford of Mexico note was $2,025,000 for the nine months
ended September 30, 1993 and $3,207,000 and $4,227,000 during the years ended
December 31, 1992 and 1991, respectively.
(8) EQUITY AND ADVANCES ACCOUNT:
Equity and advances reflect the accumulation of transactions between NAB,
other operating components of Ford and various Ford affiliates. These
transactions include operating results, corporate assessments, advances and
other intercompany transactions. Additionally, the equity and advances account
reflects the common stock investment in the Mexican maquiladora held by Ford and
its affiliates.
Transactions of NAB in the U.S. are settled through Ford cash accounts.
These cash accounts are not separately allocated to the NAB operations.
Accordingly, these transactions also have been recorded through the equity and
advances account.
F-35
<PAGE> 107
THE NORTH AMERICAN BUSINESS
(AN OPERATING COMPONENT OF FORD MOTOR COMPANY)
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
(9) TRANSACTIONS WITH RELATED PARTIES:
Sales and purchases of products and technical and administrative services
are transacted between NAB and Ford and its affiliates. A summary of the amounts
included in the NAB statements of income follows:
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTH DEC. 31,
PERIOD ENDED ----------------------------
SEPT. 30, 1993 1992 1991
-------------- ------------ ------------
<S> <C> <C> <C>
Sales.............................................. $ 401,357,000 $568,605,000 $487,111,000
Purchases
Product.......................................... 18,388,000 23,302,000 27,351,000
Technical and administrative services............ 8,900,000 9,100,000 7,100,000
</TABLE>
Sales to nonrelated parties consist primarily of seat trim and assemblies
for further processing and subsequent resale to Ford and its affiliates.
Effective January 1, 1993, NAB agreed to reduce the selling prices of its
products to Ford. The effect of this agreement reduced revenues for the nine
months ended September 30, 1993 by approximately $66 million.
See previous notes for additional related party information.
(10) LITIGATION, CLAIMS AND CONTINGENCIES:
Various legal actions and claims are pending or may be instituted or
asserted in the future against the Company. Litigation is subject to many
uncertainties, the outcome of individual litigated matters is not predictable
with assurance and it is reasonably possible that some of the foregoing matters
could be decided unfavorably to NAB.
NAB operates in Mexico under a maquilla program. Under the maquilla
program, NAB can import into Mexico any fixed assets or materials necessary for
production, without paying import taxes, as long as the assets are returned to
the United States. If materials or fixed assets are not discharged properly or
if the Company cannot prove that items are maintained in Mexico, the Mexican
Custom Authority can levy an import tax (average tax rate - 35 percent) and a
value-added tax (average rate - 10 percent).
Although the amount of liability at September 30, 1993 with respect to
these matters cannot be ascertained, the Company believes that any resulting
liability should not materially affect the financial position of the Company at
September 30, 1993.
(11) AGREEMENT WITH LEAR SEATING CORPORATION:
Pursuant to an agreement with Lear Seating Corporation ("Lear"), Ford sold
NAB to Lear on November 1, 1993. Certain assets and liabilities (identified in
the purchase agreement) presented in the September 30, 1993 and December 31,
1992 balance sheets are excluded from the purchase and will be retained by Ford.
F-36
<PAGE> 108
[MAP OF FACILITIES]
(SEE APPENDIX A)
<PAGE> 109
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any of the U.S. Underwriters. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Certain Considerations................ 9
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 17
Business.............................. 25
Management............................ 38
Principal and Selling Stockholders.... 50
Certain Transactions.................. 51
Description of Certain Indebtedness... 54
Description of Capital Stock.......... 57
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 60
Underwriting.......................... 62
Legal Matters......................... 65
Experts............................... 66
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
9,375,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
, 1994
---------------------------
LEHMAN BROTHERS
KIDDER, PEABODY & CO.
INCORPORATED
MORGAN STANLEY & CO.
INCORPORATED
WERTHEIM SCHRODER & CO.
INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 110
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
[ALTERNATE FRONT COVER PAGE FOR INTERNATIONAL PROSPECTUS]
Subject to Completion, dated April 1, 1994
PROSPECTUS
9,375,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
Of the 9,375,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 6,250,000 shares are
being offered by the Company and 3,125,000 shares are being offered by a
stockholder of the Company (the "Selling Stockholder"). The Company will not
receive any of the proceeds from the sale of Common Stock by the Selling
Stockholder. Of the 9,375,000 shares of Common Stock being offered hereby,
1,875,000 shares are being offered initially outside the United States by the
International Managers (the "International Offering") and 7,500,000 shares are
being offered initially in the United States by the U.S. Underwriters (the "U.S.
Offering" and, together with the International Offering, the "Offerings"). The
initial public offering price and underwriting discounts and commissions per
share are identical for both Offerings. See "Underwriting."
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $15.00 and $17.00 per share. The Common Stock has been approved for
listing on the New York Stock Exchange under the symbol "LEA.".
---------------------------
SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2) SELLING STOCKHOLDER
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------
Total(3)....................... $ $ $ $
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Lear and the Selling Stockholder have agreed to indemnify the International
Managers, the U.S. Underwriters, and certain other persons against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by Lear estimated at $ .
(3) The Company has granted the International Managers and U.S. Underwriters a
30-day option to purchase up to an aggregate of 937,500 additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of certificates for the shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1994.
---------------------------
LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL
LIMITED
MORGAN STANLEY & CO.
INTERNATIONAL
WERTHEIM SCHRODER INTERNATIONAL
LIMITED
, 1994
<PAGE> 111
[Alternate Back Cover Page for International Prospectus]
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or any of the International Managers. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Certain Considerations................ 9
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data............... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 17
Business.............................. 25
Management............................ 38
Principal and Selling Stockholders.... 50
Certain Transactions.................. 51
Description of Certain Indebtedness... 54
Description of Capital Stock.......... 57
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 60
Underwriting.......................... 62
Legal Matters......................... 65
Experts............................... 66
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
9,375,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
, 1994
---------------------------
LEHMAN BROTHERS
KIDDER, PEABODY INTERNATIONAL
LIMITED
MORGAN STANLEY & CO.
INTERNATIONAL
WERTHEIM SCHRODER INTERNATIONAL
LIMITED
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 112
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by the
Registrant in connection with the issuance and distribution of the securities
being registered hereby (other than underwriting discounts and commissions). All
of such expenses, except the S.E.C. filing fee and the NASD filing fee, are
estimated.
<TABLE>
<S> <C>
S.E.C. filing fee................................................. $ 60,453
NASD filing fee................................................... 18,053
Blue sky fees and expenses........................................ 12,000
Legal fees and expenses........................................... 200,000
Accounting fees and expenses...................................... 100,000
Printing and engraving............................................ 450,000
Transfer Agent and Registrar Fees................................. 2,000
Listing Fees...................................................... 225,000
Miscellaneous..................................................... 32,494
----------
Total........................................................ $1,100,000
----------
----------
-------------------------
* To be completed by amendment
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of Delaware
(the "Delaware Corporation Law"), each director and officer of the Registrant
may be indemnified by the Registrant against expenses (including attorney's
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceedings in which he is involved by reason of the fact
that he is or was a director or officer of the Registrant if he acted in good
faith and in a manner that he reasonably believed to be in or not opposed to the
best interests of the Registrant, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
Registrant, the director or officer may not be indemnified in respect to any
claim, issue or matters as to which he shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Registrant unless
a court determines otherwise.
Article Sixth of the Certificate of Incorporation and Article Fifth of the
Restated Certificate of Incorporation of the Registrant, copies of which are
filed as Exhibits 3.1 and 3.3 to this Registration Statement, provide that no
director of the Registrant shall be personally liable to that Registrant or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director; provided, however, that such clause shall not apply to any liability
of a director (1) for any breach of his duty of loyalty to the Registrant or its
stockholders, (2) for acts or omissions that are not in good faith or involve
intentional misconduct or a knowing violation of the law, (3) under Section 174
of the Delaware Corporation Law, or (4) for any transaction from which the
director derived an improper personal benefit. In addition, Article Six of the
Restated Certificate of Incorporation of the Registrant and Article VIII of the
Amended and Restated By-Laws of the Registrant, a copy of which is filed as
Exhibit 3.4 hereto, provide for the indemnification of the Registrant's
directors.
The Registrant has directors and officers liability insurance that insures
the directors and officers of the Registrant against certain liabilities. In
addition, Lehman Brothers Inc. has agreed to indemnify Jeffrey P. Hughes, David
P. Spalding, James A. Stern, Eliot Fried and Alan Washkowitz, each being a
director of the Registrant and an officer of Lehman Brothers Inc., in connection
with their service as directors of the Registrant.
II-1
<PAGE> 113
Section 9 of each of the Underwriting Agreements provides for
indemnification by each of the U.S. Underwriters and each of the International
Managers, as the case may be, of directors and officers of Lear against certain
liabilities, including liabilities under the Securities Act of 1933, under
certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On September 27, 1991, pursuant to the Stock Purchase Agreement dated as of
September 27, 1991 by and among Lear Holdings Corporation ("Holdings") and
Lehman Brothers Merchant Banking Portfolio Partnership L.P., a Delaware limited
partnership, Lehman Brothers Offshore Investment Partnership -- Japan L.P., a
Bermuda limited partnership, Lehman Brothers Offshore Investment Partnership
L.P., a Bermuda limited partnership, and Lehman Brothers Capital Partners II,
L.P., a Delaware limited partnership (collectively, the "Lehman Funds") and FIMA
Finance Management Inc., a British Virgin Islands corporation ("FIMA"), Holdings
sold (i) 13,999,953 shares of its voting common stock, par value $.01 per share
(the "Holdings Common Stock") to the Lehman Funds for approximately $70 million
in cash and (ii) 1,000,032 shares of Holdings Common Stock to FIMA for
approximately $5 million in cash.
On July 30, 1992, pursuant to a Stock Purchase Agreement dated as of July
21, 1992 by and among Holdings, the Lehman Funds and FIMA, Holdings sold (i)
2,999,997 shares of Holdings Common Stock to the Lehman Funds for approximately
$15.0 million in cash and (ii) 1,000,032 shares of Holdings Common Stock to FIMA
for approximately $5 million in cash.
On September 16, 1992, Holdings sold 84,183 shares of Holdings Common Stock
to eighteen employees of the Company for approximately $421,000 in cash.
In March 1994, the Company sold 11,220 shares of its Common Stock to an
employee of the Company for $153,000 in cash.
The issuances of securities in the above transactions were deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof as a transaction not involving any public offering. The Lehman Funds,
FIMA and the employees who purchased Holdings Common Stock and the Company's
Common Stock each represented their intention to acquire the securities for
their own account and not with a view to the distribution thereof and
appropriate legends were affixed to the stock certificates issued in such
transactions. The Lehman Funds, FIMA and such employees each had adequate access
to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(a) Exhibits:
- -------------
<S> <C>
1.1 -- Form of U.S. Underwriting Agreement.
1.2 -- Form of International Underwriting Agreement.
1.3 -- Form of Power of Attorney and Custody Agreement of the Selling Stockholder
dated as of , 1994
* 3.1 -- Certificate of Incorporation of Lear Seating Corporation ("Lear" or the
"Company"), as currently in effect on September 30, 1988 (incorporated by
reference to Exhibit 3.1 to Holdings' and Lear's Registration Statement on
Form S-1 (No. 33-25256)).
* 3.2 -- Certificate of Amendment as filed on May 15, 1990 to the Certificate of
Incorporation of Lear (incorporated by reference to Exhibit 3.2 to Holdings'
and Lear's Registration Statement on Form S-1 (No. 33-47867)).
3.3 -- Form of Restated Certificate of Incorporation of Lear to be filed prior to the
consummation of the Offerings (incorporated by reference to Exhibit 3.3 to the
Company's Transition Report on Form 10-K filed on March 31, 1994).
* 3.4 -- Amended and Restated By-laws of Lear.
* 3.5 -- Merger Agreement dated December 31, 1993, by and between Lear and Holdings
(incorporated by reference to Exhibit 3.4 to Lear's Registration Statement on
Form S-1 (No. 33-51317)).
</TABLE>
II-2
<PAGE> 114
<TABLE>
<CAPTION>
(a) Exhibits:
- -------------
<S> <C>
4.1 -- Indenture by and between Lear and The First National Bank of Boston, as
Trustee, relating to the 8 1/4% Subordinated Notes (incorporated by reference
to Exhibit 4.1 to the Company's Transition Report on Form 10-K filed on March
31, 1994).
* 4.2 -- Form of 11 1/4% Senior Subordinated Note Indenture dated as of July 15, 1992
between Lear and The Bank of New York, as Trustee (incorporated by reference
to Exhibit 4.1 to Holdings' and Lear's Registration Statement on Form S-1 (No.
33-47867)).
5.1 -- Opinion of Winston & Strawn, special counsel to the Company.
* 10.1 -- Amended and Restated Credit Agreement dated as of October 25, 1993 (the
"Credit Agreement") among Holdings, Lear, Chemical Bank, as agent for the bank
parties thereto, and Bankers Trust Company, The Bank of Nova Scotia, Citicorp
USA, Inc. and Lehman Commercial Paper Inc., as managing agents (incorporated
by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended October 2, 1993).
* 10.2 -- Amendment No. 1 to the Credit Agreement dated as of January 27, 1994
(incorporated by reference to Exhibit 10 to Lear's Current Report on Form 8-K
dated February 11, 1994).
* 10.3 -- Credit Agreement dated as of March 8, 1989, as amended June 21, 1989 (the
"Canadian Credit Agreement"), between Lear Seating Canada, Ltd. and The Bank
of Nova Scotia with respect to the establishment of credit facilities
(incorporated by reference to Exhibit 10.28 to Lear's Annual Report on Form
10-K for the year ended June 30, 1989).
* 10.4 -- Amendment dated September 13, 1989 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.30 to Lear's Quarterly Report on Form
10-Q for the quarter ended September 30, 1989).
* 10.5 -- Amendment dated March 28, 1990 to the Canadian Credit Agreement (incorporated
by reference to Exhibit 10.11 to Holdings' and Lear's Registration Statement
on Form S-1 (No. 33-47867)).
* 10.6 -- Amendment dated October 11, 1990 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.12 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
* 10.7 -- Amendment dated January 23, 1992 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.13 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
* 10.8 -- Senior Executive Incentive Compensation Plan of Lear (incorporated by
reference to Exhibit 10.14 to Holdings' and Lear's Registration Statement on
Form S-1
(No. 33-47867)).
* 10.9 -- Management Incentive Compensation Plan of Lear (incorporated by reference to
Exhibit 10.15 to Holdings' and Lear's Registration Statement on Form S-1
(No. 33-47867)).
*10.10 -- Form of Warrant Agreement dated as of December 15, 1988 between Holdings and
Norwest Bank, N.A., as Warrant Agent (incorporated by reference to Exhibit 4.3
to Holdings' and Lear's Registration Statement on Form S-1 (No. 33-25256)).
*10.11 -- Stock Option Agreement dated as of September 29, 1988 between Holdings and
certain management investors (the "Management Investors") (incorporated by
reference to Exhibit 10.6 to Holdings' and Lear's Registration Statement on
Form S-1 (No. 33-25256)).
*10.12 -- Employment Agreement dated September 29, 1988 between Lear and Kenneth L. Way
(incorporated by reference to Exhibit 10.7 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
*10.13 -- Employment Agreement dated September 29, 1988 between Lear and Robert E.
Rossiter (incorporated by reference to Exhibit 10.8 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
*10.14 -- Employment Agreement dated September 29, 1988 between Lear and James H.
Vandenberghe (incorporated by reference to Exhibit 10.9 to Holdings' and
Lear's Registration Statement on Form S-1 (No. 33-25256)).
</TABLE>
II-3
<PAGE> 115
<TABLE>
<CAPTION>
(a) Exhibits:
- -------------
<S> <C>
*10.15 -- Employment Agreement dated September 29, 1988 between Lear and James A.
Hollars (incorporated by reference to Exhibit 10.10 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
*10.16 -- Employment Agreement dated September 29, 1988 between Lear and Randal T.
Murphy (incorporated by reference to Exhibit 10.12 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
*10.17 -- Employment Agreement dated as of September 29, 1988 between Lear and Ted E.
Melson (incorporated by reference to Exhibit 10.13 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
*10.18 -- Employment Agreement dated June 1, 1992 between Lear and Donald J. Stebbins
(incorporated by reference to Exhibit 10.17 to Lear's Registration Statement
on Form S-1 (No. 33-51317)).
*10.19 -- Amendments to Employment Agreements dated as of September 21, 1991 by and
between Lear and each of Messrs. Way, Vandenberghe, Rossiter, Hollars, Melson
and Murphy (incorporated by reference to Exhibit 28.7 to Holdings' Current
Report on Form 8-K dated September 24, 1991).
*10.20 -- Stock Purchase Agreement dated July 25, 1990 by and between Fair Haven
Industries, Inc., Bradley D. Osgood, Robert Michelin and LS Acquisition
Corporation No. 24. (incorporated by reference to Exhibit 10.34 to Holdings'
Annual Report on Form 10-K for the year ended June 30, 1991).
*10.21 -- Purchase Agreement dated July, 1990 by and between Fairfax Industries, Inc.
and LS Acquisition Corporation No. 24 (incorporated by reference to Exhibit
10.37 to the Company's Annual Report on Form 10-K for the year ended June 30,
1991).
*10.22 -- Amended and Restated Stockholders and Registration Rights Agreement dated as
of September 27, 1991 by and among Holdings, the Lehman Funds, Lehman Merchant
Banking Partners Inc., as representative of the Lehman Partnerships, FIMA
Finance Management Inc., a British Virgin Islands corporation, and the
Management Investors (incorporated by reference to Exhibit 2.2 to Holdings'
Current Report on Form 8-K dated September 24, 1991).
*10.23 -- Waiver and Agreement dated September 27, 1991, by and among Holdings, Kidder
Peabody Group Inc., KP/Hanover Partners 1988, L.P., General Electric Capital
Corporation, FIMA Finance Management Inc., a Panamanian corporation, FIMA
Finance Management Inc., a British Virgin Islands corporation, MH Capital
Partners Inc., successor by merger and name change to MH Equity Corp.,
SO.PA.F. Societa Partecipazioni Finanziarie S.p.A., INVEST Societa Italiana
Investimenti S.p.A., the Lehman Partnerships and the Management Investors
(incorporated by reference to Exhibit 2.3 to Holdings' Current Report on Form
8-K dated September 24, 1991).
10.24 -- Form of Amendment to Amended and Restated Stockholders and Registration Rights
Agreement dated as of March 31, 1994 (incorporated by reference to Exhibit
10.24 to the Company's Transition Report on Form 10-K filed on March 31,
1994).
*10.25 -- 1992 Stock Option Plan (incorporated by reference to Exhibit 10.7 to Lear's
Annual Report on Form 10-K for the year ended June 30, 1993).
10.26 -- Form of Amendment to 1992 Stock Option Plan dated March , 1994 (incorporated
by reference to Exhibit 10.26 to the Company's Transition Report on Form 10-K
filed on March 31, 1994).
10.27 -- Form of 1994 Stock Option Plan (incorporated by reference to Exhibit 10.27 to
the Company's Transition Report on Form 10-K filed on March 31, 1994).
*10.28 -- Stock Purchase Agreement dated as of July 21, 1992 among the Company, the
Lehman Funds and FIMA Finance Management Inc., a British Virgin Islands
corporation (incorporated by reference to Exhibit 10.33 to Holdings' and
Lear's Registration Statement on Form S-1 (No. 33-47867)).
*10.29 -- Asset Purchase & Supply Agreement dated as of November 18, 1991 between Lear
Seating Sweden, AB and Volvo Car Corporation (incorporated by reference to
Exhibit 10.34 to Holdings' and Lear's Registration Statement on Form S-1 (No.
33-47867)).
</TABLE>
II-4
<PAGE> 116
<TABLE>
<CAPTION>
(a) Exhibits:
- -------------
<S> <C>
*10.30 -- Purchase Agreement dated as of November 1, 1993 between the Company and Ford
Motor Company (incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended October 2, 1993).
* 11.1 -- Computation of income (loss) per share.
* 21.1 -- List of subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen & Co. dated April 1, 1994.
23.2 -- Consent of Coopers & Lybrand dated April 1, 1994.
23.3 -- Consent of Winston & Strawn (included in Exhibit 5.1).
* 24.1 -- Powers of Attorney.
99.1 -- Consent of Mr. Washkowitz.
</TABLE>
- -------------------------
* Previously filed.
(b) Financial Statement Schedules:
Lear Seating Corporation and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Schedule II -- Amounts Receivable from Employees
Schedule V -- Property, Plant and Equipment
Schedule VI -- Accumulated Depreciation of Property, Plant and Equipment
Schedule VII -- Guarantees of Securities of Other Issuers
Schedule VII -- Valuation and Qualifying Accounts
Schedule X -- Supplementary Income Statement Information
ITEM 17. UNDERTAKINGS
1. 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
Securities Act of 1933 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 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 them is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
2. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(b) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
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.
II-5
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Southfield, State of
Michigan on March 31, 1994.
LEAR SEATING CORPORATION
By: /s/ KENNETH L. WAY
Kenneth L. Way
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- --------------------------------- ---------------
<S> <C> <C>
/s/ KENNETH L. WAY Chairman of the Board and March 31, 1994
Kenneth L. Way Chief Executive Officer
(Principal Executive Officer)
* President and Director March 31, 1994
Robert E. Rossiter
/s/ JAMES H. VANDENBERGHE Executive Vice President and March 31, 1994
James H. Vandenberghe Secretary (Principal Financial
and Principal Accounting Officer)
* Director March 31, 1994
Larry W. McCurdy
* Director March 31, 1994
N. Peter Ruys
* Director March 31, 1994
Gian Andrea Botta
* Director March 31, 1994
Eliot Fried
* Director March 31, 1994
Robert W. Shower
* Director March 31, 1994
Jeffrey P. Hughes
* Director March 31, 1994
David P. Spalding
* Director March 31, 1994
James A. Stern
* Director March 31, 1994
Gordon C. Davidson
*By: /s/ JAMES H. VANDENBERGHE
James H. Vandenberghe
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 118
After the Stock Split transaction discussed in Note 18 to Lear Seating
Corporation's consolidated financial statements is effected, we expect to be in
a position to render the following audit report.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
February 10, 1994
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Lear Seating Corporation:
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of LEAR SEATING CORPORATION AND
SUBSIDIARIES ("the Company") included in this registration statement and have
issued our report thereon dated February 10, 1994 (except with respect to the
matters discussed in Note 18, as to which the date is [ ], 1994). Our
audits were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules on pages S-2 through S-7 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the consolidated financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Detroit, Michigan
February 10, 1994 (Except with
respect to the matters discussed
in Note 18 to the consolidated
financial statements, as to which
the date is [ ], 1994.)
S-1
<PAGE> 119
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM EMPLOYEES(A)
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END
NAME OF PERSON OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
- ---------------------------------------------------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1991:
K. Way, Chairman and Chief Executive Officer............ $ 368 $ 42 $ -- $ 410
R. Rossiter, President and Chief Operating Officer...... 368 42 -- 410
J. Vandenberghe, Executive Vice President, Chief
Financial Officer and Secretary....................... 123 14 -- 137
J. Hollars, Senior Vice President -- International
Operations............................................ 123 14 -- 137
T. Melson, Senior Vice President -- Manufacturing
Planning.............................................. 123 14 -- 137
R. Murphy, Vice President and General Manager --
Chrysler/BMW Operations............................... 123 14 -- 137
R. Williams, Vice President -- European JIT
Operations............................................ 123 14 -- 137
---------- --------- ---------- ----------
$1,351 $ 154 $ -- $1,505
---------- --------- ---------- ----------
---------- --------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1992:
K. Way, Chairman and Chief Executive Officer............ $ 410 $ 36 $ -- $ 446
R. Rossiter, President and Chief Operating Officer...... 410 36 -- 446
J. Vandenberghe, Executive Vice President, Chief
Financial Officer and Secretary....................... 137 12 -- 149
J. Hollars, Senior Vice President -- International
Operations............................................ 137 12 -- 149
T. Melson, Senior Vice President -- Manufacturing
Planning.............................................. 137 12 -- 149
R. Murphy, Vice President and General Manager --
Chrysler/BMW Operations............................... 137 12 -- 149
R. Williams, Vice President -- European JIT
Operations............................................ 137 -- (137) --
---------- --------- ---------- ----------
$1,505 $ 120 $ (137) $1,488
---------- --------- ---------- ----------
---------- --------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1993:
K. Way, Chairman and Chief Executive Officer............ $ 446 $ 34 $ -- $ 480
R. Rossiter, President and Chief Operating Officer...... 446 34 -- 480
J. Vandenberghe, Executive Vice President, Chief
Financial Officer and Secretary....................... 149 11 -- 160
J. Hollars, Senior Vice President -- International
Operations............................................ 149 11 -- 160
T. Melson, Senior Vice President -- Manufacturing
Planning.............................................. 149 11 -- 160
R. Murphy, Vice President and General Manager --
Chrysler/BMW Operations............................... 149 11 -- 160
---------- --------- ---------- ----------
$1,488 $ 112 $ -- $1,600
---------- --------- ---------- ----------
---------- --------- ---------- ----------
FOR THE SIX MONTHS ENDED DECEMBER 31, 1993:
K. Way, Chairman and Chief Executive Officer............ $ 480 $ 18 $ -- $ 498
R. Rossiter, President and Chief Operating Officer...... 480 18 -- 498
J. Vandenberghe, Executive Vice President, Chief
Financial Officer and Secretary....................... 160 6 -- 166
J. Hollars, Senior Vice President -- International
Operations............................................ 160 6 -- 166
T. Melson, Senior Vice President -- Manufacturing
Planning.............................................. 160 6 -- 166
R. Murphy, Vice President and General Manager --
Chrysler/BMW Operations............................... 160 6 -- 166
---------- --------- ---------- ----------
$1,600 $ 60 $ -- $1,660
---------- --------- ---------- ----------
---------- --------- ---------- ----------
</TABLE>
- -------------------------
(A) Long-term notes were issued in connection with the sale of stock to certain
management investors. These notes, including accrued interest, mature on
January 31, 1997 and bear interest at a rate of prime plus 1 1/2% through
December 31, 1993.
