<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1995
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
------------------------
FORD HOLDINGS, INC.
(NAME OF THE ISSUER)
FORD HOLDINGS, INC.
FORD HOLDINGS CAPITAL CORPORATION
FORD MOTOR COMPANY
(NAME OF PERSON(S) FILING STATEMENT)
------------------------
<TABLE>
<S> <C> <C>
Flexible Rate Auction Preferred Stock Series A 345277 84 2
(Exchange)
Flexible Rate Auction Preferred Stock Series B 345277 83 4
(Exchange)
Flexible Rate Auction Preferred Stock Series C 345277 82 6
(Exchange)
Flexible Rate Auction Preferred Stock Series D 345277 81 8
(Exchange)
Flexible Rate Auction Preferred Stock Series E 345277 79 2
(Exchange)
Flexible Rate Auction Preferred Stock Series F 345277 78 4
(Exchange)
Flexible Rate Auction Preferred Stock Series G 345277 77 6
(Exchange)
Flexible Rate Auction Preferred Stock Series H 345277 76 8
(Exchange)
Flexible Rate Auction Preferred Stock Series I 345277 75 0
(Exchange)
Flexible Rate Auction Preferred Stock Series J 345277 74 3
(Exchange)
Flexible Rate Auction Preferred Stock Series K 345277 73 5
(Exchange)
(TITLE OF CLASS OF SECURITIES) (CUSIP NUMBER OF
CLASS OF SECURITIES)
Flexible Rate Auction Preferred Stock Series L 345277 63 6
Flexible Rate Auction Preferred Stock Series M 345277 62 8
Flexible Rate Auction Preferred Stock Series N 345277 61 0
Flexible Rate Auction Preferred Stock Series O 345277 59 4
Flexible Rate Auction Preferred Stock Series P 345277 58 6
Series A Cumulative Preferred Stock 345277 72 7*
Series B Cumulative Preferred Stock 345277 68 5*
Series C Cumulative Preferred Stock 345277 66 9*
Series D Cumulative Preferred Stock 345277 64 4*
(TITLE OF CLASS OF SECURITIES) (CUSIP NUMBER OF
CLASS OF SECURITIES)
</TABLE>
- -------------------------
* CUSIP Number relates to Depositary Shares representing 1/4,000 of a share of
the corresponding series of Preferred Stock.
------------------------
JOHN M. RINTAMAKI, ESQ.
FORD HOLDINGS, INC.
THE AMERICAN ROAD
ROOM 1187
DEARBORN, MI 48121
(313) 322-3000
(Name, address and telephone number of persons authorized to receive notices and
communications on
behalf of the person(s) filing statement)
This statement is filed in connection with (check the appropriate box):
a./X/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e3(c) under the
Securities Exchange Act of 1934.
b./ / The filing of a registration statement under the Securities Act of
1933.
c./ / A tender offer.
d./ / None of the above.
Check the following box if soliciting materials or an information statement
referred to in checking box (a) are preliminary copies: /X/
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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TRANSACTION VALUATION AMOUNT OF FILING FEE
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<S> <C>
$1,988,693,000* $397,739
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</TABLE>
* The Transaction Valuation was determined by adding (i) 19,764, the number of
shares to be cashed out, multiplied by the $100,000 liquidation preference to be
paid per share; plus (ii) an amount equal to the aggregate amount of dividends
that will accumulate on the Preferred Stock through the date on which the merger
consideration is anticipated to be paid.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number or the Form or
Schedule and the date of its filing.
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<PAGE> 2
INTRODUCTION
The following is a cross reference sheet pursuant to General Instruction F
of Schedule 13E-3 showing the location of the information required by Schedule
13E-3 in the Preliminary Information Statement of Ford Holdings, Inc. ("Ford
Holdings" or the "Company") as filed with the Securities and Exchange Commission
on the date hereof. All of the information contained in the referenced portions
of such Preliminary Information Statement (identified by the captions thereof)
are hereby incorporated by reference.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN INFORMATION STATEMENT
- --------------------------------------------- ----------------------------------------------
<S> <C>
1. ISSUER AND CLASS OF SECURITY SUBJECT TO
THE TRANSACTIONS
Item 1(a)............................. Outside Front Cover Page of the Information
Statement; Notice of Special Meeting of
Stockholders.
Item 1(b)............................. Outside Front Cover Page of the Information
Statement; GENERAL -- Voting Rights.
Item 1(c) and (d)..................... MARKET PRICE AND DIVIDENDS.
Item 1(e)............................. RECENT PUBLIC OFFERINGS OF PREFERRED STOCK.
Item 1(f)............................. Not Applicable.
2. IDENTITY AND BACKGROUND
Item 2(a)............................. This Statement is filed by Ford Holdings,
Inc., the issuer of the securities that are
the subject of the Rule 13e-3 transaction,
Ford Holdings Capital Corporation ("FHC") and
Ford Motor Company ("Ford"), each of which is
a Delaware corporation.
Item 2(b)-(d)......................... DIRECTORS AND EXECUTIVE OFFICERS OF FORD
HOLDINGS, FHC AND FORD.
Item 2(e)............................. To the best knowledge of the undersigned, none
of the persons with respect to whom
information is provided in this Statement,
during the last five years, has been convicted
in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
Item 2(f)............................. To the best knowledge of the undersigned, none
of the persons with respect to whom
information is provided in this Statement,
during the last five years, was a party to a
civil proceeding, was or is subject to a
judgment, decree or final order enjoining
further violations of, or prohibiting
activities subject to federal or state securi-
ties laws or finding any violation of such
laws.
Item 2(g)............................. All of the executive officers of and directors
of Ford Holdings, FHC and Ford are citizens of
the United States, except for Albert Caspers,
who is a citizen of The Federal Republic of
Germany, Michael D. Dingman, who is a citizen
of The Commonweath of the Bahamas, Marie-Josee
Kravis, who is a citizen of Canada and
Switzerland, Jacques A. Nasser, who is a
citizen of Australia, and John A. Oldfield and
Richard Parry-Jones, who are subjects of Great
Britain.
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN INFORMATION STATEMENT
- --------------------------------------------- ----------------------------------------------
<S> <C>
3. PAST CONTRACTS, TRANSACTIONS OR
NEGOTIATIONS
Item 3(a)(1).......................... Not Applicable.
Item 3(a)(2).......................... THE MERGER.
Item 3(b)............................. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
4. TERMS OF THE TRANSACTION
Item 4(a) and (b)..................... THE MERGER.
5. PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
Item 5(a) and (b)..................... GENERAL -- Plans Following the Merger; FI-
NANCING THE TRANSACTION: SOURCES AND AMOUNT OF
FUNDS -- Refinancing Plans.
Item 5(c)............................. GENERAL -- Plans Following the Merger.
Item 5(d)............................. Outside Front Cover Page of the Information
Statement; SPECIAL FACTORS -- Certain Other
Effects of the Merger.
Item 5(e)............................. GENERAL -- Plans Following the Merger.
Item 5(f)-(g)......................... SPECIAL FACTORS -- Certain Other Effects of
the Merger.
6. SOURCE AND AMOUNTS OF FUNDS OR
OTHER CONSIDERATION
Item 6(a)............................. FINANCING THE TRANSACTION: SOURCES AND AMOUNT
OF FUNDS.
Item 6(b)............................. FEES AND EXPENSES.
Item 6(c)(1) and (2).................. FINANCING THE TRANSACTION: SOURCES AND AMOUNT
OF FUNDS -- Source of Funds; -- Refinancing
Plans.
Item 6(d)............................. FINANCING THE TRANSACTION: SOURCES AND AMOUNT
OF FUNDS -- Source of Funds.
7. PURPOSE(S), ALTERNATIVES, REASONS AND
EFFECTS
Item 7(a)-(c)......................... SPECIAL FACTORS -- Background of and Reasons
for the Merger.
Item 7(d)............................. SPECIAL FACTORS -- Background of and Reasons
for the Merger; -- Certain Other Effects of
the Merger; -- Certain Tax Consequences of the
Merger; GENERAL -- Interests of Certain
Persons in the Merger.
8. FAIRNESS OF THE TRANSACTION
Item 8(a)............................. SPECIAL FACTORS -- Background of and Reasons
for the Merger; -- Fairness of the Merger; --
Opinion of the Company's Legal Advisors;
GENERAL -- Recommendation of the Board of
Directors.
Item 8(b)............................. SPECIAL FACTORS -- Background of and Reasons
for the Merger; -- Fairness of the Merger; --
Opinion of the Company's Legal Advisors.
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN INFORMATION STATEMENT
- --------------------------------------------- ----------------------------------------------
<S> <C>
Item 8(c)............................. GENERAL -- Voting Rights; -- Stockholder
Approval of the Merger; SPECIAL FACTORS --
Fairness of the Merger.
Item 8(d) and (e)..................... SPECIAL FACTORS -- Fairness of the Merger.
Item 8(f)............................. No other offer received or considered.
9. REPORTS, OPINIONS, APPRAISALS AND
CERTAIN NEGOTIATIONS
Item 9(a) and (b)..................... SPECIAL FACTORS -- Fairness of the Merger; --
Opinion of the Company's Legal Advisors.
Item 9(c)............................. Attachment D to the Information Statement.
10. INTEREST IN SECURITIES OF THE ISSUER
Item 10(a)............................ SPECIAL FACTORS -- Background of and Reasons
for the Merger; GENERAL -- Interests of
Certain Persons in the Merger; STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Item 10(b)............................ Not Applicable.
11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS
WITH RESPECT TO THE ISSUER'S
SECURITIES............................... GENERAL -- Voting Rights; THE MERGER;
FINANCING THE TRANSACTION: SOURCES AND AMOUNT
OF FUNDS -- Sources of Funds.
12. PRESENT INTENTION AND RECOMMENDATION
OF CERTAIN PERSONS WITH REGARD TO THE
TRANSACTION
Item 12(a)............................ Outside Front Cover Page of the Information
Statement; INTRODUCTION -- The Special
Meeting; SPECIAL FACTORS -- Fairness of the
Merger; GENERAL -- Stockholder Approval of the
Merger.
Item 12(b)............................ SPECIAL FACTORS -- Fairness of the Merger;
GENERAL -- Recommendation of the Board of
Directors.
13. OTHER PROVISIONS OF THE TRANSACTION
Item 13(a)............................ Outside Front Cover Page of the Information
Statement; INTRODUCTION -- The Special
Meeting; APPRAISAL RIGHTS.
Item 13(b)............................ Not Applicable.
Item 13(c)............................ Not Applicable.
14. FINANCIAL INFORMATION
Item 14(a)............................ INCORPORATION BY REFERENCE.
Item 14(b)............................ Not Applicable.
15. PERSONS AND ASSETS EMPLOYED, RETAINED
OR UTILIZED
Item 15(a)............................ FEES AND EXPENSES.
Item 15(b)............................ Not Applicable.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN INFORMATION STATEMENT
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<S> <C>
16. ADDITIONAL INFORMATION................... NOTICE OF TERMINATION OF DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLANS.
17. MATERIAL TO BE FILED AS EXHIBITS
Item 17(a)............................ Exhibit 10 -- Form of Loan Agreement.
Item 17(b)............................ Included as Attachment D (Opinion of Morris,
Nichols, Arsht & Tunnell) to the Information
Statement filed as Exhibit 20.
Item 17(c)............................ Included as Attachment A (Agreement and Plan
of Merger) to the Information Statement filed
as Exhibit 20.
Item 17(d)............................ Exhibit 20 -- Information Statement.
Item 17(e)............................ Included as Attachment C (General Corporation
Law of Delaware Section 262 Appraisal Rights)
to the Information Statement filed as Exhibit
20.
Item 17(f)............................ Not Applicable.
</TABLE>
4
<PAGE> 6
SIGNATURE
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Date: October 18, 1995
FORD HOLDINGS, INC.
By: /s/ J.M. RINTAMAKI
- ------------------------------------
J.M. Rintamaki
Secretary
FORD MOTOR COMPANY
By: /s/ J.M. RINTAMAKI
- ------------------------------------
J.M. Rintamaki
Secretary
FORD HOLDINGS CAPITAL CORPORATION
By: /s/ T.J. DEZURE
- ------------------------------------
T.J. DeZure
Secretary
5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM NUMBER DESCRIPTION
- ------------ ----------------------------------------------------------------------------
<S> <C>
99.17(a) Exhibit 10 -- Form of Loan Agreement.
99.17(b) Included as Attachment D (Opinion of Morris, Nichols, Arsht & Tunnell) to
the Information Statement filed as Exhibit 20.
99.17(c) Included as Attachment A (Agreement and Plan of Merger) to the Information
Statement filed as Exhibit 20.
99.17(d) Exhibit 20 -- Information Statement.
99.17(e) Included as Attachment C (General Corporation Law of Delaware Section 262
Appraisal Rights) to the Information Statement filed as Exhibit 20.
99.17(f) Not Applicable.
</TABLE>
<PAGE> 1
TERM LOAN AGREEMENT
Dated as of November __, 1995
among
Ford Holdings, Inc.,
Ford Motor Company
and
[Name of Bank]
<PAGE> 2
-TABLE OF CONTENTS-
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS 1
SECTION 2. THE LOANS 3
2.1 TERM LOANS 3
2.2 PROCEEDS OF THE LOANS 4
2.3 NOTICES OF BORROWING 4
2.4 EXTENSION OF LOANS 4
2.5 INTEREST RATES 5
2.6 INTEREST PAYMENT DATES 5
2.7 OVERDUE INTEREST 5
2.8 DATES FOR PAYMENT OR OPTIONAL PREPAYMENT OF PRINCIPAL 6
2.9 OPTIONAL PREPAYMENT ON OTHER DATES; REIMBURSEMENT FOR CERTAIN COSTS 6
2.10 METHOD OF PAYMENT 6
SECTION 3. THE GUARANTEE 6
SECTION 4. CONDITIONS TO THE LOANS 7
4.1 EACH LOAN 7
4.2 FIRST LOAN 8
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER AND GUARANTOR 9
5.1 CORPORATE AUTHORITY OF THE BORROWER AND GUARANTOR, ETC. 9
5.2 FINANCIAL STATEMENTS 10
5.3 LITIGATION 11
5.4 USE OF PROCEEDS 11
5.5 COMPLIANCE WITH ERISA 12
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 6. COVENANTS OF THE GUARANTOR 12
6.1 LIMITATION ON LIENS 12
6.2 LIMITATION ON SALES AND LEASEBACKS 13
6.3 MERGERS AND CONSOLIDATIONS 14
6.4 ADDITIONAL COVENANTS 14
6.5 ERISA 14
6.6 NOTIFICATION 15
SECTION 7. DEFAULT 15
SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BANK 16
8.1 ACQUISITION OF THE NOTE 16
8.2 ASSIGNMENT; PARTICIPATION 16
SECTION 9. CHANGES IN CIRCUMSTANCES 17
9.1 ILLEGALITY 17
9.2 INCREASED COST 18
SECTION 10. MISCELLANEOUS 19
10.1 NOTICES 19
10.2 TERM OF AGREEMENT 20
10.3 NO WAIVERS 20
10.4 NEW YORK LAW AND JURISDICTION 20
10.5 ENTIRE AGREEMENT 21
10.6 PAYMENT OF CERTAIN EXPENSES 21
10.7 CHANGES, WAIVERS, ETC. 21
10.8 SEVERABILITY 21
10.9 SUCCESSORS AND ASSIGNS 21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10.10 COUNTERPARTS 22
10.11 ELECTRONIC RECORDING 22
EXHIBIT A PROMISSORY NOTE
EXHIBIT B NOTICE OF BORROWING/EXTENSION
</TABLE>
<PAGE> 5
TERM LOAN AGREEMENT
This TERM LOAN AGREEMENT, dated as of November __, 1995, is among FORD
HOLDINGS, INC., a Delaware corporation, The American Road, Dearborn, Michigan
48121 (the "Borrower"), FORD MOTOR COMPANY, a Delaware corporation, The
American Road, Dearborn, Michigan 48121 (the "Guarantor"), and [NAME OF BANK,
nature of entity, address] (the "Bank").
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
The following terms, as used herein, have the following respective
meanings:
"Agreement" means this Term Loan Agreement, together with the exhibits
hereto, as amended from time to time.
"Attributable Debt" has the meaning set forth in Section 6.2.
"Bank's Actual Reserve Cost" has the meaning set forth in Section
9.2(b).
"Commitment" has the meaning set forth in Section 2.1(a).
"Consolidated Net Tangible Assets" means the aggregate amount of
assets (less applicable reserves and other properly deductible items) after
deducting therefrom (a) all current liabilities and (b) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, all as set forth on the most recent balance sheet of the
Guarantor and its consolidated subsidiaries and computed in accordance with
generally accepted accounting principles in the United States.
"Debt" has the meaning set forth in Section 6.1.
"Domestic Business Day" means a day which is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"ERISA" means the Employee Retirement Income Security Act of 1974 of
the United States, as amended.
"Event of Default" has the meaning set forth in Section 7.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System of the United States, or any successor thereto.
"Funded Debt" has the meaning set forth in Section 6.2.
"Guarantee" means the guarantee and other obligations of the Guarantor
set forth in Section 3.
"Guaranteed Obligations" has the meaning set forth in Section 3.
1
<PAGE> 6
"Interest Period" means, with respect to each Loan,
(i) initially, the period commencing on the date of
borrowing of such Loan and ending one, two, three or six
months thereafter, as the Borrower may elect pursuant to
Section 2.3 or Section 2.4; and
(ii) thereafter, each period commencing on the last
day of the next preceding Interest Period for such Loan and
ending one, two, three or six months thereafter, as the
Borrower may elect pursuant to Section 2.4;
provided, however, that:
(A) any such Interest Period which would otherwise
end on a day which is not a LIBOR Business Day shall be
extended to the next succeeding LIBOR Business Day unless such
LIBOR Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding
LIBOR Business Day;
(B) any such Interest Period which begins on the last
LIBOR Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on a day
which is the last LIBOR Business Day of the applicable
calendar month; and
(C) the Borrower may not elect an Interest Period
that would end later than the Termination Date.
"LIBOR" means, for any Interest Period with respect to any Loan, [the
rate for deposits in United States dollars for a period equal to the Interest
Period for such Loan which appears on the Reuters Screen ISDA Page as of 11:00
a.m., London time, two LIBOR Business Days prior to the date of borrowing or
extension of such Loan, as the case may be; and "Reuters Screen ISDA Page"
means the display designated as page "ISDA" on the Reuters Monitor Money Rates
Service (or such other page as may replace the ISDA Page on that service for
the purpose of displaying London interbank offered rates for United States
dollar deposits). If for any reason such page or service is not available or
such applicable rate does not appear on such page or service on a date
necessary for determining the interest rate hereunder for an Interest Period,
then the Borrower and the Bank shall agree upon a mutually satisfactory
alternative arrangement for determining the equivalent of such rate. In
addition, if for any reason there is unusual volatility in the interbank market
such that on the date necessary for determining the interest rate hereunder
London interbank offered rates for United States dollar deposits are unusually
high, then the Borrower and the Bank shall agree upon a mutually satisfactory
alternative rate or an alternative type of Loan which may not necessarily
include the Margin.]
"LIBOR Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
United States dollar deposits) in London.
"Loan" or "Loans" means one or more borrowings of funds by the
Borrower from the Bank pursuant to Sections 2.1 and 2.3, as such Loans may be
extended from time to time pursuant to the provisions of Section 2.4.
"Manufacturing Subsidiary" means a subsidiary of the Guarantor which
owns or leases a Principal Domestic Manufacturing Property.
"Margin" means 3/25 of 1% (12 basis points).
2
<PAGE> 7
"Mortgage" and "Mortgages" have the meanings set forth in Section 6.1.
"Note" has the meaning set forth in Section 2.1(a).
"Notice Office" has the meaning set forth in Section 10.1.
"Participant" has the meaning set forth in Section 8.2.
"Plan" means an employee benefit plan or other plan (other than a
multi-employer benefit plan) maintained by the Guarantor for employees of the
Guarantor and certain affiliates of the Guarantor (including on the date
hereof Ford Motor Credit Company) and covered by Title IV of ERISA.
"Principal Domestic Manufacturing Property" means any plant in the
United States owned or leased by the Guarantor or any subsidiary of the
Guarantor, the gross book value (without deduction of any depreciation
reserves) of which on the date as of which the determination is being made
exceeds 0.5% of Consolidated Net Tangible Assets and more than 75% of the total
production measured by value (as determined by any two of the following: the
Chairman of the Board of the Guarantor, its President, any Executive Vice
President of the Guarantor, any Group Vice President of the Guarantor, any Vice
President of the Guarantor, its Treasurer or its Controller) of which in the
last fiscal year prior to said date (or such lesser period prior thereto as the
plant shall have been in operation) consisted of one or more of the following:
cars or trucks or related parts and accessories or materials for any of the
foregoing. In the case of a plant not yet in operation or of a plant newly
converted to the production of a different item or items, the total production
of such plant and the composition of such production for purposes of this
definition shall be deemed to be the Guarantor's best estimate (determined as
aforesaid) of what the actual total production of such plant and the
composition of such production will be in the 12 months following the date as
of which the determination is being made.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Regulatory Change" has the meaning set forth in Section 9.2.
"Reportable Event" has the meaning set forth in Title IV of ERISA.
"Sale and Leaseback Transaction" has the meaning set forth in Section
6.2.
"Senior Debt" has the meaning set forth in Section 6.4.
"Termination Date" means the date that is 364 days from the date of
this Agreement.
"United States dollars" and "$" mean the lawful currency of the United
States.
SECTION 2. THE LOANS
2.1 TERM LOANS
(a) Subject to the terms and conditions of this Agreement, at any
time prior to January 15, 1996, the Borrower may obtain one or more term loans
from the Bank in an aggregate principal amount
3
<PAGE> 8
of up to One Billion Five Hundred Million United States dollars
($1,500,000,000) (the "Commitment"). The Loans shall be evidenced by a single
promissory note payable to the order of the Bank in an amount equal to the
aggregate unpaid principal amount of the Loans, which note shall be dated on or
before the date of the borrowing of the first Loan hereunder and shall be
substantially in the form of Exhibit A hereto (the "Note"). The principal
amount of the Loans shall be repaid as provided in Section 2.8 or 2.9. Once
the principal amount of each Loan has been repaid, it may not be reborrowed.
(b) Each Loan shall be for such Interest Period as specified by
the Borrower pursuant to Section 2.3. At the end of each Interest Period, the
Borrower may, at its option, extend such Loan pursuant to Section 2.4, but in
no event shall the Interest Period for such Loan as so extended end later than
the Termination Date.
2.2 PROCEEDS OF THE LOANS
The principal amount of each Loan shall be disbursed to the Borrower
on the date of the initial borrowing thereof in immediately available funds in
United States dollars to the bank account of the Borrower specified by the
Borrower to the Bank at the time of the borrowing.
