<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 28, 1996
REGISTRATION NO. 333-05807
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
LEAR 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 48086-5008
(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 48086-5008
(810) 746-1500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copies to:
Robert W. Ericson
John L. MacCarthy
Winston & Strawn
200 Park Avenue
New York, New York 10166
(212) 294-6700
David Mercado
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
---------------------------
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 NOTE
This Registration Statement covers the registration of 17,250,000 shares of
Common Stock, $.01 par value per share, of Lear Corporation 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 this Explanatory
Note. 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" and, together with the U.S. Offering
Prospectus, the "Prospectuses"). 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 June 28, 1996
PROSPECTUS
15,000,000 Shares
LEAR CORP. LOGO
COMMON STOCK
---------------------------
Of the 15,000,000 shares of Common Stock ("Common Stock") of Lear
Corporation ("Lear" or the "Company") being offered hereby, 7,500,000 shares are
being offered by the Company and 7,500,000 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." Concurrently with the Offerings, the Company is
undertaking a public offering (the "Note Offering") of $200,000,000 principal
amount of subordinated notes due 2006. The Offerings are not conditioned upon
the consummation of the Note Offering.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On June 27, 1996, the reported last sale price of the Common
Stock on the New York Stock Exchange Composite Tape was $36 5/8 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 11 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 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 , 1996.
---------------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
, 1996
<PAGE> 4
[INSIDE FRONT COVER]
LEAR CORPORATION LOGO
INTERIOR SYSTEMS CAPABILITIES
[A PICTURE OF A FORD WINDSTAR SEAT SYSTEM]
[A PICTURE OF A FORD WINDSTAR]
[A PICTURE OF A CHEVROLET CAVALIER DOOR PANEL]
[A PICTURE OF A CHEVROLET CAVALIER]
[DIAGRAM OF AN AUTOMOTIVE INTERIOR ILLUSTRATING FOUR INTERIOR PRODUCTS:
SEAT SYSTEMS, DOOR PANELS, HEADLINERS AND FLOOR AND ACOUSTIC SYSTEMS]]
[A PICTURE OF A SAAB 9000]
[A PICTURE OF A SAAB 9000 HEADLINER]
[A PICTURE OF A JEEP GRAND CHEROKEE]
[A PICTURE OF A JEEP GRAND CHEROKEE FLOOR SYSTEM]
<PAGE> 5
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK 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 Fifth
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,
1995;
(b) the Company's Quarterly Report on Form 10-Q for the period ended March 30,
1996;
(c) the Company's Current Report on Form 8-K dated May 22, 1996;
(d) the audited consolidated financial statements of Automotive Industries
Holding, Inc. and the notes thereto included on pages 3 through 36 of the
Company's Current Report on Form 8-K dated August 28, 1995; and
(e) 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 Corporation, 21557 Telegraph Road, P.O. Box 5008, Southfield,
Michigan 48086-5008, Attention: Director of Investor Relations (telephone: (800)
413-5327).
2
<PAGE> 6
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
Corporation and its consolidated subsidiaries. A significant portion of the
Company's operations, including the operations of the Company's AI Division and
Masland Division, are conducted through wholly-owned subsidiaries of Lear
Corporation. Effective as of May 9, 1996, Lear changed its name from "Lear
Seating Corporation" to "Lear Corporation." Unless otherwise indicated, all
information contained in this Prospectus is based on the assumption that the
Underwriters' over-allotment option is not exercised.
THE COMPANY
GENERAL
Lear is the largest independent supplier of automotive interior systems in
the estimated $40 billion global automotive interior market and the tenth
largest independent automotive supplier in the world. The Company's principal
products include: finished automobile and light truck seat systems; interior
trim products, such as door panels and headliners; and component products, such
as seat frames, seat covers and various blow molded plastic parts. The Company's
extensive product offerings were recently expanded through the acquisition of
Masland Corporation ("Masland"), a leading Tier I designer and manufacturer of
automotive floor and acoustic systems and interior and luggage trim components.
This acquisition, together with the August 1995 acquisition of Automotive
Industries Holding, Inc. ("AI" or "Automotive Industries"), has made Lear the
world's largest independent automotive supplier with the ability to design,
engineer, test and deliver products for a total vehicle interior. As original
equipment manufacturers ("OEMs") continue their worldwide expansion and seek
ways to improve their vehicle quality while simultaneously reducing the costs of
various vehicle components, management believes that suppliers such as Lear will
be increasingly asked to fill the role of "Systems Integrator" to manage the
design, purchasing and supply of the total automotive interior. Lear's
full-service capabilities make it well-positioned to fill this role.
The Company has experienced substantial growth in market presence and
profitability over the last five years both as a result of internal growth as
well as acquisitions. The Company's sales have grown from approximately $1.1
billion for the year ended June 30, 1991 to approximately $4.7 billion for the
year ended December 31, 1995, a compound annual growth rate of 38%. After giving
pro forma effect to the AI and Masland acquisitions, the Company sales would
have been approximately $5.7 billion for the year ended December 31, 1995. The
Company's operating income has grown from approximately $44.7 million for the
year ended June 30, 1991 to approximately $244.8 million for the year ended
December 31, 1995, a compound annual growth rate of 46%.
The Company's present customers include 24 OEMs, the most significant of
which are Ford, General Motors, Fiat, Chrysler, Volvo, Saab, Volkswagen, Audi
and BMW. As of June 1, 1996, after giving pro forma effect to the acquisition of
Masland, the Company would have employed approximately 40,000 people in 19
countries and operated 131 manufacturing, research, design, engineering, testing
and administration facilities.
STRATEGY
The Company's principal objective is to expand its position as the leading
independent supplier of automotive interior systems in the world. To this end,
the Company's strategy is to capitalize 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 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. With the recent acquisitions of AI and Masland, Lear has
substantial manufacturing capabilities in four of the five principal
3
<PAGE> 7
automotive interior segments: seat systems; floor and acoustic systems; door
panels; and headliners. The Company intends to enter into the remaining interior
segment, instrument panels, through strategic alliances, acquisitions, supplier
relationships and/or joint ventures.
Elements of the Company's strategy include:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its 24 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 automotive interior systems
and components 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.
- Global Presence. In 1995, more than two-thirds of total worldwide
vehicle production occurred outside of the United States and Canada. Due to
the opportunity for significant cost savings and improved product quality
and consistency, OEMs have increasingly required their suppliers to
manufacture automotive interior systems and components in multiple
geographic markets. In recent years, the Company has aggressively expanded
its operations in Western Europe and emerging markets in South America,
South Africa, the Pacific Rim and elsewhere, giving it the capability to
provide its products on a global basis to its OEM customers. In 1995, the
Company's sales outside the United States and Canada, after giving pro
forma effect to the AI and Masland acquisitions, would have grown to
approximately $1.7 billion, or approximately 30% of the Company's total pro
forma sales.
- Increased Interior Content. OEMs increasingly view the interior of
the vehicle as a major selling point to their customers. A major focus of
Lear's research and development efforts is to identify new interior
features that make vehicles safer and more comfortable, while continuing to
appeal to consumer preferences. The development of these features has been,
and management believes will continue to be, an important factor in the
Company's future growth.
- 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 four advanced technical
centers (in Southfield, Michigan, Rochester Hills, Michigan, Plymouth,
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.
The Company also has state-of-the art acoustics testing, instrumentation
and data analysis capabilities. At its 16 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 ("CAD/CAM") 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. All of the Company's seat
system facilities and many of its other manufacturing facilities are linked
by computer directly to those of the Company's suppliers and customers.
These facilities receive components from their suppliers on a just-in-time
("JIT") basis, and deliver interior systems and components to their
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.
- 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 Company's most
recent acquisitions have also given it a significant presence in the
non-seating segments of the automobile and light truck interior market. In
1995, after giving pro forma effect to the AI and Masland
4
<PAGE> 8
acquisitions, the Company's sales of non-seating systems and components
would have been approximately $1.4 billion, or approximately 25% of the
Company's total pro forma sales.
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 $4.7 billion in the year ended December 31,
1995, a compound annual growth rate of approximately 33%. This increase in sales
has been achieved through internal growth as well as through acquisitions. In
1995, the Company was the leading independent supplier to the $40 billion global
automotive interior market, with a 12% share after giving pro forma effect to
the AI and Masland acquisitions. The Company's North American content per
vehicle has increased from $12 in 1983 to $227 in 1995. In Europe, the Company's
content per vehicle has grown from $3 in 1983 to $102 in 1995.
RECENT ACQUISITIONS
The Company is acquiring all of the issued and outstanding common stock of
Masland (the "Masland Acquisition") for an aggregate purchase price of
approximately $459.6 million (including the assumption of Masland's existing
indebtedness, net of cash and cash equivalents, of $64.7 million and the payment
of fees and expenses of $10 million in connection with the acquisition). The
acquisition of Masland gives the Company substantial capabilities to produce
automotive floor and acoustic systems, which the Company did not previously
have. In 1995, Masland held a leading 38% share of the estimated $1 billion
North American floor and acoustic systems market. Masland is also a major
supplier of interior and luggage compartment trim components and other
acoustical products which are designed to minimize noise and vibration for
passenger cars and light trucks. Masland supplies the North American operations
of Ford, Chrysler, General Motors, Honda, Isuzu, Mazda, Mitsubishi, Nissan,
Subaru and Toyota, as well as the European operations of Nissan, Peugeot and
Saab. Masland has had a continuous relationship with Ford, its largest customer,
since 1922. For its fiscal year ended June 30, 1995, Masland had net sales,
EBITDA, operating income and net income of $496.6 million, $62.2 million, $47.0
million and $21.3 million, respectively.
In August 1995, the Company acquired all of the issued and outstanding
common stock of Automotive Industries, 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. The acquisition
of AI (the "AI Acquisition") afforded Lear a significant presence in the door
panel and headliner segments of the interior market, which account for
approximately 15% of the global automotive interior market. The AI Acquisition
also gave the Company access to AI's premier program management systems, CAD/CAM
capabilities, product and process variety and technological expertise.
The acquisitions of AI and Masland have solidified the Company's position
as the leading independent automotive interior supplier in the world. Currently,
Lear has manufacturing capabilities in four of the five principal automotive
interior segments: seat systems; floor and acoustic systems; door panels; and
headliners. Lear intends to enter into the remaining segment, instrument panels,
through strategic alliances, acquisitions, supplier relationships and/or joint
ventures. Management believes that the Company's ability to offer OEMs a total
interior system provides Lear with a competitive advantage as OEMs continue to
reduce their supplier base while demanding improved quality and additional Tier
I services. Management believes that as the outsourcing and supplier
consolidation trends continue, OEMs will increasingly seek global suppliers,
such as Lear, to provide total interiors, resulting in greater value from the
on-going integration of the Lear, AI and Masland businesses and long-term growth
opportunities for the Company.
In addition to the AI and Masland acquisitions, since 1990 Lear has
completed five additional strategic acquisitions. In December 1994, the Company
acquired the primary automotive seat systems supplier to Fiat and certain
related businesses (the "Fiat Seat Business" or the "FSB"), establishing Lear as
the leading independent supplier of 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. In addition to broadening
5
<PAGE> 9
the Company's geographic coverage, these acquisitions, like the AI and Masland
acquisitions, have expanded the Company's customer base and solidified
relationships with existing customers.
The Company's principal executive offices are located at 21557 Telegraph
Road, Southfield, Michigan 48086-5008. Its telephone number at that location is
(800) 413-5327.
NOTE OFFERING
Concurrently with the Offerings, the Company is undertaking a public
offering of $200 million aggregate principal amount of subordinated notes due
2006 (the "Notes"). The Note Offering is conditioned in its entirety upon the
consummation of the Offerings. The Offerings are not, however, conditioned upon
the consummation of the Note Offering. The net proceeds to the Company from the
Note Offering will be used to repay a portion of the indebtedness outstanding
under the Credit Agreement and/or the New Credit Agreement (each as defined
herein).
6
<PAGE> 10
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by:
The Company........................... 7,500,000 shares
The Selling Stockholders.............. 7,500,000 shares(1)
----------
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............................. 64,150,532 shares(2)
NYSE Symbol ............................ LEA
Use of Proceeds......................... The net proceeds to the Company from the Offerings
will be used to repay indebtedness outstanding under
the Credit Agreement, a portion of which was
incurred to finance the Masland Acquisition, and/or
indebtedness outstanding under the New Credit
Agreement. The Company will not receive any proceeds
from the sale of Common Stock by the Selling
Stockholders.
</TABLE>
- -------------------------
(1) 9,750,000 shares if the Underwriters' over-allotment option is exercised in
full.
(2) Excludes 4,468,036 shares of Common Stock issuable upon exercise of options
outstanding as of June 1, 1996 and granted pursuant to (i) stock option
agreements between the Company and certain management investors, (ii) the
Company's 1992 Stock Option Plan, (iii) the Company's 1994 Stock Option Plan
and (iv) the Company's 1996 Stock Option Plan. Also excludes (i) 160,653
shares of Common Stock issuable upon exercise of options outstanding as of
June 1, 1996 originally granted under the Automotive Industries Holding,
Inc. 1992 Key Employee Stock Option Plan and (ii) up to 1,465,773 shares of
Common Stock issuable upon exercise of options originally granted under the
Masland Corporation 1991 Stock Purchase and Option Plan and the Masland
Corporation 1993 Stock Option Incentive Plan which may be converted into
options to purchase Common Stock in connection with the Masland Acquisition.
The options described in the preceding two sentences are collectively
referred to herein as the "Options."
RISK FACTORS
Investment in the Company's Common Stock involves certain risks discussed
under "Risk Factors" that should be considered by prospective investors.
7
<PAGE> 11
SUMMARY FINANCIAL DATA OF THE COMPANY
The following summary consolidated financial data were derived from the
consolidated financial statements of the Company. The consolidated financial
statements of the Company for each of the years ended December 31, 1995, 1994
and 1993 have been audited by Arthur Andersen LLP. The consolidated financial
statements of the Company for the three months ended March 30, 1996 and April 1,
1995 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 for such
periods. The results for the three months ended March 30, 1996 are not
necessarily indicative of the results to be expected for the full 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 CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED AS OF OR FOR THE YEAR ENDED
--------------------- --------------------------------------------
MARCH 30, APRIL 1, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 1994 1993
--------- -------- ------------ ------------ ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales.............................. $1,405.8 $1,043.5 $4,714.4 $3,147.5 $1,950.3
Operating income....................... 70.0 47.7 244.8 169.6 79.6
Interest expense(1).................... 24.4 14.2 75.5 46.7 45.6
Net income (loss)(2)................... 25.8 17.0 91.6 59.8 (13.8)
Net income (loss) per share(2)......... .43 .34 1.74 1.26 (.39)
BALANCE SHEET DATA:
Total assets........................... $3,122.2 $1,797.9 $3,061.3 $1,715.1 $1,114.3
Long-term debt......................... 1,033.3 519.9 1,038.0 418.7 498.3
Stockholders' equity................... 612.5 217.1 580.0 213.6 43.2
OTHER DATA:
EBITDA(3).............................. $ 103.2 $ 66.1 $ 336.8 $ 225.7 $ 122.2
Depreciation and amortization.......... 33.2 18.4 92.0 56.1 42.6
Capital expenditures................... 33.7 23.6 110.7 103.1 45.9
North American content per
vehicle(4)........................... 274 182 227 169 112
European content per vehicle(5)........ 107 78 102 48 38
Ratio of EBITDA to interest
expense (1)(3)....................... 4.2x 4.7x 4.5x 4.8x 2.7x
Ratio of earnings to fixed
charges(6)........................... 2.5x 2.9x 2.9x 3.2x 1.5x
</TABLE>
- -------------------------
(1) Interest expense includes non-cash charges for amortization of deferred
financing fees of approximately $.8 million, $.6 million, $2.7 million, $2.4
million and $2.6 million for the three months ended March 30, 1996 and April
1, 1995 and for the years ended December 31, 1995, 1994 and 1993,
respectively.
(2) After extraordinary charges of $2.6 million and $11.7 million ($.05 and $.33
per share) for the years ended December 31, 1995 and 1993, respectively,
relating to the early extinguishment of debt.
(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 automotive 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 automotive 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) "Fixed charges" consist of interest on debt, amortization of deferred
financing fees and that portion of rental expenses representative of
interest (deemed to be one-third of rental expenses). "Earnings" consist of
income (loss) before income taxes, fixed charges, undistributed earnings and
minority interest.
8
<PAGE> 12
SUMMARY FINANCIAL DATA OF MASLAND CORPORATION
The following summary consolidated financial data were derived from the
consolidated financial statements of Masland. The consolidated financial
statements of Masland for each fiscal year presented have been audited by Price
Waterhouse LLP. The consolidated financial statements of Masland for the nine
months ended March 29, 1996 and March 31, 1995 are unaudited; however, in the
opinion of Masland'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 for such periods. The results for the nine
months ended March 29, 1996 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 Masland included in this
Prospectus, the consolidated financial statements of Masland and the notes
thereto incorporated by reference in this Prospectus and "Management's
Discussion and Analysis of Results of Operations of Masland Corporation."
MASLAND CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE FISCAL YEAR
NINE MONTHS ENDED ENDED
----------------------- ----------------------------
MARCH 29, MARCH 31, JUNE 30, JULY 1, JULY 2,
1996 1995 1995 1994 1993
--------- --------- -------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......................................... $ 343.4 $ 373.8 $496.6 $ 429.9 $ 353.5
Operating income.................................. 26.5 34.2 47.0 45.0 25.8
Net income applicable to common stock............. 11.8 15.0 21.3 20.5 11.7
BALANCE SHEET DATA:
Total assets...................................... $ 276.8 $ 226.0 $228.0 $ 203.8 $ 197.3
Long-term debt.................................... 70.8 40.2 37.0 31.4 50.1
Stockholders' equity.............................. 98.8 82.5 88.2 68.5 60.1
OTHER DATA:
EBITDA(1)......................................... $ 40.2 $ 46.5 $ 62.2 $ 57.6 $ 37.1
Capital expenditures.............................. 20.6 14.7 22.0 17.8 18.0
North American content per vehicle(2)............. 34 31 33 30 26
</TABLE>
- -------------------------
(1) "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.
(2) "North American content per vehicle" is Masland's net automotive 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.
9
<PAGE> 13
SUMMARY PRO FORMA UNAUDITED CONSOLIDATED FINANCIAL DATA
The following summary pro forma unaudited consolidated financial 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 and other data of the
Company for the three months ended March 30, 1996 and for the year ended
December 31, 1995 were prepared to illustrate the estimated effects of (i) the
Masland Acquisition (including the refinancing of certain debt of Masland with
borrowings under the Credit Agreement), (ii) the AI Acquisition (including the
refinancing of certain debt of AI with borrowings under the Credit Agreement),
(iii) the acquisition of Plastifol GmbH & Co. KG ("Plastifol") by AI in July
1995 prior to the AI Acquisition (the "Plastifol Acquisition"), (iv) the public
offering of Common Stock by the Company and the application of the net proceeds
therefrom in September 1995 (the "1995 Stock Offering"), (v) the refinancing of
the Company's prior credit facility with borrowings under the Credit Agreement,
(vi) the completion of the New Credit Agreement and (vii) the Note Offering and
the Offerings contemplated hereby and the application of the net proceeds to the
Company therefrom to repay indebtedness incurred under the Credit Agreement to
finance the Masland Acquisition (collectively, the "Pro Forma Transactions"), as
if the Pro Forma Transactions had occurred on January 1, 1995. The following
summary pro forma unaudited consolidated balance sheet data were prepared as if
the completion of the New Credit Agreement, the Masland Acquisition, the Note
Offering and the Offerings contemplated hereby and the application of the net
proceeds therefrom to repay indebtedness incurred pursuant to the Credit
Agreement to finance the Masland Acquisition had occurred as of March 30, 1996.
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
THREE MONTHS ENDED YEAR ENDED
MARCH 30, 1996 DECEMBER 31, 1995
------------------- -----------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C>
OPERATING DATA:
Net sales................................................. $ 1,527.3 $ 5,708.0
Operating income.......................................... 81.5 327.1
Interest expense(1)....................................... 29.5 123.4
Net income................................................ 28.2 104.8
Net income per share...................................... .42 1.55
BALANCE SHEET DATA:
Total assets.............................................. $ 3,700.6
Long-term debt............................................ 1,238.4
Stockholders' equity...................................... 885.5
OTHER DATA:
EBITDA(2)................................................. $ 120.7 $ 467.2
Depreciation and amortization............................. 39.2 140.1
Capital expenditures...................................... 41.8 184.2
North American content per vehicle(3)..................... 308 285
European content per vehicle(4)........................... 107 111
Ratio of EBITDA to interest expense(1)(2)................. 4.1x 3.8x
Ratio of earnings to fixed charges(5)..................... 2.5x 2.4x
</TABLE>
- -------------------------
(1) Interest expense includes non-cash charges for amortization of deferred
financing fees of approximately $1.0 million and $3.7 million for the three
months ended March 30, 1996 and the year ended December 31, 1995,
respectively.
(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 pro forma net
automotive 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 pro forma net automotive
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.
(5) "Fixed charges" consist of interest on debt, amortization of deferred
financing fees and that portion of rental expenses representative of
interest (deemed to be one-third of rental expenses). "Earnings" consist of
income (loss) before income taxes, fixed charges, undistributed earnings and
minority interest.
10
<PAGE> 14
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
A significant portion of the funds needed to finance the Company's recent
acquisitions, including the Masland Acquisition and the AI Acquisition, were
initially raised through borrowings. As a result, the Company has debt that is
greater than 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
March 30, 1996, after giving effect to the Pro Forma Transactions, the Company
would have had total debt of $1,268.7 million and stockholders' equity of $885.5
million, producing a total capitalization of $2,154.2 million, so that total
debt as a percentage of total capitalization would have been approximately 59%.
The Company's 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; (iii)
because certain of the Company's obligations under the Credit Agreement and 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; and (iv) the Company may be more vulnerable in the event of a
downturn or disruption 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, the Credit Agreement and the New Credit Agreement, together
with the Senior Subordinated Notes (as defined herein), the Subordinated Notes
(as defined herein) and the Notes, contain or will contain various restrictive
covenants 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, liens, dividends and
other restricted payments and asset sales. 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.
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. In
addition, automobile production and sales can be affected by labor relations
issues, regulatory requirements, trade agreements and other factors. A decline
in automotive sales and production could result in a decline in the Company's
results of operations or financial condition.
RELIANCE ON MAJOR CUSTOMERS AND SELECTED CAR MODELS
Two of the Company's customers, General Motors and Ford, accounted for
approximately 34% and 33%, respectively, of the Company's net sales during
fiscal 1995. After giving effect to the Masland Acquisition, sales to General
Motors and Ford 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 automotive 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
11
<PAGE> 15
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
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.
FOREIGN EXCHANGE RISK
As a result of recent acquisitions 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.
Certain 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.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. When used in this
document, the words 'anticipate,' 'believe,' 'estimate,' and 'expect' and
similar expressions are generally intended to identify forward-looking
statements. Prospective investors are cautioned that any forward-looking
statements, including statements regarding the intent, belief, or current
expectations of the Company or its management, are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those in the forward-looking statements as a result of
various factors including but not limited to (i) general economic conditions in
the markets in which the Company operates, (ii) fluctuations in worldwide or
regional automobile and light truck production, (iii) labor disputes involving
the Company or its significant customers, and (iv) those items identified under
"Risk Factors." Should one or more of those risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. The Company does not intend to update these forward-looking
statements.