S-2
<PAGE> 120
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END
DESCRIPTION OF PERIOD AT COST RETIREMENTS CHANGES(B) OF PERIOD
- ---------------------------------- ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1991:
Land............................ $ 12,697 $ -- $ (900) $ 499 $ 12,296
Buildings and improvements...... 58,490 5,487 (1,532) 2,989 65,434
Machinery and equipment......... 126,579 15,376 (4,194) 2,546 140,307
Construction in progress........ 2,334 29(a) (440) 1 1,924
---------- --------- ----------- ---------- ----------
$ 200,100 $ 20,892 $ (7,066) $ 6,035(c) $ 219,961
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1992:
Land............................ $ 12,296 $ 1,626 $ (205) $ 1 $ 13,718
Buildings and improvements...... 65,434 14,608 (244) (546) 79,252
Machinery and equipment......... 140,307 22,014 (1,746) (452) 160,123
Construction in progress........ 1,924 478(a) (197) 939 3,144
---------- --------- ----------- ---------- ----------
$ 219,961 $ 38,726(e) $ (2,392) $ (58)(d) $ 256,237
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1993:
Land............................ $ 13,718 $ 1,474 $ (1,608) $ (179) $ 13,405
Buildings and improvements...... 79,252 3,722 (9,004) (955) 73,015
Machinery and equipment......... 160,123 27,353 (3,303) (3,965) 180,208
Construction in progress........ 3,144 (954)(a) (47) (49) 2,094
---------- --------- ----------- ---------- ----------
$ 256,237 $ 31,595 $ (13,962)(f) $ (5,148) $ 268,722
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE SIX MONTHS ENDED DECEMBER
31, 1993:
Land............................ $ 13,405 $ 18,417 $ (7) $ (526) $ 31,289
Buildings and improvements...... 73,015 43,523 -- (2,024) 114,514
Machinery and equipment......... 180,208 49,650 (13,988) (5,216) 210,654
Construction in progress........ 2,094 2,964(a) -- (28) 5,030
---------- --------- ----------- ---------- ----------
$ 268,722 $ 114,554(g) $ (13,995) $ (7,794) $ 361,487
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
</TABLE>
- -------------------------
(a) Net of transfers to various property, plant and equipment categories.
(b) Includes changes due to fluctuations in foreign currency exchange rates.
(c) Amount includes $5,977,000 of additions to property, plant and equipment
through acquisitions (Note 6 to the financial statements).
(d) Amount includes $234,000 of additions to property, plant and equipment
through acquisitions (Note 6 to the financial statements).
(e) Amount includes $10,800,000 of additions to property, plant and equipment
through a financing lease obligation (Note 13 to the financial statements).
(f) Amount includes $10,800,000 of retirement of property, plant and equipment
through release from a financing lease obligation (Note 13 to the financial
statements).
(g) Amount includes $85,565,000 of additions to property, plant and equipment
through acquisitions (Note 6 to the financial statements).
S-3
<PAGE> 121
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION
OF PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS OTHER END
DESCRIPTION OF PERIOD AT COST RETIREMENTS CHANGES(A) OF PERIOD
- ------------------------------------------ ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1991:
Buildings and improvements.............. $ 3,985 $ 2,429 $ (180) $ (1) $ 6,233
Machinery and equipment................. 27,246 20,519 (2,086) (133) 45,546
---------- --------- ----------- ---------- ----------
$ 31,231 $22,948 $(2,266) $ (134) $ 51,779
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1992:
Buildings and improvements.............. $ 6,233 $ 2,892 $ (219) $ (69) $ 8,837
Machinery and equipment................. 45,546 23,336 (1,177) 190 67,895
---------- --------- ----------- ---------- ----------
$ 51,779 $26,228 $(1,396) $ 121 $ 76,732
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1993:
Buildings and improvements.............. $ 8,837 $ 3,202 $ (294) $ (149) $ 11,596
Machinery and equipment................. 67,895 27,904 (2,328) (1,540) 91,931
---------- --------- ----------- ---------- ----------
$ 76,732 $31,106 $(2,622) $ (1,689) $ 103,527
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE SIX MONTHS ENDED DECEMBER 31,
1993:
Building and improvements............... $ 11,596 $ 1,655 $ (331) $ (269) $ 12,651
Machinery and equipment................. 91,931 15,456 (7,157) (2,351) 97,879
---------- --------- ----------- ---------- ----------
$ 103,527 $17,111 $(7,488) $ (2,620) $ 110,530
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
</TABLE>
- -------------------------
(a) Includes changes due to fluctuations in foreign currency exchange rates.
S-4
<PAGE> 122
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE VII -- GUARANTEES OF SECURITIES OF OTHER ISSUERS
<TABLE>
<CAPTION>
TOTAL AMOUNT
TITLE OF ISSUE OF GUARANTEED AND
NAME OF ISSUER SECURITIES GUARANTEED OUTSTANDING NATURE OF GUARANTEE
- ------------------------ ------------------------ -------------- ------------------------
<S> <C> <C> <C>
General Seating of Letter of credit $1,995,000 Guarantee of payment of
America, Inc. securing an Economic amounts outstanding on
Development Revenue guaranteed obligations
Bond, Series 1988
General Seating of Banker's Acceptance $4,258,000 Guarantee of payment of
Canada, Ltd. unsecured bank loan
--------------
$6,253,000
--------------
--------------
</TABLE>
S-5
<PAGE> 123
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OTHER END
DESCRIPTION OF PERIOD ADDITIONS RETIREMENTS CHANGES(A) OF PERIOD
- ------------------------------------------ ---------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED JUNE 30, 1991:
Valuation of accounts deducted from
related assets:
Allowance for doubtful accounts...... $ 32 $ 170 $ (103) $ -- $ 99
Reserve for unmerchantable
inventories........................ 681 2,321 (1,663) (24) 1,315
Deferred tax asset valuation
allowance.......................... 18,105 -- -- -- 18,105
---------- --------- ----------- ---------- ----------
$ 18,818 $ 2,491 $(1,766) $ (24) $ 19,519
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1992:
Valuation of accounts deducted from
related assets:
Allowance for doubtful accounts...... $ 99 $ 206 $ (68) $ 2 $ 239
Reserve for unmerchantable
inventories........................ 1,315 2,840 (1,740) (34) 2,381
Deferred tax asset valuation
allowance.......................... 18,105 6,104 -- -- 24,209
---------- --------- ----------- ---------- ----------
$ 19,519 $ 9,150 $(1,808) $ (32) $ 26,829
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE YEAR ENDED JUNE 30, 1993:
Valuation of accounts deducted from
related assets:
Allowance for doubtful accounts...... $ 239 $ 473 $ (187) $ (9) $ 516
Reserve for unmerchantable
inventories........................ 2,381 1,390 (1,976) (56) 1,739
Deferred tax asset valuation
allowance.......................... 24,209 8,345 (2,446) -- 30,108
---------- --------- ----------- ---------- ----------
$ 26,829 $10,208 $(4,609) $ (65) $ 32,363
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
FOR THE SIX MONTHS ENDED DECEMBER 31,
1993:
Valuation of accounts deducted from
related assets:
Allowance for doubtful accounts...... $ 516 $ 318 $ (144) $ (46) $ 644
Reserve for unmerchantable
inventories........................ 1,739 617 (243) (180) 1,933
Deferred tax asset valuation
allowance.......................... 30,108 22,959 (1,613) -- 51,454
---------- --------- ----------- ---------- ----------
$ 32,363 $23,894 $(2,000) $ (226) $ 54,031
---------- --------- ----------- ---------- ----------
---------- --------- ----------- ---------- ----------
</TABLE>
- -------------------------
(a) Includes changes due to fluctuations in foreign currency exchange rates.
S-6
<PAGE> 124
LEAR SEATING CORPORATION AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE FOR THE SIX MONTHS
YEAR ENDED YEAR ENDED YEAR ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1991 1992 1993 1993 1993
----------- ----------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Charged to costs and
expenses -- Maintenance
and repairs............... $15,294 $20,545 $24,883 $26,181 $ 13,739
</TABLE>
Amounts charged to costs and expenses for (1) taxes, other than payroll and
income taxes, (2) royalties, and (3) advertising costs have been omitted since
each is less than 1% of net sales.
S-7
<PAGE> 125
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- --------- --------------------------------------------------------------------- ------------
<S> <C> <C>
1.1 -- Form of U.S. Underwriting Agreement.
1.2 -- Form of International Underwriting Agreement.
1.3 -- Form of Power of Attorney and Custody Agreement of the Selling
Stockholder dated as of , 1994
* 3.1 -- Certificate of Incorporation of Lear Seating Corporation ("Lear" or
the "Company"), as currently in effect on September 30, 1988
(incorporated by reference to Exhibit 3.1 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-25256)).
* 3.2 -- Certificate of Amendment as filed on May 15, 1990 to the Certificate
of Incorporation of Lear (incorporated by reference to Exhibit 3.2 to
Holdings' and Lear's Registration Statement on Form S-1 (No.
33-47867)).
3.3 -- Form of Restated Certificate of Incorporation of Lear to be filed
prior to the consummation of the Offerings (incorporated by reference
to Exhibit 3.3 to the Company's Transition Report on Form 10-K filed
on March 31, 1994).
* 3.4 -- Amended and Restated By-laws of Lear.
* 3.5 -- Merger Agreement dated December 31, 1993, by and between Lear and
Holdings (incorporated by reference to Exhibit 3.4 to Lear's
Registration Statement on Form S-1 (No. 33-51317)).
4.1 -- Indenture by and between Lear and The First National Bank of Boston,
as Trustee, relating to the 8 1/4% Subordinated Notes (incorporated
by reference to Exhibit 4.1 to the Company's Transition Report on
Form 10-K filed on March 31, 1994).
* 4.2 -- Form of 11 1/4% Senior Subordinated Note Indenture dated as of July
15, 1992 between Lear and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 4.1 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
5.1 -- Opinion of Winston & Strawn, special counsel to the Company.
* 10.1 -- Amended and Restated Credit Agreement dated as of October 25, 1993
(the "Credit Agreement") among Holdings, Lear, Chemical Bank, as
agent for the bank parties thereto, and Bankers Trust Company, The
Bank of Nova Scotia, Citicorp USA, Inc. and Lehman Commercial Paper
Inc., as managing agents (incorporated by reference to Exhibit 4 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1993).
* 10.2 -- Amendment No. 1 to the Credit Agreement dated as of January 27, 1994
(incorporated by reference to Exhibit 10 to Lear's Current Report on
Form 8-K dated February 11, 1994).
* 10.3 -- Credit Agreement dated as of March 8, 1989, as amended June 21, 1989
(the "Canadian Credit Agreement"), between Lear Seating Canada, Ltd.
and The Bank of Nova Scotia with respect to the establishment of
credit facilities (incorporated by reference to Exhibit 10.28 to
Lear's Annual Report on Form 10-K for the year ended June 30, 1989).
* 10.4 -- Amendment dated September 13, 1989 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.30 to Lear's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1989).
* 10.5 -- Amendment dated March 28, 1990 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.11 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
* 10.6 -- Amendment dated October 11, 1990 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.12 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
</TABLE>
<PAGE> 126
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- --------- --------------------------------------------------------------------- ------------
<S> <C> <C>
* 10.7 -- Amendment dated January 23, 1992 to the Canadian Credit Agreement
(incorporated by reference to Exhibit 10.13 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
* 10.8 -- Senior Executive Incentive Compensation Plan of Lear (incorporated by
reference to Exhibit 10.14 to Holdings' and Lear's Registration
Statement on Form S-1 (No. 33-47867)).
* 10.9 -- Management Incentive Compensation Plan of Lear (incorporated by
reference to Exhibit 10.15 to Holdings' and Lear's Registration
Statement on Form S-1 (No. 33-47867)).
*10.10 -- Form of Warrant Agreement dated as of December 15, 1988 between
Holdings and Norwest Bank, N.A., as Warrant Agent (incorporated by
reference to Exhibit 4.3 to Holdings' and Lear's Registration
Statement on Form S-1 (No. 33-25256)).
*10.11 -- Stock Option Agreement dated as of September 29, 1988 between
Holdings and certain management investors (the "Management
Investors") (incorporated by reference to Exhibit 10.6 to Holdings'
and Lear's Registration Statement on Form S-1 (No. 33-25256)).
*10.12 -- Employment Agreement dated September 29, 1998 between Lear and
Kenneth L. Way (incorporated by reference to Exhibit 10.7 to
Holdings' and Lear's Registration Statement on Form S-1 (No.
33-25256)).
*10.13 -- Employment Agreement dated September 29, 1988 between Lear and Robert
E. Rossiter (incorporated by reference to Exhibit 10.8 to Holdings'
and Lear's Registration Statement on Form S-1 (No. 33-25256)).
*10.14 -- Employment Agreement dated September 29, 1988 between Lear and James
H. Vandenberghe (incorporated by reference to Exhibit 10.9 to
Holdings' and Lear's Registration Statement on Form S-1 (No.
33-25256)).
*10.15 -- Employment Agreement dated September 29, 1988 between Lear and James
A. Hollars (incorporated by reference to Exhibit 10.10 to Holdings'
and Lear's Registration Statement on Form S-1 (No. 33-25256)).
*10.16 -- Employment Agreement dated September 29, 1988 between Lear and Randal
T. Murphy (incorporated by reference to Exhibit 10.12 to Holdings'
and Lear's Registration Statement on Form S-1 (No. 33-25256)).
*10.17 -- Employment Agreement dated as of September 29, 1988 between Lear and
Ted E. Melson (incorporated by reference to Exhibit 10.13 to
Holdings' and Lear's Registration Statement on Form S-1 (No.
33-25256)).
*10.18 -- Employment Agreement dated June 1, 1992 between Lear and Donald J.
Stebbins (incorporated by reference to Exhibit 10.17 to Lear's
Registration Statement on Form S-1 (No. 33-51317)).
*10.19 -- Amendments to Employment Agreements dated as of September 21, 1991 by
and between Lear and each of Messrs. Way, Vandenberghe, Rossiter,
Hollars, Melson and Murphy (incorporated by reference to Exhibit 28.7
to Holdings' Current Report on Form 8-K dated September 24, 1991).
*10.20 -- Stock Purchase Agreement dated July 25, 1990 by and between Fair
Haven Industries, Inc., Bradley D. Osgood, Robert Michelin and LS
Acquisition Corporation No. 24. (incorporated by reference to Exhibit
10.34 to Holdings' Annual Report on Form 10-K for the year ended June
30, 1991).
*10.21 -- Purchase Agreement dated July, 1990 by and between Fairfax
Industries, Inc. and LS Acquisition Corporation No. 24 (incorporated
by reference to Exhibit 10.37 to the Company's Annual Report on Form
10-K for the year ended June 30, 1991).
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
- --------- --------------------------------------------------------------------- ------------
<S> <C> <C>
*10.22 -- Amended and Restated Stockholders and Registration Rights Agreement
dated as of September 27, 1991 by and among Holdings, the Lehman
Funds, Lehman Merchant Banking Partners Inc., as representative of
the Lehman Partnerships, FIMA Finance Management Inc., a British
Virgin Islands corporation, and the Management Investors
(incorporated by reference to Exhibit 2.2 to Holdings' Current Report
on Form 8-K dated September 24, 1991).
*10.23 -- Waiver and Agreement dated September 27, 1991, by and among Holdings,
Kidder Peabody Group Inc., KP/Hanover Partners 1988, L.P., General
Electric Capital Corporation, FIMA Finance Management Inc., a
Panamanian corporation, FIMA Finance Management Inc., a British
Virgin Islands corporation, MH Capital Partners Inc., successor by
merger and name change to MH Equity Corp., SO.PA.F. Societa
Partecipazioni Finanziarie S.p.A., INVEST Societa Italiana
Investimenti S.p.A., the Lehman Partnerships and the Management
Investors (incorporated by reference to Exhibit 2.3 to Holdings'
Current Report on Form 8-K dated September 24, 1991).
10.24 -- Form of Amendment to Amended and Restated Stockholders and
Registration Rights Agreement dated as of March 31, 1994
(incorporated by reference to Exhibit 10.24 to the Company's
Transition Report on Form 10-K filed on March 31, 1994).
*10.25 -- 1992 Stock Option Plan (incorporated by reference to Exhibit 10.7 to
Lear's Annual Report on Form 10-K for the year ended June 30, 1993).
10.26 -- Form of Amendment to 1992 Stock Option Plan dated March , 1994
(incorporated by reference to Exhibit 10.26 to the Company's
Transition Report on Form 10-K filed on March 31, 1994).
10.27 -- Form of 1994 Stock Option Plan (incorporated by reference to Exhibit
10.27 to the Company's Transition Report on Form 10-K filed on March
31, 1994).
*10.28 -- Stock Purchase Agreement dated as of July 21, 1992 among the Company,
the Lehman Funds and FIMA Finance Management Inc., a British Virgin
Islands corporation (incorporated by reference to Exhibit 10.33 to
Holdings' and Lear's Registration Statement on Form S-1 (No.
33-47867)).
*10.29 -- Asset Purchase & Supply Agreement dated as of November 18, 1991
between Lear Seating Sweden, AB and Volvo Car Corporation
(incorporated by reference to Exhibit 10.34 to Holdings' and Lear's
Registration Statement on Form S-1 (No. 33-47867)).
*10.30 -- Purchase Agreement dated as of November 1, 1993 between the Company
and Ford Motor Company (incorporated by reference to Exhibit 10 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1993).
* 11.1 -- Computation of income (loss) per share.
* 21.1 -- List of subsidiaries of the Company.
23.1 -- Consent of Arthur Andersen & Co. dated April 1, 1994.
23.2 -- Consent of Coopers & Lybrand dated April 1, 1994.
23.3 -- Consent of Winston & Strawn (included in Exhibit 5.1).
* 24.1 -- Powers of Attorney.
99.1 -- Consent of Mr. Washkowitz.
</TABLE>
- -------------------------
* Previously filed.
<PAGE> 128
<TABLE>
<CAPTION>
INSIDE
FRONT APPENDIX A
COVER DESCRIPTION OF PHOTOGRAPHS
- ------ ---------------------------------------------------------------
<S> <C>
1. -- Photograph of exterior of the Company's Southfield, Michigan
Automotive Technical Center.
2. -- Photograph of trophy awarded by Ford Motor Trend Magazine for its
Car of the Year.
3. -- Photograph of prototype seats with seat belts built into the seats.
4. -- Full page of photographs of the exteriors of the Dodge Viper, Ford
Mustang and Chevrolet Corvette, including inset photographs of the
interiors of those cars.
</TABLE>
<TABLE>
<CAPTION>
INSIDE
BACK
COVER
- ------
<S> <C>
Map -- A world map showing the 60 facilities of Lear Seating Corporation
and its subsidiaries.
</TABLE>
<PAGE> 1
7,500,000 Shares Exhibit 1.1
LEAR SEATING CORPORATION
Common Stock
U.S. Underwriting Agreement
, 1994
Lehman Brothers Inc.
Kidder, Peabody & Co. Incorporated
Morgan Stanley & Co. Incorporated
Wertheim Schroder & Co. Incorporated
As Representatives for each of
the several U.S. Underwriters
named in Schedule I hereto,
c/o LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Lear Seating Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell and FIMA Finance Management Inc. (the "Selling
Stockholder") proposes to sell to the several U.S. Underwriters named in
Schedule I hereto (the "U.S. Underwriters") an aggregate of 7,500,000 shares
(the "Firm Shares") of Common Stock, $.01 par value (the "Common Stock"), of
the Company. In addition, for the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, the Company proposes to grant to
the U.S. Underwriters and the International Managers (as defined below) an
option to purchase up to an aggregate of 937,500 additional shares (the "Option
Shares") of Common Stock. The Firm Shares and any Option Shares purchased
pursuant to this Agreement are herein called the "Shares".
It is understood that the Company and the Selling Stockholder are
concurrently entering into an International Underwriting Agreement dated the
date hereof (the "International Underwriting Agreement"), providing for the
sale by the Company and the Selling Stockholder of an aggregate of 1,875,000
shares of Common Stock through arrangements with certain underwriters outside
the United States (the "Intern-
<PAGE> 2
2
national Managers"), for whom Lehman Brothers International (Europe), Kidder,
Peabody International Limited, Morgan Stanley & Co. International Limited and
Wertheim Schroder International Limited are acting as lead managers (the "Lead
Managers"). All shares of Common Stock to be offered by the International
Managers pursuant to the International Underwriting Agreement are herein called
the "International Shares"; the International Shares and the Shares,
collectively, are herein called the "Underwritten Shares". As specified in
Section 3, the respective closings under this Agreement and the International
Underwriting Agreement are hereby expressly made conditional on one another.
The Company and the Selling Stockholder also understand that the U.S.
Underwriters and the International Managers have entered into an agreement (the
"Agreement Between U.S. Underwriters and International Managers") contemplating
the coordination of certain transactions between the U.S. Underwriters and the
International Managers and that, pursuant thereto and subject to the conditions
set forth therein, the U.S. Underwriters may purchase from the International
Managers a portion of the International Shares or sell to the International
Managers a portion of the Shares. The Company and the Selling Stockholder
understand that any such purchases and sales between the U.S. Underwriters and
the International Managers shall be governed by the Agreement Between U.S.
Underwriters and International Managers and shall not be governed by the terms
of this Agreement or the International Underwriting Agreement.
This is to confirm the agreement concerning the purchase of the
Shares from the Company and the Selling Stockholder by the U.S. Underwriters.
The following terms as used in this Agreement shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading.
"Commission" shall mean the Securities and Exchange Commission.
"Effective Date" shall mean the date of the Effective Time.
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"Effective Time" shall mean the date and the time as of which the
Registration Statement, or the most recent post-effective amendment thereto,
if any, was declared effective by the Commission (or, if the Company will next
file with the Commission an amendment to the Registration Statement as
contemplated by clause (i) of the first paragraph of Section 1, the date and
time as of which the Registration Statement shall be declared effective).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"International Prospectus" shall mean a Prospectus relating to the
International Shares which are to be offered and sold outside the United States
to persons other than U.S. Persons.
"Preliminary Prospectuses" shall mean each prospectus included in the
Registration Statement, or any amendment thereof, before the Effective Date,
each prospectus filed with the Commission by the Company with the consent of
the Representatives pursuant to Rule 424(a) and each prospectus included in the
Registration Statement at the Effective Time that omits Rule 430A Information.
"Prospectuses" shall mean the forms of prospectuses relating to the
Underwritten Shares, as first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, the forms of final
prospectuses included in the Registration Statement at the Effective Time.
"Registration Statement" shall mean the registration statement
referred to above, as amended at the Effective Time. Such term shall include
any Rule 430A Information deemed to be included therein at the Effective Time
as provided by Rule 430A.
"Rule 424" and "Rule 430A" shall refer to such rules under the Act.
"Rule 430A Information" shall mean information with respect to the
Underwritten Shares and the offering
<PAGE> 4
4
thereof permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A.
"Rules and Regulations" shall mean the rules and regulations in
effect at any relevant time adopted by the Commission under the Act or the
Exchange Act.
"Subsidiary" and "Significant Subsidiary" shall have the meanings
assigned in Rule 405 of the Rules and Regulations. As used in reference to the
Company, "subsidiary" shall mean a Subsidiary of the Company.
"U.S. Person" shall mean any resident or national of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person; and "United States"
shall mean the United States of America (including the states thereof and the
District of Columbia) and its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Prospectus" shall mean a Prospectus relating to the Shares
which are to be offered and sold in the United States or to U.S. Persons.
1. Representations and Warranties of the Company. The Company
represents, warrants and agrees that:
(a) A registration statement on Form S-1 (File No. [33- ]) with
respect to the Underwritten Shares has been prepared by the Company in
conformity with the requirements of the Act and the Rules and Regulations
thereunder and has been filed with the Commission under the Act. Copies of
such registration statement as amended to date have been delivered by the
Company to you as the Representatives of the U.S. Underwriters. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment to such
registration statement, including forms of final prospectuses or (ii) after
effectiveness of such registration statement, final prospectuses in accordance
with Rules 430A and 424(b)(1) or (4).
