<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1995
REGISTRATION NO. 33-61583
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
LEAR SEATING CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3386776
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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>
Robert W. Ericson David Mercado
John L. MacCarthy Cravath, Swaine & Moore
Winston & Strawn 825 Eighth Avenue
35 W. Wacker Drive New York, New York 10019
Chicago, Illinois 60601 (212) 474-1000
(312) 558-5600
</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. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTES
This Registration Statement covers the registration of 17,250,000 shares of
Common Stock, $.01 par value per share, of Lear for sale in underwritten public
offerings (the "Offerings") in the United States and Canada (the "U.S.
Offering") and outside the United States and Canada (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 cover page and alternate
back cover page for the Prospectus to be used in the International Offering (the
"International Prospectus"). Otherwise, the International Prospectus will be
identical to the U.S. Offering Prospectus.
<PAGE> 3
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 September 1, 1995
PROSPECTUS
15,000,000 Shares
[LEAR LOGO]
COMMON STOCK
---------------------------
Of the 15,000,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 10,000,000 shares
are being offered by the Company and 5,000,000 shares are being offered by
certain stockholders of the Company (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. Of the 15,000,000 shares of Common
Stock being offered hereby, 12,000,000 shares are being offered initially in the
United States and Canada by the U.S. Underwriters (the "U.S. Offering") and
3,000,000 shares are being offered initially outside the United States and
Canada by the International Managers (the "International Offering" and, together
with the U.S. Offering, the "Offerings"). The public offering price and
underwriting discounts and commissions per share are identical for both
Offerings. See "Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On August 31, 1995, the reported last sale price of the Common
Stock on the New York Stock Exchange Composite Tape was $28 5/8 per share.
SEE "RISK FACTORS" ON PAGE 9 HEREIN 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>
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
-------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Lear and the Selling Stockholders 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 Selling Stockholders have granted the U.S. Underwriters and the
International Managers a 30-day option to purchase up to an aggregate of
2,250,000 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 Selling Stockholders 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 shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1995.
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
, 1995
<PAGE> 4
[LEAR SEATING CORPORATION LOGO]
[PHOTO CHEVROLET CAVALIER SUREBOND (TM) SEAT]
[PHOTO INTERIOR TRIM COMPONENTS]
[PHOTO FORD WINDSTAR INTERIOR]
<PAGE> 5
[PHOTO FIAT PUNTO]
HIGH-IMPACT, CUSTOMER-FOCUSED TECHNOLOGY. Lear Seating Corporation is
dedicated to providing its customers with world-class products and services.
From its Technical Centers in Southfield and Rochester Hills, Michigan and
Turin, Italy, research, advanced engineering and testing focus on future
products for the world market. These centers demonstrate Lear's ongoing
commitment as a technology leader and as a Tier I interior systems supplier.
<PAGE> 6
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
DURING THE OFFERINGS, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK OF THE COMPANY PURSUANT TO EXEMPTIONS
FROM RULES 10b-6, 10b-7, AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
-------------------------
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement ("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 are 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, and at the New York Stock Exchange located
at 20 Broad Street, New York, New York 10005. Copies of such material may also
be obtained from the Public Reference Section of the Commission at 450 First
Street, N.W., Washington, D.C. 20549 at prescribed rates.
The Company has filed with the Commission a 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 or
to a document incorporated by reference herein, 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the year ended December 31,
1994;
(b) the Company's Quarterly Report on Form 10-Q for the period ended April 1,
1995;
(c) the Company's Quarterly Report on Form 10-Q for the period ended July 1,
1995;
(d) the Company's Current Report on Form 8-K dated December 15, 1994, as amended
by its Form 8-K/A filed on February 28, 1995 and its Form 8-K/A filed on
August 11, 1995;
(e) the Company's Current Report on Form 8-K filed on August 28, 1995; and
(f) the Company's Registration Statement on Form 8-A filed on April 1, 1994, as
amended by Amendment No. 1 on Form 8-A/A filed on April 5, 1994.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the Offerings shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
such documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any subsequently filed document which is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits thereto, unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests for such copies should be directed to the Company's principal
office: Lear Seating Corporation, 21557 Telegraph Road, Southfield, Michigan
48034, Attention: Secretary (telephone: (810) 746-1500).
2
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere or
incorporated by reference 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. Unless otherwise indicated, all
information contained in this Prospectus is based on the assumption that the
Underwriters' over-allotment option is not exercised. Unless the context
otherwise requires, the description of the Company's business included in this
Prospectus does not include AIH.
THE COMPANY
GENERAL
Lear Seating Corporation is the largest supplier of automotive seat systems
in the world. 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 sequential just-in-time basis. As of July 1, 1995, the Company employed
approximately 26,000 people in 18 countries and operated 82 manufacturing,
research, design, engineering, testing and administration facilities. The
Company's sales have grown rapidly, both internally and through acquisitions,
from approximately $159.8 million in the fiscal year ended June 30, 1983 to
approximately $3.1 billion in the year ended December 31, 1994, a compound
annual growth rate of approximately 30%.
With the acquisition of Automotive Industries Holding, Inc. ("AIH") in
August 1995, the Company has become the largest independent Tier I supplier of
automotive seat and interior systems to the North American and European vehicle
markets. AIH is a leading designer and manufacturer of high quality interior
trim systems and blow molded products principally for North American and
European car and light truck manufacturers.
STRATEGY
The Company's strategy is to capitalize on two significant trends in the
automotive industry: (i) the outsourcing of automotive components and systems by
original equipment manufacturers ("OEMs"); and (ii) the consolidation and
globalization of the OEMs' supply base. Outsourcing of interior components and
systems has increased in response to competitive pressures on OEMs to improve
quality and reduce capital needs, costs of labor, overhead and inventory.
Consolidation among automotive industry suppliers has occurred as OEMs have more
frequently awarded long-term sole source contracts to the most capable global
suppliers. Increasingly, the criteria for selection include not only cost,
quality and responsiveness, but also certain full-service capabilities including
design, engineering and project management support.
Elements of the Company's strategy include:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its 17 OEM customers which allow Lear
to identify business opportunities and customer needs in the early stages
of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering seat systems gives it a
competitive advantage in securing new business. Lear maintains an excellent
reputation with the OEMs for timely delivery and customer service and for
providing world class quality at competitive prices.
- Product Technology and Product Design Capability. Lear has made
substantial investments in product technology and product design capability
to support its products. The Company maintains two advanced technical
centers (in Southfield, Michigan and Turin, Italy) where it develops and
tests current and future products to determine compliance with safety
standards, quality and durability, response to environmental conditions and
user wear and tear. At its 12 customer-dedicated engineering centers,
specific program applications are developed and tested. The Company has
also made substantial investments in advanced computer aided design,
engineering and manufacturing systems.
- Lean Manufacturing Philosophy. Lear's "lean manufacturing"
philosophy seeks to eliminate waste and inefficiency in its own operations
and in those of its customers and suppliers. The Company, whose facilities
are linked by computer directly to those of its suppliers and customers,
receives
3
<PAGE> 8
components from its suppliers on a just-in-time basis, and delivers seat
systems and components to its customers on a sequential just-in-time basis,
which provides products to an OEM's manufacturing facility in the color and
order in which the products are used. This process minimizes inventories
and fixed costs for both the Company and its customers and enables the
Company to deliver products on as little as 90 minutes' notice.
- Global Presence. Due to significant cost savings and improved
product quality and consistency, OEMs have increasingly required their
suppliers to manufacture seat systems and other components in multiple
geographic markets. By expanding its operations outside the United States,
Lear provides its products on a global basis to its OEM customers. For the
six months ended July 1, 1995 approximately 54% of the Company's sales were
outside the United States.
- Growth Through Strategic Acquisitions. Strategic acquisitions have
been, and management believes will continue to be, an important element in
the Company's growth worldwide and in its efforts to capitalize on
automotive industry trends. These acquisitions complement Lear's existing
capabilities and provide new growth opportunities. The Company's recent
acquisitions have expanded its OEM customer base and worldwide presence and
enhanced its relationships with existing customers. The acquisition of AIH
(the "AIH Acquisition") has also given the Company a significant presence
in the non-seating segment of the automobile and light truck interior
market.
Implementation of the Company's strategy has resulted in rapid growth of
the Company's net sales from approximately $159.8 million in the fiscal year
ended June 30, 1983 to approximately $3.1 billion in the year ended December 31,
1994, a compound annual growth rate of approximately 30%. This increase in sales
has been achieved through internal growth as well as through acquisitions. In
1994, the Company held a leading 38% share of the estimated $4.8 billion North
American outsourced seat systems market and a 27% share of the estimated $6.8
billion total seat systems market. After giving pro forma effect to the
acquisition of the primary automotive seat systems supplier to Fiat S.p.A. (the
"FSB Acquisition"), the Company's share in 1994 of the estimated $2.4 billion
European outsourced seat systems market would have been a leading 33% and its
share of the estimated $4.5 billion total seat systems market would have been
18%. The Company's North American content per vehicle has increased from $12 in
1983 to $169 in 1994. In Europe, the Company's content per vehicle has grown
from $3 in 1983 to $80 in 1994 after giving pro forma effect to the FSB
Acquisition.
RECENT ACQUISITIONS
In August 1995, the Company purchased AIH for an aggregate purchase price
of $926.4 million (including the assumption of $282.3 million of AIH's existing
indebtedness and the payment of fees and expenses in connection with the
acquisition). The acquisition of AIH, a leading designer and manufacturer of
high quality interior trim systems and blow molded products principally for
North American and European car and light truck manufacturers, positions the
Company as the largest, independent Tier I supplier of automotive seat and
interior systems to the estimated $22 billion North American and European total
light vehicle interior market. AIH's sales have grown rapidly, both internally
and through acquisitions, from approximately $209.5 million in 1991 to
approximately $512.8 million in 1994, a compound annual growth rate of
approximately 35%. As a result of the AIH Acquisition, Lear is able to provide
OEMs with a complete portfolio of interior systems and components and the
ability to manage the design, manufacture and supply of the total car and light
truck interior. In the near-term, the Company intends to operate AIH as a
separate division, using Lear's existing relationships with the OEMs to expand
AIH's business. Management believes that as the outsourcing and supplier
consolidation trends continue, the OEMs will increasingly seek global suppliers
to provide total interiors, including seat systems, resulting in greater
integration of Lear's and AIH's businesses and long-term growth opportunities
for the Company.
Since 1990, Lear has completed five additional strategic acquisitions. In
December 1994, the Company completed the FSB Acquisition, establishing Lear as
the market leader in automotive seat systems in Europe. In 1993, the Company
significantly expanded its operations in North America by purchasing certain
portions of the North American seat cover and seat systems business (the "NAB")
of Ford (the "NAB Acquisition"). In 1991 and 1992, the Company acquired the seat
systems businesses of Saab in Sweden and Finland and of Volvo in Sweden.
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.
4
<PAGE> 9
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by:
The Company........................... 10,000,000 shares
The Selling Stockholders.............. 5,000,000 shares
----------
Total Common Stock offered......... 15,000,000 shares
==========
Common Stock offered for sale in:
U.S. Offering......................... 12,000,000 shares
International Offering................ 3,000,000 shares
Common Stock to be outstanding after the
Offerings............................. 56,132,364 shares(1)
NYSE Symbol ............................ LEA
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 New Credit Agreement (as
defined herein) incurred to finance the AIH
Acquisition. The Company will not receive any
proceeds from the sale of Common Stock by the
Selling Stockholders.
</TABLE>
-------------------------
(1) Excludes 4,371,452 shares of Common Stock issuable upon exercise of options
outstanding as of July 1, 1995 and granted pursuant to (i) stock option
agreements between the Company and certain management investors, (ii) the
Company's 1992 Stock Option Plan and (iii) the Company's 1994 Stock Option
Plan. Also excludes 229,405 shares of Common Stock issuable upon exercise of
options (collectively with the options referred to in the preceding
sentence, the "Options") originally granted under the Automotive Industries
Holding, Inc. 1992 Key Employee Stock Option Plan which were converted into
options to purchase Common Stock in connection with the AIH Acquisition.
RISK FACTORS
Investment in the Company's Common Stock involves certain risks discussed
under "Risk Factors" that should be considered by prospective investors.
5
<PAGE> 10
SUMMARY FINANCIAL DATA OF THE COMPANY
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company for each of the fiscal years
ended December 31, 1994 and 1993 and June 30, 1993 and 1992 have been audited by
Arthur Andersen LLP. The consolidated financial statements of the Company for
the six months ended July 1, 1995 and July 2, 1994 are unaudited; however, in
the Company's opinion, they reflect all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of the financial position and
results of operations of such periods. The results for the six months ended July
1, 1995 are not necessarily indicative of the results to be expected for the
full fiscal year. The summary financial data below should be read in conjunction
with the other financial data of the Company included in this Prospectus, the
consolidated financial statements of the Company and the notes thereto
incorporated by reference in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company."
LEAR SEATING CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
-------------------- ----------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992
-------- -------- ------------ ------------ -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales....................... $2,186.1 $1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7
Operating income................ 114.9 84.6 169.6 79.6 81.1 56.8
Net income (loss)(1)............ 45.9 27.7 59.8 (13.8) 10.1 (22.2)
Net income (loss) per
share(1)...................... .92 .61 1.26 (.39) .25 (.80)
BALANCE SHEET DATA:
Total assets.................... $1,855.1 $1,217.2 $1,715.1 $1,114.3 $ 820.2 $ 799.9
Long-term debt.................. 460.1 383.5 418.7 498.3 321.1 348.3
Stockholders' equity............ 246.5 184.0 213.6 43.2 75.1 49.4
OTHER DATA:
EBITDA(2)....................... $ 152.0 $ 111.5 $ 225.7 $ 122.2 $ 121.8 $ 91.8
Capital expenditures............ 42.6 35.0 103.1 45.9 31.6 27.9
North American content per
vehicle(3).................... 193 159 169 112 98 94
European content per
vehicle(4).................... 90 38 48 38 37 21
</TABLE>
-------------------------
(1) After extraordinary charges of $11.7 million and $5.1 million ($.33 and $.18
per share) for the fiscal years ended December 31, 1993 and June 30, 1992,
respectively, relating to the early extinguishment of debt.
(2) "EBITDA" is operating income plus amortization and depreciation. 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.
(3) "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" comprises car and light truck production in the United
States, Canada and Mexico estimated by the Company from industry sources.
(4) "European content per vehicle" is the Company's net sales in Western Europe
divided by total Western European vehicle production. "Western European
vehicle production" comprises car and light truck production in Western
Europe estimated by the Company from industry sources.
6
<PAGE> 11
SUMMARY FINANCIAL DATA OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of AIH. The consolidated
financial statements of AIH for each fiscal year presented have been audited by
Arthur Andersen LLP. The consolidated financial statements of AIH for the six
months ended July 1, 1995 and July 2, 1994 are unaudited; however, in the
opinion of AIH's management, they reflect all adjustments, consisting only of
normal recurring items, necessary for a fair presentation of the financial
position and results of operations of such periods. The results for the six
months ended July 1, 1995 are not necessarily indicative of the results to be
expected for the full fiscal year. The summary financial data below should be
read in conjunction with the other financial data of AIH included in this
Prospectus, the consolidated financial statements of AIH and the notes thereto
incorporated by reference in this Prospectus and "Management's Discussion and
Analysis of Results of Operations of Automotive Industries Holding, Inc."
AUTOMOTIVE INDUSTRIES HOLDING, INC.
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
--------------------- ----------------------------------------
JULY 1, JULY 2, DECEMBER 31, JANUARY 1, DECEMBER 26,
1995 1994 1994 1994 1992
-------- -------- ------------ ---------- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................... $ 377.1 $ 236.8 $512.8 $348.7 $272.4
Operating income............................ 45.5 31.8 63.9 47.1 36.5
Net income(1)............................... 21.9 16.8 32.7 24.0 6.9
BALANCE SHEET DATA:
Total assets................................ $ 611.3 $ 461.0 $567.4 $338.5 $233.7
Long-term debt.............................. 221.1 154.0 216.9 93.8 75.8
Stockholders' equity........................ 241.3 207.2 219.9 189.7 109.8
OTHER DATA:
EBITDA...................................... $ 60.4 $ 41.9 $ 85.8 $ 63.0 $ 48.6
Capital expenditures........................ 30.8 18.6 40.5 22.4 8.9
</TABLE>
-------------------------
(1) Net of a preferred stock dividend of $1.0 million and an extraordinary item
relating to the early extinguishment of debt of $8.3 million in the fiscal
year ended December 26, 1992.
7
<PAGE> 12
SUMMARY PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL DATA
The following summary pro forma unaudited consolidated financial and other
data were derived from and should be read in conjunction with the pro forma
unaudited consolidated financial data included elsewhere in this Prospectus. The
following summary pro forma unaudited consolidated operating data of the Company
were prepared to illustrate the estimated effects of (i) the AIH Acquisition
(including the refinancing of certain debt of AIH with borrowings under a $1.5
billion secured revolving credit agreement with Chemical Bank and a syndicate of
financial institutions (the "New Credit Agreement")), (ii) the FSB Acquisition,
(iii) certain acquisitions completed by AIH prior to the acquisition of AIH by
the Company, (iv) the initial public offering of Common Stock by the Company
(the "IPO") and the application of the net proceeds therefrom in April 1994, (v)
the refinancing of the Company's 14% Subordinated Debentures due 2000 (the
"Subordinated Debentures") with its 8 1/4% Subordinated Notes due 2002, (vi) the
refinancing of the Company's prior $500 million credit facility (the "Prior
Credit Facility") with borrowings under the New Credit Agreement and (vii) the
Offerings contemplated hereby and the application of the net proceeds to the
Company therefrom to repay indebtedness incurred pursuant to the New Credit
Agreement to finance the AIH Acquisition (collectively, the "Pro Forma
Transactions"), as if the Pro Forma Transactions had occurred on January 1,
1994. The following summary pro forma unaudited consolidated balance sheet data
were prepared as if the AIH Acquisition, the acquisition of Plastifol GmbH & Co.
KG ("Plastifol") by AIH and the Offerings contemplated hereby and the
application of the net proceeds therefrom to repay indebtedness incurred
pursuant to the New Credit Agreement to finance the AIH Acquisition had occurred
as of July 1, 1995. The following summary pro forma unaudited consolidated
financial data do not purport to represent (i) the actual results of operations
or financial condition of the Company had the Pro Forma Transactions occurred on
the dates assumed or (ii) the results to be expected in the future.
<TABLE>
<CAPTION>
AS OF OR AS OF OR
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AND CONTENT PER VEHICLE
DATA)
<S> <C> <C>
OPERATING DATA:
Net sales.................................................... $2,612.3 $ 4,355.6
Operating income............................................. 164.1 227.1
Net income................................................... 56.7 59.4
Net income per share......................................... .95 1.00
BALANCE SHEET DATA:
Total assets................................................. $2,954.2
Long-term debt............................................... 1,116.0
Stockholders' equity......................................... 519.9
OTHER DATA:
EBITDA....................................................... $ 222.6 $ 334.5
Capital expenditures......................................... 73.4 151.0
North American content per vehicle(1)........................ 231 205
</TABLE>
-------------------------
(1) "North American content per vehicle" is the Company's pro forma net sales in
North America divided by total North American vehicle production. "North
American vehicle production" comprises car and light truck production in the
United States, Canada and Mexico estimated by the Company from industry
sources.
8
<PAGE> 13
RISK FACTORS
A potential investor should consider carefully all of the information
contained in this Prospectus before deciding whether to purchase the Common
Stock offered hereby and, in particular, should consider the following:
LEVERAGE
Substantially all the funds needed to finance the Company's recent
acquisitions, including the FSB Acquisition and the AIH 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 will be used to service its debt obligations. As of
July 1, 1995, after giving effect to the Pro Forma Transactions, the Company had
total debt of $1,140.8 million and stockholders' equity of $519.9 million,
producing a total capitalization of $1,660.7 million, so that total debt as a
percentage of total capitalization was 68.7%.
The Company's high leverage may have consequences, including the following:
(i) the ability of the Company to obtain additional financing for working
capital, capital expenditures and debt service requirements or other purposes
may be impaired; (ii) the Company may be more highly leveraged than companies
with which it competes, which may place it at a competitive disadvantage; and
(iii) the Company may be more vulnerable in the event of a downturn in its
business or in the economy generally. If the Company is unable to generate
sufficient cash flow to service its debt obligations, it will have to adopt one
or more alternatives, such as reducing or delaying planned expansion and capital
expenditures, selling assets, restructuring debt or obtaining additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms.
In addition, because certain of the Company's obligations under the New
Credit Agreement bear interest at floating rates, an increase in interest rates
could adversely affect the Company's ability to service its debt obligations. As
of July 1, 1995, the Company was not a party to any interest rate swaps or
similar arrangements; however, in the future the Company may determine to enter
into such arrangements with respect to all or a portion of its floating rate
debt. Although any interest rate swaps or similar arrangements entered into by
the Company would effectively cap or fix associated interest rates, such
arrangements could have the effect of increasing total interest expense.
CYCLICAL NATURE OF AUTOMOTIVE INDUSTRY
The Company's principal operations are directly related to domestic and
foreign automotive vehicle production. Automobile sales and production are
cyclical and can be affected by the strength of a country's general economy and
by other factors. A decline in automotive sales and production could result in a
decline in the Company's sales.
RELIANCE ON MAJOR CUSTOMERS AND SELECTED CAR MODELS
Two of the Company's customers, Ford and General Motors, accounted for
approximately 39% and 36%, respectively, of the Company's net sales during
fiscal 1994. After giving effect to the AIH Acquisition and the FSB Acquisition,
sales to Ford and General Motors will continue to represent a similar
substantial portion of the Company's total sales. Although the Company has
purchase orders from many of its customers, such purchase orders generally
provide for supplying the customers' 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's
automobile assembly plant. The 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 Company's product lines and the ability of
the Company to relocate its facilities with minimal capital expenditures. There
can be no assurances that the Company's loss of business
9
<PAGE> 14
with respect to either a particular automobile model or a particular assembly
plant would not have a material adverse effect on the Company's results of
operations or financial condition in the future.
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.
CONTROL BY LEHMAN BROTHERS HOLDINGS INC.
Certain merchant banking partnerships (the "Lehman Funds") affiliated with
Lehman Brothers Holdings Inc. own an aggregate of approximately 56% of the
outstanding Common Stock. Upon the closing of the Offerings, in which they will
participate as Selling Stockholders, the Lehman Funds will own an aggregate of
approximately 39% of the outstanding Common Stock (in each case, assuming no
Options are exercised and the Underwriters' over-allotment option is not
exercised). Pursuant to an agreement with Lehman Brothers Holdings Inc., The
Cypress Group L.L.C. provides consulting services to Lehman Brothers Holdings
Inc. with respect to the management of the equity investments of the Lehman
Funds, including the Lehman Funds' investment in Lear. After the Offerings,
employees of Lehman Brothers Holdings Inc. and The Cypress Group L.L.C. will
continue to occupy five of the ten seats on the Company's Board of Directors. As
a result of their stock ownership and representation on the Company's Board of
Directors, the Lehman Funds have the ability to control the affairs and policies
of the Company.