12
<PAGE> 16
USE OF PROCEEDS
All the net proceeds to the Company from the Offerings will be used to
repay (i) indebtedness outstanding under the Credit Agreement, a portion of
which was incurred to finance the Masland Acquisition, bearing a rate of
interest as of June 1, 1996 of approximately 6.36% and/or (ii) indebtedness
outstanding under the New Credit Agreement. 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................................................ 31 1/8 23
Fourth Quarter............................................... 32 1/4 26 1/4
1996:
First Quarter................................................ 34 25 1/4
Second Quarter (through June 27)............................. 39 1/4 27 1/2
</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 June 1, 1996, there were 249 holders of record of the outstanding
Common Stock and the Company estimates that, at such date, there were
approximately 6,400 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 Credit Agreement, the
New Credit Agreement and the Indentures governing Lear's 11 1/4% Senior
Subordinated Notes due 2000 (the "Senior Subordinated Notes") and 8 1/4%
Subordinated Notes due 2002 (the "Subordinated Notes") presently contain, and
the Indenture relating to the Notes will contain, certain restrictions on the
Company's ability to pay dividends. The Company does not intend to pay any cash
dividends in the foreseeable future.
13
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
30, 1996, after giving effect on a pro forma basis to the Masland Acquisition,
the incurrence of indebtedness under the Credit Agreement to finance such
acquisition and the completion of the New Credit Agreement, and as adjusted to
reflect the Note Offering and 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 MARCH 30, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Short-term debt:
Short-term borrowings.................................. $ 17.3 $ 17.3 $ 17.3
Current portion of long-term debt...................... 12.0 13.0 (1) 13.0
--------- --------- ---------
Total short-term debt............................... 29.3 30.3 30.3
--------- --------- ---------
Long-term debt, less current portion:
Domestic revolving loans............................... 715.5 1,179.5 (2) 718.6(4)
Industrial revenue bonds............................... 20.5 22.5 (1) 22.5
Other.................................................. 27.3 27.3 27.3
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
% Subordinated Notes due 2006....................... -- -- 200.0(5)
--------- --------- ---------
Total long-term debt, less current portion.......... 1,033.3 1,499.3 1,238.4
--------- --------- ---------
Stockholders' equity:
Common stock, par value $.01 per share; 150,000,000
shares authorized, 56,589,288 shares issued
(64,089,288 after adjustment for the Offerings)..... .6 .6 .6
Additional paid-in capital............................. 562.9 570.5 (3) 835.9(6)
Notes receivable from sale of Common Stock............. (.9) (.9) (.9)
Treasury stock, 10,230 shares of Common Stock.......... (.1) (.1) (.1)
Retained earnings...................................... 68.0 68.0 68.0
Cumulative translation adjustment...................... (14.5) (14.5) (14.5)
Minimum pension liability.............................. (3.5) (3.5) (3.5)
--------- --------- ---------
Total stockholders' equity.......................... 612.5 620.1 885.5
--------- --------- ---------
Total capitalization.............................. $1,675.1 $2,149.7 $ 2,154.2
========= ========= =========
OTHER DATA:
Debt to total capitalization........................... 63.4% 71.2 % 58.9%
</TABLE>
- -------------------------
(1) Reflects debt assumed in connection with the Masland Acquisition.
(2) Reflects borrowings under the Credit Agreement of (i) $377.3 million to
acquire all of the outstanding common stock of Masland and retire certain
stock options of Masland in connection with the Masland Acquisition, (ii)
$75.7 million to retire certain debt assumed in connection with the Masland
Acquisition, and (iii) $11 million to pay estimated fees and expenses
related to the Masland Acquisition and the New Credit Agreement. In
connection with the Masland Acquisition, the Company incurred $300 million
of indebtedness under the New Credit Agreement, the proceeds of which were
used to repay borrowings under the Credit Agreement.
(3) Reflects the issuance of options originally granted under the Masland
Corporation 1993 Stock Option Plan which were converted into options to
purchase Common Stock in connection with the Masland Acquisition.
(4) Reflects the application of the net proceeds from the Offerings of $265.4
million and the Note Offering of $195.5 million.
(5) Reflects the issuance of $200 million aggregate principal amount of the
Notes.
(6) Reflects the issuance of 7,500,000 shares of Common Stock in the Offerings
at $36 5/8 per share, net of $9.3 million in estimated fees and expenses.
14
<PAGE> 18
PRO FORMA FINANCIAL DATA
The following pro forma unaudited consolidated statements of operations of
the Company for the three months ended March 30, 1996 and for the year ended
December 31, 1995 were prepared to illustrate the estimated effects of (i) the
Masland Acquisition (including the refinancing of certain debt of Masland
pursuant to the Credit Agreement), (ii) the AI Acquisition (including the
refinancing of certain debt of AI pursuant to the Credit Agreement), (iii) the
Plastifol Acquisition, (iv) the 1995 Stock Offering, (v) the refinancing of the
Company's prior credit facility with borrowings under the Credit Agreement (vi)
the completion of the New Credit Agreement and (vii) the Note Offering and the
Offerings contemplated hereby and the application of the net proceeds to the
Company therefrom to repay indebtedness incurred pursuant to the Credit
Agreement to finance the Masland Acquisition (collectively, the "Pro Forma
Transactions"), as if the Pro Forma Transactions had occurred on January 1,
1995.
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 Masland Acquisition, the completion of
the New Credit Agreement, and the Note Offering and the Offerings contemplated
hereby and the application of the net proceeds therefrom to repay indebtedness
incurred pursuant to the Credit Agreement to finance the Masland Acquisition had
occurred as of March 30, 1996.
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, Masland and AI, including the
notes thereto, and the other financial information pertaining to the Company,
Masland and AI, 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
THREE MONTHS ENDED MARCH 30, 1996
<TABLE>
<CAPTION>
OPERATING AND
LEAR MASLAND FINANCING
HISTORICAL HISTORICAL(1) ADJUSTMENTS PRO FORMA
---------- ------------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales.......................................... $ 1,405.8 $ 122.5 $(1.0)(2) $1,527.3
Cost of sales...................................... 1,285.2 99.1 (1.0)(2) 1,383.3
---------- -------- -------- --------
Gross profit....................................... 120.6 23.4 -- 144.0
Selling, general and administrative expenses....... 43.3 10.0 -- 53.3
Amortization....................................... 7.3 .6 1.3(3) 9.2
---------- -------- -------- --------
Operating income................................... 70.0 12.8 (1.3) 81.5
Interest expense................................... 24.4 1.1 4.0(4) 29.5
Other expense, net................................. 3.1 .7 -- 3.8
---------- -------- -------- --------
Income before income taxes......................... 42.5 11.0 (5.3) 48.2
Income taxes....................................... 16.7 4.7 (1.4)(5) 20.0
---------- -------- -------- --------
Net income......................................... $ 25.8 $ 6.3 $(3.9) $ 28.2
========== ======== ======== ========
Net income per share............................... $ .43 $ .42
Weighted average shares outstanding (in
millions)........................................ 60.0 7.7(6) 67.7
EBITDA(7).......................................... $ 103.2 $ 120.7
</TABLE>
15
<PAGE> 19
PRO FORMA UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
OPERATING AND
LEAR AI MASLAND FINANCING
HISTORICAL PRO FORMA(8) HISTORICAL(1) ADJUSTMENTS PRO FORMA
---------- ------------ ------------- ------------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales............................ $ 4,714.4 $523.7 $ 473.2 $ (3.3)(2) $5,708.0
Cost of sales........................ 4,311.3 428.9 392.8 (3.3)(2) 5,129.7
--------- ------ ------- -------- --------
Gross profit......................... 403.1 94.8 80.4 -- 578.3
Selling, general and
administrative expenses............ 139.0 36.5 39.3 -- 214.8
Amortization......................... 19.3 9.5 2.3 5.3(3) 36.4
--------- ------ ------- -------- --------
Operating income..................... 244.8 48.8 38.8 (5.3) 327.1
Interest expense..................... 75.5 14.0 3.9 30.0(4) 123.4
Other expense, net................... 12.0 -- 3.4 -- 15.4
--------- ------ ------- -------- --------
Income before income taxes........... 157.3 34.8 31.5 (35.3) 188.3
Income taxes......................... 63.1 16.8 14.1 (10.5)(5) 83.5
--------- ------ ------- -------- --------
Income before extraordinary items.... 94.2 18.0 17.4 (24.8) 104.8
--------- ------ ------- -------- --------
Extraordinary loss on early
extinguishment of debt............. 2.6 -- -- (2.6)(9) --
--------- ------ ------- -------- --------
Net income........................... $ 91.6 $ 18.0 $ 17.4 $ (22.2) $ 104.8
========= ====== ======= ======== ========
Net income per share................. $ 1.74 $ 1.55
Weighted average shares outstanding
(in millions)...................... 52.6 15.0(6) 67.6
EBITDA(7)............................ $ 336.8 $ 467.2
</TABLE>
- -------------------------
(1) The Masland historical information represents amounts derived from (i) the
unaudited results of operations for the three months ended March 29, 1996
and (ii) with respect to the year ended December 31, 1995, the audited
results of operations for Masland's fiscal year ended June 30, 1995 and its
unaudited results of operations for the six month periods ending December
29, 1995 and December 30, 1994.
(2) Reflects the elimination of net sales from Masland to the Company.
(3) The adjustment to amortization represents the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 30, 1996 DECEMBER 31, 1995
------------------ ------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Amortization of goodwill from the Masland
Acquisition.......................................... $ 1.9 $ 7.6
Elimination of the historical goodwill amortization of
Masland.............................................. (.6) (2.3)
------ ------
$ 1.3 $ 5.3
====== ======
</TABLE>
16
<PAGE> 20
(4) Reflects interest expense changes as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Reduction of interest due to application of the
proceeds from the Offerings.......................... $ (4.4) $ (18.6)
Reduction of interest due to application of the
proceeds of the 1995 Stock Offering.................. -- (14.7)
Reduction in interest due to application of the
proceeds from the Note Offering to repay indebtedness
incurred under the Credit Agreement.................. (3.3) (14.0)
Estimated interest on the Notes at 9 3/8%.............. 4.7 18.8
Estimated interest on borrowings to finance
the AI Acquisition................................... -- 39.6
Elimination of interest on AI debt refinanced.......... -- (12.6)
Estimated interest on borrowings to finance the Masland
Acquisition.......................................... 7.6 32.4
Elimination of interest on Masland debt refinanced..... (1.1) (3.8)
Other changes in interest expense, commitment fees and
amortization of deferred finance fees due to the Note
Offering, the New Credit Agreement, and the
refinancing of the prior credit facility with the
Credit Agreement..................................... .5 2.9
------ ------
$ 4.0 $ 30.0
====== ======
</TABLE>
(5) Reflects the income tax effects of the operating and financing adjustments.
(6) The adjustment to weighted average shares outstanding represents the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 30, 1996 DECEMBER 31, 1995
------------------ -----------------
<S> <C> <C>
Effect of the issuance of 7.5 million shares pursuant
to the Offerings..................................... 7.5 7.5
Effect of the issuance of 10.0 million shares pursuant
to the 1995 Stock Offering........................... -- 7.3
Conversion of certain Masland stock options into Lear
stock options in connection with the Masland
Acquisition.......................................... .2 .2
---- ----
7.7 15.0
==== ====
</TABLE>
(7) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles.
(8) The AI Pro Forma information reflects (i) AI historical unaudited results
of operations for the period from January 1, 1995 through August 17, 1995,
the date on which AI was acquired by the Company; (ii) the unaudited
historical results of operations of Plastifol from January 1, 1995 through
the date of the AI Acquisition and (iii) adjustments to reflect interest on
borrowings by AI to finance the Plastifol Acquisition, amortization of
goodwill and the related income tax effects of such adjustments. The
results from operations of AI for the three months ended March 30, 1996 and
for the period subsequent to August 17, 1995 are included in the historical
results of the Company.
(9) Reflects the elimination of the extraordinary loss on refinancing of the
prior credit facility. Such loss would have been incurred in a prior period
had the Pro Forma Transactions taken place as of the beginning of the
periods presented.
17
<PAGE> 21
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF MARCH 30, 1996
<TABLE>
<CAPTION>
OPERATING
ACQUISITION AND AND
LEAR MASLAND VALUATION OF FINANCING
HISTORICAL HISTORICAL MASLAND(1) ADJUSTMENTS PRO FORMA
---------- ---------- ---------------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............... $ 21.6 $ 14.0 $ (463.0) $ 463.0(2) $ 35.6
Accounts receivable, net................ 879.0 63.4 -- -- 942.4
Inventories............................. 178.9 18.8 -- -- 197.7
Other current assets.................... 178.4 28.7 -- -- 207.1
-------- ------ -------- ------- --------
1,257.9 124.9 (463.0) 463.0 1,382.8
-------- ------ -------- ------- --------
Property, plant and equipment, net........ 648.4 114.7 -- -- 763.1
Goodwill and other intangibles, net....... 1,093.5 6.9 296.1 -- 1,396.5
Other..................................... 122.4 30.3 -- 5.5(3) 158.2
-------- ------ -------- ------- --------
$3,122.2 $276.8 $ (166.9) $ 468.5 $3,700.6
======== ====== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term borrowings................... $ 17.3 $ 6.9 $ (6.9) $ -- $ 17.3
Accounts payable and drafts............. 881.7 41.1 -- -- 922.8
Accrued liabilities..................... 395.0 24.6 -- -- 419.6
Current portion of long-term debt....... 12.0 1.0 -- -- 13.0
-------- ------ -------- ------- --------
1,306.0 73.6 (6.9) -- 1,372.7
-------- ------ -------- ------- --------
Long-Term Liabilities:
Long-term debt.......................... 1,033.3 70.8 (68.8) 203.1(4) 1,238.4
Deferred national income taxes.......... 36.7 7.6 -- -- 44.3
Other................................... 133.7 26.0 -- -- 159.7
-------- ------ -------- ------- --------
1,203.7 104.4 (68.8) 203.1 1,442.4
-------- ------ -------- ------- --------
Stockholders' Equity...................... 612.5 98.8 (91.2) 265.4(5) 885.5
-------- ------ -------- ------- --------
$3,122.2 $276.8 $ (166.9) $ 468.5 $3,700.6
======== ====== ======== ======= ========
</TABLE>
- -------------------------
(1) Assumes a purchase price of $473.6 million which consists of (i) $384.9
million to acquire all of the common stock of Masland ($377.3 million to
purchase outstanding shares and $7.6 million in connection with the
retirement of certain stock options of Masland in connection with the
Masland Acquisition), (ii) the assumption of all of Masland's existing
indebtedness ($78.7 million as of March 29, 1996) and (iii) $10.0 million to
pay estimated fees and expenses related to the Masland Acquisition. The
Masland 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
($296.1 million) allocated to goodwill. The adjustment to stockholders'
equity reflects the elimination of Masland's equity along with the issuance
of options originally granted under the Masland Corporation 1993 Stock
Option Plan which were converted into options to purchase Common Stock in
connection with the Masland Acquisition. The allocation of the purchase
price above is based on historical costs and management's estimates which
may differ from the final allocation.
(2) Reflects proceeds of borrowings under the Credit Agreement of $463.0
million.
(3) Reflects the capitalization of fees incurred in establishing the New Credit
Agreement of $1.0 million, and fees incurred in connection with the Note
Offering of $4.5 million.
(4) Reflects the effects of the Pro Forma Transactions as follows:
<TABLE>
<S> <C>
Borrowings under the Credit Agreement to finance the Masland Acquisition................. $ 463.0
Issuance of the Notes.................................................................... 200.0
Borrowings under the Credit Agreement to pay fees and expenses incurred in establishing
the New Credit Agreement and in the Note Offering...................................... 5.5
Application of the net proceeds of the Offerings......................................... (265.4)
Application of the proceeds of the Note Offering......................................... (200.0)
-------
$ 203.1
=======
</TABLE>
(5) Reflects the net proceeds of the Offerings.
18
<PAGE> 22
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, 1995,
1994 and 1993 and June 30, 1993, 1992 and 1991 have been audited by Arthur
Andersen LLP. Effective December 31, 1993, the Company changed its fiscal year
end from June 30 to December 31. The consolidated financial statements of the
Company for the three months ended March 30, 1996 and April 1, 1995 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 for such periods. The results
for the three months ended March 30, 1996 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 CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE
THREE MONTHS ENDED AS OF OR FOR THE YEAR ENDED
------------------- -----------------------------------------------------------------------
MARCH 30, APRIL 1, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, JUNE 30,
1996 1995 1995 1994 1993 1993 1992 1991
--------- -------- ------------ ------------ ------------ -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AND CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales......................... $1,405.8 $1,043.5 $4,714.4 $3,147.5 $1,950.3 $1,756.5 $1,422.7 $1,085.3
Gross profit...................... 120.6 76.6 403.1 263.6 170.2 152.5 115.6 101.4
Selling, general and
administrative expenses......... 43.3 25.8 139.0 82.6 62.7 61.9 50.1 41.6
Incentive stock and other
compensation expense(1)......... -- -- -- -- 18.0 -- -- 1.3
Amortization...................... 7.3 3.1 19.3 11.4 9.9 9.5 8.7 13.8
-------- -------- -------- -------- -------- -------- -------- --------
Operating income.................. 70.0 47.7 244.8 169.6 79.6 81.1 56.8 44.7
Interest expense(2)............... 24.4 14.2 75.5 46.7 45.6 47.8 55.2 61.7
Other expense, net(3)............. 3.1 2.1 12.0 8.1 9.2 5.4 5.8 2.2
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary items......... 42.5 31.4 157.3 114.8 24.8 27.9 (4.2) (19.2)
Income taxes...................... 16.7 14.4 63.1 55.0 26.9 17.8 12.9 14.0
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary items............. 25.8 17.0 94.2 59.8 (2.1) 10.1 (17.1) (33.2)
Extraordinary items(4)............ -- -- 2.6 -- 11.7 -- 5.1 --
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)................. $ 25.8 $ 17.0 $ 91.6 $ 59.8 $ (13.8) $ 10.1 $ (22.2) $ (33.2)
======== ======== ======== ======== ======== ======== ======== ========
Net income (loss) per share before
extraordinary items............. $ .43 $ .34 $ 1.79 $ 1.26 $ (.06) $ .25 $ (.62) $ (2.01)
Net income (loss) per share....... $ .43 $ .34 $ 1.74 $ 1.26 $ (.39) $ .25 $ (.80) $ (2.01)
Weighted average shares
outstanding (in millions)(5).... 60.0 49.4 52.6 47.6 35.5 40.0 27.8 16.5
BALANCE SHEET DATA:
Current assets.................... $1,257.9 $ 904.3 $1,207.2 $ 818.3 $ 433.6 $ 325.2 $ 282.9 $ 213.8
Total assets...................... 3,122.2 1,797.9 3,061.3 1,715.1 1,114.3 820.2 799.9 729.7
Current liabilities............... 1,306.0 956.8 1,276.0 981.2 505.8 375.0 344.2 287.1
Long-term debt.................... 1,033.3 519.9 1,038.0 418.7 498.3 321.1 348.3 386.7
Common stock subject to limited
redemption rights, net.......... -- -- -- -- 12.4 3.9 3.5 1.8
Stockholders' equity.............. 612.5 217.1 580.0 213.6 43.2 75.1 49.4 4.4
OTHER DATA:
EBITDA(6)......................... $ 103.2 $ 66.1 $ 336.8 $ 225.7 $ 122.2 $ 121.8 $ 91.8 $ 81.4
Capital expenditures.............. $ 33.7 $ 23.6 $ 110.7 $ 103.1 $ 45.9 $ 31.6 $ 27.9 $ 20.9
Number of facilities(7)........... 116 82 107 79 61 48 45 40
North American content per
vehicle(8)...................... $ 274 $ 182 $ 227 $ 169 $ 112 $ 98 $ 94 $ 84
European content per vehicle(9)... $ 107 $ 78 $ 102 $ 48 $ 38 $ 37 $ 21 $ 11
Ratio of EBITDA to interest
expense(2)(6)................... 4.2x 4.7x 4.5x 4.8x 2.7x 2.6x 1.7x 1.3x
Ratio of earnings to fixed
charges(10)..................... 2.5x 2.9x 2.9x 3.2x 1.5x 1.5x -- --
Fixed charges in excess of
earnings(10).................... $ -- $ -- $ -- $ -- $ -- $ -- $ 6.5 $ 20.7
</TABLE>
- -------------------------
(1) Includes a one-time charge of $18.0 million, of which $14.5 million was
non-cash, for the year ended December 31, 1993 for incentive stock and
other compensation expense.
(2) Interest expense includes non-cash charges for amortization of deferred
financing fees of $.8 million, $.6 million, $2.7 million, $2.4 million,
$2.6 million, $3.0 million, $3.2 million and $4.1 million for the three
months ended March 30, 1996 and April 1, 1995, and for the years ended
December 31, 1995, 1994 and 1993, and the fiscal years ended June 30, 1993,
1992 and 1991.
(3) Consists of foreign currency exchange gain or loss, minority interest in
net income (loss) of subsidiaries, equity (income) loss of affiliates,
state and local taxes and other expense.
(4) The extraordinary items resulted from the prepayment of debt.
(5) Weighted average shares outstanding is calculated on a fully-diluted basis.
(6) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flows from operations as determined by generally accepted
accounting principles.
(7) Includes facilities operated by the Company's less than majority-owned
affiliates and facilities under construction.
(8) "North American content per vehicle" is the Company's net automotive 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.
(9) "European content per vehicle" is the Company's net automotive 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.
(10) "Fixed charges" consist of interest on debt, amortization of deferred
financing fees and that portion of rental expenses representative of
interest (deemed to be one-third of rental expenses). "Earnings" consist of
income (loss) before income taxes, fixed charges, undistributed earnings
and minority interest.
19
<PAGE> 23
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 $4.7 billion in the year ended December 31, 1995, a compound
annual growth rate of approximately 33%. 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 following chart shows operating results of the Company by principal
geographic area.
GEOGRAPHIC OPERATING RESULTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
----------------------- --------------------------------------------
MARCH 30, APRIL 1, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 1994 1993
--------- --------- ------------ ------------ ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES:
United States and Canada............ $ 916.6 $ 714.4 $3,108.0 $2,378.7 $1,357.0
Europe.............................. 382.9 276.5 1,325.4 572.5 403.8
Mexico and other.................... 106.3 52.6 281.0 196.3 189.5
-------- --------- ---------- ---------- ----------
Net sales......................... $1,405.8 $ 1,043.5 $4,714.4 $3,147.5 $1,950.3
======== ========= ========== ========== ==========
OPERATING INCOME (LOSS):
United States and Canada............ $ 56.7 $ 44.6 $ 204.8 $ 155.6 $ 86.9
Europe.............................. 9.4 .1 26.5 4.4 (9.6)
Mexico and other.................... 3.9 3.0 13.5 9.6 20.3
Unallocated corporate expense(1).... -- -- -- -- (18.0)
-------- --------- ---------- ---------- ----------
Operating income.................. $ 70.0 $ 47.7 $ 244.8 $ 169.6 $ 79.6
======== ========= ========== ========== ==========
</TABLE>
- -------------------------
(1) Unallocated corporate expense consists of incentive stock option expense and
other one-time compensation expense.
Three Months Ended March 30, 1996 Compared With Three Months Ended April 1, 1995
Net sales of $1,405.8 million in the quarter ended March 30, 1996 surpassed
the first quarter of 1995 by $362.3 million or 34.7%. Sales as compared to prior
year benefited primarily from the acquisition of AI in August, 1995 and new
business in North America.
Net sales in the United States and Canada of $916.6 million in the first
quarter of 1996 exceeded the comparable period in the prior year by $202.2
million or 28.3%. Sales in the current quarter benefited from the contribution
of $175.4 million in sales from the AI Acquisition and new Ford passenger car
and Chrysler and Ford truck programs introduced within the past twelve months.
