<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 31, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
HAYES WHEELS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
3714
(Primary Standard Industrial
Classification Code Number)
13-3384636
(I.R.S. Employer
Identification No.)
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
(313) 941-2000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
DANIEL M. SANDBERG, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
(313) 941-2000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
ROBERT B. PINCUS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
ONE RODNEY SQUARE
WILMINGTON, DELAWARE 19801
LOUIS B. GOLDMAN, ESQ.
ALTHEIMER & GRAY
10 SOUTH WACKER DRIVE, SUITE 4000
CHICAGO, ILLINOIS 60606
DAVID A. KATZ, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement which
relates to the merger (the "Merger") of MWC Holdings, Inc. ("Holdings"), with
and into Hayes Wheels International, Inc. (the "Company"), pursuant to the
Merger Agreement described herein.
------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
<S> <C> <C> <C> <C>
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11,611,300
Common Stock, $.01 par value............ shares(1) N.A. $561,896,517(2) $84,755(3)
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Warrants to purchase Common Stock....... 1,150,000 warrants (4) $ (4) $ (4)
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</TABLE>
(1) Based on the maximum number of shares of New Common Stock, assuming the
exercise of all currently outstanding options to purchase shares of Company
Common Stock issued by the Company. Includes 814,400 shares to be issued to
K-H Corporation, a wholly-owned subsidiary of Varity Corporation, which
shares may be offered or sold by K-H Corporation pursuant to the Joint Proxy
Statement/Prospectus included in this Registration Statement.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f) under the Securities
Act by multiplying $31.125, the average of the high and low sales prices of
Company Common Stock on May 29, 1996 reported on the NYSE, by 18,052,900,
the number of Company Common Shares outstanding at the close of business on
May 29, 1996, assuming the exercise of all then outstanding options to
purchase Company Common Stock and adding such product to the par value of
the Holdings Common Stock pursuant to Rule 457(f)(2).
(3) Pursuant to Rule 457(b) under the Securities Act, $109,004 of the
registration fee was paid on April 17, 1996 in connection with the filing of
preliminary joint proxy materials.
(4) This Registration Statement covers the Warrants to be issued by the Company
in connection with the Merger. Such Warrants are to be issued for no
additional consideration, and therefore no additional registration fee is
required.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
HAYES WHEELS INTERNATIONAL, INC.
CROSS-REFERENCE TABLE
CROSS REFERENCE SHEET BETWEEN ITEMS OF FORM S-4 AND JOINT PROXY
STATEMENT/PROSPECTUS
PURSUANT TO ITEM 501(B) OF REGULATION S-K.
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION IN
NUMBER ITEM IN FORM S-4 JOINT PROXY STATEMENT/PROSPECTUS
- ------ ------------------------------------ ------------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus.......................... Facing Page, Cross Reference Table and Outside
Front Cover Page of Joint Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Table of Contents, "Available Information" and
"Incorporation of Documents by Reference"
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information......................... "Summary," "Risk Factors," "Pro Forma Combined
Condensed Financial Statements and Certain Other
Information" and "Additional Information
Concerning Holdings"
4. Terms of the Transaction............ "Summary," "The Merger," "Certain Provisions of
the Merger Agreement," "Certain Other
Agreements," "Stockholders' Rights of
Appraisal," "Management of Surviving
Corporation," "Description of Capital Stock,"
"Comparison of Stockholder Rights," Annex I,
Annex II and Annex III
5. Pro Forma Financial Information..... "Summary," "Pro Forma Combined Condensed
Financial Statements and Certain Other
Information"
6. Material Contacts with the Company
Being Acquired...................... "The Merger"
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........... "The Merger -- Resales of New Common Stock and
Warrants" and "Selling Stockholder"
8. Interests of Named Experts and
Counsel............................. "Experts" and "Legal Opinions"
9. Disclosure of Commission Position
Indemnification for Securities Act
Liabilities......................... *
10. Information with Respect to S-3
Registrants......................... "Summary," "Risk Factors," "Incorporation of
Certain Documents by Reference" and "Pro Forma
Combined Condensed Financial Statements and
Certain Other Information"
11. Incorporation of Certain Information
by Reference........................ "Incorporation of Certain Documents by
Reference"
12. Information with Respect to S-2 or
S-3 Registrants..................... *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION IN
NUMBER ITEM IN FORM S-4 JOINT PROXY STATEMENT/PROSPECTUS
- ------ ------------------------------------ ------------------------------------------------
<C> <S> <C>
13. Incorporation of Certain Information
by Reference........................ *
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants......................... *
15. Information with Respect to S-3
Companies........................... *
16. Information with Respect to S-2 or
S-3 Companies....................... *
17. Information with Respect to
Companies Other Than S-3 or S-2
Companies........................... "Summary," "Pro Forma Combined Condensed
Financial Statements and Certain Other
Information," "Additional Information Concerning
Holdings" and "Index to Financial Statements"
18. Information if Proxies, Consents or
Authorizations Are to Be
Solicited........................... Outside Front Cover Page, "Incorporation of
Certain Documents by Reference," "Summary,"
"Company Special Meeting," "Holdings Special
Meeting," "The Merger," "Stockholder's Rights of
Appraisal" and "Stockholder Proposals"
19. Information if Proxies, Consents or
Authorizations Are Not to Be
Solicited or in an Exchange Offer... *
</TABLE>
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* Not applicable or answer is in the negative
<PAGE> 4
Hayes Wheels Logo
May 31, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of Stockholders of Hayes Wheels International, Inc. (the "Company") to
be held at The Fairlane Club, 5000 Fairlane Woods Drive, Dearborn, Michigan, on
Tuesday, July 2, 1996 at 10:00 a.m. local time. The doors will open at 9:00 a.m.