RESTRICTIONS ON DIVIDENDS
The Company's ability to pay dividends to holders of Common Stock is
limited under the terms of the New Credit Agreement and of the indentures (the
"Indentures") governing its 11 1/4% Senior Subordinated Notes due 2000 (the
"Senior Subordinated Notes") and its 8 1/4% Subordinated Notes due 2002 (the
"Subordinated Notes"). The Company does not intend to pay any cash dividends in
the foreseeable future. See "Common Stock Price Range and Dividends."
FOREIGN EXCHANGE RISK
As a result of recent acquisitions, including the acquisitions of the
primary automotive seat systems supplier to Fiat S.p.A. ("FSB"), John Cotton
Limited and Plastifol, and the Company's business strategy, which includes plans
for the global expansion of its operations, a significant portion of the
Company's revenues and expenses are denominated in currencies other than U.S.
dollars. Changes in exchange rates therefore may have a significant effect on
the Company's results of operations and financial condition.
ANTI-TAKEOVER PROVISIONS
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 is 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 Capital Stock" for additional information regarding these and
certain other anti-takeover provisions adopted by the Company.
10
<PAGE> 15
USE OF PROCEEDS
All the net proceeds to the Company from the Offerings will be used to
repay a portion of the indebtedness outstanding under the New Credit Agreement
which was incurred to finance the AIH Acquisition, bearing a rate of interest as
of August 31, 1995 of approximately 6.9%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Company --
Liquidity and Capital Resources." The Company will not receive any proceeds from
the sale of Common Stock by the Selling Stockholders.
COMMON STOCK PRICE RANGE AND DIVIDENDS
The Common Stock is listed for trading on the New York Stock Exchange under
the symbol "LEA." The following table sets forth the high and low sale prices of
the Common Stock as reported on the New York Stock Exchange for the fiscal
periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1994:
Second Quarter............................................... $20 1/4 $16 1/4
Third Quarter................................................ 19 5/8 16
Fourth Quarter............................................... 22 1/8 17
1995:
First Quarter................................................ 20 7/8 16 5/8
Second Quarter............................................... 24 1/4 17 7/8
Third Quarter (through August 31, 1995)...................... 29 3/8 23
</TABLE>
The reported last sale price of the Common Stock on the New York Stock
Exchange Composite Tape as of a recent date is set forth on the cover page of
this Prospectus.
As of July 15, 1995, there were 243 holders of record of the outstanding
Common Stock and the Company estimates that, at such date, there were
approximately 4,500 beneficial holders.
The Company has never paid dividends on its Common Stock. Any future
payment of dividends is subject to the discretion of the Company's Board of
Directors, which may consider the Company's earnings and financial condition and
such other factors as it deems relevant. In addition, the New Credit Agreement
and the Indentures contain certain restrictions on the Company's payment of
dividends. The Company does not intend to pay any cash dividends in the
foreseeable future.
11
<PAGE> 16
CAPITALIZATION
The following table sets forth the capitalization of the Company at July 1,
1995, after giving effect on a pro forma basis to the AIH Acquisition and the
incurrence of indebtedness under the New Credit Agreement to finance such
acquisition, and as adjusted to reflect the Offerings contemplated hereby and
the application of the net proceeds to the Company therefrom. See "Use of
Proceeds" and "Pro Forma Financial Data."
<TABLE>
<CAPTION>
AS OF JULY 1, 1995
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Short-term debt:
Short-term borrowings................................... $ 19.2 $ 19.2 $ 19.2
Current maturities of long-term debt.................... 1.7 5.6 (1) 5.6
------ -------- ---------
Total short-term debt................................ 20.9 24.8 24.8
------ -------- ---------
Long-term debt, less current portion:
Term loans.............................................. 5.8 5.8 5.8
Revolving credit loans.................................. 160.0 1,073.8 (2) 799.6(5)
Loans from governmental agencies........................ 24.3 27.2 (1) 27.2
Other, including long-term notes payable and capital
lease obligations.................................... -- 13.4 (1) 13.4
11 1/4% Senior Subordinated Notes due 2000.............. 125.0 125.0 125.0
8 1/4% Subordinated Notes due 2002...................... 145.0 145.0 145.0
------ -------- ---------
Total long-term debt, less current portion........... 460.1 1,390.2 1,116.0
------ -------- ---------
Stockholders' equity:
Common stock, par value $.01 per share; 150,000,000
shares authorized, 46,142,594 shares issued
(56,142,594 after adjustment for the Offerings)...... .5 .5 .6(6)
Additional paid-in capital.............................. 274.4 276.3 (3) 550.4(6)
Notes receivable from sale of Common Stock.............. (1.0) (1.0) (1.0)
Treasury stock, 10,230 shares of Common Stock........... (.1) (.1) (.1)
Retained deficit........................................ (3.6) (6.3)(4) (6.3)
Cumulative translation adjustment....................... (17.9) (17.9) (17.9)
Minimum pension liability adjustment.................... (5.8) (5.8) (5.8)
------ -------- ---------
Total stockholders' equity........................... 246.5 245.7 519.9
------ -------- ---------
Total capitalization............................... $727.5 $1,660.7 $ 1,660.7
====== ======== ========
</TABLE>
-------------------------
(1) Reflects debt assumed in connection with the AIH Acquisition.
(2) Reflects borrowings under the New Credit Agreement of: (i) $623.8 million to
purchase all the common stock of AIH, (ii) $262.1 million to retire certain
debt assumed in connection with the AIH Acquisition, and (iii) $27.9 million
to pay estimated fees and expenses related to the AIH Acquisition and the
refinancing of the Prior Credit Facility.
(3) Reflects the issuance of options originally granted under the Automotive
Industries Holding, Inc. 1992 Key Employee Stock Option Plan which were
converted into options to purchase Common Stock in connection with the AIH
Acquisition (the "AIH Option Conversion").
(4) Reflects the write-off of deferred finance fees of $4.2 million related to
the refinancing of the Prior Credit Facility, net of the tax benefit of
these expenses of $1.5 million.
(5) Reflects the application of the net proceeds of the Offerings to the Company
to repay indebtedness under the New Credit Agreement.
(6) Reflects issuance of 10 million shares in the Offerings at $28 5/8 per
share, the reported last sale price of the Common Stock on the New York
Stock Exchange Composite Tape as of August 31, 1995, net of $12.0 million in
estimated fees and expenses.
12
<PAGE> 17
PRO FORMA FINANCIAL DATA
The following pro forma unaudited consolidated statements of operations of
the Company were prepared to illustrate the estimated effects of (i) the AIH
Acquisition (including the refinancing of certain debt of AIH pursuant to the
New Credit Agreement), (ii) the FSB Acquisition, (iii) certain acquisitions
completed by AIH prior to the acquisition of AIH by the Company, (iv) the
initial public offering of Common Stock by the Company (the "IPO") and the
application of the net proceeds therefrom in April 1994, (v) the refinancing of
the Subordinated Debentures with the net proceeds from the issuance of the
Subordinated Notes, (vi) the refinancing of the Prior Credit Facility with
borrowings under the New Credit Agreement and (vii) the Offerings contemplated
hereby and the application of the net proceeds to the Company therefrom to repay
indebtedness incurred pursuant to the New Credit Agreement to finance the AIH
Acquisition (collectively, the "Pro Forma Transactions"), as if the Pro Forma
Transactions had occurred on January 1, 1994.
The following pro forma unaudited consolidated balance sheet (collectively
with the pro forma unaudited consolidated statements of operations, the "Pro
Forma Statements") was prepared as if the AIH Acquisition, the acquisition of
Plastifol by AIH and the Offerings contemplated hereby and the application of
the net proceeds therefrom to repay indebtedness incurred pursuant to the New
Credit Agreement to finance the AIH Acquisition had occurred as of July 1, 1995.
The Pro Forma Statements do not purport to represent (i) the actual results
of operations or financial position of the Company had the Pro Forma
Transactions occurred on the dates assumed or (ii) the results to be expected in
the future.
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, AIH, FSB and Plastifol,
including the notes thereto, and the other financial information pertaining to
the Company, AIH, FSB and Plastifol, including the information set forth in
"Capitalization" and related notes thereto, included elsewhere or incorporated
by reference in this Prospectus.
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JULY 1, 1995
<TABLE>
<CAPTION>
AIH OPERATING AND
LEAR AIH ACQUISITIONS AIH AIH FINANCING
HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA ADJUSTMENTS PRO FORMA
---------- ------------- -------------- -------------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $ 2,186.1 $ 377.1 $ 49.1 $ -- $ 426.2 $ -- $2,612.3
Cost of sales............ 2,014.7 304.1 36.4 -- 340.5 -- 2,355.2
--------- ------- ------ ------ ------- ------- --------
Gross profit............. 171.4 73.0 12.7 -- 85.7 -- 257.1
Selling, general and
administrative
expenses............... 50.1 24.9 4.2 -- 29.1 (0.4)(4) 78.8
Amortization............. 6.4 2.6 -- .5 3.1 4.7(5) 14.2
--------- ------- ------ ------ ------- ------- --------
Operating income......... 114.9 45.5 8.5 (.5) 53.5 (4.3) 164.1
Interest expense......... 28.5 9.0 -- 2.1 11.1 13.8(6) 53.4
Other expense, net....... 5.8 -- -- -- -- -- 5.8
--------- ------- ------ ------ ------- ------- --------
Income before income
taxes.................. 80.6 36.5 8.5 (2.6) 42.4 (18.1) 104.9
Income taxes............. 34.7 14.6 4.3 (.7) 18.2 (4.7)(7) 48.2
--------- ------- ------ ------ ------- ------- --------
Net income............... $ 45.9 $ 21.9 $ 4.2 $ (1.9) $ 24.2 $ (13.4) $ 56.7
========= ======= ====== ====== ======= ======= ========
Net income per share..... $ .92 $ .95
Weighted average shares
outstanding (in
millions).............. 49.6 10.1(8) 59.7
</TABLE>
13
<PAGE> 18
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
AIH
LEAR FSB FSB LEAR/FSB AIH ACQUISITIONS AIH AIH
HISTORICAL HISTORICAL(9) ADJUSTMENTS(10) PRO FORMA HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS(3) PRO FORMA
---------- ------------- --------------- --------- ------------- --------------- -------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....... $3,147.5 $ 451.1 $ 4.8 $3,603.4 $512.8 $239.4 $ -- $752.2
Cost of sales... 2,883.9 443.9 (1.0) 3,326.8 408.9 210.7 (1.8) 617.8
-------- ------ ----- -------- ------ ------ ------ ------
Gross profit.... 263.6 7.2 5.8 276.6 103.9 28.7 1.8 134.4
Selling, general
and
administrative
expenses...... 82.6 31.5 (5.5) 108.6 35.3 14.4 (2.9) 46.8
Amortization.... 11.4 -- 2.0 13.4 4.7 -- 1.5 6.2
-------- ------ ----- -------- ------ ------ ------ ------
Operating income
(loss)........ 169.6 (24.3) 9.3 154.6 63.9 14.3 3.2 81.4
Interest
expense....... 46.7 5.3 4.4 56.4 9.3 (.3) 8.7 17.7
Other expense
(income),
net........... 8.1 .8 -- 8.9 -- (.2) .3 .1
-------- ------ ----- -------- ------ ------ ------ ------
Income (loss)
before income
taxes......... 114.8 (30.4) 4.9 89.3 54.6 14.8 (5.8) 63.6
Income taxes.... 55.0 .2 (1.5) 53.7 21.9 3.5 (1.7) 23.7
-------- ------ ----- -------- ------ ------ ------ ------
Net income
(loss)........ $ 59.8 $(30.6) $ 6.4 $ 35.6 $ 32.7 $ 11.3 $ (4.1) $ 39.9
======== ====== ===== ======== ====== ====== ====== ======
Net income per
share......... $ 1.26
Weighted average
shares
outstanding
(in
millions)..... 47.4
</TABLE>
<TABLE>
<CAPTION>
OPERATING AND
LEAR/FSB AIH FINANCING
PRO FORMA PRO FORMA ADJUSTMENTS PRO FORMA
--------- --------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales........................................... $3,603.4 $752.2 $ -- $4,355.6
Cost of sales....................................... 3,326.8 617.8 -- 3,944.6
-------- ------ ----- --------
Gross profit........................................ 276.6 134.4 -- 411.0
Selling, general and administrative expenses........ 108.6 46.8 (.6)(4) 154.8
Amortization........................................ 13.4 6.2 9.5 (5) 29.1
-------- -------- ----- --------
Operating income.................................... 154.6 81.4 (8.9) 227.1
Interest expense.................................... 56.4 17.7 10.8 (6) 84.9
Other expense, net.................................. 8.9 .1 -- 9.0
-------- -------- ----- --------
Income before income taxes.......................... 89.3 63.6 (19.7) 133.2
Income taxes........................................ 53.7 23.7 (3.6)(7) 73.8
-------- -------- ------ --------
Net income.......................................... $ 35.6 $ 39.9 $(16.1) $ 59.4
======== ======== ====== ========
Net income per share................................ $ 1.00
Weighted average shares outstanding (in millions)... 12.2 (8) 59.6
</TABLE>
-------------------------
(1) The AIH Historical information represents the audited results of operations
for the year ended December 31, 1994 and the unaudited results of
operations for the six months ended July 1, 1995.
(2) The AIH Acquisitions Historical information reflects the combined results
of operations for three companies acquired by AIH prior to their respective
acquisitions by AIH. The AIH Acquisitions Historical information for the
year ended December 31, 1994 reflects the results of operations of (i) John
Cotton Limited ("Cotton") headquartered in Manchester, England and acquired
in May 1994, (ii) the Gulfstream Division of O'Sullivan Corporation
("Gulfstream") located in Ohio and Virginia and acquired in December 1994,
and (iii) Plastifol headquartered in Ebersberg, Germany and acquired in
July 1995. The AIH Acquisitions Historical information for the six months
ended July 1, 1995 reflects the results of operations of Plastifol.
(3) The AIH Adjustments information with respect to the Cotton, Gulfstream and
Plastifol acquisitions represents (i) adjustments to depreciation expense
due to the revaluation of assets; (ii) reclassifications needed to present
information on a basis that is consistent with the AIH Historical
information; (iii) the elimination of management fees charged by a previous
owner of Gulfstream; (iv) interest on borrowings by AIH to finance the
acquisitions; and (v) the related income tax effects.
(4) Represents the elimination of certain management fees charged to AIH by an
affiliate of AIH which ceased to be payable upon the completion of the AIH
Acquisition.
14
<PAGE> 19
(5) The adjustment to goodwill for the AIH Acquisition represents the
following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Amortization of goodwill from the AIH Acquisition................. $ 7.3 $14.7
Elimination of the historical goodwill amortization of AIH........ (2.6) (5.2)
------ ------
$ 4.7 $ 9.5
====== ======
</TABLE>
(6) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JULY 1, 1995 DECEMBER 31, 1994
---------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Reduction of interest due to application of the proceeds from the
Offerings........................................................ $ (9.9) $ (14.0)
Estimated interest on borrowings to finance the AIH Acquisition at
interest rates of 7.2% in the first six months of 1995 and 5.1%
for the year ended December 31, 1994............................. 32.6 46.2
Elimination of interest on AIH debt being refinanced............... (10.1) (18.6)
Reduction in interest due to application of proceeds from the
IPO.............................................................. -- (1.2)
Elimination of interest on the Subordinated Debentures............. -- (3.3)
Interest on the Subordinated Notes................................. -- 1.1
Interest on borrowings to finance fees and expenses related to the
New Credit Agreement............................................. .3 .5
Change in commitment fees due to increased availability under the
New Credit Agreement............................................. .4 .9
Change in interest expense due to rate differences between the
Prior Credit Facility and the New Credit Agreement............... .2 (1.6)
Change in deferred finance fees due to the refinancing of the Prior
Credit Facility and the issuance of the Subordinated Notes....... .3 .8
------ -------
$ 13.8 $ 10.8
====== =======
</TABLE>
(7) Reflects the income tax effects of the operating and financing adjustments.
(8) Reflects the issuance of 10 million shares of Common Stock pursuant to the
Offerings, the effect on weighted average shares outstanding of the AIH
Option Conversion and the effect on weighted average shares outstanding had
the IPO occurred on January 1, 1994.
(9) The FSB Historical information for the year ended December 31, 1994
represents the results of operations of FSB translated from lira to U.S.
dollars at an average exchange rate of 1,611 lira to one U.S. dollar.
(10) The FSB Adjustments information represents (i) management's estimates of
the effects of product pricing adjustments negotiated in connection with
the FSB Acquisition of $4.8 million; (ii) the elimination of certain costs
being assumed by the seller of $1.5 million; (iii) an increase in
depreciation expense due to the revaluation of the assets of $.5 million;
(iv) on-going savings of $3.5 million as a result of consolidating
technical centers; (v) the elimination of management fees charged by the
parent of the seller of $2.0 million; (vi) amortization of goodwill as a
result of the FSB Acquisition of $2.0 million; (vii) an increase in
interest expense to finance the FSB Acquisition of $4.4 million; and (viii)
the related income tax effects of $1.5 million. The results from operations
of FSB for the six months ended July 1, 1995 are included in the historical
results of the Company.
15
<PAGE> 20
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF JULY 1, 1995
<TABLE>
<CAPTION>
OPERATING
ACQUISITION AND AND
LEAR AIH AIH AIH VALUATION OF FINANCING
HISTORICAL HISTORICAL ACQUISITIONS(1) ADJUSTED AIH(2) ADJUSTMENTS PRO FORMA
---------- ---------- -------------- -------- ---------------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash....................... $ 53.0 $ -- $ -- $ -- $(904.3) $904.3(3) $ 53.0
Accounts receivable, net... 700.2 123.2 9.8 133.0 -- -- 833.2
Inventories................ 111.0 42.0 4.8 46.8 -- -- 157.8
Other current assets....... 94.9 40.6 0.4 41.0 -- -- 135.9
-------- ------ ----- ------ ------- ------- --------
959.1 205.8 15.0 220.8 (904.3) 904.3 1,179.9
-------- ------ ----- ------ ------- ------- --------
Property, Plant and
Equipment, net............. 363.9 233.4 21.3 254.7 -- -- 618.6
Other Assets:
Goodwill and other
intangibles, net......... 494.4 146.4 39.1 185.5 404.0 -- 1,083.9
Deferred finance fees and
other.................... 37.7 25.7 3.1 28.8 -- 5.3(4) 71.8
-------- ------ ----- ------ ------- ------- --------
532.1 172.1 42.2 214.3 404.0 5.3 1,155.7
-------- ------ ----- ------ ------- ------- --------
$1,855.1 $611.3 $ 78.5 $689.8 $(500.3) $909.6 $2,954.2
======== ====== ====== ====== ======= ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Short-term borrowings...... $ 19.2 $ -- $ -- $ -- $ -- $ -- $ 19.2
Cash overdrafts............ 55.2 -- -- -- -- -- 55.2
Accounts payable........... 766.0 75.4 5.2 80.6 -- -- 846.6
Accrued liabilities........ 199.5 38.3 5.4 43.7 -- (1.5)(4) 241.7
Current portion of
long-term debt........... 1.7 3.9 -- 3.9 -- -- 5.6
-------- ------ ----- ------ ------- ------ --------
1,041.6 117.6 10.6 128.2 -- (1.5) 1,168.3
-------- ------ ----- ------ ------- ------ --------
Long-Term Liabilities:
Long-term debt............. 460.1 221.1 60.0 281.1 (264.8) 639.6 (5) 1,116.0
Deferred national income
taxes.................... 24.3 4.4 7.9 12.3 -- -- 36.6
Other...................... 82.6 26.9 -- 26.9 3.9 -- 113.4
-------- ------ ----- ------ ------- ------ --------
567.0 252.4 67.9 320.3 (260.9) 639.6 1,266.0
-------- ------ ----- ------ ------- ------ --------
Stockholders' Equity......... 246.5 241.3 -- 241.3 (239.4) 271.5 (6) 519.9
-------- ------ ----- ------ ------- ------ --------
$1,855.1 $611.3 $78.5 $689.8 $ (500.3) $909.6 $2,954.2
======== ====== ===== ====== ======== ====== ========
</TABLE>
-------------------------
(1) Represents the allocation of the purchase price to net assets of Plastifol
which was acquired by AIH in July 1995.
(2) Assumes a purchase price of $926.4 million which consists of: (i) $625.7
million to purchase all of the common stock of AIH ($623.8 million in cash
and $1.9 million in stock options granted pursuant to the AIH Option
Conversion), (ii) $282.3 million of debt assumed in connection with the AIH
Acquisition, and (iii) $18.4 million to estimated pay fees and expenses
related to the AIH Acquisition. The AIH Acquisition was accounted for using
the purchase method of accounting and the total purchase cost was allocated
first to assets and liabilities based on their respective fair values, with
the remainder allocated to goodwill. The allocation of the purchase price
above is based on historical costs and management's estimates which may
differ from the final allocation.
(3) Reflects proceeds of borrowings under the New Credit Agreement of $904.3
million.
(4) Reflects the capitalization of fees incurred in establishing the New Credit
Agreement of $9.5 million, net of the unamortized portion of fees from the
Prior Credit Facility of $4.2 million being written-off. Also reflects the
related income tax benefit of $1.5 million from the write-off.
(5) Reflects borrowings under the New Credit Agreement of $913.8 million to
finance the AIH purchase price and fees and expenses incurred to establish
the New Credit Agreement, reduced by the net proceeds of the Offerings of
$274.2 million.
(6) Reflects issuance of the 10 million shares pursuant to the Offerings at
$28 5/8 per share, the reported last sale price of the Common Stock on the
New York Stock Exchange Composite Tape on August 31, 1995, net of $12.0
million in fees and expenses and the write-off of deferred finance fees, net
of income taxes, of $2.7 million related to the refinancing of the Prior
Credit Facility.
16
<PAGE> 21
SELECTED FINANCIAL DATA OF THE COMPANY
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 each of the fiscal years ended December 31, 1994
and 1993 and June 30, 1993, 1992, 1991 and 1990 have been audited by Arthur
Andersen LLP. The consolidated financial statements of the Company for the six
months ended July 1, 1995 and July 2, 1994 are unaudited; however, in the
Company's opinion, they reflect all adjustments, consisting only of normal
recurring items, necessary for a fair presentation of the financial position and
results of operations of such periods. The results for the six months ended July
1, 1995 are not necessarily indicative of the results to be expected for the
full fiscal year. The selected financial data below should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto incorporated by reference in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of the
Company."