Partially offsetting the increase in sales was a downturn in production build
schedules on mature seat programs by domestic automotive manufacturers and the
impact of a General Motors work stoppage in March, 1996.
Net sales in Europe of $382.9 million increased in the first quarter of
1996 as compared to the first quarter of 1995 by $106.4 million or 38.5%. Sales
in the quarter ended March 30, 1996 benefited from $42.7 million in sales from
the AI Acquisition, additional volume on carryover programs in Italy and
favorable exchange rate fluctuations in Sweden, Germany and Italy.
20
<PAGE> 24
Net sales of $106.3 million in the first quarter of 1996 in the Company's
remaining geographic regions, consisting of Mexico, the Pacific Rim, South
Africa and South America, surpassed the first quarter of the prior year by $53.7
million or 102.1%. Sales in the current quarter benefited from increased
Chrysler truck and General Motors passenger car activity in Mexico and from new
business operations in Australia, South America and South Africa.
Gross profit (net sales less cost of sales) and gross margin (gross profit
as a percentage of net sales) were $120.6 million and 8.6% for the first quarter
of 1996 as compared to $76.6 million and 7.3% in 1995. Gross profit in the
current quarter benefited from the acquisition of AI, the overall growth in
sport utility and light truck seat programs in North America and increased sales
activity on seat programs in Europe and Mexico.
Selling, general and administrative expenses, including research and
development, as a percentage of net sales increased to 3.1% for the quarter
ended March 30, 1996 as compared to 2.5% a year earlier. Actual expenditures and
the percentage increased in comparison to prior year due to the inclusion of
AI's operating expenses and increased U.S. and European engineering and
administrative expenses in support of expansion of existing and potential
business opportunities.
Operating income and operating margin (operating income as a percentage of
net sales) were $70.0 million and 5.0% for the first quarter of 1996 as compared
to $47.7 million and 4.6% for the first quarter of 1995. For the quarter ended
March 30, 1996, operating income benefited from the acquisition of AI, increased
market demand on new and ongoing sport utility and light truck seat programs in
North America and improved performance at the Company's European and Mexican
operations. Partially offsetting the increase in operating income were
engineering and administrative support expenses, preproduction and facility
costs for new seat programs to be introduced globally within the next twelve
months and the adverse impact of the General Motors work stoppage. Non-cash
depreciation and amortization charges were $33.2 million and $18.4 million for
the first quarter of 1996 and 1995, respectively.
Interest expense for the first quarter of 1996 increased by $10.2 million
from the comparable period in the prior year largely as a result of interest
incurred on additional debt utilized to finance the AI Acquisition.
Other expenses for the three months ended March 30, 1996, which include
state and local taxes, foreign exchange, equity income of non-consolidated
affiliates and other non-operating expenses, increased in comparison to prior
year due to increased state and local taxes associated with the AI Acquisition.
Net income for the first quarter of 1996 was $25.8 million, or $.43 per
share, as compared to $17.0 million, or $.34 per share, in the prior year first
quarter. The provision for income taxes in the current quarter was $16.7
million, or an effective tax rate of 39.3%, as compared to $14.4 million, or an
effective tax rate of 45.9% in the previous year. The decline in the effective
tax rate is primarily due to changes in operating performance and related income
levels among the various tax jurisdictions. Earnings per share increased in 1996
by 26.5% despite the impact of the General Motors work stoppage, estimated to be
approximately $.10 per share, and an increase in the number of shares
outstanding of approximately 10.6 million shares.
Year Ended December 31, 1995 Compared With Year Ended December 31, 1994
Net sales of $4,714.4 million in the year ended December 31, 1995
represented the Company's fourteenth consecutive year of record sales and
increased by $1,566.9 million or 49.8% over net sales for the year ended
December 31, 1994. Net sales in the current year benefited from the acquisitions
of Automotive Industries on August 17, 1995 and the Fiat Seat Business on
December 15, 1994 which together accounted for $795.3 million of the increase.
Further contributing to the growth in sales were incremental volumes on new
seating programs in North America and increased production in Europe.
Gross profit and gross margin were $403.1 million and 8.6% in 1995 as
compared to $263.6 million and 8.4% in 1994. Gross profit in the current year
benefited from the overall increase in North American and European sales
activity, the acquisitions of AI and FSB, and production of certain new seat
programs in the United States and Mexico. Partially offsetting the increase in
gross profit were new program start-up expenses of $32.1 million versus $23.1
million in the prior year, and costs associated with new business opportunities
in the Pacific Rim, South America and South Africa.
21
<PAGE> 25
Selling, general and administrative expenses, including research and
development, as a percentage of net sales increased to 2.9% in 1995 as compared
to 2.6% in the previous year. Actual expenditures in 1995 increased in
comparison to prior year primarily due to the inclusion of AI and FSB
engineering and administrative expenses in 1995. In addition, research and
development costs increased at the United States and European customer focused
technical centers in support of existing and potential business opportunities.
Operating income and operating margin were $244.8 million and 5.2% in the
year ended December 31, 1995 as compared to $169.6 million and 5.4% in the year
ended December 31, 1994. The increase in operating income was primarily due to
increased volumes on new and existing light truck seating programs, improved
performance at the Company's European operations and the incremental operating
income derived from acquisitions. Partially offsetting the increase in operating
income and contributing to the decline in operating margins were design and
development costs associated with the expansion of business and program start-up
expenses for new seat programs to be introduced worldwide within the next twelve
months. Also contributing to the decline in operating margin were the increased
sales in Europe caused by the FSB which had lower margins. Non-cash depreciation
and amortization charges were $92.0 million and $56.1 million for the years
ended December 31, 1995 and 1994, respectively.
Interest expense in the year ended December 31, 1995 increased in
comparison to prior year as a result of interest incurred on additional debt
utilized to finance the AI and FSB acquisitions as well as higher interest rates
in 1995 under the Company's senior credit facility.
Other expenses in 1995 increased in comparison to prior year as foreign
exchange losses incurred at the Company's North American and European
operations, along with increased state and local taxes associated with the AI
Acquisition, more than offset income derived from joint ventures accounted for
under the equity method.
Net income for the year ended December 31, 1995 was $91.6 million, or $1.74
per share, as compared to $59.8 million, or $1.26 per share in the year ended
December 31, 1994. The provision for income taxes in fiscal 1995 was $63.1
million, or an effective tax rate of 40.1%, versus $55.0 million and 47.9% for
the previous year. The decrease in rate is largely the result of changes in
operating performance and related income levels among the various tax
jurisdictions. Earnings per share increased in 1995 by 38.1% despite an increase
in the number of shares outstanding and an extraordinary loss of $2.6 million
($.05 per share) for the early retirement of debt.
United States and Canadian Operations
Net sales in the United States and Canada were $3,108.0 million and
$2,378.7 million in the years ended December 31, 1995 and 1994, respectively.
Sales in 1995 benefited from new Ford and General Motors passenger car programs,
the contribution of $248.1 million in sales from the AI Acquisition and
incremental volume on light truck seating for previously existing programs.
Operating income and operating margin were $204.8 million and 6.6% in 1995
as compared to $155.6 million and 6.5% in 1994. Operating income in 1995
increased primarily due to increased volumes at certain of the Company's car and
light-truck seating facilities, the benefits derived from the AI Acquisition and
increased productivity and cost reduction programs at existing seat and seat
component facilities. Partially offsetting this increase in operating margin
were engineering and administrative support expenses along with preproduction
costs at new business operations.
European Operations
Net sales in Europe were $1,325.4 million in the year ended December 31,
1995 and $572.5 million in the year ended December 31, 1994. Sales in the
current year benefited from $547.2 million in sales from the FSB and AI
acquisitions, incremental volume on existing programs in Sweden and England and
favorable exchange rate fluctuations in Germany and Sweden.
Operating income and operating margin were $26.5 million and 2.0% in 1995
as compared to $4.4 million and 0.8% in 1994. Operating income in 1995 benefited
from incremental volume on mature Scandinavian and
22
<PAGE> 26
German seat programs and the benefits derived from the FSB and AI Acquisitions.
Partially offsetting the increase in operating income were engineering,
preproduction and facility costs associated with the start-up of a new seat
program in Germany.
Mexico and other Operations
Net sales of $281.0 million in 1995 in the Company's remaining geographic
regions, consisting of Mexico, the Pacific Rim, South Africa and South America,
increased by $84.7 million or 43.1% as compared to $196.3 million in the
comparable period in the prior year. Sales in the year ended December 31, 1995
benefited from the overall growth in Mexican sales activity, including the
production of new General Motors and Ford passenger car and truck seat programs.
Further contributing to the increase in sales was the addition of new business
operations in Australia, South Africa, Brazil and Argentina.
Operating income and operating margin were $13.5 million and 4.8% in the
year ended December 31, 1995 and $9.6 million and 4.9% in the previous year. The
increase in operating income was largely the result of the benefits derived from
increased market demand for new and ongoing seat programs in Mexico. Partially
offsetting the increase in operating income were engineering and preproduction
costs for recently opened manufacturing facilities in the Pacific Rim, South
Africa and South America.
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
represented 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 post-retirement 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.
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
23
<PAGE> 27
offset the benefits derived from the refinancing of subordinated debt at a lower
interest rate and the Company's initial public offering of Common Stock 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 and Canadian Operations
Net sales in the United States and Canada increased by 75.3% from $1,357.0
million in the year ended December 31, 1993 to $2,378.7 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,
Ford 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 $155.6 million and 6.5%,
respectively, in the year ended December 31, 1994 and $86.9 million and 6.4%,
respectively, in the year ended December 31, 1993. Operating income and
operating margin 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.
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.
LIQUIDITY AND CAPITAL RESOURCES
On August 17, 1995, the Company entered into a secured revolving credit
agreement with a syndicate of financial institutions (the "Credit Agreement")
providing for borrowings in the principal amount of up to $1.5 billion.
Borrowings under the Credit Agreement have been used to finance the AI and
Masland Acquisitions, to refinance certain existing indebtedness of AI and
Masland at the time of their acquisition by
24
<PAGE> 28
Lear, to refinance the Company's prior $500 million credit facility and for
general corporate purposes. As of March 30, 1996, after giving pro forma effect
to the Masland Acquisition, the incurrence of indebtedness under the New Credit
Agreement (described below) to repay indebtedness under the Credit Agreement
incurred in connection with the Masland Acquisition, and the Note Offering and
the Offerings and the application of the net proceeds therefrom, the Company
would have had $474.7 million outstanding under the Credit Agreement ($56.1
million of which was outstanding under letters of credit), with $1,000.3 million
unused and available. In addition the Company would have had $40.8 million of
long term debt outstanding with various governmental authorities, banks and
other financial institutions as well as $470.0 million of subordinated debt.
On June 27, 1996, the Company entered into a second revolving credit
agreement with a syndicate of financial institutions (the "New Credit
Agreement"). The New Credit Agreement contains substantially identical terms as
the Credit Agreement and permits borrowings of up to $300 million. Following the
Masland Acquisition, the Company borrowed the full amount permitted under the
New Credit Agreement and used the proceeds to repay outstanding indebtedness
under the Credit Agreement.
Borrowings under the Credit Agreement and 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 lending rate and the federal funds rate
plus .5% or (ii) the Eurodollar Rate (as defined in the Credit Agreement) plus a
borrowing margin of .5% to 1.0%. The applicable borrowing margin is determined
based on the level of a specified financial ratio of the Company. Under the
Credit Agreement, Lear 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.
Amounts available under the Credit Agreement and the New Credit Agreement
will be reduced by an aggregate amount of $750 million prior to maturity on
September 30, 2001. The Company's scheduled principal payments on long-term
debt, including debt assumed in connection with the Masland Acquisition, are
approximately $9.0 million, $11.5 million, $7.6 million, $5.5 million and $128.2
million for the remainder of 1996 and for the full years 1997, 1998, 1999 and
2000, respectively.
As of March 30, 1996, the Company had net cash and cash equivalents of
$21.6 million. The Company's actual cash availability on the date hereof will be
less than at March 30 because of greater working capital needs during the third
calendar quarter. Nevertheless, the Company believes that cash flows from
operations and funds available under existing credit facilities (principally the
Credit Agreement) will be sufficient to meet its future debt service
obligations, projected capital expenditures and working capital requirements, as
well as to provide the flexibility to fund future acquisitions.
Concurrently with the Offerings, the Company is undertaking the Note
Offering, which is conditioned in its entirety upon the consummation of the
Offerings. The Offerings are not, however, conditioned upon the consummation of
the Note Offering. The Notes will be subordinated in right of payment to all
existing and future senior indebtedness of the Company, including the
indebtedness evidenced by the Credit Agreement, the New Credit Agreement and the
Senior Subordinated Notes. The Notes will rank pari passu in right of payment
with the Subordinated Notes. The net proceeds to the Company from the Note
Offering will be used to repay indebtedness outstanding under the Credit
Agreement.
The Credit Agreement and the New Credit Agreement, together with the Senior
Subordinated Notes, the Subordinated Notes and the Notes, impose or will 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, liens, dividends and other restricted payments and asset sales. 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.
25
<PAGE> 29
CAPITAL EXPENDITURES
During the year ended December 31, 1995, the Company's capital expenditures
aggregated approximately $110.7 million. For the years ended December 31, 1994
and 1993, capital expenditures of the Company were $103.1 million and $45.9
million, respectively. For 1996, the Company anticipates capital expenditures of
approximately $175.0 million, reflecting a full year of AI operations and
approximately $10.0 million relating to the Masland Division.
ENVIRONMENTAL MATTERS
The Company is subject to local, state, federal and foreign laws,
regulations and ordinances (i) which govern activities or operations that may
have adverse environmental effects and (ii) that impose liability for the costs
of cleaning up certain damages resulting from sites of past spills, disposal or
other releases of hazardous substances. The Company currently is engaged in the
cleanup of hazardous substances at certain sites owned, leased or operated by
the Company, including soil and groundwater cleanup at its facilities in Mendon,
Michigan and Troy, Michigan. Management believes that the Company will not incur
compliance costs or cleanup cost at its facilities with known contamination that
would have a material adverse effect on the Company's consolidated financial
position or future results of operations.
The Company has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of contamination
from hazardous substances at four Superfund sites where liability has not been
completely determined. The Company has also been identified as a PRP at four
additional sites. Management believes that the Company is, or may be,
responsible for less than one percent, if any, of the total costs at the four
Superfund sites. Expected liability, if any, at the four additional sites is not
material.
INFLATION AND ACCOUNTING POLICIES
Lear's contracts with its major customers generally provide for an annual
productivity price reduction and provide for the recovery of increases in
material and labor costs in some contracts. Cost reduction through design
changes, increased productivity and similar programs with the Company's
suppliers generally have offset changes in selling prices. The Company's cost
structure is comprised of a high percentage of variable costs. The Company
believes that this structure provides it with additional flexibility during
economic cycles.
During 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation", which must be adopted by the Company in 1996 and requires that
stock compensation, including compensation in the form of stock options, be
calculated using a measure of fair value, compared with intrinsic value required
under current accounting principles. The new method may be either reflected in
the financial statements or disclosed in the notes to the statements. The
Company expects to adopt the statement by disclosing the effects of the fair
value method in the notes to its 1996 financial statements.
26
<PAGE> 30
SELECTED FINANCIAL DATA OF MASLAND CORPORATION
The following summary consolidated financial data were derived from the
consolidated financial statements of Masland. The consolidated financial
statements of Masland for each of fiscal years 1995, 1994 and 1993 have been
audited by Price Waterhouse LLP. The consolidated financial statements of
Masland for the nine months ended March 29, 1996 and March 31, 1995 are
unaudited; however, in the opinion of Masland'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 for such
periods. The results for the nine months ended March 29, 1996 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 Masland and the notes thereto incorporated
by reference in this Prospectus and "Management's Discussion and Analysis of
Results of Operations of Masland Corporation."
MASLAND CORPORATION
<TABLE>
<CAPTION>
AS OF OR FOR THE NINE AS OF OR FOR THE FISCAL
MONTHS ENDED YEAR ENDED
---------------------- ----------------------------
MARCH 29, MARCH 31, JUNE 30, JULY 1, JULY 2,
1996 1995 1995 1994 1993
--------- --------- -------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT CONTENT PER VEHICLE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales...................................... $ 343.4 $ 373.8 $496.6 $ 429.9 $ 353.5
Gross profit................................... 57.6 68.4 91.2 86.4 62.0
Selling, general and administrative expenses... 29.4 32.6 42.1 39.5 32.7
Amortization................................... 1.7 1.6 2.1 1.9 3.5
------- ------- ------- ------- -------
Operating income............................... 26.5 34.2 47.0 45.0 25.8
Interest expense, net.......................... 3.0 3.4 4.2 3.7 4.3
Other (income) expense, net(1)................. 2.3 3.4 4.2 4.4 (.3)
------- ------- ------- ------- -------
Income before income taxes..................... 21.2 27.4 38.6 36.9 21.8
Income taxes................................... 9.4 12.4 17.3 15.9 8.7
------- ------- ------- ------- -------
Net income..................................... 11.8 15.0 21.3 21.0 13.1
Preferred dividend............................. -- -- -- .5 1.4
------- ------- ------- ------- -------
Net income applicable to common stock.......... $ 11.8 $ 15.0 $ 21.3 $ 20.5 $ 11.7
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Current assets................................. $ 124.9 $ 111.6 $110.2 $ 101.9 $ 99.0
Total assets................................... 276.8 226.0 228.0 203.8 197.3
Current liabilities............................ 73.6 75.2 71.7 79.6 70.1
Long-term debt................................. 70.8 40.2 37.0 31.4 50.1
Stockholders' equity........................... 98.8 82.5 88.2 68.5 60.1
OTHER DATA:
EBITDA(2)...................................... $ 40.2 $ 46.5 $ 62.2 $ 57.6 $ 37.1
Capital expenditures........................... 20.6 14.7 22.0 17.8 18.0
North American content per vehicle(3).......... 34 31 33 30 26
</TABLE>
- -------------------------
(1) Other (income) expense includes minority interest in consolidated
subsidiaries.
(2) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles.
(3) "North American content per vehicle" is Masland's net automotive 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.
27
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS OF MASLAND CORPORATION
Nine Months Ended March 29, 1996 Compared with Nine Months Ended March 31, 1995
Net sales decreased $30.4 million or 8.1% from $373.8 million for the nine
months ended March 31, 1995 to $343.4 million for the nine months ended March
29, 1996. The net sales decrease was due to lower North American light vehicle
production and a slower than anticipated ramp up in production of the redesigned
Ford Taurus/Mercury Sable. Also, the fiscal 1995 period included approximately
$6.5 million in sales from the non-automotive business of H.L. Blachford, Inc.
("Blachford") which was divested in March 1995.
Cost of sales as a percentage of net sales increased from 81.7% for the
nine months ended March 31, 1995 to 83.2% for the nine months ended March 29,
1996. This cost increase was primarily due to the effect of decreased sales on
fixed costs combined with additional costs for several new product and program
launches, including the redesigned Ford F-Series pickup and the redesigned Ford
Taurus/Mercury Sable.
Selling, general and administrative expenses decreased $1.3 million or 6.5%
from $19.4 million for the nine months ended March 31, 1995 to $18.1 million for
the nine months ended March 29, 1996. The decrease was primarily due to lower
incentive compensation expense and cost savings associated with the Blachford
acquisition, which was completed in September 1994. This decrease was partially
offset by reorganization expenses related to streamlining, decentralization and
customer focus efforts.
Research, development and engineering declined from 3.5% of net sales for
the nine months ended March 31, 1995 to 3.3% of net sales for the nine months
ended March 29, 1996. Interest expense decreased from $3.4 million for the nine
months ended March 31, 1995 to $3.0 million for the nine months ended March 29,
1996, primarily due to a decline in interest rates. Other expense decreased $1.1
million for the nine months ended March 29, 1996 compared to the nine months
ended March 31, 1995. The improvement in other expense is primarily due to the
nine months ended March 31, 1995 containing the foreign exchange loss resulting
from the 50% devaluation of the Mexican peso between December 20, 1994 and March
31, 1995. The effective income tax rates for the nine months ended March 31,
1995 and March 29, 1996 were 41.8% and 39.9%, respectively. The decrease in the
effective tax rate was due to a decrease in the state income tax rate in
Masland's primary state tax jurisdiction and due to changes in the distribution
of income among Masland's various foreign and domestic tax jurisdictions.
Net cash flow provided by operating activities for the first nine months of
fiscal 1996 was $15.7 million. This was the result of net income of $11.8
million and non-cash charges of $11.2 million, primarily depreciation, offset by
an increase in non-cash working capital of $7.3 million. Significant
non-operating uses of cash were investments of $23 million in Sommer Masland
(U.K.) Ltd. and Precision Fabrics Group, Inc. ("PFG"), capital expenditures of
$20.6 million and dividends on common stock of $0.05 per share, totaling $2.0
million.
On July 31, 1995, Masland formed a joint venture, Sommer Masland (U.K.)
Ltd. by purchasing 50% of Sommer Allibert S.A.'s existing manufacturing facility
in Washington, England for approximately $8 million. This facility, which
supplies Nissan, Peugeot and Saab, has annual sales of approximately $20
million. Masland and Sommer plan to conduct their acoustic and soft-surface trim
business in the United Kingdom exclusively through the joint venture.
On September 27, 1995, Masland invested $15 million in PFG in exchange for
a 29% equity interest. In connection with the investment, Masland received an
option to acquire the remainder of PFG for 4.1 million shares of Masland. PFG
recently introduced the Precision Technology Airbag which it plans to market to
the automotive industry. PFG is presently a technology leader in the development
and manufacture of highly engineered lightweight fabrics for the aerospace,
medical and computer industries.
28
<PAGE> 32
Fiscal Year Ended June 30, 1995 Compared with Fiscal Year Ended July 1, 1994
Net sales increased $66.7 million, or 15.5%, from $429.9 million in fiscal
1994 to $496.6 million in fiscal 1995. About $33 million of the increase was
associated with the acquisition of Blachford. The remaining increase was
primarily due to participation on several new vehicles during fiscal 1995,
including the Ford Contour/Mystique, the Lincoln Continental/Town Car and the
Toyota Avalon and an overall increase in industry automotive vehicle builds
during fiscal 1995. The increase in industry vehicle builds was concentrated in
the first half of fiscal 1995.
Cost of sales as a percentage of net sales increased from 79.9% in fiscal
1994 to 81.6% in fiscal 1995. This increase in cost of sales as a percentage of
net sales was primarily due to lower margins on the acquired business of
Blachford, costs incurred on several new product launches and product mix. These
increases were partially offset by the effect of the increased sales volume on
fixed costs and the impact of various productivity initiatives.
Selling, general and administrative expenses decreased from 5.9% of net
sales in fiscal 1994 to 5.0% of net sales in fiscal 1995. This improvement was
primarily due to the effect of the increased sales volume on fixed costs,
decreased incentive compensation in fiscal 1995, and a nonrecurring charge of
$0.9 million in fiscal 1994 associated with the vesting of certain stock options
at the date of Masland's initial public offering.