At the Special Meeting, you will be asked to consider and vote on the
approval and adoption of an Agreement and Plan of Merger dated as of March 28,
1996 (the "Merger Agreement"), between MWC Holdings, Inc., a Delaware
corporation ("Holdings"), and the Company, providing for the merger (the
"Merger") of Holdings with and into the Company. The Company will be the
Surviving Corporation in the Merger (as such, the "Surviving Corporation"), and
Motor Wheel Corporation, an Ohio corporation and a wholly-owned subsidiary of
Holdings, will become a wholly-owned subsidiary of the Surviving Corporation.
Pursuant to the Merger Agreement: (i) each outstanding share of common stock,
par value $.01 per share, of the Company ("Company Common Stock"), other than
shares held by the Company or its subsidiaries (which will be cancelled) and
shares for which appraisal rights are perfected under Delaware law, will be
converted into the right to receive $28.80 in cash and one-tenth of one share of
common stock, par value $.01 per share, of the Surviving Corporation ("New
Common Stock"); (ii) each outstanding share of common stock, par value $.01 per
share, of Holdings, other than shares held by Holdings or its subsidiaries
(which will be cancelled) and shares for which appraisal rights are perfected
under Delaware law, will be converted into the right to receive 8,231.76 shares
of New Common Stock and 3,029.29 warrants, each warrant entitling the holder
thereof to purchase one share of New Common Stock at a price of $48.00 during
the period commencing on the fourth anniversary of the effective time of the
Merger and ending on the seventh anniversary thereof; and (iii) each outstanding
share of Series A Preferred Stock, par value $.01 per share, of the Company,
which shares will be sold to certain investors immediately prior to the Merger
as part of the financing for the Merger, will be converted into the right to
receive 31.25 shares of New Common Stock.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT. In determining to approve and recommend approval and
adoption of the Merger Agreement, the Board of Directors carefully reviewed and
considered the terms and conditions of the proposed Merger, as well as a number
of other factors, including the opinion of Goldman, Sachs & Co. ("Goldman
Sachs") as to the fairness of the consideration to be received by the holders of
Company Common Stock pursuant to the Merger. The full text of the opinion of
Goldman Sachs, which sets forth the assumptions made, matters considered and
limits on review undertaken, is attached as Annex II to the accompanying Joint
Proxy Statement/Prospectus.
The Merger and the Merger Agreement are more fully described in the
accompanying Joint Proxy Statement/Prospectus. In view of the importance of the
action to be taken at the Special Meeting, we urge you to read this material
carefully. If you have any questions regarding any of the foregoing, please call
Georgeson & Company, Inc., our proxy solicitation agent, toll free at (800)
223-2064 or collect at (212) 440-9800.
K-H Corporation ("K-H"), an indirect wholly-owned subsidiary of Varity
Corporation and the holder of approximately 46.3% of the outstanding shares of
Company Common Stock, has granted a proxy (the "Varity Proxy") to certain
directors of Holdings to vote K-H's shares of Company Common Stock for approval
and adoption of the Merger Agreement and against any proposal or transaction
which could prevent or delay the consummation of the transactions contemplated
by the Merger Agreement, and Holdings has agreed to cause its representatives to
attend and vote at the Special Meeting in accordance with the Varity Proxy.
<PAGE> 5
Pursuant to the Delaware General Corporation Law (the "DGCL"), holders of
Company Common Stock who do not vote in favor of the Merger Agreement and who
comply with the requirements of Section 262 of the DGCL will have, if the Merger
is consummated, the right to seek appraisal of their shares of Company Common
Stock. For a more complete description of such dissenters' rights, see
"STOCKHOLDERS' RIGHTS OF APPRAISAL" in the accompanying Joint Proxy
Statement/Prospectus.