LEAR SEATING CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED
------------------- ------------------------------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992 1991 1990
-------- -------- ------------ ------------ -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......................... $2,186.1 $1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7 $1,085.3 $1,067.9
Gross profit...................... 171.4 128.6 263.6 170.2 152.5 115.6 101.4 104.7
Selling, general and
administrative expenses......... 50.1 38.3 82.6 62.7 61.9 50.1 41.6 28.2
Incentive stock and other
compensation expense............ -- -- -- 18.0 -- -- 1.3 1.4
Amortization...................... 6.4 5.7 11.4 9.9 9.5 8.7 13.8 13.8
-------- -------- ------------ ------------ -------- -------- -------- --------
Operating income.................. 114.9 84.6 169.6 79.6 81.1 56.8 44.7 61.3
Interest expense(1)............... 28.5 25.0 46.7 45.6 47.8 55.2 61.7 61.2
Other expense, net(2)............. 5.8 4.6 8.1 9.2 5.4 5.8 2.2 4.1
-------- -------- ------------ ------------ -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary items......... 80.6 55.0 114.8 24.8 27.9 (4.2) (19.2) (4.0)
Income taxes...................... 34.7 27.3 55.0 26.9 17.8 12.9 14.0 16.6
-------- -------- ------------ ------------ -------- -------- -------- --------
Net income (loss) before
extraordinary items............. 45.9 27.7 59.8 (2.1) 10.1 (17.1) (33.2) (20.6)
Extraordinary items............... -- -- -- (11.7) -- (5.1) -- --
-------- -------- ------------ ------------ -------- -------- -------- --------
Net income (loss)................. $ 45.9 $ 27.7 $ 59.8 $ (13.8) $ 10.1 $ (22.2) $ (33.2) $ (20.6)
======= ======= ========= ========= ======= ======= ======= =======
Net income (loss) per share before
extraordinary items............. $ .92 $ .61 $ 1.26 $ (.06) $ .25 $ (.62) $ (2.01) $ (1.25)
Net income (loss) per share....... $ .92 $ .61 $ 1.26 $ (.39) $ .25 $ (.80) $ (2.01) $ (1.25)
Weighted average shares
outstanding (in millions)....... 49.6 45.6 47.4 35.5 40.0 27.8 16.5 16.5
BALANCE SHEET DATA:
Current assets.................... $ 959.1 $ 557.2 $ 818.3 $ 433.6 $ 325.2 $ 282.9 $ 213.8 $ 223.2
Total assets...................... 1,855.1 1,217.2 1,715.1 1,114.3 820.2 799.9 729.7 747.6
Current liabilities............... 1,041.6 593.4 981.2 505.8 375.0 344.2 287.1 254.5
Long-term debt.................... 460.1 383.5 418.7 498.3 321.1 348.3 386.7 402.8
Stockholders' equity.............. 246.5 184.0 213.6 43.2 75.1 49.4 4.4 35.3
OTHER DATA:
EBITDA(3)......................... $ 152.0 $ 111.5 $ 225.7 $ 122.2 $ 121.8 $ 91.8 $ 81.4 $ 94.3
Capital expenditures.............. $ 42.6 $ 35.0 $ 103.1 $ 45.9 $ 31.6 $ 27.9 $ 20.9 $ 14.9
North American content per
vehicle(4)...................... $ 193 $ 159 $ 169 $ 112 $ 98 $ 94 $ 84 $ 77
European content per vehicle(5)... $ 90 $ 38 $ 48 $ 38 $ 37 $ 21 $ 11 $ 8
Inventory turnover ratio(6)....... 36.0 36.0 36.7 30.3 25.6 27.4
</TABLE>
-------------------------
(1) Includes non-cash charges for amortization of deferred financing fees of
approximately $1.2 million, $1.2 million, $2.4 million, $2.6 million, $3.0
million, $3.2 million, $4.1 million and $4.5 million for the six months
ended July 1, 1995 and July 2, 1994 and for each of the years ended December
31, 1994 and 1993 and June 30, 1993 through June 30, 1990, respectively.
(2) Consists of foreign currency exchange gain or loss, minority interest in net
income of subsidiaries, equity in (income) loss of affiliates, state and
local taxes and other expense.
(3) "EBITDA" is operating income plus amortization and depreciation. 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.
(4) "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" comprises car and light truck production in the United
States, Canada and Mexico estimated by the Company from industry sources.
(5) "European content per vehicle" is the Company's net sales in Western Europe
divided by total Western European vehicle production. "Western European
vehicle production" comprises car and light truck production in Western
Europe estimated by the Company from industry sources.
(6) "Inventory turnover ratio" is cost of goods sold divided by average
inventory. The inventory turnover ratios for the years ended December 31,
1994 and December 31, 1993 exclude the effects of the FSB Acquisition and
the NAB Acquisition, respectively.
17
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
RESULTS OF OPERATIONS
Lear's sales have grown rapidly, both internally and through acquisitions,
from approximately $159.8 million in the fiscal year ended June 30, 1983 to
approximately $3.1 billion in the year ended December 31, 1994, a compound
annual growth rate of approximately 30%. As a result of this growth, the Company
has experienced substantial upfront costs for new programs and new facilities.
Such expenses consist of administrative expenses and engineering and design
expenses for new seating programs, including pre-production expenses and
inefficiencies incurred until the customer reaches normal operating levels. The
Company expenses such non-recurring pre-production expenses as they are
incurred.
The Company's performance is dependent on automotive vehicle production,
which is seasonal in nature. The third calendar quarter is historically the
weakest vehicle production quarter due to the impact of plant shutdowns for
vacation and model changeovers which affect automotive production in both North
America and Europe. See Note 19 to the consolidated financial statements of the
Company incorporated by reference in this Prospectus.
In February 1994, the Company changed its fiscal year end from June 30 to
December 31, effective December 31, 1993.
The following chart shows operating results of the Company by principal
geographic area.
GEOGRAPHIC OPERATING RESULTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
---------------------- ----------------------------------------------------
JULY 1, JULY 2, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994 1994 1993 1993 1992
-------- --------- ------------ ------------ -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET SALES:
United States................ $1,001.4 $ 968.0 $1,805.3 $ 981.2 $ 765.7 $ 597.1
Canada....................... 445.7 198.9 573.4 375.8 372.0 403.3
Europe....................... 625.0 241.2 572.5 403.8 432.5 268.2
Mexico and other............. 114.0 100.8 196.3 189.5 186.3 154.1
-------- --------- ------------ ------------ -------- --------
Net sales.................. $2,186.1 $ 1,508.9 $3,147.5 $1,950.3 $1,756.5 $1,422.7
======= ======= ========== ========== ======= =======
OPERATING INCOME (LOSS):
United States................ $ 53.9 $ 70.0 $ 109.3 $ 61.3 $ 51.8 $ 32.0
Canada....................... 49.8 5.4 46.3 25.6 15.3 14.7
Europe....................... 2.0 2.7 4.4 (9.6) (3.9) 3.0
Mexico and other............. 9.2 6.5 9.6 20.3 17.9 7.1
Unallocated corporate
expense(1)................. -- -- -- (18.0) -- --
-------- --------- ------------ ------------ -------- --------
Operating income........... $ 114.9 $ 84.6 $ 169.6 $ 79.6 $ 81.1 $ 56.8
======= ======= ========== ========== ======= =======
</TABLE>
-------------------------
(1) Unallocated corporate expense consists of incentive stock option expense and
other one-time compensation expense.
Six Months Ended July 1, 1995 Compared With Six Months Ended July 2, 1994
Net sales increased by 44.9% to $2,186.1 million in the first six months of
1995 as compared to $1,508.9 million in the first six months of 1994. Sales for
the six month period ended July 1, 1995 benefited from incremental volume on
mature seating programs in North America and Europe, new business in the United
States and Europe and the FSB Acquisition in December 1994. For the first six
months of 1995, FSB accounted for 9.9% of the Company's net sales.
18
<PAGE> 23
Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $171.4 million and 7.8%, respectively, for
the six month period ended July 1, 1995 as compared to $128.6 and 8.5%,
respectively, for the comparable period in the prior year. Gross profit in the
first six months of 1995 surpassed gross profit for the first six months of 1994
due to increased production volumes on passenger car and truck seat programs by
domestic and foreign automotive manufacturers. The increase in gross profit was
offset by, and the lower gross margin resulted from, new program start-up
expenses in North America, low profitability at FSB, increased engineering costs
and pre-production and facility expenses associated with new foreign ventures.
Selling, general and administrative expenses for the six months ended July
1, 1995 decreased as a percentage of net sales to 2.3% from 2.5% in the
comparable period in the prior year. The increase in actual expenditures from
$38.3 million to $50.1 million was largely the result of the FSB Acquisition,
administrative support expenses and design and development costs associated with
the expansion of business and expenses related to new business opportunities.
Operating income and operating margin (operating income as a percentage of
sales) were $114.9 million and 5.3%, respectively, for the first six months of
1995 as compared to $84.6 million and 5.6%, respectively, for the first six
months of 1994. The growth in operating income was primarily due to incremental
volume on new and mature seat programs in the United States, Canada and Europe
and improved performance in Mexico. Partially offsetting the increase in
operating income were increased engineering and support expenses, costs
associated with recently opened facilities in North America and losses related
to FSB's operations. Non-cash depreciation and amortization charges were $37.1
million and $26.9 million for the first half of the current and prior years,
respectively. During the six month period ended July 1, 1995, interest expense
increased to $28.5 million as compared to $25.0 million in the six month period
ended July 2, 1994. The increase is primarily due to the additional debt
incurred to finance the FSB Acquisition in addition to slightly higher interest
rates under the Prior Credit Facility.
Primarily as a result of foreign currency exchange fluctuations, other
expense, including state and local taxes, foreign exchange, minority interests
and equity in income of affiliates, increased in comparison to the prior period.
During the six months ended July 1, 1995, the provision for income taxes
was $34.7 million or 43.1% of pre-tax income as compared to $27.3 million or
49.6% of pre-tax income in the six month period ended July 2, 1994. The decrease
in the rate compared to the previous period is due primarily to changes in
operating performance and related income levels among the various tax
jurisdictions.
Year Ended December 31, 1994 Compared With Year Ended December 31, 1993
Net sales of $3,147.5 million in the year ended December 31, 1994
represents the thirteenth consecutive year of record sales and surpassed sales
of $1,950.3 million in the year ended December 31, 1993 by $1,197.2 million or
61.4%. Sales in 1994 benefited from internal growth from new programs and
increased seat content per vehicle, higher automotive production in the United
States and Europe and the NAB Acquisition, which accounted for $421.0 million of
the increase.
Gross profit and gross margin were $263.6 million and 8.4%, respectively,
in the year ended December 31, 1994 as compared to $170.2 million and 8.7%,
respectively, in the year ended December 31, 1993. Gross profit in 1994
surpassed gross profit in 1993 due to the benefit of higher sales volume,
including the effect of the NAB Acquisition and the Company's cost reduction
programs.
Partially offsetting the increase in gross profit were $23.1 million of
expense for engineering and pre-production costs for new facilities in the
United States, Canada and Europe, lower margin contribution in Mexico and the
$3.9 million increase in postretirement health care expenses (SFAS 106).
Selling, general and administrative expenses as a percentage of net sales
declined to 2.6% for the year ended December 31, 1994 as compared to 3.2% in the
prior year. The increase in actual expenditures was largely the result of
administrative support expenses and research and development costs associated
with the expansion of domestic and foreign business and expenses related to new
business opportunities.
19
<PAGE> 24
Operating income and operating margin were $169.6 million and 5.4%,
respectively, in the year ended December 31, 1994 and $79.6 million and 4.1%,
respectively, in the year ended December 31, 1993. The 113.1% increase in
operating income was attributable to the benefits of higher sales volume,
including the effect of the NAB Acquisition, non-recurring incentive stock and
other compensation expense of $18.0 million in 1993 and the Company's cost
reduction programs.
Partially offsetting the increase in operating income were new facility and
engineering costs for future seat programs, reduced margins in Mexico and the
effect of the adoption of SFAS 106. Non-cash depreciation and amortization
charges were $56.1 million and $42.6 million, respectively, for the years ended
December 31, 1994 and 1993. Other expense for the year ended December 31, 1994,
including state and local taxes, foreign exchange gains and losses, minority
interests and equity in income of affiliates, decreased in comparison to the
prior year as the non-recurring write-off of equipment associated with a
discontinued program in Germany and non-seating related assets in the United
States, along with a foreign exchange gain, offset state and local tax expense
associated with the NAB Acquisition. Interest expense in 1994 increased in
relation to 1993 as additional debt incurred to finance the NAB Acquisition and
higher short-term interest expense in Europe offset the benefits derived from
the refinancing of subordinated debt at a lower interest rate and the Company's
IPO in April 1994.
Net income for the year ended December 31, 1994 was $59.8 million, or $1.26
per share, as compared to a net loss of $13.8 million, or $.39 per share,
realized in the year ended December 31, 1993. The net income of $59.8 million in
1994 reflects a $55.0 million provision for national income taxes of which $26.0
million relates to foreign operations. Further contributing to the improvement
in 1994 net income was the extraordinary expense in 1993 of $11.7 million for
the early extinguishment of debt.
United States Operations
Net sales in the United States increased by 84.0% from $981.2 million in
the year ended December 31, 1993 to $1,805.3 million for the year ended December
31, 1994. Sales for the year ended December 31, 1994 benefited from the full
year contribution of the NAB Acquisition, vehicle production increases on mature
seating programs, incremental volume on new Chrysler truck and Ford passenger
car programs and sales generated by a lead vendor program under which the
Company assumed management of components for a seat program with Ford.
Operating income and operating margin were $109.3 million and 6.1%,
respectively, in the year ended December 31, 1994 and $61.3 million and 6.2%,
respectively, in the year ended December 31, 1993. Operating income in 1994 as
compared to the prior year benefited from the NAB Acquisition, the overall
increase in vehicle production and cost reduction programs which offset new
program costs for new facilities, administrative expenses associated with the
expansion of business and increased research and development expenses.
Canadian Operations
Net sales in Canada increased by 52.6% to $573.4 million in the year ended
December 31, 1994 compared to $375.8 million in the year ended December 31,
1993. Sales in 1994 reflect the benefit of a new Ford truck program introduced
in February 1994, the relocation of an NAB passenger car program from Mexico and
slightly higher volumes on mature seat programs which offset downtime associated
with a General Motors plant conversion for a replacement mid-size passenger car.
Initial production of the replacement program began in February 1994 with
attainment of targeted production levels in the second quarter of 1994.
Operating income and operating margin in Canada were $46.3 million and
8.1%, respectively, in the year ended December 31, 1994 and $25.6 million and
6.8%, respectively, in the year ended December 31, 1993. The growth in operating
income and operating margin was due to the benefits derived from higher sales
volume on mature seating programs, cost reduction programs and improved
operating performance at start-up seat facilities.
20
<PAGE> 25
European Operations
Net sales in Europe increased by 41.8% to $572.5 million for the year ended
December 31, 1994 compared to $403.8 million for the year ended December 31,
1993. The sales increase was due primarily to the addition of new seat programs
in Germany and England and vehicle production increases on established programs
in Germany, Sweden and Austria.
Operating income in Europe was $4.4 million in the fiscal year ended
December 31, 1994 compared to an operating loss of $9.6 million sustained in the
year ended December 31, 1993. Operating income in 1994 as compared to the prior
year benefited from the higher sales levels and cost reduction programs at
existing seat and seat component facilities. Partially offsetting the increase
in operating income were incremental costs associated with the start-up of a new
seat facility in England and the introduction of a replacement component program
within an established facility in Germany.
Mexican Operations
Net sales in Mexico were $196.3 million in the year ended December 31, 1994
and $189.5 million in the year ended December 31, 1993. Sales for the year ended
December 31, 1994 surpassed the prior year due to new Chrysler truck and Ford
passenger car seat programs and incremental volume on mature Ford programs.
Partially offsetting the increase in net sales was the product phase out of a
mature truck program and participation in customer cost reduction programs.
Operating income and operating margin in Mexico were $10.2 million and
5.2%, respectively, in the year ended December 31, 1994 and $20.3 million and
10.7%, respectively, in the prior year. Operating income and operating margin in
1994 declined in relation to the prior year as a result of the Company's
participation in customer cost reduction programs and costs associated with the
introduction of replacement products at new and established facilities.
Year Ended June 30, 1993 Compared With Year Ended June 30, 1992
Net sales of $1,756.5 million in the fiscal year ended June 30, 1993
increased $333.8 million or 23.5% over the fiscal year ended June 30, 1992. The
increase was due to 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 January 1992, and incremental volume on domestic and Mexican
programs.
Gross profit and gross margin were $152.5 million and 8.7%, respectively,
in the fiscal year ended June 30, 1993 and $115.6 million and 8.1%,
respectively, in the fiscal year ended June 30, 1992. Gross profit increased 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 effects on sales and a retroactive price increase recognized in
the first and second quarters of the fiscal year ended June 30, 1992.
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.
Operating income and operating margin were $81.1 million and 4.6%,
respectively, in the fiscal year ended June 30, 1993, compared to $56.8 million
and 4.0%, respectively, in the fiscal year ended June 30, 1992. The growth in
operating income 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 introduced after June 30, 1993, plant shutdown costs and
21
<PAGE> 26
non-recurring prior fiscal year adjustments noted above. Non-cash depreciation
and amortization charges were $40.7 million in the fiscal year ended June 30,
1993 and $35.0 million in the fiscal year ended June 30, 1992.
Interest expense in the fiscal year ended June 30, 1993 declined in
relation to the fiscal year ended June 30, 1992 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 capital infusions made on September 27,
1991 and July 30, 1992.
Other expense, including state and local taxes, foreign exchange gains or
losses, 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 than offset by the
expense portion of non-recurring capitalization and related costs of $3.2
million associated with a capital raising transaction completed on September 27,
1991.
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.
United States Operations
Net sales in the United States were $765.7 million and $597.1 million in
the fiscal years ended June 30, 1993 and 1992, respectively. Net sales in fiscal
1993 surpassed the prior year 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.
Operating income and operating margin were $51.8 million and 6.8%,
respectively, in the fiscal year ended June 30, 1993 and $32.0 million and 5.4%,
respectively, in the fiscal year ended June 30, 1992. 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 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.
Canadian Operations
Net sales from Canadian operations were $372.0 million in the fiscal year
ended June 30, 1993 and $403.3 million in the fiscal year ended June 30, 1992.
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.
Operating income and operating margin were $15.3 million and 4.1%,
respectively, in the fiscal year ended June 30, 1993 and $14.7 million and 3.6%,
respectively, in the fiscal year ended June 30, 1992. Operating income in the
fiscal year ended June 30, 1993 benefited 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 new Ford seating program.
European Operations
Net sales in Europe were $432.5 million in the fiscal year ended June 30,
1993 and $268.2 million in the fiscal year ended June 30, 1992. Net sales in
fiscal 1993 exceeded net sales in the prior 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
22
<PAGE> 27
increase in net sales were reduced vehicle production schedules for established
seating programs in Sweden and unfavorable exchange rate fluctuations.
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. 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
were 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 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 the full year contribution of facilities in Sweden and Finland of
which the Company assumed control in the fiscal year ended June 30, 1992.
Mexican Operations
Net sales in Mexico were $186.3 million in the fiscal year ended June 30,
1993 and $154.1 million in the fiscal year ended June 30, 1992. Net sales
increased 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%, respectively, in the fiscal year ended June 30, 1993 and $7.1 million and
4.6%, respectively, in the fiscal year ended June 30, 1992. 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.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the AIH Acquisition, the Company entered into a $1.5
billion secured revolving credit agreement with Chemical Bank and a syndicate of
financial institutions (the "New Credit Agreement"), the purpose of which was to
finance the AIH Acquisition, to refinance a portion of the existing indebtedness
of AIH, to refinance the Company's prior $500 million credit facility (the
"Prior Credit Facility"), and for general corporate purposes, including
acquisitions. Borrowings under the New Credit Agreement bear interest, at the
election of the Company, at a floating rate of interest equal to (i) the higher
of Chemical Bank's prime rate and the federal funds rate plus .5% or (ii) the
Eurodollar Rate (as defined in the New Credit Agreement) plus a borrowing margin
of .5% to 1.0%. The applicable borrowing margin is determined based on the
satisfaction of a specified financial ratio of the Company. Amounts available to
be drawn under the New Credit Agreement will be reduced by an aggregate amount
of $650 million during the term of the New Credit Agreement, which matures on
September 30, 2001.
Borrowings under the New Credit Agreement will bear interest at floating
rates, although the Company is permitted to convert variable rate interest
obligations on up to an aggregate of $500 million in principal amount of
indebtedness into fixed rate interest obligations. The Company also has
scheduled principal payments on long-term debt, including debt assumed in the
AIH Acquisition, of $3.0, $12.3, $4.3, $7.3 and $2.1 million in 1995, 1996,
1997, 1998, and 1999, respectively.
In addition to its debt service obligations, the Company will require
liquidity for capital expenditures and working capital needs. During the fiscal
year ended December 31, 1994, the Company's capital expenditures aggregated
approximately $103.1 million. The Company anticipates spending approximately
$135.0 million for capital expenditures in 1995.
As of July 1, 1995, and after giving effect to the AIH Acquisition, the
Offerings and the application of the net proceeds therefrom, the Company would
have had $854.7 million outstanding under the New Credit
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Agreement ($55.1 million of which would have been outstanding under letters of
credit), resulting in approximately $645.3 million of available commitments. As
of July 1, 1995, the Company had net cash and cash equivalents of $53.0 million.
The Company's actual cash availability at the date hereof will be less than at
July 1 because of greater working capital needs during the Company's
traditionally weak third quarter. Nevertheless, the Company believes that cash
flows from operations, together with amounts available under the New Credit
Agreement and its current cash balances, will be sufficient to meet its debt
service obligations, projected capital expenditures and working capital
requirements, as well as to provide the flexibility to fund future acquisitions.
The New Credit Agreement, together with the Senior Subordinated Notes and
the Subordinated Notes, impose various restrictions and covenants on the
Company, including, among other things, financial covenants relating to the
maintenance of minimum operating profit and net worth levels and interest
coverage ratios as well as restrictions on indebtedness, guarantees,
acquisitions, capital expenditures, investments, loans and advances, liens,
dividends and other restricted payments, asset sales and issuances of stock.
Such restrictions, together with the leveraged nature of the Company, could
limit the Company's ability to respond to market conditions, to provide for
unanticipated capital investments or to take advantage of business
opportunities.
INFLATION
Lear'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
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.
During the six months ended July 1, 1995, the Company recorded a reduction
in stockholders' equity of $14.1 million due to the devaluation of the Mexican
peso by approximately 44%. The effect on the results of the Company's operations
has not been material.
BUSINESS OF THE COMPANY
GENERAL
Lear is the largest independent supplier of automobile and light truck seat
systems in the world. 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 sequential parts delivery ("SPD") basis for installation in
vehicles near the end of the assembly process. The SPD process not only enables
the Company to deliver seat systems to customers on a just-in-time ("JIT") basis
but also permits delivery in the color and order in which the products are used
in the OEMs' assembly lines. The Company's present customers include 17 OEMs,
the most significant of which are Ford, General Motors, Fiat, Chrysler, Volvo,
Volkswagen, BMW, Saab and Mazda. As of July 1, 1995, the Company employed
approximately 26,000 people in 18 countries and operated 82 manufacturing,
research, design, engineering, testing and administration facilities.
Lear's sales have grown rapidly from approximately $159.8 million in the
fiscal year ended June 30, 1983 to approximately $3.1 billion in the fiscal year
ended December 31, 1994, a compound annual growth rate of approximately 30%.
This increase in sales, which has been achieved through internal growth as well
as through acquisitions, is attributable primarily to the Company's strategy of
capitalizing on two significant trends in the automotive industry: (i) the
outsourcing of automotive components and systems by OEMs; and (ii) the
consolidation and globalization of the OEM's supply base. Outsourcing of
interior components and systems has increased in response to competitive
pressures on OEMs to improve quality and reduce capital needs, costs of labor,
overhead and inventory. Consolidation among automotive industry suppliers has
occurred as OEMs have more frequently awarded long-term sole source contracts to
the most capable global suppliers.
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Increasingly, the criteria for selection include not only cost, quality and
responsiveness, but also certain full-service capabilities, including design,
engineering and project management support. OEMs now have rigorous programs for
evaluating and rating suppliers, which encompass quality, cost control,
reliability of delivery, new technology implementation and overall management.