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectuses are first
<PAGE> 5
5
filed (if required) in accordance with Rule 424(b) and on each Closing Date (as
defined in Section 4) the Prospectuses (and any supplements thereto) will,
comply in all material respects with the applicable requirements of the Act and
the Rules and Regulations. The Company has included in the Registration
Statement, as amended at the Effective Date, all information required by the
Act and the Rules and Regulations thereunder to be included in the Prospectuses
with respect to the Underwritten Shares and the offering thereof, and the
Prospectuses, when filed with the Commission, did or will contain all Rule 430A
Information, together with all other such required information, with respect to
the Underwritten Shares and the offering thereof and, except to the extent the
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution Time
or, to the extent not completed at the Execution Time, shall contain only such
specific additional information and other changes (beyond that contained in the
latest Preliminary Prospectuses) as the Company has advised you, prior to the
Execution Time, will be included or made therein. The Commission has not
issued any stop order preventing or suspending the use of any Preliminary
Prospectus or the Prospectuses or the effectiveness of the Registration
Statement, and no proceeding for any such purpose has been initiated or
threatened by the Commission.
(c) On the Effective Date, the Registration Statement did not or
will not 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 not misleading; and, on the Effective Date, the Prospectuses
did not or will not, and on the date of any filing pursuant to Rule 424(b) and
on each Closing Date, the Prospectuses (together with any supplements thereto)
will not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that
the Company makes no representation or warranty as to information contained in
or omitted from the Registration Statement or the Prospectuses in reliance
upon, and in conformity with, written information furnished to the Company by
you, or by any U.S. Underwriter through you, specifically for inclusion
therein.
(d) Neither the Commission nor, to the knowledge of the Company, the
"blue sky" or securities authority of
<PAGE> 6
6
any jurisdiction has issued an order (a "Stop Order") suspending the
effectiveness of the Registration Statement, preventing or suspending the use
of any Preliminary Prospectuses, the Prospectuses, the Registration Statement,
or any amendment or supplement thereto, refusing to permit the effectiveness of
the Registration Statement, or suspending the registration or qualification of
the Shares, nor, to the knowledge of the Company, has any of such authorities
instituted or threatened to institute any proceeding with respect to a Stop
Order in any jurisdiction in which the Shares are sold.
(e) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full power and authority, and all necessary
consents, authorizations, approvals, orders, licenses, certificates, and
permits of and from, all Federal, state, local, and other governmental and
foreign authorities, to own, lease, license, and use its properties and assets
and to carry on its business in the manner described in the Prospectus except
where such failure will not have a material adverse effect on the Company and
its subsidiaries taken as a whole. Except as described in the Registration
Statement and Prospectuses, each such consent, authorization, approval, order,
license, certificate and permit is valid and in full force and effect, and
there is no proceeding pending, or to the knowledge of the Company, threatened,
which might lead to the revocation, termination, suspension or nonrenewal of
any such consent, authorization, approval, order, license, certificate or
permit. Each of the Company and its subsidiaries is duly qualified to do
business and is in good standing in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct of its
business makes such qualification necessary, except in those jurisdictions
where failure to qualify or to be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(f) The Company has an authorized capitalization as set forth in the
Registration Statement. Except as described or otherwise disclosed in the
Prospectuses, each outstanding share of Common Stock and each outstanding share
of capital stock of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, has not been issued and is not owned or
held in violation of any preemptive rights of stockholders, and, in the case of
the Company's subsidiaries, is owned of record and benefi-
<PAGE> 7
7
cially by the Company (except for directors' qualifying shares), or its
subsidiaries free and clear of all liens, security interests, pledges, charges,
encumbrances, stockholders' agreements and voting trusts. The Company's
capital stock conform to the statements in relation thereto contained in the
Prospectuses. There is no commitment, plan or arrangement to issue, and no
outstanding option, warrant or other right calling for the issuance of, any
share of capital stock of the Company or the Company's subsidiaries to any
person or any security or other instrument which by its terms is convertible
into, exercisable for, or exchangeable for capital stock of the Company or the
Company's subsidiaries, except as described or otherwise disclosed in the
Prospectuses. There is outstanding no security or other instrument which by
its terms is convertible into or exchangeable for capital stock of the Company
or any of their subsidiaries, except as described or otherwise disclosed in the
Prospectuses.
(g) Other than as described in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such securities
in the securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Act.
(h) Neither the Company nor any of its subsidiaries has sustained,
since the date of the Company's Report on Form 10-K for the six month period
ended December 31, 1993, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectuses; and,
since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectuses.
<PAGE> 8
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(i) Except as described in the Registration Statement and the
Prospectuses, neither the Company nor any of its subsidiaries have entered into
any material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business.
(j) Neither the Company nor any of its subsidiaries is now or is
expected by the Company or its subsidiaries to be in violation or breach of, or
in default with respect to, any provision of any contract, agreement,
instrument, lease, or license to which the Company or any of its subsidiaries
is a party, the effect of which would materially adversely affect the financial
condition, results of operations, business, assets, liabilities or prospects of
the Company and its subsidiaries taken as a whole. Each such contract,
agreement, instrument, lease or license (i) is in full force, (ii) assuming the
correctness of (iii) below, is the legal, valid, and binding obligation of the
Company or its subsidiaries and is enforceable as to the Company or its
subsidiaries, as the case may be, in accordance with its terms, except that
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles and (iii) to the
Company's knowledge, is the legal, valid and binding obligation of the other
parties thereto and is enforceable as to each of them in accordance with its
terms, except that enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general equity principles.
Each of the Company and its subsidiaries enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating.
(k) The Underwritten Shares being sold by the Company have been duly
and validly authorized and, when duly countersigned by the Company's Transfer
Agent and Registrar and issued and delivered in accordance with the provisions
of this Agreement and the International Underwriting Agreement, as described in
the Registration Statement, will be duly and validly issued, fully paid and
nonassessable; the Underwritten Shares conform to the description of the Common
Stock in the Prospectuses; and the Underwritten Shares have been approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
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9
(l) The execution, delivery and performance of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions contemplated hereby and thereby, the issuance and sale of the
Shares and the amendment to the Certificate of Incorporation of the Company and
the By-laws of the Company described in the Prospectuses, will not conflict
with or result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or the By-laws, in each case as
amended, of the Company or any of its subsidiaries or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties or assets; and no consent, approval, authorization, order,
registration, filing or qualification of or with any court or governmental
agency or body is required for the issue and sale of the Underwritten Shares or
the consummation of the other transactions contemplated by this Agreement or
the International Underwriting Agreement, except the registration under the Act
of the Underwritten Shares, and such consents, approvals, authorizations,
registrations, filings or qualifications as may be required under state
securities or Blue Sky laws or as may be required by the laws of any country
other than the United States in connection with the purchase and distribution
of the Underwritten Shares by the U.S. Underwriters and the International
Managers.
(m) The Company will not, during the period of 180 days after the
date hereof except pursuant to this Agreement or the International Underwriting
Agreement or as contemplated by the Prospectuses, offer, sell or otherwise
dispose of any common stock or securities convertible into or exchangeable or
exercisable for such common stock of the Company, directly or indirectly,
without the prior written consent of the Representatives.
(n) Except as may otherwise be disclosed in or contemplated by the
Prospectuses, since the date as of which information is given in the
Prospectuses, the Company has not (i) issued or granted any securities, (ii)
incurred any
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liability or obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business, (iii)
entered into any transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its capital stock.
(o) Any contract, agreement, instrument, lease or license required
to be described in the Registration Statement or the Prospectuses has been
properly described therein, and any contract, agreement, instrument, lease or
license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
(p) There is no labor strike or work stoppage or lockout actually
pending, imminent or threatened against the Company or any of its subsidiaries
which would have a material adverse effect on the consolidated financial
condition, results of operations, business, assets, liabilities or prospects of
the Company and its subsidiaries taken as a whole.
(q) Except as set forth in the Registration Statement and except as
would not materially and adversely affect the consolidated financial position,
stockholders' equity, results of operations, business or prospects of the
Company and its subsidiaries taken as a whole, (i) the Company is not in
violation of any applicable Federal, state or local environmental law or any
applicable order of any governmental authority with respect thereto; (ii) the
Company is not in violation of or subject to any existing, or pending or, to
the Company's knowledge, threatened action, suit, investigation, inquiry or
proceeding by any governmental authority nor is the Company subject to any
remedial obligations under any applicable Federal, state or local environmental
law; (iii) the Company and its subsidiaries are in compliance with all permits
or similar authorizations, if any, required to be obtained or filed in
connection with their operations including, without limitation, emissions,
discharges, treatment, storage, disposal or release of a Hazardous Material
into the environment except where any noncompliance could not reasonably be
expected to have a material adverse effect on the operations of the Company and
its subsidiaries; and (iv) to the knowledge of the Company and its
subsidiaries, after appropriate inquiry, no Hazardous Materials have been
disposed of or released by the Company or its subsidiaries on or to the
Company's or
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its subsidiaries' property, except in accordance with applicable environmental
laws. The term "Hazardous Material" means any oil (including petroleum
products, crude oil and any fraction thereof), chemical, contaminant,
pollutant, solid or hazardous waste, or Hazardous Substance (as defined in
Section 101(14) of the Comprehensive Environmental Response, Compensation and
Liability Act and regulations thereunder), that is regulated as toxic or
hazardous to human health or the environment under any Federal, state or local
environmental law.
(r) Except with respect to taxable periods commencing before the
taxable period ended June 30, 1989, as to which no representation is made, the
Company has filed all Federal, state and local income and franchise tax returns
required to be filed through the date hereof and has paid all taxes shown to be
due with respect to the taxable periods covered by such returns, and no tax
deficiency has been assessed, nor does the Company have any knowledge of any
tax deficiency which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a material adverse effect on
the consolidated financial condition, results of operations, business, assets,
liabilities or prospects of the Company and its subsidiaries taken as a whole.
(s) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(t) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement present
fairly the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
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12
(u) Arthur Andersen & Co., who have certified certain financial
statements of the Company, and Coopers & Lybrand, who have certified certain
financial statements of the North American Business of Ford Motor Company (as
defined in the Prospectuses), and whose reports appear in the Prospectus, are
independent public accountants as required by the Act and the Rules and
Regulations.
(v) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company or any of its subsidiaries, threatened against the
Company or any of its subsidiaries which could reasonably be expected to result
in any material adverse change in the consolidated financial condition, results
of operations, business, assets, liabilities or prospects of the Company or any
of its subsidiaries or which affects the transactions contemplated by this
Agreement and the Prospectuses or which is required to be disclosed in the
Registration Statement and the Prospectuses, which is not disclosed and
correctly summarized therein.
(w) The filing of the Registration Statement has been duly
authorized by the Company.
(x) Each of the Company and its subsidiaries holds good and
marketable title to, or valid and enforceable leasehold interests in, all items
of real and personal property which are material to the business of the Company
and its subsidiaries taken as a whole, free and clear of any lien, claim,
encumbrance, preemptive rights or any other claim of any other third party
which might materially interfere with the conduct of the business of the
Company and its subsidiaries taken as a whole. The Company and its
subsidiaries are in material compliance with all applicable laws, rules and
regulations, except where such failure to comply would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(y) The Company has not taken, and agrees that it will not take,
directly or indirectly, any action that could reasonably be expected to cause
or result in stabilization or manipulation of the price of any security to
facilitate the sale or resale of the Shares.
(z) The Company has requested that the Underwriters reserve up to
300,000 Shares to be sold to certain employees of the Company and its
subsidiaries. The Company has further requested that such reserved Shares be
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reserved from the Shares to be sold by it and not from Shares to be sold by the
Selling Stockholder.
2. Representations, Warranties and Agreements of the Selling
Stockholder. The Selling Stockholder, represents, warrants and agrees that:
(a) The Selling Stockholder has, and immediately prior to the First
Closing Date (as defined in Section 4) the Selling Stockholder will have, good
and valid title to the Underwritten Shares to be sold by the Selling
Stockholder hereunder and under the International Underwriting Agreement on
such date, free and clear of all liens, encumbrances, equities or claims; and
upon delivery of such Underwritten Shares and payment therefor pursuant hereto
and thereto, good and valid title to such Underwritten Shares, free and clear
of all liens, encumbrances, equities or claims, will pass to the several U.S.
Underwriters and the International Managers.
(b) The Selling Stockholder has placed in custody under a custody
agreement (the "Custody Agreement") with Marc E. Perlmutter, Esq. and Richard
S. Borisoff, Esq., as custodians (each a "Custodian"), for delivery under this
Agreement and under the International Underwriting Agreement, certificates in
negotiable form (with signature guaranteed by a commercial bank or trust
company having an office or correspondent in the United States or a member firm
of the New York or American Stock Exchanges) representing the Underwritten
Shares to be sold by the Selling Stockholder hereunder and under the
International Underwriting Agreement.
(c) The Selling Stockholder has duly and irrevocably executed and
delivered a power of attorney (each, a "Power of Attorney") appointing the
Custodian and one or more other persons, as attorneys-in-fact, with full power
of substitution, and with full authority (exercisable by any one or more of
them) to execute and deliver this Agreement and the International Underwriting
Agreement and to take such other action as may be necessary or desirable to
carry out the provisions hereof or thereof on behalf of the Selling
Stockholder.
(d) The Selling Stockholder has full right, power and authority to
enter into and perform under this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement; the execution,
delivery
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14
and performance of this Agreement, the International Underwriting Agreement,
the Power of Attorney and the Custody Agreement by the Selling Stockholder and
the consummation by the Selling Stockholder of the transactions contemplated
hereby and thereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the Selling
Stockholder is subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or the By-laws or any
partnership agreement of the Selling Stockholder or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Selling Stockholder or the property or assets of the
Selling Stockholder; and no consent, approval, authorization, order, filing or
registration of or with, any court or governmental agency or body is required
for the execution, delivery and performance of this Agreement, the
International Underwriting Agreement, the Power of Attorney or the Custody
Agreement by the Selling Stockholder and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby, except the
registration under the Act of the Underwritten Shares, and such consents,
approvals, authorizations, registrations, filings or qualifications as may be
required under state securities or Blue Sky laws or as may be required by the
laws of any country other than the United States in connection with the
purchase and distribution of the Shares by the U.S. Underwriters.
(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectuses, the Prospectuses or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by the Selling Stockholder
specifically for use therein, such Preliminary Prospectuses did, and the
Registration Statement did or will, and the Prospectuses and any amendments or
supplements to the Registration Statement or the Prospectuses will, when they
become effective or are filed with the Commission, as the case may be, not
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
not misleading.
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15
(f) The Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 1 are not
true and correct, is familiar with the Registration Statement and has no
knowledge of any material fact, condition or information not disclosed in the
Prospectuses or any supplement thereto which has adversely affected or may
adversely affect the business of the Company or any of its subsidiaries; and
the sale of the Underwritten Shares by the Selling Stockholder pursuant hereto
and pursuant to the International Underwriting Agreement is not prompted by any
information concerning the Company or any of its subsidiaries which is not set
forth in the Prospectuses or any supplement thereto.
(g) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Underwritten Shares.
3. Purchase of the Shares by the U.S. Underwriters. (a) Subject to
the terms and conditions and upon the basis of the representations and
warranties herein set forth, the Company agrees to issue and sell 5,000,000
shares of the Firm Shares and the Selling Stockholder agrees to sell 2,500,000
shares of Firm Shares, to the U.S. Underwriters, and each of the U.S.
Underwriters agrees, severally and not jointly, to purchase, at a price of $[
] per Share, the number of Firm Shares set forth opposite such U.S.
Underwriter's name in Schedule I hereto. Each U.S. Underwriter shall be
obligated to purchase from the Company and from the Selling Stockholder that
number of the Firm Shares which represents the same proportion of the number of
the Firm Shares to be sold by the Company and by the Selling Stockholder,
respectively, as the number of the Firm Shares set forth opposite the name of
such U.S. Underwriter in Schedule I represents of the total number of the Firm
Shares to be purchased by all of the Underwriters pursuant to this Agreement.
The respective purchase obligations of the U.S. Underwriters with respect to
the Firm Shares shall be rounded among the U.S. Underwriters to avoid
fractional shares, as the Representatives may determine. The U.S. Underwriters
agree to offer the Firm Shares to the public as set forth in the U.S.
Prospectus. Each U.S. Underwriter agrees that, except to the extent permitted
by the Agreement Between U.S. Underwriters and International Managers, it will
not offer any of the Shares outside the United States.
<PAGE> 16
16
The obligations of the Company hereunder to issue and sell any Shares
and of the Selling Stockholder to sell any Shares, and the obligations of the
U.S. Underwriters to purchase the Shares, are subject to the closing of the
sale and purchase of the International Shares (excluding the International
Shares issuable upon exercise of the International Managers' over-allotment
option) pursuant to the International Underwriting Agreement.
(b) The Company hereby grants to the U.S. Underwriters an option to
purchase from the Company solely for the purpose of covering over-allotments in
the sale of Firm Shares, up to 750,000 shares of the Option Shares for a period
of 30 days from the date hereof at the purchase price per Share set forth
above. Option Shares shall be purchased from the Company for the accounts of
the U.S. Underwriters, severally and not jointly, in proportion to the number
of Firm Shares set forth opposite such U.S. Underwriter's name in Schedule I
hereto, except that the respective purchase obligations of each U.S.
Underwriter shall be adjusted by the Representatives so that no U.S.
Underwriter shall be obligated to purchase Option Shares other than in
100-share quantities.
4. Delivery of and Payment for Shares. Delivery of certificates for
the Firm Shares, and certificates for the Option Shares, if the option to
purchase the same is exercised on or before the third Business Day prior to the
First Closing Date, shall be made at the offices of Lehman Brothers Inc., 388
Greenwich Street (Cashier's Window, Main Level), New York, New York 10013 (or
such other place as mutually may be agreed upon), at 10:00 A.M., New York City
time, on the fifth full Business Day following the date of this Agreement or on
such later date as shall be determined by you and the Company (the "First
Closing Date").
The option to purchase Option Shares granted in Section 3 hereof may
be exercised during the term specified therein by written notice to the Company
from the Representatives. Such notice shall set forth the aggregate number of
Option Shares as to which the option is being exercised and the time and date,
not earlier than either the First Closing Date or the second Business Day after
the date on which the option shall have been exercised nor later than the fifth
Business Day after the date of such exercise, as determined by the
Representatives, when the Option Shares are to be delivered (each an "Option
Closing Date"). Delivery and payment for such Option Shares shall be made at
<PAGE> 17
17
the offices set forth above for delivery and payment of the Firm Shares. (The
First Closing Date and each Option Closing Date are herein individually
referred to as a "Closing Date" and collectively referred to as the "Closing
Dates".)
Delivery of certificates for the Shares shall be made by or on behalf
of the Company and the Selling Stockholder to you, for the respective accounts
of the U.S. Underwriters, against payment of the purchase price therefor by
certified or official bank check payable in New York Clearing House (next day)
funds to the order of the Company and the Selling Stockholder. The
certificates for the Shares shall be registered in such names and denominations
as you shall have requested at least two full Business Days prior to the
applicable Closing Date, and shall be made available for checking and packaging
in New York, New York, or such other location as may be designated by you at
least one full Business Day prior to such Closing Date. Time shall be of the
essence, and delivery of certificates for the Shares at the time and place
specified in this Agreement is a further condition to the obligations of each
U.S. Underwriter.
5. Qualified Independent Underwriter.
(a) The Company hereby confirms its engagement of the services of
Morgan Stanley & Co. Incorporated (the "Independent Underwriter") as, and the
Independent Underwriter hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(1) of Schedule E ("Schedule E") of the By-laws of the National
Association of Securities Dealers, Inc. ("the NASD") with respect to the
offering and sale of the Underwritten Shares.
(b) The Independent Underwriter hereby represents and warrants to,
and agrees with, the Company and the other Underwriters that with respect to
the offering and sale of the Underwritten Shares as described in the
Prospectuses:
(i) the Independent Underwriter constitutes a "qualified independent
underwriter" within the meaning of Section 2(1) of Schedule E;
(ii) the Independent Underwriter has participated in the preparation
of the Registration Statement and
<PAGE> 18
18
the Prospectuses and has exercised the usual standards of "due diligence"
in respect thereto;
(iii) the Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act
specifically including those inherent in Section 11 thereof;
(iv) based upon, among other factors, the information set forth in
the Prospectuses and its review of such other documents and the taking of
such other actions as the Independent Underwriter, in its sole
discretion, has deemed necessary or appropriate for the purposes of
delivering its recommendation hereunder, the Independent Underwriter
recommends, as of the date of the execution and delivery of this
Agreement, that the price for the Underwritten Shares not exceed the
amount set forth in Section 3 of this Agreement, which price should in no
way be considered or relied upon as an indication of the value of the
Underwritten Shares; and
(v) the Independent Underwriter will furnish to the other
Underwriters on each Closing Date a letter, dated the date of delivery
thereof, in form and substance satisfactory to such Underwriters, to the
effect of clauses (i) through (iv) above.
(c) The Company, the Independent Underwriter and the other
Underwriters agree to comply in all material respects with all of the
requirements of Schedule E applicable to them in connection with the offering
and sale of the Underwritten Shares. The Company agrees to cooperate with the
Underwriters, including the Independent Underwriter, to enable the Underwriters
to comply with Schedule E and the Independent Underwriter to perform the
services contemplated by this Agreement.
(d) The Company agrees promptly to reimburse the Independent
Underwriter for all out-of-pocket expenses, including fees and disbursements of
counsel, reasonably incurred in connection with this Agreement and the services
to be rendered as Independent Underwriter hereunder.
(e) The Independent Underwriter hereby consents to the references to
it as set forth under the caption "Underwriting" in the Prospectuses.
<PAGE> 19
19
6. Covenants. The Company agrees with each U.S. Underwriter that:
(a) The Company shall use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendments thereto
to become effective. The Company shall advise you promptly of the filing of
any amendment to the Registration Statement or any supplement to any Prospectus
and, upon notification from the Commission that the Registration Statement or
any such amendment has become effective, shall so advise you promptly (in
writing, if requested). If the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of any Prospectus is otherwise
required under Rule 424(b), the Company will cause such Prospectus, properly
completed, and any supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) in the manner and within the time
period prescribed and will provide evidence satisfactory to the Representatives
of such timely filing. The Company shall notify you promptly of any request by
the Commission for any amendment of or supplement to the Registration Statement
or any Prospectus or for additional information; the Company shall prepare and
file with the Commission, promptly upon your request, any amendments or
supplements to the Registration Statement or the U.S. Prospectus which, in your
reasonable opinion, may be necessary or advisable in connection with the
distribution of the Shares; and the Company shall not file any amendment or
supplement to the Registration Statement or the U.S. Prospectus, which filing
is not consented to by you after reasonable notice thereof. The Company shall
advise you promptly of the issuance by the Commission or any state or other
governmental or regulatory body of any stop order or other order suspending the
effectiveness of the Registration Statement, suspending or preventing the use
of any Preliminary Prospectus or Prospectus or suspending the qualification of
the Shares for offering or sale in any jurisdiction, or of the institution of
any proceedings for any such purpose; and the Company shall use its best
efforts to prevent the issuance of any stop order or other such order and,
should a stop order or other such order be issued, to obtain as soon as
possible the lifting thereof.
(b) The Company shall furnish to each of the Representatives and to
counsel for the U.S. Underwriters a signed copy of the Registration Statement
as originally filed and each amendment thereto filed with the Commission,
<PAGE> 20
20
including all consents and exhibits filed therewith, and shall furnish to the
U.S. Underwriters such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding exhibits
other than this Agreement), any Preliminary Prospectus, the U.S. Prospectus and
all amendments and supplements to any of such documents, in each case as soon
as available and in such quantities as the Representatives may from time to
time reasonably request.
(c) Within the time during which the Prospectuses relating to the
Underwritten Shares are required to be delivered under the Act, the Company
shall comply with all requirements imposed upon it by the Act, the Exchange Act
and the Rules and Regulations so far as is necessary to permit the continuance
of sales of or dealings in the Underwritten Shares as contemplated by the
provisions hereof and by the Prospectuses. If during such period any event
occurs as a result of which the U.S. Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the U.S. Prospectus
to comply with the Act or the Exchange Act or the Rules and Regulations, the
Company shall promptly notify you and, subject to the penultimate sentence of
paragraph (a) of this Section 6, shall amend the Registration Statement or
supplement the U.S. Prospectus or file such document (at the expense of the
Company) so as to correct such statement or omission or to effect such
compliance.
(d) The Company shall take or cause to be taken all necessary action
and furnish to whomever you may direct such information as may be required in
qualifying the Shares (and any International Shares that may be sold to the
U.S. Underwriters by the International Managers) for offer and sale under the
state securities or Blue Sky laws of such jurisdictions as you shall designate
and to continue such qualifications in effect for as long as may be necessary
for the distribution of the Shares (and such International Shares); except that
in no event shall the Company be obligated in connection therewith to qualify
as a foreign corporation or to execute a general consent to service of process.