It is important that your shares of the Company Common Stock be represented
at the Special Meeting regardless of the number of shares you hold. You are
urged to complete the enclosed proxy card and return it in the enclosed business
reply envelope, whether or not you plan to attend the Special Meeting. If you do
attend and wish to vote in person, you may revoke your proxy at that time.
Very truly yours,
<TABLE>
<S> <C>
John E. Utley Ron Cucuz
John E. Utley Ron Cucuz
Chairman of the Board President and Chief Executive Officer
</TABLE>
2
<PAGE> 6
HAYES WHEELS INTERNATIONAL, INC.
38481 HURON RIVER DRIVE, ROMULUS, MI 48174
(313) 941-2000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 2, 1996
TO THE STOCKHOLDERS OF
HAYES WHEELS INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of
Stockholders of Hayes Wheels International, Inc. (the "Company") will be held at
The Fairlane Club, 5000 Fairlane Woods Drive, Dearborn, Michigan, on Tuesday,
July 2, 1996, at 10:00 a.m. (local time), for the purposes of considering and
acting upon:
1. The approval and adoption of the Agreement and Plan of Merger dated
as of March 28, 1996 (the "Merger Agreement"), between MWC Holdings, Inc.,
a Delaware corporation ("Holdings"), and the Company, providing for the
merger (the "Merger") of Holdings with and into the Company. The Company
will be the surviving corporation in the Merger (as such, the "Surviving
Corporation"), and Motor Wheel Corporation, an Ohio corporation and a
wholly-owned subsidiary of Holdings, will become a wholly-owned subsidiary
of the Surviving Corporation. Pursuant to the Merger Agreement: (i) each
outstanding share of common stock, par value $.01 per share, of the Company
("Company Common Stock"), other than shares held by the Company or its
subsidiaries (which will be cancelled) and shares for which appraisal
rights are perfected under Delaware law, will be converted into the right
to receive $28.80 in cash and one-tenth of one share of common stock, par
value $.01 per share, of the Surviving Corporation ("New Common Stock");
(ii) each outstanding share of common stock, par value $.01 per share, of
Holdings, other than shares held by Holdings or its subsidiaries (which
will be cancelled) and shares for which appraisal rights are perfected
under Delaware law, will be converted into the right to receive 8,231.76
shares of New Common Stock and 3,029.29 warrants, each warrant entitling
the holder thereof to purchase one share of New Common Stock at a price of
$48.00 during the period commencing on the fourth anniversary of the
effective time of the Merger and ending on the seventh anniversary thereof,
and (iii) each outstanding share of Series A Preferred Stock, par value
$.01 per share, of the Company, which shares will be sold to certain
investors immediately prior to the Merger as part of the financing for the
Merger, will be converted into the right to receive 31.25 shares of New
Common Stock.
2. The transaction of such other business as may properly come before
the Special Meeting or any adjournments or postponements thereof.
The close of business on May 30, 1996, has been fixed as the record date
for the determination of holders of Company Common Stock who will be entitled to
receive notice of and to vote at the Special Meeting. The affirmative vote of
the holders of not less than a majority of the outstanding shares of Company
Common Stock will be necessary for approval and adoption of the Merger
Agreement. A list of the holders of Company Common Stock entitled to vote at the
Special Meeting will be open to examination, during ordinary business hours, at
the location of the Special Meeting for 10 days preceding the Special Meeting. A
holder of approximately 46.3% of the outstanding shares of Company Common Stock
has granted its proxy to vote its shares of Company Common Stock at the Special
Meeting in favor of the Merger.
AFTER CAREFUL CONSIDERATION, THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO AND IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
Pursuant to the Delaware General Corporation Law (the "DGCL"), holders of
Company Common Stock who do not vote in favor of the Merger Agreement and who
comply with the requirements of
<PAGE> 7
Section 262 of the DGCL will have, if the Merger is consummated, the right to
seek appraisal of their shares of Company Common Stock. For a more complete
description of such dissenters' rights, see "STOCKHOLDERS' RIGHTS OF APPRAISAL"
in the accompanying Joint Proxy Statement/Prospectus.
It is important that your shares of Company Common Stock be represented at
the Special Meeting regardless of the number of shares you hold. You are urged
to complete the enclosed proxy card and return it in the enclosed business reply
envelope. If you attend the Special Meeting and wish to vote in person, you may
revoke your proxy at that time.
By Order of the Board of Directors,
Daniel M. Sandberg
Daniel M. Sandberg
Secretary
Romulus, Michigan
May 31, 1996
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
2
<PAGE> 8
May 31, 1996
MWC HOLDINGS, INC.
2501 WOODLAKE CIRCLE
OKEMOS, MI 48864
(517) 337-5700
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
MWC Holdings, Inc. ("Holdings") to be held on Tuesday, July 2, 1996 at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, 43rd floor,
New York, New York, at 10:00 a.m., local time (the "Special Meeting").