Under these programs, each facility operated by a supplier is evaluated
independently. The suppliers who obtain superior ratings from an OEM are
considered for new business; those who do not may continue their existing
contracts, but are unlikely to be considered for additional business. As a
result, the OEMs' new supplier policies have sharply reduced the number of
component and systems suppliers. The Company believes that OEMs in North America
and Europe will continue to pursue outsourcing and supplier consolidation as a
means of cost reduction.
The principal beneficiaries of the trend to outsourcing have been
independent suppliers, such as the Company, with proven design, engineering,
program management and SPD manufacturing capabilities. The Company 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. 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 shortly:
<TABLE>
<CAPTION>
ACTUAL/
LOCATION OF SCHEDULED
PROGRAM LEAR FACILITY START DATE
-------------------------------------------------- --------------------- ----------------
<S> <C> <C>
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
BMW -- 3 Series................................... Brits, South Africa July 1995
GMT 600 Van....................................... Wentzville, MO September 1995
BMW -- Roadster................................... Duncan, SC September 1995
VW -- Gol......................................... Sao Paulo, Brazil October 1995
GM Blazer......................................... Jakarta, Indonesia October 1995
BMW -- 3 Series................................... Wackersdorf, Germany November 1995
Holden -- VS...................................... Adelaide, Australia November 1995
</TABLE>
The outsourced market for automobile and light truck seat systems in North
America is approximately 70% of the estimated total North American seat systems
market of $6.8 billion. In 1994, the Company held a leading 38% share of the
estimated $4.8 billion outsourced seat systems market and a 27% share of the
estimated $6.8 billion total seat systems market. After giving pro forma effect
to the FSB Acquisition, the Company's share of the estimated $2.4 billion
European outsourced seat systems market would have been a leading 33% and its
share of the estimated $4.5 billion total seat systems market would have been
18%. The Company is also the largest supplier of seat systems and seat
components in Mexico.
The Company's North American content per vehicle has increased from $12 in
1983 to $169 in 1994. In Western Europe, the content per vehicle has grown from
$3 in 1983 to $80 in 1994 after giving pro forma effect to the FSB Acquisition.
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.
STRATEGY
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 17 OEM customers which allow Lear
to identify business opportunities and customer needs in the early stages
of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering seat systems gives it a
competitive advantage in securing new
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business. Lear maintains an excellent reputation with the OEMs for timely
delivery and customer service and for providing world class quality at
competitive prices. As a result of the Company's service and performance
record, it has received high quality ratings from virtually every OEM with
which it does business.
- Product Technology and Product Design Capability. Lear has made
substantial investments in product technology and product design capability
to support its products. The Company maintains two advanced technical
centers (in Southfield, Michigan and Turin, Italy) where it develops and
tests current and future products to determine compliance with safety
standards, quality and durability, response to environmental conditions and
user wear and tear. At its 12 customer-dedicated engineering centers,
specific program applications are developed and tested. Benchmarking
studies are also conducted to aid in developing innovative seat design
features. The Company has recently made substantial investments to upgrade
its advanced computer-aided engineering ("CAE") and computer-aided
design/computer-aided manufacturing ("CAD/CAM") systems. Such tools as
advanced design modeling software, dynamic crash simulation, linear and
non-linear finite element analysis and solids modeling are among several
tools recently added to electronically create a seat and evaluate its
performance.
- Lean Manufacturing Philosophy. Lear's "lean manufacturing"
philosophy seeks to eliminate waste and inefficiency in its own operations
and in those of its customers and suppliers. 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 on a
JIT basis, and delivers seat systems and components to its customers on a
sequential JIT basis, which provides products to an OEM's manufacturing
facility in the color and order in which the products are used. This
process minimizes inventories and fixed costs for both the Company and its
customers and enables the Company to deliver products on as little as 90
minutes' notice. For the year ended December 31, 1994, the Company's
overall annual inventory turnover rate was 36 times and up to 150 times in
the case of certain of the Company's JIT plants. The Company also minimizes
fixed costs by using existing suppliers to the OEMs and the OEMs themselves
for certain components. In cases where one of the Company's manufacturing
facilities is underutilized, the Company is able to redistribute products
to increase facility utilization.
- Global Presence. By expanding its operations outside the United
States, Lear has sought to provide its products on a global basis to its
OEM customers. Due to significant cost savings and improved product quality
and consistency, OEMs have increasingly required their suppliers to
manufacture seat systems and other components in multiple geographic
markets. By expanding its operations outside the United States, Lear
provides its products on a global basis to its OEM customers. A global
market presence also affords Lear some protection against cyclical
downturns in any single market. For the six months ended July 1, 1995,
approximately 54% of the Company's sales were outside the United States. In
furtherance of its global expansion strategy, on June 28, 1995 the Company
entered into a joint venture agreement with an affiliate of Industria
Espanola del Polieter, S.A. ("INESPO"), a Spanish corporation, to supply
seat systems to Volkswagen in Brazil.
- Growth Through Strategic Acquisitions. Strategic acquisitions have
been, and management believes will continue to be, an important element in
the Company's growth worldwide and in its efforts to capitalize on the
automotive industry trends described above. These acquisitions complement
Lear's existing capabilities and provide new growth opportunities. The
Company's recent acquisitions have expanded its OEM customer base and
worldwide presence and enhanced its relationships with existing customers.
The AIH Acquisition has also given the Company a significant presence in
the non-seating segment of the automobile and light truck interior market.
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RECENT ACQUISITIONS
To supplement its internal growth and implement its business strategy, the
Company has made six strategic acquisitions since 1990. The following is a
summary of these acquisitions:
AIH Acquisition
In August 1995, AIHI Acquisition Corp., a wholly-owned subsidiary of Lear,
acquired all the outstanding common stock of AIH and subsequently merged with
and into AIH. The aggregate purchase price for the AIH Acquisition was $926.4
million (including the assumption of $282.3 million of AIH's existing
indebtedness and fees and expenses of $18.4 million). These funds were provided
by borrowings under the New Credit Agreement.
AIH is a leading designer and manufacturer of high quality interior trim
systems and blow molded products principally for North American and European
automobile and light truck manufacturers. AIH's interior trim products include
complete door panel assemblies, seatbacks and inserts, armrests, consoles and
headliners. Blow molded products include windshield washer reservoirs, fuel tank
shields and radiator coolant overflow reservoirs. AIH sales increased, both
internally and through acquisitions, from $209.5 million in 1991 to $512.8
million in 1994, resulting in a compound annual growth rate of approximately
35%.
The Company believes that the AIH Acquisition will provide Lear with
several strategic benefits, including the following:
- Market Share. The AIH Acquisition has made Lear the largest
independent Tier I supplier of seat and automotive interior systems
in the estimated $22 billion North American and European total light
vehicle interior market. Although the Company has manufactured
certain interior components for several years, the AIH Acquisition
affords Lear a significant presence in the non-seating and
non-instrument panel segments of the interior market, which account
for approximately 47% of the total interior market. A substantial
portion of this market is still provided in-house by OEMs and the
outsourced market is much more fragmented than the seat systems
market, thereby providing the Company with significant growth
opportunities as outsourcing continues and supplier consolidations
increase as OEMs seek global supplier relationships.
- OEM Relationships. Management believes that the ability to offer
integrated interior systems provides Lear with a competitive
advantage as OEMs continue to reduce their supplier base while
demanding improved quality and additional Tier I services. In this
regard, management believes that OEMs will increasingly ask their
lead interior suppliers to fill the role of "Systems Integrator" to
manage the design, purchasing and supply of the total automobile
interior. As a result of the AIH Acquisition, Lear is
well-positioned to fill this role.
- Growth Opportunities. Lear's market leadership, expertise and
established relationships with European OEMs (Fiat, Opel, Volvo and
Saab) should provide AIH with additional access to the European
market. In addition, Lear's entry into automotive growth areas
worldwide, particularly in South America and the Asia-Pacific
region, provides further growth opportunities for AIH.
- AIH Management. The AIH Acquisition will provide the Company with
the experience and expertise of AIH's strong management team. AIH is
a stand-alone entity and initially will be operated as such. The AIH
Acquisition also gives the Company access to AIH's comprehensive
program management system that tracks each program's status,
predicting lead time and cost variances for each product change
requested.
FSB Acquisition
On December 15, 1994, the Company, through its wholly-owned subsidiary,
Lear Seating Italia S.r.L., purchased from Gilardini S.p.A. ("Gilardini"), a
subsidiary of Fiat, all the shares of SEPI S.p.A. ("SEPI"), the primary
automotive seat systems supplier to Fiat. SEPI and its wholly-owned subsidiary,
SEPI Sud S.p.A. ("SEPI Sud"), operate eight facilities in Italy producing
automotive seat systems for 85% of Fiat's Italian
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<PAGE> 32
vehicle production under the Fiat, Lancia, Alfa Romeo and Ferrari nameplates as
well as seat frames for certain Fiat models for which SEPI and SEPI Sud do not
supply the seat systems. In connection with this acquisition, Lear also acquired
from Gilardini interests in seat systems and seat covers businesses in Poland,
Spain and Turkey. Lear also anticipates acquiring interests in proposed South
American joint ventures which plan to supply automotive seat systems to Fiat or
its affiliates in Brazil and Argentina. Lear and Fiat also entered into a
long-term supply agreement for the production of substantially all outsourced
automotive seat systems for Fiat and affiliated companies worldwide.
The FSB Acquisition not only established Lear as the market leader in
automotive seat systems in Europe, but combined with its leading position in
North America, made Lear the largest automotive seat systems manufacturer in the
world. In addition, it gave the Company additional access to rapidly expanding
markets in South America and Eastern Europe.
NAB Acquisition
On November 1, 1993, Lear significantly strengthened its position in the
North American automotive seating market by purchasing the North American seat
cover and seat system business of Ford. 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 (as well as for several independent
suppliers) and manufactures seat systems for certain Ford models. The NAB
Acquisition included the machinery, equipment, real property and other assets
used in the operations of the NAB as well as all of the issued and outstanding
capital stock of Favesa S.A. de C.V., a maquiladora operation located in Juarez,
Mexico.
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 has provided Lear with better control over the costs and quality of one
of the critical components of a seat system. In addition, by virtue of the NAB
Acquisition, the Company was able to enhance its relationship with its largest
OEM customer, entering into a five year supply agreement with Ford covering
models for which the NAB had produced seat covers and seat systems at the time
of the acquisition. The Company also assumed during the term of the supply
agreement primary engineering responsibility for a substantial portion of Ford's
car models, providing Lear with greater involvement in the planning and design
of seat systems and related products for future light vehicle models.
Scandinavian Acquisitions
In 1991 and 1992, the Company acquired the seat systems businesses of Saab
in Sweden and Finland and of Volvo in Sweden. In connection with each of these
acquisitions, the Company entered into long-term relationships with the
respective OEMs.
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 in the Company's emergence as a dominant supplier of entire seat
systems.
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 1980s. 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.
The following is the approximate composition by product category of the
Company's net sales in the year ended December 31, 1994: seat systems, 78%; seat
covers, 12%; seat frames, 8%; and seat components, 2%.
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<PAGE> 33
- Seat Systems. The seat systems business consists of the design,
engineering, 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.
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.
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 1990s, which it expects will lead to an increase in outsourcing
opportunities in the future. Such business includes the Ford Taurus/Mercury
Sable, the Ford Explorer, the Ford Contour/Mercury Mystique, the Dodge Ram
Pick-up Truck, the Chevrolet Cavalier/Pontiac Sunfire, the Ford Windstar
Minivan, all Jaguar models and the GM Opel Omega.
- 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 America seat cover business and is producing
approximately 80% of the seat covers for Ford's North American vehicles. The
Company's major external customers for seat covers are Ford and other
independent seat system 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.
The Company's seat frames are 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.
- 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
All the Company's plants use 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, Canada. 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
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<PAGE> 34
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 and have now evolved
to SPD principles. The Company's seating plants are typically no more than 30
minutes or 20 miles from its customers' assembly plants and manufacture seats
for delivery to the customers' facilities 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 customers' 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 customers' plants to keep production current with the
customers' demand.
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. Approximately one-third of the Company's
seats are manufactured using the SureBond process. See "-- Litigation."
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 in modules, then tested and packaged for shipment.
The Company operates a specially designed trailer fleet that accommodates the
off-loading of vehicle seats at the assembly plant.
The Company obtains steel, aluminum and foam chemicals used in its seat
frames from various producers under various supply arrangements. Leather, fabric
and purchased components generally are acquired from suppliers. The principal
raw materials used in the production of polyurethane foam are polyol (poly
oxyalkylene) and TDI (toluene discyanate). These materials are supplied under
various arrangements with major chemical companies and are readily available.
Leather, fabric and purchased components are generally purchased from various
suppliers under contractual arrangements generally lasting no longer than one
year. Some of the purchased components are obtained through the Company's own
customers.
CUSTOMERS
The Company currently serves the worldwide automobile and light truck
market, which produces over 50 million vehicles annually. The outsourced market
for automobile and light truck seat systems in North America currently
represents approximately 70% of the total North American market for these
products which is estimated to have annual revenues of approximately $6.8
billion. The outsourced market for seat systems in Europe is approximately 53%
of the total European seat systems market, which in 1994 was estimated to have
annual revenues of approximately $4.5 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 require OEMs in the North
American and the European markets to outsource more of their seating
requirements. The Company's OEM customers currently include Ford, General
Motors, Fiat, Chrysler, Volvo, Volkswagen, BMW, Saab, Mazda, Jaguar, Audi,
Subaru, Isuzu, Suzuki, Daimler-Benz, Renault and Peugeot.
In the past six years, in the course of retooling and reconfiguring plants
for new models and model changeovers, OEMs have eliminated production of seat
systems and components from certain of their facilities, thereby committing
themselves to purchasing these products from outside suppliers. During this
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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 seating systems by the OEM, (iii) a reduction in net
overhead expenses and capital investment due to the availability of plant space
previously associated with seat production at the OEM's facilities for expansion
of other manufacturing operations 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 reduction to its
customers through design improvements and its "Champion Programs," whereby
individual members of management are responsible for working with a specific
vendor to aggressively reduce costs.
The Company receives blanket purchase orders from its customers that
normally cover annual requirements for seats to be supplied for a particular car
model. Such purchase orders 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. Although such purchase orders may be
terminated at any time, the Company does not believe that any of its customers
have terminated a material purchase order prior to the end of the life of a
model. The primary risk to the Company is that an OEM will produce fewer units
of a model than anticipated. 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 established models. The Company's seat systems
sales for the year ended December 31, 1994 broke down into the following vehicle
categories: 42% light truck and sport utility, 18% mid-size, 13% luxury, 11%
full-size, 9% sport vehicles and 7% compact vehicles. The following table
indicates the vehicles for which the Company or its affiliates produce seat
systems and the locations of such production:
31
<PAGE> 36
<TABLE>
<S> <C> <C>
UNITED STATES AND CANADA
FORD: GENERAL MOTORS: BMW:
Ford Crown Victoria Buick LeSabre 3 Series
Ford Explorer Buick Park Avenue
Ford F-Series Pick-up Truck Buick Regal CAMI - GENERAL MOTORS/SUZUKI:
Ford Mustang GT & LX Chevrolet Cavalier Geo Metro
Ford Probe Chevrolet Corvette Geo Tracker
Ford Ranger Supercab/STX Chevrolet Lumina Suzuki Sidekick
Ford Taurus Chevrolet Monte Carlo Suzuki Swift
Ford Taurus SHO Chevrolet Tahoe/GMC Yukon
Ford Thunderbird SC Chevrolet C/K Pick-up Truck CHRYSLER:
Ford Windstar Minivan Chevrolet Kodiak Dodge Dakota Pick-up Truck
Mercury Sable Chevrolet/GMC G-Van Dodge Ram Pick-up Truck
Mercury Cougar XR7 GMC Pick-up Truck Dodge Viper
Mercury Grand Marquis Chevrolet/GMC Suburban
Mazda Navajo GMC Top Kick FUJI/ISUZU:
Pontiac Bonneville Isuzu Rodeo
Pontiac Sunfire Subaru Legacy
HONDA:
Passport
EUROPE
FIAT: ALFA ROMEO: JAGUAR:
Barchetta Alfa 145/146 XJS
Coupe 500 Alfa 155 X300
Croma Alfa 164
X230 Coupe LANCIA:
Punto Spider Dedra
Tempra Delta
Tipo CHRYSLER: Thema
Uno Eurostar Minivan Y11
Kappa
GENERAL MOTORS - OPEL: VOLVO:
Astra 800 Series VOLKSWAGEN:
Corsa 900 Series Transporter T4
Omega
Vectra SAAB:
Saab 900
Saab 9000
MEXICO
BMW: CHRYSLER: VOLKSWAGEN:
3 Series Dodge Ram Pick-up Truck Golf
5 Series Jetta
7 Series GENERAL MOTORS: Derby
Chevrolet Cavalier GPA Minivan
FORD: Chevrolet C/K Pick-up Truck
Ford Contour Opel Corsa
Ford Escort Pontiac Sunfire
Ford F-Series Pick-up Truck
Mercury Mystique
Mercury Tracer
OTHER
GENERAL MOTORS - HOLDEN (AUSTRALIA): VOLVO (THAILAND): GENERAL MOTORS - OPEL
VS 800 Series (INDONESIA):
900 Series 330 Blazer
BMW (SOUTH AFRICA): Optima
3 Series Vectra
</TABLE>
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<PAGE> 37
As a result 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, Rochester Hills, Michigan and Lordstown, Ohio facilities 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 enters into
these arrangements to cooperate and 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
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.
Ford and General Motors, the two largest automobile and light truck
manufacturers in the world, are also the Company's two largest customers,
accounting for 39% and 36%, respectively, of the Company's net sales during
1994. After giving effect to the AIH Acquisition and the FSB Acquisition, sales
to Ford and General Motors will continue to represent a similar substantial
portion of the Company's total sales.
MARKETING AND SALES
The Company markets its products by maintaining strong relationships with
its customers. Throughout its 78-year history, customers have benefitted from
the Company's 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 on both corporate and plant levels is an integral part
of the Company's marketing strategy. Recognizing this, the Company was
reorganized into six independent divisions, each with the ability to focus on
its own customers and programs and each having complete responsibility for the
product, from design to installation. By moving the decision process closer to
the customer, and instilling a philosophy of "cooperative autonomy," the Company
is more responsive to, and has strengthened its relationship with, its
customers. Automobile manufacturers have increasingly reduced their number of
suppliers as part of their move to purchase systems rather than discrete
components. This trend 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 product
innovations, to 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 car
model, it is also generally engaged to supply the automobile with seating when
the car goes into production. The Company has responded to this trend by
improving its engineering and technical capabilities and investing in technical
centers in the United States and in Europe. The Company has also developed
full-scope engineering capabilities, including all aspects of safety and
functional testing and comfort assessment. In addition, the Company has
established various remote
33
<PAGE> 38
engineering sites in close proximity to several of its OEM customers to enhance
customer relationships and design activity.
TECHNOLOGY
The Company conducts advanced product design and development at its
technical centers in Southfield, Michigan and Turin, Italy. After the FSB
Acquisition, Lear transferred its European technical facility from Rietberg,
Germany to Turin, Italy. 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 invested
to further upgrade its CAE and CAD/CAM systems, including investments in
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, $21.9 million and $16.2 million for the
six months ended July 1, 1995 and for the years ended December 31, 1994 and
1993, respectively.
The Company uses its patented SureBond process (the patent for which has
approximately 8 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. See "-- Litigation".
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
of its 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
The Company 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. In connection with the FSB
Acquisition, the Company obtained a 49% interest in Industrias Cousin Freres,
S.L., a Spanish joint venture with Bertrand Faure S.A. which produces seat
components, and a 35% interest in Markol Otomotiv Yan Sanayi Ve Ticart, a
Turkish joint venture which proposes to produce seat systems for Tofas, a Fiat
affiliate, and seat covers for certain of the Company's Italian subsidiaries. As
part of the Company's effort to procure business in the Asia-Pacific market, the
Company holds a 49% interest in Lear Seating Thailand Corporation. The Company
also participates in joint ventures with NHK Spring Co., Ltd. of Japan and
certain other foreign automotive component suppliers.
EMPLOYEES
As of July 1, 1995, the Company employed approximately 6,700 persons in the
United States, 11,000 in Mexico, 2,700 in Canada, 1,400 in Germany, 2,100 in
Italy, 1,300 in Sweden, 300 in the United Kingdom, 300 in Poland, 100 in Austria
and 100 in France. Of these, approximately 3,650 were salaried employees and the
balance were paid on an hourly basis. Approximately 20,000 of the Company's
employees are members of unions. The Company has experienced some labor disputes
at its plants, none of which have 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.
34
<PAGE> 39
FACILITIES
As of July 1, 1995, the Company's operations were conducted through 82
facilities, including six facilities operated by the Company's less than
majority-owned affiliates, in 18 countries employing 26,000 people worldwide.
Substantially all owned facilities secure borrowings under the Company's various
debt agreements.
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 SPD
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.
LITIGATION
On August 17, 1995, Astechnologies, Inc. ("Astech") filed a complaint
against the Company in the United States District Court for the Northern
District of Georgia, Atlanta Division. Astech asserts that the Company's
SureBond process, which bonds seat covers to foam pads, and the Company's
manufacture and use of certain machines to carry out such process, infringe an
Astech patent. See "-- Manufacturing." Astech also asserts that the Company
breached an agreement between the Company and Astech relating to the use in
connection with the SureBond process of machines purchased by the Company from
Astech. Astech seeks unspecified treble damages and an injunction against
further patent infringement.
The Company does not believe that Astech's patent is valid nor does the
Company believe that, if Astech's patent were to be upheld, the Company has
infringed Astech's patent. The Company intends to vigorously contest Astech's
claims and does not believe that Astech's claims will have a material adverse
effect on the Company's consolidated financial position or future results of
operations.
The Company is also involved in certain other legal actions and claims
arising in the ordinary course of business. 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 adverse effect on
the Company's consolidated financial position or future results of operations.
35
<PAGE> 40
SELECTED FINANCIAL DATA OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
The following summary consolidated financial information and other data
were derived from the consolidated financial statements of AIH. The consolidated
financial statements of AIH for each of fiscal years 1994, 1993, 1992 and 1991
and the nine months ended December 29, 1990 have been audited by Arthur Andersen
LLP. The consolidated financial statements of AIH for the six months ended July
1, 1995 and July 2, 1994 are unaudited; however, in the opinion of AIH's
management, they reflect all adjustments, consisting only of normal recurring
items, necessary for a fair presentation of the financial position and results
of operations of such periods. The results for the six months ended July 1, 1995
are not necessarily indicative of the results to be expected for the full fiscal
year. The selected financial data below should be read in conjunction with the
consolidated financial statements of AIH and the notes thereto incorporated by
reference in this Prospectus and "Management's Discussion and Analysis of
Results of Operations of Automotive Industries Holding, Inc."
AUTOMOTIVE INDUSTRIES HOLDING, INC.