Research, development and engineering expenses increased 21.1% from $14.2
million in fiscal 1994 to $17.2 million in fiscal 1995, primarily due to
increased levels of activity regarding new process and product development at
Masland's Technical Center in Plymouth, Michigan and due to incremental costs
associated with the acquisition of Blachford. Interest expense increased from
$3.7 million in fiscal 1994 to $4.2 million in fiscal 1995 due to incremental
debt arising from the Blachford acquisition and an increase in average interest
rates. Other income and expense consists of foreign currency exchange losses in
fiscal 1994 and fiscal 1995. The loss of $1.0 million incurred in fiscal 1995
relates primarily to the 45% devaluation of the Mexican peso subsequent to
December 20, 1994. The effective income tax rates for fiscal 1994 and fiscal
1995 were 39.0% and 41.3%, respectively. The increase in the effective income
tax rate was due to decreased tax benefits recognized in fiscal 1995 compared to
fiscal 1994 associated with tax net operating loss carryforwards and other tax
credits and due to changes in the distribution of income among Masland's various
foreign and domestic tax jurisdictions.
Fiscal Year Ended July 1, 1994 Compared to the Fiscal Year Ended July 2, 1993
Net sales increased 21.6% from $353.5 million in fiscal 1993 to $429.9
million in fiscal 1994. On May 8, 1993, Masland began to consolidate the results
of Amtex, Inc., a 50% owned joint venture ("Amtex"), as a result of entering
into a revised Joint Venture Agreement with its joint venture partner. Prior to
this date, the results of Amtex were accounted for under the equity method. Had
the results of Amtex been consolidated for all of fiscal 1993, sales for that
year would have been $369.4 million and the increase in Masland's sales for
fiscal 1994 would have been $60.5 million or 16.4%. This increase was due to
overall increases in North American automotive industry vehicle builds during
fiscal 1994 compared to fiscal 1993, and participation on several new vehicles
during fiscal 1994, including the Chrysler Neon and the Ford Mustang.
Cost of sales as a percentage of net sales improved from 82.5% in fiscal
1993 to 79.9% in fiscal 1994. This improvement was a result of Masland's
continuing efforts to improve productivity and reduce costs and the effect of
increased sales on fixed costs in fiscal 1994.
Selling, general and administrative expenses increased by $2.2 million, but
decreased from 6.5% of net sales in fiscal 1993 to 5.9% of net sales in fiscal
1994. The increased costs in fiscal 1994 were primarily due to a charge to
expense of $0.9 million resulting from the immediate vesting of certain stock
options concurrent with Masland's initial public offering, the consolidation of
Amtex and to increased incentive compensation resulting from improved
profitability.
29
<PAGE> 33
Research, development and engineering expenses increased 47.9% from $9.6
million in fiscal 1993 to $14.2 million in fiscal 1994, primarily due to
Masland's Technical Center in Plymouth, Michigan becoming fully operational
during fiscal 1994 and an increase in engineering personnel and related
expenses. Interest expense decreased from $4.3 million in fiscal 1993 to $3.7
million in fiscal 1994 due to a decrease in average interest rates and lower
average borrowings, partially offset by additional interest expense resulting
from the consolidation of Amtex. Earnings of Amtex prior to May 8, 1993 were
recorded under the equity method of accounting and were included in other
(income) expense, primarily accounting for the change in this balance from
income of $0.5 million for fiscal 1993 to expense of $0.4 million in fiscal
1994. The effective income tax rates for fiscal 1993 and fiscal 1994 were 39.4%
and 39.0%, respectively.
30
<PAGE> 34
BUSINESS OF THE COMPANY
GENERAL
Lear is the largest independent supplier of automotive interior systems in
the estimated $40 billion global automotive interior systems market and the
tenth largest independent automotive supplier in the world. The Company's
principal products include: finished automobile and light truck seat systems;
interior trim products, such as door panels and headliners; and component
products, such as seat frames, seat covers and various blow molded plastic
parts. The Company's extensive product offerings were recently expanded through
the acquisition of Masland, a leading Tier I designer and manufacturer of
automotive floor and acoustic systems and interior and luggage trim components.
This acquisition, together with the August 1995 acquisition of Automotive
Industries, has made Lear the world's largest independent automotive supplier
with the ability to design, engineer, test and deliver products for a total
vehicle interior. The Company's present customers include 24 original equipment
manufacturers ("OEMs"), the most significant of which are Ford, General Motors,
Fiat, Chrysler, Volvo, Saab, Volkswagen and BMW. As of June 1, 1996, after
giving pro forma effect to the Masland Acquisition, the Company would have
employed approximately 40,000 people in 19 countries and operated 131
manufacturing, research and development, product engineering and administration
facilities.
The Company has experienced substantial growth in market presence and
profitability over the last five years both as a result of internal growth as
well as acquisitions. The Company's sales have grown from approximately $1.1
billion for the year ended June 30, 1991 to approximately $4.7 billion for the
year ended December 31, 1995, a compound annual growth rate of 38%. After giving
pro forma effect to the AI and Masland acquisitions, the Company's sales would
have been approximately $5.7 billion for the year ended December 31, 1995. The
Company's operating income has grown from $44.7 million for the year ended June
30, 1991 to $244.8 million for the year ended December 31, 1995, a compound
annual growth rate of 46%.
The increase in the Company's sales and the improvement in its operating
performance are 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 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. 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 will continue to reduce the number of
component and system 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 Company has positioned itself as the leading global Tier I supplier of
interior systems and components to OEMs. Tier I status typically means that the
supplier is awarded a program for a particular vehicle in the early stages of a
vehicle's design. The Tier I supplier becomes responsible for total product
management, including design, development, component sourcing, quality assurance
procedures, manufacture and delivery to the OEM's assembly plant. The OEMs
benefit from lower costs, improved quality, timely delivery and the
administrative convenience of being able to outsource complete systems to a
single supplier or a small group of suppliers.
In 1995, Lear was the leading independent supplier to the total $40 billion
global automotive interior market, with a 12% share after giving pro forma
effect to the AI and Masland acquisitions. In addition, the Company in 1995 held
a leading 34% share of the estimated $6.9 billion total North American seat
systems market and was the leading independent supplier to the estimated $5.5
billion total Western European seat
31
<PAGE> 35
systems market, with a 19% share. The door panel and headliner segments of the
automotive interior market are highly fragmented, contain no dominant
independent supplier and are in the early stages of the outsourcing and/or
consolidation process. The Company believes that the same competitive pressures
that contributed to the rapid expansion of its seat systems business in North
America since 1983 will continue to encourage automakers in the North American
and European markets to outsource more of their door panel and headliner
requirements.
The Company's North American content per vehicle has increased from $12 in
1983 to $227 in 1995. In Western Europe, the content per vehicle has grown from
$3 in 1983 to $102 in 1995. These increases have resulted from the Company's
ability to capitalize on a number of industry trends including outsourcing,
greater design responsibility by Tier I suppliers and the increased
sophistication of seat systems and other interior products as OEMs add
convenience features and luxury items into vehicle models. The increases in
content per vehicle also resulted from several recent acquisitions, including
Automotive Industries and the Fiat Seat Business. See " -- Recent Acquisitions."
In addition, the Company believes it can further increase interior content
through the development of more advanced automobile safety features, such as
side impact airbags and fully integrated seatbelts.
The Company is the successor to a seat frame manufacturing business founded
in 1917 that served as a supplier to General Motors and Ford from its inception.
As a result of the expansion of the Company's business from automotive seat
systems to products for a vehicle's complete interior, the Company changed its
name to "Lear Corporation" from "Lear Seating Corporation" effective May 9,
1996.
BUSINESS STRATEGY
Lear's business objective is to expand its position as the leading
independent supplier of automotive interior systems in the world. To achieve
this objective, the Company will continue to pursue a strategy based upon the
following elements:
- Strong Relationships with the OEMs. The Company's management has
developed strong relationships with its 24 OEM customers which allow Lear to
identify business opportunities and anticipate customer needs in the early
stages of vehicle design. Management believes that working closely with OEMs in
the early stages of designing and engineering vehicle interior 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. As a result of the
Company's service and performance record, many of the Company's facilities have
won awards from OEMs with which they do business.
- Global Presence. In 1995, more than two-thirds of total worldwide vehicle
production occurred outside of the United States and Canada. Due to
opportunities for significant cost savings and improved product quality and
consistency, OEMs have increasingly required their suppliers to manufacture
interior systems and other components in multiple geographic markets. In recent
years, the Company has aggressively expanded its operations in Western Europe
and emerging markets in South America, South Africa, the Pacific Rim and
elsewhere, giving it the capability to provide 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. During 1995, in furtherance of
its global expansion strategy, the Company entered into three joint ventures and
expanded its wholly-owned operations into South Africa. The first joint venture
agreement was with an affiliate of Industria Espanola del Polieter, S.A., a
Spanish corporation, to supply seat systems in Brazil for the Volkswagen Gol.
The Company also entered into a joint venture agreement with TeknoSeating S.A.,
the largest independent automotive supplier in Argentina, to supply seat systems
to Volkswagen in Argentina for the Gol and the Cordoba models and with
Trambusti, a Brazilian company, to supply seat systems to Fiat in Brazil for the
Palio (Fiat's World Car), the Tempra, and several light truck models. In
addition, Lear further expanded its presence internationally by opening a
facility in South Africa to provide seat systems to BMW. In 1995, the Company's
sales outside the United States and Canada, after giving pro forma effect to the
AI and Masland acquisitions, would have grown to approximately $1.7 billion or
approximately 30% of the Company's total pro forma sales.
32
<PAGE> 36
- Increased Interior Content. OEMs increasingly view the interior of the
vehicle as a major selling point to their customers. A major focus of Lear's
research and development efforts is to identify new interior features that make
vehicles safer and more comfortable, while continuing to appeal to consumer
preferences. For example, Lear's involvement in 1994 with Volvo and AutoLiv led
to the automotive industry's first vehicle with side-impact airbags. In
addition, Lear's proprietary Integral Restraint Seat, which will be introduced
in GM's 1997 Buick Park Avenue, offers consumers easy access to the vehicle's
rear seat as well as improved seat comfort and safety. The development of these
and other safety and comfort features has been, and management believes will
continue to be, an important factor in the Company's future growth.
- Product Technology and Design Capability. Lear has made substantial
investments in technology and design capability to support its products. The
Company maintains four research and development centers (in Southfield,
Michigan, Rochester Hills, Michigan, Plymouth, 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. The Company also has state-of-the-art acoustics testing,
instrumentation and data analysis capabilities. At its 16 customer-dedicated
product engineering centers, specific program applications are developed and
tested. Benchmarking studies are also conducted to aid in developing innovative
interior design features. The Company has also made substantial investments to
upgrade its advanced computer-aided engineering ("CAE") and computer-aided
design/computer-aided manufacturing ("CAD/CAM") systems. Several tools recently
added to electronically create a product and evaluate its performance include
advanced design modeling software, dynamic crash simulation, linear and
non-linear finite element analysis and solids modeling. Lear's "Best-in-Class"
testing program incorporates the use of a state-of-the-art programmable vehicle
model, which allows the Company to evaluate the actual feel and ergonomic
implications of various interior products. In addition, the Company has
developed a program management process to ensure that customers' expectations
are met. The proprietary "Visions" program allows Lear to manage all aspects of
product development. The process ensures that employees, customers and suppliers
of the Company work as a team to deliver high quality, cost-effective products
on a timely basis.
- 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 automotive interior products at lower costs than the OEMs. All of the
Company's seat system facilities and many of its other manufacturing facilities
are linked by computer directly to those of the Company's suppliers and
customers. These facilities receive components from their suppliers on a JIT
basis, and deliver interior systems and components to 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. The 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, 1995, the Company's overall annual inventory turnover rate
was 30 times and up to 200 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 seating manufacturing facilities is underutilized, the Company is
able to redistribute products to increase facility utilization.
- 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 outsourcing
and supplier consolidation trends. The Company's recent acquisitions have
expanded its OEM customer base and worldwide presence and enhanced its
relationships with existing customers. The AI and Masland acquisitions also
provide the Company a significant presence in the non-seating segments of the
automobile and light truck interior market. The Company believes that these
markets hold significant growth potential for Lear because currently there is no
dominant independent supplier of these products and they are in the early stages
of the outsourcing and consolidation process that has contributed to the
expansion of the seat systems industry since the early 1980's. In 1995, after
giving pro forma effect to the AI and Masland acquisitions, the Company's sales
of non-seating systems and components would have been approximately $1.4
billion, or approximately 25% of the Company's total pro forma sales. The
Company will continue to consider strategic acquisitions that expand its global
presence, improve its technological capabilities or enhance customer
relationships.
33
<PAGE> 37
RECENT ACQUISITIONS
To supplement its internal growth and implement its business strategy, the
Company has made several strategic acquisitions since 1990. The following is a
summary of recent major acquisitions:
Masland Acquisition
The Company is acquiring Masland for an aggregate purchase price of $459.6
million (including the assumption of Masland's existing indebtedness, net of
cash and cash equivalents, of $64.7 million and the payment of fees and expenses
of $10 million in connection with the acquisition). In 1995, Masland held a
leading 38% share of the estimated $1 billion North American floor and acoustic
systems market. Masland is also a major supplier of interior and luggage
compartment trim components and other acoustical products which are designed to
minimize noise and vibration for passenger cars and light trucks. Masland
supplies the North American operations of Ford, Chrysler, General Motors, Honda,
Isuzu, Mazda, Mitsubishi, Nissan, Subaru and Toyota, as well as the European
operations of Nissan, Peugeot and Saab. Masland has had a continuous
relationship with Ford, its largest customer, since 1922. For its fiscal year
ended June 30, 1995, Masland had net sales, EBITDA, operating income and net
income of $496.6 million, $62.2 million, $47.0 million and $21.3 million,
respectively.
In addition to the experience and expertise of Masland's management team,
the Company believes that the Masland Acquisition will provide Lear with several
benefits, including the following:
- Total Interior Systems. The Masland Acquisition enhances Lear's ability
to provide a total interior system. Before the acquisition, the Company
had manufacturing capabilities in three of the five principal automotive
interior system segments. The Masland Acquisition gives Lear
manufacturing capabilities and a leading market position in a fourth
segment, floor and acoustic systems, leaving instrument panels as the
only segment in which the Company does not have a manufacturing
capability. Management believes that the ability to offer a total
interior system provides Lear with a competitive advantage as OEMs
continue to reduce their supplier base while demanding improved quality
and additional Tier I services. Integrating the total interior for a
model through one supplier provides several benefits to an OEM, including
(i) cost reduction, (ii) shorter product development cycles, (iii)
improved interior appearance through better fitting components and color,
grain and material matching and (iv) greater ability to focus on core
competencies.
- Growth Opportunities. Lear's market leadership, expertise and established
relationships with European OEMs (Fiat, Opel, Volvo, Saab and BMW) will
provide Masland with additional access to the European market. In
addition, Lear's entry into global automotive growth areas, particularly
in South America and the Asia-Pacific region, affords further growth
opportunities for Masland.
- Margin Improvements. Operating margins in the floor and acoustic systems
market are generally higher than those in the seating market.
Historically, Masland's operating margins have been higher than the
Company's and should, therefore, improve the Company's consolidated
operating margin. The additional cash flows provided from operations
would be available for debt reduction or reinvestment in new growth
opportunities worldwide. In addition, the Company believes that
additional savings will be realized through purchasing, engineering,
manufacturing and administration consolidation.
- Technology. Masland provides the Company with access to leading-edge
technology. Its 33,000 square foot Technical Center in Plymouth, Michigan
provides complete full service acoustics testing, design, product
engineering, systems integration and program management. Masland's
acoustics lab offers state-of-the-art instrumentation, testing, and
data-analysis capabilities. It also owns one of the few
proprietary-design dynamometers capable of precision acoustics testing of
front, rear, and four wheel drive vehicles. Together with its
custom-designed reverberation room, computer controlled data gathering
and analysis capabilities, Masland provides precisely controlled
laboratory conditions for sophisticated interior and exterior noise,
vibration, and harshness (NVH) testing of parts, materials, and systems,
including powertrain, exhaust, and suspension components. Masland also
owns a 29%
34
<PAGE> 38
interest in PFG, which has patented a process to sew and fold an
ultralight fabric into airbags which are 60% lighter than the current
airbags used in the automotive industry.
AI Acquisition
In August 1995, the Company acquired all the outstanding common stock of
AI, a leading designer and manufacturer of high quality interior systems and
blow molded plastic parts to automobile and light truck manufacturers. Prior to
the AI Acquisition, Lear had participated primarily in the seat system segment
of the interior market, which comprises approximately 47% of the total combined
North American and Western European interior markets. By providing the Company
with substantial manufacturing capabilities in door panels and headliners, the
AI Acquisition made Lear the largest independent Tier I supplier of automotive
interior systems in the North American and Western European light vehicle
interior market. Management believes that OEMs will increasingly ask their lead
suppliers to fill the role of "Systems Integrator" to manage the design,
purchase and supply of the total vehicle interior. As a result of the AI
Acquisition, as well as the Masland Acquisition, Lear is well-positioned to fill
this role. The aggregate purchase price for the AI Acquisition was $885.0
million (including the assumption of $250.5 million of AI's existing
indebtedness and fees and expenses of $18.1 million). These funds were provided
by borrowings under the Credit Agreement.
Prior to its acquisition by Lear, Automotive Industries itself augmented
its substantial internal growth with selected strategic acquisitions. The
acquisitions allowed AI to expand its interior trim systems product capabilities
and substantially increased AI's ability to provide advanced design, engineering
and program management services to its customers. At the same time, these
acquisitions increased AI's global presence and provided AI access to new
customers and new technologies. As a division of Lear, AI continues to consider
strategic acquisitions as a means to further growth.
FSB Acquisition
On December 15, 1994, the Company, through its wholly-owned subsidiary,
Lear Seating Italia Holdings, S.r.L., acquired the primary automotive seat
systems supplier to Fiat and certain related businesses (the "Fiat Seat
Business" or the "FSB"). Lear and Fiat also entered into a long-term supply
agreement for Lear to produce all outsourced automotive seat systems for Fiat
and affiliated companies worldwide. The acquisition of the Fiat Seat Business
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 access to rapidly expanding markets in South America and has
resulted in the formation of new joint ventures which will supply automotive
seat systems to Fiat or its affiliates in Brazil and Argentina.
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 systems business (the "NAB") of Ford Motor Company. 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. 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 one of its largest OEM customers, 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.
35
<PAGE> 39
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 to the Company's emergence as a dominant supplier of entire seat
systems and seat components. With the acquisitions of Automotive Industries and
Masland, the Company has expanded its product offerings and can now manufacture
and supply its customers with floor systems, headliners and door panels. The
Company also produces a variety of blow molded products and other automotive
components such as fluid reservoirs, fuel tank shields, exterior airdams, front
grille assemblies, engine covers, battery trays/covers and insulators. Lear
believes that as OEMs continue to seek ways to improve vehicle quality while
simultaneously reducing the costs of the various vehicle components, they will
increasingly look to suppliers such as Lear with the capability to test, design,
engineer and deliver products for a complete vehicle interior.
The following is the approximate composition by product category of the
Company's net sales in the year ended December 31, 1995, after giving pro forma
effect to the AI and Masland acquisitions: seat systems, $3.7 billion; floor and
acoustic systems, $450 million; door panels, $350 million; headliners, $100
million; and other component products, $1.1 billion.
- SEAT SYSTEMS. The seat systems business consists of the manufacture,
assembly and supply of seating requirements for a vehicle or assembly plant.
Seat systems typically represent approximately 50% of the cost of the total
automotive interior. The Company produces seat systems for automobiles and light
trucks that are fully finished and ready to be installed in a vehicle. Seat
systems are fully assembled seats, designed to achieve maximum passenger comfort
by adding a wide range of manual and power features such as lumbar supports,
cushion and back bolsters and leg and thigh supports.
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, child restraint seats, and
side impact air bags.
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 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 next
six years, which it expects will lead to an increase in opportunities in the
future. In addition, with the AI and Masland acquisitions, the Company believes
it has significant cross-selling opportunities across both customers and vehicle
platforms and is well-positioned to expand its position as the leading
independent supplier of automotive interior systems in the world.
- FLOOR AND ACOUSTIC SYSTEMS. Floor systems consist both of carpet and
vinyl products, molded to fit precisely the front and rear passenger
compartments of cars and trucks, and accessory mats. While carpet floors are
used predominately in passenger cars and trucks, vinyl floors, because of their
better wear and washability characteristics, are used primarily in commercial
and fleet vehicles. The Company, through its Masland Division, is the largest
supplier of vinyl floor systems in North America, and the only supplier of both
carpet and vinyl floor systems. Recently, Masland developed Maslite(TM), a
lightweight material which has replaced vinyl accessory mats on selected
applications. Maslite(TM) is a superior product with improved performance with
the additional significant advantage of 40% less weight than vinyl.
The automotive floor system is multi-purpose. Its performance is based on
the correct selection of materials to achieve an attractive, quiet, comfortable
and durable interior compartment. Automotive carpet
36
<PAGE> 40
requirements are more stringent than the requirements for carpet used in homes
and offices. For example, automotive carpet must provide higher resistance to
fading and improved resistance to wear despite being lighter in weight than
carpet found in homes and offices. The Masland Division's significant experience
has enabled it to meet these specialized needs. Carpet floor systems generally
consist of tufted carpet to which a specifically engineered thermoplastic
backcoating has been added. This backcoating, when heated, enables the Company
to mold the carpet to fit precisely the interior of the vehicle. Additional
insulation materials are added to provide noise, heat and vibration resistance.
Floor systems are complex products which are based on sophisticated designs and
use specialized design materials to achieve the desired visual, acoustic and
heat management requirements in the automotive interior.
The Masland Division's primary acoustic product, after floor systems, is
the dash insulator. The dash insulator attaches to the vehicle's sheet metal
firewall, separating the passenger compartment from the engine compartment, and
is the primary component for preventing engine noise and heat from entering the
passenger compartment. The Masland Division's ability to produce both the dash
insulator and the floor system enables the Company to accelerate the design
process and supply an integrated system. The Company believes that OEMs,
recognizing the cost and quality advantages of producing the dash insulator and
the floor system as an integrated system, will increasingly seek suppliers to
coordinate the design, development and manufacture of the entire floor and
acoustic system.
Floor and acoustic systems accounted for approximately 81% of Masland's
total revenues in 1995 when it held a leading 38% share in the estimated $1
billion North American floor and acoustic systems market. In addition, the
Masland Division participates in the European floor system market through its
joint venture with Sommer-Allibert S.A.
- DOOR PANELS. Door panels consist 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 and 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.
In 1995, after giving pro forma effect to the AI Acquisition, the Company
would have held a leading 16% share of the estimated $1.6 billion North American
door panel market. Management believes that this leadership position has been
obtained by offering OEMs the widest variety of manufacturing processes for door
panel production. In Western Europe, the Company held a small position in the
door panel market. These markets are highly fragmented and just beginning to
experience the outsourcing and/or consolidation trends that have characterized
the seat systems market since the 1980's. With its global scope, technological
expertise and established customer relationships, Lear believes that it is
well-positioned to benefit from these positive industry dynamics.
- HEADLINERS. The Company designs and manufactures headliners which consist
of the headliner substrate, covering material, visors, overhead consoles, grab
handles, coat hooks, lighting, wiring and insulators. As with door panels, upon
assembly each component must fit precisely and must match the color of the base
substrate. With its sophisticated design and engineering capabilities, the
Company believes it is able to supply headliners with enhanced quality and lower
costs than OEMs could internally achieve. Through its manufacturing
capabilities, the Company also believes that it is one of the most
process-diverse suppliers of headliners in North America.
The headliner market is highly fragmented, with no dominant independent
supplier. As OEMs continue to seek ways to improve vehicle quality and
simultaneously reduce costs, the Company believes that headliners will
increasingly be outsourced to suppliers such as Lear, providing the Company with
significant growth opportunities.
- COMPONENT PRODUCTS. In addition to the interior systems and other
products described above, the Company is able to supply a variety of interior
trim and other automobile components as well as blow molded plastic parts.