The purpose of the Special Meeting is to consider a proposal to approve an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Holdings
will be merged (the "Merger") with and into Hayes Wheels International, Inc., a
Delaware corporation (the "Company"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"). As a result of the Merger,
Motor Wheel Corporation, an Ohio corporation and a wholly-owned subsidiary of
Holdings, will become a wholly-owned subsidiary of the Surviving Corporation.
Subject to the terms and conditions of the Merger Agreement, (a) each share
of common stock of Holdings, par value $.01 per share ("Holdings Common Stock"),
outstanding immediately prior to the effective time of the Merger (the
"Effective Time"), other than shares held by Holdings or its subsidiaries (which
will be cancelled) and shares as to which dissenters' rights are perfected under
Delaware law, will be converted into (i) 8,231.76 shares of common stock, par
value $.01 per share, of the Surviving Corporation ("New Common Stock") and (ii)
3,029.29 warrants, with each warrant entitling the holder thereof to purchase
one share of New Common Stock at an exercise price of $48.00 per share during
the period from the fourth anniversary of the Effective Time through the seventh
anniversary thereof, (b) each outstanding share of common stock, par value $.01
per share, of the Company ("Company Common Stock"), other than shares held by
the Company or its subsidiaries (which will be cancelled) and shares as to which
dissenters' rights are perfected under Delaware law, will be converted into (i)
$28.80 in cash and (ii) one-tenth of one share of New Common Stock and (c) each
outstanding share of Series A Preferred Stock, par value $.01 per share, of the
Company, which shares will be sold to certain investors immediately prior to the
Merger as part of the financing of the Merger, will be converted into 31.25
shares of New Common Stock.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER BETWEEN HOLDINGS AND THE
COMPANY IS ADVISABLE AND IN THE BEST INTERESTS OF HOLDINGS AND ITS STOCKHOLDERS.
ACCORDINGLY, YOUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT. You are encouraged to read the accompanying Joint Proxy
Statement/Prospectus, which provides additional information regarding Holdings,
the Company and the Merger.
Joseph Littlejohn & Levy Fund II L.P. ("JLL"), the holder of approximately
74.1% of the outstanding shares of Holdings Common Stock, has granted a proxy
(the "JLL Proxy") to certain representatives of Varity Corporation ("Varity"),
the beneficial owner of approximately 46.3% of the outstanding shares of Company
Common Stock, to vote JLL's shares of Holdings Common Stock for approval and
adoption of the Merger Agreement and against any proposal or transaction which
could prevent or delay the consummation of the transactions contemplated by the
Merger Agreement, and Varity has agreed to cause its representatives to attend
and vote at the Special Meeting in accordance with the JLL Proxy. Approval of
the Merger requires an affirmative vote of a majority of shares of Holdings
Common Stock outstanding and entitled to vote at the Special Meeting. Therefore,
there will be a quorum at the Special Meeting and sufficient votes cast for
<PAGE> 9
approval and adoption of the Merger Agreement to ensure its passage without the
vote of any other stockholder.
Pursuant to the Delaware General Corporation Law (the "DGCL"), holders of
Holdings Common Stock who do not vote in favor of the Merger Agreement and who
comply with the requirements of Section 262 of the DGCL will have, if the Merger
is consummated, the right to seek appraisal of their shares of Holdings Common
Stock. For a more complete description of such dissenters' rights, see
"STOCKHOLDERS' RIGHTS OF APPRAISAL" in the attached Joint Proxy
Statement/Prospectus.
On behalf of your Board of Directors, I urge you to complete, date and sign
the accompanying proxy and return it promptly in the enclosed postage-paid
envelope. This will not prevent you from attending the Special Meeting or voting
in person, but will assure that your vote is counted if you are unable to attend
the Special Meeting. You may revoke your proxy at any time by filing a written
notice of revocation with, or by delivering a duly executed proxy bearing a
later date to, the Secretary of Holdings at Holdings' main office prior to the
Special Meeting or by attending the Special Meeting and voting in person.
On behalf of the Board of Directors, I thank you for your support and urge
you to vote FOR approval and adoption of the Merger Agreement.
Sincerely,
Richard W. Tuley
Richard W. Tuley
President
2
<PAGE> 10
MWC HOLDINGS, INC.