<TABLE>
<CAPTION>
AS OF
AS OF OR FOR THE OR FOR THE
SIX MONTHS ENDED AS OF OR FOR THE YEAR ENDED NINE MONTHS
----------------- ------------------------------------------------------- ENDED
JULY 1, JULY 2, DECEMBER 31, JANUARY 1, DECEMBER 26, DECEMBER 28, DECEMBER 29,
1995 1994 1994 1994 1992 1991 1990
------- ------- ------------ ---------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.......................... $ 377.1 $ 236.8 $512.8 $348.7 $272.4 $209.5 $135.5
Gross profit....................... 73.0 50.6 103.9 74.9 55.5 40.7 26.8
Selling, general and administrative
expenses......................... 24.9 16.6 35.3 24.4 16.7 11.1 7.1
Amortization....................... 2.6 2.2 4.7 3.4 2.3 2.2 1.6
------- ------- ------------ ---------- ------------ ------------ ------------
Operating income................... 45.5 31.8 63.9 47.1 36.5 27.4 18.1
Interest expense, net.............. 9.0 3.6 9.3 7.1 9.4 15.0 11.8
Other expense, net................. -- -- -- -- -- .1 .1
------- ------- ------------ ---------- ------------ ------------ ------------
Income before income taxes and
extraordinary items.............. 36.5 28.2 54.6 40.0 27.1 12.3 6.2
Income taxes....................... 14.6 11.4 21.9 16.0 11.0 5.4 3.1
------- ------- ------------ ---------- ------------ ------------ ------------
Net income before extraordinary
items............................ 21.9 16.8 32.7 24.0 16.1 6.9 3.1
Extraordinary items................ -- -- -- -- 8.3 -- --
------- ------- ------------ ---------- ------------ ------------ ------------
Net income before preferred
dividend......................... 21.9 16.8 32.7 24.0 7.8 6.9 3.1
Preferred dividend................. -- -- -- -- .9 2.5 1.7
------- ------- ------------ ---------- ------------ ------------ ------------
Net income......................... $ 21.9 $ 16.8 $ 32.7 $ 24.0 $ 6.9 $ 4.4 $ 1.4
====== ====== ========== ======== ========== ========== ==========
BALANCE SHEET DATA:
Current assets..................... $ 205.8 $ 156.4 $187.6 $ 93.0 $ 63.4 $ 47.8 $ 45.3
Total assets....................... 611.3 461.0 567.4 338.5 233.7 216.6 212.6
Current liabilities................ 117.6 79.7 96.2 36.0 32.7 33.4 27.6
Long-term debt..................... 221.1 154.0 216.9 93.8 75.8 105.3 115.8
Stockholders' equity............... 241.3 207.2 219.9 189.7 109.8 34.3 55.1
OTHER DATA:
EBITDA............................. $ 60.4 $ 41.9 $ 85.8 $ 63.0 $ 48.6 $ 38.8 $ 25.6
Capital expenditures............... 30.8 18.6 40.5 22.4 8.9 7.8 4.3
</TABLE>
36
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
Six Months Ended July 1, 1995 Compared with Six Months Ended July 2, 1994
Revenues
Revenues for the six months ended July 1, 1995 totaled $377.1 million
compared to $236.8 million for the six months ended July 2, 1994, an increase of
$140.3 million or 59.2%. The increase was the result of newly awarded business
and increased production of models served by AIH, particularly in the light
truck segment, combined with AIH's acquisitions of Cotton and Gulfstream.
Cost of Sales
Cost of sales as a percentage of revenues increased to 80.6% for the first
six months of 1995 compared to 78.6% for the same period in 1994. The decrease
in gross margin is the result of lower margins at the acquired companies (which
were anticipated at the time of such acquisitions) and costs associated with
program launches.
Selling, General and Administrative
Selling, general and administrative costs increased to $24.9 million or
6.6% of revenues for the six months ended July 1, 1995 compared to $16.6 million
or 7.0% of revenues for the six months ended July 2, 1994. Approximately $5.6
million of the increase was the result of incremental costs associated with
AIH's acquisitions. The remaining increase was due to incremental engineering
and administrative costs to support the revenue growth.
Interest Expense
Interest expense for the six months ended July 1, 1995 was approximately
$9.0 million or 2.4% of revenues, an increase of $5.4 million compared to the
same period in 1994. Approximately $2.9 million of the increase is due to
increased borrowings to finance AIH's acquisitions. The remaining increase was
due to higher rates on floating rate indebtedness and increased borrowings to
finance capital expenditures.
Income Taxes
The effective income tax rates for the first six months of 1995 and 1994
were 39.9% and 40.2%, respectively. The effective income tax rates differed from
the federal statutory rate due primarily to the effects of state income taxes
and non-deductible expenses.
Year Ended December 31, 1994 Compared with Year Ended January 1, 1994
Revenues
Revenues for the year ended December 31, 1994 increased 47.0% to $512.8
million from $348.7 million in 1993. Approximately $55.0 million of the revenue
increase was due to the incremental effects of the May 1994 acquisition of
Cotton and the December 1994 acquisition of Gulfstream. The remaining increase
was from ongoing operations resulting from new business on several redesigned or
new platforms including the GM C/K Pickup and J Car (Cavalier, Sunfire) and
Ford's Windstar mini-van and Contour/Mystique. AIH also benefited from increased
production by North American OEMs, particularly in the light truck segment.
AIH's content per vehicle produced in North America increased 22.7% to $31.40 in
1994 from $25.60 in 1993. AIH's European sales increased to $44.6 million as a
result of the Cotton acquisition.
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<PAGE> 42
Cost of Sales
Cost of sales, as a percentage of revenues, increased to 79.7% in 1994 from
78.5% in 1993. AIH's margins were lower than 1993 levels due to anticipated
lower margins associated with the acquired businesses and start-up costs on new
programs.
Selling, General and Administrative
Selling, general and administrative expenses increased by $11.0 million,
but decreased to 6.9% of revenues in 1994 compared to 7.0% of revenues in 1993.
The increased costs were incurred principally to support the continued growth
and design, engineering and program development activities associated with
future growth in new business and AIH's 1994 acquisitions.
Other
Amortization expense increased from $3.4 million in 1993 to $4.7 million in
1994 due to incremental goodwill amortization related to AIH's 1994
acquisitions. Interest expense increased from $7.1 million in 1993 to $9.3
million in 1994. The increase was the result of additional borrowings to fund
AIH's 1994 acquisitions and higher interest rates on AIH's floating rate
indebtedness. The effective income tax rates were 40.1% and 40.0%, respectively,
for 1994 and 1993. The effective rates were higher than federal statutory rates
as a result of non-deductible goodwill amortization and state income taxes.
Year Ended January 1, 1994 Compared with Year Ended December 26, 1992
Revenues
Revenues for the year ended January 1, 1994 increased 28.0% to $348.7
million from $272.4 million in 1992. The increase reflects incremental business
awarded to AIH on new and redesigned vehicles, increased automotive production
and revenues from acquired businesses. AIH's revenue content per vehicle
produced in North America increased 9.4% from $23.40 in 1992 to $25.60 in 1993.
Approximately one-half of the revenue increase resulted from the acquisition of
ASAA International, Inc. in May 1993 and Fibercraft//DESCon Engineering, Inc. in
July 1993. AIH also benefited from the continuing recovery in the North American
automotive market.
Cost of Sales
Cost of sales, as a percentage of revenues, decreased to 78.5% in 1993 from
79.6% in 1992. The improvement was the result of AIH's continuing efforts to
improve productivity and reduce costs and the effect of the increased sales on
fixed costs. AIH's margins increased despite the costs associated with launch of
several new programs.
Selling, General and Administrative
Selling, general and administrative expenses increased to 7.0% of revenues
in 1993 compared to 6.1% of revenues in 1992. The increase was due principally
to the incremental costs related to AIH's 1993 acquisitions. Costs to support
the growth in revenues and new program development also led to an increase in
selling, general and administrative expenses.
Other
Amortization expense increased from $2.3 million in 1992 to $3.4 million in
1993 due to additional amortization related to AIH's 1993 acquisitions. Interest
expense decreased to $7.1 million in 1993 compared with $9.5 million in 1992.
The decrease was due principally to the retirement of certain indebtedness with
the proceeds of the public offering of AIH's Class A Common Stock in August
1993. The effective income tax rates for 1993 and 1992 were 40.0% and 40.5%,
respectively. The effective tax rates were higher than federal statutory rates
as a result of non-deductible goodwill amortization and state income taxes.
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<PAGE> 43
BUSINESS OF AUTOMOTIVE INDUSTRIES HOLDING, INC.
GENERAL
AIH is a designer and manufacturer of high-quality interior trim systems
and blow molded products principally for North American and European car and
light truck manufacturers. AIH's interior trim products include complete door
panel assemblies, seatbacks and inserts, armrests, consoles, and headliners.
Blow molded products include windshield washer reservoirs, fuel tank shields and
radiator coolant overflow reservoirs. AIH's products are sold to almost every
major automotive OEM including Ford, General Motors, Chrysler, Honda, Diamond
Star (Mitsubishi), Mazda, Subaru, Isuzu, Nissan and Toyota and, with the
Plastifol acquisition, Mercedes, Volkswagen, BMW and Jaguar.
Since 1987, AIH has achieved substantial internal growth. This growth has
been augmented by selected strategic acquisitions, including Plasta Fiber
Industries, Inc. ("PFI") in February 1992, Cellasto Plastics Corporation
("Cellasto") in July 1992, ASAA International, Inc. ("ASAA") in May 1993,
Fibercraft//DESCon Engineering, Inc., ("Fibercraft") in July 1993, Cotton in May
1994, Gulfstream in December 1994 and Plastifol in July 1995. In addition, in
January 1994 AIH completed its acquisition of an initial 40% interest in
Interiores Automotrices Summa, S.A. de C.V. ("IASSA"). These acquisitions have
allowed AIH to expand its interior trim systems and blow molded products
capabilities and have substantially increased AIH's ability to provide advanced
design, engineering and program management services to customers. At the same
time, they have increased AIH's global presence and have provided AIH access to
new customers and new technologies.
AIH STRATEGY
AIH's business objective is to expand its position as a leading supplier of
interior trim systems and blow molded products to North American and European
OEMs. To achieve this objective, AIH has pursued, and as a subsidiary of Lear
will continue to pursue, a strategy based upon the following elements:
High Quality Products. AIH emphasizes the importance of product quality to
all of its employees, utilizes technologically advanced machinery and production
techniques, incorporates raw materials that conform to AIH's stringent quality
standards, and uses advanced testing equipment and methods.
Low Delivered Cost. AIH strives to achieve low delivered costs to its
customers through its emphasis on quality, as evidenced by its near-zero
customer rejection rate, and its responsiveness to customer needs, including its
reliable and timely delivery. AIH's in-house scrap rejection rate of less than
one-half of one percent and the resulting savings from reduced scrap and rework
exemplifies AIH's ability to control its costs. In addition, AIH has located its
plants in areas with high-quality and relatively low-cost labor, and has
equipped its facilities with technologically advanced, cost-effective machinery.
Long-Term Customer Relationships. Because of the long lead times required
to obtain contracts and the reduction of in-house technical staff by OEMs, AIH
has sought to develop long-term relationships with customers by working closely
with them throughout all phases of new product development and subsequent
production. In particular, AIH seeks to continue to develop its relationship and
reputation with customers by continually exceeding their expectations in every
phase of AIH's operations.
Focus on Complex, Value-Added Products. AIH focuses its efforts on a
"systems" approach to developing its products. These integrated systems, rather
than individual components, produce greater value for the customer since certain
services such as design and engineering and subassembly are provided more cost
efficiently by AIH.
Provide Complete Services from Initial Design to Manufacturing. AIH has
responded to OEMs' needs for full service from their suppliers. With the
acquisition of Fibercraft, AIH has enhanced its capabilities to provide
cost-effective integrated development services from the initial styling of
components through the manufacturing process.
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<PAGE> 44
Strategic Acquisitions. AIH is continually seeking to acquire businesses to
complement and expand its interior trim systems and blow molded products systems
capabilities. Such opportunities should continue to present themselves as OEMs
continue to rationalize their supplier base toward larger more global suppliers.
AIH PRODUCTS
AIH produces interior trim systems and components as well as blow molded
plastic parts principally for North American and European car and light truck
manufacturers. AIH's primary interior trim systems and blow molded products are
described below:
<TABLE>
<S> <C>
Interior Trim Systems Blow Molded Products
- Complete door panel assemblies - Seatbacks
- Armrests and consoles - Windshield washer
- Custom injection molded interior reservoirs
trim including "A," "B" and "C" - Fuel tank shields
pillars, cowl panels, scuff plates, - Coolant reservoirs
trunk liners and quarter panels - Front grille assemblies
- Sun visors - HVAC ducts
- Headliners and package trays - Interior insulators
- Appliques and bolsters - Hood insulators
- Load floors - Engine shrouds
- Spare tire covers - Air intake ducts
- Exterior air dams
- Vapor canisters
</TABLE>
Interior Trim Systems. The core technologies used in AIH's interior trim
systems include injection molding, low-pressure injection molding, rotational
molding and urethane foaming, compression molding of Wood-Stock(TM) (a
proprietary process that combines polypropylene and wood flour), glass
reinforced urethane and a proprietary headliner process. One element of AIH's
strategy is to focus on more complex, value-added products such as door panel
systems and armrests. AIH delivers these integrated systems at attractive prices
to the customer because certain services such as design and engineering and
sub-assembly are provided more cost efficiently by AIH.
Door panel systems and armrests represent AIH's most complex products. A
door panel consists of several component parts that are attached to a base
molded substrate by various methods. Specific components include vinyl- or
cloth-covered appliques, armrests, radio speaker grilles, map pocket
compartments or carpet and sound reducing insulation. Upon assembly, each
component must fit precisely, with a minimum of misalignment or gap, and must
match the color of the base substrate. Armrests are produced by either
rotational molding or injection molding of a vinyl covering and are then
combined with an insert and filled with a resilient polyurethane foam to produce
the finished product.
There has been a rapid evolution in AIH's product mix over the last four
years, particularly considering AIH's rapid revenue growth over the same period.
In fiscal 1987, approximately 36% of AIH's revenues were derived from component
value-added assemblies such as door panel systems and armrests. For the year
ended December 31, 1994, approximately 50% of AIH's revenues are derived from
value-added assemblies.
Blow Molded Products. AIH produces a variety of blow molded products. In
contrast to AIH's interior systems products, blow molded products require little
assembly. However, the manufacturing process for such parts demands considerable
expertise in order to consistently produce high-quality products. Blow molded
parts are produced by extruding a shaped parison or tube of plastic material and
then clamping a mold around the parison. High pressure air is introduced into
the tube causing the hot plastic to take the shape of the surrounding mold. The
part is removed from the mold after cooling and finished by trimming, drilling
and other operations.
The combined pressures of cost reduction and fuel economy enhancement have
caused automotive manufacturers to concentrate their efforts on developing and
employing lower cost, lighter materials. As a result, plastic content in cars
and light trucks has grown significantly. Plastics are now commonly used in such
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<PAGE> 45
nonstructural components as interior and exterior trim, door panels, instrument
panels, grilles, bumpers, duct systems, taillights and fluid reservoirs.
Increasingly, automobile content requires large plastic injection molded
assemblies for both the interior and exterior. For interior trim applications,
substitution of plastics for other materials is largely complete, and little
growth through substitution is expected. However, further advances in injection
molding technologies are improving the performance and appearance of parts
molded in reinforced thermoplastics.
Product Requirements. AIH's products must conform to the increasingly
exacting standards set by the North American and European OEMs. Product color,
weatherability and durability are critical to AIH's success in developing the
plastic automotive parts business; AIH's plants have been favorably rated by
Ford, Chrysler, GM, Diamond Star, Isuzu, Mazda, Honda, Nissan, Rover and Jaguar
with respect to their near-zero defect level in these areas. As a result of
AIH's service and quality record, near-zero customer rejection rate, and its
production rejection rate of less than one-half of one percent, the OEMs have
awarded high quality ratings to AIH.
AIH CUSTOMERS
AIH supplies its products primarily to Ford, General Motors and Chrysler,
but has increased its business with Diamond Star (Mitsubishi), Honda, Isuzu,
Rover, Mazda, Nissan, Mercedes, BMW, Volkswagen, and Jaguar. For the year ended
December 31, 1994, Ford, General Motors and Chrysler accounted for approximately
45%, 17% and 12%, respectively, of AIH's net sales.
AIH's sales of value-added assemblies and component systems have increased
as a result of the OEMs' decision to reduce their internal engineering and
design resources. In recent years, AIH has significantly increased its capacity
to provide complete engineering and design services to support its product line.
Because assembled parts such as door panels, armrests and consoles need to be
designed at an early stage in the development of new automobiles or model
revisions, AIH is increasingly given the opportunity to participate earlier in
the product planning process. This has resulted in opportunities to add value by
furnishing engineering and design services and managing the sub-assembly process
for the manufacturer, as well as providing the broader range of parts that are
required for the assembly.
AIH's customers typically award blanket purchase orders that normally cover
parts to be supplied for a particular car model. Such purchase orders typically
extend over the life of the model, which is generally four to seven years. Even
though such purchase orders generally may be terminated at any time, AIH does
not believe that any of its customers have terminated a material purchase order
prior to the end of the life of a model. The primary risk to AIH is that an OEM
will produce fewer units of a model than anticipated. In addition, AIH competes
for new business to supply parts for successor models and therefore runs the
risk that the OEM will not select AIH to produce parts on a successor model. In
order to reduce its reliance on any one model, AIH produces parts for a broad
cross-section of both new and more mature models. AIH has been
41
<PAGE> 46
chosen as a supplier on a variety of generally successful car and light truck
models. The following table presents an overview of the major models for which
AIH produces interior trim and blow molded products:
UNITED STATES AND CANADA
<TABLE>
<S> <C> <C>
FORD: GENERAL MOTORS: CHRYSLER:
Ford F-Series Pick-up Truck Buick LeSabre Dodge Caravan
Ford Escort Buick Park Avenue Dodge Dakota Pick-up Truck
Ford Explorer Buick Regal Plymouth Voyager
Ford Ranger Cadillac DeVille DIAMOND STAR:
Ford Taurus Chevrolet Corsica Eagle Talon
Ford Contour Chevrolet Beretta Mitsubishi Eclipse
Ford Econoline Chevrolet Cavalier Plymouth Laser
Ford Windstar Chevrolet Lumina HONDA:
Ford Bronco Chevrolet C/K Pick-up Truck Accord
Ford Thunderbird Oldsmobile Cutlass Civic
Ford Fiesta Oldsmobile Delta 88 MAZDA:
Ford Scorpio Oldsmobile 98 G26
Ford Mondeo Pontiac Bonneville MX6
Mercury Cougar Pontiac Grand Prix Probe
Mercury Mondeo Pontiac Sunfire Protege
Mercury Mystique NISSAN:
Mercury Sable King Cab Pick-up Truck
Mercury Tracer TOYOTA:
Camry
</TABLE>
EUROPE
<TABLE>
<S> <C> <C>
BMW: ROVER: MERCEDES:
3 Series Discovery 200 Series
JAGUAR: RX3
J40 RX8 Theta
XJS Range Rover
VOLKSWAGEN:
Passat
Golf
</TABLE>
42
<PAGE> 47
Based on its ability to service its OEM customers' needs effectively, AIH
believes it will be able to maintain or expand its position on most existing
models, while also expanding into new models, as further consolidation in the
OEM supplier base occurs. For example, AIH has been selected as a major supplier
for the 1995 model changeovers of the Ford Explorer, Ford Ranger, Ford
Taurus/Mercury Sable, Ford F-Series Pick-up Truck, Oldsmobile N-Car and Chrysler
Minivan.
AIH believes that the expanding presence of foreign manufacturers in North
America represents an attractive growth opportunity over the next decade. AIH is
currently supplying products for Diamond Star, Honda, Isuzu, Mazda and Nissan.
AIH believes that it is favorably positioned to increase its business with the
foreign manufacturers in the United States because of AIH's superior reputation
for quality, reliability and lower delivered cost.
AIH MARKETING AND SALES
Sales of AIH's products to OEMs are made directly by AIH's sales and
engineering force, headquartered in Rochester Hills, Michigan. Through the sales
and engineering office, AIH services its OEM customers and manages its
continuing programs of product design improvement and development. AIH's sales
and engineering force consists of approximately 250 individuals, including
several who are located periodically at various OEMs' offices in order to
facilitate the development of new programs.
AIH operates in a highly competitive, fragmented environment, with only a
few injection and blow molders generating sales in excess of $100 million. The
number of AIH's competitors is expected to decrease due to the supplier
consolidation resulting from changing OEM policies. AIH's major competitors
include Davidson Interior Trim (a division of Textron), UT Automotive (a
subsidiary of United Technologies), Prince Corporation, The Becker Group, and GM
and Ford internal operations, plus a large number of smaller operations.
AIH principally competes for new business both at the beginning of the
development of new models and upon the redesign of existing models by its major
customers. New model development generally begins two to four years prior to the
marketing of such models to the public. Once a producer has been designated to
supply parts to a new program, an OEM will generally continue to purchase those
parts from the designated producer for the life of the program. Competitive
factors in the market for AIH's products include product quality, customer
service, product mix, new product innovation, cost and timely delivery. AIH
believes that the implementation of its business strategy allows it to compete
effectively in the market for its products.
AIH is well positioned to succeed in this highly competitive supplier
environment. AIH's size (equal to or larger than many of its competitors),
quality and customer service orientation, manufacturing expertise and
technological leadership all contribute to AIH's success in the automotive
supply industry.
AIH EMPLOYEES
As of July 1, 1995, AIH had approximately 7,400 employees. AIH believes
that its future success will depend in part on its ability to continue to
recruit, retain and motivate qualified personnel at all levels of AIH. AIH has
instituted a large number of employee programs to increase employee morale and
expand the employees' participation in AIH's business. While most of AIH's
employees are not unionized, AIH has approximately 625 hourly employees
represented by labor unions. AIH has not experienced any work stoppages and
considers its relations with its employees to be good.
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<PAGE> 48
MANAGEMENT
Set forth below is certain information concerning the executive officers of
the Company.
<TABLE>
<CAPTION>
YEARS WITH
THE COMPANY
NAME AGE POSITION OR PREDECESSOR
------------------------- --- ------------------------------------------------ --------------
<S> <C> <C> <C>
Kenneth L. Way........... 56 Chairman of the Board and Chief Executive 29
Officer
Robert E. Rossiter....... 49 President, Chief Operating Officer and Director 24
of the Company
James H. Vandenberghe.... 45 Executive Vice President and Chief Financial 22
Officer of the Company
James A. Hollars......... 50 Senior Vice President and President -- 22
International Division of the Company
Barthold H. Hoemann...... 56 Senior Vice President and President -- Ford 14
Division of the Company
Frederick F. Sommer...... 52 Senior Vice President and President -- --
Automotive Industries Division of the Company
Donald J. Stebbins....... 37 Vice President, Treasurer and Assistant 3
Secretary of the Company
Joseph F. McCarthy....... 51 Vice President, Secretary and General Counsel of 1
the Company
Gerald G. Harris......... 61 Vice President and President -- GM Division of 33
the Company
Terrence E. O'Rourke..... 48 Vice President and President -- Chrysler 1
Division of the Company
Randal T. Murphy......... 60 Vice President and President -- BMW Division of 15
the Company
Richard N. Hodgson....... 47 Vice President and President -- Components 13
Division of the Company
</TABLE>
Set forth below is a description of the business experience of each
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 29 years at Lear 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, Inc.