37
<PAGE> 41
Lear produces seat covers for integration into its own seat systems and for
delivery to external customers. The Company's major external customers for seat
covers are other independent seat systems suppliers as well as the OEMs. The
Company is currently producing approximately 80% of the seat covers for Ford's
North American vehicles. 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.
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 either delivered to its own plants where they become part of a
completed seat that is sold to the OEM customer, to customer-operated assembly
plants or to other independent seating suppliers for use in the manufacture of
assembled seating systems.
The Company, through its AI Division, produces a variety of interior trim
products, such as pillars, cowl panels, scuff plates, trunk liners, quarter
panels and spare tire covers, as well as blow molded plastic products, such as
fluid reservoirs, vapor canisters and duct systems. In contrast to AI's interior
trim 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.
MANUFACTURING
All of the Company's facilities use JIT manufacturing techniques and most
of the Company's seating related products and many of the Company's other
interior products 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
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 were next
applied to the Company's growing seat systems business and have now evolved into
sequential parts delivery ("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, 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 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. The Company's principal
bonding technique involves its patented SureBond(TM) process, a technique in
which fabric is affixed to the underlying foam padding using adhesives. The
SureBond(TM) process has several major advantages when compared to traditional
methods, including design flexibility, increased quality and lower cost. The
SureBond(TM) process, unlike alternative bonding processes, results in a more
comfortable seat in which air can circulate freely. The SureBond(TM) 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(TM)
38
<PAGE> 42
process is not capital intensive when compared to competing bonding
technologies. Approximately one-third of the Company's seats are manufactured
using the SureBond(TM) process.
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 customer's assembly plant.
The Company's AI Division uses numerous molding, bonding, trimming and
finishing manufacturing processes. The wide variety of manufacturing processes
helps to satisfy customers' different cost and functionality specifications.
AI's ability and experience in producing interior products for such a vast array
of applications enhances the Company's ability to provide total interior
solutions to OEMs globally. The AI Division employs many of the same JIT
principles used at the Company's seat facilities.
The core technologies used in the AI Division'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 the AI Division's strategy
is to focus on more complex, value-added products such as door panels and
armrests. The AI Division 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 AI.
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. Increasingly, automobile content
requires large plastic injection molded assemblies for both the interior and
exterior. Plastics are now commonly used in such nonstructural components as
interior and exterior trim, door panels, instrument panels, grilles, bumpers,
duct systems, taillights and fluid reservoirs. 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.
The Masland Division produces carpet at its largest plant in Carlisle,
Pennsylvania. Smaller "focused" factories are dedicated to specific groups of
customers and are strategically located near their production facilities. This
proximity improves responsiveness to Masland customers and speeds product
delivery to customer assembly lines, which is done on a JIT basis. Masland's
manufacturing operations are complemented by its research and development
efforts, which have led to the development of a number of proprietary products,
such as their EcoPlus(TM) recycling process as well as Maslite(TM), a
lightweight proprietary material used in the production of accessory mats.
The Company obtains steel, aluminum and foam chemicals used in its seat
systems from several producers under various supply arrangements. These
materials are supplied under various arrangements and are readily available.
Leather, fabric and certain purchased components are generally purchased from
various suppliers under contractual arrangements usually lasting no longer than
one year. Some of the purchased components are obtained through the Company's
own customers. The principal purchased components for interior trim systems are
polyethylene and polypropylene resins which are generally purchased under long-
term agreements and are available from multiple suppliers.
CUSTOMERS
Lear serves the worldwide automobile and light truck market, which produces
approximately 50 million vehicles annually. The Company's OEM customers
currently include Ford, General Motors, Fiat, Chrysler, Volvo, Saab, Opel,
Jaguar, Volkswagen, Audi, BMW, Rover, Honda USA, Daimler-Benz, Mitsubishi,
Mazda, Toyota, Subaru, Nissan, Isuzu, Peugeot, Porsche, Renault, and Suzuki.
During the year ended December 31, 1995, after giving pro forma effect to the AI
and Masland acquisitions, Ford and General
39
<PAGE> 43
Motors, the two largest automobile and light truck manufacturers in the world,
would have accounted for approximately 36% and 31%, respectively, of the
Company's net sales. For additional information regarding customers, foreign and
domestic operations and sales, see Note 17, "Geographic Segment Data," to the
consolidated financial statements of the Company incorporated by reference in
this Prospectus.
In the past six years, in the course of retooling and reconfiguring plants
for new models and model changeovers, OEMs have eliminated seating production
from certain of their facilities, thereby committing themselves to purchasing
seat systems and components from outside suppliers. During this period, the
Company became a supplier of these products for a significant number of new
models, many on a JIT basis.
The purchase of seat systems on a JIT basis has allowed the Company's
customers to realize a competitive advantage as a result of (i) a reduction in
labor costs since suppliers like the Company generally enjoy lower direct labor
and benefit rates, (ii) the elimination of working capital and personnel costs
associated with the production of seat systems by the OEM, (iii) a reduction in
net overhead expenses and capital investment due to the availability of
approximately 60,000 to 80,000 square feet of seat production plant space for
expansion of other OEM manufacturing operations and (iv) a reduction in
transaction costs by utilizing a limited number of sophisticated system
suppliers instead of numerous individual component suppliers. In addition, the
Company offers improved quality and on-going cost reductions to its customers
through continuous, Company-initiated design improvements. The Company believes
that such cost reductions will lead OEMs to outsource an increasing portion of
their seating requirements in the future and provide the Company with
significant growth opportunities.
The Company's sales of value-added assemblies and component systems have
increased as a result of the decision by most OEMs to reduce their internal
engineering and design resources. In recent years, the Company has significantly
increased its capacity to provide complete engineering and design services to
support its product line. Because assembled parts such as door panels, floor and
acoustic systems, armrests and consoles need to be designed at an early stage in
the development of new automobiles or model revisions, the Company 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.
The Company has implemented a program of dedicated teams consisting of
interior trim and seat system personnel who are able to meet all of a customer's
interior needs. These teams provide a single interface for Lear's customers and
avoid duplication of sales and engineering efforts. As innovative designs are
developed which integrate components into a single unit, the potential to
provide the Company's customers with additional cost and time savings should
significantly increase. With the acquisition of Masland, the Company intends to
integrate floor and acoustic systems into its existing marketing strategy.
The Company receives blanket purchase orders from its customers that
normally cover annual requirements for products to be supplied for a particular
vehicle model. Such supply relationships typically extend over the life of the
model, which is generally four to seven years, and do not require the purchase
by the customer of any minimum number of products. 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 interior systems and components for a broad
cross-section of both new and more established models.
The Company's sales for the year ended December 31, 1995 were comprised of
the following vehicle categories: 41% light truck; 23% mid-size; 15% compact and
other; 12% luxury/sport; and 9% full-size. The following table presents an
overview of the major vehicle models for which the Company or its affiliates
40
<PAGE> 44
produce seat systems, floor and acoustic systems, interior trim products or
other components and the locations of such production:
<TABLE>
<S> <C> <C>
UNITED STATES AND CANADA
BMW: FORD (CONT): GENERAL MOTORS (CONT):
3 Series Ford Windstar Minivan GMC Sonoma
Z3 Lincoln Continental GMC Top Kick
SUZUKI: Lincoln Mark VIII Oldsmobile 88
Geo Metro Lincoln Town Car Oldsmobile Achieva
Geo Tracker Mercury Cougar Oldsmobile Aurora
Suzuki Sidekick Mercury Grand Marquis Oldsmobile Ciera
Suzuki Swift Mercury Mystique Oldsmobile Cutlass Supreme
CHRYSLER: Mercury Sable Oldsmobile Eurosport
Chrysler Cirrus Mercury Tracer Oldsmobile Silhouette
Chrysler Concorde Mercury Villager Pontiac Bonneville
Chrysler LeBaron SUBARU/ISUZU: Pontiac Firebird
Chrysler LHS Isuzu Rodeo Pontiac Grand Am
Chrysler Sebring Subaru Legacy Pontiac Grand Prix
Chrysler Town & Country GENERAL MOTORS: Pontiac Sunfire
Dodge Avenger Buick Century Pontiac Transport
Dodge Caravan Buick LeSabre Prizm
Dodge Dakota Pick-up Truck Buick Park Avenue Saturn SC
Dodge Intrepid Buick Regal Saturn SL
Dodge Neon Buick Riviera HONDA:
Dodge Ram Pick-up Truck Buick Skylark Accord
Dodge Ram Van Cadillac DeVille/Concours Civic
Dodge Ram Wagon Cadillac Eldorado Passport
Dodge Viper Chevrolet Astro MAZDA:
Eagle Talon Chevrolet Beretta 626
Jeep Cherokee Chevrolet Blazer B2000
Jeep Grand Cherokee Chevrolet C/K Pick-up Truck MX6
Jeep Wrangler Chevrolet Camaro MITSUBISHI:
Plymouth Neon Chevrolet Cavalier Eclipse
Plymouth Voyager Chevrolet Corsica Gallant
FORD: Chevrolet Corvette NISSAN:
Ford Aerostar Chevrolet Kodiak Altima
Ford Bronco Chevrolet Lumina/Van King Cab Pick-up Truck
Ford Contour Chevrolet Monte Carlo Quest
Ford Crown Victoria Chevrolet Express Sentra
Ford Econoline/Club Wagon Chevrolet/GMC Suburban TOYOTA:
Ford Escort Chevrolet S Pick-up Truck Avalon
Ford Explorer Chevrolet Tahoe/GMC Yukon Camry
Ford F-Series Pick-up Truck GMC 10-30,15-35 Corolla
Ford Mustang GMC C/K Pick-up Truck Tacoma Pick-up Truck
Ford Probe GMC Savana
Ford Ranger GMC Safari
Ford Taurus
Ford Taurus SHO
Ford Thunderbird
MEXICO
BMW: FORD: GENERAL MOTORS (CONT.):
3 Series Ford Contour Opel Corsa
CHRYSLER: Ford Escort Pontiac Sunfire
Chrysler Cirrus Ford F-Series NISSAN:
Dodge Neon Ford Ghia Pick-up
Dodge Ram Mercury Mystique Tsuru
JX Convertible Mercury Tracer VOLKSWAGEN:
Plymouth Neon GENERAL MOTORS: Golf
Chevrolet Cavalier Jetta
Chevrolet C/K Pick-up Truck Derby
Chevrolet Tahoe/GMC Yukon GPA Minivan
</TABLE>
41
<PAGE> 45
<TABLE>
<S> <C> <C>
EUROPE
ALFA ROMEO: OPEL: ROVER (CONT):
Alfa 145/146 Astra 400/Saloon
Alfa 155 Corsa/Van 600
Alfa 164 Omega 800
Coupe Vectra Discovery
Spider HONDA: Land Rover
AUDI: Accord Maestro
A Series Civic Metro
B Series JAGUAR: MGA
BMW: XK8 Mini
3 Series X300 R3
5 Series X330 Range Rover
CHRYSLER: MAN: SAAB:
Voyager Eurostar Heavy Truck Saab 900
DINA: LANCIA: Saab 900 Cabriolet
Heavy Truck Dedra Saab 9000
FIAT: Delta TOYOTA:
126 Kappa Carina
500 Thema Corolla
Barchetta Y11 VOLVO:
Brava/Bravo MERCEDES: 800 Series
Coupe 500 200 Series 900 Series
Croma C-Class VOLKSWAGEN:
Ducato X230 E-Class Golf
Punto S-Class Passat
Tempra PORSCHE: Taro
Tipo 911 Transit
Uno 986 Boxster Transporter T4
FORD: RENAULT: T-4 Multivan
Escort Cabrio Viento
Fiesta ROVER:
Mondeo 200/New 400
Scorpio
OTHER
FIAT (SOUTH AMERICA): GENERAL MOTORS -- BMW (SOUTH AFRICA):
Brava/Bravo HOLDEN (AUSTRALIA): 3 Series
Duno Acclaim PEUGEOT (ARGENTINA):
Fiorino Berlina 306
Palio Caprice 405
Tempra Commodore 504
Tipo Statesman VOLKSWAGEN (SOUTH AMERICA):
Uno OPEL (INDONESIA): Combi
FORD (ARGENTINA): S-10 Blazer Gol
Ranger Polo
Saveiro
VOLVO (THAILAND):
800 Series
900 Series
</TABLE>
Because of the economic benefits inherent in outsourcing to suppliers such
as Lear and the costs associated with reversing a decision to purchase seat
systems and other interior systems and components from an outside supplier, the
Company believes that automotive manufacturers' level of commitment to
purchasing seating and other interior systems and components from outside
suppliers, particularly on a JIT basis, will increase. However, under the
contracts currently in effect in the United States and Canada between each of
General Motors, Ford and Chrysler with the UAW and the CAW, in order for any of
such manufacturers to
42
<PAGE> 46
obtain components that it currently produces itself from external sources, it
must first notify the UAW or the CAW of such intention. If the UAW or the CAW
objects to the proposed outsourcing, some agreement will have to be reached
between the UAW or the CAW and the OEM. Factors that will normally be taken into
account by the UAW, the CAW and the OEM include whether the proposed new
supplier is technologically more advanced than the OEM, whether cost benefits
exist 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, Wentzville, Missouri 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 enhance its relationship with its
customers.
The collective bargaining agreements between the UAW and the CAW and each
of General Motors, Ford and Chrysler expire in September 1996 and are presently
being renegotiated. Among other items, wage, benefit and outsourcing levels are
anticipated to be issues in such negotiations. There can be no assurance as to
the outcome of such negotiations.
The Company's contracts with its major customers generally provide for an
annual productivity price reduction and, in some cases, provide for the recovery
of increases in material and labor costs. Cost reduction through design changes,
increased productivity and similar programs with the Company's suppliers have
generally offset changes in selling prices. The Company's cost structure is
comprised of a high percentage of variable costs. The Company believes that this
structure provides it with additional flexibility during economic cycles.
MARKETING AND SALES
Lear markets its products by maintaining strong relationships with its
customers fostered during its 79-year history through extensive technical and
product development capabilities, reliable delivery of high quality products,
strong customer service, innovative new products and a competitive cost
structure. Close personal communications with automobile manufacturers are an
integral part of the Company's marketing strategy. Recognizing this, the Company
is organized into seven 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-making process
closer to the customer, and instilling a philosophy of "cooperative autonomy,"
the Company is more responsive to, and has strengthened its relationships with,
its customers. Automobile manufacturers have increasingly reduced the number of
their suppliers as part of a strategy of purchasing systems rather than
individual components. This process favors suppliers like Lear with established
ties to OEMs 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 interior systems or components. Manufacturers have
increasingly looked to suppliers like the Company to assume responsibility for
introducing product innovation, shortening the development cycle of new models,
decreasing tooling investment and labor costs, reducing the number of costly
design changes in the early phases of production and improving interior comfort
and functionality. Once the Company is engaged to develop the design for the
interior system or component of a specific vehicle model, it is also generally
engaged to supply these items when the vehicle goes into production. The Company
has devoted substantial resources toward improving its engineering and technical
capabilities and developing 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, acoustics testing and
comfort assessment. In addition, the Company has established several engineering
sites in close proximity to its OEM customers to enhance customer relationships
and design activity. Finally, the Company has implemented a program of dedicated
teams consisting of interior trim and seat system personnel who are able to meet
all of a customer's interior needs. These teams provide a single interface for
Lear's customers and avoid duplication of sales and engineering efforts.
43
<PAGE> 47
TECHNOLOGY
The Company conducts advanced product design development at its technical
centers in Southfield, Michigan, Rochester Hills, Michigan, Plymouth, Michigan
and Turin, Italy and at 16 worldwide product engineering centers. At these
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. The Company also has
state-of-the-art acoustics testing, instrumentation and data analysis
capabilities.
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 interior industry. Research and development costs incurred in
connection with the development of new products and manufacturing methods, to
the extent not recoverable from the customer, are charged to operations as
incurred. Such costs amounted to approximately $53.3 million, $21.9 million, and
$16.2 million for the years ended December 31, 1995, 1994 and 1993.
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 (belt systems integrated into seats), side impact
air bags and child restraint seats. The Company has recently invested to further
upgrade its CAE and CAD/CAM systems, including three-dimensional color graphics,
customer telecommunications and direct interface with customer CAD systems.
Lear uses its patented SureBond(TM) 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(TM) 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.
Through its AI Division, the Company has virtually all technologies and
manufacturing processes available for interior trim and under-the-hood
applications. The manufacturing processes include, among other things, high and
low pressure injection molding, vacuum forming, blow molding, soft foam molding,
heat staking, water jet cutting, vibration welding, ultrasonic welding, and
robotic painting. This wide range of capabilities allows the Company to assist
its customers in selecting the technologies that are the most cost effective for
each application. Combined with its design and engineering capabilities and its
state-of-the-art technical center, AI provides comprehensive support to its OEM
customers from product development to production.
The Masland Acquisition also provides the Company with access to
leading-edge technology. The Masland Division owns one of the few
proprietary-design dynamometers capable of precision acoustics testing of front,
rear and four-wheel drive vehicles. Together with its custom-designed
reverberation room, computer-controlled data acquisition and analysis
capabilities provide precisely controlled laboratory testing conditions for
sophisticated interior and exterior noise, vibration and harshness (NVH) testing
of parts, materials and systems, including powertrain, exhaust and suspension
components. Through its Masland Division, the Company also owns a 29% interest
in PFG, which has patented a process to sew and fold an ultralight fabric into
airbags which are 60% lighter than the current airbags used in the automotive
industry. As this new airbag fits into a shirt pocket when folded, it is
adaptable to side restraint systems (door panels and seats) as well as
headliners.
The Company holds a number of mechanical and design patents covering its
products and has numerous applications for patents currently pending. In
addition, the Company holds several trademarks relating to various manufacturing
processes. The Company also licenses its technology to a number of seating
manufacturers.
JOINT VENTURES AND MINORITY INTERESTS
The Company pursues attractive joint ventures in order to facilitate the
exchange of technical information, expand its product offerings, and broaden its
customer base. Several of the Company's recent
44
<PAGE> 48
acquisitions, including Masland and Automotive Industries, have provided the
Company with strategic joint ventures. With the Masland Acquisition, Lear
acquired an interest in PFG, Sommer Masland (U.K.) Ltd. and Amtex. Sommer
Masland helped to expand Masland's geographical presence in Europe and
strengthened its relationship with several existing customers, including Nissan,
Peugeot and Saab. The Amtex joint venture established a relationship with
Hayashi Telempu Co., Ltd., the joint venture partner and a leading Japanese
automotive interior trim supplier. The AI Acquisition included a 40% interest in
Industrias Automotrices Summa, S.A. de C.V., as well as a 33% interest in
Guildford Kast Plastifol Ltd., both of which produce interior trim parts for
automobiles.
The following is a list of the Company's principal joint ventures and
minority-owned affiliates:
<TABLE>
<CAPTION>
PERCENTAGE
LOCATION PRODUCT OWNERSHIP
---------- ---------------- ----------
<S> <C> <C> <C>
Amtex* U.S.A. Interior trim 50%
General Seating of America, Inc. U.S.A. Seat systems 35
General Seating of Canada, Ltd. Canada Seat systems 35
Guildford Kast Plastifol Ltd. England Interior trim 33
Industrias Automotrices Summa, S.A. de C.V. Mexico Interior trim 40
Industrias Cousin Freres Spain Seat components 49
Lear Inespo Comercial, Industrial Ltda.* Brazil Seat systems 50
Lear Seating Thailand Thailand Seat systems 49
and components
Markol Automotiv Yan Sanayi Ve Ticart Turkey Seat systems 35
Precision Fabrics Group, Inc. U.S.A. Fabrics 29
Probel S.A. Brazil Seat components 31
Sommer Masland (U.K.) Ltd. England Interior trim 50
Teknoseating S.A.* Argentina Seat systems 50
</TABLE>
- -------------------------
* Consolidated entities.
COMPETITION
Lear is one of the two primary suppliers in the outsourced North American
seat systems market. The Company's main independent competitor is Johnson
Controls, Inc., and it competes, to a lesser extent, with Douglas & Lomason
Company and Magna International, Inc. The Company's major independent
competitors in Europe, besides Johnson Controls, Inc., are Bertrand Faure
(headquartered in France) and Keiper Recaro (headquartered in Germany). The
Company's primary independent competitors in the other segments of the
automotive interior market include Davidson Interior Trim (a division of
Textron), UT Automotive (a subsidiary of United Technologies), Prince
Corporation, The Becker Group, Collins & Aikman Corp. Automotive Division (a
division of Collins & Aikman Corporation), JPS Automotive Products Corporation,
a subsidiary of Foamex International, the Magee Carpet Company and a large
number of smaller operations. The Company also competes with the OEMs' in-house
seat system and automotive interior suppliers. The Company competes on the basis
of technical expertise, reliability, quality and price. The Company believes its
technical resources, product design capabilities and customer responsiveness are
the key factors that allow it to compete successfully in the automotive interior
market.
SEASONALITY
Lear's principal operations are directly related to the automotive
industry. Consequently, the Company may experience seasonal fluctuation to the
extent automotive vehicle production slows, such as in the summer months when
plants close for model year changeovers and vacation. Historically, the
Company's sales and operating profit have been the strongest in the second and
fourth calendar quarters. After giving pro forma effect to the AI and Masland
acquisitions, net sales for the year ended December 31, 1995 by calendar quarter
broke down as follows: first quarter, 24%; second quarter, 26%; third quarter,
23%; and fourth quarter, 27%.
45
<PAGE> 49
See Note 18, "Quarterly Financial Data," of the notes to the Company's
consolidated financial statements incorporated by reference in this Prospectus.
EMPLOYEES
As of June 1, 1996, after giving pro forma effect to the Masland
Acquisition, the Company would have employed approximately 18,700 persons in the
United States and Canada, 12,100 in Mexico and 7,900 in Europe. Of these, about
6,200 were salaried employees and the balance were paid on an hourly basis.
Approximately 25,500 of the Company's employees are members of unions. The
Company has collective bargaining agreements with several unions including: the
UAW; the Canadian Auto Workers (the "CAW"); the Textile Workers of Canada; the
International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of
America; the International Association of Machinists and Aerospace Workers; and
the AFL-CIO. Each of the Company's unionized facilities in the United States and
Canada has a separate contract with the union which represents the workers
employed there, with each such contract having an expiration date independent of
the Company's other labor contracts. The majority of the Company's European and
Mexican employees are members of industrial trade union organizations and
confederations within their respective countries. The majority of these
organizations and confederations operate under national contracts which are not
specific to any one employer. The Company has experienced some labor disputes at
its plants, none of which has significantly disrupted production or had a
materially adverse effect on its operations. The Company has been able to
resolve all such labor disputes and believes its relations with its employees
are generally good.
LITIGATION
The Company is involved in certain 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 effect on the Company's consolidated
financial position or future results of operations.
The Company is subject to various laws, regulations and ordinances which
govern activities such as discharges to the air and water, as well as handling
and disposal practices for solid and hazardous wastes, and which impose costs
and damages associated with spills, disposal or other releases of hazardous
substances. The Company believes that it is in substantial compliance with such
requirements. Management does not believe that it will incur compliance costs
pursuant to such requirements that would have a material adverse effect on the
Company's consolidated financial position or future results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company -- Environmental Matters."
The Company has been identified as a potentially responsible party ("PRP")
under the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA" or "Superfund"), for the cleanup of contamination
from hazardous substances at four Superfund sites where liability has not been
determined. The Company has also been identified as a PRP at four additional
sites. Management believes that the Company is, or may be, responsible for less
than one percent, if any, of total costs at the four Superfund sites. Expected
liability, if any, at the four additional sites is not material. The Company has
set aside reserves which management believes are adequate to cover any such
liabilities. Management believes that such matters will not result in
liabilities that will have a material adverse effect on the Company's
consolidated financial position or future results of operations.