2501 WOODLAKE CIRCLE
OKEMOS, MI 48864
(517) 337-5700
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 2, 1996
-------------------------
TO THE STOCKHOLDERS OF
MWC HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of MWC
Holdings, Inc. ("Holdings") will be held on Tuesday, July 2, at 10:00 a.m.,
local time, at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, 43rd floor, New York, New York (the "Special Meeting"), for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement") providing for the
merger of Holdings with and into Hayes Wheels International, Inc., a
Delaware corporation (the "Company"), with the Company continuing as the
surviving corporation (the "Surviving Corporation"), pursuant to which (a)
each outstanding share of common stock, par value $.01 per share, of
Holdings ("Holdings Common Stock"), other than shares held by Holdings or
its subsidiaries (which will be cancelled) and shares as to which
dissenters' rights are perfected under Delaware law, will be converted into
(i) 8,231.76 shares of common stock, par value $.01 per share, of the
Surviving Corporation ("New Common Stock") and (ii) 3,029.29 warrants, with
each warrant entitling the holder thereof to purchase one share of New
Common Stock at an exercise price of $48.00 per share during the period
from the fourth anniversary of the effective time of the Merger (the
"Effective Time") through the seventh anniversary thereof, (b) each
outstanding share of common stock, par value $.01 per share, of the Company
("Company Common Stock"), other than shares held by the Company or its
subsidiaries (which will be cancelled) and shares as to which dissenters'
rights are perfected under Delaware law, will be converted into (i) $28.80
in cash and (ii) one-tenth of one share of New Common Stock and (c) each
outstanding share of Series A Preferred Stock, par value $.01 per share, of
the Company, which shares will be sold to certain third-party investors
immediately prior to the Merger as part of the financing of the Merger,
will be converted into 31.25 shares of New Common Stock. As a result of the
Merger, Motor Wheel Corporation, an Ohio corporation and a wholly-owned
subsidiary of Holdings, will become a wholly-owned subsidiary of the
Surviving Corporation.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Only Stockholders of record at the close of business on May 30, 1996 are
entitled to notice of the Special Meeting and to vote thereat and at any and all
adjournments thereof.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER BETWEEN HOLDINGS AND THE
COMPANY IS ADVISABLE AND IN THE BEST INTERESTS OF HOLDINGS AND ITS STOCKHOLDERS.
ACCORDINGLY, YOUR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
<PAGE> 11
Joseph Littlejohn & Levy Fund II L.P. ("JLL"), the holder of approximately
74.1% of the outstanding shares of Holdings Common Stock, has granted a proxy
(the "JLL Proxy") to certain representatives of Varity Corporation ("Varity"),
the beneficial owner of approximately 46.3% of the outstanding shares of Company
Common Stock, to vote JLL's shares of Holdings Common Stock for approval and
adoption of the Merger Agreement and against any proposal or transaction which
could prevent or delay the consummation of the transactions contemplated by the
Merger Agreement, and Varity has agreed to cause its representatives to attend
and vote at the Special Meeting in accordance with the JLL Proxy. Therefore,
there will be a quorum at the Special Meeting and sufficient votes cast for
approval and adoption of the Merger Agreement to ensure its passage without the
vote of any other stockholder.
Pursuant to the Delaware General Corporation Law (the "DGCL"), holders of
Holdings Common Stock who do not vote in favor of the Merger Agreement and who
comply with the requirements of Section 262 of the DGCL will have, if the Merger
is consummated, the right to seek appraisal of their shares of Holdings Common
Stock. For a more complete description of such dissenters' rights, see
"STOCKHOLDERS' RIGHTS OF APPRAISAL" in the attached Joint Proxy
Statement/Prospectus.
Your vote is important. Please complete the accompanying proxy and return
it promptly in the addressed envelope enclosed.
Dale R. Martin
Dale R. Martin
Secretary
May 31, 1996
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
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The affirmative vote of the holders of a majority of shares of Holdings
Common Stock outstanding and entitled to vote at the Special Meeting is
required for approval and adoption of the Merger Agreement. Regardless of
whether you plan to attend the Special Meeting, please sign, date and
return the enclosed proxy in the envelope provided. Please do not send
stock certificates at this time.
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2
<PAGE> 12
HAYES WHEELS INTERNATIONAL, INC.
AND
MWC HOLDINGS, INC.
JOINT PROXY STATEMENT
-------------------------
HAYES WHEELS INTERNATIONAL, INC.
PROSPECTUS
-------------------------
This Joint Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is
being furnished to the holders of common stock, par value $.01 per share
("Company Common Stock"), of Hayes Wheels International, Inc., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Company Board") for use at a Special
Meeting of Stockholders of the Company to be held at The Fairlane Club, 5000
Fairlane Woods Drive, Dearborn, Michigan, on Tuesday, July 2, 1996 at 10:00
a.m., local time, and at any and all adjournments or postponements thereof (the
"Company Special Meeting").