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 is currently Executive Vice
President and Chief Financial Officer of the Company. Mr. Vandenberghe
previously served as Senior Vice President -- Finance, Secretary and Chief
Financial Officer of the Company since 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 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 and
President -- International Division of the Company. He was promoted to this
position in 1995. Prior to serving in this position, he was President --
International Operations of the Company since 1994. Previously he served as
Senior Vice President -- International Operations of the Company since 1993 and
Vice President -- International upon the sale of
44
<PAGE> 49
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 was elected Senior Vice President and
President -- Ford Division of the Company in May 1995. Prior to serving in this
position he was President -- Ford Division of the Company since November 1994.
Mr. Hoemann previously served as Senior Vice President -- North American JIT
Operations of the Company since 1993, as Vice President-Component Operations for
the Company in 1992 and 1993 and as Vice President and General Manager of the
Company's subsidiary, Lear Plastics Corporation, in 1991 and 1992. 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.
Frederick F. Sommer. Mr. Sommer was elected Senior Vice President and
President -- Automotive Industries Division of the Company upon consummation of
the AIH Acquisition. Prior to the AIH Acquisition, he served as President of AIH
since November 1991 and Chief Executive Officer of AIH since May 1994. From
March 1992 to May 1994, Mr. Sommer served as Chief Operating Officer of AIH. Mr.
Sommer also served as Executive Vice President of AIH from October 1990 until
November 1991. Prior thereto, he served as Vice President -- Manufacturing and
Purchasing of the U.S. subsidiary of Nissan from January 1987 until October
1990.
Donald J. Stebbins. Mr. Stebbins is currently Vice President, Treasurer and
Assistant Secretary 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, he 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 the Company in April 1994. Prior to joining the Company, Mr.
McCarthy served as Vice President -- Legal and Secretary for both Hayes Wheels
International, Inc. and Kelsey-Hayes Company. Prior to joining Hayes Wheels
International, Inc. and Kelsey-Hayes Company, Mr. McCarthy was a partner in the
law firm of Kreckman & McCarthy from 1973 to 1983.
Gerald G. Harris. Mr. Harris was elected Vice President and President -- GM
Division of the Company in May 1995. Prior to serving in this position, he was
President -- GM Division of the Company since November 1994. Mr. Harris
previously served as Vice President and General Manager -- GM Operations since
March 1994. Previously Mr. Harris served as Director -- Ford Business Unit from
March 1992 to March 1994, Director of Sales from August 1990 to March 1992 and
Sales Manager from January 1989 to August 1990.
Terrence E. O'Rourke. Mr. O'Rourke was elected Vice President and President
-- Chrysler Division of the Company in May 1995. Prior to serving in this
position, he was President -- Chrysler Division of the Company since November
1994. Previously, Mr. O'Rourke served as Director -- Strategic Planning since
October 1994. Prior to joining Lear, Mr. O'Rourke was employed by Ford Motor
Company as Supply Manager -- Climate Control Department from 1992 and
Procurement Operations Manager from 1988.
Randal T. Murphy. Mr. Murphy was elected Vice President and President --
BMW Division of the Company in May 1995, after having served as President -- BMW
Division of the Company since November 1994. Prior to serving in these
positions, he was Vice President and General Manager -- Chrysler/BMW Operations
since March 1994. Previously he served as Director -- JIT Operations from 1993
and Vice President -- Product Engineering from 1980.
Richard N. Hodgson. Mr. Hodgson was elected Vice President and President --
Components Division of the Company in May 1995, after having served as President
-- Components Division of the Company since November 1994. Prior to serving in
these positions, he was Vice President -- Components Operations since April
1993. Previously he served as Plant Manager for Lear's subsidiary, Lear Seating
Canada Ltd., from 1982.
45
<PAGE> 50
SELLING STOCKHOLDERS
The following table and accompanying footnotes set forth certain
information regarding beneficial ownership of the Company's Common Stock by the
Selling Stockholders as of July 15, 1995 prior to the Offerings and as adjusted
to reflect the sale of 10,000,000 shares of Common Stock by the Company and
5,000,000 shares of Common Stock by the Selling Stockholders in the Offerings:
<TABLE>
<CAPTION>
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------------------- -----------------------------------
NUMBER OF NUMBER OF
SHARES SHARES OF SHARES
OF COMMON STOCK COMMON STOCK OF COMMON STOCK
OWNED PERCENTAGE OF BEING OWNED PERCENTAGE OF
BENEFICIALLY COMMON STOCK(3) OFFERED(4) BENEFICIALLY(4) COMMON STOCK(3)(4)
--------------- --------------- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Lehman Funds(1)........... 25,958,724 56.3% 4,125,000 21,833,724 38.9%
FIMA Finance Management
Inc.(2)................. 5,510,044 11.9 875,000 4,635,044 8.3
</TABLE>
-------------------------
(1) The number of shares beneficially owned by the Lehman Funds comprises
9,324,051 shares of Common Stock owned by Lehman Brothers Merchant Banking
Portfolio Partnership L.P. and 6,337,584 shares of Common Stock owned by
Lehman Brothers Capital Partners II, L.P. (each located at Three World
Financial Center, New York, New York 10285); 2,563,440 shares of Common
Stock owned by Lehman Brothers Offshore Investment Partnership L.P. and
7,733,649 shares of Common Stock owned by Lehman Brothers Offshore
Investment Partnership-Japan L.P. (each located at Clarendon House, Church
Street, Hamilton HMCX, Bermuda). LB I Group Inc. and Lehman Brothers
Holdings 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. LB I Group Inc. and Lehman
Brothers Offshore Partners Ltd. are wholly-owned subsidiaries of Lehman
Brothers Holdings Inc. Each of the partnerships may be deemed to share with
Lehman Brothers Holdings Inc. the power to vote and the power to dispose of
the shares owned by such partnership. The address of Lehman Brothers
Holdings Inc. is Three World Financial Center, New York, New York 10285.
(2) FIMA Finance Management Inc. ("FIMA") is a wholly-owned subsidiary of EXOR
Group S.A. ("EXOR Group"), formerly IFINT, S.A. EXOR Group, a Luxembourg
corporation, is the international investment holding company of IFI,
S.p.A., the parent company of the Agnelli Group. The address of FIMA is
Wickhams Cay, Road Town, Tortola, British Virgin Islands.
(3) Assumes that none of the Options, pursuant to which 4,600,857 shares are
issuable, are exercised.
(4) The Lehman Funds have collectively, and FIMA has, granted to the
Underwriters an option to purchase up to an aggregate of 1,855,000 and
395,000 additional shares of Common Stock, respectively, exercisable solely
to cover over-allotments. See "Underwriting." The data set forth in the
table assume that the Underwriters' over-allotment option is not exercised.
In 1988, FIMA first acquired an ownership interest in the Company by
purchasing 6,435,000 shares of Common Stock of the Company. In 1991, FIMA and
the Lehman Funds acquired an aggregate of 14,999,985 additional shares from the
Company for an aggregate purchase price of $75.0 million and certain additional
shares of Common Stock from certain other stockholders (the "1991 Common Stock
Acquisition"). In 1992, the Company sold an additional $20.0 million worth of
Common Stock to the Lehman Funds and FIMA (the "1992 Common Stock Acquisition").
In connection with the 1991 Common Stock Acquisition, the 1992 Common Stock
Acquisition, the offering of the Senior Subordinated Notes, the NAB Acquisition,
the offering of the Subordinated Notes, the IPO, the AIH Acquisition and the
Offerings, Lehman Brothers, an affiliate of the Lehman Funds, has received
compensation from the Company comprising underwriting fees, discounts and
commissions and financial advisory fees. In addition, Lehman Commercial Paper
Inc., an affiliate of the Lehman Funds, has from time to time been a lender
under the Company's credit facilities and has received customary fees in such
capacity.
46
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists 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 July 15, 1995, there were 46,132,364 shares of Common Stock
outstanding. 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 Subordinated Notes from paying
dividends to holders of Common Stock. 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
The Board of Directors has 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
The Lehman Funds, FIMA and certain current and former officers and
employees of 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.
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 the 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.
47
<PAGE> 52
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.
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 filed 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
The Company is 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
48
<PAGE> 53
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 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 may 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 is listed on the New York Stock Exchange under the symbol
LEA.
49
<PAGE> 54
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 U.S. federal income tax purposes regardless of its source. An
individual will be deemed to be a resident of the United States for U.S. federal
income tax purposes if: (1) such individual is a lawful permanent resident of
the United States at any time during the taxable year; (2) such individual makes
an election to be treated as a resident pursuant to the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"); or (3) such individual
is present in the United States for an aggregate of 183 days or more during the
calendar year. In addition, an individual will be presumed to be a resident of
the United States for U.S. federal income tax purposes if such individual is
present in the United States on at least 31 days in the current calendar year
and for an aggregate of 183 days during the three-year period ending with the
current calendar year (counting, for such purposes 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). This presumption of residence may be rebutted if it is
established that such individual has a "tax home" in a foreign country and a
"closer connection" to such foreign country than to the United States, with such
terms being defined in the Code. Furthermore, the determination of residence
under the Code may be rebutted by application of an applicable tax treaty or
convention between the United States and an appropriate foreign country that may
also treat such individual as a tax resident of such country. 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 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 U.S. 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, local or foreign 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 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 U.S. federal income tax on
net income
50
<PAGE> 55
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 U.S.
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 U.S. office of a U.S. 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 U.S. 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 U.S. 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. 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.
51
<PAGE> 56
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 estate's 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, the underwriters named below (the "U.S. Underwriters"),
for whom Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, PaineWebber
Incorporated and Schroder Wertheim & Co. Incorporated are acting as
representatives (the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders, and the Company and the Selling
Stockholders 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. .............................................
Morgan Stanley & Co. Incorporated.................................
PaineWebber Incorporated..........................................
Schroder Wertheim & Co. Incorporated..............................
----------
Total........................................................ 12,000,000
==========
</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 and Canada (the
"International Managers" and together with the U.S. Underwriters, the
"Underwriters"), for whom Lehman Brothers International (Europe), Morgan Stanley
& Co. International Limited, PaineWebber International (U.K.) Ltd. and J. Henry
Schroder & Co. Limited are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company and the Selling Stockholders, and
the Company and the Selling Stockholders 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).............................
Morgan Stanley & Co. International Limited.........................
PaineWebber International (U.K.) Ltd. .............................
J. Henry Schroder & Co. Limited....................................
---------
Total......................................................... 3,000,000
=========
</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
52
<PAGE> 57
International Managers, as the case may be, pursuant to the 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 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 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 Stockholders 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 Selling Stockholders have granted to the U.S. Underwriters and the
International Managers an option to purchase up to an aggregate of 1,800,000 and
450,000 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 Selling Stockholders. 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.
The Company, the Selling Stockholders and certain 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 120 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 without the prior written
consent of the Representatives.
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 outside the United States or Canada or 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 in
the United States or Canada 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.
53
<PAGE> 58
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 or Canada or its provinces, any
corporation, partnership or other entity created or organized in or under the
laws of the United States or Canada or its provinces, or any estate or trust the
income of which is subject to United States or Canadian income taxation
regardless of the source of its income (other than the foreign branch of any
U.S. Person), and includes any United States or Canadian branch of a person
other than a U.S. Person.
Each International Manager has represented and agreed that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
shares of Common Stock will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has 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) it has only issued or
passed on, and will only issue and 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 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995.
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 and Canada and its
provinces. 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.
Prior to the Offerings, the Lehman Funds, each an affiliate of Lehman
Brothers and Lehman Brothers International (Europe), beneficially own, in the
aggregate, approximately 56% of the outstanding Common Stock of the Company
(assuming 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 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.
The Lehman Funds will receive a portion of the proceeds from the Offerings.
Five of the ten members of the Company's Board of Directors presently are
employed by Lehman Brothers or The Cypress Group L.L.C.,
54
<PAGE> 59
a company that provides consulting services to Lehman Brothers with respect to
the management of the equity investments of the Lehman Funds. Lehman Brothers
has from time to time provided investment banking, financial advisory and other
services to the Company, for which services it has received fees.
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 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.
EXPERTS
The audited financial statements and schedule of the Company incorporated
by reference into this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said reports.
The audited financial statements of the FSB incorporated by reference into
this Prospectus have been audited by Arthur Andersen & Co., s.a.s., as indicated
in their report with respect thereto, and are included herein in reliance upon
authority of said firm as experts in giving said report.
The audited financial statements of AIH and its subsidiaries incorporated
by reference into this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon authority of said firm as
experts in giving said report.
The audited financial statements of Plastifol incorporated by reference
into this Prospectus have been audited by KPMG Deutsche Treuhand --
Gesellschaft, as indicated in their report with respect thereto, and are
included herein in reliance upon authority of said firm as experts in giving
said report.
55
<PAGE> 60
[LEAR LOGO]
[Lear Seating Corporation is the world's
largest independent automotive supplier of
seat and interior systems -- with 33,000
quality-dedicated, customer-focused people
through 107 facilities in 18 countries
around the globe.]
LEAR TOTAL SYSTEMS CAPABILITIES
[Diagram of Lear Total Systems Capabilities]
<PAGE> 61
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON 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
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 11
Common Stock Price Range and
Dividends........................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data of the
Company............................. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 18
Business of the Company............... 24
Selected Financial Data of Automotive
Industries Holding, Inc. ........... 36
Management's Discussion and Analysis
of Results of Operations of
Automotive Industries Holding,
Inc. ............................... 37
Business of Automotive Industries
Holding, Inc. ...................... 39
Management............................ 44
Selling Stockholders.................. 46
Description of Capital Stock.......... 47
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 50
Underwriting.......................... 52
Legal Matters......................... 55
Experts............................... 55
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
15,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
, 1995
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
------------------------------------------------------
------------------------------------------------------
<PAGE> 62
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 PAGE FOR INTERNATIONAL OFFERING]
Subject to Completion, dated September 1, 1995
PROSPECTUS
15,000,000 Shares
[LEAR LOGO]
COMMON STOCK
---------------------------
Of the 15,000,000 shares of Common Stock ("Common Stock") of Lear Seating
Corporation ("Lear" or the "Company") being offered hereby, 10,000,000 shares
are being offered by the Company and 5,000,000 shares are being offered by
certain stockholders of the Company (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. Of the 15,000,000 shares of Common
Stock being offered hereby, 3,000,000 shares are being offered initially outside
the United States and Canada by the International Managers (the "International
Offering") and 12,000,000 shares are being offered initially in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering" and, together
with the International Offering, the "Offerings"). The public offering price and
underwriting discounts and commissions per share are identical for both
Offerings. See "Underwriting."
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On August 31, 1995, the reported last sale price of the Common
Stock on the New York Stock Exchange Composite Tape was $28 5/8 per share.
SEE "RISK FACTORS" ON PAGE 9 HEREIN 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>
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
Per Share.............................. $ $ $ $
-------------------------------------------------------------------------------------------------------
Total(3)............................... $ $ $ $
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Lear and the Selling Stockholders 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 Selling Stockholders have granted the International Managers and the
U.S. Underwriters a 30-day option to purchase up to an aggregate of
2,250,000 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 Selling Stockholders 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 shares will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1995.
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
, 1995
<PAGE> 63
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
------------------------------------------------------
------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON 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
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 9
Use of Proceeds....................... 11
Common Stock Price Range and
Dividends........................... 11
Capitalization........................ 12
Pro Forma Financial Data.............. 13
Selected Financial Data of the
Company............................. 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 18
Business of the Company............... 24
Selected Financial Data of Automotive
Industries Holding, Inc. ........... 36
Management's Discussion and Analysis
of Results of Operations of
Automotive Industries Holding,
Inc. ............................... 37
Business of Automotive Industries
Holding, Inc. ...................... 39
Management............................ 44
Selling Stockholders.................. 46
Description of Capital Stock.......... 47
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 50
Underwriting.......................... 52
Legal Matters......................... 55
Experts............................... 55
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
15,000,000 SHARES
[LOGO]
COMMON STOCK
---------------------------
PROSPECTUS
, 1995
---------------------------
LEHMAN BROTHERS
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
------------------------------------------------------
------------------------------------------------------
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. 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>
SEC filing fee............................................... $ 159,860
NASD filing fee.............................................. 30,500
Blue sky fees and expenses................................... 25,000
Legal fees and expenses...................................... 150,000
Accounting fees and expenses................................. 125,000
Printing and engraving....................................... 500,000
Listing fees................................................. 100,000
Miscellaneous................................................ 9,640
----------
Total................................................... $1,100,000
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is a Delaware corporation. Reference is made to Section 145
of the Delaware General Corporation Law, as amended (the "GCL"), which provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at its request in such capacity of another corporation or
business organization against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that such
person's conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of a corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses that such officer or director actually and reasonably
incurred.
Reference is also made to Section 102(b)(7) of the GCL, which permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the GCL or (iv) for any transaction from which the director
derived an improper personal benefit.
The certificate of incorporation of the Registrant provides for the
elimination of personal liability of a director for breach of fiduciary duty as
permitted by Section 102(b)(7) of the GCL and the by-laws of the Registrant
provide that the Registrant shall indemnify its directors and officers to the
full extent permitted by Section 145 of the GCL.
The Registrant has directors and officers liability insurance that insures
the directors and officers of the Registrants 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 or former officer of Lehman Brothers
Inc., in connection with their service as directors of the Registrant.
II-1
<PAGE> 65
The Underwriting Agreements provide 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 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A list of exhibits is set forth on the Index to Exhibits.
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 this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrants' annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 66
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and 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 August 31, 1995.
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>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ KENNETH L. WAY Chairman of the Board and August 31, 1995
------------------------------------- Chief Executive Officer
Kenneth L. Way (Principal Executive Officer)
* President, Chief Operating August 31, 1995
------------------------------------- Officer and Director
Robert E. Rossiter
/s/ JAMES H. VANDENBERGHE Executive Vice President August 31, 1995
------------------------------------- and Chief Financial Officer
James H. Vandenberghe (Principal Financial and
Principal Accounting Officer)
* Director August 31, 1995
-------------------------------------
Larry W. McCurdy
* Director August 31, 1995
-------------------------------------
Gian Andrea Botta
* Director August 31, 1995
-------------------------------------
Eliot Fried
* Director August 31, 1995
-------------------------------------
Robert W. Shower
* Director August 31, 1995
-------------------------------------
Jeffrey P. Hughes
</TABLE>
II-3
<PAGE> 67
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director August 31, 1995
-------------------------------------
David P. Spalding
* Director August 31, 1995
-------------------------------------
James A. Stern
* Director August 31, 1995
-------------------------------------
Alan Washkowitz
*By: /s/ JAMES H. VANDENBERGHE
-------------------------------------
James H. Vandenberghe
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 68
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER EXHIBIT NUMBERED PAGE
-------------- ------- -------------
<C> <C> <S> <C>
1.1 -- Form of U.S. Underwriting Agreement. *
1.2 -- Form of International Underwriting Agreement. *
2.1 -- Agreement and Plan of Merger, dated as of July 16, 1995, among *
Lear, AIHI Acquisition Corp. and Automotive Industries Holding,
Inc. ("AIH") (incorporated by reference to Exhibit 2.1 to Lear's
Current Report on Form 8-K dated August 28, 1995).
5.1 -- Opinion of Winston & Strawn, special counsel to Lear. *
23.1 -- Consent of Arthur Andersen LLP. *
23.2 -- Consent of Arthur Andersen LLP with respect to AIH Financial *
Statements.
23.3 -- Consent of Arthur Andersen & Co., s.a.s. with respect to FSB *
Financial Statements.
23.4 -- Consent of KPMG Deutsche Treuhand-Gesellschaft with respect to *
the Plastifol Financial Statements.
23.5 -- Consent of Winston & Strawn (included in Exhibit 5.1). *
** 24.1 -- Powers of Attorney. *
** 27.1 -- Financial Data Schedule (incorporated by reference to Exhibit *
27.1 to Lear's Quarterly Report on Form 10-Q filed August 4,
1995).
** 99.1 -- Amended and Restated Stockholders and Registration Rights *
Agreement dated as of September 27, 1991 by and among Lear, 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).
** 99.2 -- 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).
** 99.3 -- Amendment to Amended and Restated Stockholders and Registration *
Rights Agreement (incorporated by reference to Exhibit 10.24 to
Lear's Transition Report on Form 10-K filed March 31, 1994).
99.4 -- Waiver to Amended and Restated Stockholders and Registration *
Rights Agreement dated August 15, 1995.
</TABLE>
-------------------------
** Previously filed.
<PAGE> 1
[Draft -- 8/29/95]
EXHIBIT 1.1
12,000,000 Shares
LEAR SEATING CORPORATION
Common Stock
U.S. Underwriting Agreement
September , 1995
Lehman Brothers Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Schroder Wertheim & 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 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 "Lehman Funds") and FIMA Finance
Management Inc. ("FIMA") (each a "Selling Stockholder" and collectively the
"Selling Stockholders") propose to sell to the several U.S. Underwriters named
in Schedule I hereto (the "U.S. Underwriters") an aggregate of 12,000,000
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 Selling
Stockholders propose to grant to the U.S. Underwriters and the International
Managers (as defined below) an option to purchase up to an aggregate of
2,250,000 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 Stockholders
are concurrently entering into an International
<PAGE> 2
2
Underwriting Agreement dated the date hereof (the "International Underwriting
Agreement"), providing for the sale by the Company and the Selling Stockholders
of an aggregate of 3,000,000 shares of Common Stock through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers"), for whom Lehman Brothers International (Europe), Morgan Stanley &
Co. International Limited, PaineWebber International (U.K.) Ltd. and J. Henry
Schroder & Co. 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 Stockholders 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 Stockholders 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.
<PAGE> 3
3
"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.
"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
<PAGE> 4
4
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 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 or Canada and its provinces, any corporation, partnership or
other entity created or organized in or under the laws of the United States or
Canada and its provinces or any estate or trust the income of which is subject
to United States or Canadian income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States or Canadian 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.
<PAGE> 5
5
Reference made herein to any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any documents incorporated
by reference therein (including all exhibits thereto) pursuant to Item 12 of
Form S-3 under the Securities Act, as of the date of such Preliminary
Prospectus or the Prospectus and any reference to any amendment or supplement
to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any document filed under the Exchange Act after the date of such
Preliminary Prospectus or the Prospectus and incorporated by reference in such
Preliminary Prospectus or the Prospectus.
1. Representations and Warranties of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 (File No. 33-61583)
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 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
<PAGE> 6
6
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 any Selling Stockholder, or by any U.S.
Underwriter through you, specifically for inclusion therein.
(d) The documents incorporated by reference in the
Prospectuses, when they were filed with the Commission (or upon amendment
thereof by other documents included in such incorporated documents), conformed
in all material respects to the requirements of the Act or Exchange Act, as
applicable, and the Rules and Regulations thereunder, and such documents were
timely filed as required thereby and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and any
further documents so filed and incorporated by reference in the Prospectuses,
when such documents become effective or are filed with Commission will
<PAGE> 7
7
conform in all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the Rules and Regulation thereunder, and will be timely
filed as required thereby and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) 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.
(f) 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 Prospectuses 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
<PAGE> 8
8
or to be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(g) 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 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.
(h) 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, other than rights that have been duly and validly
waived.
(i) Neither the Company nor any of its subsidiaries has
sustained, since the date of the Company's Report on Form 10-K for the year
ended December 31, 1994, any material loss or interference with its business
from
<PAGE> 9
9
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.
(j) 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.