2.3 NOTICES OF BORROWING
The Borrower shall give notice of the borrowing of each Loan to the
Bank at the Notice Office of the Bank no later than two LIBOR Business Days
prior to the date of such borrowing, but not later than 11:00 a.m. (New York
City time) on such date. The notice shall be given by telephone (and shall be
promptly confirmed in a writing substantially in the form of Exhibit B hereto)
and shall specify:
(a) the date of the borrowing, which shall be a LIBOR
Business Day;
(b) the amount of the borrowing, which shall be not less
than $1,000,000; and
(c) the duration of the initial Interest Period.
A notice of borrowing, once given to the Bank, shall not be revocable by the
Borrower.
2.4 EXTENSION OF LOANS
(a) At the end of each Interest Period with respect to each Loan,
the Borrower may, at its option, elect to extend such outstanding Loan in an
amount equal to or less than the then outstanding principal amount of such
Loan. The notice by the Borrower to the Bank of an election to extend an
outstanding Loan shall be given by telephone (and shall be promptly confirmed
in a writing substantially in the form of Exhibit B hereto) no later than two
LIBOR Business Days prior to the last day of the then-existing Interest Period
with respect to such Loan, but no later than 11:00 a.m. (New York City time) on
such day.
(b) Each notice given by the Borrower pursuant to this Section 2.4
shall specify:
(i) that such outstanding Loan is to be extended;
(ii) the principal amount of such Loan as so extended; and
4
<PAGE> 9
(iii) the Interest Period for such Loan as so extended.
(c) With respect to each extension of an outstanding Loan pursuant
to this Section 2.4:
(i) the Borrower shall pay to the Bank all accrued and
unpaid interest with respect to such outstanding Loan on the last day
of the then-existing Interest Period with respect thereto;
(ii) no repayment of the principal amount of such
outstanding Loan shall be required; provided, that if the Borrower
chooses to extend such Loan in a lesser principal amount, the Borrower
shall repay the principal amount not to be extended on the last day of
the then-existing Interest Period; and
(iii) the Loan to be outstanding upon the extension of such
Loan shall not be deemed to be a new Loan for purposes of Section 4.1.
2.5 INTEREST RATES
(a) Each Loan shall bear interest on the outstanding principal
amount thereof during each Interest Period applicable thereto at a rate per
annum equal to the sum of LIBOR plus the Margin.
(b) Interest on each Loan shall be computed on the basis of a year
of 360 days and paid for the actual number of days for which such Loan is
outstanding. Interest for each Interest Period shall be calculated from and
including the first day thereof to but excluding the last day thereof.
2.6 INTEREST PAYMENT DATES
Interest on each Loan shall be payable as follows: (i) if the current
Interest Period for such Loan is one month, two months or three months, on the
last day of such Interest Period or (ii) if the current Interest Period for such
Loan is six months, on the last day of the third month and on the last day of
the sixth month of such Interest Period, and in each case upon payment in full
of the Loan.
2.7 OVERDUE INTEREST
Any overdue principal of any Loan and, to the extent permitted by law,
overdue interest thereon, shall bear interest payable on demand for each day
from the date payment thereof was due to the date of actual payment, at a daily
rate, which shall be calculated by the Bank (whose determination shall be
conclusive in the absence of manifest error) and shall be a rate per annum
equal to the sum of (i) 1% plus (ii) the Margin plus (iii) the interest rate
per annum at which deposits in the amount of such overdue payment are offered
to the Bank by other leading banks, as determined by the Bank, in the interbank
market in which such deposits are obtained for one day (or, if such amount
remains unpaid more than three LIBOR Business Days, then for such other period
of time not longer than six months as the Bank may elect).
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2.8 DATES FOR PAYMENT OR OPTIONAL PREPAYMENT OF PRINCIPAL
The principal amount of each Loan shall be repaid on or before the
last day of the last Interest Period therefor, which in no event shall be later
than the Termination Date. The Borrower may, at its option, prepay the
principal amount of any Loan, in whole or in part, without penalty or premium,
on the last day of any Interest Period therefor, in each case together with
accrued interest on the amount prepaid to the date of prepayment.
2.9 OPTIONAL PREPAYMENT ON OTHER DATES; REIMBURSEMENT FOR CERTAIN COSTS
The Borrower may, at its option, prepay the principal amount of any
Loan, in whole or in part, at times other than those provided for in Section
2.8, in each case together with accrued interest on the amount prepaid to the
date of prepayment; provided, however, that the Borrower shall reimburse the
Bank on demand for any loss incurred by it as a result of the timing of such
payment, including without limitation, any loss incurred in liquidating or
re-employing deposits from third parties but excluding loss of the Margin or
any other profit for the period after such payment, provided that the amount of
such loss shall in no event exceed the amount of interest that would have
accrued from the date of prepayment to the last day of the then-current
Interest Period with respect to such Loan in the absence of prepayment, and the
Bank shall have delivered to the Borrower a written statement setting forth the
basis for determining such loss, which written statement shall be conclusive in
the absence of manifest error. The Bank shall use its reasonable efforts to
mitigate any loss resulting from any prepayment by the Borrower.
2.10 METHOD OF PAYMENT
All payments required to be made pursuant to this Agreement or the
Note shall be made in immediately available funds in United States dollars to
the account in the continental United States to be designated by the Bank.
Whenever any payment of principal of, or interest on, any Loan shall be due on
a day which is not a LIBOR Business Day, the date for payment thereof shall be
extended to the next succeeding LIBOR Business Day, unless as a result thereof
such date would fall in the next calendar month, in which case, such date shall
be advanced to the next preceding LIBOR Business Day, and, in the case of
payment of principal, interest thereon shall be payable to the date of payment
as extended or advanced as the case may be.
SECTION 3. THE GUARANTEE
(a) The Guarantor hereby guarantees to the Bank the due and
punctual payment of the principal of and interest on the Loans and any other
payment obligations of the Borrower under this Agreement or the Note (the
"Guaranteed Obligations") when and as the same shall become due and payable,
whether at maturity, upon declaration or otherwise, according to the terms
thereof. Upon the occurrence of an Event of Default under this Agreement, the
Guarantor shall on behalf of the Borrower upon demand by the Bank punctually
make any payment due and payable by the Borrower under this Agreement or the
Note, whether at maturity, upon declaration or otherwise; and any such payment
shall be treated for the purposes of this Agreement and the Note as if such
payment were made by the Borrower.
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(b) The Guarantor hereby agrees that its obligations under this
Section 3 shall be irrevocable and unconditional and that the Guarantor shall
not have the right to assert any defenses based upon the validity, regularity
or enforceability of this Agreement or the Note, the absence of any attempt to
collect from the Borrower or other action to enforce the same, the waiver or
consent by the Bank with respect to any provisions thereof or hereof (other
than with respect to this Section 3), or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of the
Guarantor.
(c) With respect to its obligations under this Section 3, the
Guarantor waives filing of claims with a court, trustee or receiver in the
event of receivership or bankruptcy of the Borrower, diligence, presentment,
demand of payment, protest or notice with respect to Guaranteed Obligations and
all demands whatsoever (other than that provided for in subsection (a) above),
and covenants that this Guarantee is a continuing guarantee and will not be
discharged except by complete performance of the Guaranteed Obligations of the
Borrower and the obligations of the Guarantor under this Guarantee.
(d) To the extent of any payment by the Guarantor to the Bank
under this Section 3, the Guarantor shall succeed to all corresponding claims
that the Bank may have and otherwise be subrogated to the rights of the Bank
against the Borrower or any other person or security in connection with the
Loans to the Borrower, and the Bank shall use reasonable efforts to cooperate
with the Guarantor in seeking recovery under such claims.
(e) The Guarantor's obligations under this Section 3 constitute a
guarantee of payment and not of collection merely and shall remain in full
force and effect until the Guaranteed Obligations shall have been paid in full
in accordance with the terms of this Agreement and the Note. If at any time
any payment of any of the Guaranteed Obligations is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, the Guarantor's obligations
hereunder with respect to such payment shall be reinstated at such time as
though such payment had not been made.
(f) If demand for, or acceleration of the time for, payment by the
Borrower to the Bank of any Guaranteed Obligations is stayed upon the
insolvency, bankruptcy, reorganization or proposed compromise or arrangement
with creditors of the Borrower, all such Guaranteed Obligations of which
payment or performance is stayed that would otherwise be subject to demand for
payment or acceleration shall nonetheless be payable by the Guarantor under
this Section 3 immediately on demand by the Bank.
SECTION 4. CONDITIONS TO THE LOANS
The obligation of the Bank to make each Loan hereunder is subject to
the performance by the Borrower of all its obligations under this Agreement and
to the satisfaction of the following further conditions:
4.1 EACH LOAN
(a) In the case of each Loan proposed to be made hereunder to the
Borrower:
(i) the Bank shall have received the notice from the
Borrower required by Section 2.3;
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(ii) the principal amount of such Loan, when added to the
sum of the aggregate principal amount of all Loans then outstanding
hereunder, shall not exceed the amount of the Commitment;
(iii) after giving effect to the making of such Loan, no
Event of Default and no event which, with the giving of notice or
lapse of time or both, would become an Event of Default, shall have
occurred and be continuing; and
(iv) the representations and warranties of the Borrower
and the Guarantor contained in this Agreement, except those contained
in Sections 5.2(a)(iii) and (b)(iii) and 5.3, shall be true and
correct in all material respects on and as of the date of such Loan,
except to the extent such representations and warranties expressly
relate to an earlier date.
Each borrowing of a new Loan shall be deemed to be a representation and
warranty by the Borrower and Guarantor that the conditions specified in clauses
(ii), (iii) and (iv) above are satisfied on and as of the date of such
borrowing.
4.2 FIRST LOAN
(a) In the case of the first Loan proposed to be made hereunder to
the Borrower:
(i) the Bank shall have received an opinion of counsel to
the Borrower and the Guarantor (which counsel may be an employee of
the Borrower or the Guarantor) addressed to the Bank and in form
satisfactory to the Bank in its reasonable judgment, to the effect
that:
(A) each of the Borrower and the Guarantor has
been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Delaware, with corporate power under the laws of such State to
enter into this Agreement, to borrow money as contemplated by
this Agreement and deliver the Note (in the case of the
Borrower), to extend the Guarantee (in the case of the
Guarantor), and to carry out the provisions of this Agreement
and (in the case of the Borrower) the Note;
(B) this Agreement has been duly authorized,
executed and delivered by each of the Borrower and the
Guarantor and, assuming due authorization, execution and
delivery hereof by the Bank, is a valid and binding agreement
of each of the Borrower and the Guarantor enforceable in
accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization or
similar laws relating to or affecting creditors' rights
generally and by general equitable principles regardless of
whether such enforceability is considered in a proceeding in
equity or at law;
(C) the Note has been duly authorized by the
Borrower, and when duly executed and delivered by the
Borrower, will be a valid and binding obligation of the
Borrower enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting
creditors' rights generally and by general equitable
principles regardless of whether such enforceability is
considered in a proceeding in equity or at law;
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(D) the execution, delivery and performance by
each of the Borrower and the Guarantor of this Agreement and
(in the case of the Borrower) the Note will not conflict with
or result in a breach of any of the terms or provisions of, or
constitute a default under (in each case material to the
Borrower or the Guarantor, as the case may be, and its
subsidiaries considered as a whole), or result in the creation
or imposition of any lien, charge or encumbrance (in each case
material to the Borrower or the Guarantor, as the case may be,
and its subsidiaries considered as a whole) upon any of the
property or assets of the Borrower or the Guarantor, as the
case may be, pursuant to the terms of, any indenture,
mortgage, deed of trust, loan agreement, guarantee, lease
financing agreement or other similar agreement or instrument
known to such counsel under which the Borrower or the
Guarantor, as the case may be, is a debtor or a guarantor, nor
will such action result in any violation of the provisions of
the Certificate of Incorporation or the By-Laws of the
Borrower or the Guarantor, as the case may be; and
(E) there is no consent, approval, authorization,
order, registration or qualification of or with any
governmental authority having jurisdiction over the Borrower
or the Guarantor which is required for, and the absence of
which would materially affect, the execution, delivery and
performance of this Agreement or (in the case of the Borrower)
the Note;
(ii) the Bank shall have received a certificate of the
Secretary or the Assistant Secretary of each of the Borrower and the
Guarantor setting forth the resolutions of the Board of Directors
authorizing this Agreement and certifying that the persons signing
this Agreement on behalf of the Borrower and the Guarantor are duly
elected and qualified officers (indicating the offices held) of the
Borrower or the Guarantor, as the case may be, with the authority to
sign this Agreement on behalf of the Borrower or the Guarantor, as the
case may be, and setting forth the signatures of such officers; and
(iii) the Bank shall have received a certificate of good
standing of the Borrower from the State of Delaware and certificates
of good standing of the Guarantor from the States of Delaware,
Michigan, New York and Ohio.
The documents referred to in this Section 4.2 shall be delivered to
the Bank no later than two LIBOR Business Days prior to the date of the first
Loan hereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BORROWER AND GUARANTOR
The Borrower and Guarantor represent and warrant to the Bank that:
5.1 CORPORATE AUTHORITY OF THE BORROWER AND GUARANTOR, ETC.
(a) Each of the Borrower and the Guarantor has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with corporate power under the laws of such
State to execute and deliver this Agreement and (in the case of the Borrower)
the Note, and to perform its obligations under this Agreement and (in the case
of the Borrower) the Note, and (in the case of the Guarantor) is duly qualified
and in good standing to do business as a foreign corporation in the States of
Michigan, New York and Ohio;
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(b) This Agreement has been duly authorized, executed and
delivered on behalf of each of the Borrower and the Guarantor and, assuming due
authorization, execution and delivery hereof by the Bank, is a valid and
legally binding agreement of each of the Borrower and the Guarantor; and the
Note has been duly authorized by the Borrower and, when executed and delivered
in accordance with this Agreement, will have been duly executed and delivered
and will constitute a valid and legally binding obligation of the Borrower;
(c) The execution, delivery and performance by each of the
Borrower and the Guarantor of this Agreement and (in the case of the Borrower)
the Note will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under (in each case material to the
Borrower or the Guarantor, as the case may be, and its subsidiaries considered
as a whole), or result in the creation or imposition of any lien, charge or
encumbrance (in each case material to the Borrower or the Guarantor, as the
case may be, and its subsidiaries considered as a whole) upon any of the
property or assets of the Borrower or the Guarantor, as the case may be,
pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement, guarantee, lease financing agreement or other similar agreement or
instrument under which the Borrower or the Guarantor, as the case may be, is a
debtor or a guarantor, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or the By-Laws of the Borrower
or the Guarantor, as the case may be; and
(d) There is no consent, approval, authorization, order,
registration or qualification of or with any governmental authority having
jurisdiction over the Borrower or the Guarantor which is required for, and the
absence of which would materially affect, the execution, delivery and
performance of this Agreement or (in the case of the Borrower) the Note.
5.2 FINANCIAL STATEMENTS
(a) The Borrower's Financial Statements:
(i) The Borrower has furnished the Bank with, and
the Bank hereby acknowledges receipt of, a copy of the Borrower's
Annual Report to the Securities and Exchange Commission on Form 10-K
for the year ended December 31, 1994 (the "Borrower's 10-K Report"),
and the financial statements set forth in such report present fairly
in all material respects the consolidated financial position of the
Borrower and its consolidated subsidiaries at December 31, 1994 and
1993 and the consolidated results of operations and cash flows of the
Borrower and its consolidated subsidiaries for each of the three years
in the period ended December 31, 1994, in conformity with generally
accepted accounting principles in the United States;
(ii) The Borrower has furnished the Bank with, and the Bank
hereby acknowledges receipt of, a copy of the Borrower's Quarterly
Report to the Securities and Exchange Commission on Form 10-Q for the
quarter ended September 30, 1995 (the "Borrower's 10-Q Report"), and
the financial statements set forth in such report present fairly in
all material respects the consolidated financial position of the
Borrower and its consolidated subsidiaries at September 30, 1995 and
the consolidated results of operations and cash flows of the Borrower
and its consolidated subsidiaries for the quarterly period ended
September 30, 1995, in conformity with generally accepted accounting
principles in the United States; and
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(iii) As of the date of this Agreement there has not occurred
any material adverse change in the financial position of the Borrower
and its subsidiaries considered as a whole, since December 31, 1994,
other than as set forth or contemplated in the Borrower's 10-K Report
or the Borrower's 10-Q Report.
(b) The Guarantor's Financial Statements:
(i) The Guarantor has furnished the Bank with, and the Bank
hereby acknowledges receipt of, a copy of the Guarantor's Annual
Report to the Securities and Exchange Commission on Form 10-K for the
year ended December 31, 1994 (the "Guarantor's 10-K Report"), and the
financial statements set forth in such report present fairly in all
material respects the consolidated financial position of the Guarantor
and its consolidated subsidiaries at December 31, 1994 and 1993 and
the consolidated results of operations and cash flows of the Guarantor
and its consolidated subsidiaries for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles in the United States;
(ii) The Guarantor has furnished the Bank with, and the Bank
hereby acknowledges receipt of, a copy of the Guarantor's Quarterly
Report to the Securities and Exchange Commission on Form 10-Q for the
quarter ended September 30, 1995 (the "Guarantor's 10-Q Report"), and
the financial statements set forth in such report present fairly in
all material respects the consolidated financial position of the
Guarantor and its consolidated subsidiaries at September 30, 1995 and
the consolidated results of operations and cash flows of the Guarantor
and its consolidated subsidiaries for the quarterly period ended
September 30, 1995, in conformity with generally accepted accounting
principles in the United States; and
(iii) As of the date of this Agreement there has not occurred
any material adverse change in the financial position of the Guarantor
and its subsidiaries considered as a whole, since December 31, 1994,
other than as set forth or contemplated in the Guarantor's 10-K Report
or the Guarantor's 10-Q Report.
5.3 LITIGATION
As of the date of this Agreement there are no legal or governmental
proceedings pending of which the Borrower or the Guarantor, as the case may be,
or any of its subsidiaries is the subject, and no such proceedings are known by
the Borrower or the Guarantor, as the case may be, to be threatened or
contemplated by governmental authorities or threatened by others, other than as
set forth or contemplated in the Borrower's 10-K Report, the Borrower's 10-Q
Report, the Guarantor's 10-K Report or the Guarantor's 10-Q Report and other
than such proceedings which the Borrower or the Guarantor, as the case may be,
believes will not have a material adverse effect upon the financial position of
the Borrower or Guarantor, as the case may be, and its subsidiaries considered
as a whole.
5.4 USE OF PROCEEDS
The proceeds of the Loans will be used by the Borrower for general
corporate purposes, including, without limitation, to pay the Merger
Consideration as defined in the Information Statement of the Borrower dated on
or about October 30, 1995 in connection with the cash out of the holders of
preferred stock of the Borrower. None of such proceeds will be used, directly
or indirectly, for the purpose, whether
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immediate, incidental or ultimate, of purchasing or carrying any margin stock
within the meaning of Regulation U of the Federal Reserve Board.
5.5 COMPLIANCE WITH ERISA
The Guarantor has satisfied the minimum funding standards under ERISA
with respect to its Plans and is in compliance in all material respects with
the currently applicable provisions of ERISA.
SECTION 6. COVENANTS OF THE GUARANTOR
During the term of this Agreement, unless compliance shall have been
waived in writing by the Bank, the Guarantor agrees that:
6.1 LIMITATION ON LIENS
The Guarantor will not itself, and will not permit any Manufacturing
Subsidiary to, incur, issue, assume, guarantee or suffer to exist any notes,
bonds, debentures or other similar evidences of indebtedness for money borrowed
(notes, bonds, debentures or other similar evidences of indebtedness for money
borrowed being hereinafter called "Debt"), secured by pledge of, or mortgage or
lien on, any Principal Domestic Manufacturing Property of the Guarantor or any
Manufacturing Subsidiary, or any shares of stock of or Debt of any
Manufacturing Subsidiary (mortgages, pledges and liens being hereinafter called
"Mortgage" or "Mortgages"), without effectively providing that the Guarantee of
the Loan to the Borrower hereunder (together with, if the Guarantor shall so
determine, any other Debt of the Guarantor or such Manufacturing Subsidiary
then existing or thereafter created ranking equally with the Guarantee) shall
be secured equally and ratably with (or prior to) such secured Debt, so long as
such secured Debt shall be so secured, unless, after giving effect thereto, the
aggregate amount of all such secured Debt so secured plus all Attributable Debt
of the Guarantor and its Manufacturing Subsidiaries in respect of Sale and
Leaseback Transactions (as defined in Section 6.2) would not exceed 5% of the
Consolidated Net Tangible Assets; provided, however, that this Section 6.1
shall not apply to Debt secured by:
(a) Mortgages on property of, or on any shares of stock
of or Debt of, any corporation existing at the time such corporation
becomes a Manufacturing Subsidiary;
(b) Mortgages in favor of the Guarantor or any
Manufacturing Subsidiary;
(c) Mortgages in favor of any governmental body to secure
progress, advance or other payments pursuant to any contract or
provision of any statute;
(d) Mortgages on property, shares of stock or Debt
existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or
any part of the purchase price thereof or to secure any Debt incurred
prior to, at the time of, or within 60 days after, the acquisition of
such property or shares or Debt for the purpose of financing all or
any part of the purchase price thereof; and
(e) any extension, renewal or replacement (or successive
extensions, renewals or replacements), as a whole or in part, of any
Mortgage referred to in the foregoing clauses (a) to (d), inclusive;
provided, however, that such extension, renewal or replacement
Mortgage shall be
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limited to all or a part of the same property, shares of stock or Debt
that secured the Mortgage extended, renewed or replaced (plus
improvements on such property).
6.2 LIMITATION ON SALES AND LEASEBACKS
The Guarantor will not itself, and it will not permit any
Manufacturing Subsidiary to, enter into any arrangement with any bank,
insurance company or other lender or investor (not including the Guarantor or
any Manufacturing Subsidiary) or to which any such lender or investor is a
party, providing for the leasing by the Guarantor or a Manufacturing Subsidiary
for a period, including renewals, in excess of three years of any Principal
Domestic Manufacturing Property which has been or is to be sold or transferred
by the Guarantor or such Manufacturing Subsidiary to such lender or investor or
to any person to whom funds have been or are to be advanced by such lender or
investor on the security of such Principal Domestic Manufacturing Property
(herein referred to as a "Sale and Leaseback Transaction") unless either:
(a) the Guarantor or such Manufacturing Subsidiary could
create Debt secured by a Mortgage pursuant to Section 6.1 on the
Principal Domestic Manufacturing Property to be leased in an amount
equal to the Attributable Debt with respect to such Sale and Leaseback
Transaction without equally and ratably securing the Guarantee, or
(b) the Guarantor, within 120 days after the sale or
transfer shall have been made by the Guarantor or by a Manufacturing
Subsidiary, applies an amount equal to the greater of
(i) the net proceeds of the sale of the Principal
Domestic Manufacturing Property leased pursuant to such
arrangement or
(ii) the fair market value of the Principal
Domestic Manufacturing Property so leased at the time of
entering into such arrangement (as determined by any two of
the following: the Chairman of the Board of the Guarantor,
its President, any Executive Vice President of the Guarantor,
any Group Vice President of the Guarantor, any Vice President
of the Guarantor, its Treasurer or its Controller)
to the retirement of Funded Debt of the Guarantor; provided, however, that the
amount to be applied to the retirement of Funded Debt of the Guarantor shall be
reduced by the principal amount of Funded Debt voluntarily retired by the
Guarantor within 120 days after such sale.