<PAGE> 21
21
(e) The Company shall furnish to you, on or prior to the date of
this Agreement, a letter or letters, in form and substance satisfactory to
counsel for the U.S. Underwriters, pursuant to which each executive officer and
director of the Company; Lehman Brothers Merchant Banking Portfolio Partnership
L.P., Lehman Brothers Capital Partners II, L.P., Lehman Brothers Offshore
Investment Partnership L.P. and Lehman Brothers Offshore Investment
Partnership--Japan L.P.; the Selling Stockholder and the Management Investors
(as defined in the Amended and Restated Stockholders Agreement dated as of
September 27, 1991) shall agree not to offer for sale, sell or otherwise
dispose of any shares of Common Stock (other than the Underwritten Shares) of
any securities convertible or exchangeable or exercisable for such common stock
during the 180 days following the date of the Prospectuses except with your
prior written consent.
(f) Whether or not the transactions contemplated in this Agreement
are consummated, to pay or cause to be paid the costs incident to the
authorization, issuance, sale and delivery of the Shares and any expenses or
taxes (including stock transfer taxes) payable in that connection; the costs
incident to the preparation, printing and filing under the Act of the
Registration Statement and any amendments and exhibits thereto; the costs of
distributing the Registration Statement as originally filed and each amendment
and post-effective amendment thereof (including exhibits), any Preliminary
Prospectus, each Prospectus and any amendment or supplement to each Prospectus,
all as provided in this Agreement, the costs of printing this Agreement, the
International Underwriting Agreement and other underwriting documents,
including, but not limited to, Underwriters' Questionnaires, Underwriters'
Powers of Attorney, Blue Sky Memoranda, Legal Investment Surveys, Agreements
Among Underwriters, Selected Dealer Agreements, the Agreement Between U.S.
Underwriters and International Managers, the Agreements Among International
Managers and the International Selling Agreements; the filing fee of the NASD;
the reasonable fees and expenses of qualifying the Shares under the securities
laws of the several jurisdictions as provided in this paragraph and of
preparing and printing a Blue Sky Memorandum and a memorandum concerning the
legality of the Shares as an investment, if any (including fees and expenses of
counsel to the U.S. Underwriters in connection therewith); the cost of printing
certificates; the cost and charges of any transfer agent or registrar; the cost
of delivering and distributing the
<PAGE> 22
22
Custody Agreements and the Powers of Attorney and all other costs and expenses
incident to the performance of the obligations of the company and the
obligations of the Selling Stockholder hereunder for which provision is not
otherwise made in this Section. It is understood, however, that, except as
provided in this Section, Section 9 and Section 10 hereof, the Selling
Stockholder shall pay all its own costs and expenses, including the fees of its
counsel, stock transfer taxes due upon resale of any of the Shares by them and
any advertising expenses incurred in connection with any offers they may make.
It is further understood, however, that, except as provided in this Section,
Section 9 and Section 10 hereof, the Selling Stockholder shall pay all its own
costs and expenses, including the fees of its counsel and any transfer taxes
payable in connection with its sales of the Shares to the U.S. Underwriters.
Except as provided in this Section, Section 9 and in Section 10, the
Underwriters shall pay their own costs and expenses, including the fees and
expenses of their counsel, any transfer taxes on the Shares which they may sell
and the expenses of advertising any offering of the Shares made by the U.S.
Underwriters.
(g) To apply the net proceeds from the sale of the Underwritten
Shares being sold by the Company as set forth in the Prospectuses.
(h) The Company shall, on or prior to each Closing Date, cause the
Shares to be purchased on such date by the U.S. Underwriters to be approved
for listing on the New York Stock Exchange, subject only to official notice of
issuance, and shall take such action as shall be necessary to comply with the
rules and regulations of the New York Stock Exchange with respect to such
shares.
(i) During a period of five years from the Effective Date, the
Company shall furnish to the Representatives copies of all reports or other
communications furnished to shareholders and copies of any reports or financial
statements furnished to or filed with the Commission, the New York Stock
Exchange or any other national securities exchange on which any class of
securities of the Company shall be listed.
(j) As soon as practicable after the Effective Date of the
Registration Statement, to make generally available to its security holders and
to deliver to the U.S. Underwriters an earnings statement of the Company,
con-
<PAGE> 23
23
forming with the requirements of Section 11(a) of the Act, covering a period
of at least 12 months beginning after the Effective Date.
7. Further Agreements of the Selling Stockholder. The Selling
Stockholder agrees:
(a) For a period of 180 days from the date of the Prospectuses, not
to offer for sale, sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock (other than the Underwritten Shares) or any securities
convertible into or exchangeable or exercisable for such common stock, without
the prior written consent of the Representatives.
(b) That the Underwritten Shares to be sold by the Selling
Stockholder hereunder and under the International Underwriting Agreement, which
are represented by the certificates held in custody for the Selling
Stockholder, are subject to the interest of the U.S. Underwriters and the
International Managers, that the arrangements made by the Selling Stockholder
for such custody are to that extent irrevocable, and that the obligations of
the Selling Stockholder hereunder shall not be terminated by any act of the
Selling Stockholder, by operation of law or the occurrence of any other event.
(c) To deliver to the Representatives prior to the First Closing
Date a properly completed and executed United States Treasury Department Form
W-9.
8. Conditions of U.S. Underwriters' Obligations. The respective
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy, when made and as of each Closing Date, of the representations and
warranties of the Company and the Selling Stockholder contained herein, to the
performance by the Company and the Selling Stockholder of their respective
obligations hereunder and to each of the following additional terms and
conditions:
(a) The Registration Statement and any post-effective amendment
thereto has become effective under the Act; if the Registration Statement has
not become effective prior to the Execution Time, unless the U.S. Underwriters
agree in writing to a later time, the Registration Statement will become
effective not later than (i) 6:00 P.M. New York City time on the date of
determination of the public offering price, if such determination occurred at
or prior
<PAGE> 24
24
to 3:00 P.M. New York City time on such date or (ii) 2:00 P.M. on the business
day following the day on which the public offering price was determined, if
such determination occurred after 3:00 P.M. New York City time on such date; if
required under Rule 424(b), the Prospectuses shall have been timely filed with
the Commission in accordance with Section 6(a) hereof, not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier time
as may be required by Rule 430(A)(a)(3); no Stop Order shall have been issued
and prior to that time no proceeding for that purpose shall have been initiated
or threatened by the Commission; any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectuses or
otherwise shall have been complied with; and the Company shall not have filed
with the Commission any amendment or supplement to the Registration Statement
or the Prospectuses without the consent of the Underwriters. If the Company
has elected to rely upon Rule 430A of the Act, the price of the Shares and any
price- related information previously omitted from the effective Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing pursuant to Rule 424(b) of the Act within the prescribed
time period, and prior to the applicable Closing Date the Company shall have
provided evidence satisfactory to the U.S. Underwriters of such timely filing,
or a post-effective amendment providing such information shall have been
prepared, filed and declared effective in accordance with the requirements of
Rule 430A of the Act.
(b) No U.S. Underwriter or International Manager shall have
discovered after the date hereof and disclosed to the Company on or prior to
such applicable Closing Date that the Registration Statement or the
Prospectuses or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Cravath, Swaine & Moore, counsel
for the U.S. Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Underwritten
Shares, the Registration Statement and the Prospectuses, and all other legal
matters relating to this Agreement and the transactions contemplated hereby,
shall be reasonably satisfactory in all respects to
<PAGE> 25
25
Cravath, Swaine & Moore, counsel for the U.S. Underwriters, and the Company
shall have furnished to such counsel all documents and information that they
may reasonably request to enable them to pass upon such matters.
(d) On each Closing Date, Winston & Strawn, as special counsel to
the Company, shall have furnished to the U.S. Underwriters their written
opinion addressed to the Underwriters and dated such Closing Date in form and
substance satisfactory to the U.S. Underwriters to the effect that:
(i) the Company and each of its Significant Subsidiaries have been
duly incorporated and are validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses, requires such
qualification; and have all corporate power and authority necessary to
own or hold their respective properties and to conduct the business in
which they are engaged as described in the Prospectus;
(ii) this Agreement and the International Underwriting Agreement have
been duly authorized, executed, and delivered by the Company, are legally
valid and binding obligations of the Company, and are enforceable against
the Company in accordance with their terms, except to the extent that
rights to indemnity or contribution hereunder and thereunder may be
limited by Federal or state securities laws or the public policy
underlying such laws may limit the right to indemnity and contribution
thereunder; no consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
Federal, state, local or other governmental authority or any court or
other tribunal is required by the Company for the execution, delivery, or
performance of this Agreement or the International Underwriting Agreement
by the Company (except filings under the Act which have been made and
consents, authorizations, permits, orders and other matters required
under "blue sky" or state securities laws as to which such counsel need
express no opinion);
<PAGE> 26
26
(iii) the Underwritten Shares being sold by the Company have been
duly and validly authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued and delivered in accordance with
the provisions of this Agreement and the International Underwriting
Agreement, as described in the Registration Statement, will be duly and
validly issued, fully paid and nonassessable; the Underwritten Shares
conform to the description of the Common Stock in the Prospectuses; and
the Underwritten Shares have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance;
(iv) the Registration Statement was declared effective under the Act
as of the date and time specified in such opinion, the Prospectuses were
filed with the Commission pursuant to the subparagraph of Rule 424(b) of
the Rules and Regulations specified in such opinion on the date specified
therein, no Stop Order has been issued and, to the knowledge of such
counsel, no proceeding for that purpose is pending or threatened by the
Commission;
(v) the Registration Statement and the Prospectuses and any further
amendments or supplements thereto made by the Company prior to each
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
Rules and Regulations.
Notwithstanding the foregoing, each of such opinions may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights generally and to court decisions with respect thereto and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and no opinion need be
expressed as to the availability of equitable remedies for any breach of any
such agreement.
In rendering such opinion, such counsel may (i) state that their
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of New York and the corporate law of the
State of Delaware; and (ii) rely (to the extent such counsel
<PAGE> 27
27
deems proper and specifies in their opinion), as to matters involving the
application of the laws of jurisdictions other than the State of New York or
the United States or the corporate law of the State of Delaware upon opinions
(dated the applicable Closing Date, addressed to the U.S. Underwriters and in
form reasonably satisfactory to the U.S. Underwriters with signed or conformed
copies for each of the U.S. Underwriters) of counsel acceptable to Cravath,
Swaine & Moore. Such counsel shall also have furnished to the U.S.
Underwriters a written statement, addressed to the U.S. Underwriters and dated
the applicable Closing Date, in form and substance satisfactory to the U.S.
Underwriters, to the effect that such counsel participated in conferences with
officers and representatives of the Company, Arthur Anderson & Co., Coopers &
Lybrand, the U.S. Underwriters and Cravath, Swaine & Moore in connection with
the preparation of the Registration Statement, and based on the foregoing and
without assuming responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or making any
independent check or verification thereof, no facts have come to the attention
of such counsel which lead them to believe that (I) the Registration Statement,
as of the Effective Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or (II) each of the
Prospectuses as amended or supplemented, as of each Closing Date, contains any
untrue statement of a material fact or omits to state a 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.
(e) On each Closing Date, Joseph F. McCarthy, General Counsel to the
Company, or Michael O'Shea, corporate counsel to the Company, shall have
furnished to the U.S. Underwriters his written opinion addressed to the U.S.
Underwriters and dated such Closing Date in form and substance satisfactory to
the U.S. Underwriters to the effect that:
(i) the Company and each of its Significant Subsidiaries have been
duly incorporated and are validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the
<PAGE> 28
28
conduct of their respective businesses, requires such qualification; and
have all corporate power and authority necessary to own or hold their
respective properties and to conduct the business in which they are
engaged as described in the Prospectuses;
(ii) the Company has an authorized capitalization as set forth in the
Prospectuses, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and nonassessable and conform to the description thereof contained in the
Prospectuses; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued and are fully paid, nonassessable and (except for directors'
qualifying shares) owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims, except as described
in the Prospectuses; to the best of such counsel's knowledge after due
inquiry and investigation, there is no commitment, plan, or arrangement
to issue, and no outstanding option, warrant, or other right calling for
the issuance of, any share of capital stock of the Company or of the
Company's subsidiaries to any person other than the Company, or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company or of
the Company's subsidiaries, except as may be described in the
Prospectuses;
(iii) the Underwritten Shares being sold by the Company have been
duly and validly authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued and delivered in accordance with
this Agreement and the International Underwriting Agreement, as described
in the Registration Statement, will be duly and validly issued, fully
paid and nonassessable; the Underwritten Shares conform to the
description of the Common Stock in the Prospectuses; and the Underwritten
Shares have been approved for listing on the New York Stock Exchange,
subject to official notice of issuance;
(iv) there is no litigation, arbitration, claim, governmental or
other proceeding or investigation pending or, to the best of such
counsel's knowledge after due inquiry and investigation, threatened to
which the Company or any of its subsidiaries is a party
<PAGE> 29
29
or to which any of their respective operations, businesses or assets is
the subject which if determined adversely to the Company might have a
material adverse effect upon the consolidated financial position,
stockholders' equity, results of operations, business or prospects of the
Company and its subsidiaries taken as a whole; neither the Company nor
any of its subsidiaries is in violation of, or in default with respect
to, any law, rule, regulation, order, judgment, or decree, except as may
be described in the Prospectuses or such as in the aggregate do not have
a significant likelihood of having a material adverse effect upon the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole;
(v) neither the Company nor any of its subsidiaries is now in
violation or breach of, or in default with respect to, any material
provision of any contract, agreement, instrument, lease or license, which
is material to the Company and its subsidiaries taken as a whole;
(vi) neither the Company nor any of its subsidiaries is in violation
or breach of, or in default with respect to, any term of its Certificate
of Incorporation or By-laws;
(vii) the execution, delivery and performance of this Agreement and
the International Underwriting Agreement and the issue and sale of the
Shares do not violate, result in a breach of, conflict with, or (with or
without the giving of notice or the passage of time or both) entitle any
party to terminate or call a default under any material contract,
agreement, instrument, lease, or license known to such counsel, or
violate or result in a breach of any term of the articles of
incorporation (or other charter document) or by-laws of the Company or
any of its subsidiaries, or violate, result in a breach of, or conflict
with any law or statute, rule, or regulation, or any order, judgment, or
decree known to such counsel, that is binding on the Company or any of
its subsidiaries or to which any of their respective operations,
businesses or assets are subject; no consent, authorization, approval,
order, license, certificate or permit of or from, or declaration or
filing with any Federal, state, local or other governmental or foreign
authority or any court or other
<PAGE> 30
30
tribunal is required by the Company for the execution, delivery or
performance of this Agreement and the International Underwriting
Agreement or for the issuance and sale of the Shares by the Company
(except filings under the Act which have been made and consents,
authorization, permits, orders and other matters required under Blue Sky
or State securities laws as to which such counsel need express no
opinion);
(viii) any contract, agreement, instrument, lease or license required
to be described in the Registration Statement or the Prospectuses has
been properly described therein; any contract, agreement, instrument,
lease, or license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to the
Registration Statement;
(ix) insofar as statements in the Prospectuses purport to summarize
the status of litigation or the provisions of laws, rules, regulations,
orders, judgments, decrees, contracts, agreements, instruments, leases,
or licenses, such statements have been prepared or reviewed by such
counsel and accurately reflect the status of such litigation and
provisions purported to be summarized and are correct in all material
respects; and
(x) there are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any
Underwritten Shares pursuant to the Company's Certificate of
Incorporation or By-laws, in each case as amended, or any agreement or
other instrument; and no holders of securities of the Company have rights
to the registration thereof under the Registration Statement except as
set forth in the Prospectuses or, if any such holders have such rights,
such holders have waived such rights;
Notwithstanding the foregoing, each of such opinions may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights generally and to court decisions with respect thereto and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and no opinion need be
<PAGE> 31
31
expressed as to the availability of equitable remedies for any breach of any
such agreement.
In rendering such opinion, such counsel may (i) state that his
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of Michigan and the corporate law of the
State of Delaware; and (ii) rely (to the extent such counsel deems proper and
specifies in his opinion), as to foreign matters involving the application of
the laws of jurisdictions other than the State of Michigan or the United States
or the corporate law of the State of Delaware upon opinions (dated each Closing
Date, addressed to the U.S. Underwriters and in form reasonably satisfactory to
the U.S. Underwriters with signed or conformed copies for each of the U.S.
Underwriters) of counsel acceptable to Cravath, Swaine & Moore.
(f) (A) On the First Closing Date, there shall have been furnished
to you the opinion (addressed to the U.S. Underwriters) of Smith-Hughes,
Raworth & McKenzie, British Virgin Islands counsel to the Selling Stockholder,
dated such Closing Date in form and substance satisfactory to the U.S.
Underwriters to the effect that, with respect to the Selling Stockholder:
(i) The Selling Stockholder has the legal right and power, and all
authorization and approval required by law to enter into this Agreement,
the International Underwriting Agreement, the Power of Attorney and the
Custody Agreement; the execution, delivery and performance of this
Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement by the Selling Stockholder and the
consummation by the Selling Stockholder of the transactions contemplated
hereby and thereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any British Virgin Islands statute, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to such
counsel to which the Selling Stockholder is a party or by which the
Selling Stockholder is bound or to which any of the property or assets of
the Selling Stockholder is subject, nor will such actions result in any
violation of the provisions of the Certificate of Incorporation or the
Memorandum and Articles of Association of the Selling Stockholder or any
statute or any order, rule or regulation of the British Virgin Islands
known to
<PAGE> 32
32
such counsel of any court or governmental agency or body having
jurisdiction over the Selling Stockholder or the property or assets of
the Selling Stockholder; and no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental agency
or body of the British Virgin Islands required for the execution,
delivery and performance of this Agreement, the International
Underwriting Agreement, the Power of Attorney or the Custody Agreement by
the Selling Stockholder and the consummation by the Selling Stockholder
of the transactions contemplated hereby and thereby;
(ii) This Agreement and the International Underwriting Agreement
have each been duly authorized, executed and delivered by the Selling
Stockholder; and
(iii) The Power of Attorney and the Custody Agreement have each been
duly authorized, executed and delivered by the Selling Stockholder; and
(B) On the First Closing Date, there shall have been furnished to
you the opinion (addressed to the U.S. Underwriters) of Paul, Weiss, Rifkind,
Wharton & Garrison, special United States counsel to the Selling Stockholder,
dated such Closing Date in form and substance satisfactory to the U.S.
Underwriters to the effect that, with respect to the Selling Stockholder;
(i) The execution, delivery and performance of this Agreement, the
International Underwriting Agreement, the Power of Attorney and the
Custody Agreement by the Selling Stockholder and the consummation by the
Selling Stockholder of the transactions contemplated hereby and thereby
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute of the
United States or the State of New York, nor will such actions result in
any violation of the provisions of any order, rule or regulation of the
United States or the State of New York known to such counsel of any court
of governmental agency or body having jurisdiction over the Selling
Stockholder or the property or assets of the Selling Stockholder; and no
consent, approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body of the United States
or the State of New York is required for the execution,
<PAGE> 33
33
delivery and performance of this Agreement, the International
Underwriting Agreement, the Power of Attorney or the Custody Agreement by
the Selling Stockholder and the consummation of the Selling Stockholder
of the transactions contemplated hereby and thereby, except the
registration under the Act of the Underwritten Shares, and such consents,
approvals, authorizations, registrations, filings or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the shares by the U.S.
Underwriters;
(ii) This Agreement, the International Underwriting Agreement, the
Power of Attorney and the Custody Agreement constitute valid and binding
agreements of the Selling Stockholder, enforceable in accordance with
their respective terms, (a) except that such enforceability may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium or similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in
equity), and (b) except to the extent that rights to indemnity or
contribution hereunder and thereunder may be limited by federal or state
securities laws or the public policy underlying such laws may limit the
right to indemnity and contribution thereunder; and
(iii) Assuming that the U.S. Underwriters and the International
Managers are purchasers in good faith of the Underwritten Shares to be
sold by the Selling Stockholder on the First Closing Date under this
Agreement and the International Underwriting Agreement without notice of
any adverse claim (as such term is defined in the Uniform Commercial Code
of the State of New York), upon delivery of such Shares pursuant to this
Agreement and the International Underwriting Agreement, the U.S.
Underwriters and the International Managers will acquire good title to
such Shares free and clear of any security interests, liens, equities and
other encumbrances.
(h) The Company shall have furnished to the Underwriters on each
Closing Date a certificate, dated such
<PAGE> 34
34
Closing Date, of its President or a Vice President and its Chief Financial
Officer stating that:
(i) the representations, warranties and agreements of the Company in
Section 1 herein are true and correct as of such Closing Date; the
Company has complied with all its agreements contained herein; and the
conditions set forth in Paragraph 8(a) have been fulfilled; and
(ii) they have carefully examined the Registration Statement and the
Prospectuses and, in their opinion, (A) as of the Effective Time of the
Registration Statement, the Registration Statement did not include any
untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (B) as of its date, each of the Prospectuses, as
amended or supplemented, did not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading and (C) since the Effective Date of the
Registration Statement or the date of each Prospectus, as the case may
be, no event has occurred which should have been set forth in a
supplement to or amendment of each Prospectus which has not been set
forth in such a supplement or amendment.
(i) At the Execution Time and on each Closing Date, the Company
shall have furnished to the U.S. Underwriters a letter of Arthur Andersen &
Co. addressed to the Underwriters and dated such Closing Date and in form and
substance satisfactory to the U.S. Underwriters confirming that they are
independent public accountants within the meaning of the Act and are in
compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, and stating,
as of the date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the U.S. Prospectus, as of a date not more than five
days prior to the date of such letter), the conclusions and findings of such
firm with respect to the financial information and other matters covered by its
letter delivered to the U.S. Underwriters concurrently with the execution of
this Agreement and confirming in all material respects the conclusions and
findings set forth in such prior letter.
<PAGE> 35
35
(j) The NASD upon review of the terms of the public offering of the
Underwritten Shares, shall not have objected to the participation by any of the
U.S. Underwriters in such offering or asserted any violation of the By-Laws of
the NASD.
(k) Neither the Company nor any of its subsidiaries (1) shall have
sustained since the date of the latest audited financial statements included in
the U.S. Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the U.S. Prospectus or (2) since
such date there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or result of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the U.S. Prospectus, the effect of which, in any such case
described in clause (1) or (2) of this subparagraph, is, in the judgment of the
U.S. Underwriters, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares
on the terms and in the manner contemplated in the U.S. Prospectus.
(l) The Shares to be purchased on such Closing Date by the U.S.
Underwriters shall be approved for listing on the New York Stock Exchange,
subject only to official notice of issuance and evidence of satisfactory
distribution.
(m) The Selling Stockholder (or the Custodian or one or more
attorneys-in-fact on behalf of the Selling Stockholder) shall have furnished to
the Representatives on each Closing Date a certificate, dated such Closing
Date, signed by, or on behalf of, the Selling Stockholder (or the Custodian or
one or more attorneys-in-fact) stating that the representations, warranties and
agreements of the Selling Stockholder contained herein are true and correct as
of such Closing Date and that the Selling Stockholder has complied with all
agreements contained herein to be performed by the Selling Stockholder at or
prior to the such Closing Date.
All such opinions, certificates, letters and documents mentioned
above or elsewhere in this Agreement
<PAGE> 36
36
shall be deemed to be in compliance with the provisions hereof only if they are
reasonably satisfactory to you and Cravath, Swaine & Moore, counsel for the
U.S. Underwriters, and the Company shall furnish to you conformed copies
thereof in such quantities as you reasonably request.
9. Indemnification and Contribution. (a) The Company and the
Selling Stockholder jointly and severally agree to indemnify and hold harmless
each U.S. Underwriter against any loss, claim, damage or liability (or any
action in respect thereof), including without limitation, any legal or other
expenses reasonably incurred by any U.S. Underwriter or any such controlling
person in connection with defending or investigating any such action or claim,
joint or several, to which such U.S. Underwriter may become subject, under the
Act or otherwise, insofar as such loss, claim, damage or liability (or action
in respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, any Prospectus or the Registration
Statement or any Prospectus as amended or supplemented or in any Blue Sky
application or other document executed by the Company specifically for that
purpose or based upon written information furnished by the Company filed in any
state or other jurisdiction in order to qualify any of or all the Shares under
the securities laws thereof (any such application, document or information
being hereinafter referred to as a "Blue Sky Application"), or (ii) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, any Prospectus or the Registration Statement or any
Prospectus as amended or supplemented or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and shall reimburse each U.S. Underwriter promptly after
receipt of invoices from such U.S. Underwriter for any legal or other expenses
as reasonably incurred by such U.S. Underwriter in connection with
investigating, preparing to defend or defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action, notwithstanding the possibility that payments for such expenses
might later be held to be improper, in which case such payments shall be
promptly refunded; provided, however, that the Company and the Selling
Stockholder shall not be liable (x) under this paragraph 9(a) in any such case
to the extent, but only to the extent, that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or
<PAGE> 37
37
omission or alleged omission made in reliance upon and in conformity with
written information furnished to the Company through the Representatives by or
on behalf of any U.S. Underwriter specifically for use in the preparation of
the Registration Statement, any Preliminary Prospectus, any Prospectus or the
Registration Statement or any Prospectus as amended or supplemented, or any
Blue Sky application, and (y) in no event shall the liability of the Selling
Stockholder exceed the proceeds received by the Selling Stockholder from the
sale by the Selling Stockholder of its portion of the Shares pursuant to this
Agreement. The Company also agrees to indemnify and hold harmless the
Independent Underwriter and each person, if any, who controls the Independent
Underwriter within the meaning of either Section 15 of the Act, or Section 20
of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments incurred as a result of the Independent Underwriter's
participation as a "qualified independent underwriter" within the meaning of
Section 1 of Article III of the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. in connection with the offering of the
Common Stock except for any losses, claims, damages, liabilities and judgments
resulting from the Independent Underwriter's, or such controlling person's,
gross negligence or willful misconduct.