(k) 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 of real property
<PAGE> 10
10
under which it is operating except where such failure could not reasonably be
expected to have a material adverse effect on the Company and its subsidiaries
taken as a whole.
(l) 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.
(m) 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, 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
<PAGE> 11
11
Underwritten Shares by the U.S. Underwriters and the International Managers.
(n) The Company will not, during the period of 120 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 Lehman Brothers Inc.;
provided, however, that the Company may issue and sell Common Stock pursuant to
any employee stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the Effective Time and the Company may issue
Common Stock issuable upon the conversion of securities or the exercise of
warrants outstanding at the Effective Time.
(o) 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
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.
(p) 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.
(q) 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.
(r) Except as set forth in the Registration Statement and the
Prospectuses and except as would not
<PAGE> 12
12
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 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.
(s) Except with respect to taxable periods commencing before
the taxable period ended June 30, 1990, 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, individually or in the aggregate, 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,
<PAGE> 13
13
liabilities or prospects of the Company and its subsidiaries taken as a whole.
(t) 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.
(u) The financial statements (including the related notes and
supporting schedules) incorporated by reference in the Prospectuses 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 applicable generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
(v) Arthur Andersen LLP, who have certified certain financial
statements of the Company and AIH (as defined in the Prospectuses), Arthur
Andersen & Co., s.a.s., who have certified certain financial statements of FSB
(as defined in the Prospectuses), and KPMG Deutsche Treuhand-Gesellschaft who
have certified certain financial statements of Plastifol (as defined in the
Prospectuses) and whose reports are incorporated by reference in the
Prospectus, are independent public accountants as required by the Act and the
Rules and Regulations.
(w) 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
<PAGE> 14
14
the Prospectuses, which is not disclosed and correctly summarized therein.
(x) The filing of the Registration Statement has been duly
authorized by the Company.
(y) 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 are reasonably expected to 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.
(z) 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.
2. Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder represents, warrants and agrees that:
(a) Such Selling Stockholder has, and immediately prior to
the First Closing Date (as defined in Section 4) such Selling Stockholder will
have, good and valid title to the Underwritten Shares to be sold by such
Selling Stockholders hereunder as set forth in Schedule II hereto 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) Such Selling Stockholder has duly and irrevocably
executed and delivered powers of attorney (each, a "Power of Attorney")
appointing one or more other persons, as attorneys-in-fact, with full power of
substitution, and
<PAGE> 15
15
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 such Selling Stockholder.
(c) Such Selling Stockholder has full right, power and
authority to enter into and perform under this Agreement, the International
Underwriting Agreement and the Power of Attorney; the execution, delivery and
performance of this Agreement, the International Underwriting Agreement and the
Power of Attorney by such Selling Stockholder and the consummation by such
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 such Selling
Stockholder is a party or by which such Selling Stockholder is bound or to
which any of the property or assets of such 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 such Selling
Stockholder or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling Stockholder
or the property or assets of such 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 or the
Power of Attorney by such Selling Stockholder and the consummation by such
Selling Stockholder of the transactions contemplated hereby and thereby, except
the registration under the Act of the Underwritten Shares, filings pursuant to
Sections 13 and 16 of the Exchange Act, 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.
(d) 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
<PAGE> 16
16
conformity with written information concerning such Selling Stockholder
furnished to the Company by such 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.
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 8,000,000
shares of the Firm Shares and the Selling Stockholders agree to sell 4,000,000
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 Stockholders 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 Stockholders,
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.
The obligations of the Company hereunder to issue and sell any
Shares and of the Selling Stockholders 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 Inter
<PAGE> 17
17
national Managers' over-allotment option) pursuant to the International
Underwriting Agreement.
(b) The Selling Stockholders hereby grant to the U.S.
Underwriters an option to purchase from the Selling Stockholders solely for the
purpose of covering over-allotments in the sale of Firm Shares, up to 1,800,000
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 Selling Stockholders 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. Option Shares shall be sold
by the Selling Stockholders in proportion to the number of Firm Shares set
forth opposite such Selling Stockholder's name in Schedule II hereto, rounded
among the Selling Stockholders to avoid fractional shares.
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., [ ], New York, New York [ ]
(or such other place as mutually may be agreed upon), at 10:00 A.M., New York
City time, on the third full Business Day following the date of this Agreement
if this Agreement is executed before 4:30 p.m. New York time, on the fourth
full Business Day following the date of this Agreement if this Agreement is
executed after 4:30 p.m. New York time 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 Selling Stockholders 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 third Business Day after the date of such
<PAGE> 18
18
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 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 Stockholders 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 Stockholders. 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. 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
<PAGE> 19
19
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 the Lehman Brothers Inc. 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, 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
<PAGE> 20
20
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.
(e) The Company shall furnish to you, on or prior to the date
of this Agreement, a letter or letters or agreement, in form and substance
satisfactory to counsel for the U.S. Underwriters, pursuant to which each
executive officer and director of the Company 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 120 days following the date of the
Effective Date except with the prior written consent of Lehman Brothers Inc.
(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 amend-
<PAGE> 21
21
ments 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 reasonable 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 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 Stockholders hereunder for which provision is not
otherwise made in this Section. It is understood, however, that, except as
provided in this Section, Section 8 and Section 10 hereof, each Selling
Stockholder shall pay all its own costs and expenses, including the fees of its
counsel and stock transfer taxes. Except as provided in this Section, Section
8 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
<PAGE> 22
22
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,
conforming with the requirements of Section 11(a) of the Act, covering a period
of at least 12 months beginning after the Effective Date.
6. Further Agreements of the Selling Stockholders. Each
Selling Stockholder agrees:
(a) For a period of 120 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 Lehman Brothers Inc.
(b) To deliver to the Representatives prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9.
7. 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 Stockholders contained herein, to
the performance by the Company and the Selling Stockholders of their respective
obligations hereunder and to each of the following additional terms and
conditions:
(a) The Registration Statement and any posteffective
amendment thereto has become effective under the Act; if the Registration
Statement has not become effective
<PAGE> 23
23
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 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.
<PAGE> 24
24
(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
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 and their counsel
(with customary qualifications and assumptions agreed to by counsel for 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
<PAGE> 25
25
the execution, delivery, or performance of this Agreement or the
International Underwriting Agreement by the Company (except filings
under the Act and the NYSE which have been made and consents,
authorizations, permits, orders and other matters required by the
National Association of Securities Dealers or 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 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 and other financial and statistical information
included in or excluded from the Registration Statement or the
Prospectuses, 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 and the documents incorporated by
reference therein (other than any financial statements, related
schedules and other financial and statistical information included in
or excluded from the Registration Statement or the Prospectuses), at
the time they were filed with the Commission, complied as
<PAGE> 26
26
to form in all material respects with the Exchange Act and the
applicable Rules and Regulations (except as aforesaid).
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 (to the extent specifically referred to therein), the laws of
the State of New York and the General Corporation 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 than the State of New York or the United States or the General
Corporation 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 reasonably satisfactory to the U.S. Underwriters,
to the effect that such counsel participated in conferences with officers and
representatives of the Company, Arthur Andersen LLP, 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
(relying as to factual matters upon the statements of officers and other
representatives of the Company, the Selling Stockholders and others), 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
<PAGE> 27
27
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 (other than the information omitted therefrom in reliance on Rule
430A), 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, except that such counsel need not express an opinion
or belief as to any financial statements, schedules, and other financial or
statistical information included in or excluded from the Registration Statement
or the Prospectuses.
(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 (with customary qualifications and assumptions agreed to
by counsel for 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
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
<PAGE> 28
28
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
or has been disclosed to the U.S. Underwriters;
(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 or to which
any of their respective operations, businesses or assets is the
subject which could reasonably be expected to 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
<PAGE> 29
29
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 will not conflict with or result in a breach or
violation in any material respect of any of the terms and provisions
of, or constitute 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 in
any material respect 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 authority or any court or other 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 or as may be required by the laws of any country other than the
United States as to which such counsel need express no opinion);
(viii) any contract, agreement, instrument, lease or license
required to be described in the Registration
<PAGE> 30
30
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, in all material
respects, 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.
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 to the extent specifically referred to therein, the laws of the
State of Michigan and the General Corporation 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
<PAGE> 31
31
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) On the First Closing Date, there shall have been furnished
to you the opinion of counsel for each of the Selling Stockholders (addressed
to the Underwriters), dated the Closing Date in form and substance satisfactory
to the Underwriters to the effect that:
(i) each Selling Stockholder has full right, power and
authority to enter into this Agreement and to perform its obligations
hereunder;
(ii) this Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder; and
(iii) the execution, delivery and performance of this
Agreement by each Selling Stockholder and the consummation by each
Selling Stockholder of the transactions contemplated hereby will not
conflict with or result in a breach or violation in any material
respect of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which each
Selling Stockholder is a party or by which each Selling Stockholder is
bound or to which any of the property or assets of each selling
Stockholder is subject, nor will such actions result in any violation
in any material respect of the provisions of the partnership agreement
of each Selling Stockholder or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency
having jurisdiction over each Selling Stockholder or the property or
assets of each Selling Stockholder; and no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency is required for the execution, delivery
and performance of this Agreement by each Selling Stockholder and the
consummation by each Selling Stockholder of the transactions
contemplated hereby, except the registration under the Act of the
Shares,
<PAGE> 32
32
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 Underwriters or as may be required by the laws of any country
other than the United States, and amendments to filings made under the
Exchange Act.
(g) 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 7(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.
(h) At the Effective Time and on each Closing Date, the
Company shall have furnished to the U.S. Underwriters a letter of Arthur
Andersen LLP 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
<PAGE> 33
33
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.
(i) 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.
(j) 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.
(k) 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.
<PAGE> 34
34
(l) Each Selling Stockholder (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, such Selling Stockholder (or the Custodian or
one or more attorneys-in-fact) stating that the representations, warranties and
agreements of such Selling Stockholder contained herein are true and correct as
of such Closing Date and that such Selling Stockholder has complied with all
agreements contained herein to be performed by such 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 U.S. Underwriters, and the
Company shall furnish to you conformed copies thereof in such quantities as you
reasonably request.
8. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each U.S. Underwriter and Selling Stockholder
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 Selling Stockholder in connection with
defending or investigating any such action or claim, joint or several, to which
such U.S. Underwriter or such Selling Stockholder 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
<PAGE> 35
35
make the statements therein not misleading; and shall reimburse each U.S.
Underwriter or Selling Stockholder promptly after receipt of invoices from such
U.S. Underwriter or Selling Stockholder for any legal or other expenses as
reasonably incurred by such U.S. Underwriter or Selling Stockholder 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 shall not be
liable (x) under this paragraph 8(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 U.S. Underwriter or Selling Stockholder 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.
(b) Each Selling Stockholder severally, but not jointly,
shall indemnify and hold harmless the Company and each U.S. Underwriter
against any loss, claim, damage or liability (or any action in respect thereof)
to which the Company or 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 (ii) the admission or alleged admission 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
or such U.S. Underwriter promptly after receipt of invoices from the Company or
such U.S. Underwriter for any legal or other expenses as reasonably incurred by
the Company or such U.S. Underwriter in connection with
<PAGE> 36
36
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 not withstanding 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 concerning such Selling Stockholder furnished to the Company or
such U.S. Underwriter by or on behalf of such Selling Stockholder specifically
for use in the preparation thereof; provided, further, that such
indemnification or reimbursement shall in no case exceed the net proceeds to
such Selling Stockholder from the sale of Underwritten Shares.
(c) Each U.S. Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company and each Selling Stockholder against
any loss, claim, damage or liability (or any action in respect thereof) to
which the Company or any Selling Stockholder 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
or such Selling Stockholder promptly after receipt of invoices from the Company
or such Selling Stockholder for any legal or other expenses as reasonably
incurred by the Company or such Selling Stockholder 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
<PAGE> 37
37
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 or such Selling Stockholder through you by or on behalf of such
U.S. Underwriter specifically for use in the preparation thereof.
(d) Promptly after receipt by any indemnified party under
subsection (a), (b) or (c) 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 8 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 8. 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.
(e) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under subsection (a), (b) or
(c) above, then each
<PAGE> 38
38
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),
(b) or (c) above (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders 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
Stockholders 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 Stockholders
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
Stockholders 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 Stockholders and the
U.S. Underwriters 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 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
<PAGE> 39
39
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), no Selling
Stockholder shall be required to contribute any amount in excess of the amount
by which the amount of proceeds received by such Selling Stockholder from the
sale by such Selling Stockholder of its portion of the Shares pursuant to this
Agreement exceed the amount of any damages such 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 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 (e) hereof).
(e) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the Selling Stockholders may otherwise have, and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Company, any Selling Stockholder or any U.S. Underwriter within the meaning of
the Act; and the obligations of the U.S. Underwriters under this Section 8
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,
<PAGE> 40
40
is named in the Registration Statement as about to become a director of the
Company) or any Selling Stockholder, to each officer of the Company who has
signed the Registration Statement and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. 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 5(f) and Section
10.
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.
10. 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
<PAGE> 41
41
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 5(i) and Section 8 shall
at all times be effective. For purposes of this Agreement, the release of the
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-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
<PAGE> 42
42
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 5(f), Section 8 and
Section 10 of this Agreement.
Any notice referred to above may be given at the address
specified in Section 12 hereof in writing or by telecopier, telex or telephone,
and if by telecopier, telex or telephone, shall be immediately confirmed in
writing.
If notice shall have been given pursuant to this Section 10
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.
11. Survival of Certain Provisions. The agreements contained
in Section 8 hereof and the representations, warranties and agreements of the
Company contained in Sections 1 and 5 hereof and the Selling Stockholder
contained in Sections 2 and 6 hereof shall survive the delivery of the Shares
to the U.S. Underwriters 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.
12. 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
<PAGE> 43
43
given to FIMA, such notice shall be in writing or by telecopy addressed to FIMA
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; (c) whenever notice is required by the provisions of this
agreement to be given to the Lehman Funds, such notice shall be in writing or
by telecopy addressed to [ ]; and (d) 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.
13. Information Furnished by U.S. Underwriters. 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 (c) of Section 8 hereof.
14. Information Furnished by Selling Stockholders. The
Selling Stockholders 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 "Selling Stockholders" in any Preliminary
Prospectus and in the Prospectuses are correct and constitute the only written
information furnished by or on behalf of the Selling Stockholder pursuant to
Section 8(b) hereof.
15. Parties. This Agreement shall inure to the benefit of
and binding upon the several U.S. Underwriters, the Company, the Selling
Stockholders 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 Stockholders 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.
<PAGE> 44
44
Underwriters and International Managers and (b) the indemnity agreement of the
U.S. Underwriters contained in Section 8 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.
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.
<PAGE> 45
45
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: James H. Vandenberghe
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 46
46
FIMA FINANCE MANAGEMENT INC., as a
Selling Stockholder,
By:
______________________________
Name:
Title:
<PAGE> 47
47
LEHMAN BROTHERS MERCHANT BANKING
PORTFOLIO PARTNERSHIP L.P., as Selling
Stockholder
By: LBI Group, Inc.
By:
______________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS II, L.P., as Selling
Stockholder
By: Lehman Brothers Holdings Inc.
By:
______________________________
Name:
Title:
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP L.P., as Selling
Stockholder
By: Lehman Brothers Offshore
Partners Ltd
By:
______________________________
Name:
Title:
<PAGE> 48
48
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP - JAPAN L.P., as Selling
Stockholder
By: Lehman Brothers Offshore
Partners Ltd.
By:
______________________________
Name:
Title:
<PAGE> 49
49
Accepted:
LEHMAN BROTHERS INC.
MORGAN STANLEY CO. INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & 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:_______________________
Name:
Title:
<PAGE> 50
50
SCHEDULE I
U.S. Underwriting Agreement dated September , 1995
<TABLE>
<CAPTION>
Number of Firm
Shares to be
U.S. Underwriters Purchased
----------------- --------------
<S> <C>
Lehman Brothers Inc.
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Schroder Wertheim & Co. Incorporated
==============
Total 12,000,000
</TABLE>
<PAGE> 51
51
SCHEDULE II
U.S Underwriting Agreement dated September , 1995
<TABLE>
<CAPTION>
Number of Firm
Selling Stockholder Shares to be Sold
------------------- -----------------
<S> <C>
Lehman Brother Merchant Banking
Portfolio Partnership L.P.
Lehman Brothers Capital
Partners II, L.P.
Lehman Brothers Offshore
Investment Partnership L.P
Lehman Brothers Offshore
Investment Partnership -
Japan L.P.
FIMA Finance Management Inc.
====================
4,000,000
</TABLE>
<PAGE> 1
EXHIBIT 1.2
[Draft -- 8/29/95]
3,000,000 Shares
LEAR SEATING CORPORATION
Common Stock
International Underwriting Agreement
September , 1995
Lehman Brothers International (Europe)
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
J. Henry Schroder & Co. 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 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 "Lehman Funds") and FIMA Finance
Management Inc. ("FIMA") (each a "Selling Stockholder" and collectively the
"Selling Stockholders") propose to sell to the several International Managers
named in Schedule I hereto (the "International Managers") an aggregate of
3,000,000 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 Selling
Stockholders propose to grant to the U.S. Underwriters and the International
Managers (as defined below) an option to purchase up to an aggregate of
2,250,000 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 Stockholders
are concurrently entering into a U.S. Underwriting Agreement dated the date
hereof (the "U.S. Under-
<PAGE> 2
2
writing Agreement"), providing for the sale by the Company and the Selling
Stockholders of an aggregate of 12,000,000 shares of Common Stock through
arrangements with certain underwriters in the United States and Canada (the
"U.S. Underwriters"), for whom Lehman Brothers Inc., Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated and Schroder Wertheim & 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 Stockholders 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 Stockholders 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 Stockholders 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 or Canada 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 or Canada and its provinces, any corporation, partnership or
other entity created or organized in or under the laws of the United States or
Canada and its provinces or any estate or trust the income of which is subject
to United States or Canadian income taxation regardless of the source of its
income (other than the foreign branch of any U.S. Person), and includes any
United States or Canadian 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 Canada or to
U.S. Persons.
Reference made herein to any Preliminary Prospectus or to the
Prospectus shall be deemed to refer to and include any documents incorporated
by reference therein (including all exhibits thereto) pursuant to Item 12 of
Form S-3 under the Securities Act, as of the date of such Preliminary
Prospectus or Prospectus and any reference to any amendment or supplement to
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any document filed under the Exchange Act after the date of such
Preliminary Prospectus or the Prospectus and incorporated by reference in such
Preliminary Prospectus or Prospectus.
1. Representations and Warranties of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 (File No. 33-61583)
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
<PAGE> 5
5
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).
(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
<PAGE> 6
6
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
any Selling Stockholder, or by any International Manager through you,
specifically for inclusion therein.
(d) The documents incorporated by reference in the
Prospectuses, when they were filed with the Commission (or upon amendment
thereof by other documents included in such incorporated documents), conformed
in all material respects to the requirements of the Act or Exchange Act, as
applicable, and the Rules and Regulations thereunder, and such documents were
timely filed as required thereby and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; and any
further documents so filed and incorporated by reference in the Prospectuses,
when such documents become effective or are filed with Commission will conform
in all material respects to the requirements of the Act or the Exchange Act, as
applicable, and the Rules and Regulation thereunder, and will be timely filed
as required thereby and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(e) 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.
(f) 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, certifi-
<PAGE> 7
7
cates, 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 Prospectuses 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.
(g) 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 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.
<PAGE> 8
8
(h) 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, other than rights that have been duly and validly
waived.
(i) Neither the Company nor any of its subsidiaries has
sustained, since the date of the Company's Report on Form 10-K for the year
ended December 31, 1994, 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.
(j) 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.
(k) 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 accor-
<PAGE> 9
9
dance 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 of real
property under which it is operating except where such failure could not
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(l) 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.
(m) 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, 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
<PAGE> 10
10
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.
(n) The Company will not, during the period of 120 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 Lehman Brothers International (Europe);
provided, however, that the Company may issue and sell Common Stock pursuant to
any employee stock option plan, stock ownership plan or dividend reinvestment
plan of the Company in effect at the Effective Time and the Company may issue
Common Stock issuable upon the conversion of securities or the exercise of
warrants outstanding at the Effective Time.
(o) 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
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.
(p) 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 in the Registration Statement.
(q) 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
<PAGE> 11
11
prospects of the Company and its subsidiaries taken as a whole.
(r) Except as set forth in the Registration Statement and the
Prospectuses 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 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.
(s) Except with respect to taxable periods commencing before
the taxable period ended June 30, 1990, 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, individually or in the aggregate, if
determined adversely to the Company or any of its subsidiaries, could
reasonably be expected to have a
<PAGE> 12
12
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.
(t) 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.
(u) The financial statements (including the related notes and
supporting schedules) incorporated by reference in the Prospectus 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 applicable generally accepted accounting
principles applied on a consistent basis throughout the periods involved.
(v) Arthur Andersen LLP, who have certified certain financial
statements of the Company and AIH (as defined in the Prospectuses), Arthur
Andersen & Co., s.a.s., who have certified certain financial statements of FSB
(as defined in the Prospectuses) and KPMG Deutsche Treuhand-Gesellschaft, who
have certified certain financial statements of Plastifol (as defined in the
Prospectuses), and whose reports are incorporated by reference in the
Prospectus, are independent public accountants as required by the Act and the
Rules and Regulations.
(w) 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.
<PAGE> 13
13
(x) The filing of the Registration Statement has been duly authorized by the
Company.
(y) 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 could reasonably be expected to 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.
(z) 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.
2. Representations, Warranties and Agreements of the Selling
Stockholders. Each Selling Stockholder represents, warrants and agrees that:
(a) Such Selling Stockholder has, and immediately prior to
the First Closing Date (as defined in Section 4) such Selling Stockholder will
have, good and valid title to the Underwritten Shares to be sold by such
Selling Stockholder hereunder as set forth in Schedule II hereto 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) Such Selling Stockholder has duly and irrevocably
executed and delivered powers of attorney (each, a "Power of Attorney")
appointing 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 such Selling Stockholder.
<PAGE> 14
14
(c) Such Selling Stockholder has full right, power and
authority to enter into and perform under this Agreement, the U.S.
Underwriting Agreement and the Power of Attorney; the execution, delivery and
performance of this Agreement, the U.S. Underwriting Agreement and the Power of
Attorney by such Selling Stockholder and the consummation by such 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 such Selling
Stockholder is a party or by which the Selling Stockholder is bound or to which
any of the property or assets of such 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 such Selling
Stockholder or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such Selling Stockholder
or the property or assets of such 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 or the Power of
Attorney by such Selling Stockholder and the consummation by such Selling
Stockholder of the transactions contemplated hereby and thereby, except the
registration under the Act of the Underwritten Shares, filings pursuant to
Sections 13 and 16 of the Exchange Act, 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.
(d) 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 concerning such Selling Stockholder furnished to the
Company by such 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
<PAGE> 15
15
be stated therein or necessary to make the statements therein not misleading.
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 2,000,000
shares of the Firm Shares and the Selling Stockholders agree to sell 1,000,000
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
Stockholders 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 Stockholders, 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.
The obligations of the Company hereunder to issue and sell any
Shares and of the Selling Stockholders 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 Selling Stockholders hereby grant 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 450,000
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 Selling Stockholders for the accounts of the International Managers,
severally and not jointly, in proportion to the number of Firm Shares set
<PAGE> 16
16
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.