"Attributable Debt" means, as to any particular lease under which any
person is at the time liable, at any date as of which the amount thereof is to
be determined, the total net amount of rent (discounted from the respective due
dates thereof at the rate of 9.15% per annum (which is the rate per annum borne
by the Guarantor's Sinking Fund Debentures due August 1, 2004) compounded
annually) required to be paid by such person under such lease during the
remaining term thereof. The net amount of rent required to be paid under any
such lease for any such period shall be the total amount of the rent payable by
the lessee with respect to such period, but may exclude amounts required to be
paid on account of maintenance and repairs, insurance, taxes, assessments,
water rates and similar charges. In the case of any lease which is terminable
by the lessee upon the payment of a penalty, such net amount shall also include
the amount of such penalty, but no rent shall be considered as required to be
paid under such lease subsequent to the first date upon which it may be so
terminated.
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"Funded Debt" means all indebtedness for money borrowed having a
maturity of more than 12 months from the date of the most recent balance sheet
of the Guarantor and its consolidated subsidiaries or having a maturity of less
than 12 months but by its terms being renewable or extendible beyond 12 months
from the date of such balance sheet at the option of the borrower.
6.3 MERGERS AND CONSOLIDATIONS
The Guarantor may consolidate with, or sell or convey all or
substantially all its assets to, or merge with or into any other corporation,
provided that in any such case (i) the successor corporation shall be a
corporation organized and existing under the laws of the United States of
America or a State thereof, (ii) such corporation shall expressly assume the
due and punctual performance and observance of all the covenants and conditions
of this Agreement to be performed by the Guarantor, including, without
limitation, the Guarantee, by an instrument, satisfactory to the Bank in its
reasonable judgment, executed and delivered to the Bank by such corporation,
and (iii) such successor corporation shall not, immediately after such merger
or consolidation or such sale or conveyance, be in default in the performance
of any such covenant or condition and shall not immediately thereafter have
outstanding any secured Debt not expressly permitted by the provisions of
Section 6.1.
6.4 ADDITIONAL COVENANTS
In the event that, at any time while this Agreement is in effect, the
Guarantor shall issue any indebtedness for borrowed money which is not by its
terms subordinate and junior to other indebtedness of the Guarantor ("Senior
Debt") and such Senior Debt shall include, or be issued pursuant to a trust
indenture or other agreement which includes, financial covenants not
substantially provided for in this Agreement, the Guarantor shall so advise the
Bank. Thereupon, if the Bank shall so request by written notice to the
Guarantor, the Guarantor and the Bank shall enter into an amendment to this
Agreement providing for substantially the same financial covenants as those
contained in such Senior Debt, trust indenture or other agreement, mutatis
mutandis. Such amendment containing such financial covenants shall remain in
effect so long as such covenants remain in effect with respect to such Senior
Debt. As used in this Section 6.4 the term "financial covenant" shall mean a
covenant on the part of the Guarantor to the general effect that the Guarantor
shall maintain, on a consolidated basis and as of a specified date or dates,
(a) a specified minimum net worth, (b) a ratio of debt to net worth not in
excess of a specified maximum, (c) current assets in an amount not less than a
specified amount in excess of current liabilities or (d) any similar ratio or
amount or similar measure for the same general purpose of stating a minimum
financial condition.
6.5 ERISA
The Guarantor will comply with the minimum funding standards under
ERISA with respect to its Plans and will use its best efforts to comply in all
material respects with all other applicable provisions of ERISA and the
regulations and interpretations promulgated thereunder. The Guarantor will
deliver to the Bank within 30 days after any executive officer of the Guarantor
becomes aware of the occurrence of any Reportable Event (other than a reduction
in active Plan participants) with respect to any Plan, a certificate signed by
the Chief Financial Officer, the Vice President - Finance, the Controller or
the Treasurer of the Guarantor setting forth the details as to such Reportable
Event and the action which the Guarantor is taking and proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event
given to the Pension Benefit Guaranty Corporation.
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6.6 NOTIFICATION
The Guarantor will notify the Bank within 30 days after any executive
officer of the Company becomes aware of any failure on the part of the Company
duly to observe or perform any covenant contained in Section 6.1 or 6.2.
SECTION 7. DEFAULT
In case one or more of the following "Events of Default" shall have
occurred and be continuing, that is to say:
(a) default in any payment of principal of any Loan as
and when the same shall become due and payable, whether at maturity or
upon required repayment or upon declaration or otherwise, and the
continuance of such default for five Domestic Business Days; or
(b) default in the payment of any installment of interest
upon any Loan as and when the same shall become due and payable, and
continuance of such default for a period of five Domestic Business
Days; or
(c) failure on the part of the Guarantor duly to observe
or perform any covenant contained in Section 6.1 or Section 6.2 for 90
days after the date on which written notice of such failure, requiring
the Guarantor to remedy the same, shall have been given to the
Guarantor by the Bank; or
(d) failure on the part of the Borrower or the Guarantor,
as the case may be, duly to observe or perform any of its other
covenants or agreements in this Agreement for a period of 30 days
after the date on which written notice of such failure, requiring the
Borrower or the Guarantor, as the case may be, to remedy the same,
shall have been given to the Borrower or the Guarantor, as the case
may be, by the Bank; provided, however, that in the case of a default
under Section 3, such 30-day grace period shall run from the date that
demand for payment by the Bank was made upon the Guarantor pursuant to
Section 3; or
(e) any representation or warranty by the Borrower or the
Guarantor in this Agreement or in any certificate delivered pursuant
hereto shall have proven to have been materially false or misleading
when made or given; or
(f) a Reportable Event (other than a reduction in active
Plan participants) shall have occurred with respect to any Plan and,
within 30 days after the reporting of such Reportable Event to the
Bank, the Bank shall have notified the Guarantor in writing that the
Bank has made a reasonable determination that such Reportable Event is
likely to have a material adverse effect upon the financial position
of the Guarantor and its subsidiaries considered as a whole; or
(g) either the Borrower or the Guarantor shall have
entered against it by a court having jurisdiction in the premises a
decree or order for relief in respect of the Borrower or Guarantor, as
the case may be, in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Borrower or
Guarantor, as the case may be, or for
15
<PAGE> 20
any substantial part of its property, or ordering the winding-up or liquidation
of its affairs and such decree or order shall remain unstayed and in effect for
a period of 90 consecutive days; or
(h) either the Borrower or Guarantor shall commence a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consent to the entry of an
order for relief in an involuntary case under any such law, or consent
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of
the Borrower or Guarantor, as the case may be, or for any substantial
part of its property, or make any general assignment for the benefit
of creditors, or fail generally to pay its debts as they become due,
or take any corporate action in furtherance of any of the foregoing;
or
(i) default in the payment of the principal of (or
premium, if any, on) or interest on any other borrowing of the
Borrower or Guarantor of $5,000,000 or more and such default continues
for a period of 30 days, or any default with respect to any other
borrowing of the Borrower or Guarantor of $5,000,000 or more and such
default causes acceleration thereof; or
(j) either (i) more than 50% in voting power of the
voting securities of the Guarantor shall be held by any person or
persons who "act as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of
securities" of the Guarantor within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934 or (ii) persons whose election to
the Board of Directors shall not have been recommended by the
Organization Review and Nominating Committee (or successor Committee)
of the Board shall constitute a majority of the members of the Board
of Directors of the Guarantor; or
(k) the Guarantee set forth in Section 3 shall no longer
be in full force and effect;
then, and in each and every such case, the Bank, by notice in writing to the
Borrower and the Guarantor, may terminate this Agreement and/or may declare the
principal of all outstanding Loans to be due and payable immediately, and upon
any such declaration the same shall become and shall be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived.
SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BANK
8.1 ACQUISITION OF THE NOTE
The Bank represents and warrants to the Borrower that it is the
present intention of the Bank to acquire the Note to be delivered to it
hereunder for its own account as a result of making loans in the ordinary
course of its commercial banking business and not with a view to the
distribution or resale of any thereof, other than in connection with any
assignment or participation provided for under Section 8.2, subject,
nevertheless, to any legal or administrative requirement that the disposition
of the property of the Bank shall at all times be within its control.
8.2 ASSIGNMENT; PARTICIPATION
The Bank shall not, without the consent of the Borrower and Guarantor
(which consents shall not be unreasonably withheld), transfer to any other
office, branch or affiliate of the Bank or to any other
16
<PAGE> 21
financial institution, person or entity, all or any portion of the Loans, the
Note, the Commitment or any of the Bank's other rights and obligations under
this Agreement and the Note; provided, however, that (i) the Bank may transfer
or assign the Note or the Loans or any interest therein as a pledge to any
Federal Reserve Bank, provided that such pledge shall not release the Bank from
its obligations hereunder and (ii) the Bank may transfer or assign all or any
portion of the Loans, the Note, the Commitment or any of the Bank's other
rights and obligations under this Agreement and the Note to any office, branch
or affiliate of the Bank located in the United States. Any such transferee or
assignee of the Bank shall not be entitled to receive any greater interest or
other payment by reason of Section 9.2 than the Bank would have been entitled
to receive with respect to the rights so transferred or assigned unless such
transfer or assignment is made by reason of the provisions of Section 9.1 or
9.2 requiring the Bank to designate a different lending office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
The Bank shall have the right to sell to any bank or other financial
institution (a "Participant") a participating interest in the Commitment or in
the Loans and the Note; provided, however, that, following any such sale, (a)
the Bank's obligations under this Agreement shall remain unmodified and fully
effective and enforceable against the Bank, (b) the Bank shall remain solely
responsible to the Borrower and the Guarantor for the performance of such
obligations, including, without limitation, the Commitment and the obligation
of the Bank to fund Loans hereunder, (c) the Bank shall remain the holder of
the then outstanding Note for all purposes of this Agreement, (d) the Borrower
and Guarantor shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement, (e) the
Bank shall retain the sole right and responsibility to enforce the obligations
of the Borrower and Guarantor hereunder and under the Note, including, without
limitation, the sole right to approve of or consent to any action hereunder and
under the Note or any amendment, modification or waiver hereof and of the Note,
except that the Bank may grant to a Participant a joint right to approve of or
consent to any action, amendment, modification or waiver that would (i) reduce
the amount or extend the time for payment (other than pursuant to Section 2.4)
of any principal of, or interest on, the Note, or (ii) increase the amount of
the Commitment, in each case, from that in effect at the time of the sale of
the participating interest, and (f) any such participating interest shall be in
a minimum amount of $5,000,000 on the date the participating interest is sold.
The Bank shall as soon as practicable notify the Borrower and the Guarantor of
the names of any Participants.
SECTION 9. CHANGES IN CIRCUMSTANCES
9.1 ILLEGALITY
(a) If, after the date of this Agreement, the introduction of, or
any change in, any applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof or compliance by the Bank with any
request or directive of any such authority shall make it unlawful for the Bank
to make, maintain or fund any Loan, the Bank shall give notice thereof to the
Borrower. Before giving any notice pursuant to this Section 9.1, the Bank
shall designate a different lending office if such designation would avoid the
need for giving such notice and it would not otherwise be disadvantageous to
the Bank in its reasonable judgment. Upon receipt of such notice the Borrower
shall on either (A) the last day of the then-current Interest Period applicable
to such Loan if the Bank may lawfully continue to maintain and fund such Loan
to such day or (B) not later than the last date the Bank may lawfully continue
to fund and maintain such Loan, either (i) prepay in full, without premium or
penalty, the then outstanding principal amount of such Loan, together with
accrued interest thereon, or (ii) convert such Loan into another type of Loan
upon such terms and conditions as shall be
17
<PAGE> 22
mutually agreed to by the Bank and the Borrower (if it would not be unlawful
for the Bank to make such other type of Loan).
(b) Upon any prepayment or conversion of any Loan made pursuant to
Section 9.1(a) other than at the end of an Interest Period, the Borrower shall
reimburse the Bank upon demand for any loss incurred by it as a result of the
timing of such prepayment or conversion, in the manner provided in Section 2.9.
9.2 INCREASED COST
(a) If (i) Regulation D of the Federal Reserve Board as in effect
on the date hereof ("Regulation D") or (ii) after the date hereof, the adoption
of any applicable law or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
of any such authority, central bank or comparable agency (a "Regulatory
Change"):
(A) shall subject the Bank to any tax, duty or other
charge with respect to the Loans while the interest rate on the Loans
is derived from LIBOR or its obligation to make such Loans, or shall
change the basis of taxation of payments to the Bank of the principal
of or interest on such Loans or any other amounts due under this
Agreement in respect of such Loans or its obligation to make such
Loans (except for changes in the rate of tax on the overall net income
of the Bank or the lending office of the Bank making such Loans
imposed by the jurisdictions in which such Bank's principal executive
office or such lending office are located); or
(B) shall impose, modify or cause to be applicable any
reserve (including, without limitation, any imposed by the Federal
Reserve Board), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, the
Bank or such lending office or shall impose on the Bank (or such
lending office) or all interbank markets applicable to such Loans
any other condition affecting such Loans or its obligation to make
such Loans;
and the result of any of the foregoing is to increase the cost to the Bank (or
such lending office) of making or maintaining any such Loan, or to reduce the
amount of any sum received or receivable by the Bank (or such lending office)
under this Agreement or the Note, by an amount deemed by the Bank to be
material, the Borrower shall pay to the Bank such additional amount or amounts
as will compensate the Bank for any such increased cost or reduction incurred
or suffered by the Bank from and after the later of (i) the date that is 15
days prior to receipt of notice from the Bank of such costs and (ii) the last
date preceding receipt of such notice from the Bank on which interest was due
and payable pursuant to Section 2.6 on any such Loan.
(b) Without limiting the effect of the foregoing, so long as the
Bank shall be required to maintain reserves against "Eurocurrency liabilities"
under Regulation D (or, so long as the Bank may be required, by reason of any
Regulatory Change, to maintain reserves against any other category of
liabilities which includes deposits by reference to which LIBOR is determined
as provided in this Agreement or against any category of extensions of credit
or other assets of the Bank which includes the Loans as LIBOR-based loans)
(such reserves are collectively called "Reserves") the Borrower shall pay to
the Bank an amount (reasonably estimated by the Bank) for each day during each
Interest Period for such Loans equal to the product of the following:
18
<PAGE> 23
(i) the principal amount of each Loan to which such
Interest Period relates; multiplied by
(ii) the difference between (A) a fraction, the numerator
of which is LIBOR (expressed as a decimal) applicable to such Loan and
the denominator of which is one (1) minus the Bank's Actual Reserve
Cost (defined below) (expressed as a decimal) and (B) LIBOR;
multiplied by
(iii) 1/360.
For the purposes of this Section 9.2(b), the "Bank's Actual Reserve
Cost" (which shall be reasonably estimated by the Bank) shall be equal to the
cost actually incurred by the Bank from time to time during such Interest
Period as a result of the requirement that the Bank maintain Reserves with
respect to such Loan.
(c) The Bank shall take reasonable steps, including without
limitation, the designation of a different lending office (unless it would
otherwise be disadvantageous to the Bank in its reasonable judgment) if such
steps would avoid the need for or reduce the amount of any payment that
otherwise would be due under Section 9.2(a) or 9.2(b). Any amounts payable by
the Borrower under Sections 9.2(a) and 9.2(b) shall be remitted after the end
of each Interest Period, within 30 days after submission by the Bank to the
Borrower of a written statement setting forth the amount thereof.
(d) From time to time during the term of this Agreement, upon the
request of the Borrower, the Bank shall provide to the Borrower its best
estimate of the Bank's Actual Reserve Cost incurred or to be incurred with
respect to LIBOR-based loans in the principal amount specified in the
Borrower's request.
SECTION 10. MISCELLANEOUS
10.1 NOTICES
Unless otherwise specified herein all notices, requests, demands or
other communications to or from the parties hereto shall be in writing and
shall be deemed to have been duly given and made, in the case of a letter, upon
delivery or three days after deposit in the mail registered first class mail,
postage prepaid; and in the case of a facsimile, when a facsimile is sent and
receipt is telephonically confirmed; provided, however, that notices pursuant
to Section 2.3 or 2.4 or any other notices herein which are given by telephone
shall not be effective until received by the party to whom notice is given.
Unless otherwise specified herein, any such notice, request, demand, or
communication shall be delivered or addressed as follows:
(a) if to the Borrower, to it at The American Road,
Dearborn, Michigan 48121 U.S.A., Attention: Vice President and
Treasurer (or facsimile number 313-322-3359, Attention: Vice President
and Treasurer);
(b) if to the Guarantor, to it at The American Road,
Dearborn, Michigan 48121 U.S.A., Attention: Assistant Treasurer in
charge of banking (or facsimile number 313-322-3359, Attention:
Assistant Treasurer in charge of banking);
19
<PAGE> 24
(c) if to the Bank, to it at ____________________________________,
Attention: ______________ (or facsimile number ________________, Attention:
_______________) (such office, as it may be changed from time to time
pursuant to this Section, is referred to herein as the "Notice Office");
and
(d) if to any other holder of the Note, to it at the address or
facsimile number of such holder specified in a notice given to the Borrower
and the Guarantor or, if such holder's address and facsimile number have
not been so specified, at the address or facsimile number of the payee of
the Note;
or at such other address or facsimile number as either party hereto may
designate by written notice to the other party hereto; or, in the case of
such other holder of the Note, at the address and facsimile number of any
such holder as such holder may designate by written notice to the Bank,
Borrower and Guarantor.
10.2 TERM OF AGREEMENT
The term of this Agreement shall be until the payment in full of the
Loans or, in the event no Loans are borrowed hereunder by the date set forth in
Section 2.1(a), until such date; provided that the Borrower may terminate this
Agreement at any time prior to the date any Loan is borrowed hereunder by
giving the Bank two Domestic Business Days' prior notice; and provided,
further, that the obligations of the Borrower or Guarantor with respect to any
payment required to be made by it under this Agreement shall survive the term
of this Agreement.
10.3 NO WAIVERS
No failure or delay by the Bank or any other holder of the Note in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
10.4 NEW YORK LAW AND JURISDICTION
(a) THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND GOVERNED BY, THE INTERNAL LAWS (EXCLUDING THE LAW OF CONFLICTS) OF
THE STATE OF NEW YORK.
(b) EACH PARTY TO THIS AGREEMENT IRREVOCABLY AND UNCONDITIONALLY
SUBMITS TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF
NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
THE APPELLATE COURTS FROM ANY THEREOF, FOR PURPOSES OF ANY ACTION ARISING UNDER
THIS AGREEMENT OR THE NOTE OR REGARDING THE LOANS MADE HEREUNDER, AND EACH
HEREBY AGREES THAT ANY DISPUTES RELATING TO THIS AGREEMENT, THE NOTE OR THE
LOANS SHALL BE RESOLVED ONLY IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK. EACH OF SUCH PARTIES
HEREBY STIPULATES THAT THE VENUES REFERENCED IN THIS SECTION 10.4(B) ARE
CONVENIENT AND EACH WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
RELATING TO THE VENUE OR CONVENIENCE OF SUCH COURTS. IF FOR ANY REASON CLAIMS
HEREUNDER CANNOT BE PURSUED IN ANY OF THE
20
<PAGE> 25
FOREGOING COURTS OF NEW YORK, ALL REFERENCES IN THIS SECTION 10.4(B) TO THE
COURTS OF NEW YORK SHALL INSTEAD BE DEEMED TO BE REFERENCES TO THE COURTS OF
THE STATE OF MICHIGAN AND OF THE UNITED STATES FOR THE EASTERN DISTRICT OF
MICHIGAN. ENFORCEMENT OF FINAL, NONAPPEALABLE JUDGMENTS RECEIVED IN ANY OF
THE FOREGOING COURTS MAY ALSO BE SOUGHT IN ANY OTHER APPROPRIATE COURT OR
JURISDICTION.
10.5 ENTIRE AGREEMENT
This Agreement, together with the Note, constitutes the entire
understanding between the parties with respect to the subject matter of this
Agreement and supersedes any prior discussions, negotiations, agreements and
understandings. The parties hereto acknowledge that the general banking or
business conditions or any similar bank lending rules or requirements of any
organization not having the force of law, now or hereafter in effect,
shall not be applicable to this Agreement, the Note or the Loans.
10.6 PAYMENT OF CERTAIN EXPENSES
The Borrower will upon the occurrence of an Event of Default pay all
reasonable out-of-pocket expenses incurred by the Bank (including counsel fees)
in connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom.
10.7 CHANGES, WAIVERS, ETC.
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by a statement in writing
signed by the Borrower, the Guarantor and the Bank.
10.8 SEVERABILITY
If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each provision of this Agreement shall be
valid and enforceable to the extent permitted by law.
10.9 SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Upon execution of
an instrument, satisfactory to the Bank in its reasonable judgment, evidencing
such assumption, any direct or indirect subsidiary of the Guarantor may at any
time assume the rights and obligations of the Borrower under this Agreement,
the Loans and the Note, with the Guarantee of the Guarantor remaining in full
force and effect, and upon any such assumption, the Borrower shall be
completely relieved of all of its obligations under this Agreement, the Loans
and the Note, and the entity which has assumed such obligations shall be
considered the Borrower for all purposes under this Agreement, the Loans and
the Note.
21
<PAGE> 26
10.10 COUNTERPARTS
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument. Complete sets of counterparts shall be delivered to the Borrower,
the Guarantor and the Bank.
10.11 ELECTRONIC RECORDING
The parties to this Agreement may electronically record any telephone
communications with one another relating to any notices of borrowing or
extension pursuant to Section 2.3 or 2.4. In the event that any electronically
recorded notice of borrowing or extension differs from the terms of the
corresponding written notice of borrowing or extension, the terms of the
electronically recorded notice shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
FORD HOLDINGS, INC.
By: ____________________________________
Name:
Title:
FORD MOTOR COMPANY
By: ____________________________________
Name:
Title:
[NAME OF BANK]
By: ____________________________________
Name:
Title:
22
<PAGE> 27
EXHIBIT A
PROMISSORY NOTE
[DATE]
FOR VALUE RECEIVED, FORD HOLDINGS, INC., a Delaware corporation (the
"Borrower"), hereby unconditionally promises to pay to the order of [NAME AND
ADDRESS OF BANK] (the "Bank") the aggregate unpaid principal amount of the
Loans to the Borrower then outstanding, no later than the Termination Date;
provided, however, that the Borrower shall pay the unpaid principal amount of
each Loan made to the Borrower on the last day of the last Interest Period with
respect thereto. The Company shall pay interest on the unpaid principal amount
of each Loan from time to time outstanding, and on any overdue principal and,
to the extent permitted by law, on overdue interest thereon, at such interest
rates and on such dates as are determined from time to time pursuant to the
Term Loan Agreement referred to below. All such principal and interest shall
be payable in lawful currency of the United States of America in immediately
available funds.