(b) Each U.S. Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company against any loss, claim, damage or
liability (or any action in respect thereof) to which the Company may become
subject, under the Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any Preliminary Prospectus, any Prospectus or the
Registration Statement or any Prospectus as amended or supplemented, or in any
Blue Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, any Prospectus or the
Registration Statement or any Prospectus as amended or supplemented, or in any
Blue Sky Application a material fact required to be stated therein or necessary
to make the statements therein not misleading and shall reimburse the Company
promptly after receipt of invoices from the Company for any legal or other
expenses as reasonably incurred by the Company in connection with
investigating, preparing to defend or defending against or appearing as a
third-party witness in connection with any such loss, claim,
<PAGE> 38
38
damage, liability or action notwithstanding the possibility that payments for
such expenses might later be held to be improper, in which case such payments
shall be promptly refunded; provided, however, that such indemnification or
reimbursement shall be available in each such case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through you by or on behalf of such U.S.
Underwriter specifically for use in the preparation thereof.
(c) Promptly after receipt by any indemnified party under subsection
(a) or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure so to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 9 except to the extent it
has been prejudiced in any material respect by such failure or from any
liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against any
indemnified party and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under such
subsection for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; except that the Representatives shall have the right to
employ counsel to represent you and those other U.S. Underwriters who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the U.S. Underwriters against the Company under such subsection
if, in your reasonable judgment, it is advisable for you and those U.S.
Underwriters to be represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the Company.
Notwithstanding anything contained herein to the contrary, if indemnity may be
sought
<PAGE> 39
39
pursuant to Section 9(a) hereof in respect of such action or proceeding, then
in addition to such separate counsel for the indemnified parties the
indemnifying party shall be liable for the reasonable fees and expenses of not
more than one separate counsel (in addition to any local counsel) for the
Independent Underwriter in its capacity as a "qualified independent
underwriter" and all persons, if any, who control the Independent Underwriter
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act.
(d) If the indemnification provided for in this Section 9 is
unavailable to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Stockholder and the
U.S. Underwriters from the offering of the Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, the Selling
Stockholder and the U.S. Underwriters in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company, the Selling
Stockholder and the U.S. Underwriters shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and/or the Selling Stockholder bear
to the total underwriting discounts and commissions received by the U.S.
Underwriters, in each case as set forth in the table on the cover page of the
U.S. Prospectus (with the estimated expenses allocated pro rata among the
Shares and the International Shares). Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company, the Selling
Stockholder or the U.S. Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company, the Selling Stockholder and the
U.S. Underwriters agree that it would
<PAGE> 40
40
not be just and equitable if contributions pursuant to this subsection (d) were
to be determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take into account the equitable considerations referred to in
the first sentence of this subsection (d). The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating, preparing to defend or
defending against any action or claim which is the subject of this subsection
(d). Notwithstanding the provisions of this subsection (d), (i) no U.S.
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages
which such U.S. Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and
(ii) notwithstanding the provisions of this subsection (d), the Selling
Stockholder shall not be required to contribute any amount in excess of the
amount by which the amount of proceeds received by the Selling Stockholder from
the sale by the Selling Stockholder of its portion of the Shares pursuant to
this Agreement exceed the amount of any damages the Selling Stockholder has
otherwise been required to pay by reason of such untrue of alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations and not joint. Each party entitled to contribution agrees that
upon the service of a summons or other initial legal process upon it in any
action instituted against it in respect of which contribution may be sought, it
shall promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom contribution
may be sought for any obligation it may have hereunder or otherwise (except as
specifically provided in subsection (c) hereof).
<PAGE> 41
41
(e) The obligations of the Company and the Selling Stockholder under
this Section 9 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have, and shall extend, upon the same terms
and conditions, to each person, if any, who controls any U.S. Underwriter
within the meaning of the Act; and the obligations of the U.S. Underwriters
under this Section 9 shall be in addition to any liability that the respective
U.S. Underwriters may otherwise have, and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with his
or her consent, is named in the Registration Statement as about to become a
director of the Company) or the Selling Stockholder, to each officer of the
Company who has signed the Registration Statement and to each person, if any,
who controls the Company within the meaning of the Act.
10. Substitution of U.S. Underwriters. If, on either Closing Date,
any U.S. Underwriter defaults in the performance of its obligations under this
Agreement, the non-defaulting U.S. Underwriters may, but shall not be required
to, find one or more substitute underwriters to purchase such Shares or may,
but shall not be required to, make such other arrangements satisfactory to the
Company as such non-defaulting U.S. Underwriters deem advisable, or the
non-defaulting U.S. Underwriters may, but shall not be required to, agree to
purchase such Shares in each case upon the terms set forth in this Agreement.
If the non-defaulting U.S. Underwriters or other underwriters satisfactory to
the non-defaulting U.S. Underwriters do not elect to purchase the Shares which
the defaulting U.S. Underwriter agreed but failed to purchase, this Agreement
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter or the Company, except that the Company shall continue to be liable
for the payment of expenses to the extent set forth in Section 6(f) and Section
11.
Nothing contained herein shall relieve a defaulting U.S. Underwriter
of any liability it may have to the Company for damages caused by its default.
If other underwriters agree to purchase the Shares of the defaulting U.S.
Underwriter, either the U.S. Underwriters or the Company may postpone the First
Closing Date for up to seven full business days in order to effect any changes
that in the opinion of counsel for the Company or counsel for the U.S.
Underwriters may be necessary in the Registration Statement, the U.S.
Prospectus or in any other document or arrangement.
<PAGE> 42
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11. Effective Date and Termination. (a) This Agreement shall
become effective at 11:00 A.M., New York City time, on the first full Business
Day following the date hereof, or at such earlier time after the Registration
Statement becomes effective as you shall first release the Firm Shares for sale
to the public. You shall notify the Company immediately after you have taken
any action which causes this Agreement to become effective. Until this
Agreement is effective, it may be terminated by the Company by giving notice as
hereinafter provided to you, or by you by giving notice as hereinafter provided
to the Company, except that the provisions of Section 6(i) and Section 9 shall
at all times be effective. For purposes of this Agreement, the release of the
initial public offering of the Firm Shares for sale to the public shall be
deemed to have been made when you release, by telecopy or otherwise, firm
offers of the Firm Shares to securities dealers or release for publication a
newspaper advertisement relating to the Firm Shares, whichever occurs first.
(b) From the date of this Agreement until the First Closing Date,
this Agreement may be terminated by you in your absolute discretion by giving
notice as hereinafter provided to the Company, if (i) the Company shall have
failed, refused or been unable, at or prior to such Closing Date, to perform
any agreement on its part to be performed hereunder, (ii) any other condition
to the obligations of the U.S. Underwriters hereunder is not fulfilled, (iii)
there occurs any change, or any development involving a prospective change, in
or affecting the financial condition of the Company or its subsidiaries, which
in your judgment, materially impairs the investment quality of the Shares; (iv)
there is any downgrading in the rating of any debt securities of the Company by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act or Rule 15c3-1 under the Exchange Act),
or any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (v) trading in
securities generally on the New York Stock Exchange shall have been suspended
or materially limited, or minimum prices shall have been established on such
exchange by the Commission, or by such exchange or other regulatory body or
governmental authority having jurisdiction, (vi) any banking moratorium shall
have been declared by Federal or New York governmental authorities, (vii) there
is an out-
<PAGE> 43
43
break or escalation of hostilities involving the United States on or after the
date hereof, or the United States is or becomes engaged in hostilities which
result in the declaration of a national emergency or war, the effect of which,
in your judgment, makes it inadvisable or impractical to proceed with the
completion of the sale of or any payment for the Shares on the terms and in the
manner contemplated in the Prospectuses, or (viii) there shall have been such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such), in your judgment, as to make it inadvisable or
impractical to proceed with the delivery of the Shares. Any termination of this
Agreement pursuant to this Section 11 shall be without liability on the part of
the Company or any U.S. Underwriter, except as otherwise provided in Section
6(g), Section 9 and Section 11 of this Agreement.
Any notice referred to above may be given at the address specified in
Section 13 hereof in writing or by telecopier, telex or telephone, and if by
telecopier, telex or telephone, shall be immediately confirmed in writing.
Any notice referred to above may be given at the address specified in
Section 14 hereof in writing or by telecopy or telephone, and if by telecopy or
telephone, shall be immediately confirmed in writing.
If notice shall have been given pursuant to this Section 11
preventing this Agreement from becoming effective, or if the Company shall fail
to tender the Shares for delivery to the U.S. Underwriters for any reason
permitted under this Agreement, or if the U.S. Underwriters shall decline to
purchase the Shares for any reason permitted under this Agreement, the Company
shall reimburse the U.S. Underwriters for the reasonable fees and expenses of
their counsel and for such other out-of-pocket expenses as shall have been
incurred by them in connection with this Agreement and the proposed purchase of
the Shares, and upon demand the Company shall pay the full amount thereof to
the U.S. Underwriters.
12. Survival of Certain Provisions. The agreements contained in
Section 9 hereof and the representations, warranties and agreements of the
Company contained in Sections 1 and 6 hereof and the Selling Stockholder
contained in Sections 2 and 7 hereof shall survive the delivery of the Shares
to the U.S. Underwriters hereunder and shall
<PAGE> 44
41
remain in full force and effect, regardless of any termination or cancellation
of this Agreement or any investigation made by or on behalf of any indemnified
party.
13. Notices. Except as otherwise provided in the Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, such notice shall be in writing or by telecopy addressed to the
Company at the address of the Company set forth in the Registration Statement,
Attention: James H. Vandenberghe; (b) whenever notice is required by the
provisions of this Agreement to be given to the Selling Stockholder, such
notice shall be in writing or by telecopy addressed to the Selling Stockholder
at Wickam's Cay, Road Town, Tortola, British Virgin Islands, with a copy to
IFINT-USA Inc., 375 Park Avenue, Suite 2107, New York, NY 10152, Attention:
Stephen V. O'Connell and (c) whenever notice is required by the provisions of
this Agreement to be given to the several U.S. Underwriters, such notice shall
be in writing or by telecopy addressed to you, in care of Lehman Brothers Inc.,
Three World Financial Center, New York, New York 10285, Attention: Syndicate
Department.
14. Information Furnished by U.S. Underwriters. The Company, the
Selling Stockholder and the U.S. Underwriters severally confirm that the
statements set forth in the last paragraph of the cover page with respect to
the public offering of the Shares and under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectuses are correct and constitute the
written information furnished by or on behalf of any U.S. Underwriter referred
to in paragraph (b) of Section 1 hereof and in paragraphs (a) and (b) of
Section 9 hereof.
15. Parties. This Agreement shall inure to the benefit of and
binding upon the several U.S. Underwriters, the Company, the Selling
Stockholder and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Company
and the Selling Stockholder contained in this Agreement shall also be deemed to
be for the benefit of the person or persons, if any, who control any U.S.
Underwriter within the meaning of Section 15 of the Act and for the benefit of
any International Manager (and controlling persons thereof) who offers or sells
any Shares in accordance with the terms of the Agreement Between U.S.
Underwriters and International Managers and (b) the
<PAGE> 45
42
indemnity agreement of the U.S. Underwriters contained in Section 9 hereof
shall be deemed to be for the benefit of directors of the Company, officers of
the Company who signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Act. Nothing in this
Agreement shall be construed to give any person, other than the persons
referred to in this paragraph, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
16. Compliance with Schedule E of NASD by-Laws. Each U.S.
Underwriter agrees, severally and not jointly, that in accordance with Section
12 of Schedule E of the By-Laws of the NASD, a transaction in Shares issued by
the Company shall not be executed by such U.S. Underwriter in a discretionary
account without the prior specific written approval of the customer.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without respect
to choice of law principles thereof.
<PAGE> 46
43
18. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
If the foregoing correctly sets forth the agreement among the
Company, the Selling Stockholder and the U.S. Underwriters, please indicate
your acceptance in the space provided for that purpose below.
Very truly yours,
LEAR SEATING CORPORATION,
By:
---------------------------
Name:
Title:
FIMA Finance Management Inc., as Selling Stockholder,
By:
----------------------------
Name:
Title:
<PAGE> 47
44
Accepted:
LEHMAN BROTHERS INC.
KIDDER, PEABODY & CO. INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
WERTHEIM SCHRODER & CO. INCORPORATED
For themselves and as Representatives
for each of the several U.S. Underwriters
named in Schedule I hereto
By: LEHMAN BROTHERS INC.
By:
--------------------------
Authorized Representative
MORGAN STANLEY & CO. INCORPORATED
As the Qualified Independent Underwriter
and as an Underwriter
By:
--------------------------
Authorized Representative
<PAGE> 1
Exhibit 1.2
1,875,000 Shares
LEAR SEATING CORPORATION
Common Stock
International Underwriting Agreement
, 1994
Lehman Brothers International (Europe)
Kidder, Peabody International Limited
Morgan Stanley & Co. International Limited
Wertheim Schroder International Limited
As Lead Managers for each of
the several International Managers
named in Schedule I hereto,
c/o LEHMAN BROTHERS INTERNATIONAL (EUROPE)
One Broadgate
London EC2M 7HA
ENGLAND
Dear Sirs:
Lear Seating Corporation, a Delaware corporation (the "Company"),
proposes to issue and sell and FIMA Finance Management Inc. (the "Selling
Stockholder") proposes to sell to the several International Managers named in
Schedule I hereto (the "International Managers") an aggregate of 1,875,000
shares (the "Firm Shares") of Common Stock, $.01 par value (the "Common
Stock"), of the Company. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, the Company
proposes to grant to the U.S. Underwriters and the International Managers (as
defined below) an option to purchase up to an aggregate of 937,500 additional
shares (the "Option Shares") of Common Stock. The Firm Shares and any Option
Shares purchased pursuant to this Agreement are herein called the "Shares".
It is understood that the Company and the Selling Stockholder are
concurrently entering into a U.S. Underwriting Agreement dated the date hereof
(the "U.S. Underwriting Agreement"), providing for the sale by the Company and
the Selling Stockholder of an aggregate of 7,500,000
<PAGE> 2
2
shares of Common Stock through arrangements with certain underwriters in the
United States (the "U.S. Underwriters"), for whom Lehman Brothers Inc., Kidder
Peabody & Co. Incorporated, Morgan Stanley & Co. Incorporated and Wertheim
Schroder & Co. Incorporated are acting as representatives (the
"Representatives"). All shares of Common Stock to be offered by the U.S.
Underwriters pursuant to the U.S. Underwriting Agreement are herein called the
"U.S. Shares"; the U.S. Shares and the Shares, collectively, are herein called
the "Underwritten Shares". As specified in Section 3, the respective closings
under this Agreement and the U.S. Underwriting Agreement are hereby expressly
made conditional on one another.
The Company and the Selling Stockholder also understand that the U.S.
Underwriters and the International Managers have entered into an agreement (the
"Agreement Between U.S. Underwriters and International Managers") contemplating
the coordination of certain transactions between the U.S. Underwriters and the
International Managers and that, pursuant thereto and subject to the conditions
set forth therein, the U.S. Underwriters may purchase from the International
Managers a portion of the Shares or sell to the International Managers a
portion of the U.S. Shares. The Company and the Selling Stockholder understand
that any such purchases and sales between the U.S. Underwriters and the
International Managers shall be governed by the Agreement Between U.S.
Underwriters and International Managers and shall not be governed by the terms
of this Agreement or the U.S. Underwriting Agreement.
This is to confirm the agreement concerning the purchase of the
Shares from the Company and the Selling Stockholder by the International
Managers.
The following terms as used in this Agreement shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading.
"Commission" shall mean the Securities and Exchange Commission.
<PAGE> 3
3
"Effective Date" shall mean the date of the Effective Time.
"Effective Time" shall mean the date and the time as of which the
Registration Statement, or the most recent post- effective amendment thereto,
if any, was declared effective by the Commission (or, if the Company will next
file with the Commission an amendment to the Registration Statement as
contemplated by clause (i) of the first paragraph of Section 1, the date and
time as of which the Registration Statement shall be declared effective).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"International Prospectus" shall mean a Prospectus relating to the
International Shares which are to be offered and sold outside the United States
to persons other than U.S. Persons.
"Preliminary Prospectuses" shall mean each prospectus included in the
Registration Statement, or any amendment thereof, before the Effective Date,
each prospectus filed with the Commission by the Company with the consent of
the Representatives pursuant to Rule 424(a) and each prospectus included in the
Registration Statement at the Effective Time that omits Rule 430A Information.
"Prospectuses" shall mean the forms of prospectuses relating to the
Underwritten Shares, as first filed pursuant to Rule 424(b) after the Execution
Time or, if no filing pursuant to Rule 424(b) is required, the forms of final
prospectuses included in the Registration Statement at the Effective Time.
"Registration Statement" shall mean the registration statement
referred to above, as amended at the Effective Time. Such term shall include
any Rule 430A Information deemed to be included therein at the Effective Time
as provided by Rule 430A.
"Rule 424" and "Rule 430A" shall refer to such rules under the Act.
<PAGE> 4
4
"Rule 430A Information" shall mean information with respect to the
Underwritten Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rules and Regulations" shall mean the rules and regulations in
effect at any relevant time adopted by the Commission under the Act or the
Exchange Act.
"Subsidiary" and "Significant Subsidiary" shall have the meanings
assigned in Rule 405 of the Rules and Regulations. As used in reference to the
Company, "subsidiary" shall mean a Subsidiary of the Company.
"U.S. Person" shall mean any resident or national of the United
States, any corporation, partnership or other entity created or organized in or
under the laws of the United States or any estate or trust the income of which
is subject to United States income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States branch of a person other than a U.S. Person; and "United States"
shall mean the United States of America (including the states thereof and the
District of Columbia) and its territories, its possessions and other areas
subject to its jurisdiction.
"U.S. Prospectus" shall mean a Prospectus relating to the Shares
which are to be offered and sold in the United States or to U.S. Persons.
1. Representations and Warranties of the Company. The Company
represents, warrants and agrees that:
(a) A registration statement on Form S-1 (File No. [33- ]) with
respect to the Underwritten Shares has been prepared by the Company in
conformity with the requirements of the Act and the Rules and Regulations
thereunder and has been filed with the Commission under the Act. Copies of
such registration statement as amended to date have been delivered by the
Company to you as the Lead Managers of the International Managers. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment to such
registration statement, including forms of final prospectuses or (ii) after
effectiveness of such registration statement, final prospectuses in accordance
with Rules 430A and 424(b)(1) or (4).
<PAGE> 5
5
(b) On the Effective Date, the Registration Statement did or will,
and when the Prospectuses are first filed (if required) in accordance with Rule
424(b) and on each Closing Date (as defined in Section 4) the Prospectuses (and
any supplements thereto) will, comply in all material respects with the
applicable requirements of the Act and the Rules and Regulations. The Company
has included in the Registration Statement, as amended at the Effective Date,
all information required by the Act and the Rules and Regulations thereunder to
be included in the Prospectuses with respect to the Underwritten Shares and the
offering thereof, and the Prospectuses, when filed with the Commission, did or
will contain all Rule 430A Information, together with all other such required
information, with respect to the Underwritten Shares and the offering thereof
and, except to the extent the Lead Managers shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to you
prior to the Execution Time or, to the extent not completed at the Execution
Time, shall contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Prospectuses) as the Company
has advised you, prior to the Execution Time, will be included or made therein.
The Commission has not issued any stop order preventing or suspending the use
of any Preliminary Prospectus or the Prospectuses or the effectiveness of the
Registration Statement, and no proceeding for any such purpose has been
initiated or threatened by the Commission.
(c) On the Effective Date, the Registration Statement did not or
will not 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 not misleading; and, on the Effective Date, the Prospectuses
did not or will not, and on the date of any filing pursuant to Rule 424(b) and
on each Closing Date, the Prospectuses (together with any supplements thereto)
will not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that
the Company makes no representation or warranty as to information contained in
or omitted from the Registration Statement or the Prospectuses in reliance
upon, and in conformity with, written information furnished to the Company by
you, or by any International Manager through you, specifically for inclusion
therein.
<PAGE> 6
6
(d) Neither the Commission nor, to the knowledge of the Company, the
"blue sky" or securities authority of any jurisdiction has issued an order (a
"Stop Order") suspending the effectiveness of the Registration Statement,
preventing or suspending the use of any Preliminary Prospectuses, the
Prospectuses, the Registration Statement, or any amendment or supplement
thereto, refusing to permit the effectiveness of the Registration Statement, or
suspending the registration or qualification of the Shares, nor, to the
knowledge of the Company, has any of such authorities instituted or threatened
to institute any proceeding with respect to a Stop Order in any jurisdiction in
which the Shares are sold.
(e) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full power and authority, and all necessary
consents, authorizations, approvals, orders, licenses, certificates, and
permits of and from, all Federal, state, local, and other governmental and
foreign authorities, to own, lease, license, and use its properties and assets
and to carry on its business in the manner described in the Prospectus except
where such failure will not have a material adverse effect on the Company and
its subsidiaries taken as a whole. Except as described in the Registration
Statement and Prospectuses, each such consent, authorization, approval, order,
license, certificate and permit is valid and in full force and effect, and
there is no proceeding pending, or to the knowledge of the Company, threatened,
which might lead to the revocation, termination, suspension or nonrenewal of
any such consent, authorization, approval, order, license, certificate or
permit. Each of the Company and its subsidiaries is duly qualified to do
business and is in good standing in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct of its
business makes such qualification necessary, except in those jurisdictions
where failure to qualify or to be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(f) The Company has an authorized capitalization as set forth in the
Registration Statement. Except as described or otherwise disclosed in the
Prospectuses, each outstanding share of Common Stock and each outstanding share
of capital stock of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, has not been issued and is not owned or
held in violation of
<PAGE> 7
7
any preemptive rights of stockholders, and, in the case of the Company's
subsidiaries, is owned of record and beneficially by the Company (except for
directors' qualifying shares), or its subsidiaries free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements
and voting trusts. The Company's capital stock conform to the statements in
relation thereto contained in the Prospectuses. There is no commitment, plan
or arrangement to issue, and no outstanding option, warrant or other right
calling for the issuance of, any share of capital stock of the Company or the
Company's subsidiaries to any person or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for capital
stock of the Company or the Company's subsidiaries, except as described or
otherwise disclosed in the Prospectuses. There is outstanding no security or
other instrument which by its terms is convertible into or exchangeable for
capital stock of the Company or any of their subsidiaries, except as described
or otherwise disclosed in the Prospectuses.
(g) Other than as described in the Prospectuses, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such securities
in the securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Act.
(h) Neither the Company nor any of its subsidiaries has sustained,
since the date of the Company's Report on Form 10-K for the six month period
ended December 31, 1993, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectuses; and,
since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Prospectuses.
<PAGE> 8
8
(i) Except as described in the Registration Statement and the
Prospectuses, neither the Company nor any of its subsidiaries have entered into
any material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business.
(j) Neither the Company nor any of its subsidiaries is now or is
expected by the Company or its subsidiaries to be in violation or breach of, or
in default with respect to, any provision of any contract, agreement,
instrument, lease, or license to which the Company or any of its subsidiaries
is a party, the effect of which would materially adversely affect the financial
condition, results of operations, business, assets, liabilities or prospects of
the Company and its subsidiaries taken as a whole. Each such contract,
agreement, instrument, lease or license (i) is in full force, (ii) assuming the
correctness of (iii) below, is the legal, valid, and binding obligation of the
Company or its subsidiaries and is enforceable as to the Company or its
subsidiaries, as the case may be, in accordance with its terms, except that
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization or similar laws affecting the enforcement of
creditors' rights generally and by general equity principles and (iii) to the
Company's knowledge, is the legal, valid and binding obligation of the other
parties thereto and is enforceable as to each of them in accordance with its
terms, except that enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by general equity principles.
Each of the Company and its subsidiaries enjoys peaceful and undisturbed
possession under all leases and licenses under which it is operating.
(k) The Underwritten Shares being sold by the Company have been duly
and validly authorized and, when duly countersigned by the Company's Transfer
Agent and Registrar and issued and delivered in accordance with the provisions
of this Agreement and the U.S. Underwriting Agreement, as described in the
Registration Statement, will be duly and validly issued, fully paid and
nonassessable; the Underwritten Shares conform to the description of the Common
Stock in the Prospectuses; and the Underwritten Shares have been approved for
listing on the New York Stock Exchange, subject to official notice of issuance.