This Proxy Statement/Prospectus is also being furnished to the holders of
common stock, par value $.01 per share ("Holdings Common Stock"), of MWC
Holdings, Inc., a Delaware corporation ("Holdings"), in connection with the
solicitation of proxies by the Board of Directors of Holdings (the "Holdings
Board") for use at a Special Meeting of Stockholders of Holdings to be held at
the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, 43rd
floor, New York, New York, on Tuesday, July 2, 1996 at 10:00 a.m., local time,
and at any and all adjournments or postponements thereof (the "Holdings Special
Meeting" and, together with the Company Special Meeting, the "Special
Meetings").
At the Special Meetings, holders of Company Common Stock and Holdings Common
Stock will be asked to consider and vote upon a proposal to approve and adopt
the Agreement and Plan of Merger dated as of March 28, 1996 (the "Merger
Agreement") between the Company and Holdings, which provides for the merger (the
"Merger") of Holdings with and into the Company, with the Company continuing as
the surviving corporation (the "Surviving Corporation"). As a result of the
Merger, Motor Wheel Corporation, an Ohio corporation and a wholly-owned
subsidiary of Holdings ("Motor Wheel"), will become a wholly-owned subsidiary of
the Surviving Corporation. Subject to the terms and conditions of the Merger
Agreement, (a) each share of Company Common Stock outstanding immediately prior
to the effective time of the Merger (the "Effective Time"), other than shares
held by the Company or its subsidiaries (which will be cancelled) and shares as
to which dissenters' rights are perfected under Delaware law, will be converted
into (i) $28.80 in cash and (ii) one-tenth of one share of common stock, par
value $.01 per share, of the Surviving Corporation ("New Common Stock"), (b)
each outstanding share of Series A Preferred Stock, par value $.01 per share, of
the Company ("Company Preferred Stock"), which shares will be sold to certain
investors (the "New Investors") immediately prior to the Merger as part of the
financing of the Merger, will be converted into 31.25 shares of New Common
Stock, and (c) each outstanding share of Holdings Common Stock, other than
shares held by Holdings or its subsidiaries (which will be cancelled) and shares
as to which dissenters' rights are perfected under Delaware law, will be
converted into (i) 8,231.76 shares of New Common Stock and (ii) 3,029.29
warrants, with each warrant entitling the holder thereof to purchase one share
of New Common Stock at a price of $48.00 during the period commencing on the
fourth anniversary of the Effective Time and ending on the seventh anniversary
thereof ("Warrants"). Cash will be paid in lieu of any fractional share of New
Common Stock.
In connection with the Merger Agreement and pursuant to the Stock Option
Agreement dated as of March 28, 1996, among Varity Corporation, a Delaware
corporation ("Varity"), K-H Corporation, a Delaware corporation and an indirect
wholly-owned subsidiary of Varity ("K-H"), and Holdings (the "Stock Option
Agreement"), K-H has granted to Holdings an option to purchase, subject to the
occurrence of certain events, 8,144,000 shares of Company Common Stock (the
"Varity Shares"), which represent approximately 46.3% of the outstanding shares
of Company Common Stock, at a price of $32.00 per share in cash (the "Option").
K-H also granted to certain directors of Holdings a proxy to vote the Varity
Shares in favor of the Merger at the Company Special Meeting. Joseph Littlejohn
& Levy Fund II L.P. ("JLL") has granted a proxy to certain representatives of
Varity to vote JLL's shares of Holdings Common Stock (approximately 74.1% of the
outstanding shares of Holdings Common Stock) in favor of the Merger at the
Holdings Special Meeting.
The consummation of the Merger is subject, among other things, to: (i) the
approval and adoption of the Merger Agreement by the requisite vote at each of
the Special Meetings; (ii) the receipt of certain regulatory approvals or the
expiration of statutory waiting periods; and (iii) the receipt of necessary
financing. SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY STOCKHOLDERS IN CONNECTION WITH THEIR
CONSIDERATION OF THE MERGER, INCLUDING THE RISK THAT IF A COURT WERE TO
DETERMINE THAT THE COMPANY OR THE SURVIVING CORPORATION WAS INSOLVENT,
UNDERCAPITALIZED, OR UNABLE TO PAY ITS DEBTS AT THE TIME OF OR AFTER GIVING
EFFECT TO THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
THE COURT COULD REQUIRE THAT PERSONS RECEIVING CONSIDERATION IN THE MERGER
RETURN SUCH CONSIDERATION. A conformed copy of the Merger Agreement is attached
hereto as Annex I.
This Proxy Statement/Prospectus also constitutes the Prospectus of the
Company filed as part of a Registration Statement on Form S-4 (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC" or the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the shares of New Common Stock and the Warrants to be issued
pursuant to the Merger, and the shares of New Common Stock issuable pursuant to
such Warrants. This Proxy Statement/Prospectus also constitutes a prospectus for
resales by K-H (in such capacity, the "Selling Stockholder") of the shares of
New Common Stock received by it in the Merger in exchange for the Varity Shares
(the "New Varity Shares").