The holder of this Note is hereby authorized by the Borrower to, and
prior to any transfer of this Note shall, endorse on the schedule forming a
part hereof or a continuation thereof appropriate notations evidencing the
date, amount and Interest Period of each Loan, as it may be extended from time
to time, and the date and amount of each payment of principal made by the
Borrower.
This Note is the Note referred to in the Term Loan Agreement dated as
of November __, 1995, among the Borrower, Ford Motor Company, as Guarantor, and
the Bank, as amended from time to time. Reference is made to such Term Loan
Agreement for provisions for the prepayment hereof, for the acceleration of the
maturity hereof and for the Guarantee hereof. Terms defined in such Term Loan
Agreement are used herein as therein defined.
This Note shall be construed in accordance with, and governed by, the
internal laws (excluding the law of conflicts) of the State of New York.
FORD HOLDINGS, INC.
By: _______________________________
Name:
Title:
23
<PAGE> 28
SCHEDULE OF PAYMENTS OF PRINCIPAL
TO PROMISSORY NOTE DATED [DATE] OF FORD HOLDINGS, INC.
<TABLE>
<CAPTION>
Amount of Unpaid
Amount of Interest Principal Principal
Date Loan Period Paid Balance Notation
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 29
EXHIBIT B
NOTICE OF [BORROWING/EXTENSION]
Date: ________________
To: [NAME AND ADDRESS OR FACSIMILE
NUMBER OF NOTICE OFFICE OF BANK]
Pursuant to Section 2.3 or 2.4, as applicable, of the Term Loan
Agreement dated as of November __, 1995, among Ford Holdings, Inc., Ford Motor
Company and [NAME OF BANK], we hereby confirm the notice of
[borrowing/extension] we gave you by telephone, and the interest rate
applicable thereto, as follows:
[Loan Prior to [Loan After
Extension] Extension]
Date of [Borrowing/Extension]:
Amount of Borrowing: $
Interest Period:
Interest Rate:
Bank Account to Receive Funds:
Sincerely,
FORD HOLDINGS, INC.
By: ________________________________
Name:
Title:
25
<PAGE> 1
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
OF
FORD HOLDINGS, INC.
TO BE HELD NOVEMBER 27, 1995
To the Stockholders of Ford Holdings, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of FORD
HOLDINGS, INC., a Delaware corporation ("Ford Holdings"), will be held on
November 27, 1995, at 9:00 a.m., Eastern Standard Time, at the offices of Ford
Motor Company, World Headquarters, The American Road, Dearborn, Michigan 48121,
for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of October 16, 1995, between Ford Holdings and Ford
Holdings Capital Corporation, a Delaware corporation ("FHC") and a
wholly-owned subsidiary of Ford Holdings, pursuant to which: (i) FHC will
merge with and into Ford Holdings, with Ford Holdings as the surviving
corporation; (ii) each share (other than shares held by holders who properly
exercise their rights of appraisal in accordance with Section 262 of the
Delaware General Corporation Law) of Ford Holdings Flexible Rate Auction
Preferred Stock (Exchange) Series A through K, Flexible Rate Auction
Preferred Stock Series L through P, Series A Cumulative Preferred Stock,
Series B Cumulative Preferred Stock, Series C Cumulative Preferred Stock and
Series D Cumulative Preferred Stock issued and outstanding immediately prior
to the effective date of the merger (the "Effective Date") will be converted
into the right to receive the $100,000 liquidation preference associated
with such share (which is the equivalent of a liquidation preference of $25
for each Depositary Share representing 1/4,000 of a share of Series A
through D Cumulative Preferred Stock) plus any accumulated and unpaid
dividends thereon through the date of payment; (iii) each share of capital
stock of FHC issued and outstanding immediately prior to the Effective Date
will be canceled and retired; and (iv) each share of common stock of Ford
Holdings ("Ford Holdings Common") issued and outstanding immediately prior
to the Effective Date will continue unchanged as a share of common stock of
Ford Holdings, the surviving corporation.
2. To consider and transact such other business as may properly come
before the meeting or any adjournment or postponement thereof.
A copy of the Agreement and Plan of Merger appears as Attachment A to, and
is described in, the accompanying Information Statement.
A complete list of stockholders entitled to notice of and to vote at the
meeting will be available for inspection by stockholders at the offices of Ford
Motor Company, at the address referenced above, during the ten days prior to the
meeting and will also be available for inspection at the meeting.
Under Delaware law, approval of the merger requires the affirmative vote or
consent of holders of at least a majority of the shares of outstanding stock of
each of FHC and Ford Holdings. Only holders of record as of October 16, 1995,
the record date established by the Board of Directors of Ford Holdings, are
entitled to notice of and to vote on the merger. As of October 16, 1995, 100% of
the Ford Holdings Common, representing 75% of the combined voting power of all
classes of capital stock of Ford Holdings, was owned of record by Ford Motor
Company ("Ford") and Ford Motor Credit Company ("Ford Credit"). Ford and Ford
Credit have indicated their intention to vote in favor of the merger. AS A
RESULT, ASSUMING FORD AND FORD CREDIT VOTE IN FAVOR OF THE MERGER, NO VOTE ON
THE PART OF ANY OTHER STOCKHOLDER OF FORD HOLDINGS WILL BE NECESSARY TO
EFFECTUATE THE MERGER.
By Order of the Board of Directors,
John M. Rintamaki
Secretary
Dearborn, Michigan
October 30, 1995
<PAGE> 2
FORD HOLDINGS, INC.
THE AMERICAN ROAD
DEARBORN, MICHIGAN 48121
INFORMATION STATEMENT
This Information Statement ("Information Statement") is being furnished to
the stockholders of Ford Holdings, Inc. ("Ford Holdings" or the "Company") in
connection with a Special Meeting of Stockholders to be held November 27, 1995
(the "Special Meeting") to consider and approve the merger of Ford Holdings
Capital Corporation, a wholly-owned subsidiary of Ford Holdings ("FHC"), with
and into Ford Holdings (the "Merger"). The Merger will be effected pursuant to
an Agreement and Plan of Merger, dated as of October 16, 1995, by and between
FHC and Ford Holdings, a copy of which is annexed hereto as Attachment A (the
"Agreement and Plan of Merger"). This Information Statement is being mailed to
stockholders beginning on or about October 30, 1995.
Under Delaware law, approval of the Merger requires the affirmative vote or
consent of holders of at least a majority of the shares of outstanding stock of
each of FHC and Ford Holdings. Only holders of record as of October 16, 1995 are
entitled to notice of and to vote on the Merger. As of October 16, 1995, 100% of
the common stock, $1.00 par value per share (the "Ford Holdings Common"), of
Ford Holdings, representing 75% of the combined voting power of all classes of
capital stock of Ford Holdings, was owned of record by Ford Motor Company
("Ford") and Ford Motor Credit Company, a wholly-owned subsidiary of Ford ("Ford
Credit"). Ford and Ford Credit have indicated their intention to vote in favor
of the Merger at the Special Meeting. As a result, assuming Ford and Ford Credit
vote in favor of the Merger, no further action on the part of the stockholders
of Ford Holdings is necessary to effectuate the Merger. Therefore, this is not a
solicitation of proxies. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
Pursuant to the terms and subject to the conditions of the Agreement and
Plan of Merger: (i) FHC will be merged with and into Ford Holdings, with Ford
Holdings as the surviving corporation; (ii) each share (other than shares held
by holders who properly exercise their rights of appraisal in accordance with
Section 262 of the Delaware General Corporation Law ("DGCL")) of Ford Holdings
Flexible Rate Auction Preferred Stock (Exchange) Series A through K, Flexible
Rate Auction Preferred Stock Series L through P (the Flexible Rate Auction
Preferred Stock (Exchange) Series A through K and the Flexible Rate Auction
Preferred Stock Series L through P are hereinafter sometimes referred to
collectively as "Flexible Rate Preferred"), Series A Cumulative Preferred Stock
("Series A Preferred"), Series B Cumulative Preferred Stock ("Series B
Preferred"), Series C Cumulative Preferred Stock ("Series C Preferred") and
Series D Cumulative Preferred Stock ("Series D Preferred," which, together with
the Series A Preferred, Series B Preferred and Series C Preferred, is
hereinafter sometimes collectively referred to as the "Series A Preferred
through Series D Preferred") issued and outstanding immediately prior to the
Effective Date (as defined under "The Merger -- Effective Date of the Merger")
will be converted into the right to receive the $100,000 liquidation preference
associated with such share (which is the equivalent of a liquidation preference
of $25 for each Depositary Share representing 1/4,000 of a share of Series A
Preferred through Series D Preferred) plus any accumulated and unpaid dividends
thereon through the date of payment (the "Merger Consideration"); (iii) each
share of capital stock of FHC issued and outstanding immediately prior to the
Effective Date will be canceled and retired, and no payment shall be made with
respect thereto; and (iv) each share of Ford Holdings Common issued and
outstanding immediately prior to the Effective Date will continue after the
Effective Date unchanged as a share of common stock of Ford Holdings, the
surviving corporation. As a result of the Merger, the holders of the Ford
Holdings Common will own 100% of the voting stock of Ford Holdings, and the
holders of shares of Flexible Rate Preferred and Series A Preferred through and
Series D Preferred (collectively, the "Preferred Stock") will cease to have any
ownership interest in Ford Holdings. Under Delaware law, holders of the
Preferred Stock are entitled to appraisal rights in connection with the Merger.
See "Appraisal Rights."
It is presently contemplated that the Effective Date of the Merger will be
December 30, 1995 and it is anticipated that the Merger Consideration will be
paid to holders of record of the Preferred Stock on or about January 4, 1996
(the date on which such holders are anticipated to surrender certificates
representing shares of Preferred Stock in exchange for the Merger
Consideration).
The Board of Directors of Ford Holdings (the "Board") has (i) approved the
Agreement and Plan of Merger and the transactions contemplated thereby,
including the Merger, (ii) determined that the Merger is fair to, and in the
best interests of, the stockholders and (iii) recommended that the stockholders
of Ford Holdings approve and authorize the adoption of the Agreement and Plan of
Merger.
-------------------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-------------------------
The date of this Information Statement is October 30, 1995.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION......................................................................... 1
The Special Meeting................................................................ 1
Parties to the Merger.............................................................. 1
SPECIAL FACTORS...................................................................... 1
Background of and Reasons for the Merger........................................... 1
Fairness of the Merger............................................................. 2
Opinion of the Company's Legal Advisors............................................ 4
Certain Other Effects of the Merger................................................ 5
Accounting Treatment of the Merger................................................. 6
Certain Tax Consequences of the Merger............................................. 6
Regulatory Requirements............................................................ 6
GENERAL.............................................................................. 6
Events Prior to the Merger......................................................... 6
Plans Following the Merger......................................................... 7
Voting Rights...................................................................... 7
Recommendation of the Board of Directors........................................... 8
Interests of Certain Persons in the Merger......................................... 8
Stockholder Approval of the Merger................................................. 8
THE MERGER........................................................................... 9
Conversion of Shares of Preferred Stock............................................ 9
Effective Date of the Merger....................................................... 9
Payment of Merger Consideration.................................................... 9
Amendment and Termination of the Agreement and Plan of Merger...................... 9
FINANCING THE TRANSACTION: SOURCES AND AMOUNT OF FUNDS............................... 10
Amount of Funds.................................................................... 10
Source of Funds.................................................................... 10
Refinancing Plans.................................................................. 10
APPRAISAL RIGHTS..................................................................... 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................................... 13
MARKET PRICE AND DIVIDENDS........................................................... 14
Ford Holdings Common............................................................... 14
Series A Preferred through Series D Preferred...................................... 14
Flexible Rate Preferred............................................................ 14
RECENT PUBLIC OFFERINGS OF PREFERRED STOCK........................................... 15
DIRECTORS AND EXECUTIVE OFFICERS OF FORD HOLDINGS, FHC AND FORD...................... 16
Ford Holdings...................................................................... 16
Ford Holdings Capital Corporation.................................................. 17
Ford............................................................................... 18
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................... 24
NOTICE OF TERMINATION OF DIVIDEND REINVESTMENT AND STOCK PURCHASE PLANS.............. 24
INDEPENDENT PUBLIC ACCOUNTANTS....................................................... 24
FEES AND EXPENSES.................................................................... 25
ADDITIONAL INFORMATION............................................................... 25
INCORPORATION BY REFERENCE........................................................... 25
OTHER MATTERS........................................................................ 26
ATTACHMENT A -- Agreement and Plan of Merger......................................... A-1
ATTACHMENT B -- Resolution of Stockholders of Ford Holdings, Inc. ................... B-1
ATTACHMENT C -- General Corporation Law of Delaware Section 262 Appraisal Rights..... C-1
ATTACHMENT D -- Opinion of Morris, Nichols, Arsht & Tunnell.......................... D-1
</TABLE>
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<PAGE> 4
INTRODUCTION
THE SPECIAL MEETING
The Special Meeting will be held on November 27, 1995, at 9:00 a.m.,
Eastern Standard Time, at the offices of Ford Motor Company, The American Road,
Dearborn, Michigan 48121.
The purpose of the Special Meeting is to consider and vote upon a proposal
to authorize and adopt the Agreement and Plan of Merger, dated as of October 16,
1995, between Ford Holdings and FHC. A copy of the full text of the resolution
of the stockholders of Ford Holdings that will be considered and voted upon at
the Special Meeting is set forth in Attachment B to this Information Statement.
As a result of the Merger, all holders of Preferred Stock will cease to have any
equity interest in, or possess any rights as stockholders of, Ford Holdings. See
"Special Factors -- Certain Other Effects of the Merger."
The Board has fixed the close of business on October 16, 1995 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of and to vote at the Special Meeting. As of the Record Date, 100% of the
Ford Holdings Common, representing 75% of the combined voting power of all
classes of capital stock of the Company, was owned of record by Ford and Ford
Credit. Holders of Ford Holdings Common are entitled to one vote for each share
of Ford Holdings Common held as of the Record Date and holders of Preferred
Stock are entitled to 0.0185355 votes per share of Preferred Stock held as of
the Record Date. See "General -- Voting Rights." As a result, Ford and Ford
Credit, which have indicated their intention to vote in favor of the Merger,
have a sufficient number of votes to approve the Merger without the affirmative
vote of any other stockholder of Ford Holdings.
Stockholders have the right to dissent from the Merger and, subject to
certain conditions provided under the DGCL, to have the fair value of their
shares of Preferred Stock judicially determined and paid to them in cash. See
"Appraisal Rights" and Attachment C to this Information Statement.
PARTIES TO THE MERGER
Ford Holdings was incorporated on September 1, 1989. Ford Holdings' primary
activities, conducted through its subsidiaries, consist of consumer and
commercial financing operations, insurance underwriting and equipment leasing.
Ford Holdings' telephone number is (313) 322-3000. FHC recently was organized
under Delaware law by Ford Holdings for the sole purpose of effecting the
Merger. FHC has not engaged in any activities except in connection with the
Merger. FHC's principal executive offices are located at The American Road,
Dearborn, Michigan 48121, and its telephone number is (313) 322-3000. FHC
currently has nominal assets and no liabilities, no operating history, and will
cease to exist when it is merged with and into Ford Holdings in connection with
the Merger.
SPECIAL FACTORS
BACKGROUND OF AND REASONS FOR THE MERGER
Ford Holdings was incorporated for the principal purpose of acquiring,
owning and managing certain of the financial services businesses of Ford. These
businesses consist principally of the nonautomotive financing businesses which
comprise Ford's Financial Services Group -- i.e., consumer and commercial
financing operations, insurance underwriting and equipment leasing. These
businesses are conducted by Ford Holdings through its wholly-owned subsidiaries,
Associates First Capital Corporation and its subsidiaries ("The Associates"),
USL Capital Corporation and its subsidiaries ("USL Capital"), The American Road
Insurance Company and its subsidiaries ("American Road"), Ford Motor Land
Development Corporation and its subsidiaries ("Ford Land"), Ford Leasing
Development Company and its subsidiaries ("Ford Leasing") and Ford Holdings
Financing, Inc. ("Ford Financing").
The Associates' primary business activities are consumer finance,
commercial finance and insurance underwriting. The Associates conducts its
operations primarily through its principal operating subsidiary, Associates
Corporation of North America.
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The principal business of USL Capital is the leasing and financing of
office and other business and commercial equipment, the leasing and management
of rail cars and commercial auto fleets, the leasing and financing of commercial
aircraft, industrial and energy facilities, and equipment financing for state
and local governments.
American Road is principally engaged in underwriting insurance with respect
to coverages for physical damage on vehicles financed through Ford Credit,
credit life and credit disability insurance in connection with retail vehicle
financing, and extended service plan products covering vehicle repairs on retail
contracts. In addition, Ford Life Insurance Company, a wholly-owned subsidiary
of American Road, offers deferred annuities.
Ford Land's principal business is real estate development. Ford Leasing's
principal business is the leasing of dealership facilities to franchised Ford
vehicle dealers. Ford Financing's principal business is the leasing of certain
commercial assets to Ford.
All of the outstanding Ford Holdings Common, representing 75% of the
combined voting power of all classes of capital stock of the Company, is owned,
directly or indirectly, by Ford. The balance of the capital stock, consisting of
shares of Preferred Stock, accounts for the remaining 25% of the total voting
power; none of the Preferred Stock is held, directly or indirectly, by Ford.
There are two principal reasons for the Merger, the effect of which will be
the cancellation of the Preferred Stock in exchange for an amount in cash equal
to the liquidation preference of the Preferred Stock, plus an amount equal to
dividends accumulated and unpaid thereon through the date of payment. Through
the Merger and resulting cancellation of the Preferred Stock, the Company
desires to (1) improve its capital structure by eliminating the relatively high
cost of the Preferred Stock and (2) achieve certain tax efficiencies as a result
of the consolidation for federal income tax purposes of Ford Holdings with Ford.
Capital Structure Improvement. As shown under "Market Price and Dividends,"
the Preferred Stock is relatively expensive capital. The aggregate amount of
dividends paid by Ford Holdings on its Preferred Stock in 1994 was approximately
$94 million. However, Ford Holdings' pre-tax income from investments aggregated
only $45 million in 1994. In the future, it is expected that the Company's
Preferred Stock dividend obligations would continue to substantially exceed its
investment income. The Merger, therefore, will eliminate this inefficiency
inherent in the Company's current capital structure.
Tax Efficiencies. As a result of the fact that 25% of the total voting
power of the capital stock of the Company is held by holders of the Preferred
Stock who are persons not affiliated with Ford, Ford Holdings and Ford do not
file consolidated income tax returns for federal income tax purposes. This
results in tax inefficiencies because Ford Holdings currently pays federal
income tax at a maximum marginal rate of 35% and Ford currently pays and is
expected in the near future to continue to pay federal income tax at an
alternative minimum tax rate of 20%. In addition, any dividend paid by Ford
Holdings on the Ford Holdings Common is taxable to Ford and Ford Credit for
federal income tax purposes. With the cancellation of the Preferred Stock
resulting from the Merger, Ford Holdings will become an indirect wholly-owned
subsidiary of Ford, which will permit Ford Holdings to be consolidated with Ford
for federal income tax purposes, resulting in its income being taxed at Ford's
current lower alternative minimum tax rate of 20% and Ford Holdings being able
to pay dividends to Ford and Ford Credit on a tax-free basis.
Because the Preferred Stock has no redemption provision and because there
would be no assurance in an exchange or tender offer of obtaining 100% of the
Preferred Stock (which is necessary in order for Ford to obtain 100% voting
control of Ford Holdings), the Company has determined that the Merger is the
only transaction structure by which the purposes and benefits described above
can be effectively achieved.
FAIRNESS OF THE MERGER
The Board has concluded that the Merger, including the Merger Consideration
and the structure of the Merger, is fair to the stockholders of Ford Holdings.
This determination is based in large part on the nature of the Preferred Stock
and the contractual provisions contained in the Certificates of Designations
governing the rights and preferences associated with the Preferred Stock filed
with the Secretary of State of the State of
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<PAGE> 6
Delaware (the "Certificates of Designations"). Specifically, the Board noted
that the Merger, including the Merger Consideration, was contemplated in the
Certificates of Designations. As a result, the Board concluded that the terms of
the Merger, including the Merger Consideration, were accepted by the holders of
the Preferred Stock when they purchased the Preferred Stock.
The preferences, limitations and relative, participating, optional or other
special rights associated with the Preferred Stock are set forth in the
respective Certificates of Designations. Unlike the treatment accorded Ford
Holdings Common, the Certificates of Designations relating to the Preferred
Stock do not provide that the holders of the Preferred Stock are entitled to
share in the residual assets of the Company on liquidation. Rather, the
Certificates of Designations provide that the holders of the Preferred Stock are
entitled only to a specified, stated liquidation value upon a liquidation of the
Company. As a result, whereas Ford Holdings Common represents an interest in the
residual value of the Company, the Preferred Stock represents only a fixed and
defined claim against the Company's earnings and assets.
The Certificates of Designations provide, and the prospectuses and
supplements thereto relating to the issuance of the Preferred Stock explicitly
disclosed, that the holders of Preferred Stock will not be entitled to vote as a
single class on any merger or consolidation involving the Company, as they
otherwise would be entitled, if, as a result of such merger or consolidation,
they are paid an amount equal to the Merger Consideration in exchange for their
shares. The Board determined that this provision in the Certificates of
Designations is a contractual right on the part of the Company, conferred by the
holders of the Preferred Stock, to cash out the holders of the Preferred Stock
without a class vote by paying them the Merger Consideration.
Furthermore, with the exception of the Certificate of Designations relating
to the Flexible Rate Auction Preferred Stock (Exchange) Series A through K, the
Certificates of Designations expressly provide, and the prospectuses and
supplements thereto relating to the issuance of the Preferred Stock explicitly
disclosed, that in any merger or consolidation of another corporation (including
any affiliated corporation) with or into the Company, which merger or
consolidation by its terms provides for the payment of only cash to the holders
of Preferred Stock, the holders of Preferred Stock will be entitled to receive
an amount equal to the Merger Consideration, AND NO MORE. The Board considered
this provision to provide further evidence that the holders of the Preferred
Stock, who are bound by the terms of such Certificates of Designations, are
entitled only to the Merger Consideration.
The Board also concluded that the liquidation preference set forth in the
Certificates of Designations established a significant parameter that limited
the maximum amount of the fair value of the Preferred Stock because it
constituted notice to potential purchasers of the Preferred Stock that, upon
dissolution of the Company, their shares would be canceled for no more than the
stated liquidation preference.
Based upon the foregoing contractual provisions, the Board also concluded
that the Merger Consideration is fair to the holders of the Preferred Stock.
The Board recognized that the nature of preferred stock (i.e., that it
represents a fixed claim against the company), which distinguishes it from
common stock (which represents an interest in the residual value of a company),
would account in large part for the difference, if any, in the market price of
the Preferred Stock relative to its stated liquidation preference. Because the
Preferred Stock does not represent an interest in the residual value of the
Company, the market price for shares of the Preferred Stock is not reflective of
any such residual value. Rather, the Preferred Stock trades in the market much
like a bond or other debt instrument and the market price generally is a direct
function of the interest rate environment at the time the Preferred Stock is
traded. That is, the market price of the Preferred Stock reflects the value to
the purchaser of an instrument offering the stated return relative to the return
offered by other investment options in the market. Put another way, the
Preferred Stock may trade at a discount or premium to its liquidation preference
to result in a yield consistent with the prevailing market rates of interest.