<PAGE> 9
9
(l) The execution, delivery and performance of this Agreement and
the U.S. Underwriting Agreement and the consummation of the transactions
contemplated hereby and thereby, the issuance and sale of the Shares and the
amendment to the Certificate of Incorporation of the Company and the By-laws of
the Company described in the Prospectuses, will not conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries is
subject, nor will such actions result in any violation of the provisions of the
Certificate of Incorporation or the By-laws, in each case as amended, of the
Company or any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or assets;
and no consent, approval, authorization, order, registration, filing or
qualification of or with any court or governmental agency or body is required
for the issue and sale of the Underwritten Shares or the consummation of the
other transactions contemplated by this Agreement or the U.S. Underwriting
Agreement, except the registration under the Act of the Underwritten Shares,
and such consents, approvals, authorizations, registrations, filings or
qualifications as may be required under state securities or Blue Sky laws or as
may be required by the laws of any country other than the United States in
connection with the purchase and distribution of the Underwritten Shares by the
U.S. Underwriters and the International Managers.
(m) The Company will not, during the period of 180 days after the
date hereof except pursuant to this Agreement or the U.S. Underwriting
Agreement or as contemplated by the Prospectuses, offer, sell or otherwise
dispose of any common stock or securities convertible into or exchangeable or
exercisable for such common stock of the Company, directly or indirectly,
without the prior written consent of the Lead Managers.
(n) Except as may otherwise be disclosed in or contemplated by the
Prospectuses, since the date as of which information is given in the
Prospectuses, the Company has not (i) issued or granted any securities, (ii)
incurred any liability or obligation, direct or contingent, other than
<PAGE> 10
10
liabilities and obligations which were incurred in the ordinary course of
business, (iii) entered into any transaction not in the ordinary course of
business or (iv) declared or paid any dividend on its capital stock.
(o) Any contract, agreement, instrument, lease or license required
to be described in the Registration Statement or the Prospectuses has been
properly described therein, and any contract, agreement, instrument, lease or
license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to or has been incorporated as an
exhibit by reference into the Registration Statement.
(p) There is no labor strike or work stoppage or lockout actually
pending, imminent or threatened against the Company or any of its subsidiaries
which would have a material adverse effect on the consolidated financial
condition, results of operations, business, assets, liabilities or prospects of
the Company and its subsidiaries taken as a whole.
(q) Except as set forth in the Registration Statement and except as
would not materially and adversely affect the consolidated financial position,
stockholders' equity, results of operations, business or prospects of the
Company and its subsidiaries taken as a whole, (i) the Company is not in
violation of any applicable Federal, state or local environmental law or any
applicable order of any governmental authority with respect thereto; (ii) the
Company is not in violation of or subject to any existing, or pending or, to
the Company's knowledge, threatened action, suit, investigation, inquiry or
proceeding by any governmental authority nor is the Company subject to any
remedial obligations under any applicable Federal, state or local environmental
law; (iii) the Company and its subsidiaries are in compliance with all permits
or similar authorizations, if any, required to be obtained or filed in
connection with their operations including, without limitation, emissions,
discharges, treatment, storage, disposal or release of a Hazardous Material
into the environment except where any noncompliance could not reasonably be
expected to have a material adverse effect on the operations of the Company and
its subsidiaries; and (iv) to the knowledge of the Company and its
subsidiaries, after appropriate inquiry, no Hazardous Materials have been
disposed of or released by the Company or its subsidiaries on or to the
Company's or its subsidiaries' property, except in accordance with
<PAGE> 11
11
applicable environmental laws. The term "Hazardous Material" means any oil
(including petroleum products, crude oil and any fraction thereof), chemical,
contaminant, pollutant, solid or hazardous waste, or Hazardous Substance (as
defined in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act and regulations thereunder), that is regulated
as toxic or hazardous to human health or the environment under any Federal,
state or local environmental law.
(r) Except with respect to taxable periods commencing before the
taxable period ended June 30, 1989, as to which no representation is made, the
Company has filed all Federal, state and local income and franchise tax returns
required to be filed through the date hereof and has paid all taxes shown to be
due with respect to the taxable periods covered by such returns, and no tax
deficiency has been assessed, nor does the Company have any knowledge of any
tax deficiency which, if determined adversely to the Company or any of its
subsidiaries, could reasonably be expected to have a material adverse effect on
the consolidated financial condition, results of operations, business, assets,
liabilities or prospects of the Company and its subsidiaries taken as a whole.
(s) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company or any of its subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(t) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement present
fairly the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods indicated, and
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis throughout the periods involved.
<PAGE> 12
12
(u) Arthur Andersen & Co., who have certified certain financial
statements of the Company, and Coopers & Lybrand, who have certified certain
financial statements of the North American Business of Ford Motor Company (as
defined in the Prospectuses), and whose reports appear in the Prospectus, are
independent public accountants as required by the Act and the Rules and
Regulations.
(v) There is no litigation or governmental proceeding pending or, to
the knowledge of the Company or any of its subsidiaries, threatened against the
Company or any of its subsidiaries which could reasonably be expected to result
in any material adverse change in the consolidated financial condition, results
of operations, business, assets, liabilities or prospects of the Company or any
of its subsidiaries or which affects the transactions contemplated by this
Agreement and the Prospectuses or which is required to be disclosed in the
Registration Statement and the Prospectuses, which is not disclosed and
correctly summarized therein.
(w) The filing of the Registration Statement has been duly
authorized by the Company.
(x) Each of the Company and its subsidiaries holds good and
marketable title to, or valid and enforceable leasehold interests in, all items
of real and personal property which are material to the business of the Company
and its subsidiaries taken as a whole, free and clear of any lien, claim,
encumbrance, preemptive rights or any other claim of any other third party
which might materially interfere with the conduct of the business of the
Company and its subsidiaries taken as a whole. The Company and its
subsidiaries are in material compliance with all applicable laws, rules and
regulations, except where such failure to comply would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(y) The Company has not taken, and agrees that it will not take,
directly or indirectly, any action that could reasonably be expected to cause
or result in stabilization or manipulation of the price of any security to
facilitate the sale or resale of the Shares.
(z) The Company has requested that the Underwriters reserve up to
300,000 Shares to be sold to certain employees of the Company and its
subsidiaries. The Company has further requested that such reserved Shares be
<PAGE> 13
13
reserved from all Shares to be sold by it and not from Shares to be sold by the
Selling Stockholder.
2. Representations, Warranties and Agreements of the Selling
Stockholder. The Selling Stockholder, represents, warrants and agrees that:
(a) The Selling Stockholder has, and immediately prior to the First
Closing Date (as defined in Section 4) the Selling Stockholder will have, good
and valid title to the Underwritten Shares to be sold by the Selling
Stockholder hereunder and under the U.S. Underwriting Agreement on such date,
free and clear of all liens, encumbrances, equities or claims; and upon
delivery of such Underwritten Shares and payment therefor pursuant hereto and
thereto, good and valid title to such Underwritten Shares, free and clear of
all liens, encumbrances, equities or claims, will pass to the several U.S.
Underwriters and the International Managers.
(b) The Selling Stockholder has placed in custody under a custody
agreement (the "Custody Agreement") with Marc E. Perlmutter, Esq. and Richard
S. Borisoff, Esq. as custodians (each a "Custodian"), for delivery under this
Agreement and under the U.S. Underwriting Agreement, certificates in negotiable
form (with signature guaranteed by a commercial bank or trust company having an
office or correspondent in the United States or a member firm of the New York
or American Stock Exchanges) representing the Underwritten Shares to be sold by
the Selling Stockholder hereunder and under the U.S. Underwriting Agreement.
(c) The Selling Stockholder has duly and irrevocably executed and
delivered a power of attorney (each, a "Power of Attorney") appointing the
Custodian and one or more other persons, as attorneys-in-fact, with full power
of substitution, and with full authority (exercisable by any one or more of
them) to execute and deliver this Agreement and the U.S. Underwriting Agreement
and to take such other action as may be necessary or desirable to carry out the
provisions hereof or thereof on behalf of the Selling Stockholder.
(d) The Selling Stockholder has full right, power and authority to
enter into and perform under this Agreement, the U.S. Underwriting Agreement,
the Power of Attorney and the Custody Agreement; the execution, delivery and
performance of this Agreement, the U.S. Underwriting
<PAGE> 14
14
Agreement, the Power of Attorney and the Custody Agreement by the Selling
Stockholder and the consummation by the Selling Stockholder of the transactions
contemplated hereby and thereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the Selling
Stockholder is subject, nor will such actions result in any violation of the
provisions of the Certificate of Incorporation or the By-laws or any
partnership agreement of the Selling Stockholder or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Selling Stockholder or the property or assets of the
Selling Stockholder; and no consent, approval, authorization, order, filing or
registration of or with, any court or governmental agency or body is required
for the execution, delivery and performance of this Agreement, the U.S.
Underwriting Agreement, the Power of Attorney or the Custody Agreement by the
Selling Stockholder and the consummation by the Selling Stockholder of the
transactions contemplated hereby and thereby, except the registration under the
Act of the Underwritten Shares, and such consents, approvals, authorizations,
registrations, filings or qualifications as may be required under state
securities or Blue Sky laws or as may be required by the laws of any country
other than the United States in connection with the purchase and distribution
of the Shares by the International Managers.
(e) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectuses, the Prospectuses or any
amendment or supplement thereto are made in reliance upon and in conformity
with written information furnished to the Company by the Selling Stockholder
specifically for use therein, such Preliminary Prospectuses did, and the
Registration Statement did or will, and the Prospectuses and any amendments or
supplements to the Registration Statement or the Prospectuses will, when they
become effective or are filed with the Commission, as the case may be, not
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
not misleading.
(f) The Selling Stockholder has no reason to believe that the
representations and warranties of the
<PAGE> 15
15
Company contained in Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact, condition or
information not disclosed in the Prospectuses or any supplement thereto which
has adversely affected or may adversely affect the business of the Company or
any of its subsidiaries; and the sale of the Underwritten Shares by the Selling
Stockholder pursuant hereto and pursuant to the U.S. Underwriting Agreement is
not prompted by any information concerning the Company or any of its
subsidiaries which is not set forth in the Prospectuses or any supplement
thereto.
(g) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Underwritten Shares.
3. Purchase of the Shares by the International Managers. (a)
Subject to the terms and conditions and upon the basis of the representations
and warranties herein set forth, the Company agrees to issue and sell 1,250,000
shares of the Firm Shares and the Selling Stockholder agrees to sell 625,000
shares of Firm Shares, to the International Managers and each of the
International Managers agrees, severally and not jointly, to purchase, at a
price of $[ ] per Share, the number of Firm Shares set forth opposite such
International Manager's name in Schedule I hereto. Each International Manager
shall be obligated to purchase from the Company and from the Selling
Stockholder that number of the Firm Shares which represents the same proportion
of the number of the Firm Shares to be sold by the Company and by the Selling
Stockholder, respectively, as the number of the Firm Shares set forth opposite
the name of such International Manager in Schedule I represents of the total
number of the Firm Shares to be purchased by all of the Underwriters pursuant
to this Agreement. The respective purchase obligations of the International
Managers with respect to the Firm Shares shall be rounded among the
International Managers to avoid fractional shares, as the Lead Managers may
determine. The International Managers agree to offer the Firm Shares to the
public as set forth in the International Prospectus. Each International
Manager agrees that, except to the extent permitted by the Agreement Between
U.S. Underwriters and International Managers, it will not offer any of the
Shares inside the United States.
<PAGE> 16
16
The obligations of the Company hereunder to issue and sell any Shares
and of the Selling Stockholder to sell any Shares, and the obligations of the
International Managers to purchase the Shares, are subject to the closing of
the sale and purchase of the U.S. Shares (excluding the U.S. Shares issuable
upon exercise of the U.S. Underwriters' over-allotment option) pursuant to the
U.S. Underwriting Agreement.
(b) The Company hereby grants to the International Managers an
option to purchase from the Company, solely for the purpose of covering
over-allotments in the sale of Firm Shares, up to 187,500 shares of the Option
Shares for a period of 30 days from the date hereof at the purchase price per
Share set forth above. Option Shares shall be purchased from the Company for
the accounts of the International Managers, severally and not jointly, in
proportion to the number of Firm Shares set forth opposite such International
Manager's name in Schedule I hereto, except that the respective purchase
obligations of each International Manager shall be adjusted by the Lead
Managers so that no International Manager shall be obligated to purchase Option
Shares other than in 100-share quantities.
4. Delivery of and Payment for Shares. Delivery of certificates for
the Firm Shares, and certificates for the Option Shares, if the option to
purchase the same is exercised on or before the third Business Day prior to the
First Closing Date, shall be made at the offices of Lehman Brothers Inc., 388
Greenwich Street (Cashier's Window, Main Level), New York, New York 10013 (or
such other place as mutually may be agreed upon), at 10:00 A.M., New York City
time, on the fifth full Business Day following the date of this Agreement or on
such later date as shall be determined by you and the Company (the "First
Closing Date").
The option to purchase Option Shares granted in Section 3 hereof may
be exercised during the term specified therein by written notice to the Company
from the Lead Managers. Such notice shall set forth the aggregate number of
Option Shares as to which the option is being exercised and the time and date,
not earlier than either the First Closing Date or the second Business Day after
the date on which the option shall have been exercised nor later than the fifth
Business Day after the date of such exercise, as determined by the
Representatives, when the Option Shares are to be delivered (each an "Option
Closing Date"). Delivery and payment for such Option Shares shall be made at
<PAGE> 17
17
the offices set forth above for delivery and payment of the Firm Shares. (The
First Closing Date and each Option Closing Date are herein individually
referred to as a "Closing Date" and collectively referred to as the "Closing
Dates".)
Delivery of certificates for the Shares shall be made by or on behalf
of the Company and the Selling Stockholder to you, for the respective accounts
of the International Managers, against payment of the purchase price therefor
by certified or official bank check payable in New York Clearing House (next
day) funds to the order of the Company and the Selling Stockholder. The
certificates for the Shares shall be registered in such names and denominations
as you shall have requested at least two full Business Days prior to the
applicable Closing Date, and shall be made available for checking and packaging
in New York, New York, or such other location as may be designated by you at
least one full Business Day prior to such Closing Date. Time shall be of the
essence, and delivery of certificates for the Shares at the time and place
specified in this Agreement is a further condition to the obligations of each
International Manager.
5. Qualified Independent Underwriter.
(a) The Company hereby confirms its engagement of the services of
Morgan Stanley & Co. Incorporated (the "Independent Underwriter") as, and the
Independent Underwriter hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(1) of Schedule E ("Schedule E") of the By-laws of the National
Association of Securities Dealers, Inc. ("the NASD") with respect to the
offering and sale of the Underwritten Shares.
(b) The Independent Underwriter hereby represents and warrants to,
and agrees with, the Company and the other Underwriters that with respect to
the offering and sale of the Underwritten Shares as described in the
Prospectuses:
(i) the Independent Underwriter constitutes a "qualified independent
underwriter" within the meaning of Section 2(1) of Schedule E;
(ii) the Independent Underwriter has participated in the preparation
of the Registration Statement and
<PAGE> 18
18
the Prospectuses and has exercised the usual standards of "due diligence"
in respect thereto;
(iii) the Independent Underwriter has undertaken the legal
responsibilities and liabilities of an underwriter under the Act
specifically including those inherent in Section 11 thereof;
(iv) based upon, among other factors, the information set forth in
the Prospectuses and its review of such other documents and the taking of
such other actions as the Independent Underwriter, in its sole
discretion, has deemed necessary or appropriate for the purposes of
delivering its recommendation hereunder, the Independent Underwriter
recommends, as of the date of the execution and delivery of this
Agreement, that the price for the Underwritten Shares not exceed the
amount set forth in Section 3 of this Agreement, which price should in no
way be considered or relied upon as an indication of the value of the
Underwritten Shares; and
(v) the Independent Underwriter will furnish to the other
Underwriters on each Closing Date a letter, dated the date of delivery
thereof, in form and substance satisfactory to such Underwriters, to the
effect of clauses (i) through (iv) above.
(c) The Company, the Independent Underwriter and the other
Underwriters agree to comply in all material respects with all of the
requirements of Schedule E applicable to them in connection with the offering
and sale of the Underwritten Shares. The Company agrees to cooperate with the
Underwriters, including the Independent Underwriter, to enable the Underwriters
to comply with Schedule E and the Independent Underwriter to perform the
services contemplated by this Agreement.
(d) The Company agrees promptly to reimburse the Independent
Underwriter for all out-of-pocket expenses, including fees and disbursements of
counsel, reasonably incurred in connection with this Agreement and the services
to be rendered as Independent Underwriter hereunder.
(e) The Independent Underwriter hereby consents to the references to
it as set forth under the caption "Underwriting" in the Prospectuses.
<PAGE> 19
19
6. Covenants. The Company agrees with each International Manager
that:
(a) The Company shall use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendments thereto
to become effective. The Company shall advise you promptly of the filing of
any amendment to the Registration Statement or any supplement to any Prospectus
and, upon notification from the Commission that the Registration Statement or
any such amendment has become effective, shall so advise you promptly (in
writing, if requested). If the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of any Prospectus is otherwise
required under Rule 424(b), the Company will cause such Prospectus, properly
completed, and any supplement thereto to be filed with the Commission pursuant
to the applicable paragraph of Rule 424(b) in the manner and within the time
period prescribed and will provide evidence satisfactory to the Representatives
of such timely filing. The Company shall notify you promptly of any request by
the Commission for any amendment of or supplement to the Registration Statement
or any Prospectus or for additional information; the Company shall prepare and
file with the Commission, promptly upon your request, any amendments or
supplements to the Registration Statement or the International Prospectus
which, in your reasonable opinion, may be necessary or advisable in connection
with the distribution of the Shares; and the Company shall not file any
amendment or supplement to the Registration Statement or the International
Prospectus, which filing is not consented to by you after reasonable notice
thereof. The Company shall advise you promptly of the issuance by the
Commission or any state or other governmental or regulatory body of any stop
order or other order suspending the effectiveness of the Registration
Statement, suspending or preventing the use of any Preliminary Prospectus or
Prospectus or suspending the qualification of the Shares for offering or sale
in any jurisdiction, or of the institution of any proceedings for any such
purpose; and the Company shall use its best efforts to prevent the issuance of
any stop order or other such order and, should a stop order or other such order
be issued, to obtain as soon as possible the lifting thereof.
(b) The Company shall furnish to each of the Lead Managers and to
counsel for the International Managers a signed copy of the Registration
Statement as originally filed and each amendment thereto filed with the
Commission,
<PAGE> 20
20
including all consents and exhibits filed therewith, and shall furnish to the
International Managers such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding exhibits
other than this Agreement), any Preliminary Prospectus, the International
Prospectus and all amendments and supplements to any of such documents, in each
case as soon as available and in such quantities as the Lead Managers may from
time to time reasonably request.
(c) Within the time during which the Prospectuses relating to the
Underwritten Shares are required to be delivered under the Act, the Company
shall comply with all requirements imposed upon it by the Act, the Exchange Act
and the Rules and Regulations so far as is necessary to permit the continuance
of sales of or dealings in the Underwritten Shares as contemplated by the
provisions hereof and by the Prospectuses. If during such period any event
occurs as a result of which the International Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if during such period it is
necessary to amend the Registration Statement or supplement the International
Prospectus to comply with the Act or the Exchange Act or the Rules and
Regulations, the Company shall promptly notify you and, subject to the
penultimate sentence of paragraph (a) of this Section 6, shall amend the
Registration Statement or supplement the International Prospectus or file such
document (at the expense of the Company) so as to correct such statement or
omission or to effect such compliance.
(d) The Company shall take or cause to be taken all necessary action
and furnish to whomever you may direct such information as may be required in
qualifying the Shares (and any U.S. Shares that may be sold to the
International Managers by the U.S. Underwriters) for offer and sale under the
state securities or Blue Sky laws of such jurisdictions as you shall designate
and to continue such qualifications in effect for as long as may be necessary
for the distribution of the Shares (and such U.S. Shares); except that in no
event shall the Company be obligated in connection therewith to qualify as a
foreign corporation or to execute a general consent to service of process.
(e) The Company shall furnish to you, on or prior to the date of
this Agreement, a letter or letters, in form
<PAGE> 21
21
and substance satisfactory to counsel for the International Managers, pursuant
to which each executive officer and director of the Company; Lehman Brothers
Merchant Banking Portfolio Partnership L.P., Lehman Brothers Capital Partners
II, L.P., Lehman Brothers Offshore Investment Partnership L.P. and Lehman
Brothers Offshore Investment Partnership--Japan L.P.; the Selling Stockholder
and the Management Investors (as defined in the Amended and Restated
Stockholders Agreement dated as of September 27, 1991), shall agree not to
offer for sale, sell or otherwise dispose of any shares of Common Stock (other
than the Underwritten Shares) of any securities convertible or exchangeable or
exercisable for such common stock during the 180 days following the date of the
Prospectuses except with your prior written consent.
(f) Whether or not the transactions contemplated in this Agreement
are consummated, to pay or cause to be paid the costs incident to the
authorization, issuance, sale and delivery of the Shares and any expenses or
taxes (including stock transfer taxes) payable in that connection; the costs
incident to the preparation, printing and filing under the Act of the
Registration Statement and any amendments and exhibits thereto; the costs of
distributing the Registration Statement as originally filed and each amendment
and post-effective amendment thereof (including exhibits), any Preliminary
Prospectus, each Prospectus and any amendment or supplement to each Prospectus,
all as provided in this Agreement, the costs of printing this Agreement, the
U.S. Underwriting Agreement and other underwriting documents, including, but
not limited to, Underwriters' Questionnaires, Underwriters' Powers of Attorney,
Blue Sky Memoranda, Legal Investment Surveys, Agreements Among Underwriters,
Selected Dealer Agreements, the Agreement Between U.S. Underwriters and
International Managers, the Agreements Among International Managers and the
International Selling Agreements; the filing fee of the NASD; the reasonable
fees and expenses of qualifying the Shares under the securities laws of the
several jurisdictions as provided in this paragraph and of preparing and
printing a Blue Sky Memorandum and a memorandum concerning the legality of the
Shares as an investment, if any (including fees and expenses of counsel to the
International Managers in connection therewith); the cost of printing
certificates; the cost and charges of any transfer agent or registrar; the cost
of delivering and distributing the Custody Agreements and the Powers of
Attorney and all other costs and expenses incident to the performance of the
<PAGE> 22
22
obligations of the company and the obligations of the Selling Stockholder
hereunder for which provision is not otherwise made in this Section. It is
understood, however, that, except as provided in this Section, Section 9 and
Section 10 hereof, the Selling Stockholder shall pay all its own costs and
expenses, including the fees of its counsel, stock transfer taxes due upon
resale of any of the Shares by them and any advertising expenses incurred in
connection with any offers they may make. It is further understood, however,
that, except as provided in this Section, Section 9 and Section 10 hereof, the
Selling Stockholder shall pay all its own costs and expenses, including the
fees of its counsel and any transfer taxes payable in connection with its sales
of the Shares to the International Managers. Except as provided in this
Section, Section 9 and in Section 10, the International Managers shall pay
their own costs and expenses, including the fees and expenses of their counsel,
any transfer taxes on the Shares which they may sell and the expenses of
advertising any offering of the Shares made by the International Managers.
(g) To apply the net proceeds from the sale of the Underwritten
Shares being sold by the Company as set forth in the Prospectuses.
(h) The Company shall, on or prior to each Closing Date, cause the
Shares to be purchased on such date by the International Managers to be
approved for listing on the New York Stock Exchange, subject only to official
notice of issuance, and shall take such action as shall be necessary to comply
with the rules and regulations of the New York Stock Exchange with respect to
such shares.
(i) During a period of five years from the Effective Date, the
Company shall furnish to the Lead Managers copies of all reports or other
communications furnished to shareholders and copies of any reports or financial
statements furnished to or filed with the Commission, the New York Stock
Exchange or any other national securities exchange on which any class of
securities of the Company shall be listed.
(j) As soon as practicable after the Effective Date of the
Registration Statement, to make generally available to its security holders and
to deliver to the International Managers an earnings statement of the Company,
conforming with the requirements of Section 11(a) of the
<PAGE> 23
23
Act, covering a period of at least 12 months beginning after the Effective
Date.
7. Further Agreements of the Selling Stockholder. The Selling
Stockholder agrees:
(a) For a period of 180 days from the date of the Prospectuses, not
to offer for sale, sell or otherwise dispose of, directly or indirectly, any
shares of Common Stock (other than the Underwritten Shares) or any securities
convertible into or exchangeable or exercisable for such common stock, without
the prior written consent of the Lead Managers.
(b) That the Underwritten Shares to be sold by the Selling
Stockholder hereunder and under the U.S. Underwriting Agreement, which are
represented by the certificates held in custody for the Selling Stockholder,
are subject to the interest of the U.S. Underwriters and the International
Managers, that the arrangements made by the Selling Stockholder for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholder hereunder shall not be terminated by any act of the Selling
Stockholder, by operation of law or the occurrence of any other event.
(c) To deliver to the Representatives prior to the First Closing
Date a properly completed and executed United States Treasury Department Form
W-9.