PROPERTIES
The Company's operations are conducted through 131 facilities, including
111 manufacturing facilities, 16 product engineering centers and 4 research and
development centers, in 19 countries and one Crown Colony employing
approximately 40,000 people worldwide. The Company's management is headquartered
in Southfield, Michigan.
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 many of its facilities to provide
46
<PAGE> 50
for efficient JIT manufacturing of its products. No facility is materially
underutilized. Of the 131 facilities, 70 are owned and 61 are leased with
expiration dates ranging from 1996 through 2005. Management believes
substantially all of the Company's property and equipment is in good condition
and that it has sufficient capacity to meet its current and expected
manufacturing and distribution needs. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of the Company -- Capital
Expenditures."
The following table summarizes the locations of the Company's facilities,
including those acquired in connection with the Masland Acquisition:
<TABLE>
<S> <C> <C> <C>
ARGENTINA GERMANY POLAND UNITED STATES (CONTINUED)
Buenos Aires Ebersberg Myslowice Grand Rapids, MI
Eisenach Tychy Marlette, MI
AUSTRALIA Gustavsburg Marshall, MI
Adelaide Munich SOUTH AFRICA Mendon, MI
Brooklyn Plattling Brits Mequon, MI
Quakenbruck Midland, MI
AUSTRIA Rietberg SPAIN Plymouth, MI
Koflach Pamplona Rochester Hills, MI
HONG KONG Romulus, MI
BRAZIL Wanchai SWEDEN Southfield, MI
Belo Horizante Bengtsfors Troy, MI
Sao Paolo INDIA Trollhattan Warren, MI
Holol Bridgeton, MO
CANADA THAILAND Wentzville, MO
Ajax INDONESIA Bangkok Bowling Green, OH
Kitchener Jakarta Fremont, OH
Maple TURKEY Huron, OH
Mississauga ITALY Bursa Lorain, OH
Oakville Bruino Lordstown, OH
St. Thomas Caivano UNITED STATES Sidney, OH
Whitby Cassino Manteca, CA Warren, OH
Woodstock Grugliasco Atlanta, GA Carlisle, PA
Melfi West Chicago, IL Lewistown, PA
ENGLAND Novara Frankfort, IN Duncan, SC
Abington Orbassano Greencastle, IN Morristown, TN
Coventry Pozzilli Hammond, IN El Paso, TX
Lancashire Louisville, KY Lebanon, VA
Nottingham MEXICO Madisonville, KY Luray, VA
Tipton Cuautitlan Allen Park, MI Strasburg, VA
Washington Hermosillo Clawson, MI Winchester, VA
La Cuesta Dearborn, MI Janesville, WI
FRANCE Naucalpan Detroit, MI Sheboygan, WI
Meaux Puebla Fair Haven, MI
Paris Ramos Arizpe Fenton, MI
Rio Bravo Flint, MI
Saltillo
San Lorenzo
Tlahuac
Toluca
</TABLE>
47
<PAGE> 51
MANAGEMENT
Set forth below is certain information concerning the executive officers of
the Company.
<TABLE>
<CAPTION>
YEARS WITH
THE COMPANY,
PREDECESSOR OR
NAME AGE POSITION ACQUIRED COMPANY
- ------------------------- --- --------------------------------------------- ----------------
<S> <C> <C> <C>
Kenneth L. Way........... 57 Chairman of the Board and Chief Executive 30
Officer
Robert E. Rossiter....... 50 President, Chief Operating Officer and 25
Director of the Company
James H. Vandenberghe.... 46 Executive Vice President, Chief Financial 23
Officer and Director of the Company
James A. Hollars......... 51 Senior Vice President and President -- BMW 23
Division of the Company
Roger Alan Jackson....... 50 Senior Vice President -- Human Resources and 1
Corporate Relations
Robert Lawrie............ 51 Senior Vice President -- Global Mergers, --
Acquisitions and Strategic Alliances
Frank J. Preston......... 53 Senior Vice President and President -- 1
Masland Division
Frederick F. Sommer...... 52 Senior Vice President and President -- 5
Automotive Industries Division of the Company
Gerald G. Harris......... 62 Vice President and President -- GM Division 34
of the Company
Terrence E. O'Rourke..... 49 Vice President and President -- Ford Division 2
of the Company
Joseph F. McCarthy....... 52 Vice President, Secretary and General Counsel 2
of the Company
Donald J. Stebbins....... 38 Vice President, Treasurer and Assistant 4
Secretary 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 30 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 of 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, Chief Financial Officer and Director of the Company. He was appointed
Executive Vice President of the Company in 1993 and became a director in
November 1995. Mr. Vandenberghe also served as a director of the Company from
1988 until the merger of Lear Holdings Corporation ("Holdings"), Lear's former
parent, into Lear. Mr. Vandenberghe previously served as Senior Vice President
- -- Finance, Secretary and Chief Financial Officer of the Company since 1988.
James A. Hollars. Mr. Hollars is currently Senior Vice President and
President -- BMW Division of the Company. He was appointed to this position in
November 1995. Prior to serving in this position, he was Senior Vice President
and President -- International Operations of the Company since November 1994.
Previously he served as Senior Vice President -- International Operations of the
Company since 1993 and Vice President -- International since the sale of LSI's
Power Equipment Division to Lucas Industries in 1988.
48
<PAGE> 52
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.
Roger Alan Jackson. Mr. Jackson was elected Senior Vice President -- Human
Resources and Corporate Relations in October 1995. Previously, he served as Vice
President -- Human Resources for Allen Bradley, a wholly-owned subsidiary of
Rockwell International. Mr. Jackson was employed by Rockwell International or
its subsidiaries from December 1977 to September 1995.
Robert Lawrie. Mr. Lawrie was elected Senior Vice President -- Global
Mergers, Acquisitions and Strategic Alliances in June 1996. Prior to joining the
Company, Mr. Lawrie served as Vice President and Special Counsel to the Chairman
of Magna International Inc. since July 1992. Prior to his tenure with Magna
International, Inc., Mr. Lawrie held positions as an International Consultant to
Consolidated Hydro Inc. in 1992 and as Senior Vice President, General Counsel
and Secretary of Abitibi-Price Inc., an international paper manufacturer, from
January 1991 to July 1992. From 1988 to 1991, Mr. Lawrie was the managing
partner of the Los Angeles office of Broad Schulz Larson & Wineberg, a law firm.
Frank J. Preston. Dr. Preston was elected Senior Vice President and
President -- Masland Division of the Company upon consummation of the Masland
Acquisition. Prior to the Masland Acquisition, he served as President of Masland
since January 1995 and Chief Executive Officer of Masland since January 1996.
During 1995, Dr. Preston also served as Chief Operating Officer of Masland.
Prior to joining Masland, Dr. Preston held various positions with Textron, most
recently President of Textron Automotive Interiors.
Frederick F. Sommer. Mr. Sommer was elected Senior Vice President and
President -- Automotive Industries Division of the Company upon consummation of
the AI Acquisition. Prior to the AI Acquisition, he served as President of AI
since November 1991 and Chief Executive Officer of AI since May 1994. From March
1992 to May 1994, Mr. Sommer served as Chief Operating Officer of AI. Mr. Sommer
also served as Executive Vice President of AI 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.
Gerald G. Harris. Mr. Harris was elected Vice President and 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. Prior to 1989, Mr. Harris held various managerial
positions with the Company.
Terrence E. O'Rourke. Mr. O'Rourke was elected Vice President and President
- -- Ford Division of the Company in November 1995. Prior to serving in this
position, he was Vice President and 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.
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.
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 a 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.
49
<PAGE> 53
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 June 1, 1996 prior to the Offerings and as adjusted
to reflect the sale of 7,500,000 shares of Common Stock by the Company and
7,500,000 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)........... 16,471,224 29.1% 6,186,370 10,284,854 16.0%
FIMA Finance Management
Inc.(2)................. 3,497,544 6.2 1,313,630 2,183,914 3.4
</TABLE>
- -------------------------
(1) The number of shares beneficially owned by the Lehman Funds includes
5,916,258 shares of Common Stock owned by Lehman Brothers Merchant Banking
Portfolio Partnership L.P. and 4,021,298 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); 1,626,544 shares of Common
Stock owned by Lehman Brothers Offshore Investment Partnership L.P. and
4,907,124 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
Wickham's Cay, Road Town, Tortola, British Virgin Islands.
(3) Assumes that none of the Options, pursuant to which a maximum of 6,094,462
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 1,855,910 and
394,090 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 initial public offering of the
Company's Common Stock in April 1994, the AI Acquisition, the 1995 Stock
Offering 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.
50
<PAGE> 54
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 ("Preferred Stock").
COMMON STOCK
As of June 1, 1996, there were 56,650,532 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, the New Credit Agreement and
the Indentures governing the Senior Subordinated Notes and the Subordinated
Notes, and will be restricted under the Indenture governing the 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 Amended and Restated Stockholders
and Registration Rights Agreement dated September 27, 1991, as amended (the
"Stockholders Agreement"), which contains certain restrictions on the transfer
of Common Stock held by those stockholders and grants such stockholders certain
registration rights.
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
made by the stockholders party to the Stockholders Agreement. If any requested
registration is in the form of an underwritten offering, the Stockholders
Agreement requires the Company to designate Lehman Brothers Inc. as the managing
underwriter of the offering. 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 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.
In addition to the demand registration rights summarized above, the parties
to the Stockholders 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 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 Agreement are subject to certain holdback provisions
51
<PAGE> 55
during the registration and sale of shares of Common Stock. Under the
Stockholders 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 with voting
or other rights or preferences that could impede the success of any attempt to
change control of the Company. The Company's Restated Certificate of
Incorporation provides that the Board of Directors of the Company will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for Cause (as defined below) and only by the
affirmative vote of the holders of a majority of the then-outstanding shares of
capital stock entitled to vote generally in an election of directors. Vacancies
on the Board of Directors may be filled only by the remaining directors and not
by the stockholders. "Cause" is defined as the willful and continuous failure
substantially to perform one's duties to the Company or the willful engaging in
gross misconduct materially and demonstrably injurious to the Company.
The by-laws provide that special meetings of stockholders may be called by
the chairman, the president, any vice president, the secretary or any assistant
secretary of the Company and must be called by any such officer at the request
in writing of a majority of the Board of Directors or at the request in writing
of stockholders owning at least a majority of the capital stock of the Company
issued and outstanding and entitled to vote. The by-laws establish an advance
notice procedure for the nomination, other than by or at the direction of the
Board of Directors, of candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of stockholders. In
general, notice of intent to nominate a director must be received by the
secretary of the Company not less than 60 nor more than 90 days prior to the
date of the annual meeting, and must contain certain specified information
concerning the person to be nominated. Notice of intent to raise business at
such meeting must be received by the secretary of the Company not less than 120
nor more than 150 days prior to the first anniversary of the date of the
Company's consent solicitation or proxy statement released in connection with
the previous year's meeting.
DELAWARE ANTI-TAKEOVER LAW
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 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.
52
<PAGE> 56
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 (the
"address system"). 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 recently proposed and which have
not yet been put into effect, the address system for claiming treaty benefits
would be eliminated for payments made after December 31, 1997. Rather, to claim
the benefits of a tax treaty pursuant to these proposed regulations, a non-U.S.
holder of Common Stock would have to file certain forms 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
53
<PAGE> 57
States. Instead, the effectively connected dividends are subject to the U.S.
federal income tax on net income applicable to U.S. persons. Effectively
connected dividends received by a foreign corporation may be subject to an
additional "branch profits tax" at a 30% rate (or a lower rate under an
applicable income tax treaty) when such dividends are deemed repatriated from
the United States.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless (i) the
gain is effectively connected with the conduct of a trade or business of the
non-U.S. holder in the United States, (ii) in the case of a non-U.S. holder who
is an individual and holds the Common Stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year of the
disposition and either (x) has a "tax home" in the United States (as specially
defined for U.S. federal income tax purposes) or (y) maintains an office or
other fixed place of business in the United States and the income from the sale
of the stock is attributable to such office or other fixed place of business,
(iii) in the case of a non-resident individual who is a partner in a foreign
partnership holding the Common Stock, such non-resident individual is present in
the United States for 183 or more days in the taxable year of the disposition or
the gain is effectively connected with a trade or business conducted by such
partnership in the United States, (iv) the non-U.S. holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain 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. However, U.S.
Treasury regulations that were recently proposed would, if adopted in their
present form, eliminate this address system and require a payee to furnish
certain documentation to the payor so as to be able to claim such exemption from
backup withholding.
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.
54
<PAGE> 58
The backup withholding and information reporting rules are currently under
review by the Treasury Department, and their application to the Common Stock is
subject to change.
FEDERAL ESTATE TAXES
Common Stock owned or treated as owned by an individual who is neither a
citizen nor a resident of the United States for federal estate tax purposes at
the date of death will be included in such individual 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., Donaldson, Lufkin & Jenrette Securities
Corporation, 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. .............................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Morgan Stanley & Co. Incorporated.................................
PaineWebber Incorporated..........................................
Schroder Wertheim & Co. Incorporated..............................
----------
Total........................................................
==========
</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), Donaldson,
Lufkin & Jenrette Securities Corporation, 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
55
<PAGE> 59
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).............................
Donaldson, Lufkin & Jenrette Securities Corporation................
Morgan Stanley & Co. International Limited.........................
PaineWebber International (U.K.) Ltd. .............................
J. Henry Schroder & Co. Limited....................................
---------
Total.........................................................
=========
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting
Agreement (collectively, the "Underwriting Agreements") provide that the
obligations of the U.S. Underwriters and the International Managers to purchase
shares of Common Stock are subject to certain conditions, and that if any of the
foregoing shares of Common Stock are purchased by the U.S. Underwriters pursuant
to the U.S. Underwriting Agreement or by the International Managers pursuant to
the International Underwriting Agreement, all the shares of Common Stock agreed
to be purchased by either the U.S. Underwriters or the International Managers,
as the case may be, pursuant to 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 90 days from
the date of this Prospectus, directly or indirectly, offer, sell or otherwise
dispose of any shares of
56
<PAGE> 60
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, and 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 or to any U.S. Person. Each International Manager
has also agreed that it will offer to sell shares only in compliance with all
relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between the U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, (a) the term "United
States" means the United States of America (including the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction, and (b) the term "U.S. Person" means any resident or national of
the United States 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.
57
<PAGE> 61
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 29% 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.
One of the nine members of Lear's Board of Directors is presently employed by
Lehman Brothers. In addition, two members of Lear's Board of Directors are
principals of The Cypress Group L.L.C., a company that has provided 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, New York, New York. Certain
legal matters in connection with the Offerings will be passed upon for the U.S.
Underwriters and the International Managers by Cravath, Swaine & Moore, New
York, New York. Cravath, Swaine & Moore has performed, and continues to perform,
services for the Lehman Funds from time to time.
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 AI 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 Masland incorporated by reference into
this Prospectus have been audited by Price Waterhouse LLP, as indicated in their
report with respect hereto, and are included herein in reliance upon authority
of said firm as experts in giving said report.
58
<PAGE> 62
[INSIDE BACK COVER]
LEAR CORPORATION LOGO [framed by flags of the countries in which the
Company operates.]
Lear Corporation is the world's largest independent supplier of
automotive interior systems - with approximately 40,000 quality - dedicated,
customer - focused people throughout 131 facilities in 19 countries around the
globe.
Lear Interior Systems Capabilities
[A picture of the interior of an automobile depicting the automotive
interior products listed below which the Company produces]
<TABLE>
<CAPTION>
<C> <S>
Trunk Liners/Luggage Compartment Trim Spare Tire Covers
Load Floors Fuel Tank Shields
Package Trays Seat Systems
Seat Backs Quarter Panels
C-Pillars/Trim Arm Rests
Appliques/Bolsters Scuff Plates
Headliners Door Panels/Trim
B-Pillars/Trim Accessory Mats
Headrests SEAT COMPONENTS
Sunvisors - Frames
A-Pillars/Trim - Covers
Brake Pedal Insulator - Foam
Cowl Panels/Trim - Hardware
HVAC Ducts Consoles
Hood Insulators/Liners Carpet/Vinyl/Floor Systems
Engine Shrounds Interior Insulators/Acoustic Stuffers
Coolant Reservoirs Inner/Outer Dash
Grille Assemblies Air Intake Ducts
Vapor Canisters
Windshield Washer Reservoirs
Exterior Air Dams
</TABLE>
<PAGE> 63
----------------------------------------------------
----------------------------------------------------
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.......................... 11
Cautionary Statements for Purposes of
the "Safe Harbor" Provisions of the
Private Securities Litigation Reform
Act of 1995......................... 12
Use of Proceeds....................... 13
Common Stock Price Range and
Dividends........................... 13
Capitalization........................ 14
Pro Forma Financial Data.............. 15
Selected Financial Data of the
Company............................. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 20
Selected Financial Data of Masland
Corporation......................... 27
Management's Discussion and Analysis
of Results of Operations of Masland
Corporation......................... 28
Business of the Company............... 31
Management............................ 48
Selling Stockholders.................. 50
Description of Capital Stock.......... 51
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 53
Underwriting.......................... 55
Legal Matters......................... 58
Experts............................... 58
</TABLE>
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
15,000,000 SHARES
LEAR CORP. LOGO
COMMON STOCK
---------------------------
PROSPECTUS
, 1996
---------------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
SCHRODER WERTHEIM & CO.
----------------------------------------------------
----------------------------------------------------
<PAGE> 64
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 JUNE 28, 1996
PROSPECTUS
15,000,000 Shares
LEAR CORP. LOGO
COMMON STOCK
---------------------------
Of the 15,000,000 shares of Common Stock ("Common Stock") of Lear
Corporation ("Lear" or the "Company") being offered hereby, 7,500,000 shares are
being offered by the Company and 7,500,000 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." Concurrently with the Offerings, the Company is
undertaking a public offering (the "Note Offering") of $200,000,000 principal
amount of subordinated notes due 2006. The Offerings are not conditioned upon
the consummation of the Note Offering.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "LEA." On June 27, 1996, the reported last sale price of the Common
Stock on the New York Stock Exchange Composite Tape was $36 5/8 per share.
SEE "RISK FACTORS" COMMENCING ON PAGE 11 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 , 1996.
---------------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
, 1996
<PAGE> 65
[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.......................... 11
Cautionary Statements for Purposes of
the "Safe Harbor" Provisions of the
Private Securities Litigation Reform
Act of 1995......................... 12
Use of Proceeds....................... 13
Common Stock Price Range and
Dividends........................... 13
Capitalization........................ 14
Pro Forma Financial Data.............. 15
Selected Financial Data of the
Company............................. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Company........ 20
Selected Financial Data of Masland
Corporation......................... 27
Management's Discussion and Analysis
of Results of Operations of Masland
Corporation......................... 28
Business of the Company............... 31
Management............................ 48
Selling Stockholders.................. 50
Description of Capital Stock.......... 51
Certain United States Federal Tax
Considerations for Non-U.S. Holders
of Common Stock..................... 53
Underwriting.......................... 55
Legal Matters......................... 58
Experts............................... 58
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
15,000,000 SHARES
LEAR CORP. LOGO
COMMON STOCK
---------------------------
PROSPECTUS
, 1996
---------------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INTERNATIONAL
PAINEWEBBER INTERNATIONAL
SCHRODERS
------------------------------------------------------
------------------------------------------------------
<PAGE> 66
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............................................... $ 229,425
NASD filing fee.............................................. 30,500
Blue sky fees and expenses................................... 10,000
Legal fees and expenses...................................... 150,000
Accounting fees and expenses................................. 50,000
Printing and engraving....................................... 400,000
Listing fees................................................. 26,250
Miscellaneous................................................ 103,825
----------
Total................................................... $1,000,000
==========
</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 (including attorneys' fees) 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 David P. Spalding, James
A. Stern 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> 67
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> 68
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Southfield, State of Michigan on June 27, 1996.
LEAR 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
Registration Statement 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 Chief June 27, 1996
- ------------------------------------- Executive Officer
Kenneth L. Way (Principal Executive Officer)
* President, Chief Operating Officer June 27, 1996
- ------------------------------------- and Director
Robert E. Rossiter
/s/ JAMES H. VANDENBERGHE Executive Vice President, June 27, 1996
- ------------------------------------- Chief Financial Officer and
James H. Vandenberghe Director (Principal Financial and
Principal Accounting Officer)
* Director June 27, 1996
- -------------------------------------
Larry W. McCurdy
* Director June 27, 1996
- -------------------------------------
Gian Andrea Botta
* Director June 27, 1996
- -------------------------------------
Robert W. Shower
* Director June 27, 1996
- -------------------------------------
David P. Spalding
* Director June 27, 1996
- -------------------------------------
James A. Stern
* Director June 27, 1996
- -------------------------------------
Alan Washkowitz
*By: /s/ JAMES H. VANDENBERGHE
- -------------------------------------
James H. Vandenberghe
Attorney-in-fact
</TABLE>
II-3
<PAGE> 69
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 May 23, 1996, by and among --
Lear, PA Acquisition Corp. and Masland.
5.1 -- Opinion of Winston & Strawn, special counsel to Lear. --
12.1 -- Statement Regarding Computation of Ratios. --
23.1 -- Consent of Arthur Andersen LLP. --
23.2 -- Consent of Arthur Andersen LLP with respect to AI Financial --
Statements.
**23.3 -- Consent of Price Waterhouse LLP, with respect to the Masland --
Financial Statements.
23.4 -- Consent of Winston & Strawn (included in Exhibit 5.1). --
*24.1 -- Powers of Attorney. --
*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
certain management investors (incorporated by reference to
Exhibit 2.2 to Lear Holdings Corporation's 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 Lear Holdings Corporation's 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 (incorporated by
reference to Exhibit 99.4 to Lear's Registration Statement on
Form S-3 (33-61583)).
99.5 -- Form of Amendment and Waiver dated as of June 21, 1996 to
Amended and Restated Stockholders and Registration Rights
Agreement dated as of September 27, 1991, as amended.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by Amendment.
<PAGE> 1
EXHIBIT 1.1
15,000,000 Shares
LEAR CORPORATION
Common Stock
U.S. Underwriting Agreement
, 1996
Lehman Brothers Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
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 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".
<PAGE> 2
2
It is understood that the Company and the Selling Stockholders
are concurrently entering into an International Underwriting Agreement dated
the date hereof (the "International Underwriting Agreement"), providing for the
sale by the Company and the Selling 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), Donaldson, Lufkin & Jenrette Securities
Corporation, 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 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 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.
<PAGE> 3
3
The following terms as used in this Agreement shall have the
following meanings:
"Act" shall mean the Securities Act of 1933, as amended.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading.
"Commission" shall mean the Securities and Exchange
Commission.
"Effective Date" shall mean the date of the Effective Time.
"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,
as amended.
"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,
<PAGE> 4
4
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 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. Preliminary Prospectus" shall mean a Preliminary
Prospectus relating to the Shares which are to be offered and sold in the
United States or Canada and its provinces or to U.S. Persons.
<PAGE> 5
5
"U.S. Prospectus" shall mean a Prospectus relating to the
Shares which are to be offered and sold in the United States or Canada and its
provinces 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 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. 333-05807)
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
<PAGE> 6
6
Commission, did or will contain all Rule 430A Information, together with all
other such required information, with respect to the Underwritten Shares and
the offering thereof and, except to the extent the Representatives shall agree
in writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not completed at
the Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectuses) as
the Company has advised you, prior to the Execution Time, will be included or
made therein. The Commission has not issued any stop order preventing or
suspending the use of any Preliminary Prospectus or the Prospectuses or the
effectiveness of the Registration Statement, and no proceeding for any such
purpose has been initiated or threatened by the Commission.