Company Common Stock is listed for trading under the symbol "HAY" on the New
York Stock Exchange (the "NYSE"). On March 28, 1996, the last trading day prior
to the announcement of the execution of the Merger Agreement, the last sale
price of the Company Common Stock, as reported on the NYSE, was $24.75. On May
30, 1996, the last trading day prior to the date of this Proxy
Statement/Prospectus, the last sale price of the Company Common Stock, as
reported on the NYSE, was $31.125. Company stockholders should obtain a current
quote for their shares of Company Common Stock. Holdings Common Stock is not
listed for trading or quoted on any stock exchange or quotation service.
This Proxy Statement/Prospectus, together with the applicable Notice of
Meeting and Letter to Stockholders and the accompanying forms of proxy, are
first being mailed to the stockholders of the Company and Holdings on or about
June 3, 1996.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------------
The date of this Proxy Statement/Prospectus is May 31, 1996.
<PAGE> 13
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
(OR INCORPORATED BY REFERENCE HEREIN) IN CONNECTION WITH THE SOLICITATION OF
PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR HOLDINGS. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR HOLDINGS SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THE INFORMATION CONTAINED (OR INCORPORATED BY REFERENCE) HEREIN WITH
RESPECT TO THE COMPANY AND ITS SUBSIDIARIES HAS BEEN PROVIDED BY THE COMPANY.
THE INFORMATION CONTAINED HEREIN WITH RESPECT TO HOLDINGS AND ITS SUBSIDIARIES
HAS BEEN PROVIDED BY HOLDINGS. NEITHER HOLDINGS NOR THE COMPANY WARRANTS THE
ACCURACY OF INFORMATION RELATING TO THE OTHER PARTY.
AVAILABLE INFORMATION
The Company and Motor Wheel are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements (in the case of the Company)
and other information with the Commission. The reports, proxy statements (in the
case of the Company) and other information filed by the Company and Motor Wheel
with the Commission can be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and are available at the Commission's Regional Offices at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661, and copies of such
materials may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, material filed by the Company may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement under
the Securities Act with respect to the New Common Stock to be issued pursuant to
the Merger Agreement, the Warrants and the New Common Stock issuable pursuant to
the Warrants. This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto,
certain parts of which are omitted in accordance with the Rules and Regulations
of the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company, Holdings
and the securities offered hereby. Such additional information may be obtained
from the Commission's principal office in Washington, D.C. Statements contained
in this Proxy Statement/Prospectus, or in any document incorporated in this
Proxy Statement/Prospectus by reference, as to the contents of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents filed
with the SEC pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1996; and
2. The Company's Current Report on Form 8-K dated March 28, 1996.
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Special Meetings
ii
<PAGE> 14
shall be deemed to be incorporated by reference into this Proxy
Statement/Prospectus and to be a part hereof from the dates of filing of such
documents or reports. 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 Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE HEREIN) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON
WRITTEN OR ORAL REQUEST TO HAYES WHEELS INTERNATIONAL, INC., 38481 HURON RIVER
DRIVE, ROMULUS, MICHIGAN 48174 (TELEPHONE NUMBER (313) 941-2000), ATTENTION:
SECRETARY. IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE COMPANY
SPECIAL MEETING, REQUESTS SHOULD BE RECEIVED BY JUNE 25, 1996.
THIS PROXY STATEMENT/PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE
CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 WITH RESPECT TO THE FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND BUSINESS OF THE COMPANY, HOLDINGS AND THE SURVIVING
CORPORATION, INCLUDING STATEMENTS UNDER THE CAPTIONS "THE MERGER -- CERTAIN
PROJECTIONS," "PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND CERTAIN
OTHER INFORMATION," "-- PROPOSED STRATEGY OF THE SURVIVING CORPORATION" AND
"ADDITIONAL INFORMATION CONCERNING HOLDINGS -- HOLDINGS' MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY SUCH MATTERS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING
STATEMENTS INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) EXPECTED COST
SAVINGS FROM THE MERGER AND THE MOTOR WHEEL RESTRUCTURING (AS HEREINAFTER
DEFINED) CANNOT BE FULLY REALIZED; (2) COMPETITIVE PRESSURE IN THE SURVIVING
CORPORATION'S INDUSTRY INCREASES SIGNIFICANTLY; (3) COSTS OR DIFFICULTIES
RELATED TO THE INTEGRATION OF THE BUSINESSES OF THE COMPANY AND HOLDINGS ARE
GREATER THAN EXPECTED; AND (4) GENERAL ECONOMIC CONDITIONS ARE LESS FAVORABLE
THAN EXPECTED. FURTHER INFORMATION ON OTHER FACTORS WHICH COULD AFFECT THE
FINANCIAL RESULTS OF THE SURVIVING CORPORATION AFTER THE MERGER AND SUCH FORWARD
LOOKING STATEMENTS IS INCLUDED IN THE SECTION HEREIN ENTITLED "RISK FACTORS" AND
IN THE ANNUAL REPORTS ON FORM 10-K OF THE COMPANY AND MOTOR WHEEL.