8. Conditions of International Managers' Obligations. The
respective obligations of the several International Managers hereunder are
subject to the accuracy, when made and as of each Closing Date, of the
representations and warranties of the Company and the Selling Stockholder
contained herein, to the performance by the Company and the Selling Stockholder
of their respective obligations hereunder and to each of the following
additional terms and conditions:
(a) The Registration Statement and any post-effective amendment
thereto has become effective under the Act; if the Registration Statement has
not become effective prior to the Execution Time, unless the International
Managers agree in writing to a later time, the Registration Statement will
become effective not later than (i) 6:00 P.M. New York City time on the date of
determination of the public offering price, if such determination occurred at
or
<PAGE> 24
24
prior to 3:00 P.M. New York City time on such date or (ii) 2:00 P.M. on the
business day following the day on which the public offering price was
determined, if such determination occurred after 3:00 P.M. New York City time
on such date; if required under Rule 424(b), the Prospectuses shall have been
timely filed with the Commission in accordance with Section 6(a) hereof, not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement or, if applicable, such
earlier time as may be required by Rule 430(A)(a)(3); no Stop Order shall have
been issued and prior to that time no proceeding for that purpose shall have
been initiated or threatened by the Commission; any request of the Commission
for inclusion of additional information in the Registration Statement or the
Prospectuses or otherwise shall have been complied with; and the Company shall
not have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectuses without the consent of the
Underwriters. If the Company has elected to rely upon Rule 430A of the Act,
the price of the Shares and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Act within the prescribed time period, and prior to the applicable Closing Date
the Company shall have provided evidence satisfactory to the International
Managers of such timely filing, or a post-effective amendment providing such
information shall have been prepared, filed and declared effective in
accordance with the requirements of Rule 430A of the Act.
(b) No U.S. Underwriter or International Manager shall have
discovered after the date hereof and disclosed to the Company on or prior to
such applicable Closing Date that the Registration Statement or the
Prospectuses or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Cravath, Swaine & Moore, counsel
for the International Managers, is material or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Underwritten
Shares, the Registration Statement and the Prospectuses, and all other legal
matters relating to this Agreement and the transactions contemplated hereby,
shall be reasonably satisfactory in all respects to
<PAGE> 25
25
Cravath, Swaine & Moore, counsel for the International Managers, and the
Company shall have furnished to such counsel all documents and information that
they may reasonably request to enable them to pass upon such matters.
(d) On each Closing Date, Winston & Strawn, as special counsel to
the Company, shall have furnished to the International Managers their written
opinion addressed to the Underwriters and dated such Closing Date in form and
substance satisfactory to the International Managers to the effect that:
(i) the Company and each of its Significant Subsidiaries have been
duly incorporated and are validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses, requires such
qualification; and have all corporate power and authority necessary to
own or hold their respective properties and to conduct the business in
which they are engaged as described in the Prospectus;
(ii) this Agreement and the U.S. Underwriting Agreement have been
duly authorized, executed, and delivered by the Company, are legally
valid and binding obligations of the Company, and are enforceable against
the Company in accordance with their terms, except to the extent that
rights to indemnity or contribution hereunder and thereunder may be
limited by Federal or state securities laws or the public policy
underlying such laws may limit the right to indemnity and contribution
thereunder; no consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any
Federal, state, local or other governmental authority or any court or
other tribunal is required by the Company for the execution, delivery, or
performance of this Agreement or the U.S. Underwriting Agreement by the
Company (except filings under the Act which have been made and consents,
authorizations, permits, orders and other matters required under "blue
sky" or state securities laws as to which such counsel need express no
opinion);
(iii) the Underwritten Shares being sold by the Company have been
duly and validly authorized and, when
<PAGE> 26
26
duly countersigned by the Company's Transfer Agent and Registrar and
issued and delivered in accordance with the provisions of this Agreement
and the U.S. Underwriting Agreement, as described in the Registration
Statement, will be duly and validly issued, fully paid and nonassessable;
the Underwritten Shares conform to the description of the Common Stock in
the Prospectuses; and the Underwritten Shares have been approved for
listing on the New York Stock Exchange, subject to official notice of
issuance;
(iv) the Registration Statement was declared effective under the Act
as of the date and time specified in such opinion, the Prospectuses were
filed with the Commission pursuant to the subparagraph of Rule 424(b) of
the Rules and Regulations specified in such opinion on the date specified
therein, no Stop Order has been issued and, to the knowledge of such
counsel, no proceeding for that purpose is pending or threatened by the
Commission;
(v) the Registration Statement and the Prospectuses and any further
amendments or supplements thereto made by the Company prior to each
Closing Date (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
Rules and Regulations.
Notwithstanding the foregoing, each of such opinions may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights generally and to court decisions with respect thereto and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and no opinion need be
expressed as to the availability of equitable remedies for any breach of any
such agreement.
In rendering such opinion, such counsel may (i) state that their
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of New York and the corporate law of the
State of Delaware; and (ii) rely (to the extent such counsel deems proper and
specifies in their opinion), as to matters involving the application of the
laws of jurisdictions other
<PAGE> 27
27
than the State of New York or the United States or the corporate law of the
State of Delaware upon opinions (dated the applicable Closing Date, addressed
to the International Managers and in form reasonably satisfactory to the
International Managers with signed or conformed copies for each of the
International Managers) of counsel acceptable to Cravath, Swaine & Moore. Such
counsel shall also have furnished to the International Managers a written
statement, addressed to the International Managers and dated the applicable
Closing Date, in form and substance satisfactory to the International Managers,
to the effect that such counsel participated in conferences with officers and
representatives of the Company, Arthur Anderson & Co., Coopers & Lybrand, the
International Managers and Cravath, Swaine & Moore in connection with the
preparation of the Registration Statement, and based on the foregoing and
without assuming responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or making any
independent check or verification thereof, no facts have come to the attention
of such counsel which lead them to believe that (I) the Registration Statement,
as of the Effective Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or (II) each of the
Prospectuses as amended or supplemented, as of each Closing Date, contains any
untrue statement of a material fact or omits to state a 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.
(e) On each Closing Date, Joseph F. McCarthy, General Counsel to the
Company, or Michael O'Shea, corporate counsel to the Company, shall have
furnished to the International Managers his written opinion addressed to the
International Managers and dated such Closing Date in form and substance
satisfactory to the International Managers to the effect that:
(i) the Company and each of its Significant Subsidiaries have been
duly incorporated and are validly existing and in good standing under the
laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses, requires such
<PAGE> 28
28
qualification; and have all corporate power and authority necessary to
own or hold their respective properties and to conduct the business in
which they are engaged as described in the Prospectuses;
(ii) the Company has an authorized capitalization as set forth in the
Prospectuses, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully paid
and nonassessable and conform to the description thereof contained in the
Prospectuses; and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued and are fully paid, nonassessable and (except for directors'
qualifying shares) owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims, except as described
in the Prospectuses; to the best of such counsel's knowledge after due
inquiry and investigation, there is no commitment, plan, or arrangement
to issue, and no outstanding option, warrant, or other right calling for
the issuance of, any share of capital stock of the Company or of the
Company's subsidiaries to any person other than the Company, or any
security or other instrument which by its terms is convertible into,
exercisable for, or exchangeable for capital stock of the Company or of
the Company's subsidiaries, except as may be described in the
Prospectuses;
(iii) the Underwritten Shares being sold by the Company have been
duly and validly authorized and, when duly countersigned by the Company's
Transfer Agent and Registrar and issued and delivered in accordance with
this Agreement and the U.S. Underwriting Agreement, as described in the
Registration Statement, will be duly and validly issued, fully paid and
nonassessable; the Underwritten Shares conform to the description of the
Common Stock in the Prospectuses; and the Underwritten Shares have been
approved for listing on the New York Stock Exchange, subject to official
notice of issuance;
(iv) there is no litigation, arbitration, claim, governmental or
other proceeding or investigation pending or, to the best of such
counsel's knowledge after due inquiry and investigation, threatened to
which the Company or any of its subsidiaries is a party or to which any
of their respective operations, businesses or assets is the subject which
if determined
<PAGE> 29
29
adversely to the Company might have a material adverse effect upon the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole; neither the Company nor any of its subsidiaries is in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment, or decree, except as may be described in the
Prospectuses or such as in the aggregate do not have a significant
likelihood of having a material adverse effect upon the consolidated
financial position, stockholders' equity, results of operations, business
or prospects of the Company and its subsidiaries taken as a whole;
(v) neither the Company nor any of its subsidiaries is now in
violation or breach of, or in default with respect to, any material
provision of any contract, agreement, instrument, lease or license, which
is material to the Company and its subsidiaries taken as a whole;
(vi) neither the Company nor any of its subsidiaries is in violation
or breach of, or in default with respect to, any term of its Certificate
of Incorporation or By-laws;
(vii) the execution, delivery and performance of this Agreement and
the U.S. Underwriting Agreement and the issue and sale of the Shares do
not violate, result in a breach of, conflict with, or (with or without
the giving of notice or the passage of time or both) entitle any party to
terminate or call a default under any material contract, agreement,
instrument, lease, or license known to such counsel, or violate or result
in a breach of any term of the articles of incorporation (or other
charter document) or by-laws of the Company or any of its subsidiaries,
or violate, result in a breach of, or conflict with any law or statute,
rule, or regulation, or any order, judgment, or decree known to such
counsel, that is binding on the Company or any of its subsidiaries or to
which any of their respective operations, businesses or assets are
subject; no consent, authorization, approval, order, license, certificate
or permit of or from, or declaration or filing with any Federal, state,
local or other governmental or foreign authority or any court or other
tribunal is required by the Company for the execution, delivery or
performance of this Agreement and the U.S.
<PAGE> 30
30
Underwriting Agreement or for the issuance and sale of the Shares by the
Company (except filings under the Act which have been made and consents,
authorization, permits, orders and other matters required under Blue Sky
or State securities laws as to which such counsel need express no
opinion);
(viii) any contract, agreement, instrument, lease or license required
to be described in the Registration Statement or the Prospectuses has
been properly described therein; any contract, agreement, instrument,
lease, or license required to be filed as an exhibit to the Registration
Statement has been filed with the Commission as an exhibit to the
Registration Statement;
(ix) insofar as statements in the Prospectuses purport to summarize
the status of litigation or the provisions of laws, rules, regulations,
orders, judgments, decrees, contracts, agreements, instruments, leases,
or licenses, such statements have been prepared or reviewed by such
counsel and accurately reflect the status of such litigation and
provisions purported to be summarized and are correct in all material
respects; and
(x) there are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer of, any
Underwritten Shares pursuant to the Company's Certificate of
Incorporation or By-laws, in each case as amended, or any agreement or
other instrument; and no holders of securities of the Company have rights
to the registration thereof under the Registration Statement except as
set forth in the Prospectuses or, if any such holders have such rights,
such holders have waived such rights;
Notwithstanding the foregoing, each of such opinions may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to
creditors' rights generally and to court decisions with respect thereto and to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law); and no opinion need be
expressed as to the availability of equitable remedies for any breach of any
such agreement.
<PAGE> 31
31
In rendering such opinion, such counsel may (i) state that his
opinion is limited to matters governed by the Federal laws of the United States
of America, the laws of the State of Michigan and the corporate law of the
State of Delaware; and (ii) rely (to the extent such counsel deems proper and
specifies in his opinion), as to foreign matters involving the application of
the laws of jurisdictions other than the State of Michigan or the United States
or the corporate law of the State of Delaware upon opinions (dated each Closing
Date, addressed to the International Managers and in form reasonably
satisfactory to the International Managers with signed or conformed copies for
each of the International Managers) of counsel acceptable to Cravath, Swaine &
Moore.
(f) (A) On the First Closing Date, there shall have been furnished
to you the opinion (addressed to the International Managers) of Smith-Hughes,
Raworth & McKenzie, British Virgin Islands counsel to the Selling Stockholder,
dated such Closing Date in form and substance satisfactory to the International
Managers to the effect that, with respect to the Selling Stockholder:
(i) The Selling Stockholder has the legal right and power and all
authorization and approval required by law to enter into this Agreement,
the U.S. Underwriting Agreement, the Power of Attorney and the Custody
Agreement; the execution, delivery and performance of this Agreement, the
U.S. Underwriting Agreement, the Power of Attorney and the Custody
Agreement by the Selling Stockholder and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any British Virgin Islands
statute, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Selling
Stockholder is a party or by which the Selling Stockholder is bound or to
which any of the property or assets of the Selling Stockholder is
subject, nor will such actions result in any violation of the provisions
of the Certificate of Incorporation or the Memorandum and Articles of
Association or any partnership agreement of the Selling Stockholder or
any statute or any order, rule or regulation of the British Virgin
Islands known to such counsel of any court or governmental agency or body
having jurisdiction over
<PAGE> 32
32
the Selling Stockholder or the property or assets of the Selling
Stockholder; and no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body of the British Virgin Islands is required for the execution,
delivery and performance of this Agreement, the U.S. Underwriting
Agreement, the Power of Attorney or the Custody Agreement by the Selling
Stockholder and the consummation by the Selling Stockholder of the
transactions contemplated hereby and thereby, except the registration
under the Act of the Underwritten Shares, and such consents, approvals,
authorizations, registrations, filings or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the shares by the International Managers or
as may be required by the laws of any country other than the United
States;
(ii) This Agreement and the U.S. Underwriting Agreement have each
been duly authorized, executed and delivered by the Selling Stockholder;
and
(iii) The Power of Attorney and the Custody Agreement have each been
duly authorized, executed and delivered by the Selling Stockholder; and
(B) On the First Closing Date, there shall have been furnished to
you the opinion (addressed to the International Managers) of Paul, Weiss,
Rifkind, Wharton & Garrison, special United States counsel to the Selling
Stockholder, dated such Closing Date in the form and substance satisfactory to
the International Managers to the effect that, with respect to the Selling
Stockholder;
(i) The execution, delivery and performance of this Agreement, the
U.S. Underwriting Agreement, the Power of Attorney and the Custody
Agreement by the Selling Stockholder and the consummation by the Selling
Stockholder of the transactions contemplated hereby and thereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute of the United
States or the State of New York, nor will such actions result in any
violation of the provisions of any order, rule or regulation of the
United States or the State of New York known to such counsel of any court
of governmental agency or body having jurisdiction over
<PAGE> 33
33
the Selling Stockholder or the property or assets of the Selling
Stockholder; and no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body of the United States or the State of New York is required for the
execution, delivery and performance of this Agreement, the U.S.
Underwriting Agreement, the Power of Attorney or the Custody Agreement by
the Selling Stockholder and the consummation of the Selling Stockholder
of the transactions contemplated hereby and thereby, except the
registration under the Act of the Underwritten Shares, and such consents,
approvals, authorizations, registrations, filings or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the shares by the U.S.
Underwriters;
(ii) This Agreement, the U.S. Underwriting Agreement, the Power of
Attorney and the Custody Agreement constitute valid and binding
agreements of the Selling Stockholders, enforceable in accordance with
their respective terms, (a) except that such enforceability may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium or similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in
equity), and (b) except to the extent that rights to indemnity or
contribution hereunder and thereunder may be limited by federal or state
securities laws or the public policy underlying such laws may limit the
right to indemnity and contribution thereunder; and
(iii) Assuming that the U.S. Underwriters and the International
Managers are purchasers in good faith of the Underwritten Shares to be
sold by the Selling Stockholder on the First Closing Date under this
Agreement and the U.S. Underwriting Agreement without notice of any
adverse claim (as such term is defined in the Uniform Commercial Code of
the State of New York), upon delivery of such Shares pursuant to this
Agreement and the U.S. Underwriting Agreement, the U.S. Underwriters and
the International Managers will acquire good title to such Shares free
and clear of any security interests, liens, equities and other
encumbrances.
<PAGE> 34
34
(h) The Company shall have furnished to the Underwriters on each
Closing Date a certificate, dated such Closing Date, of its President or a Vice
President and its Chief Financial Officer stating that:
(i) the representations, warranties and agreements of the Company in
Section 1 herein are true and correct as of such Closing Date; the
Company has complied with all its agreements contained herein; and the
conditions set forth in Paragraph 8(a) have been fulfilled; and
(ii) they have carefully examined the Registration Statement and the
Prospectuses and, in their opinion, (A) as of the Effective Time of the
Registration Statement, the Registration Statement did not include any
untrue statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (B) as of its date, each of the Prospectuses, as
amended or supplemented, did not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading and (C) since the Effective Date of the
Registration Statement or the date of each Prospectus, as the case may
be, no event has occurred which should have been set forth in a
supplement to or amendment of each Prospectus which has not been set
forth in such a supplement or amendment.
(i) At the Execution Time and on each Closing Date, the Company
shall have furnished to the International Managers a letter of Arthur Andersen
& Co. addressed to the International Managers and dated such Closing Date and
in form and substance satisfactory to the International Managers confirming
that they are independent public accountants within the meaning of the Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, and stating, as of the date of such letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the International Prospectus,
as of a date not more than five days prior to the date of such letter), the
conclusions and findings of such firm with respect to the financial information
and other matters covered by its letter delivered to the International Managers
concurrently with the execution of this Agreement
<PAGE> 35
35
and confirming in all material respects the conclusions and findings set forth
in such prior letter.
(j) The NASD upon review of the terms of the public offering of the
Underwritten Shares, shall not have objected to the participation by any of the
International Managers in such offering or asserted any violation of the
By-Laws of the NASD.
(k) Neither the Company nor any of its subsidiaries (1) shall have
sustained since the date of the latest audited financial statements included in
the International Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the International Prospectus or
(2) since such date there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or result of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the International Prospectus the effect of which, in any such
case described in clause (1) or (2) of this subparagraph, is, in the judgment
of the International Managers, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the terms and in the manner contemplated in the
International Prospectus.
(l) The Shares to be purchased on such Closing Date by the
International Managers shall be approved for listing on the New York Stock
Exchange, subject only to official notice of issuance and evidence of
satisfactory distribution.
(m) The Selling Stockholder (or the Custodian or one or more
attorneys-in-fact on behalf of the Selling Stockholder) shall have furnished to
the Lead Managers on each Closing Date a certificate, dated such Closing Date,
signed by, or on behalf of, the Selling Stockholder (or the Custodian or one or
more attorneys-in-fact) stating that the representations, warranties and
agreements of the Selling Stockholder contained herein are true and correct as
of such Closing Date and that the Selling Stockholder has complied
<PAGE> 36
36
with all agreements contained herein to be performed by the Selling Stockholder
at or prior to the such Closing Date.
All such opinions, certificates, letters and documents mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are reasonably satisfactory to you and
Cravath, Swaine & Moore, counsel for the International Managers, and the
Company shall furnish to you conformed copies thereof in such quantities as you
reasonably request.
9. Indemnification and Contribution. (a) The Company and the
Selling Stockholder jointly and severally agree to indemnify and hold harmless
each International Manager against any loss, claim, damage or liability (or any
action in respect thereof), including without limitation, any legal or other
expenses reasonably incurred by any International Manager or any such
controlling person in connection with defending or investigating any such
action or claim, joint or several, to which such International Manager may
become subject, under the Act or otherwise, insofar as such loss, claim, damage
or liability (or action in respect thereof) arises out of or is based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, any Preliminary Prospectus, any Prospectus or
the Registration Statement or any Prospectus as amended or supplemented or in
any Blue Sky application or other document executed by the Company specifically
for that purpose or based upon written information furnished by the Company
filed in any state or other jurisdiction in order to qualify any of or all the
Shares under the securities laws thereof (any such application, document or
information being hereinafter referred to as a "Blue Sky Application"), or (ii)
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, any Prospectus or the Registration Statement or any
Prospectus as amended or supplemented or in any Blue Sky Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and shall reimburse each International Manager promptly after
receipt of invoices from such International Manager for any legal or other
expenses as reasonably incurred by such International Manager in connection
with investigating, preparing to defend or defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action, notwithstanding the possibility that payments for such expenses
might later be held to be improper, in which
<PAGE> 37
37
case such payments shall be promptly refunded; provided, however, that the
Company and the Selling Stockholder shall not be liable (x) under this
paragraph 9(a) in any such case to the extent, but only to the extent, that any
such loss, claim, damage, liability or action arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any International
Manager specifically for use in the preparation of the Registration Statement,
any Preliminary Prospectus, any Prospectus or the Registration Statement or any
Prospectus as amended or supplemented, or any Blue Sky application, and (y) in
no event shall the liability of the Selling Stockholder exceed the proceeds
received by the Selling Stockholder from the sale by the Selling Stockholder of
its portion of the Shares pursuant to this Agreement. The Company also agrees
to indemnify and hold harmless the Independent Underwriter and any person, if
any, who controls the Independent Underwriter within the meaning of either
Section 15 of the Act, or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and judgments incurred as a result
of the Independent Underwriter's participation as a "qualified independent
underwriter" within the meaning of Section 1 of Article III of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. in
connection with the offering of the Common Stock except for any losses, claims,
damages, liabilities and judgments resulting from the Independent
Underwriter's, or such controlling person's, gross negligence or willful
misconduct.
(b) Each International Manager severally, but not jointly, shall
indemnify and hold harmless the Company against any loss, claim, damage or
liability (or any action in respect thereof) to which the Company may become
subject, under the Act or otherwise, insofar as such loss, claim, damage or
liability (or action in respect thereof) arises out of or is based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, any Preliminary Prospectus, any Prospectus or the
Registration Statement or any Prospectus as amended or supplemented, or in any
Blue Sky Application, or (ii) the omission or alleged omission to state in the
Registration Statement, any Preliminary Prospectus, any Prospectus or the
Registration Statement or any Prospectus as amended or supplemented, or in any
Blue Sky Application a material fact required to be stated therein or necessary
to
<PAGE> 38
38
make the statements therein not misleading and shall reimburse the Company
promptly after receipt of invoices from the Company for any legal or other
expenses as reasonably incurred by the Company in connection with
investigating, preparing to defend or defending against or appearing as a
third-party witness in connection with any such loss, claim, damage, liability
or action notwithstanding the possibility that payments for such expenses might
later be held to be improper, in which case such payments shall be promptly
refunded; provided, however, that such indemnification or reimbursement shall
be available in each such case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished
to the Company through you by or on behalf of such International Manager
specifically for use in the preparation thereof.
(c) Promptly after receipt by any indemnified party under subsection
(a) or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure so to notify the indemnifying party shall not relieve it from
any liability which it may have under this Section 9 except to the extent it
has been prejudiced in any material respect by such failure or from any
liability which it may have to an indemnified party otherwise than under this
Section 9. If any such claim or action shall be brought against any
indemnified party and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, jointly with any other similarly notified indemnifying party,
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the indemnified
party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under such
subsection for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; except that the Representatives shall have the right to
employ counsel to represent you and those other International Managers who may
be subject to liability arising out of any claim in respect of which indemnity
may be sought by the International Managers
<PAGE> 39
39
against the Company under such subsection if, in your reasonable judgment, it
is advisable for you and those International Managers to be represented by
separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Company. Notwithstanding anything contained
herein to the contrary, if indemnity may be sought pursuant to Section 9(a)
hereof in respect of such action or proceeding, then in addition to such
separate counsel for the indemnified parties the indemnifying party shall be
liable for the reasonable fees and expenses of not more than one separate
counsel (in addition to any local counsel) for the Independent Underwriter in
its capacity as a "qualified independent underwriter" and all persons, if any,
who control the Independent Underwriter within the meaning of either Section 15
of the Act or Section 20 of the Exchange Act.
(d) If the indemnification provided for in this Section 9 is
unavailable to hold harmless an indemnified party under subsection (a) or (b)
above, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, the Selling Stockholder and the
International Managers from the offering of the Shares or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company, the
Selling Stockholder and the International Managers in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Stockholder and the International Managers shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and/or the Selling
Stockholder bear to the total underwriting discounts and commissions received
by the International Managers, in each case as set forth in the table on the
cover page of the International Prospectus (with the estimated expenses
allocated pro rata among the Shares and the U.S. Shares). Relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement
<PAGE> 40
40
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholder or the
International Managers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company, the Selling Stockholder and the International Managers
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were to be determined by pro rata allocation (even if the
International Managers were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this subsection (d). The
amount paid by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating, preparing to defend or defending against any action or claim
which is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), (i) no International Manager shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such International Manager has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) notwithstanding the
provisions of this subsection (d), the Selling Stockholder shall not be
required to contribute any amount in excess of the amount by which the amount
of proceeds received by the Selling Stockholder from the sale by the Selling
Stockholder of its portion of the Shares pursuant to this Agreement exceed the
amount of any damages the Selling Stockholder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The International
Managers' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint. Each
party entitled to contribution agrees that upon the service of a summons or
other initial legal process upon it in any action instituted against it in
respect of which contribution may be sought, it shall promptly give
<PAGE> 41
41
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought for
any obligation it may have hereunder or otherwise (except as specifically
provided in subsection (c) hereof).