Option Shares shall be sold by the Selling Stockholders in proportion to the
number of Firm Shares set forth opposite such Selling Stockholder's name in
Schedule II hereto, rounded among the Selling Stockholders to avoid fractional
shares.
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., [ ], New York, New York [ ] (or such other
place as mutually may be agreed upon), at 10:00 A.M., New York City time, on
the third full Business Day following the date of this Agreement if this
Agreement is executed before 4:30 p.m. New York time, on the fourth full
Business Day following the date of this Agreement if this Agreement is executed
after 4:30 p.m. New York time 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 Selling Stockholders 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 third 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 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 Stockholders 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
<PAGE> 17
17
the Company and the Selling Stockholders. 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. 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
<PAGE> 18
18
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 Lehman Brothers
International (Europe) 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, 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
<PAGE> 19
19
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.
(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 International Managers, pursuant to which each executive
officer and director of the Company 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 120 days following the date of the Effective Time
except with prior written consent of Lehman Brothers International (Europe).
(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 reasonable 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 Powers of Attorney and all other
costs and expenses incident to the performance of the obligations of
<PAGE> 20
20
the company and the obligations of the Selling Stockholders hereunder for which
provision is not otherwise made in this Section. It is understood, however,
that, except as provided in this Section, Section 8 and Section 10 hereof, each
Selling Stockholder shall pay all its own costs and expenses, including the
fees of its counsel and stock transfer taxes.
(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 Act, covering a period
of at least 12 months beginning after the Effective Date.
6. Further Agreements of the Selling Stockholders. Each Selling
Stockholder agrees:
(a) For a period of 120 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 Lehman Brothers International
(Europe).
<PAGE> 21
21
(b) To deliver to the Representatives prior to the First
Closing Date a properly completed and executed United States Treasury
Department Form W-9.
7. 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 Stockholders
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 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 5(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
<PAGE> 22
22
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
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 (with
customary qualifications and assumptions agreed to by counsel for 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
<PAGE> 23
23
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 and the NYSE which have been
made and consents, authorizations, permits, orders and other matters
required by the National Association of Securities Dealers or 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 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 and other financial and statistical information
included in or excluded from the Registration Statement or the
Prospectuses, as to which such counsel need express no opinion) comply
as to form in all material
<PAGE> 24
24
respects with the requirements of the Act and the Rules and
Regulations and the documents incorporated by reference therein (other
than any financial statement's related schedules and other financial
and statistical information included in or excluded from the
Registration Statement or the Prospectuses), at the time they were
filed with the Commission, complied as to form in all material
respects with the Exchange Act and the applicable Rules and
Regulations (except as aforesaid).
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 (to the extent specifically referred to therein), the laws of
the State of New York and General Corporation 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 than the State of New York or the United States or the General
Corporation 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 reasonably satisfactory to the
International Managers, to the effect that such counsel participated in
conferences with officers and representatives of the Company, Arthur Andersen
LLP, 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 (relying as to factual matters upon
the
<PAGE> 25
25
statements of officers and other representatives of the Company, the Selling
Stockholders and others), 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 (other than the information omitted
therefrom in reliance on Rule 430A), 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, except that such
counsel need not express an opinion or belief as to any financial statements,
schedules and other financial or statistical information included in or
excluded from the Registration Statement or the Prospectuses.
(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 (with customary qualifications and
assumptions agreed to by counsel for 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
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
<PAGE> 26
26
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 or has been disclosed to the
International Managers;
(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 could reasonably be expected to 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;
<PAGE> 27
27
(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 will not conflict with or result in a breach or
violation in any material respect of any of the terms and provisions
of, or constitute 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 in any
material respect 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 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. 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 or as may be
required by the laws of any country other than the United States 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;
<PAGE> 28
28
(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, in all material
respects, 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.
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 to the extent specifically referred to therein, the laws of the
State of Michigan and General Corporation 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) On the First Closing Date, there shall have been furnished
to you the opinion of counsel for each of the
<PAGE> 29
29
Selling Stockholders (addressed to the Underwriters), dated the Closing Date in
form and substance satisfactory to the Underwriters to the effect that:
(i) each Selling Stockholder has full right, power and
authority to enter into this Agreement and to perform its obligations
hereunder;
(ii) this Agreement has been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder; and
(iii) the execution, delivery and performance of this
Agreement by each Selling Stockholder and the consummation by each
Selling Stockholder of the transactions contemplated hereby will not
conflict with or result in a breach or violation in any material
respect of any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which each
Selling Stockholder is a party or by which each Selling Stockholder is
bound or to which any of the property or assets of each selling
Stockholder is subject, nor will such actions result in any violation
in any material respect of the provisions of the partnership agreement
of each Selling Stockholder or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency
having jurisdiction over each Selling Stockholder or the property or
assets of each Selling Stockholder; and no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency is required for the execution, delivery
and performance of this Agreement by each Selling Stockholder and the
consummation by each Selling Stockholder of the transactions
contemplated hereby, except the registration under the Act of the
Shares, 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 Underwriters or as may be required by the laws of any
country other than the United States, and amendments to filings made
under the Exchange Act.
(g) The Company shall have furnished to the International
Managers on each Closing Date a certificate, dated such Closing Date, of its
President or a Vice President and its Chief Financial Officer stating that:
<PAGE> 30
30
(i) they have carefully examined the Registration Statement
and the Prospectuses and, in their opinion, in each case to the extent
information provided in the Registration Statement or Prospectus
relates to (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.
(h) At the Effective Time and on each Closing Date, the
Company shall have furnished to the International Managers a letter of Arthur
Andersen LLP 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 and confirming in all
material respects the conclusions and findings set forth in such prior letter.
(i) 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.
<PAGE> 31
31
(j) Neither the Company nor any of its Significant
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.
(k) 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.
(l) Each Selling Stockholder (or one or more
attorneys-in-fact on behalf of such 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, such Selling Stockholder (or one or more
attorneys-in-fact) stating that the representations, warranties and agreements
of such Selling Stockholder contained herein are true and correct as of such
Closing Date and that such Selling Stockholder has complied with all agreements
contained herein to be performed by such Selling Stockholder at or prior to
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.
<PAGE> 32
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8. Indemnification and Contribution. (a) The Company agrees
to indemnify and hold harmless each International Manager and Selling
Shareholder 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 Selling Stockholder in
connection with defending or investigating any such action or claim, joint or
several, to which such International Manager or Selling Shareholder 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 and Selling
Shareholder promptly after receipt of invoices from such International Manager
or Selling Shareholder for any legal or other expenses as reasonably incurred
by such International Manager or Selling Shareholder 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 shall not be liable (x)
under this paragraph 8(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 or Selling Shareholder specifically for use
in the preparation of the Registration Statement, any Preliminary Prospectus,
any Prospectus or the Registration Statement or
<PAGE> 33
33
any Prospectus as amended or supplemented, or any Blue Sky application.
(b) Each Selling Stockholder severally, but not jointly,
shall indemnify and hold harmless the Company and each International Manager
against any loss, claim, damage or liability (or any action in respect thereof)
to which the Company or 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 (ii) the admission or alleged admission 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
or such International Manager promptly after receipt of invoices from the
Company or such International Manager for any legal or other expenses as
reasonably incurred by the Company or 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 not withstanding 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 concerning such Selling Stockholder furnished to the Company or
such International Manager by or on behalf of such Selling Stockholder
specifically for use in the preparation thereof; provided, further, that such
indemnification or reimbursement shall in no case exceed the net proceeds to
such Selling Stockholder from the sale of the Underwritten Shares.
(c) Each International Manager severally, but not jointly,
shall indemnify and hold harmless the Company and each Selling Stockholder
against any loss, claim, damage or liability (or any action in respect thereof)
to which the Company or any Selling Stockholder may become subject, under the
Act or otherwise, insofar as such loss, claim, damage or
<PAGE> 34
34
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
or such Selling Stockholder promptly after receipt of invoices from the Company
or such Selling Stockholder for any legal or other expenses as reasonably
incurred by the Company or such Selling Stockholder 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 or such Selling Stockholder through you by or on behalf of such
International Manager specifically for use in the preparation thereof.
(d) Promptly after receipt by any indemnified party under
subsection (a) (b) or (c) 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 8 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 8. 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
<PAGE> 35
35
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 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.
(e) If the indemnification provided for in this Section 8 is
unavailable to hold harmless an indemnified party under subsection (a), (b) or
(c) 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), (b) or (c) above (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, the Selling Stockholders
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 Stockholders 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 Stockholders 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
Stockholders 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 of a material fact or the omission or alleged omission
to state a material fact relates to
<PAGE> 36
36
information supplied by the Company, the Selling Stockholders 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 Stockholders and the International Managers
agree that it would not be just and equitable if contributions pursuant to this
subsection (e) 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 (e). 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 (e) 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 (e). Notwithstanding the provisions of
this subsection (e), (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 (e), no Selling Stockholder shall be required to
contribute any amount in excess of the amount by which the amount of proceeds
received by such Selling Stockholder from the sale by such Selling Stockholder
of its portion of the Shares pursuant to this Agreement exceed the amount of
any damages such 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 (e) 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
<PAGE> 37
37
any obligation it may have hereunder or otherwise (except as specifically
provided in subsection (d) hereof).
(f) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the Selling Stockholders may otherwise have, and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Company, any Selling Stockholder or any International Manager within the
meaning of the Act; and the obligations of the International Managers under
this Section 8 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 any Selling Stockholder, to each
officer of the Company who has signed the Registration Statement and to each
person, if any, who controls the Company or any Selling Stockholder within the
meaning of the Act.
9. 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 5(f) and Section 10.
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 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
<PAGE> 38
38
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.
10. 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 5(i)
and Section 8 shall at all times be effective. For purposes of this Agreement,
the release of the 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 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
<PAGE> 39
39
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 5(f), Section 8 and Section 10 of this Agreement.
Any notice referred to above may be given at the address
specified in Section 12 hereof in writing or by telecopier, telex or telephone,
and if by telecopier, telex or telephone, shall be immediately confirmed in
writing.
If notice shall have been given pursuant to this Section 10
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, and upon demand the Company shall pay the full amount
thereof to the International Managers.
11. Survival of Certain Provisions. The agreements contained
in Section 8 hereof and the representations, warranties and agreements of the
Company contained in Sections 1 and 5 hereof and the Selling Stockholder
contained in Sections 2 and 6 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.
<PAGE> 40
40
12. 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 FIMA, such notice shall be in
writing or by telecopy addressed to FIMA 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; (c) whenever notice
is required by the provisions of this Agreement to be given to the Lehman
Funds, such notice shall be in writing or by telecopy addressed to [
]; and
13. Information Furnished by U.S. Underwriters. 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 (c) of Section 8 hereof.
14. Information Furnished by Selling Stockholders. The
Selling Stockholders 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 "Selling Stockholders" in any Preliminary
Prospectus and in the Prospectuses are correct and constitute the only written
information furnished by or on behalf of such Selling Stockholder pursuant to
Section 8(b) hereof.
15. Parties. This Agreement shall inure to the benefit of
and binding upon the several International Managers, the Company, the Selling
Stockholders 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
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
<PAGE> 41
41
Managers and (b) the indemnity agreement of the International Managers
contained in Section 8 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.
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 Stockholders and the International Managers, please
indicate your acceptance in the space provided for that purpose below.
Very truly yours,
LEAR SEATING CORPORATION,
By:
_________________________
Name: James H. Vandenberghe
Title: Executive Vice
President and Chief
Financial officer
<PAGE> 42
42
FIMA FINANCE MANAGEMENT INC., as
Selling Stockholder,
By:
_________________________
Name:
Title:
LEHMAN BROTHERS MERCHANT BANKING
PORTFOLIO PARTNERSHIP L.P., as
Selling Stockholder
By: LBI Group, Inc.
By:
_________________________
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS II, L.P., as Selling
Stockholder
By: Lehman Brothers Holdings, Inc.
By:
_________________________
Name:
Title:
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP L.P., as Selling
Stockholder
By: Lehman Brothers Offshore
Partners Ltd.
By:
_________________________
Name:
Title:
<PAGE> 43
43
Lehman Brothers Offshore Investment
Partnership - Japan L.P., as
Selling Stockholder
By: Lehman Brothers Offshore
Partners Ltd.
By:
_________________________
Name:
Title:
<PAGE> 44
44
Accepted:
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL (U.K.) LIMITED
J. HENRY SCHRODER & CO. LTD.
For themselves and as Lead Managers
for each of the several International Managers
named in Schedule I hereto
By: LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By:_________________________
Name:
Title:
<PAGE> 45
45
SCHEDULE I
International Underwriting Agreement dated September , 1995
<TABLE>
<CAPTION>
Number of Firm
Shares to be
International Managers Purchased
---------------------- -----------
<S> <C>
Lehman Brothers International
(Europe)
Morgan Stanley & Co. International
Limited
PaineWebber International (U.K.) Limited
J. Henry Schroder & Co. Ltd.
============
Total 2,000,000
</TABLE>
<PAGE> 46
46
SCHEDULE II
International Underwriting Agreement dated September , 1995
<TABLE>
<CAPTION>
Number of Firm
Selling Stockholder Shares to be Sold
------------------- -----------------
<S> <C>
Lehman Brother Merchant Banking
Portfolio Partnership L.P.
Lehman Brothers Capital
Partners II, L.P.
Lehman Brothers Offshore
Investment Partnership L.P
Lehman Brothers Offshore
Investment Partnership -
Japan L.P.
FIMA Finance Management Inc.
====================
1,000,000
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[WINSTON & STRAWN LETTERHEAD]
September 1, 1995
Lear Seating Corporation
21557 Telegraph Road
Southfield, MI 48034
Re: Registration Statement on Form S-3
of Lear Seating Corporation (No. 33-61583)
(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-3 of the offer and sale (the "Offering") of up to 17,250,000 shares of
Common Stock of the Company, par value of $.01 per share (the "Common Stock").
Of the 17,250,000 shares being offered in the Offering, (i) 10,000,000 shares
are being offered by the Company and (ii) 7,250,000 (assuming the exercise of
the Underwriters' over-allotment option) are being offered by selling
stockholders (the "Selling Stockholders").
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 August 4, 1995 under the Act, as amended by Amendment No. 1 thereto filed
with the Commission on September 1, 1995 (as so amended, the "Registration
Statement"); (ii) the United States preliminary prospectus dated September 1,
1995; (iii) the International preliminary prospectus dated September 1, 1995;
(iv) the Restated Certificate of Incorporation of the Company, (the "Charter");
(v) the Amended and Restated By-laws of the Company, (the "By-Laws"); (vi) the
form of the United States Underwriting Agreement to be entered into by the
Company, the Selling Stockholders, Lehman Brothers, Painewebber Incorporated,
Morgan Stanley & Co. Incorporated and Schroder Wertheim & Co. Incorporated
(the "U.S. Underwriting
<PAGE> 2
[WINSTON & STRAWN LETTERHEAD]
Lear Seating Corporation
September 1, 1995
Page 2
Agreement"); (vii) the form of the International Underwriting Agreement to be
entered into by the Company, the Selling Stockholders, Lehman Brothers
International (Europe), Painewebber International (U.K.) Ltd., Morgan Stanley &
Co. International Limited and J. Henry Schroder & Co. 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, was are of the
opinion that:
(a) the 10,000,000 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 7,250,000 shares of Common Stock covered by the
Registration Statement are and, when sold the Selling Stockholders in
accordance with the provisions of the Underwriting Agreements, will be legally
issued, fully paid and non-assessable.
We hereby consent to the reference to our firm under the
heading "Legal Matters" in the prospectuses included in 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
<PAGE> 3
[WINSTON & STRAWN LETTERHEAD]
Lear Seating Corporation
September 1, 1995
Page 3
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 PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated February 15,
1995 included in Lear Seating Corporation's Form 10-K for the year ended
December 31, 1994, and to all references to our firm included in this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan
August 24, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 26, 1995
included in Lear Seating Corporation's Form 8-K filed on August 28, 1995, and to
all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
August 24, 1995
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated November 30,
1994 included in Lear Seating Corporation's Form 8-K/A filed on February 28,
1995, and to all references to our firm included in this registration statement.
/s/ Arthur Andersen & Co., s.a.s.
ARTHUR ANDERSEN & CO., s.a.s.
Turin, Italy
August 24, 1995
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
on Form S-3 of LEAR SEATING Corporation of our report dated August 23, 1995 with
respect to the balance sheet of Plastifol GmbH & Co. KG as of 31 December 1994
and the related profit and loss account and cash flow statement for the year
then ended which report appears in the Form 8-K of LEAR SEATING Corporation
filed on August 28, 1995.
/s/ KPMG Deutsche Treuhand-Gesellschaft
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Munich, Germany
August 23, 1995
<PAGE> 1
EXHIBIT 99.4
WAIVER dated as of August 15, 1995 (this "Waiver") to the
Amended and Restated Stockholders and Registration Rights Agreement dated as of
September 27, 1991, as amended as of March 31, 1994 (the "Agreement"), among
Lear Seating Corporation (as successor to Lear Holdings Corporation), a
Delaware corporation (the "Company"), Lehman Brothers Merchant Banking
Portfolio Partnership L.P. (formerly Shearson Lehman Hutton Merchant Banking
Portfolio Partnership L.P.), a Delaware limited partnership, Lehman Brothers
Offshore Investment Partnership--Japan L.P. (formerly Shearson Lehman Hutton
Offshore Investment Partnership--Japan L.P.), a Bermuda limited partnership,
Lehman Brothers Offshore Investment Partnership L.P. (formerly Shearson Lehman
Hutton Offshore Investment Partnership L.P.), a Bermuda limited partnership,
and Lehman Brothers Capital Partners II, L.P. (formerly Shearson Lehman Hutton
Capital Partners II, L.P.), a Delaware limited partnership (each a "Lehman
Partnership" and, collectively, the "Lehman Group"), LB I Group Inc. (formerly
Shearson Lehman Hutton Merchant Banking Partners, Inc.), a Delaware
corporation, as the Lehman Group Representative (the "Lehman Group
Representative"), FIMA Finance Management Inc., a British Virgin Islands
corporation ("FIMA"), and the parties listed in Schedule A to the Agreement or
who became Management Investors pursuant to Section 6.10 thereof (the
"Management Investors" and, together with the Lehman Group and FIMA, the
"Investors").
The parties hereto agree as follows:
SECTION 1. Waiver. The Holders hereby waive their rights
under Section 4.2 of the Agreement, including, without limitation, their rights
to participate in the public offering of Shares by the Company, FIMA and the
Lehman Group (the "Offering") pursuant to a registration statement filed with
the Securities and Exchange Commission on August 4, 1995 (the "Registration
Statement"), and their rights under the notice provisions thereof with respect
to the Offering.
SECTION 2. Notice. The Company expects the Registration
Statement relating to the Offering to become effective on or about September
20, 1995. The preceding sentence shall satisfy in full the notice requirements
of Section 4.3(a) of the Agreement with respect of the Offering.
SECTION 3. Effectiveness; Miscellaneous. (a) This Amendment
shall become effective as of the date first set forth above.
<PAGE> 2
(b) This Waiver constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings, oral or written,
relating to the subject matter hereof.
(c) Section headings used herein are for convenience of
reference only and are not to affect the construction of, or to be taken into
consideration in interpreting, this Waiver.
(d) The laws of the State of Delaware shall govern the
interpretation, validity and performance of the terms of this Amendment,
regardless of the law that might be applied under applicable principles of
conflicts of laws.
(e) Each reference to a party hereto shall be deemed to
include its successors and assigns, all of whom shall be bound by this Waiver
and to whose benefit the provisions of this Waiver shall insure.
(e) This Waiver may be executed in any number of
counterparts, each of which shall be an original but all of which, when taken
together, shall constitute but one instrument.
(f) Capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Agreement.
(g) Except as specifically modified hereby, the Agreement
shall continue in full force and effect in accordance with the provisions
thereof. As used therein, the terms "Agreement", "herein", "hereunder",
"hereinafter", "hereto", "hereof" and words of similar import shall, unless the
context otherwise requires, refer to the Agreement as modified hereby.
IN WITNESS WHEREOF, the undersigned have executed this Waiver
as of the date first set forth above.
LEAR SEATING CORPORATION
By _______________________________
Name: J.H. Vandenberge
Title: Executive Vice President
-2 -
<PAGE> 3
As Holders of a majority of the Shares
held by the Lehman Partnerships and their
respective Permitted Transferees:
Lehman Brothers Merchant Banking Portfolio
Partnership L.P.
By _______________________________
Name:
Title:
Lehman Brothers Capital
Partners II, L.P.
By _______________________________
Name:
Title:
Lehman Brothers Offshore
Investment Partnership LP.
By _______________________________
Name:
Title:
Lehman Brothers Offshore
Investment Partnership-Japan LP.
By _______________________________
Name:
Title:
As Holders of a majority of the Shares
held by FIMA and its Permitted Transferees:
FIMA Finance Management, Inc.
By _______________________________
Name:
Title:
-3-
<PAGE> 4
As Holders of a majority of the Shares
held by Management Investors and their
respective Permitted Transferees:
_________________________________
Name: John Boerger
Shares of Common Stock:__________
_________________________________
Name: P. Burke
Shares of Common Stock:__________
_________________________________
Name: Jimmie Comer
Shares of Common Stock:__________
_________________________________
Name: G.H. Dunze
Shares of Common Stock:__________
_________________________________
Name: M.R. Edwards
Shares of Common Stock:__________
_________________________________
Name: C.E. Fisher
Shares of Common Stock:__________
_________________________________
Name: A.J. Goscinski
Shares of Common Stock:__________
_________________________________
Name: J.A. Hollars
Shares of Common Stock:__________
_________________________________
Name: L.R. Haskell
Shares of Common Stock:__________
-4-
<PAGE> 5
_________________________________
Name: L.K. Hensley
Shares of Common Stock:__________
_________________________________
Name: T.B. Henstock
Shares of Common Stock:__________
_________________________________
Name: R.G. Hodgson
Shares of Common Stock:__________
_________________________________
Name: R.B. Hopkins, Jr.
Shares of Common Stock:__________
_________________________________
Name: G.G. Harris
Shares of Common Stock:__________
_________________________________
Name: W.G. Jamieson
Shares of Common Stock:__________
_________________________________
Name: E.F. Kozlowski
Shares of Common Stock:__________
_________________________________
Name: W.A. Ludwig
Shares of Common Stock:__________
_________________________________
Name: T.E. Melson
Shares of Common Stock:__________
_________________________________
Name: R.T. Murphy
Shares of Common Stock:__________
-5-
<PAGE> 6
_________________________________
Name: R.E. Rossiter
Shares of Common Stock:__________
_________________________________
Name: R.B. Smith, Jr.
Shares of Common Stock:__________
_________________________________
Name: D.J. Stebbins
Shares of Common Stock:__________
_________________________________
Name: R.G. Tancredi
Shares of Common Stock:__________
_________________________________
Name: J.E. Thompson
Shares of Common Stock:__________
_________________________________
Name: M.P. Tepfenhart
Shares of Common Stock:__________
_________________________________
Name: J.H. Vandenberghe
Shares of Common Stock:__________
_________________________________
Name: A.H. Vartanian
Shares of Common Stock:__________
_________________________________
Name: J. Wainwright
Shares of Common Stock:__________
_________________________________
Name: K.L. Way
Shares of Common Stock:__________
-6-