(c) On the Effective Date, the Registration Statement did not
or will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading; and, on the Effective Date, the
Prospectuses did not or will not, and on the date of any filing pursuant to
Rule 424(b) and on each Closing Date, the Prospectuses (together with any
supplements thereto) will not, include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided that the Company makes no representation or warranty as to
information contained in or omitted from the Registration Statement or the
Prospectuses in reliance upon, and in conformity with, written information
furnished to the Company by you or 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
<PAGE> 7
7
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 Regulations 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 owner-
<PAGE> 8
8
ship, 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.
(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.
<PAGE> 9
9
(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, 1995, 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 material
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,
<PAGE> 10
10
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 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 in any
material respect 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 in any material respect
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,
<PAGE> 11
11
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 90 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 (i) 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, (ii) the
Company may issue options to the holders of Masland Corporation ("Masland")
stock options in connection with the acquisition of Masland by the Company and
may issue and sell Common Stock pursuant to such options, and (iii) 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 (except
employee stock options and Common Stock issuable thereunder and options to be
issued in connection with the Masland acquisition and Common Stock issuable
thereunder), (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
<PAGE> 12
12
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 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.
<PAGE> 13
13
(s) Except with respect to taxable periods commencing before
the taxable period ended June 30, 1991, 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, 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 AI (as defined in the Prospectuses), and Price
Waterhouse LLP, who have certified certain financial statements of Masland (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.
<PAGE> 14
14
(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.
(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, severally and not jointly, represents,
warrants and agrees as to itself 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
International Underwriting Agreement on such date,
<PAGE> 15
15
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 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 in any material respect 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
in any material respect of the provisions of the Certificate of Incorporation
or the By-laws or comparable instruments, as applicable, 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
<PAGE> 16
16
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 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, in the light of the circumstances
under which they were made, 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
shares of the Firm Shares and each of the Selling Stockholders, severally and
not jointly, agrees to sell that number of Firm Shares set forth opposite such
Selling Stockholder's name in Schedule II hereto, 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
<PAGE> 17
17
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 and Canada.
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 International Managers' over-allotment
option) pursuant to the International Underwriting Agreement.
(b) Subject to the terms and conditions of this Agreement,
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., Three World Financial Center (18th Floor), Attn: Mr. Alan
Washkowitz, New York, New York 10285 (or such other place as mutually may be
agreed upon), at
<PAGE> 18
18
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, or 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 and the Selling Stockholders
(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
each of 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
exercise, as determined by the Representatives, when the Option Shares are to
be delivered (the "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 the 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 checks payable in New York Clearing
House (next day) funds to the order of the Company and each of 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.
<PAGE> 19
19
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 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 Lehman Brothers Inc. and to
counsel for the U.S. Underwriters a signed copy of the Registration Statement
as originally filed and each
<PAGE> 20
20
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 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 5, shall amend the Registration Statement or
supplement the U.S. Prospectus or file such document (at the expense of the
Company) so as to correct such statement or omission or to effect such
compliance.
(d) The Company shall take or cause to be taken all necessary
action and furnish to whomever you may direct such information as may be
required in qualifying the Shares (and any International Shares that may be
sold to the U.S. Underwriters by the International Managers) for offer and sale
under the state securities or Blue Sky laws of such jurisdictions as you shall
designate and to continue such qualifications in effect for as long as may be
necessary for the distribution of the Shares (and such International Shares);
except that in no event shall the Company be obligated in connection therewith
to qualify as a foreign corporation or to execute a general consent to service
of process.
<PAGE> 21
21
(e) The Company shall furnish to you, on or prior to the date
of this Agreement, a letter or letters or agreement, in form and substance
reasonably satisfactory to counsel for the U.S. Underwriters, pursuant to which
each executive officer and director of the Company who owns any shares of
Common Stock at the Execution Time 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 90 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 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 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; and all
other costs and expenses incident to the performance of the obligations of the
Company 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.
<PAGE> 22
22
(g) To apply the net proceeds from the sale of the
Underwritten Shares being sold by the Company as set forth in the Prospectuses.
(h) The Company shall, on or prior to each Closing Date,
cause the Shares to be purchased on such date by the U.S. Underwriters to be
approved for listing on the New York Stock Exchange, subject only to official
notice of issuance, and shall take such action as shall be necessary to comply
with the rules and regulations of the New York Stock Exchange with respect to
such shares.
(i) During a period of five years from the Effective Date,
the Company shall, upon written request, 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, the Company shall 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) and Rule 158
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, severally and not jointly, agrees:
(a) For a period of 90 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
<PAGE> 23
23
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 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 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 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.
<PAGE> 24
24
(b) No U.S. Underwriter or International Manager shall have
discovered after the date hereof and disclosed to the Company on or prior to
such applicable Closing Date that the Registration Statement or the
Prospectuses or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Cravath, Swaine & Moore, counsel
for the U.S. Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Underwritten Shares, the Registration Statement and the Prospectuses, and all
other legal matters relating to this Agreement and the transactions
contemplated hereby, shall be reasonably satisfactory in all respects to
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 reasonably 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, except where the failure to be so
qualified and in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole; 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;
<PAGE> 25
25
(ii) this Agreement and the International Underwriting
Agreement have been duly authorized, executed, and delivered by the
Company, are legally valid and binding obligations of the Company, and
are enforceable against the Company in accordance with their terms,
except to the extent that rights to indemnity or contribution
hereunder and thereunder may be limited by Federal or state securities
laws or the public policy underlying such laws may limit the right to
indemnity and contribution thereunder; no consent, authorization,
approval, order, license, certificate, or permit of or from, or
declaration or filing with, any Federal, state, local or other
governmental authority or any court or other tribunal is required by
the Company for the execution, delivery, or performance of this
Agreement or the International Underwriting Agreement by the Company
(except filings under the Act 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, 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
<PAGE> 26
26
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 therein or excluded therefrom),
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 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
<PAGE> 27
27
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 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 reasonably
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, except where the failure to be so
qualified and in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole; and have
all corporate power and authority necessary to own or hold their
<PAGE> 28
28
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 owned directly or indirectly
by the Company have been duly and validly authorized and issued and
are fully paid, nonassessable and (except for directors' qualifying
shares) owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims, except as described in
the Prospectuses; to the best of such counsel's knowledge after due
inquiry and investigation, there is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other
right calling for the issuance of, any share of capital stock of the
Company or of the Company's subsidiaries to any person other than the
Company, or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for capital stock
of the Company or of the Company's subsidiaries, except as may be
described in the Prospectuses 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
<PAGE> 29
29
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;
(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 declara-
<PAGE> 30
30
tion 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 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 or incorporated
therein by reference;
(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
<PAGE> 31
31
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 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 reasonably
satisfactory to the Underwriters to the effect that:
(i) such 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 such Selling Stockholder; and
(iii) the execution, delivery and performance of this
Agreement by such Selling Stockholder and the consummation by such
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 such
Selling Stockholder is a party or by which such Selling Stockholder is
bound or to which any of the
<PAGE> 32
32
property or assets of such selling Stockholder is subject, nor will
such actions result in any violation in any material respect of the
provisions of the partnership agreement (if any) of such Selling
Stockholder or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency having jurisdiction
over such Selling Stockholder or the property or assets of such
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 such Selling Stockholder and the consummation by such
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 Underwriters on
each Closing Date a certificate, dated such Closing Date, of its President or a
Vice President and its Chief Financial Officer or Treasurer 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
<PAGE> 33
33
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 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,
<PAGE> 34
34
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 reasonable 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.
(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.
(m) On each Closing Date, a representative of Masland, who is
reasonably satisfactory to Cravath, Swaine & Moore, counsel for the U.S.
Underwriters, shall have furnished his written certificate addressed to the
U.S. Underwriters and dated such Closing Date in form and substance reasonably
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 the representative has carefully examined the Registration
Statement and the Prospectuses and, in that representative's opinion, (A) as of
the Effective Time of the Registration Statement, the Registration Statement as
it pertained or related to Masland 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, as each
pertained or related to Masland did not include any
<PAGE> 35
35
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 pertinent or relating to Masland 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.
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 make the statements therein
not misleading; and shall reimburse each U.S. Underwriter or Selling
Stockholder
<PAGE> 36
36
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, further, that the Company shall not be liable pursuant to this
Section 8(a) with respect to any untrue statement or alleged untrue statement
or omission or alleged omission in any Preliminary Prospectus which is
corrected in a Prospectus if the person asserting such loss, claim, damage or
liability purchased Shares from a U.S. Underwriter but was not sent or given a
copy of a Prospectus at or prior to the written confirmation of the sale of
such Shares to such person; and 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 from any 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 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
<PAGE> 37
37
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, 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 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 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 no Selling
Stockholder shall be liable pursuant to this Section 8(b) with respect to any
untrue statement or alleged untrue statement or omission or alleged omission in
any Preliminary Prospectus which is corrected in a Prospectus if the person
asserting such loss, claim, damage or liability purchased Shares from a U.S.
Underwriter but was not sent or given a copy of a Prospectus at or prior to the
written confirmation of the sale of such Shares to such person; and provided,
further, that the aggregate amount of all such indemnification or reimbursement
payable by any Selling Stockholder pursuant to this Agreement and Section 8(b)
of the International Underwriting Agreement 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
<PAGE> 38
38
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
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
<PAGE> 39
39
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 any indemnified party shall have the right to employ
its own counsel to represent it if, in the reasonable judgment of such
indemnified party (based on advice of counsel), it is advisable for such
indemnified party to be represented by separate counsel because there may be
legal defenses available to it or other indemnified parties that are
inconsistent with those available to the indemnifying party, and in that event
the fees and expenses of such separate counsel shall be paid by the
indemnifying party.
(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 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 Stockholders 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
(after underwriting discounts and commissions but before deducting other
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
<PAGE> 40
40
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 (e) 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 (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 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 (e), no Selling Stockholder
shall be required to contribute any amount in excess of the amount by which the
amount of net proceeds received by such Selling Stockholder from the sale by
such Selling Stockholder of its portion of the Shares pursuant to this
Agreement exceeds 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 (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
<PAGE> 41
41
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
(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 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, 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 a 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 remaining non-defaulting U.S. Underwriters shall be
obligated to purchase the Shares which the defaulting U.S. Underwriter agreed
but failed to purchase on such Closing Date in the respective proportions which
the number of Firm Shares set opposite the name of each remaining
non-defaulting U.S. Underwriter in Schedule 1 hereto bears to the total number
of Firm Shares set opposite the names of all the remaining non-defaulting U.S.
Underwriters in Schedule 1 hereto; provided, however, that the remaining
non-defaulting U.S. Underwriters shall not be obligated to purchase any of the
Shares on such Closing Date if the total number of Shares which the defaulting
U.S. Underwriter or U.S. Underwriters agreed but failed to purchase on such
date exceeds 9.09% of the total number of Shares to be purchased on such
Closing Date, and any remaining non-defaulting U.S. Underwriter shall not be
obligated to purchase more than 110% of the number of Shares which it agreed to
purchase on
<PAGE> 42
42
such Closing Date pursuant to the terms of Section 3. If the foregoing
maximums are exceeded, the remaining non-defaulting U.S. Underwriters, or those
other underwriters satisfactory to the Representatives who so agree, shall have
the right, but shall not be obligated, to purchase, in such proportion as may
be agreed upon among them, all the Shares to be purchased on such Closing Date.
If the remaining non-defaulting U.S. Underwriters or other underwriters
satisfactory to the Representatives do not elect to purchase the Shares which
the defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to
purchase on such Closing Date, this Agreement (or, with respect to the Option
Closing Date, the obligation of the U.S. Underwriters to purchase, and of the
Company to sell, the Option Shares) shall terminate without liability on the
part of any non-defaulting U.S. Underwriter or the Company or the Selling
Stockholders, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Sections 5(f) and 10. As used
in this Agreement, the term "U.S. Underwriter" includes, for all purposes of
this Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Firm Shares which
a defaulting U.S. Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting U.S.
Underwriter of any liability it may have to the Company and the Selling
Stockholders for damages caused by its default. If other underwriters are
obligated or agree to purchase the Shares of a defaulting or withdrawing U.S.
Underwriter, either the Representatives or the Company may postpone the 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 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
<PAGE> 43
43
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 and the Selling
Stockholders, 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 (other than the conditions set forth in Section 7(i)
hereof) 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 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
<PAGE> 44
44
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 10 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> 45
45
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
EXOR America 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 Three World Financial Center (18th Floor), New York,
New York 10285, Attention: Alan Washkowitz; 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 (c) of Section 1
hereof and in paragraphs (a) and (c) of Section 8 hereof.
14. Information Furnished by Selling Stockholders. Each of
the Selling Stockholders severally confirm that the statements with respect to
such Selling Stockholder set forth 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
<PAGE> 46
46
in accordance with the terms of the Agreement Between U.S. 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, any person controlling the Company within the meaning
of Section 15 of the Act, the directors of each Selling Stockholder, the
officers of each Selling Stockholder and any person controlling any Selling
Stockholder with 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> 47
47
If the foregoing correctly sets forth the agreement among the
Company, the Selling Stockholders and the U.S. Underwriters, please indicate
your acceptance in the space provided for that purpose below.
Very truly yours,
LEAR CORPORATION,
By:
------------------------------
Name:
Title:
FIMA FINANCE MANAGEMENT INC., as a
Selling Stockholder,
By:
------------------------------
Name:
Title:
<PAGE> 48
48
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> 49
49
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP - JAPAN L.P., as Selling
Stockholder
By: Lehman Brothers Offshore
Partners Ltd.
By: ______________________________
Name:
Title:
<PAGE> 50
50
Accepted:
LEHMAN BROTHERS INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
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> 51
51
SCHEDULE I
U.S. Underwriting Agreement dated , 1996
<TABLE>
<CAPTION>
Number of Firm Shares
U.S. Underwriters to Be Purchased
----------------- ---------------
<S> <C>
Lehman Brothers Inc.
Donaldson, Lufkin & Jenrette Securities
Corporation
Morgan Stanley & Co. Incorporated
PaineWebber Incorporated
Schroder Wertheim & Co. Incorporated
Total
===============
</TABLE>
<PAGE> 52
52
SCHEDULE II
U.S. Underwriting Agreement dated , 1996
<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.
====================
</TABLE>
<PAGE> 1
EXHIBIT 1.2
15,000,000 Shares
LEAR CORPORATION
Common Stock
International Underwriting Agreement
, 1996
Lehman Brothers International (Europe)
Donaldson, Lufkin & Jenrette Securities Corporation
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 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 Shareholder" and collectively the "Selling
Shareholders") 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
Shareholders 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 Shareholders
are concurrently entering into a U.S. Under-
<PAGE> 2
2
writing Agreement dated the date hereof (the "U.S. Underwriting Agreement"),
providing for the sale by the Company and the Selling Shareholders 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., Donaldson, Lufkin & Jenrette
Securities Corporation, 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 Shareholders 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 Shareholders 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 Shareholders 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,
as amended.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"International Preliminary Prospectus" shall mean a
Preliminary Prospectus relating to the Shares which are to be offered and sold
outside the United States or Canada to persons other than U.S. Persons.
"International Prospectus" shall mean a Prospectus relating to
the 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.
<PAGE> 4
4
"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 U.S.
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.
<PAGE> 5
5
1. Representations and Warranties of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-3 (File No. 333-05807)
with respect to the Underwritten Shares has been prepared by the Company in
conformity with the requirements of the Act and the Rules and Regulations
thereunder and has been filed with the Commission under the Act. Copies of
such registration statement as amended to date have been delivered by the
Company to you as the Lead Managers of the International Managers. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment to such
registration statement, including forms of final prospectuses or (ii) after
effectiveness of such registration statement, final prospectuses in accordance
with Rules 430A and 424(b)(1) or (4).
(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
<PAGE> 6
6
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 Shareholder, 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 Regulations 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
<PAGE> 7
7
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 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 shareholders, 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,
shareholders' 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,
<PAGE> 8
8
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, 1995, 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,
shareholders' 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
<PAGE> 9
9
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 material 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 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 in any material respect 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
<PAGE> 10
10
in any violation in any material respect of the provisions of the Certificate
of Incorporation or the By-laws, in each case as amended, of the Company or any
of its subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties or assets; and no consent,
approval, authorization, order, registration, filing or qualification of or
with any court or governmental agency or body is required for the issue and
sale of the Underwritten Shares or the consummation of the other transactions
contemplated by this Agreement or the U.S. Underwriting Agreement, except the
registration under the Act of the Underwritten Shares, and such consents,
approvals, authorizations, registrations, filings or qualifications as may be
required under state securities or Blue Sky laws or as may be required by the
laws of any country other than the United States in connection with the
purchase and distribution of the Underwritten Shares by the U.S. Underwriters
and the International Managers.
(n) The Company will not, during the period of 90 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 (i) 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, (ii) the
Company may issue options to holders of Masland Corporation ("Masland") stock
options in connection with the acquisition of Masland by the Company and may
issue and sell Common Stock pursuant to such options, and (iii) 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 (except
employee stock options and Common Stock issuable thereunder and options to be
issued in connection with the Masland acquisition and Common Stock issuable
thereunder), (ii) incurred any liability or obligation, direct or contingent,
other than liabilities and obligations which were incurred in the ordinary
course of business,
<PAGE> 11
11
(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
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, shareholders' 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,
<PAGE> 12
12
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, 1991, 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, 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 AI (as defined in the Prospectuses), and Price
Waterhouse LLP, who have certified certain financial statements of Masland (as
defined in the Prospectuses), and whose reports are
<PAGE> 13
13
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.
(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
Shareholders. Each Selling Shareholder, severally and not jointly, represents,
warrants and agrees as to itself that:
(a) Such Selling Shareholder has, and immediately prior to
the First Closing Date (as defined in Section 4) such Selling Shareholder will
have, good and valid title to the Underwritten Shares to be sold by such
Selling Share-
<PAGE> 14
14
holder 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 Shareholder 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 Shareholder.
(c) Such Selling Shareholder 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 Shareholder and the consummation by such Selling
Shareholder of the transactions contemplated hereby and thereby 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 indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which such Selling Shareholder is a party or by which the Selling Shareholder
is bound or to which any of the property or assets of such Selling Shareholder
is subject, nor will such actions result in any violation in any material
respect of the provisions of the Certificate of Incorporation or the By-laws or
comparable instruments, as applicable, or any partnership agreement of such
Selling Shareholder or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such Selling
Shareholder or the property or assets of such Selling Shareholder; 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 Shareholder and the consummation by such Selling
Shareholder 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
<PAGE> 15
15
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 Shareholder furnished to the
Company by such Selling Shareholder 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, in the light of the circumstances
under which they were made, 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
shares of the Firm Shares and each of the Selling Shareholders, severally and
not jointly, agrees to sell that number of Firm Shares set forth opposite such
Selling Shareholder's name in Schedule II hereto, 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 Shareholders 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 Shareholders, 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
International Managers 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
<PAGE> 16
16
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 and Canada.
The obligations of the Company hereunder to issue and sell any
Shares and of the Selling Shareholders 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) Subject to the terms and conditions of this Agreement,
the Selling Shareholders hereby grant to the International Managers an option
to purchase from the Selling Stockholders, 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
Shareholders for the accounts of the International Managers, severally and not
jointly, in proportion to the number of Firm Shares set forth opposite such
International Manager's name in Schedule I hereto, except that the respective
purchase obligations of each International Manager shall be adjusted by the
Lead Managers so that no International Manager shall be obligated to purchase
Option Shares other than in 100-share quantities. Option Shares shall be sold
by the Selling Shareholders in proportion to the number of Firm Shares set
forth opposite such Selling Shareholder's name in Schedule II hereto, rounded
among the Selling Shareholders 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., Three World Financial Center (18th Floor), Attention: Mr. Alan
Washkowitz, New York, New York 10285 (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, or 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
<PAGE> 17
17
Company and the Selling Shareholders (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
each of the Selling Shareholders 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 Lead Managers, when the Option Shares are to be
delivered (the "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 the 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 Shareholders to you, for the respective
accounts of the International Managers, against payment of the purchase price
therefor by certified or official bank checks payable in New York Clearing
House (next day) funds to the order of the Company and each of the Selling
Shareholders. 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
<PAGE> 18
18
(in writing, if requested). If the Registration Statement has become or
becomes effective pursuant to Rule 430A, or filing of any Prospectus is
otherwise required under Rule 424(b), the Company will cause such Prospectus,
properly completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) in the manner and within
the time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. The Company shall notify you promptly
of any request by the Commission for any amendment of or supplement to the
Registration Statement or any Prospectus or for additional information; the
Company shall prepare and file with the Commission, promptly upon your request,
any amendments or supplements to the Registration Statement or the
International Prospectus which, in your reasonable opinion, may be necessary or
advisable in connection with the distribution of the Shares; and the Company
shall not file any amendment or supplement to the Registration Statement or the
International Prospectus, which filing is not consented to by you after
reasonable notice thereof. The Company shall advise you promptly of the
issuance by the Commission or any state or other governmental or regulatory
body of any stop order or other order suspending the effectiveness of the
Registration Statement, suspending or preventing the use of any Preliminary
Prospectus or Prospectus or suspending the qualification of the Shares for
offering or sale in any jurisdiction, or of the institution of any proceedings
for any such purpose; and the Company shall use its best efforts to prevent the
issuance of any stop order or other such order and, should a stop order or
other such order be issued, to obtain as soon as possible the lifting thereof.
(b) The Company shall furnish to 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
<PAGE> 19
19
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 5, shall amend the Registration Statement or
supplement the International Prospectus or file such document (at the expense
of the Company) so as to correct such statement or omission or to effect such
compliance.
(d) The Company shall take or cause to be taken all necessary
action and furnish to whomever you may direct such information as may be
required in qualifying the Shares (and any U.S. Shares that may be sold to the
International Managers by the U.S. Underwriters) for offer and sale under the
state securities or Blue Sky laws of such jurisdictions as you shall designate
and to continue such qualifications in effect for as long as may be necessary
for the distribution of the Shares (and such 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 reasonably
satisfactory to counsel for the International Managers, pursuant to which each
executive officer and director of the Company who owns any shares of Common
Stock at the Execution Time 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 90 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
<PAGE> 20
20
(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 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;
and all other costs and expenses incident to the performance of the obligations
of the Company 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 Shareholder 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, upon written request, 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, the Company shall make generally available to its
security holders and to deliver to the International Managers an earnings
statement of the
<PAGE> 21
21
Company, conforming with the requirements of Section 11(a) and Rule 158 of the
Act, covering a period of at least 12 months beginning after the Effective
Date.
6. Further Agreements of the Selling Shareholders. Each
Selling Shareholder, severally and not jointly, agrees:
(a) For a period of 90 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).
(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 Shareholders
contained herein, to the performance by the Company and the Selling Shareholder
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 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
<PAGE> 22
22
been initiated or threatened by the Commission; any request of the Commission
for inclusion of additional information in the Registration Statement or the
Prospectuses or otherwise shall have been complied with; and the Company shall
not have filed with the Commission any amendment or supplement to the
Registration Statement or the Prospectuses without the consent of the
Underwriters. If the Company has elected to rely upon Rule 430A of the Act,
the price of the Shares and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b) of the
Act within the prescribed time period, and prior to the applicable Closing Date
the Company shall have provided evidence satisfactory to the International
Managers of such timely filing, or a post-effective amendment providing such
information shall have been prepared, filed and declared effective in
accordance with the requirements of Rule 430A of the Act.