(e) The obligations of the Company and the Selling Stockholder under
this Section 9 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have, and shall extend, upon the same terms
and conditions, to each person, if any, who controls any International Manager
within the meaning of the Act; and the obligations of the International
Managers under this Section 9 shall be in addition to any liability that the
respective International Managers may otherwise have, and shall extend, upon
the same terms and conditions, to each director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) or the Selling Stockholder, to each
officer of the Company who has signed the Registration Statement and to each
person, if any, who controls the Company within the meaning of the Act.
10. Substitution of International Managers. If, on either Closing
Date, any International Manager defaults in the performance of its obligations
under this Agreement, the non-defaulting International Managers may, but shall
not be required to, find one or more substitute underwriters to purchase such
Shares or may, but shall not be required to, make such other arrangements
satisfactory to the Company as such non-defaulting International Managers deem
advisable, or the non-defaulting International Managers may, but shall not be
required to, agree to purchase such Shares in each case upon the terms set
forth in this Agreement. If the non-defaulting International Managers or other
underwriters satisfactory to the non-defaulting International Managers do not
elect to purchase the Shares which the defaulting International Manager agreed
but failed to purchase, this Agreement shall terminate without liability on the
part of any non-defaulting International Manager or the Company, except that
the Company shall continue to be liable for the payment of expenses to the
extent set forth in Section 6(f) and Section 11.
Nothing contained herein shall relieve a defaulting International
Manager of any liability it may have to the Company for damages caused by its
default. If other
<PAGE> 42
42
underwriters agree to purchase the Shares of the defaulting International
Manager, either the International Managers or the Company may postpone the
First Closing Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Company or counsel for the
International Managers may be necessary in the Registration Statement, the
International Prospectus or in any other document or arrangement.
11. Effective Date and Termination. (a) This Agreement shall
become effective at 11:00 A.M., New York City time, on the first full Business
Day following the date hereof, or at such earlier time after the Registration
Statement becomes effective as you shall first release the Firm Shares for sale
to the public. You shall notify the Company immediately after you have taken
any action which causes this Agreement to become effective. Until this
Agreement is effective, it may be terminated by the Company by giving notice as
hereinafter provided to you, or by you by giving notice as hereinafter provided
to the Company, except that the provisions of Section 6(i) and Section 9 shall
at all times be effective. For purposes of this Agreement, the release of the
initial public offering of the Firm Shares for sale to the public shall be
deemed to have been made when you release, by telecopy or otherwise, firm
offers of the Firm Shares to securities dealers or release for publication a
newspaper advertisement relating to the Firm Shares, whichever occurs first.
(b) From the date of this Agreement until the First Closing Date,
this Agreement may be terminated by you in your absolute discretion by giving
notice as hereinafter provided to the Company, if (i) the Company shall have
failed, refused or been unable, at or prior to such Closing Date, to perform
any agreement on its part to be performed hereunder, (ii) any other condition
to the obligations of the International Managers hereunder is not fulfilled,
(iii) there occurs any change, or any development involving a prospective
change, in or affecting the financial condition of the Company or its
subsidiaries, which in your judgment, materially impairs the investment quality
of the Shares; (iv) there is any downgrading in the rating of any debt
securities of the Company by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act or Rule
15c3-1 under the Exchange Act), or any public announcement that any such
organization has under surveillance or review its rating of any debt securities
of the Company (other than an announcement with
<PAGE> 43
43
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (v) trading in securities generally on the New
York Stock Exchange shall have been suspended or materially limited, or minimum
prices shall have been established on such exchange by the Commission, or by
such exchange or other regulatory body or governmental authority having
jurisdiction, (vi) any banking moratorium shall have been declared by Federal
or New York governmental authorities, (vii) there is an outbreak or escalation
of hostilities involving the United States on or after the date hereof, or the
United States is or becomes engaged in hostilities which result in the
declaration of a national emergency or war, the effect of which, in your
judgment, makes it inadvisable or impractical to proceed with the completion of
the sale of or any payment for the Shares on the terms and in the manner
contemplated in the Prospectuses, or (viii) there shall have been such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such), in your judgment, as to make it inadvisable or
impractical to proceed with the delivery of the Shares. Any termination of
this Agreement pursuant to this Section 11 shall be without liability on the
part of the Company or any International Manager, except as otherwise provided
in Section 6(g), Section 9 and Section 11 of this Agreement.
Any notice referred to above may be given at the address specified in
Section 13 hereof in writing or by telecopier, telex or telephone, and if by
telecopier, telex or telephone, shall be immediately confirmed in writing.
Any notice referred to above may be given at the address specified in
Section 14 hereof in writing or by telecopy or telephone, and if by telecopy or
telephone, shall be immediately confirmed in writing.
If notice shall have been given pursuant to this Section 11
preventing this Agreement from becoming effective, or if the Company shall fail
to tender the Shares for delivery to the International Managers for any reason
permitted under this Agreement, or if the International Managers shall decline
to purchase the Shares for any reason permitted under this Agreement, the
Company shall reimburse the International Managers for the reasonable fees and
expenses of their counsel and for such other out-of-pocket expenses as shall
have been incurred by them in connection with this Agreement and the proposed
purchase of the Shares,
<PAGE> 44
44
and upon demand the Company shall pay the full amount thereof to the
International Managers.
12. Survival of Certain Provisions. The agreements contained in
Section 9 hereof and the representations, warranties and agreements of the
Company contained in Sections 1 and 6 hereof and the Selling Stockholder
contained in Sections 2 and 7 hereof shall survive the delivery of the Shares
to the International Managers hereunder and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
13. Notices. Except as otherwise provided in the Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, such notice shall be in writing or by telecopy addressed to the
Company at the address of the Company set forth in the Registration Statement,
Attention: James H. Vandenberghe; (b) whenever notice is required by the
provisions of this Agreement to be given to the Selling Stockholder, such
notice shall be in writing or by telecopy addressed to the Selling Stockholder
at Wickam's Cay, Road Town, Tortola, British Virgin Islands, with a copy to
IFINT-USA Inc., 375 Park Avenue, Suite 2107, New York, NY 10152, Attention:
Stephen V. O'Connell, and (c) whenever notice is required by the provisions of
this Agreement to be given to the several International Managers, such notice
shall be in writing or by telecopy addressed to you, in care of Lehman Brothers
International (Europe), One Broadgate, London EC2M 7HA, England, Attention:
Syndicate Department.
14. Information Furnished by U.S. Underwriters. The Company, the
Selling Stockholder and the International Managers severally confirm that the
statements set forth in the last paragraph of the cover page with respect to
the public offering of the Shares and under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectuses are correct and constitute the
written information furnished by or on behalf of any International Manager
referred to in paragraph (b) of Section 1 hereof and in paragraphs (a) and (b)
of Section 9 hereof.
15. Parties. This Agreement shall inure to the benefit of and
binding upon the several International Managers, the Company, the Selling
Stockholder and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those
<PAGE> 45
45
persons, except that (a) the representations, warranties, indemnities and
agreements of the Company and the Selling Stockholder contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any International Manager within the meaning of Section 15
of the Act and for the benefit of any U.S. Underwriter (and controlling persons
thereof) who offers or sells any Shares in accordance with the terms of the
Agreement Between U.S. Underwriters and International Managers and (b) the
indemnity agreement of the International Managers contained in Section 9 hereof
shall be deemed to be for the benefit of directors of the Company, officers of
the Company who signed the Registration Statement and any person controlling
the Company within the meaning of Section 15 of the Act. Nothing in this
Agreement shall be construed to give any person, other than the persons
referred to in this paragraph, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
16. Compliance with Schedule E of NASD by-Laws. Each International
Manager agrees, severally and not jointly, that in accordance with Section 12
of Schedule E of the By-Laws of the NASD, a transaction in Shares issued by the
Company shall not be executed by such International Manager in a discretionary
account without the prior specific written approval of the customer.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without respect
to choice of law principles thereof.
<PAGE> 46
46
18. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
If the foregoing correctly sets forth the agreement among the
Company, the Selling Stockholder and the International Managers, please
indicate your acceptance in the space provided for that purpose below.
Very truly yours,
LEAR SEATING CORPORATION,
By:
---------------------------
Name:
Title:
FIMA Finance Management Inc., as Selling Stockholder,
By:
----------------------------
Name:
Title:
<PAGE> 47
47
Accepted:
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
KIDDER, PEABODY INTERNATIONAL LIMITED
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
WERTHEIM SCHRODER INTERNATIONAL LIMITED
For themselves and as Lead Managers
for each of the several International Managers
named in Schedule I hereto
By: LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By:
-------------------------
Authorized Representative
MORGAN STANLEY & CO. INCORPORATED
As the Qualified Independent Underwriter
and as an Underwriter
By:
-------------------------
Authorized Representative
<PAGE> 1
EXHIBIT 1.3
Lear Seating Corporation
1994 Common Stock Offering
Power of Attorney and Custody Agreement
Selling Stockholder
New York, New York
, 1994
Marc E. Perlmutter, Esq.
Richard S. Borisoff, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Dear Messrs. Perlmutter and Borisoff:
The undersigned stockholder, FIMA Finance Management Inc. ("the
Stockholder"), has delivered to one of you:
(i) one or more certificates (collectively the "Common Stock
Certificates") in negotiable form representing the aggregate number of
shares, after giving effect to the 33-for-1 stock split, of Common
Stock, $.01 par value (the "Common Stock") of Lear Seating Corporation,
a Delaware corporation (the "Company"), set forth opposite the
Stockholder's name on Schedule I hereto; and
(ii) duly executed stock powers with respect to all Common Stock
Certificates, with signatures guaranteed
<PAGE> 2
2
by a bank or trust company or by a member firm of the New York Stock
Exchange.
Pursuant to Underwriting Agreements (the "Underwriting
Agreements") to be entered into between the Company, the Stockholder and
respectively, (x) Lehman Brothers Inc. ("Lehman Brothers"), Kidder, Peabody &
Co. Incorporated, Morgan Stanley & Co. Incorporated and Wertheim Schroder & Co.
Incorporated, as representatives of the several United States underwriters (the
"U.S. Underwriters"), and (y) Lehman Brothers International (Europe), Kidder,
Peabody International Limited, Morgan Stanley & Co. International Limited and
Wertheim Schroder International Limited, as lead managers of the several
international managers (together with the U.S. Underwriters, the
"Underwriters"), the Underwriters propose to offer to the public, as part of a
public offering of Common Stock in which the Company will also sell shares of
Common Stock (the "Offering"), the number of shares of Common Stock set forth
in the column entitled "Amount" in Schedule II hereto from the Stockholder (all
shares set forth in the column entitled "Amount" in Schedule II being
hereinafter referred to as "Shares"). In connection with the proposed
Offering, the Company has filed a Registration Statement on Form S-1 (File No.
33-52565)
<PAGE> 3
3
(the "Registration Statement") with the Securities and Exchange Commission
under the Securities Act of 1933.
1. For purposes of the Offering, and in order to ensure the
orderly sale of the Shares to the Underwriters, each of you is hereby appointed
agent and attorney-in-fact for the Stockholder and instructed and authorized to
hold the Common Stock Certificates (collectively the "Certificates") as
custodian for the account of the Stockholder and to dispose of them in
accordance with this Power of Attorney and Custody Agreement. In furtherance
of the foregoing, each of you is authorized and directed on behalf of the
Stockholder:
(a) to enter into Underwriting Agreements providing for, among
other things, the sale of the Shares to the Underwriters and the
indemnification of the Underwriters for certain liabilities (such
Underwriting Agreements to be substantially in the form attached
hereto);
(b) to establish the purchase price and the initial offering
price of the Shares; provided, however, that the purchase price per
Share shall not be less than the price per share paid to the Company in
the Offering, and provided the initial offering price per share is not
less than $[ ] per share;
<PAGE> 4
4
(c) to cause (i) Common Stock Certificates representing the
aggregate number of shares set forth opposite the Stockholder's name in
the column entitled "Amount" in Schedule II and (ii) duly executed stock
powers with respect to such Certificates, with signatures guaranteed by
a bank or trust company or by a member firm of the New York Stock
Exchange, to be delivered to the Underwriters on the First Closing Date
(as defined in the Underwriting Agreements, such Closing Date being
hereinafter referred to as the "First Closing Date");
(d) to use your best efforts to cause the Common Stock
Certificates delivered on the First Closing Date to be transferred to
and registered in such names on the books of the Company as are
specified pursuant to the Underwriting Agreements and to make such
Certificates available for inspection, checking and packaging by the
Underwriters prior to the First Closing Date as required under the
Underwriting Agreements;
(e) to pay on the First Closing Date all applicable state
transfer taxes, if any, involved in the transfer of the Shares to the
Underwriters on such Closing Date;
<PAGE> 5
5
(f) to accept payment, net of underwriting discounts, for the
Shares on behalf of the Stockholder on the Closing Date, to give receipt
for such payment, and, after reimbursement of expenses incurred by
either of you for which the Stockholder is liable, including all
applicable state transfer taxes, to remit to the Stockholder such
payment for such Shares;
(g) to return to the Stockholder all Common Stock Certificates
for shares attributable to the Stockholder not sold to the Underwriters;
and
(h) to make, execute, acknowledge and deliver all orders,
receipts, notices, requests, instructions, letters of transmittal,
certificates, letters and other writings and communications to the
Securities and Exchange Commission, the Underwriters, the Company and
the Transfer Agent, and, in general, to do all things and take all
actions that either of you in your discretion may consider necessary or
proper in connection with or to carry out the sale of the Shares to the
Underwriters, as fully as could the Stockholder if personally present
and acting.
2. This Power of Attorney and Custody Agreement and all
authority conferred hereby and instructions hereby given, are granted,
conferred and made subject to the
<PAGE> 6
6
interests of the Underwriters and the Company under the Underwriting Agreements
and in consideration of those interests, and for the purpose of completing the
transactions contemplated by the Underwriting Agreements, this Power of
Attorney and Custody Agreement and all authority conferred hereby shall be
irrevocable, shall be deemed to be coupled with an interest and shall not be
terminated by operation of law, by any acts of the Stockholder, the
Underwriters or the Company or any other person, or the occurrence of any other
event, including the death or incapacity of the Stockholder or the commencement
of any bankruptcy, insolvency or similar proceedings involving the Stockholder.
If any such event should occur before the delivery of the Shares pursuant to
the Underwriting Agreements, Certificates representing the Shares shall be
delivered by or on behalf of the Stockholder and all other actions contemplated
hereby shall be consummated in accordance with the terms and conditions of the
Underwriting Agreements and this Power of Attorney and Custody Agreement as if
such event had not occurred, regardless of whether either of you or any other
person shall have received notice of such event. Any actions taken by either
of you pursuant to this Power of Attorney and Custody Agreement shall be as
valid as if such acts or events had not occurred.
<PAGE> 7
7
Notwithstanding the foregoing, (i) if the Underwriting Agreements
are not executed prior to , 1994, (ii) if Lehman Brothers notifies
either of you prior to that time that the Underwriting Agreements will not be
executed or (iii) if the Underwriting Agreements are terminated prior to the
delivery of the Shares thereunder, then the Stockholder shall have the power,
by giving written notice to you, to terminate this Power of Attorney and
Custody Agreement, subject, however, to all lawful action done or performed by
both of you pursuant hereto prior to your actual receipt of such notice, and
except that the liability of the Stockholder for all expenses that each of you
shall incur, other than those expenses the Company is obligated to pay, in
connection herewith shall survive any termination thereof and both of you shall
return this Power of Attorney and Custody Agreement and the applicable
Certificates to the Stockholder.
3. The Stockholder hereby represents, warrants and agrees that:
(a) the Stockholder has duly executed and delivered this Power of
Attorney and Custody Agreement and all authorizations and consents
necessary for the execution and delivery hereof by the Stockholder and
for the execution and delivery of the Underwriting
<PAGE> 8
8
Agreements by either of you on behalf of the Stockholder have been
given; and this Power of Attorney and Custody Agreement is, and upon
execution will be, valid, binding and enforceable against the
Stockholder in accordance with its terms, except as may be limited by
bankruptcy, moratorium or similar laws.
(b) the Stockholder now has good, valid and marketable title to
the shares represented by the Certificates, and on the First Closing
Date will have such title to all such shares, free and clear in each
case of all liens, encumbrances, equities and claims whatsoever, and the
Stockholder now has, and at the time of execution of the Underwriting
Agreements and on the First Closing Date will have, full right, power
and authority to enter into the Underwriting Agreements and to sell,
assign, transfer and deliver such shares on the First Closing Date
thereunder; the Stockholder has no knowledge of any fact that would
impair the validity of the Certificates; and upon delivery of such
shares under the Underwriting Agreements and payment therefor pursuant
thereto, the Underwriters will acquire valid and marketable title to
such shares free and clear of any liens, encumbrances, equities and
claims whatsoever;
<PAGE> 9
9
(c) the Stockholder has reviewed the Registration statement and
the form of Underwriting Agreements attached hereto; and (i) the
statements with respect to the Stockholder under the heading "Principal
and Selling Stockholders" in the Registration Statement are true and
complete in all material respects and the Stockholder will promptly
advise you if they cease to be so, and (ii) the representations and
warranties to be made by the Stockholder in the Underwriting Agreements
are true and correct and do not omit to state any fact required to be
stated therein or necessary to make the statements therein not
misleading; and
(d) both of you will be entitled to rely on the opinions of
counsel provided to the Underwriters pursuant to Section 7(f) of the
Underwriting Agreements, which will specifically allow your reliance
thereon.
4. Until payment of the purchase price for the Shares has been
made to you pursuant to the Underwriting Agreements, the Stockholder shall
remain the owner of any and all shares of Common Stock and shall have the right
to vote such shares and to receive all dividends and distributions on such
shares to the extent the Stockholder
<PAGE> 10
10
had such rights prior to entering into this Power of Attorney and Custody
Agreement.
5. Both of you shall be entitled to act and rely upon any
statement, request, notice or instructions given in writing to either of you by
Lehman Brothers with respect to each Closing Date or with respect to the
non-execution or termination of the Underwriting Agreements, not only as to the
authorization, validity and effectiveness thereof, but also as to the truth and
accuracy of any information contained therein, so long as both of you believe
it is genuine.
6. It is hereby agreed and understood (i) that you will receive
no compensation from the Stockholder for your responsibilities hereunder, (ii)
that both of you assume no responsibility or liability to any person under this
Power of Attorney and Custody Agreement other than to deal with the
Certificates and other instruments deposited with you hereunder or issuable
upon conversion thereof and the proceeds from the sale of shares of Common
Stock represented thereby in accordance with the provisions hereof and (iii) no
implied duties or obligations shall be read into this Power of Attorney and
Custody Agreement. Each of you shall not be liable for any error of judgment
or for any act done or omitted or for any mistake of fact or law except
<PAGE> 11
11
for your own gross negligence or bad faith. The Stockholder severally and not
jointly hereby agrees to hold each of you and each of your partners, members
and employees harmless from any and all loss, damage or liability or expense
that either of you or any of them may sustain or incur as a result of any
action taken in good faith hereunder and not due to such person's gross
negligence.
7. This Power of Attorney and Custody Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
8. This Power of Attorney and Custody Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without respect to the choice of law provisions thereof.
<PAGE> 12
12
Please acknowledge your acceptance of the provisions hereof and
acknowledge your custody of the Certificates by executing and returning the
enclosed copy hereof to the Stockholder.
Very truly yours,
FIMA FINANCE MANAGEMENT
INC. 1/
by:
Name:
Title:
Subscribed and sworn to
before me this ___ day
of _________, 1994.
Notary Public
1/ The name of the Stockholder shall be exactly as such Stockholder's
name appears on the Common Stock Certificates.
<PAGE> 13
13
ACKNOWLEDGMENT AND RECEIPT
Marc E. Perlmutter, Esq., as of the date first above written,
hereby acknowledges acceptance of his duties under the foregoing Power of
Attorney and Custody Agreement and acknowledges receipt of the Certificates
representing the shares set forth on Schedule I and stock powers relating
thereto.
Marc E. Perlmutter, Esq.
Richard S. Borisoff, Esq., as of the date first above written,
hereby acknowledges acceptance of his duties under the foregoing Power of
Attorney and Custody Agreement and acknowledges receipt of the Certificates
representing the shares set forth on Schedule I and stock powers relating
thereto.
Richard S. Borisoff, Esq.
<PAGE> 14
14
Schedule I
Shares* Deposited Under Agreement
<TABLE>
<CAPTION>
Stockholder Common Stock
- ----------- ------------
<S> <C>
FIMA Finance Management Inc.
</TABLE>
____________________
* Represents shares of Common Stock after giving effect to the approximately
33-for-1 stock split.
<PAGE> 15
15
Schedule II
Shares of Common Stock to be Sold
<TABLE>
<CAPTION>
Stockholder Amount
- ----------- ------
<S> <C>
FIMA Finance Management
Inc.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
March 28, 1994
Lear Seating Corporation
21557 Telegraph Road
Southfield, MI 48034
Re: Registration Statement on Form S-1 of Lear Seating
Corporation (No. 33-52565) (the "Registration Statement")
Gentlemen:
We have acted as special counsel to Lear Seating Corporation, a Delaware
corporation (the "Company"), in connection with the registration on Form S-1 of
the offer and sale (the "Offering") of up to 10,312,500 shares of Common Stock
of the Company, par value $.01 per share (the "Common Stock"). Of the
10,312,500 shares being offered in the Offering, (i) 7,187,500 shares are being
offered by the Company (assuming the exercise of the underwriters'
over-allotment option) and (ii) 3,125,000 are being offered by a selling
stockholder (the "Selling Stockholder").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the Registration Statement relating to the Common Stock, as filed with the
Securities and Exchange Commission (the "Commission") on March 8, 1994 under
the Act, the United States preliminary prospectus dated March 16, 1994, the
International preliminary prospectus dated March 16, 1994 and Amendment No. 1
to the Registration Statement filed with the Commission on April 1, 1994 (as so
amended, the "Registration Statement"); (ii) the Restated Certificate of
Incorporation of the Company, which will be in effect prior to the commencement
of the Offering (the "Charter"); (iii) the Amended and Restated By-laws of the
Company, as currently in effect (the "By-laws"); (iv) the form of the United
States underwriting agreement to be entered into by the Company, Lehman
Brothers, Kidder, Peabody & Co. Incorporated, Morgan Stanley & Co.
Incorporated and Wertheim Schroder & Co. Incorporated (the "U.S. Underwriting
Agreement"); (vii) the form of the International underwriting agreement to be
entered into by the Company, Lehman Brothers International (Europe), Kidder,
Peabody International Limited, Morgan Stanley & Co. International Limited
<PAGE> 2
Lear Seating Corporation
March 25, 1994
Page 2
and Wertheim Schroder International Limited (the "International Underwriting
Agreement," and together with the U.S. Underwriting Agreement, the
"Underwriting Agreements") and (viii) resolutions of the Board of Directors of
the Company relating to, among other things, the issuance and sale of the
Common Stock and the filing of the Registration Statement. We have also
examined such other documents as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as certified or photostatic copies, and the authenticity of
the originals of such latter documents. As to any facts material to this
opinion which we did not independently establish or verify, we have relied
upon oral or written statements and representations of officers and
other representatives of the Company and others.
Based upon and subject to the foregoing, we are of the opinion that <1> upon
the filing of the Charter with the Secretary of State of Delaware:
<2>(a) The 7,187,500 shares of Common Stock covered by the Registration
Statement, when sold by the Company in accordance with the provisions of the
Underwriting Agreements following approval thereof by the Pricing Committee of
the Board of Directors of the Company, shall be legally issued, fully paid and
non-assessable.
(b) The 3,125,000 shares of Common Stock covered by the Registration
Statement, when sold by the Selling Stockholder in accordance with the
provisions of the Underwriting Agreements, shall be legally issued, fully paid
and non-assessable.
We hereby consent to the reference to our firm under the heading
<3> "Legal Matters" in the Prospectus forming a part of the Registration
Statement and to the filing of this opinion with the Commission as an exhibit
to the Registration Statement. In giving such consent, we do not concede that
we are experts within the meaning of the Act or the rules and regulations
thereunder or that this consent is required by Section 7 of the Act.
Very truly yours,
/S/ Winston & Strawn
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and all references to our Firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN & CO.
Detroit, Michigan
April 1, 1994
<PAGE> 1
[LOGO]
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement, Amendment No.
1, on Form S-1 (File No. 33-52565), of our report, dated November 18, 1993,
which includes an explanatory paragraph concerning a change in accounting
principle and a subsequent event, on our audits of the financial statements of
The North American Business (an operating component of Ford Motor Company) as of
September 30, 1993 and December 31, 1992, and for the nine months ended
September 30, 1993 and the years ended December 31, 1992 and 1991. We also
consent to the reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand
COOPERS & LYBRAND
Detroit, Michigan
April 1, 1994
<PAGE> 1
Exhibit 99.1
Lear Seating Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Attention: Kenneth L. Way
Chief Executive Officer
Re: Consent to Act as Director
--------------------------
Dear Mr. Way:
I hereby consent to serve as a Director of Lear Seating Corporation
("Lear") upon my election to such position. Lear may include my name as a
proposed Director and my relevant biographical information in its Registration
Statement on Form S-1, and may file this consent as an Exhibit to the
Registration Statement.
Very truly yours,
/s/ ALAN WASHKOWITZ
Alan Washkowitz