Notwithstanding the fact that the market price of the Preferred Stock may
fluctuate with general movements in interest rates, the Board determined that
the contractual provisions in the Certificates of Designations limiting a
holder's right to receive the Merger Consideration in the event of a merger are
controlling for purposes of establishing fair value. Just as a holder in a high
interest rate environment would not expect to receive anything less than the
Merger
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<PAGE> 7
Consideration when his or her Preferred Stock is trading at a discount to the
liquidation preference, a holder in a low or moderate interest rate environment
should not expect to receive more than the contractually provided for Merger
Consideration when his or her Preferred Stock is trading at a premium to the
liquidation preference.
In coming to the conclusions set forth above, the Board relied on the
opinion of Morris, Nichols, Arsht & Tunnell ("Morris Nichols"), special Delaware
counsel to the Company, with respect to what a court would likely determine the
"fair value" of the Preferred Stock to be in an appraisal proceeding under
Section 262 of the DGCL. Morris Nichols indicated in their opinion that, in an
appraisal proceeding to determine the "fair value" of the Preferred Stock, a
court applying principles of Delaware law would determine the fair value of such
shares based principally on the value of the liquidation and dividend rights of
the shares. Morris Nichols further indicated that, while the matter is not free
from doubt, it is their opinion that the liquidation and dividend rights of the
Preferred Stock and the provisions in the Certificates of Designations described
above relating to the Merger Consideration would limit the amount of the
appraised value of the Preferred Stock to an amount equal to, or not materially
different from, the Merger Consideration. See "Opinion of the Company's Legal
Advisors."
As a result of the fundamental distinctions between common stock and
preferred stock, such as the Preferred Stock, discussed above, and in reliance
on the Morris Nichols opinion, the Board did not believe that the traditional
indicia of value commonly associated with common stock were relevant to the
determination of the fair value of the Preferred Stock. Therefore, the Board
decided that factors such as net book value, going concern value, or historical
or current market prices of the Preferred Stock should be given no weight for
the purpose of determining the fair value of the Preferred Stock.
The Merger does not require the approval of at least a majority of the
unaffiliated security holders of the Company. The Board determined that the
contemplation of such a transaction in the Certificates of Designations was
sufficient to ensure the fairness of the Merger to the holders of the Preferred
Stock as described in this Information Statement. Specifically, the Board noted
that the purchase of the Preferred Stock in light of the provision in the
Certificates of Designations providing for the relinquishment of a class vote if
the holders of the Preferred Stock received the Merger Consideration in a merger
or other consolidation amounted to an acknowledgment by such holders that
separate approval of a transaction such as the Merger by unaffiliated
stockholders was not necessary.
Two of the directors of the Company, Messrs. Richardson and Toffey (the
"Nonemployee Directors"), are elected solely by the holders of the Preferred
Stock. They are the only directors of the Company who are not employees of Ford
and are not otherwise affiliated with the Company. Based on the foregoing
analysis of the fairness of the Merger Consideration, the Nonemployee Directors
did not believe it was necessary to retain an unaffiliated representative to
negotiate the Agreement and Plan of Merger or to undertake a separate
determination of the fairness of the Merger Consideration. Each of the
Nonemployee Directors voted to approve the Agreement and Plan of Merger, and Mr.
Richardson, the only director of the Company who owns any Preferred Stock, has
indicated his intention to tender his shares in exchange for the Merger
Consideration.
OPINION OF THE COMPANY'S LEGAL ADVISORS
Morris Nichols were retained by the Company to render advice to the Board
in connection with the proposed Merger. After the amount of the Merger
Consideration to be paid to the holders of the Preferred Stock had been
determined by the Company, the Board requested the opinion of Morris Nichols as
to the fair value of the Merger Consideration in the context of an appraisal
proceeding conducted in accordance with Section 262 of the DGCL. The Board
received Morris Nichols' written opinion for consideration at its October 16,
1995 meeting at which the Board approved the Agreement and Plan of Merger. Set
forth below is a brief description of the Morris Nichols opinion. Such
description does not purport to be complete and is qualified in its entirety by
reference to the opinion, which is annexed to this Information Statement as
Attachment D. Stockholders are urged to read the Morris Nichols opinion in its
entirety, including the assumptions, limitations, and qualifications set forth
therein, the matters considered, and the limits of review by Morris Nichols.
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<PAGE> 8
MORRIS NICHOLS WERE ENGAGED FOR THE PURPOSE OF ASSISTING THE BOARD IN ITS
CONSIDERATION OF THE TERMS OF THE MERGER AND WERE NOT ENGAGED TO RENDER LEGAL
ADVICE TO ANY STOCKHOLDER WITH RESPECT TO HIS OR HER INDIVIDUAL CLAIMS.
STOCKHOLDERS WHO HAVE LEGAL QUESTIONS RELATING TO THEIR APPRAISAL RIGHTS OR THE
MATTERS SET FORTH HEREIN SHOULD CONSULT THEIR OWN LEGAL ADVISORS.
Morris Nichols have served as the Company's special Delaware counsel since
the Company's inception. As part of their regular services, Morris Nichols are
regularly engaged to provide counsel with respect to the DGCL and have been
involved in numerous appraisal proceedings under Section 262 of the DGCL. On the
basis of their familiarity with the Company, the terms and conditions of the
Preferred Stock and their previous experience and reputation, Morris Nichols
were chosen by the Board to provide advice regarding what a court would likely
determine the "fair value" of the Preferred Stock to be in an appraisal
proceeding under Section 262 of the DGCL. However, in rendering their opinion,
Morris Nichols indicated that they are not experts in the valuation of
corporations or assets or securities thereof, and that their opinion should not
be relied upon as purporting to represent such a valuation. The opinion is
limited in all respects to matters of Delaware law.
In rendering their opinion, Morris Nichols reviewed the Agreement and Plan
of Merger, the Certificate of Incorporation of Ford Holdings, including the
Certificates of Designations of each of the series of Preferred Stock, the
prospectuses and supplements thereto relating to the respective issuances of the
Preferred Stock, the DGCL and such Delaware case law as they deemed necessary to
render the opinion. No limitations were imposed by the Company upon Morris
Nichols with respect to the investigations made or the procedures followed by
Morris Nichols in rendering their opinion.
In their opinion, Morris Nichols noted the distinctions, recognized in the
Delaware case law, between common stock and nonparticipating preferred stock
that is not convertible into common stock. Morris Nichols stated that, in their
opinion, where an appraisal proceeding involves shares of preferred stock that
are not convertible into and do not participate with common stock with respect
to dividends or upon liquidation, as is the case with the Preferred Stock, the
valuation methodologies commonly applied in appraisal proceedings involving
common stock are largely irrelevant to a determination of the "intrinsic value
of the stock" converted in the merger. Morris Nichols went on to state that, in
their opinion, the fair value of such preferred stock should be viewed as
equivalent to the value of the contract rights and preferences attaching to such
shares, including dividend, liquidation, redemption or other preferences and
rights. Finally, Morris Nichols concluded that, in their opinion, the provisions
of the Certificates of Designations described above relating to the Merger
Consideration should be viewed by a court as limiting the fair value of the
Preferred Stock in such a proceeding.
In addition to serving as special Delaware counsel to the Company, Morris
Nichols also serve as special Delaware counsel to Ford and Ford Credit. For the
two-year period July 1, 1993 through June 30, 1995, Morris Nichols were paid
$165,700 for all legal services provided by them to the Company, Ford, Ford
Credit, and their subsidiaries. Ford has agreed to reimburse Morris Nichols for
their expenses and to indemnify them for certain liabilities.
CERTAIN OTHER EFFECTS OF THE MERGER
Upon consummation of the Merger, each share of Preferred Stock in respect
of which appraisal rights have not been perfected in accordance with Section 262
of the DGCL (a "Converting Share") will be converted into the right to receive
the Merger Consideration upon surrender by the holder thereof of the certificate
or certificates representing such shares, together with the transmittal letter
referred to under "The Merger -- Payment of Merger Consideration." Each share of
Preferred Stock in respect of which appraisal rights have been perfected in
accordance with Section 262 of the DGCL (a "Dissenting Share") will become the
right to pursue appraisal rights in respect of the Preferred Stock under Section
262 of the DGCL. As a result, the present holders of Preferred Stock will cease
to have any ownership interest in, or rights as stockholders of, Ford Holdings.
The receipt of the Merger Consideration will be a taxable transaction to the
holders of the Preferred Stock and, in turn, to the holders of the Depositary
Shares representing Series A Preferred through Series D Preferred ("Depositary
Shares") for federal income tax purposes and may be taxable for state, local,
foreign and other tax purposes. See "Special Factors -- Certain Tax Consequences
of the Merger."
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As a result of the Merger, public trading of the Depositary Shares will
cease and the registration of the Depositary Shares and the Series A Preferred
through Series D Preferred under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), will be terminated. Consequently, Ford Holdings, after the
Merger, will be relieved of the duty to file proxy and information statements,
and its officers, directors and more than 10% stockholders will be relieved of
the reporting requirements under, and the "short swing" profit liability
provisions of, Section 16 of the Exchange Act.
A further result of the Merger is the termination of the Ford Holdings
Series A Preferred through Series D Preferred Stock Dividend Reinvestment and
Stock Purchase Plans and the Dividend Reinvestment and Stock Purchase Plan of
Ford and Ford Holdings offered to registered holders of Ford Series B Cumulative
Preferred Stock (collectively, the "Plans"). See "Notice of Termination of
Dividend Reinvestment and Stock Purchase Plans."
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a "purchase," as such term is used
under generally accepted accounting principles, for accounting and financial
reporting purposes. However, because FHC has only nominal assets and no
liabilities, no determination of the fair value of FHC's assets and liabilities
will be made for purposes of allocation of the purchase price of such assets and
liabilities assumed.
CERTAIN TAX CONSEQUENCES OF THE MERGER
The receipt of the Merger Consideration by a holder of Preferred Stock (or
a holder of Depositary Shares) pursuant to the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code (the
"Code"), and may also be a taxable transaction under applicable state, local,
foreign and other tax laws.
In general, a stockholder will recognize gain or loss equal to the
difference between the tax basis for the shares of Preferred Stock held by such
stockholder and the amount of cash received in exchange therefor. Such gain or
loss will be capital gain or loss if the shares of Preferred Stock are capital
assets in the hands of the stockholder and will be long-term capital gain or
loss if the holding period for the Preferred Stock is more than one year.
The foregoing discussion may not be applicable to stockholders who are not
citizens or residents of the United States or who are otherwise subject to
special tax treatment under the Code.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING TAX LAW
AS OF THE DATE OF THIS INFORMATION STATEMENT, WHICH MAY DIFFER ON THE EFFECTIVE
DATE. EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE MERGER,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
REGULATORY REQUIREMENTS
Except for those that have already been met or obtained, there are no state
or federal regulatory requirements that must be met or approvals that must be
obtained in connection with the Merger.
GENERAL
EVENTS PRIOR TO THE MERGER
Prior to the Effective Date of the Merger, Ford and Ford Holdings are
considering a variety of internal corporate transactions leading to the
reorganization of certain of Ford's financial services businesses, as described
below under "Plans Following the Merger." The reorganization would consolidate
all or a substantial portion of the businesses of Ford's Financial Services
Group under the ownership of a single legal entity. As part of the
reorganization, Ford Holdings would form this single entity as a new,
wholly-owned
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subsidiary ("Newco"), to own all of the outstanding capital stock of The
Associates, the outstanding capital stock of USL Capital and/or one or more
additional businesses of Ford's Financial Services Group.
PLANS FOLLOWING THE MERGER
As was announced by Ford on October 12, 1995, Ford is investigating
strategic actions with respect to the nonautomotive financing businesses in its
Financial Services Group. Although it is too early to predict what, if anything,
might result from such investigation, such actions could include the partial or
complete sale of USL Capital and the partial sale of The Associates.
Whether or not any sale of its nonautomotive financing businesses takes
place, following the Merger, Ford is contemplating a reorganization of its
Financial Services Group that would consolidate all or a substantial portion of
those businesses under the ownership of a single legal entity. As described
above under "Events Prior to the Merger," the reorganization could include the
formation of Newco by Ford Holdings. In addition, following the Merger, it is
contemplated that Ford Holdings would recapitalize its existing ownership
structure, exchanging Ford Holdings debt and/or preferred stock for a portion of
outstanding Ford Holdings Common.
Following the Merger, Ford and Ford Credit, then being the sole
stockholders of Ford Holdings, plan to elect persons as directors of the Company
who likely will be employees of Ford or its affiliates and who likely will
consist of those persons who are members of the present board of directors of
the Company, other than Messrs. Richardson and Toffey, who are not employees of
Ford or its affiliates.
VOTING RIGHTS
The Board has fixed the close of business on October 16, 1995 as the Record
Date for the determination of the stockholders entitled to notice of and to vote
on the proposed Merger. Accordingly, only holders of record of shares of Ford
Holdings Common and Preferred Stock on the Record Date will be entitled to
notice of and to vote on the Merger. On the Record Date the following shares of
Ford Holdings were issued and outstanding: 1,099 shares of Ford Holdings Common
held by Ford and Ford Credit; 8,000 shares of Flexible Rate Auction Preferred
Stock (Exchange) Series A through K held by one holder of record; 2,150 shares
of Flexible Rate Auction Preferred Stock Series L through N held by one holder
of record; 1,000 shares of Flexible Rate Auction Preferred Stock Series O
through P held by one holder of record; 2,876.7434 shares of Series A Preferred
held by one holder of record; 1,733.7447 shares of Series B Preferred held by
one holder of record; 2,002.0842 shares of Series C Preferred held by one holder
of record; and 2,001.2790 shares of Series D Preferred held by one holder of
record.
Under Ford Holdings' Certificate of Incorporation, on all matters other
than the election of directors as to which stockholders generally have a vote,
including the Merger, holders of Preferred Stock have 25% of the voting power
and holders of Ford Holdings Common have the remaining 75% of the voting power.
Holders of Preferred Stock are entitled to the number of votes determined
pursuant to the following formula per $100,000 liquidation preference:
X = [(Y divided by .75) minus Y] divided by Z
X: number of votes per share of Preferred Stock per $100,000 liquidation
preference.
Y: number of shares of Ford Holdings Common outstanding on the Record Date.
Z: amount equal to sum of the liquidation preference of all outstanding
Preferred Stock on the Record Date divided by 100,000.
Based on the above formula and the current number of outstanding shares of Ford
Holdings Common and Preferred Stock, holders of Preferred Stock are entitled to
0.0185355 votes for each share of Preferred Stock. Holders of Ford Holdings
Common are entitled to one vote per share of Ford Holdings Common. Holders of
Preferred Stock will vote together as a single class with the holders of shares
of Ford Holdings Common in respect of the Merger. The class vote of holders of
Preferred Stock referred to under the caption "Special Factors -- Fairness of
the Merger" does not apply to the Merger because, in accordance with the terms
of the
7
<PAGE> 11
Certificates of Designations of the Preferred Stock, each holder of Preferred
Stock will in connection therewith receive an amount in cash equal to the Merger
Consideration.
Under the terms of depositary agreements among Ford Holdings, Chemical
Bank, as depositary, and holders of Depositary Shares, holders of Depositary
Shares are entitled to instruct Chemical Bank as to the voting of the shares of
Series A Preferred through Series D Preferred represented by the Depositary
Shares. Holders of record of Depositary Shares may contact Chemical Bank by
calling 1-800-635-5835. Beneficial owners of Depositary Shares may contact the
record owner of the Depositary Shares beneficially owned by them with respect to
voting such shares.
Beneficial owners of Flexible Rate Preferred should contact the record
owner of such stock beneficially owned by them with respect to voting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
On October 16, 1995, the Board unanimously approved the Agreement and Plan
of Merger upon the recommendation of the officers of Ford Holdings to pursue the
Merger in accordance with the terms of the Agreement and Plan of Merger. The
terms of the Agreement and Plan of Merger were approved by the Board, which
concluded that the terms of the Merger, including the Merger Consideration, are
fair to and in the best interests of Ford Holdings and its stockholders, and the
Board recommended that the stockholders approve and adopt the Agreement and Plan
of Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The current Board consists of Elizabeth S. Acton, John M. Devine, S. I.
Gilman, Malcolm S. Macdonald, David N. McCammon, Dean E. Richardson, H. James
Toffey, Jr. and Kenneth Whipple. With the exception of Messrs. Richardson and
Toffey, all of the Directors are officers and/or employees of Ford and Messrs.
McCammon and Whipple are directors of Ford Credit. See "Directors and Executive
Officers of Ford Holdings and Ford."
STOCKHOLDER APPROVAL OF THE MERGER
The presence, in person or by proxy, of holders of a majority of the issued
and outstanding shares of stock of Ford Holdings entitled to vote at the Special
Meeting is necessary to constitute a quorum at the Special Meeting. Under
Section 251 of the DGCL, authorization and approval of the Agreement and Plan of
Merger and the Merger require the affirmative vote or consent of the holders of
at least a majority of the voting power of the outstanding stock of each of Ford
Holdings and FHC. Only holders of record as of the Record Date are entitled to
notice of and to vote at the Special Meeting. Accordingly, any failure to vote
in favor of the Merger, including any abstention or broker nonvote, will have
the same effect as a vote against the Merger. Ford and Ford Credit, the holders
of capital stock representing more than a majority of the combined voting power
of all classes of capital stock of Ford Holdings outstanding, have indicated
their intention to attend the Special Meeting and to vote in favor of the
Agreement and Plan of Merger and the Merger at the Special Meeting. See "General
- -- Voting Rights." As a result, assuming Ford and Ford Credit attend the Special
Meeting and vote in favor of the Merger, a quorum will be present for the
transaction of business at the Special Meeting and no further action on the part
of any other stockholder of Ford Holdings will be necessary to effectuate the
Merger.
FORD HOLDINGS, FORD AND FORD CREDIT ARE NOT ASKING HOLDERS OF PREFERRED
STOCK FOR A PROXY TO VOTE THEIR SHARES AT THE SPECIAL MEETING AND SUCH HOLDERS
ARE REQUESTED NOT TO SEND A PROXY.
8
<PAGE> 12
THE MERGER
Set forth below is a brief description of the material features of the
Merger. Such description does not purport to be complete and is qualified in its
entirety by reference to the Agreement and Plan of Merger annexed hereto as
Attachment A.
CONVERSION OF SHARES OF PREFERRED STOCK
If the Merger is consummated, each Converting Share of Preferred Stock
issued and outstanding immediately prior to the Effective Date shall be
converted into and become a right to receive an amount equal to the liquidation
preference associated therewith ($100,000 per share of Preferred Stock or $25
per Depositary Share) plus an amount equal to accumulated and unpaid dividends
thereon through the date of payment (the "Merger Consideration"). Each share of
Ford Holdings Common issued and outstanding immediately prior to the Effective
Date shall continue after the Effective Date unchanged as a share of common
stock of Ford Holdings, the surviving corporation of the Merger. Each share of
common stock of FHC issued and outstanding immediately prior to the Effective
Date shall be canceled and retired, and no payment shall be made with respect
thereto.
EFFECTIVE DATE OF THE MERGER
If the Agreement and Plan of Merger is not terminated as provided for
therein, the Merger will become effective on the date and at the time set forth
in the Certificate of Merger to be filed with the Secretary of State of the
State of Delaware (the "Effective Date"). It is presently contemplated that the
Certificate of Merger will provide for an Effective Date and time of December
30, 1995 at 12:01 a.m.
PAYMENT OF MERGER CONSIDERATION
The Agreement and Plan of Merger provides that, from and after the
Effective Date, The Bank of New York, in the case of Flexible Rate Preferred,
and Chemical Bank, in the case of the Series A Preferred through Series D
Preferred (the "Payment Agents") shall act as payment agents in effecting the
payment of the Merger Consideration. If the Merger is consummated as
contemplated in the Agreement and Plan of Merger, after the Effective Date
(anticipated to be December 30, 1995) the Payment Agents will, upon surrender by
a holder of record on the Effective Date of the certificate or certificates
representing such holder's shares of Preferred Stock, together with a completed
letter of transmittal in a form to be provided to such holder ("Transmittal
Letter"), pay by bank check or, at the Payment Agent's option, wire transfer of
immediately available funds to such holder the Merger Consideration multiplied
by the number of Converting Shares represented by the certificate or
certificates surrendered. With respect to the Depositary Shares, other than
those constituting Dissenting Shares, the applicable Payment Agent will pay the
Merger Consideration for the Series A Preferred through Series D Preferred to
the Depositary under the Deposit Agreements relating to the Series A Preferred
through Series D Preferred against surrender of the certificates representing
such shares, together with a completed Transmittal Letter. Pursuant to such
Deposit Agreements, the Depositary will pass through to the holders of the
Depositary Shares their proportionate share of the Merger Consideration against
surrender of the depositary receipts representing such shares, together with a
completed Transmittal Letter.
From and after the Effective Date, holders of certificates theretofore
evidencing Converting Shares shall cease to have any rights as stockholders of
Ford Holdings. From and after the Effective Date and to the date of payment of
the Merger Consideration, until surrendered as set forth above, each certificate
theretofore representing Converting Shares shall represent solely the right to
receive the Merger Consideration multiplied by the number of shares represented
by such certificate, without any interest thereon.
AMENDMENT AND TERMINATION OF THE AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger provides that, to the extent provided by
law, the Agreement and Plan of Merger may be amended, modified, or supplemented
at any time prior to the Effective Date whether prior to or subsequent to the
approval of the stockholders of Ford Holdings with respect to any of the terms
9
<PAGE> 13
contained therein, except the terms of the conversion of the Converting Shares
into the right to receive the Merger Consideration as provided therein. The
Agreement and Plan of Merger may be postponed or terminated, and the transaction
contemplated thereby abandoned upon the mutual agreement of Ford Holdings and
FHC to postpone or terminate the Merger at any time prior to the Effective Date
for any reason. The Agreement and Plan of Merger further provides that in the
event of any termination of the Agreement and Plan of Merger, the Agreement and
Plan of Merger shall cease and terminate, the Merger as provided for therein
shall not be consummated and neither Ford Holdings nor FHC shall have any
liability under the Agreement and Plan of Merger of any nature whatever,
including any liability to any stockholder of any party to the Agreement and
Plan of Merger.
FINANCING THE TRANSACTION: SOURCES AND AMOUNT OF FUNDS
AMOUNT OF FUNDS
The aggregate amount of Merger Consideration to be paid to holders of
Preferred Stock, assuming no holder dissents from the Merger, is estimated to be
$1,988,693,000. Of this amount, $1,976,400,000 constitutes the aggregate
liquidation preference of the Preferred Stock and $12,293,000 constitutes the
estimated aggregate amount of dividends that will or would otherwise accumulate
from the dividend payment date for each series of Preferred Stock next preceding
December 30, 1995 (the anticipated Effective Date of the Merger) through January
4, 1996 (the date on which record owners of the Preferred Stock are anticipated
to surrender certificates representing such stock).