(b) No U.S. Underwriter or International Manager shall have
discovered after the date hereof and disclosed to the Company on or prior to
such applicable Closing Date that the Registration Statement or the
Prospectuses or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Cravath, Swaine & Moore, counsel
for the International Managers, is material or omits to state a fact which, in
the opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Underwritten Shares, the Registration Statement and the Prospectuses, and all
other legal matters relating to this Agreement and the transactions
contemplated hereby, shall be reasonably satisfactory in all respects to
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 reasonably satisfactory to the International Managers
(with customary qualifications and assumptions agreed to by counsel for the
International Managers) to the effect that:
<PAGE> 23
23
(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, except where the failure to be so
qualified and in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole; and have
all corporate power and authority necessary to own or hold their
respective properties and to conduct the business in which they are
engaged as described in the Prospectus;
(ii) this Agreement and the U.S. Underwriting Agreement have
been duly authorized, executed, and delivered by the Company, are
legally valid and binding obligations of the Company, and are
enforceable against the Company in accordance with their terms, except
to the extent that rights to indemnity or contribution hereunder and
thereunder may be limited by Federal or state securities laws or the
public policy underlying such laws may limit the right to indemnity
and contribution thereunder; no consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or
filing with, any Federal, state, local or other governmental authority
or any court or other tribunal is required by the Company for the
execution, delivery, or performance of this Agreement or the U.S.
Underwriting Agreement by the Company (except filings under the Act
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
<PAGE> 24
24
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, 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
therein or excluded therefrom), 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
<PAGE> 25
25
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 statements of officers and other representatives of the Company, the
Selling Shareholders 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
reasonably 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
<PAGE> 26
26
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, except where the failure to be so qualified and in good
standing would not have a material adverse effect on the Company and
its subsidiaries taken as a whole; 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 owned directly or indirectly
by the Company have been duly and validly authorized and issued and
are fully paid, nonassessable and (except for directors' qualifying
shares) owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims, except as described in
the Prospectuses; to the best of such counsel's knowledge after due
inquiry and investigation, there is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other
right calling for the issuance of, any share of capital stock of the
Company or of the Company's subsidiaries to any person other than the
Company, or any security or other instrument which by its terms is
convertible into, exercisable for, or exchangeable for capital stock
of the Company or of the Company's subsidiaries, except as may be
described in the Prospectuses 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
<PAGE> 27
27
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, shareholders' 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, shareholders' equity, results of
operations, business or prospects of the Company and its subsidiaries
taken as a whole;
(v) neither the Company nor any of its subsidiaries is now in
violation or breach of, or in default with respect to, any material
provision of any contract, agreement, instrument, lease or license,
which is material to the Company and its subsidiaries taken as a
whole;
(vi) neither the Company nor any of its subsidiaries is in
violation or breach of, or in default with respect to, any term of its
Certificate of Incorporation or By-laws;
(vii) the execution, delivery and performance of this
Agreement and the U.S. Underwriting Agreement and the issue and sale
of the Shares 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
<PAGE> 28
28
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 or incorporated
therein by reference;
(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
<PAGE> 29
29
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 Selling Shareholders
(addressed to the Underwriters), dated the Closing Date in form and substance
reasonably satisfactory to the Underwriters to the effect that:
(i) such Selling Shareholder 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 such Selling Shareholder; and
(iii) the execution, delivery and performance of this
Agreement by such Selling Shareholder and the consummation by such
Selling Shareholder 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 such
Selling Shareholder is a party or by which such Selling Shareholder is
bound or to which any of the property or assets of such Selling
Shareholder is subject, nor will such actions result in any violation
<PAGE> 30
30
in any material respect of the provisions of the partnership agreement
of such Selling Shareholder or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency
having jurisdiction over such Selling Shareholder or the property or
assets of such Selling Shareholder; 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 such Selling Shareholder and the
consummation by such Selling Shareholder 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 or Treasurer
stating that:
(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
<PAGE> 31
31
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.
(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, shareholders' 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 reasonable 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.
<PAGE> 32
32
(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 Shareholder (or one or more
attorneys-in-fact on behalf of such Selling Shareholder) 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 Shareholder (or one or more
attorneys-in-fact) stating that the representations, warranties and agreements
of such Selling Shareholder contained herein are true and correct as of such
Closing Date and that such Selling Shareholder has complied with all agreements
contained herein to be performed by such Selling Shareholder at or prior to
such Closing Date.
(m) On each Closing Date, a representative of Masland, who is
reasonably satisfactory to Cravath, Swaine & Moore, counsel for the
International Managers, shall have furnished his written certificate addressed
to the International Managers and dated such Closing Date in form and substance
reasonably satisfactory to the International Managers (with customary
qualifications and assumptions agreed to by counsel for the International
Managers) to the effect that the representative has carefully examined the
Registration Statement and the Prospectuses and, in that representative's
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 as it pertained or related
to Masland 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, as each pertained or related to
Masland 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 pertinent or relating to Masland 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.
All such opinions, certificates, letters and documents
mentioned above or elsewhere in this Agreement
<PAGE> 33
33
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.
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 Shareholder 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, further, that the Company shall not be liable
pursuant to this Section 8(a) with respect to any untrue statement or alleged
untrue statement or omission or alleged omission in any Preliminary Prospectus
which is corrected in a Prospectus if the person asserting such loss,
<PAGE> 34
34
claim, damage or liability purchased Shares from a U.S. Underwriter but was not
sent or given a copy of a Prospectus at or prior to the written confirmation of
the sale of such Shares to such person; and provided, 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 any Prospectus as
amended or supplemented, or any Blue Sky Application.
(b) Each Selling Shareholder 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 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, in the light of the circumstances under which
they were made, 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 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
<PAGE> 35
35
was made in reliance upon and in conformity with written information concerning
such Selling Shareholder furnished to the Company or such International Manager
by or on behalf of such Selling Shareholder specifically for use in the
preparation thereof; provided, further, that the Selling Shareholder shall be
liable pursuant to this Section 8(b) with respect to any untrue statement or
alleged untrue statement or omission or alleged omission in any Preliminary
Prospectus which is corrected in a Prospectus if the person asserting such
loss, claim, damage or liability purchased Shares from an International Manager
but was not sent or given a copy of a Prospectus at or prior to the written
confirmation of the sale of such Shares to such person; and provided, further,
that the aggregate amount of all such indemnification or reimbursement payable
by any Selling Shareholder pursuant to this Agreement and Section 8(b) of the
International Underwriting Agreement shall in no case exceed the net proceeds
to such Selling Shareholder 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 Shareholder
against any loss, claim, damage or liability (or any action in respect thereof)
to which the Company or any 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 (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 Shareholder promptly after receipt of invoices from the Company
or such Selling Shareholder for any legal or other expenses as reasonably
incurred by the Company or such 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 such indemnification or reimbursement shall
be available in each such case to the extent, but only to the
<PAGE> 36
36
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 Shareholder 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 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 any indemnified party shall have the right
to employ its own counsel to represent it if, in the reasonable judgment of
such indemnified party (based on advice of counsel), it is advisable for such
indemnified party to be represented by separate counsel because there may be
legal defenses available to it or other indemnified parties that are
inconsistent with those available to the indemnifying party, and in that event
the fees and expenses of such separate counsel shall be paid by the
indemnifying party.
(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
<PAGE> 37
37
(c) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Selling Shareholders 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 Shareholders 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 Shareholders and the International Managers shall be deemed to be in
the same proportion as the total net proceeds from the offering of the Shares
(after underwriting discounts and commissions but before deducting other
expenses) received by the Company and/or the Selling Shareholders 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 information supplied by the Company, the Selling
Shareholders 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 Shareholders 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
<PAGE> 38
38
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 Shareholder
shall be required to contribute any amount in excess of the amount by which the
amount of net proceeds received by such Selling Shareholder from the sale by
such Selling Shareholder of its portion of the Shares pursuant to this
Agreement exceeds the amount of any damages such Selling Shareholder 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 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
Shareholders under this Section 8 shall be in addition to any liability which
the Company and the Selling Shareholders may otherwise have, and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Selling Shareholder or any International Manager within the meaning of the Act;
and the obligations of the International Managers and the Selling Shareholders
under this Section 8 shall be in addition to any liability that the respective
International Managers and the Selling Shareholders 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 Shareholder, 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 Shareholder within the meaning of the Act.
<PAGE> 39
39
9. Substitution of International Managers. If, on either
Closing Date, any International Manager defaults in the performance of its
obligations under this Agreement, the remaining non-defaulting International
Managers shall be obligated to purchase the Shares which the defaulting
International Manager agreed but failed to purchase on such Closing Date in the
respective proportions which the number of Firm Shares set opposite the name of
each remaining non-defaulting International Manager in Schedule 1 hereto bears
to the total number of Firm Shares set opposite the names of all the remaining
non-defaulting International Managers in Schedule 1 hereto; provided, however,
that the remaining non-defaulting International Managers shall not be obligated
to purchase any of the Shares on such Closing Date if the total number of
Shares which the defaulting International Manager or International Managers
agreed but failed to purchase on such date exceeds 9.09% of the total number of
Shares to be purchased on such Closing Date, and any remaining non-defaulting
International Manager shall not be obligated to purchase more than 110% of the
number of Shares which it agreed to purchase on such Closing Date pursuant to
the terms of Section 3. If the foregoing maximums are exceeded, the remaining
non-defaulting International Managers, or those other underwriters satisfactory
to the Lead Managers who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them,
all the Shares to be purchased on such Closing Date. If the remaining
International Managers or other underwriters satisfactory to the Lead Managers
do not elect to purchase the Shares which the defaulting International Manager
or International Managers agreed but failed to purchase on such Closing Date,
this Agreement (or, with respect to the Option Closing Date, the obligation of
the International Managers to purchase, and of the Company to sell, the Option
Shares) shall terminate without liability on the part of any non-defaulting
International Manager or the Company or the Selling Stockholders, except that
the Company will continue to be liable for the payment of expenses to the
extent set forth in Sections 5(f) and 10. As used in this Agreement, the term
"International Manager" includes, for all purposes of this Agreement unless the
context requires otherwise, any party not listed in Schedule 1 hereto who,
pursuant to this Section 9, purchases Firm Shares which a defaulting
International Manager agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting
International Manager of any liability it may have to the Company and the
Selling Stockholders for damages caused by its default. If other underwriters
are obligated
<PAGE> 40
40
or agree to purchase the Shares of a defaulting or withdrawing International
Manager, either the Lead Managers or the Company may postpone the Closing Date
for up to seven full Business Days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the International Managers
may be necessary in the Registration Statement, the 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 and the Selling
Shareholders, 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 (other than the conditions set forth in
Section 7(i) hereof) is not fulfilled; (iii) there occurs any change, or any
development involving a prospective change, in or affecting the financial
condition of the Company or its subsidiaries, which in your judgment,
materially impairs the investment quality of the Shares; (iv) there is any
downgrading in the rating of any debt securities of the Company by any
"nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act or Rule 15c3-1 under the Exchange Act),
or any public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with
<PAGE> 41
41
positive implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (v) trading in securities generally on the New
York Stock Exchange shall have been suspended or materially limited, or minimum
prices shall have been established on such exchange by the Commission, or by
such exchange or other regulatory body or governmental authority having
jurisdiction; (vi) any banking moratorium shall have been declared by Federal
or New York governmental authorities; (vii) there is an outbreak or escalation
of hostilities involving the United States on or after the date hereof, or the
United States is or becomes engaged in hostilities which result in the
declaration of a national emergency or war, the effect of which, in your
judgment, makes it inadvisable or impractical to proceed with the completion of
the sale of or any payment for the Shares on the terms and in the manner
contemplated in the Prospectuses; or (viii) there shall have been such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such), in your judgment, as to make it inadvisable or
impractical to proceed with the delivery of the Shares. Any termination of
this Agreement pursuant to this Section 10 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
<PAGE> 42
42
Shareholder 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.
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 EXOR America 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 Three
World Financial Center (18th Floor), New York, NY, Attention: Alan Washkowitz;
and (d) whenever notice is required by provisions of this Agreement to be given
to the several International Managers, such notice shall be in writing or by
telecopy addressed to you, in care of Lehman Brothers International (Europe),
One Broadgate, London EC2M 7HA, England.
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
(c) of Section 1 hereof and in paragraphs (a) and (c) of Section 8 hereof.
14. Information Furnished by Selling Shareholders. Each the
Selling Shareholders severally confirm that the statements with respect to such
Selling Shareholder set forth under the caption "Selling Shareholders" in any
Preliminary Prospectus and in the Prospectuses are correct and constitute the
only written information furnished by or on behalf of such Selling Shareholder
pursuant to Section 8(b) hereof.
15. Parties. This Agreement shall inure to the benefit of
and binding upon the several International
<PAGE> 43
43
Managers, the Company, the Selling Shareholders 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
Shareholder contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who control any International Manager
within the meaning of Section 15 of the Act and for the benefit of any U.S.
Underwriter (and controlling persons thereof) who offers or sells any Shares in
accordance with the terms of the Agreement Between U.S. Underwriters and
International Managers and (b) the indemnity agreement of the International
Managers contained in Section 8 hereof shall be deemed to be for the benefit of
directors of the Company, officers of the Company who signed the Registration
Statement, any person controlling the Company within the meaning of Section 15
of the Act, directors of each Selling Shareholder, officers of each Selling
Shareholder and any person controlling any Selling Shareholder 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.
<PAGE> 44
44
If the foregoing correctly sets forth the agreement among the
Company, the Selling Shareholders and the International Managers, please
indicate your acceptance in the space provided for that purpose below.
Very truly yours,
LEAR CORPORATION,
By:_________________________
Name:
Title:
FIMA FINANCE MANAGEMENT INC., as
Selling Shareholder,
By:_________________________
Name:
Title:
<PAGE> 45
45
LEHMAN BROTHERS MERCHANT BANKING
PORTFOLIO PARTNERSHIP L.P., as
Selling Shareholder
By: LBI Group, Inc.
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS CAPITAL
PARTNERS II, L.P., as Selling Shareholder
By: Lehman Brothers Holdings, Inc.
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP L.P., as Selling Shareholder
By: Lehman Brothers Offshore
Partners Ltd.
By:
-------------------------
Name:
Title:
LEHMAN BROTHERS OFFSHORE INVESTMENT
PARTNERSHIP - JAPAN L.P., as Selling
Shareholder
By: Lehman Brothers Offshore
Partners Ltd.
By:
-------------------------
Name:
Title:
<PAGE> 46
46
Accepted:
LEHMAN BROTHERS INTERNATIONAL (EUROPE)
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
MORGAN STANLEY & CO. INTERNATIONAL LIMITED
PAINEWEBBER INTERNATIONAL (U.K.) LTD.
J. HENRY SCHRODER & CO. LIMITED
For themselves and as Lead Managers
for each of the several International Managers
named in Schedule I hereto
By: LEHMAN BROTHERS INTERNATIONAL (EUROPE)
By:_________________________
Name:
Title:
<PAGE> 47
47
SCHEDULE I
International Underwriting Agreement dated , 1996
<TABLE>
<CAPTION>
Number of Firm
Shares to be
International Managers Purchased
- ---------------------- -----------
<S> <C>
Lehman Brothers International (Europe)
Donaldson, Lufkin & Jenrette Securities Corporation
Morgan Stanley & Co. International Limited
PaineWebber International (U.K.) Ltd.
J. Henry Schroder & Co. Limited
Total ==============
</TABLE>
<PAGE> 48
48
SCHEDULE II
International Underwriting Agreement dated , 1996
<TABLE>
<CAPTION>
<C> <C>
Selling Shareholder Number of Firm
Shares to be Sold
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. =============
</TABLE>
<PAGE> 1
EXHIBIT 5.1
June 28, 1996
Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
RE: REGISTRATION STATEMENT ON FORM S-3 OF
LEAR CORPORATION (NO. 333-05807)
(THE "REGISTRATION STATEMENT")
Ladies and Gentlemen:
We have acted as special counsel to Lear 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 $0.01 per share (the "Common Stock"). Of the 17,250,000
shares being offered in the Offering, (i) 7,500,000 are being offered by the
Company and (ii) 9,750,000 (assuming the exercise of the underwriter's
over-allotment options) 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 June 12, 1996 under
the Act, as amended by Amendment No. 1 thereto filed with the Commission on
June 18, 1996, and as amended by Amendment No. 2 thereto filed with the
Commission on June 28, 1996 (as so amended, the "Registration Statement"),
(ii) the United States preliminary prospectus dated June 18, 1996, (iii) the
International preliminary prospectus dated June 18, 1996, (iv) the Restated
Certificate of Incorporation of the Company, as currently in effect (the
"Charter"), (v) the Amended and Restated By-laws of the Company, as currently
in effect (the "By-Laws"), (vi) the form of the United States Underwriting
Agreement to be entered into by the Company, the Selling Stockholders, Lehman
Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated and Schroder Wertheim &
Co. Incorporated (the "U.S. Underwriting Agreement"), (vii) the form of the
International Underwriting Agreement to be entered into by the Company, the
Selling Stockholders, Lehman Brothers International (Europe), Donaldson, Lufkin
& Jenrette Securities Corporation, Morgan Stanley & Co. International Limited,
PaineWebber International (U.K.) Ltd., 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
<PAGE> 2
Lear Corporation
June 28, 1996
Page 2
Directors of the Company relating to, among other things, the issuance and sale
of the Common Stock and the filing of the Registration Statement. We have also
examined such other documents as we have deemed necessary or appropriate as a
basis for the opinion set forth below.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents. As to any facts material to this opinion
which we did not independently establish or verify, we have relied upon oral or
written statements and representations of officers and other representatives of
the Company and others.
Based upon and subject to the foregoing, we are of the opinion that:
(a) the 7,500,000 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 Special Committee of
the Board of Directors of the Company, shall be legally issued, fully paid and
non-assessable.
(b) the 9,750,000 shares of Common Stock covered by the Registration
Statement are and, when sold by 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
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 12.1 -- COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS, EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------
THREE MONTHS ENDED
--------------------- DECEMBER 31, JUNE 30,
MARCH 30, APRIL 1, ----------------------- ----------------------
1996 1995 1995 1994 1993 1993 1992 1991
---------- -------- ------ ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before provision for national income
taxes, minority interests in net income
(loss) of subsidiaries, equity (income)
loss of affiliates, and extraordinary
items...................................... $ 40.8 $ 30.3 $152.9 $114.6 $26.1 $28.4 $(6.5) $(20.3)
Fixed charges................................ 27.2 15.8 82.6 52.2 49.8 51.7 58.1 63.3
Distributed income of affiliates............. -- -- 1.3 0.9 1.0 -- -- --
Minority interest expense for majority-owned
subsidiaries with no fixed charges......... -- -- -- -- -- -- -- (0.4)
------ ------ ------- ------- ------ ------ ------ -------
Earnings..................................... $ 68.0 $ 46.1 $236.8 $167.7 $76.9 $80.1 $51.6 $ 42.6
------ ------ ------- ------- ------ ------ ------ -------
Interest expense............................. 24.4 14.2 75.5 46.7 45.6 47.8 55.2 61.7
Portion of lease expense representative of
interest(1)................................ 2.8 1.6 7.1 5.5 4.2 3.9 2.9 1.6
------ ------ ------- ------- ------ ------ ------ -------
Fixed Charges................................ $ 27.2 $ 15.8 $ 82.6 $ 52.2 $49.8 $51.7 $58.1 $ 63.3
------ ------ ------- ------- ------ ------ ------ -------
Ratio of Earnings to Fixed Charges........... 2.5x 2.9x 2.9x 3.2x 1.5x 1.5x -- --
====== ====== ======= ======= ====== ====== ====== =======
Fixed Charges in Excess of Earnings.......... $ -- $ -- $ -- $ -- $ -- $ -- $ 6.5 $ 20.7
====== ====== ======= ======= ====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS PRO FORMA
ENDED YEAR ENDED
MARCH 30, DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
Income before provision for national income taxes, minority interests in net
income (loss) of subsidiaries, equity (income) loss of affiliates, and
extraordinary items......................................................... $ 47.2 $ 187.2
Fixed charges................................................................. 32.8 133.4
Distributed income of affiliates.............................................. 1.6 1.3
Minority interest expense for majority-owned subsidiaries with no fixed
charges..................................................................... -- --
------ -------
Earnings...................................................................... $ 81.6 $ 321.9
------ -------
Interest expense.............................................................. 29.5 123.4
Portion of lease expense representative of interest(1)........................ 3.3 10.0
------ -------
Fixed Charges................................................................. $ 32.8 $ 133.4
------ -------
Ratio of Earnings to Fixed Charges............................................ 2.5x 2.4x
====== =======
Fixed Charges in Excess of Earnings........................................... -- --
====== =======
</TABLE>
- -------------------------
(1) One-third of lease expense.
<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 6, 1996
included in Lear Corporation's Form 10-K for the year ended December 31, 1995,
and to all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan
June 27, 1996
<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 Corporation's Form 8-K dated August 28, 1995, and to all
references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
June 27, 1996
<PAGE> 1
EXHIBIT 99.5
FORM OF
AMENDMENT AND WAIVER
AMENDMENT AND WAIVER dated as of June 21, 1996 (the "Amendment and 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 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"), LBI 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. Amendment. References to the "120-day period" in Section 4.3(a)
and 4.3(b) of the Agreement shall each be replaced with "90-day period."
SECTION 2. Waiver. The Holders, other than the Lehman Group and FIMA,
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") contemplated
by the Registration Statement (Reg. No. 333-05807) filed with the Securities
and Exchange Commission on June 12, 1996, as the same may be amended or
supplemented (the "Registration Statement"), and their rights under the notice
provisions thereof with respect to the Offering. In addition, with respect to
the Offering, the Company and the Holders hereby waive the requirements of
Section 4.3(a) of the Agreement for every Holder other than the Lehman Group,
FIMA, each other Holder who serves as an executive officer of the Company on
the date hereof and their respective Permitted Transferees.
SECTION 3. Notice. The Company expects the Registration Statement relating
to the Offering to become effective on or about July 2, 1996. The preceding
sentence shall satisfy in full the notice requirements of Section 4.3(a) of the
Agreement with respect of the Offering.
<PAGE> 2
SECTION 4. Effectiveness; Miscellaneous. (a) This Amendment and Waiver
shall become effective as of the date first set forth above.
(b) This Amendment and 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 Amendment and Waiver.
(d) The laws of the State of Delaware shall govern the interpretation,
validity and performance of the terms of this Amendment and Waiver, 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 Amendment and Waiver
and to whose benefit the provisions of this Amendment and Waiver shall inure.
(f) This Amendment and 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.
(g) Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Agreement.
(h) 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 Amendment and Waiver
as of the date first set forth above.
LEAR CORPORATION
By________________________________________
Name: Joseph F. McCarthy
Title: Vice President, Secretary and
General Counsel
-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:
-3-
<PAGE> 4
As Holders of a majority of the Shares
held by FIMA and its Permitted Transferees:
FIMA Finance Management, Inc.
By_______________________________
Name:
Title:
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:__________
-4-
<PAGE> 5
_________________________________
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:__________
_________________________________
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:__________
-5-
<PAGE> 6
_________________________________
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:__________
_________________________________
Name: R.E. Rossiter
Shares of Common Stock:__________
_________________________________
Name: R.B. Smith, Jr.
Shares of Common Stock:__________
-6-
<PAGE> 7
_________________________________
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:___________
-7-
<PAGE> 8
Permitted Transferees:
________________________________________
Name: Michele J. Wainwright
(Permitted Transferee of
J. Wainwright)
Shares of Common Stock: _______________
________________________________________
Name: Carolyn L. Hodgson
Shares of Common Stock: _______________
-8-