SOURCE OF FUNDS
Cash on Hand. Ford Holdings intends to pay the Merger Consideration
primarily from cash on hand and bank loans. As of September 30, 1995, Ford
Holdings had cash and marketable securities in the amount of $759,014,242 and
expects to have not less than $500,000,000 on December 30, 1995.
Bank Loans. Ford Holdings presently is negotiating with Morgan Guaranty
Trust Company of New York (the "Bank") a loan agreement under which the Bank
will commit to lend to Ford Holdings approximately $1,500,000,000. Any loans
under the loan agreement would mature no later than 364 days after the date of
the agreement. Loans will bear interest at the London Interbank Offered Rate for
one, two, three or six-month deposits in U.S. dollars, plus 0.12 percentage
points. The loans will be fully guaranteed by Ford.
Events of default under the loan agreement will include (i) default in the
payment of principal or interest for a period of five business days, (ii)
default in most nonpayment covenants for a period of 30 days after receipt of
written notice thereof and in other nonpayment covenants for a period of 90 days
after receipt of written notice thereof, (iii) breach of a representation and
warranty, (iv) certain bankruptcy defaults, (v) a material "Reportable Event"
under the Employee Retirement Income Security Act of 1974 occurs with respect to
a Ford employee benefit plan, (vi) certain cross-defaults to borrowings of
$5,000,000 or more, (vii) a change in control of Ford and (viii) the Ford
guarantee no longer being in full force and effect.
REFINANCING PLANS
As described under "General -- Plans Following the Merger," Ford is
investigating strategic actions with respect to its nonautomotive financing
businesses, which actions could include the partial or complete sale of USL
Capital and the partial sale of The Associates. In the event Ford Holdings
completes any such sale, Ford Holdings intends to use the proceeds therefrom to
repay the bank loans described above. If no such sale occurs or if proceeds from
any such sales are insufficient to repay the bank loans, Ford intends to either
lend or contribute to Ford Holdings funds sufficient to repay the bank loans.
10
<PAGE> 14
APPRAISAL RIGHTS
Under Section 262 of the DGCL ("Section 262"), if the Merger is consummated
as contemplated in the Agreement and Plan of Merger, holders of shares of
Preferred Stock are entitled to appraisal rights with respect to such shares. A
record holder of shares of Preferred Stock who makes the demand described below
with respect to such shares, who continuously is the record holder of such
shares through the Effective Date, who otherwise complies with Section 262 and
who neither votes in favor of the Merger nor consents thereto in writing will be
entitled to have the "fair value" of his or her Preferred Stock at the Effective
Date (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) judicially determined and paid to him or her in cash
by complying with the provisions of Section 262. Ford Holdings is required to
send a notice to that effect to each holder of Preferred Stock not less than 20
days prior to the Special Meeting. This Information Statement constitutes such
notice. Within ten days after the Effective Date, Ford Holdings must also
provide notice of the Effective Date to all holders who have complied with
Section 262.
The following is a brief summary of Section 262 which sets forth the
procedures for dissenting from the Merger and demanding statutory appraisal
rights. This summary is not a complete statement of the law relating to
appraisal rights and is qualified in its entirety by reference to Section 262, a
copy of which is annexed hereto as Attachment C. This discussion and Attachment
C should be reviewed carefully by any holder who wishes to exercise statutory
appraisal rights or who wishes to preserve the right to do so, as failure to
comply with the procedures set forth herein and therein will result in the loss
of appraisal rights.
Holders of record of Preferred Stock who desire to exercise their appraisal
rights must satisfy each of the following conditions. A written demand for
appraisal must be delivered to Ford Holdings before the taking of the vote on
the Merger at the Special Meeting and the holder of the shares with respect to
which appraisal is sought must not vote in favor of nor consent to the Merger.
STOCKHOLDERS WHO ELECT TO EXERCISE APPRAISAL RIGHTS SHOULD MAIL OR DELIVER THEIR
WRITTEN DEMAND TO: FORD HOLDINGS, INC., ROOM 1187, THE AMERICAN ROAD, DEARBORN,
MICHIGAN 48121, ATTENTION: JOHN M. RINTAMAKI, SECRETARY. The written demand for
appraisal should specify the stockholder's name and mailing address, the number
and class of shares of Preferred Stock owned, and that the stockholder is
thereby demanding appraisal of his or her shares. A proxy or vote against the
Merger will not by itself constitute such a demand.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
certificates for shares of the Preferred Stock. If such shares are owned of
record in a fiduciary capacity, such as by trustee, guardian or custodian, such
demand must be executed by the fiduciary. If such shares are owned of record by
more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by all owners. An authorized agent, including an agent for two
or more owners, may execute the demand for appraisal for a stockholder of
record; however, the agent must identify the record owner(s) and expressly
disclose that, in exercising the demand, such person is acting as agent for the
record owner(s).
A record owner, such as a broker or depositary, who holds shares of
Preferred Stock as a nominee for others, may exercise appraisal rights with
respect to shares held for all or less than all beneficial owners of shares as
to which the holder is the record owner. In such case, the written demand must
set forth the number of shares covered by such demand. Where the number of
shares is not expressly stated, the demand will be presumed to cover all shares
outstanding in the name of such record owner. Beneficial owners who are not
record owners and who intend to exercise appraisal rights should instruct the
record owner to comply strictly with the statutory requirements with respect to
the exercise of appraisal rights before the Special Meeting.
A holder of shares of Preferred Stock in "street name" who desires
appraisal rights with respect to such shares must take such actions as may be
necessary to ensure that a timely and proper demand for appraisal is made by the
record owner of such shares. Holders of Depositary Shares representing Series A
Preferred through Series D Preferred who desire appraisal rights must notify and
instruct the Depositary (Chemical Bank) with respect thereto. Such notice should
be sent via registered mail to Chemical Bank, 450 West 33rd Street, 15th Floor,
New York, New York 10001, Attention: Martin J. Curran, Vice President. Shares of
Preferred Stock held through brokerage firms, banks and other financial
institutions are frequently deposited with and held of record in the name of the
nominee of a central security depository, such as Cede & Co.,
11
<PAGE> 15
Kray & Co. and Philadep & Co. and others. Any holder of shares of Preferred
Stock desiring appraisal rights with respect to such shares who held his or her
shares through a brokerage firm, bank or other financial institution is
responsible for ensuring that the demand for appraisal is made by the record
holder thereof. The stockholder should instruct such firm, bank or institution
that the demand for appraisal must be made by the record holder of the shares,
which might be the nominee of a central security depository if the shares have
been so deposited. As required by Section 262, a demand for appraisal must
reasonably inform the corporation of the identity of the record holder (which
might be a nominee as described above) and of such holder's intention to seek
appraisal of such shares.
Within 120 days after the Effective Date, either Ford Holdings or any
stockholder who has complied with the required conditions of Section 262 and who
is otherwise entitled to appraisal rights may file a petition in the Delaware
Court of Chancery (the "Court") demanding a determination of the fair value of
the shares of Preferred Stock. Within 120 days after the Effective Date, any
stockholder who has theretofore complied with the applicable provisions of
Section 262 will be entitled, upon written request, to receive from Ford
Holdings a statement setting forth the aggregate number of shares of Preferred
Stock not voted in favor of the Merger and with respect to which demands for
appraisal were received by Ford Holdings and the number of holders of such
shares. Such statement must be mailed within ten days after the written request
therefor has been received by Ford Holdings.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Court will determine which stockholders are entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder. When proceedings are not dismissed, the Court will appraise the
shares owned by such stockholders, determining the fair value of such shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest to be paid, if any, upon
the amount determined to be the fair value. Stockholders considering seeking
appraisal should bear in mind that the fair value of their shares of Preferred
Stock determined under Section 262 could be more than, the same as, or less than
the value of the Merger Consideration that they would otherwise receive pursuant
to the Agreement and Plan of Merger if they did not seek appraisal of their
shares. The cost of the appraisal proceeding may be determined by the Court and
imposed upon the parties as the Court deems equitable in the circumstances. Upon
application of a dissenting stockholder, the Court also may order that all or a
portion of the expenses incurred by any holder of shares of Preferred Stock in
connection with an appraisal, including without limitation, reasonable
attorney's fees and the fees and expenses of experts utilized in the appraisal
proceeding, be charged pro rata against the value of all of the shares of
Preferred Stock entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses. No appraisal proceeding in the
Court will be dismissed with respect to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms as the Court
deems just.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Date, be entitled to vote for any purpose the
shares subject to such demand or to receive payment of dividends or other
distributions on such shares (except dividends or other distributions payable to
holders of record of shares of the class of Preferred Stock subject to such
demand as of a date prior to the Effective Date).
At any time within 60 days after the Effective Date, any former holder of
shares of Preferred Stock shall have the right to withdraw his or her demand for
appraisal and accept the terms offered pursuant to the Agreement and Plan of
Merger. After this period, such holder may withdraw his or her demand for
appraisal only with the consent of Ford Holdings as the surviving corporation of
the Merger. If no petition is filed with the Court within 120 days after the
Effective Date, stockholders' rights to appraisal shall cease and all holders of
Preferred Stock shall be entitled to receive the Merger Consideration as
provided in the Agreement and Plan of Merger. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to Ford Holdings a written
withdrawal of his or her demand for appraisal and acceptance of the Merger
Consideration, except (i) that any such attempt to withdraw made more than 60
days after the Effective Date will require
12
<PAGE> 16
written approval of Ford Holdings and (ii) that no appraisal proceeding in the
Court shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
The foregoing is a brief summary of certain of the provisions of Section
262 of the DGCL which sets forth the procedures for dissenting from the Merger
and demanding statutory appraisal rights. This summary is qualified in its
entirety by the reference to the full text of Section 262, a copy of which is
annexed to this Information Statement as Attachment C.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Ford is the direct or indirect beneficial owner of all of the outstanding
shares of Ford Holdings Common, representing 75% of the total voting power of
the outstanding capital stock of the Company. As majority stockholder, Ford is
in a position to cause the election of a majority of the Board of the Company
and to control the Company's affairs.
The Company, Ford and Ford Credit also maintain a number of financial and
administrative arrangements and regularly engage in transactions with each
other. These arrangements include management services agreements between the
Company and Ford and the Company and Ford Credit ("Management Services
Agreements") pursuant to which, upon the reasonable request of the Company,
certain employees of Ford and Ford Credit work on the affairs of the Company and
its subsidiaries, so as to enable the Company to continue to conduct and operate
the business and affairs of the Company and to provide other services required
by the Company. The services provided for under the Management Services
Agreements include, but are not necessarily limited to, accounting, finance,
treasury, systems, credit, personnel (including administration of pension and
other benefit plans), purchasing, engineering, legal, tax, and other technical
and professional support, including Ford employees who serve as executive
officers of the Company and/or its subsidiaries.
Under the Management Services Agreements, the Company reimburses Ford or
Ford Credit, as appropriate, for the costs of the services provided to the
Company or its subsidiaries by Ford or Ford Credit, as the case may be.
Presently, such costs include an allocation of the total compensation (including
benefits) and overhead charges related to such employees, based on the time
spent in rendering services under the Management Services Agreements, and in
cases where the services are provided for purposes other than to enable the
Company to provide, in turn, a service to Ford or Ford Credit, a reasonable
markup on such costs. Out-of-pocket expenses incurred by Ford or Ford Credit
under the Management Services Agreements also are reimbursed by the Company. The
Associates also has similar management services agreements with the various Ford
subsidiaries that acquired The Associates' former foreign subsidiaries.
Certain of the arrangements and agreements between the Company (and/or its
subsidiaries) and Ford (and its subsidiaries) were established by Ford prior to
the Company's formation and thus were not the result of direct negotiations
between Ford and the Company. The Company has examined such arrangements and
agreements and believes that they are fair and reasonable.
13
<PAGE> 17
MARKET PRICE AND DIVIDENDS
FORD HOLDINGS COMMON
There is no active market for Ford Holdings Common and the Company has not
paid any dividends on the Ford Holdings Common.
SERIES A PREFERRED THROUGH SERIES D PREFERRED
The Depositary Shares are listed and traded on the New York Stock Exchange
("NYSE") under the symbols "FHI.PR," "FHI.PRB," "FHI.PRC" and "FHI.PRD,"
respectively. The following table sets forth, for the periods indicated, the
high and low closing prices for the Depositary Shares as reported by the NYSE.
The quotations do not include retail mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
CLOSING PRICES FOR DEPOSITARY SHARES
----------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D
---------------- ---------------- ---------------- ----------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993
Fourth Quarter............ $28.63 $25.88 $28.63 $25.75 $25.75 $24.50 -- --
1994
First Quarter............. 28.13 25.00 28.13 24.88 25.63 22.50 -- --
Second Quarter............ 25.63 24.13 25.63 24.13 23.50 21.63 -- --
Third Quarter............. 25.25 24.38 25.38 24.38 23.00 21.25 $25.25 $24.63
Fourth Quarter............ 24.50 22.50 24.50 22.75 21.75 20.25 24.69 22.88
1995
First Quarter............. 25.38 23.13 25.38 23.13 22.88 20.75 25.50 23.25
Second Quarter............ 26.63 24.88 26.50 24.88 24.75 22.38 26.75 25.13
Third Quarter............. 27.13 25.63 27.13 25.63 24.88 23.38 27.25 25.75
</TABLE>
Since their issuance, the Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred have accumulated dividends at the annual rate
of 8%, 8%, 7.12% and 8.10%, respectively, which dividends have been paid
quarterly on the first business day of March, June, September and December of
each year.
On October 13, 1995, the last trading day preceding the execution of the
Agreement and Plan of Merger, the high and low sales prices for the Depositary
Shares were as follows:
<TABLE>
<CAPTION>
SERIES HIGH LOW
------------------------------------------------------- -------- --------
<S> <C> <C>
Series A Depositary Shares............................. $ 25.625 $ 25.375
Series B Depositary Shares............................. 25.625 25.375
Series C Depositary Shares............................. 25.375 25.125
Series D Depositary Shares............................. 25.750 25.375
</TABLE>
FLEXIBLE RATE PREFERRED
The Flexible Rate Preferred is traded pursuant to its terms in a "Dutch
Auction" process conducted by The Bank of New York, as auction agent. Auctions
are held at the beginning of each dividend period for each series of Flexible
Rate Preferred and the dividend rates for such dividend period are established
as a result of the related auction. Shares of Flexible Rate Preferred traded in
an auction are sold at their liquidation preference (i.e., $100,000 per share).
14
<PAGE> 18
The following sets forth as of October 18, 1995 for each series of Flexible
Rate Preferred, the current dividend rate, the date on which the last auction
occurred, the date on which the next auction is scheduled to occur and the range
of dividend rates during the past two years:
<TABLE>
<CAPTION>
SERIES OF FLEXIBLE CURRENT DATE OF LAST DATE OF NEXT RANGE OF
RATE PREFERRED DIVIDEND RATE AUCTION AUCTION DIVIDEND RATES
- ------------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Series A.................. 4.290% 9-5-95 10-24-95 2.590-4.690%
Series B.................. 5.250% 1-25-94 1-16-01 4.190-5.250%
Series C.................. 4.270% 10-10-95 11-28-95 2.490-4.850%
Series D.................. 7.190% 2-14-95 2-15-00 2.520-7.190%
Series E.................. 6.000% 7-19-94 7-22-97 4.240-6.000%
Series F.................. 4.280% 9-12-95 10-31-95 2.540-4.590%
Series G.................. 6.100% 2-08-94 2-10-04 2.815-6.100%
Series H.................. 5.500% 11-12-93 11-13-98 2.645-5.500%
Series I.................. 9.125% 10-19-90 10-20-95 9.125%
Series J.................. 6.600% 4-28-95 4-26-02 3.070-6.600%
Series K.................. 4.950% 4-02-93 5-03-96 4.950%
Series L.................. 4.300% 10-13-95 12-01-95 4.265-4.792%
Series M.................. 4.264% 9-19-95 11-07-95 4.240-4.917%
Series N.................. 7.500% 12-22-94 12-10-97 7.500%
Series O.................. 4.261% 10-03-95 11-20-95 4.260-4.515%
Series P.................. 4.290% 10-17-95 12-05-95 4.285-4.515%
</TABLE>
RECENT PUBLIC OFFERINGS OF PREFERRED STOCK
The following table sets forth certain information regarding public
offerings for cash of Preferred Stock during the past three years which were
registered under the Securities Act of 1933, as amended:
<TABLE>
<CAPTION>
AMOUNT OF AGGREGATE NET
SECURITIES OFFERING PRICE PROCEEDS TO
TITLE OF CLASS DATE OF OFFERING OFFERED PER SHARE FORD HOLDINGS
- ----------------------------------- ----------------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Series B Preferred................. January 19, 1993 6,900,000* $ 25** $ 167,066,250
Series C Preferred................. August 20, 1993 8,000,000* $ 25** $ 193,700,000
Series D Preferred................. August 3, 1994 8,000,000* $ 25** $ 193,700,000
Flexible Rate Preferred Series
L-N.............................. December 12, 1994 2,150 $100,000 $ 212,125,000
Flexible Rate Preferred Series
O-P.............................. June 20, 1995 1,000 $100,000 $ 99,000,000
</TABLE>
- -------------------------
* Depositary Shares representing 1/4,000 of a share of Preferred Stock.
** Price per Depositary Share.
15
<PAGE> 19
DIRECTORS AND EXECUTIVE OFFICERS OF FORD HOLDINGS, FHC AND FORD
FORD HOLDINGS
The following table sets forth the name, business or residential address
and present principal occupation or employment of each director and executive
officer of Ford Holdings. Directors of Ford Holdings are indicated by an
asterisk.
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
*John M. Devine.................... Chairman of the Board
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*Kenneth Whipple................... President
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*Elizabeth S. Acton................ Vice President -- Treasurer
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*S. I. Gilman...................... Vice President
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*Malcolm S. Macdonald.............. Vice President
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*David N. McCammon................. Vice President
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
*Dean E. Richardson................ Manufacturers National Corporation, Retired Chairman of
20180 Mack Avenue the c/o Comerica Bank Board of Directors
Grosse Pointe Woods, MI 48236
*H. James Toffey, Jr. ............. First Boston, Inc., Retired Managing Director
12784 Mariner Court
Palm City, FL 34990
E. A. Law.......................... Vice President -- Controller
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
John M. Rintamaki.................. Vice President -- General Counsel and Secretary
Ford Holdings, Inc.
The American Road
Dearborn, MI 48121
</TABLE>
Except for Messrs. Toffey and Richardson, all of the above officers and
directors have been employed by Ford or its subsidiaries in one or more
executive capacities during the past five years. Mr. Toffey was a Managing
Director of First Boston, Inc. until his retirement in 1986. Mr. Richardson was
the Chairman of the
16
<PAGE> 20
Board of Directors of Manufacturers National Corporation from October 1973 until
his retirement in April 1990. Mr. Richardson serves as a director of The Detroit
Edison Company, Tecumseh Products Company and the Automobile Club of Michigan.
Mr. Whipple serves as a director of CMS Energy Corporation, Ford Credit,
and USL Capital and is a Trustee of JPM Advisor Funds. Mr. Macdonald serves as a
director of The Hertz Corporation. Mr. McCammon serves as a director of Ford
Credit and The Hertz Corporation.
FORD HOLDINGS CAPITAL CORPORATION
The following table sets forth the name, business or residential address
and principal occupation or employment of each director and executive officer of
FHC. Directors are indicated by an asterisk.
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
*Malcolm S. Macdonald.............. Chairman of the Board and President
Ford Motor Company
The American Road
Dearborn, MI 48121
*David M. Brandi................... Vice President -- Treasurer
Ford Motor Company
The American Road
Dearborn, MI 48121
*Susan J. Tarpley.................. Vice President -- Controller
Ford Motor Company
The American Road
Dearborn, MI 48121
*Elizabeth S. Acton................ Vice President
Ford Motor Company
The American Road
Dearborn, MI 48121
Mark S. Erskine.................... Vice President
Ford Motor Company
The American Road
Dearborn, MI 48121
Thomas J. DeZure................... Secretary
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
All of the above officers and directors have been employed by Ford or its
subsidiaries in one or more executive capacities during the past five years.
17
<PAGE> 21
FORD
The following table sets forth the name, business or residential address
and principal occupation or employment of each director and executive officer of
Ford. Directors of Ford are indicated by an asterisk. Unless otherwise
indicated, the position listed is with Ford.
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
*Alex Trotman...................... Chairman of the Board, President and Chief Executive
Ford Motor Company Officer
The American Road
Dearborn, MI 48121
*Colby H. Chandler................. Eastman Kodak Company, Retired Chairman of the Board and
Eastman Kodak Company Chief Executive Officer
343 State Street
Rochester, NY 14650-1106
*Michael D. Dingman................ Shipston Group Limited, President and Chief Executive
Shipston Group Limited Officer
Liberty Lane
Hampton, NH 03842
*Edsel B. Ford II.................. Vice President -- Ford Motor Company (President and
Ford Motor Credit Company Chief Operating Officer, Ford Motor Credit Company)
The American Road
Dearborn, MI 48121
*William Clay Ford................. Member and Retired Chairman of the Finance Committee
Ford Motor Company
The American Road
Dearborn, MI 48121
*William Clay Ford, Jr. ........... Chairman of the Finance Committee
The American Road
Dearborn, MI 48121
*Roberto C. Goizueta............... The Coca-Cola Company, Chairman of the Board and Chief
The Coca-Cola Company Executive Officer
One Coca-Cola Plaza, N.W.
P.O. Drawer 1734
Atlanta, GA 30313
*Irvine O. Hockaday, Jr. .......... Hallmark Cards Incorporated, President and Chief
Hallmark Cards Incorporated Executive Officer
2501 McGee
Kansas City, MO 64108
*Marie-Josee Kravis................ Fellow of the Hudson Institute Inc.
c/o Council on Foreign Relations
58 E. 68th Street
New York, NY 10021
*Drew Lewis........................ Union Pacific Corporation, Chairman of the Board and
Union Pacific Corporation Chief Executive Officer
Martin Tower -- 16th Floor
1170 Eighth Avenue
Bethlehem, PA 18018
</TABLE>
18
<PAGE> 22
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
*Ellen R. Marram................... The Seagram Beverage Group, President
The Seagram Beverage Group
375 Park Avenue
New York, NY 10152-0192
*Kenneth H. Olsen.................. Digital Equipment Corporation, President Emeritus
Digital Equipment Corporation
40 Old Bolton Road
Stow, MA 01775
*Carl E. Reichardt................. Wells Fargo & Company, Retired Chairman of the Board and
Wells Fargo & Company Chief Executive Officer
P.O. Box 63710
San Francisco, CA 94163
*Louis R. Ross..................... Vice Chairman and Chief Technical Officer
Ford Motor Company
The American Road
Dearborn, MI 48121
*Clifton R. Wharton, Jr. .......... Teachers Insurance and Annuity Association -- College
Teachers Insurance and Annuity Retirement Equities Fund, Retired Chairman of the Board
Association -- College Retirement and Chief Executive Officer
Equities Fund
Apartment 21-B
870 United Nations Plaza
New York, NY 10017
W. Wayne Booker.................... Executive Vice President -- International Automotive
Ford Motor Company Operations
The American Road
Dearborn, MI 48121
Edward E. Hagenlocker.............. Executive Vice President (President, Ford Automotive
Ford Motor Company Operations)
The American Road
Dearborn, MI 48121
Peter J. Pestillo.................. Executive Vice President -- Corporate Relations
Ford Motor Company
The American Road
Dearborn, MI 48121
Kenneth Whipple.................... Executive Vice President (President, Ford Financial
Ford Motor Company Services Group)
The American Road
Dearborn, MI 48121
John M. Devine..................... Group Vice President and Chief Financial Officer
Ford Motor Company
The American Road
Dearborn, MI 48121
Jacques A. Nasser.................. Group Vice President -- Product Development
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
19
<PAGE> 23
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
William E. Odom.................... Group Vice President (Chairman and Chief Executive
Ford Motor Credit Company Officer, Ford Motor Credit Company)
The American Road
Dearborn, MI 48121
Robert L. Rewey.................... Group Vice President -- Marketing and Sales
Ford Motor Company
The American Road
Dearborn, MI 48121
Robert H. Transou.................. Group Vice President -- Manufacturing
Ford Motor Company
The American Road
Dearborn, MI 48121
Albert Caspers..................... Vice President (Chairman of the Board, Ford of Europe
Ford of Europe Incorporated Incorporated)
Eagle Way, Brentwood
Essex, CM13 3BW, England
Kenneth R. Dabrowski............... Vice President -- Commercial Truck Vehicle Center
Ford Motor Company
The American Road
Dearborn, MI 48121
James D. Donaldson................. Vice President -- Large Front Wheel Drive Vehicle Center
Ford Motor Company
The American Road
Dearborn, MI 48121
Norman F. Ehlers................... Vice President -- Facilities, Materials and Services
Ford Motor Company Purchasing
The American Road
Dearborn, MI 48121
James E. Englehart................. Vice President -- Light Truck Vehicle Center
Ford Motor Company
The American Road
Dearborn, MI 48121
Ronald E. Goldsberry............... Vice President -- General Manager, Ford Customer Service
Ford Motor Company Division
The American Road
Dearborn, MI 48121
Elliott S. Hall.................... Vice President -- Washington Affairs
Ford Motor Company
Washington Staff Office
1350 I Street, N.W.
Suite 1000
Washington, D.C. 20005
John A. Hall....................... Vice President -- Employee Relations
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
20
<PAGE> 24
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
John T. Huston..................... Vice President -- Powertrain Operations
Ford Motor Company
The American Road
Dearborn, MI 48121
Kenneth K. Kohrs................... Vice President -- Rear Wheel Drive Car Vehicle Center
Ford Motor Company
The American Road
Dearborn, MI 48121
Vaughn A. Koshkarian............... Vice President
Ford Motor Company
The American Road
Dearborn, MI 48121
Robert O. Kramer................... Vice President -- Human Resources
Ford Motor Company
The American Road
Dearborn, MI 48121
Frank E. Macher.................... Vice President -- General Manager, Automotive Components
Ford Motor Company Division
The American Road
Dearborn, MI 48121
Keith C. Magee..................... Vice President -- General Manager, Lincoln-Mercury
Ford Motor Company Division
The American Road
Dearborn, MI 48121
John W. Martin, Jr. ............... Vice President -- General Counsel
Ford Motor Company
The American Road
Dearborn, MI 48121
Carlos E. Mazzorin................. Vice President -- Production Purchasing
Ford Motor Company
The American Road
Dearborn, MI 48121
David N. McCammon.................. Vice President -- Finance
Ford Motor Company
The American Road
Dearborn, MI 48121
W. Dale McKeehan................... Vice President -- Vehicle Operations
Ford Motor Company
The American Road
Dearborn, MI 48121
John P. McTague.................... Vice President -- Technical Affairs
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
21
<PAGE> 25
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
John A. Oldfield................... Vice President (Chairman, Aston Martin Lagonda Limited)
Aston Martin Lagonda Limited
Pickford Street
Newport Pagnell
Buckinghamshire MK16 9AN
England
Richard Parry-Jones................ Vice President -- Small/Medium Vehicle Center
Ford Motor Company Limited
Research and Engineering Center
GM-15/462
Laindon Basildon, Essex
SS15 6EE England
Helen O. Petrauskas................ Vice President -- Environmental and Safety Engineering
Ford Motor Company
The American Road
Dearborn, MI 48121
Murray L. Reichenstein............. Vice President
Ford Motor Company
The American Road
Dearborn, MI 48121
Neil W. Ressler.................... Vice President -- Advanced Vehicle Technology
Ford Motor Company
The American Road
Dearborn, MI 48121
Ross H. Roberts.................... Vice President -- General Manager, Ford Division
Ford Motor Company
The American Road
Dearborn, MI 48121
David W. Scott..................... Vice President -- Communications
Ford Motor Company
The American Road
Dearborn, MI 48121
Charles W. Szuluk.................. Vice President -- Process Leadership
Ford Motor Company
The American Road
Dearborn, MI 48121
John J. Telnack.................... Vice President -- Design
Ford Motor Company
The American Road
Dearborn, MI 48121
Thomas J. Wagner................... Vice President -- Customer Communication and
Ford Motor Company Satisfaction
The American Road
Dearborn, MI 48121
Dennis F. Wilkie................... Vice President -- Business Development Office
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
22
<PAGE> 26
<TABLE>
<CAPTION>
NAME AND ADDRESS PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------------------- --------------------------------------------------------
<S> <C>
Daniel R. Coulson.................. Principal Accounting Officer
Ford Motor Company
The American Road
Dearborn, MI 48121
Malcolm S. Macdonald............... Treasurer
Ford Motor Company
The American Road
Dearborn, MI 48121
Dennis E. Ross..................... Chief Tax Officer
Ford Motor Company
The American Road
Dearborn, MI 48121
John M. Rintamaki.................. Secretary
Ford Motor Company
The American Road
Dearborn, MI 48121
</TABLE>
Except for Dennis E. Ross, who joined Ford in 1995, all of the above
officers have been employed by Ford or its subsidiaries in one or more executive
capacities during the past five years. For the five-year period prior to joining
Ford, Mr. Ross was a partner of the law firm of Davis Polk & Wardwell in New
York. With respect to the principal occupations of the above directors, pages
3-10 of the Ford Proxy Statement, dated April 6, 1995 and filed with the
Securities and Exchange Commission (the "SEC"), is incorporated herein by
reference.
23
<PAGE> 27
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Ford Holdings capital stock as of October 16, 1995 for (i) each
person who is known by Ford Holdings to be the beneficial owner of more than
five percent of any class of Ford Holdings' voting securities, (ii) each
Director of Ford Holdings, (iii) each executive officer of Ford Holdings, and
(iv) all Directors and executive officers of Ford Holdings as a group. Unless
otherwise indicated, Ford Holdings believes that the individuals listed each
have sole voting and investment power with respect to such shares. Unless
otherwise indicated, the address of each person listed is c/o Ford Motor
Company, The American Road, Dearborn, Michigan 48121 Attention: Secretary.
<TABLE>
<CAPTION>
AMOUNT PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------- ------------------------------------- ------------------ --------
<S> <C> <C> <C>
Common Stock................... Ford Motor Company 604 55%
Common Stock................... Ford Motor Credit Company(1) 495 45%
Series A Preferred............. Dean E. Richardson(2) 4,000(3) *
Series A Preferred............. All officers and directors as a group 4,000(3) *
</TABLE>
- -------------------------
* less than 1%
(1) Ford Motor Credit Company is a wholly-owned subsidiary of Ford Motor
Company.
(2) Dean E. Richardson is a Director of Ford Holdings. His address is c/o
Comerica Bank, 20180 Mack Avenue, Grosse Pointe Woods, Michigan 48236.
(3) Indicates number of Depositary Shares beneficially owned. Each Depositary
Share represents 1/4,000 of a share of its corresponding series of
Preferred Stock.
NOTICE OF TERMINATION OF DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLANS
Ford Holdings currently has Dividend Reinvestment and Stock Purchase Plans
relating to each of the Series A Preferred through Series D Preferred and Ford
and Ford Holdings currently have a Dividend Reinvestment and Stock Purchase Plan
offered to registered owners of Ford Series B Cumulative Preferred Stock which
permit investment of dividends in Ford Holdings Series A Preferred or Ford
Common Stock (collectively, the "Plans"). In anticipation of the Merger and
cancellation of the Preferred Stock, as of the Effective Date, each of the Plans
will be terminated in its entirety. In addition, on and after October 30, 1995,
optional cash payments for investments under the Plans will no longer be
available. Any optional cash payments received by Chemical Bank on or after
October 30, 1995 will be returned to the relevant Plan participants.
Participants in the Plans will receive their proportionate share of the
Merger Consideration as soon as practicable following the Effective Date in
accordance with the terms of the Plans. Participants whose accounts are credited
with Depositary Shares who desire appraisal rights in connection with the Merger
must notify and instruct the Depositary (Chemical Bank) with respect thereto.
See "Appraisal Rights."
Any questions regarding the Plans should be directed to Chemical Bank at
1-800-442-4295 or (212) 613-7427 or at the following address: Chemical Dividend
Reinvestment Department, P.O. Box 750, Pittsburgh, PA 15230-9625.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., independent auditors, audited and reported on the
consolidated financial statements of the Company and its subsidiaries for its
fiscal year ended December 31, 1994. Such financial statements have been
incorporated by reference in this Information Statement in reliance upon such
report. Representatives of Coopers & Lybrand are not expected to be present at
the Special Meeting.
24
<PAGE> 28
FEES AND EXPENSES
Ford Holdings will pay all fees and expenses incurred in connection with
the contemplated Merger, including the filing fees with the SEC and printing and
mailing costs of this Information Statement. The expenses incurred and to be
incurred by the Company in connection with the Merger and the related
transaction are estimated as follows:
<TABLE>
<CAPTION>
TYPE OF EXPENSE ESTIMATED AMOUNT
-------------------------------------------------------------- ----------------
<S> <C>
Financing Costs............................................... $ 90,000,000
Filing Fees................................................... 397,739]
Legal Fees.................................................... 200,000
Printing and Mailing Fees..................................... 250,000
------------
Total.................................................... $ 90,847,739
============
</TABLE>
ADDITIONAL INFORMATION
The Company, FHC and Ford have filed a Schedule 13E-3 with the SEC with
respect to the Merger. As permitted by the rules and regulations of the SEC,
this Information Statement omits certain information contained in the Schedule
13E-3. The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports, proxy statements and
other information with the SEC. The Schedule 13E-3 and the respective exhibits
thereto, as well as such reports, proxy statements and other information, may be
inspected and copied at the SEC's offices, without charge, or copies thereof may
be obtained from the SEC upon payment of prescribed rates. Copies of the
Schedule 13E-3 may also be obtained without charge by calling the Company's
Stockholder Relations Department at 1-800-555-5259. Statements contained in this
Information Statement concerning documents filed with the SEC as exhibits to the
Schedule 13E-3 or included in this Information Statement as attachments are
necessarily not complete and, in each instance, reference is made to the copy of
the document filed as an exhibit to the Schedule 13E-3 or such attachments.
INCORPORATION BY REFERENCE
The following documents filed by the Company with the SEC are incorporated
herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1994.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.
In addition, the Ford Motor Company Proxy Statement, dated April 6, 1995,
is incorporated herein by reference.
All documents subsequently filed with the SEC by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Information Statement and prior to the Date of the Special Meeting shall be
deemed incorporated by reference into this Information Statement and to be part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Information Statement
to the extent a statement contained herein, or in any subsequently filed
documents which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Information Statement.
A copy of the documents incorporated herein by reference (without exhibits,
unless such exhibits are specifically incorporated by reference into the
information incorporated by reference herein) that are not delivered herewith
will be provided, without charge, to each person, including each beneficial
owner, to whom
25
<PAGE> 29
a copy of this Information Statement is delivered, upon written or oral request
of such person and by first class mail or other equally prompt means within one
business day of receipt of request. Requests should be directed to Ford
Holdings, Inc., The American Road, Dearborn, Michigan, 48121, Attention:
Stockholder Relations Department, telephone number 1-800-555-5259.
OTHER MATTERS
The management of Ford Holdings knows of no other matter to be presented at
the Special Meeting which would be a proper subject for action by the
stockholders of the Company. The By-Laws of the Company provide that no business
other than that stated in the notice of meeting shall be transacted at any
meeting of the stockholders.
By Order of the Board of Directors
John M. Rintamaki
Secretary
Dearborn, Michigan
October 30, 1995
26
<PAGE> 30
ATTACHMENT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of October 16, 1995, by and
between FORD HOLDINGS, INC., a Delaware corporation ("Ford Holdings"), and FORD
HOLDINGS CAPITAL CORPORATION, a Delaware corporation ("FHC"). Ford Holdings and
FHC are sometimes referred to herein as the "Constituent Corporations."
WITNESSETH:
WHEREAS, the respective Boards of Directors of Ford Holdings and FHC deem
the merger of Ford Holdings and FHC, with Ford Holdings as the surviving
corporation, pursuant to Section 251 of the Delaware General Corporation Law and
upon the terms and subject to the conditions herein stated, desirable and in the
best interests of their respective stockholders; and
WHEREAS, the Boards of Directors of Ford Holdings and FHC have each adopted
resolutions approving this Agreement and Plan of Merger and authorizing the
execution hereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements,
covenants and provisions hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
TERMS OF THE MERGER
1.01 The Merger. On the Effective Date (as defined below), FHC shall be
merged with and into Ford Holdings, with Ford Holdings as the surviving
corporation, pursuant to the provisions of and with the effect provided in
Subchapter IX of the Delaware General Corporation Law (the "Merger").
1.02 Conversion of Shares.
(a) Upon the Effective Date, by virtue of the Merger and without any action
on the part of any stockholder of Ford Holdings or FHC:
(i) Subject to Section 1.02(b), each share of Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series A, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series B, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series C, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series D, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series E, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series F, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series G, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series H, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series I, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series J, Ford Holdings Flexible
Rate Auction Preferred Stock (Exchange) Series K, Ford Holdings Flexible
Rate Auction Preferred Stock Series L, Ford Holdings Flexible Rate Auction
Preferred Stock Series M, Ford Holdings Flexible Rate Auction Preferred
Stock Series N, Ford Holdings Flexible Rate Auction Preferred Stock Series
O, Ford Holdings Flexible Rate Auction Preferred Stock Series P, Ford
Holdings Series A Cumulative Preferred Stock, Ford Holdings Series B
Cumulative Preferred Stock, Ford Holdings Series C Cumulative Preferred
Stock and Ford Holdings Series D Cumulative Preferred Stock issued and
outstanding immediately prior to the Effective Date shall be canceled and
extinguished and be converted into and become a right to receive an amount
equal to the liquidation preference associated therewith ($100,000 per
share) plus an amount equal to accumulated and unpaid dividends thereon
through the date of payment thereof (the "Merger Consideration").
A-1
<PAGE> 31
(ii) Each share of Ford Holdings common stock issued and outstanding
immediately prior to the Effective Date shall continue after the Effective
Date unchanged as shares of common stock of Ford Holdings, the surviving
corporation.
(iii) Each share of FHC common stock issued and outstanding
immediately prior to the Effective Date shall be canceled and retired, and
no payment shall be made with respect thereto.
(b) Notwithstanding Section 1.02 (a), shares of capital stock of Ford
Holdings outstanding immediately prior to the Effective Date and held by a
holder who, acting in accordance with Section 262 of the Delaware General
Corporation Law, (A) delivers to Ford Holdings a written demand for appraisal of
his or her shares before the taking of the vote on the Merger at a Special
Meeting of Stockholders to be called and duly noticed for the purpose of
considering and voting on the Merger, as required by such section, (B) continues
to hold such shares through the Effective Date, and (C) otherwise complies with
Section 262 of the Delaware General Corporation Law ("Dissenting Shares") shall
be converted into the right to receive in cash the value of the shares held by
him or her in accordance with Section 262 of the Delaware General Corporation
Law, and shall not be converted into the right to receive the Merger
Consideration, unless such holder withdraws or otherwise loses his or her right
to demand an appraisal of his or her shares. If after the Effective Date such
holder withdraws or loses his or her right to demand an appraisal of his or her
shares, such shares shall be treated as if they had been converted as of the
Effective Date into the right to receive the Merger Consideration payable in
respect to such shares pursuant to Section 1.02 (a) above.
1.03 Payment of Cash and Exchange of Shares.
(a) From and after the Effective Date, The Bank of New York, in the case of
the Ford Holdings Flexible Rate Auction Preferred Stock (Exchange) Series A-K
and Ford Holdings Flexible Rate Auction Preferred Stock Series L-P, and Chemical
Bank, in the case of the Ford Holdings Series A-D Cumulative Preferred Stock,
(the "Payment Agents") shall act as payment agents in effecting the payment of
the Merger Consideration. Ford Holdings shall deposit with the Payment Agents in
trust for the benefit of holders of certificates formerly representing shares of
Preferred Stock, immediately available funds in the aggregate amount (the
"Payment Fund") equal to the product of the Merger Consideration multiplied by
the number of shares entitled to payment pursuant to Section 1.02 of this
Agreement. All record holders of certificates evidencing shares of Preferred
Stock shall receive a form of letter of transmittal with instructions for use
thereof in surrendering such certificates and receiving the Merger Consideration
therefor. If the Merger is consummated, the Payment Agents shall, upon surrender
by a holder of record on the Effective Date of the certificates theretofore
representing shares of Preferred Stock, together with a completed letter of
transmittal, distribute by bank check or, at the option of the Payment Agents,
by wire transfer of immediately available funds to each such holder of record
(other than holders of Dissenting Shares) the Merger Consideration multiplied by
the number of shares formerly represented by such certificates, without any
interest thereon, in exchange therefor, and such certificates shall forthwith be
canceled. The Payment Agents shall, pursuant to irrevocable instructions, make
the payments referred to in Section 1.02 out of the Payment Fund. Until
surrendered and exchanged, each certificate theretofore representing shares of
capital stock of Ford Holdings (other than certificates representing shares held
by Ford Holdings or FHC or representing Dissenting Shares) shall represent
solely the right to receive the Merger Consideration multiplied by the number of
shares represented by such certificate, without any interest thereon.
Notwithstanding any of the foregoing, neither the Payment Agents nor any party
hereto shall be liable to a holder of shares for any Merger Consideration
delivered to a public official pursuant to applicable abandoned property,
escheat and similar laws.
(b) After the Effective Date, there shall be no transfers on the stock
transfer books of Ford Holdings of any shares entitled to payment under Section
1.02 of this Agreement.
(c) From and after the Effective Date, holders of certificates theretofore
evidencing shares entitled to payment under Section 1.02 of this Agreement shall
cease to have any rights as stockholders of Ford Holdings, except as provided
herein or by law.
A-2
<PAGE> 32
1.04 Certificate of Incorporation and By-Laws. The Certificate of
Incorporation and By-Laws of Ford Holdings as in effect immediately prior to the
Effective Date, until further amended, shall be and remain the Certificate of
Incorporation and By-Laws of Ford Holdings, the surviving corporation, following
the Merger.
1.05 Board of Directors; Officers. The Board of Directors of Ford Holdings
on the Effective Date shall remain the Board of Directors of Ford Holdings after
the Merger. Such directors shall serve as directors of Ford Holdings, the
surviving corporation, until the next annual meeting of stockholders of Ford
Holdings or until such time as their successors have been duly appointed or
elected. The officers of Ford Holdings immediately prior to the Effective Date
shall be the officers of Ford Holdings after the Merger. Such officers shall
serve as officers of Ford Holdings, the surviving corporation, until the next
annual meeting of stockholders of Ford Holdings or until such time as their
successors have been duly elected or appointed in accordance with the By-Laws of
the surviving corporation.
1.06 Effect of the Merger. Upon the Effective Date, FHC shall be merged
with and into Ford Holdings, which shall continue its corporate existence under
the laws of the State of Delaware. The separate corporate existence and
corporate organization of FHC shall cease upon the Effective Date, and Ford
Holdings as the surviving corporation shall possess all of the rights,
privileges, immunities and franchises, of a public as well as a private nature,
of each of the Constituent Corporations; and all property, real, personal,
intellectual, and mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all and every other
interest, of or belonging to or due to each of the Constituent Corporations,
shall be taken and deemed to be transferred to and vested in Ford Holdings as
the surviving corporation without further act or deed; and the title to any real
estate or intellectual property, or any interest therein, vested in the
Constituent Corporations shall not revert or be in any way impaired by reason of
such Merger. Neither the rights of creditors nor any liens upon the property of
either Constituent Corporation shall be impaired by the Merger, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to Ford Holdings as the surviving corporation and may be enforced against Ford
Holdings to the same extent as if the debts, liabilities and duties had been
incurred or contracted by Ford Holdings. Any existing claim, action or
proceeding, whether civil, criminal, or administrative, by or against either
Constituent Corporation may be prosecuted to judgment or decree as if the Merger
had not taken place, or Ford Holdings may be substituted in such action or
proceeding.
ARTICLE II
EFFECTIVE DATE
2.01 Effective Date. If this Agreement and Plan of Merger is duly adopted
by the requisite vote or written consent of stockholders of Ford Holdings and
FHC and is not terminated as contemplated in Article III, a Certificate of
Merger, executed in accordance with the laws of the State of Delaware, shall be
filed with the Secretary of State of the State of Delaware (the "Certificate of
Merger"). The Merger shall become effective on the date and at the time set
forth in the Certificate of Merger. Such date is sometimes referred to herein as
the "Effective Date."
ARTICLE III
TERMINATION
3.01 Termination or Postponement. This Agreement and Plan of Merger may be
(i) postponed or (ii) terminated, and the transactions contemplated hereby
abandoned, upon the mutual agreement of the parties hereto to postpone or
terminate the Merger contemplated hereby, at any time prior to the Effective
Date for any reason.
3.02 Liability. In the event of any termination of this Agreement and Plan
of Merger as provided in Section 3.01 above, this Agreement and Plan of Merger
shall cease and terminate, the Merger as provided herein shall not be
consummated and neither Ford Holdings nor FHC shall have any liability under
this
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Agreement and Plan of Merger of any nature whatsoever, including any liability
to any stockholder of any party to this Agreement and Plan of Merger.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.01 Amendment and Modification. To the extent permitted by law, this
Agreement and Plan of Merger may be amended, modified, or supplemented at any
time prior to the Effective Date whether prior to or subsequent to the approval
of the stockholders of the parties hereto, with respect to any of the terms
contained herein except the terms of the conversion provided for in Section
1.02.
4.02 Governing Law. All questions concerning the validity and operation of
this Agreement and Plan of Merger and the performance of the obligations imposed
upon the parties hereunder shall be governed by the laws of the State of
Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed by their duly authorized officers, all as of the day
and year first above written.
FORD HOLDINGS, INC.
By: /s/ JOHN M. RINTAMAKI
--------------------------------------
John M. Rintamaki
Secretary
FORD HOLDINGS CAPITAL CORPORATION
By: /s/ DAVID M. BRANDI
--------------------------------------
David M. Brandi
Vice President -- Treasurer
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ATTACHMENT B
RESOLUTION OF STOCKHOLDERS OF FORD HOLDINGS, INC.
BE IT RESOLVED, that the Agreement and Plan of Merger, dated as of October
16, 1995, between Ford Holdings, Inc. ("Ford Holdings") and Ford Holdings
Capital Corporation, a Delaware corporation ("FHC") and a wholly-owned
subsidiary of Ford Holdings, pursuant to which, among other things: (i) FHC will
merge with and into Ford Holdings, with Ford Holdings as the surviving
corporation; (ii) each share (other than shares held by holders who properly
exercise their rights of appraisal in accordance with Section 262 of the
Delaware General Corporation Law) of Ford Holdings Flexible Rate Auction
Preferred Stock (Exchange) Series A through K, Flexible Rate Auction Preferred
Stock Series L through P, Series A Cumulative Preferred Stock, Series B
Cumulative Preferred Stock, Series C Cumulative Preferred Stock and Series D
Cumulative Preferred Stock issued and outstanding immediately prior to the
effective date of the merger (the "Effective Date") will be converted into the
right to receive the $100,000 liquidation preference associated with such share
(which is the equivalent of a liquidation preference of $25 for each Depositary
Share representing 1/4,000 of a share of Series A through D Cumulative Preferred
Stock) plus any accumulated and unpaid dividends thereon through the date of
payment; (iii) each share of capital stock of FHC issued and outstanding
immediately prior to the Effective Date will be canceled and retired; and (iv)
each share of common stock of Ford Holdings issued and outstanding immediately
prior to the Effective Date will continue unchanged as a share of common stock
of Ford Holdings, the surviving corporation, be and hereby is approved and
adopted.
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ATTACHMENT C
GENERAL CORPORATION LAW OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days
thereafter, shall notify each of the stockholders entitled to appraisal
rights of the effective date of the merger or consolidation and that
appraisal rights are available for any or all of the shares of the
constituent corporation, and shall include in such notice a copy of this
section. The notice shall be sent by certified or registered mail, return
receipt requested, addressed to the stockholder at his address as it
appears on the records of the corporation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of the
notice, demand in writing from the surviving or resulting corporation the
appraisal of his shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of
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their shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list at
the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall
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be dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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ATTACHMENT D
OPINION OF
MORRIS, NICHOLS ARSHT & TUNNELL
October 16, 1995
Board of Directors
Ford Holdings, Inc.
The American Road
Dearborn, Michigan 48121
Ladies and Gentlemen:
You have requested our opinion as to certain matters of Delaware law
arising in connection with the merger (the "Merger") of Ford Holdings Capital
Corporation, a Delaware corporation ("Capital"), with and into Ford Holdings,
Inc., a Delaware corporation ("Holdings"), pursuant to the Agreement and Plan of
Merger dated as of October 16, 1995 by and between Holdings and Capital (the
"Merger Agreement"). The Merger Agreement provides that each share of Preferred
Stock, par value $1.00 per share, of Holdings (the "Preferred Stock") will be
converted in the Merger into the right to receive an amount equal to the
liquidation preference per share of such stock plus an amount equal to
accumulated and unpaid dividends thereon through the payment date. Because the
shares of Preferred Stock will be exchanged in the Merger for cash, the holders
will be entitled to appraisal rights under Section 262 ("Section 262") of the
Delaware General Corporation Law (the "DGCL"). Under Section 262, a stockholder
who perfects his or her appraisal rights is entitled to have the Delaware Court
of Chancery determine the "fair value" of his shares. You have asked, in
particular, our opinion as a matter of Delaware law as to the per share amount
that a court would likely award should a proceeding seeking such an appraisal be
brought.
Based upon the documents and information that you have furnished to us, as
described below, and subject to the assumptions, limitations and qualifications
hereinafter set forth and the legal analysis discussed below, and limited in all
respects to matters of Delaware law, it is our opinion that should a proceeding
be brought pursuant to Section 262 seeking an appraisal of the fair value of any
of the shares of Series Preferred Stock exchanged for cash in the Merger, a
court applying principles of Delaware law would determine the fair value of such
shares based principally on the value of the liquidation and dividend rights of
the shares of such series and that while, for the reasons set forth herein, the
matter is not free from doubt, it is our further opinion that such principles
applied to a record consisting of the facts hereinafter described would limit
the appraised value to an amount equal to, or not materially different from, the
$100,000 per share liquidation preference of such shares, plus an amount equal
to accumulated and unpaid dividends on such shares through and including the
payment date.
DOCUMENTS REVIEWED
In connection with your request for our opinion, you have provided to us
and we have reviewed (1) the Merger Agreement, (2) the Certificate of
Incorporation of Holdings (the "Certificate of Incorporation"), including the
Certificate of the Designations, Powers, Preferences and Relative, Participating
or Other Rights, and the Qualifications, Limitations or Restrictions Thereof, of
Flexible Rate Auction Preferred Stock (Exchange), Series A, Series B, Series C,
Series D, Series E, Series F, Series G, Series H, Series I, Series J and Series
K (the "Flexible Rate Auction Preferred Stock, Series A through K") of Holdings,
the Certificate of the Designations, Preferences and Relative, Participating,
Optional or Other Special Rights, and the Qualifications, Limitations or
Restrictions Thereof, of Flexible Rate Auction Preferred Stock, Series L, Series
M and Series N (the "Flexible Rate Auction Preferred Stock, Series L through N")
of Holdings, the Certificate of the Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations, or Restrictions Thereof, of Flexible Rate Auction Preferred Stock,
Series O and Series P of Holdings (together with the Flexible Rate Auction
Preferred Stock, Series A through K and the Flexible Rate Auction Preferred
Stock, Series L through M, the "Flexible Rate Auction Preferred
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Stock"), the Certificate of the Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations or Restrictions Thereof of Series A Cumulative Preferred Stock of
Holdings, the Certificate of the Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations or Restrictions Thereof, of Series B Cumulative Preferred Stock of
Holdings, the Certificate of the Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations, or Restrictions Thereof, of Series C Cumulative Preferred Stock of
Holdings, and the Certificate of the Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and the Qualifications,
Limitations or Restrictions Thereof, of Series D Cumulative Preferred Stock
(together with the Series A Cumulative Preferred Stock, the Series B Cumulative
Preferred Stock, and the Series C Cumulative Preferred Stock, the "Cumulative
Preferred Stock", and together with such series and the Flexible Rate Auction
Preferred Stock, the "Series Preferred Stock") of Holdings and (3) the
prospectuses and prospectus supplements relating to the offerings by Holdings of
each series of the Series Preferred Stock. We have not reviewed any other
documents in connection with your request for our opinion and have assumed there
are no such documents that are contrary to or inconsistent with the opinions
expressed herein.
THE PREFERRED STOCK TERMS
Each series of Flexible Rate Auction Preferred Stock contains the following
provision (the "Voting Provision"):
Without the affirmative vote of the holders of a majority of the
outstanding shares of all series of Auction Preferred, Voting Preferred and
Parity Preferred, voting as a single class, in person or by proxy at a
special meeting for the purpose, or the unanimous written consent of the
holders of all series of Auction Preferred, Voting Preferred and Parity
Preferred voting without such a meeting (subject to the provisions of any
applicable law), the Corporation may not sell, lease or convey all or
substantially all of the assets of the Corporation, or consolidate or merge
with or into any other corporation unless, in the case of a consolidation
or merger, each holder of shares of Auction Preferred, Voting Preferred and
Parity Preferred shall receive, upon such consolidation or merger, an
amount in cash equal to the liquidation preference, Merger Premium, if any,
and accumulated and unpaid dividends through the date of payment of such
shares of Auction Preferred, Voting Preferred and Parity Preferred in
exchange for such shares of Auction Preferred, Voting Preferred and Parity
Preferred.
(Emphasis added.) Each series of Cumulative Preferred Stock includes an
identical Voting Provision, except that the underscored term is replaced by the
word "premium."
The "Merger Premium" is an amount determined by the "Term Selection Agent"
in the event it determines that any series of Flexible Rate Auction Preferred
Stock should change from a "Short-Term Dividend Period" to a "Long-Term Dividend
Period." Such capitalized terms are defined in the terms of the Flexible Rate
Auction Preferred Stock. In general, the dividends on the Flexible Rate Auction
Preferred Stock are to be reset to market rates by an auction procedure every 49
days. If the Term Selection Agent determines that the most favorable financing
alternative for Holdings involves a longer period before the dividend rate is to
be reset, it may establish a Long-Term Dividend Period of greater than 49 days,
and in doing so may establish an amount above the shares' liquidation preference
that is payable in a merger, i.e., the Merger Premium. You have informed us that
in each case where the Term Selection Agent has selected a Long-Term Dividend
Period for a series of Flexible Rate Auction Preferred Stock, it has not
established any Merger Premium. You also have informed us that the Voting
Provision and the provisions concerning the determination of the Merger Premium
(including the lack of authority in the Term Selection Agent to fix such a
premium with respect to Short-Term Dividend Periods) were intended to fix the
premium to which investors were entitled in a cash-out merger.
Each series of Cumulative Preferred Stock, each series of Flexible Rate
Auction Preferred Stock, Series L through M, and both series of Flexible Rate
Auction Preferred Stock, Series O and Series P (collectively,
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the "Merger Preference Series") contains the following provision, or one that is
substantively similar (the "Merger Preference"):
In any merger or consolidation of the Corporation with or into any
other corporation, including any Affiliate, or a merger or consolidation of
any other corporation, including any Affiliate, with or into the
Corporation, which merger or consolidation by its terms provides for the
payment of only cash to holders of the Auction Preferred, each holder of
Auction Preferred shall be entitled to receive an amount equal to the
liquidation preference of the shares of Auction Preferred held by such
holder, any Merger Premium, plus an amount equal to accumulated and unpaid
dividends on such shares to and including the date of payment thereof, and
no more, in exchange for such shares of Auction Preferred (a "Cash-Out
Merger").
The Merger Preference for each series of Cumulative Preferred Stock provides
that in any merger in which cash is paid for that series, the shares of such
series must receive their liquidation preference, plus accrued and unpaid
dividends.
Finally, each of the series of Series Preferred Stock contains the
following provision or one that is substantively similar (the "Liquidation
Preference"):
Upon the liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, holders of Auction Preferred
shall be entitled to receive, out of assets of the Corporation available
for distribution to stockholders after satisfying claims of creditors but
before any payment or distribution to the Common stock or on any other
class of stock ranking junior to the shares of Auction Preferred upon
liquidation ("Junior Liquidation Stock"), a liquidating distribution in the
amount of $100,000 per share, which shall be the liquidation preference of
such shares, plus an amount equal to accumulated and unpaid dividends on
each such share (whether or not declared) to and including the date of
final dissolution. Unless and until payment in full has been made to
holders of shares of Auction Preferred of the liquidating distribution to
which they are entitled as provided in this Section 4, no dividends or
distributions shall be made to holders of the Common Stock or the Junior
Liquidation Stock, no payment or delivery or commitment to make payment or
delivery of any money or assets to any Affiliate shall be made and no
purchase, redemption or other acquisition for any consideration by the
Corporation shall be made in respect of the Common Stock or the Junior
Liquidation Stock. After the payment to holders of shares of Auction
Preferred of the full amount of the liquidating distributions to which they
are entitled pursuant to the second next preceding sentence, holders of the
shares of Auction Preferred (in their capacity as such holders) shall have
no right or claim to any of the remaining assets of the Corporation.
LEGAL ANALYSIS
As indicated above, with certain exceptions not relevant here, Section 262
provides for an appraisal by the Court of Chancery of the fair value of shares
of a class or series of stock of a constituent corporation in mergers, such as
the Merger, effected pursuant to Section 251 of the DGCL. The Delaware Supreme
Court has accepted a broad definition of value as that term is used in Section
262:
The basic concept of value under the appraisal statute is that the
stockholder is entitled to be paid for that which has been taken from him,
viz., his proportionate interest in a going concern. By value of the
stockholder's proportionate interest in the corporate enterprise is meant
that true or intrinsic value of his stock which has been taken by the
merger. In determining what figure represents this true or intrinsic value,
the appraiser and the courts must take into consideration all factors and
elements which reasonably might enter into the fixing of value. Thus,
market value, asset value, dividends, earning prospects, the nature of the
enterprise and any other facts which were known or which could be
ascertained as of the date of merger and which throw any light on future
prospects of the merged corporation are not only pertinent to an inquiry as
to the value of the dissenting stockholders' interest, but must be
considered by the agency fixing the value.
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Tri-Continental Corp. v. Battye, 74 A.2d 71 (Del. 1950). In particular, the
Delaware Court of Chancery has looked to asset value, market value and
discounted cash flows when valuing shares under Section 262. See generally, D.
Drexler, L. Black & A. Sparks, Delaware Corporation Law and Practice, Section
36.08 (1995).
In our experience, appraisal cases, for the most part, deal with common
stock or with preferred stock that is convertible into common stock. There is a
paucity of case law involving appraisal rights of holders of preferred stock
that, like the Series Preferred Stock, is not convertible. In our opinion, where
an appraisal involves shares of preferred stock that are not convertible and do
not participate with the common stock with respect to dividends or upon
liquidation, the valuation methodologies commonly applied in appraisal
proceedings are largely irrelevant to a determination of the "intrinsic value of
[the] stock" converted in a merger. Unlike common stock, nonconvertible,
non-participating preferred stock does not entitle a holder to a proportionate
interest in the corporate enterprise. Thus, for example, the Flexible Rate
Auction Preferred Stock is entitled to "cumulative cash dividends at the
Applicable Rate . . . and no more." Similarly, in liquidation, holders of the
Flexible Rate Auction Preferred Stock are entitled to a $100,000 per share
liquidation preference plus an amount equal to accumulated and unpaid dividends;
following such payment upon liquidation, the holders of such shares "shall have
no right or claim to any of the remaining assets of the corporation." The terms
of the Cumulative Preferred Stock contain similar limitations on residual
claims. We believe such contract limitations on the value of preferred stocks
such as the Series Preferred Stock account for the paucity of appraisal cases
involving such "pure" preferred stock. In our opinion, the fair value of a non-
convertible preferred stock that does not participate in the residual claims of
the common stock should be viewed as equivalent to the value of the contract
rights and preferences attaching to such shares, including dividend,
liquidation, redemption and other preferences and rights.
The decided cases support this view. In Jacques Coe & Co. v.
Minneapolis-Moline Co., Del. Ch., 75 A.2d 244 (1950), the court was called upon
to value a non-convertible preferred stock. The court approved a valuation which
comprised the following elements: asset value of $139.60, which equalled the
call price plus dividend arrearages; actual market price of $113; and an
"earnings and dividend" factor of $140, which consisted of the five year per
share average earnings of the corporation (on the preferred stock only)(1),
capitalized by a multiple of 5x. Asset value was weighted 40%, market price 30%,
and earnings and dividend value 30%.
Significantly, the court determined that the call or liquidation price
operated as a ceiling on the asset value factor, and in so doing tacitly agreed
with a concession by the parties that such price was also a ceiling on the fair
value of the preferred stock being appraised. The court stated:
The preferred stockholders contend that it was error to limit net asset
value to the call or liquidation price when the asset value was more
than twice that amount. They concede that the final appraised value
should not have exceeded the call or liquidation price, but they urged
that such a limitation should not have been placed on net asset value
which constituted but one element of the appraised value. Obviously the
more assets there are, the more the preferred is protected but this
should not increase the amount of net assets attributable to the
preferred. The appraiser properly limited net asset value to the call or
liquidation price where the net assets were substantially in excess of
such prices because he was seeking value at a particular time. The
stockholders' contention, if here adopted, would result in a distortion
of the ultimate value of the preferred stock.
75 A.2d at 247 (emphasis added).
Dana v. Tri-Continental Corporation, Del. Ch., C.A. 249 (Nov. 12, 1952)
(unreported opinion), involved the appraisal of preferred stock of a closed-end
investment company, the assets of which consisted essentially of a diversified
portfolio of cash, bonds, and preferred and common stocks. The preferred stock
preferences included a $5.50 per share annual cumulative dividend and a $110
redemption price, plus arrearages in dividends. The preferred stock was not
convertible and there were no dividend arrearages at the time of the merger.
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(1) Earnings divided by total preferred shares outstanding.
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The appraiser discussed at some length the differences between preferred
and common stocks. He concluded that it was improper to attempt to create values
utilizing the traditional value factors of earnings and assets employed in cases
involving common equity and applying them to the preferred stock he was called
upon to value. He said:
A preferred stock is entitled to a fixed and limited participation in
assets and earnings, whereas a common stock, being the equity security,
has, subject to the rights of the preferred stock, an unlimited right of
participation in the assets and earnings of the corporation.
After the asset value of a preferred stock has reached a certain
point, doubling or tripling or quadrupling the asset value will not enhance
the value of the preferred stock. Similarly, after the net earnings per
share of preferred stock has reached a certain point, further improvement
of earnings will not increase the value of the preferred stock. Leaving out
of consideration the effect on the value of preferred stock of the right of
the corporation to redeem the stock at a fixed price or the right of a
preferred holder to convert his shares into common stock, there is a
ceiling on the value of preferred stock which is determined by the dividend
which the preferred stock is entitled to receive.
Id., Report of Appraiser at 14.
In addition, although the preferred stock was traded, and thus had a market
value, the appraiser declined to give market value separate weight because the
announcement of the merger, some four months prior to the merger, affected the
market price, and he declined to give weight to an unaffected market price that
was four months old.
The appraiser in Dana thus valued the preferred stock solely on the basis
of capitalizing the $5.50 dividend rate. He considered both "asset coverage" and
"dividend coverage" in fixing this rate, as well as quality of management.
"Asset coverage" was the amount by which the corporation's value, valued on a
liquidation basis, exceeded the preferred liquidation obligation. In effect, the
appraiser attempted to determine the degree of risk involved in predicting
whether the corporation would earn and declare the preference dividend year
after year in the future.
Finally, the appraiser in Dana rejected the argument that preferred shares
should be valued at not less than their redemption or voluntary liquidation
value, noting that, instead, the corporation's ability to redeem the preferred
stock limited its potential value. He wrote:
In the first place, neither the redemption price nor the liquidation price
of a preferred stock is evidence of inherent or affirmative value. By this
I mean that neither the redemption nor the liquidation price is a value
factor which in and of itself gives value to a preferred stock. Such prices
do not operate as a floor to support the value of stock; rather, they
operate as a ceiling to limit the stock's potential maximum value. While
the redemption price is not necessarily the highest price at which a
preferred stock will sell, it is, nonetheless, a very effective brake upon
further upward movement of price.
Id., Final Report Appraiser at 2, (emphasis added).
We believe it is proper to read the Jacques Coe and Dana decisions as
indicating that a corporation's right to redeem stock constitutes a limit on the
value of that stock. Where the corporation has bargained for the right to redeem
such shares at a specific price, it is unlikely that a court would deem the
"fair value" to be more, thus permitting the stockholder to receive more than
the benefit of its bargain. This view is supported by the prohibition set forth
in Section 160(c) of the DGCL, which prohibits corporations from purchasing
shares at a price higher than that for which the shares may be redeemed at the
corporation's option.
In our opinion, the methodology followed in valuing the Series Preferred
Stock would be similar to that used by the appraiser and confirmed by the Court
of Chancery in Dana. In addition, we believe that the Merger Preference, like a
right of redemption, should be viewed by a court as limiting the fair value of
the Merger Preference Series. Finally, as to the Flexible Rate Auction Preferred
Stock, we believe that the intent of the drafters of the Voting Provision would
lead a court to conclude that the Merger Premium mechanism limits the fair value
of those series in a similar fashion.
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The foregoing analysis is consistent with Delaware cases that construe the
rights of holders of preferred stock that are set forth in the certificate of
incorporation as strictly contractual rights, the operation of which is not
measured by a fiduciary standard. See Jedwab v. MGM Grand Hotels, Inc., 509 A.2d
584 (Del. Ch. 1986); H.B. Korenvaes Investments, L.P. v. Marriott Corporation,
Del. Ch., C.A. No. 12922, Allen, C. (July 1, 1993); Rosan v. Chicago Milwaukee
Corp., Del. Ch., C.A. No. 10526, Chandler, V.C. (Feb. 6, 1990). Such rights are
subject to strict construction. See, e.g., Waggoner v. Laster, 581 A.2d 1127
(Del. 1990). Since Holdings obtained an explicit and absolute contractual right
at all times to avail itself of the Merger Preference for each series of the
Merger Preference Series, it appears to us, under the principles discussed
above, that those amounts limit the intrinsic value of the shares of such
series. Furthermore, as noted above, you have informed us that the provisions
involving Merger Premiums were intended to establish a limit on the amount to
which investors were entitled if Holdings "called" the shares early by way of a
merger. It would appear directly to contradict this intent to permit the holders
to argue that the "fair value" of their shares includes a premium, even though
they purchased shares with a "Merger Premium" explicitly set at zero.
ASSUMPTIONS, LIMITATIONS AND QUALIFICATIONS
Our opinion is limited in all respects to the Delaware General Corporation
Law and, in particular, to the provisions of Section 262 of that statute dealing
with appraisal rights.
We have assumed that any appraisal proceeding instituted in connection with
the Merger would be brought by Holdings or by a stockholder of Holdings who made
a proper demand for appraisal and who is otherwise entitled to appraisal rights
and who has otherwise complied with the provisions of subsections (a) and (d) of
Section 262.
We call to your attention that predictions as to the outcome of any
litigation, including appraisal proceedings, particularly where no proceeding
has, in fact, been commenced, is uncertain, and that a court conducting an
appraisal proceeding would not necessarily follow or consider this opinion or
the reasoning set forth herein.
We also call to your attention that we are not experts in the valuation of
corporations or assets or securities thereof, and that this opinion should not
be relied upon by you or any other person as purporting to represent such a
valuation.
Our opinion is based solely on our review of the documents and information
provided to us, and the assumptions recited herein, and we have undertaken no
independent investigation with respect thereto.
Our belief that the fair value of the shares of Series Preferred Stock in
an appraisal proceeding would be calculated and limited in the manner set forth
above is based on the contract interpretation and your description of intent set
forth above.
The admission by a court, under traditional evidentiary rules, of parole
evidence, separate writings or other extrinsic evidence inconsistent with the
interpretations set forth herein could lead to a conclusion different from that
set forth herein.
This opinion has been delivered solely for your benefit in connection with
the transactions contemplated by the Merger Agreement and may not be relied upon
by any other person or entity without our prior written consent.
Very truly yours,
/s/ MORRIS, NICHOLS, ARSHT & TUNNELL
MORRIS, NICHOLS, ARSHT & TUNNELL
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