iii
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................... ii
SUMMARY............................... 1
The Companies....................... 1
Company Special Meeting............. 2
Holdings Special Meeting............ 2
Risk Factors........................ 3
The Merger and the
Merger Agreement................. 3
Certain Federal Income Tax
Considerations................... 6
Source and Amount of Funds.......... 7
Stockholders' Rights of Appraisal... 8
Certain Other Agreements............ 8
Hayes Wheels International, Inc.
Selected Historical Consolidated
Financial Information............ 9
MWC Holdings, Inc. Selected
Historical Consolidated Financial
Information...................... 10
Recent Developments................. 11
Selected Unaudited Pro Forma
Combined Financial Data.......... 11
Company Common Stock Prices and
Dividends........................ 13
Comparative Per Share Data.......... 14
RISK FACTORS.......................... 15
Leverage and Liquidity.............. 15
Increase in Variable Interest
Rates............................ 15
Fraudulent Transfer
Considerations................... 15
Dependence on Major Customers....... 16
Cyclical Nature of
Automotive Industry.............. 17
Labor Relations..................... 17
Challenges of Business
Integration...................... 17
Potential Control by JLL............ 17
More Limited Public Market for
Shares of New Common Stock and
Absence of Public Market for
Warrants......................... 17
Discontinuation of Dividends........ 18
COMPANY SPECIAL MEETING............... 18
General............................. 18
Record Date, Voting Rights and Vote
Required......................... 18
Proxies; Revocation of Proxies...... 19
Stockholders' Rights of Appraisal... 20
HOLDINGS SPECIAL MEETING.............. 20
General............................. 20
<CAPTION>
PAGE
----
<S> <C>
Record Date, Voting Rights and Vote
Required......................... 20
Proxies; Revocation of Proxies...... 21
Stockholders' Rights of Appraisal... 22
SOURCE AND AMOUNT
OF FUNDS............................ 23
Sources and Uses of Funds........... 23
Senior Secured Credit Facilities.... 24
Senior Subordinated Notes........... 26
Subscription Agreements............. 27
Redemption, Debt Tender Offer and
Consent Solicitation............. 28
Miscellaneous....................... 28
THE MERGER............................ 29
General............................. 29
Background of the Merger............ 29
The Company's Reasons for the
Merger; Recommendation of the
Company's Board.................. 32
Opinion of the Financial Advisor to
the Company Board................ 34
Holdings' Reasons for the Merger;
Recommendation of the Holdings
Board............................ 37
Certain Transactions; Interests of
Certain Persons in the Merger.... 38
Ownership of New Common Stock after
the Effective Time............... 42
Treatment of Stock Options.......... 43
Stock Exchange Listing.............. 43
Certain Projections................. 43
Accounting Treatment................ 45
Approvals and Consents.............. 45
Procedures for Exchange of Company
and Holdings Stock
Certificates..................... 45
Resales of New Common Stock and
Warrants......................... 47
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS...................... 49
Tax Consequences of the Merger
Generally........................ 49
Tax Consequences to Holdings
Stockholders..................... 49
Tax Consequences to Holders of
Company Common Stock............. 50
Tax Consequences to Holders of
Company Preferred Stock.......... 50
</TABLE>
iv
<PAGE> 16
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Tax Consequences to Holders of
Company Common Stock of Cash
Received in Lieu of Fractional
Shares of New Common Stock....... 50
Tax Consequences to Holdings
Stockholders of Cash Received in
Lieu of Fractional Shares of New
Common Stock..................... 51
Dissenting Holders of Company Common
Stock............................ 51
Dissenting Holdings Stockholders.... 51
CERTAIN PROVISIONS OF THE MERGER
AGREEMENT........................... 51
Certain Representations
and Warranties................... 51
Conduct of Business Pending
the Merger....................... 51
Employee Benefits................... 52
Indemnification..................... 53
No Solicitation..................... 53
Third Party Standstill Agreements... 54
Exercise of Option.................. 54
Conditions to Consummation of the
Merger........................... 54
Termination......................... 55
Fees and Expenses................... 56
Amendment and Waiver................ 57
CERTAIN OTHER AGREEMENTS.............. 57
Stock Option Agreement; Irrevocable
Proxy............................ 57
Stockholders Agreement.............. 58
Registration Rights Agreement....... 59
Warrant Agreement................... 59
STOCKHOLDERS' RIGHTS OF APPRAISAL..... 61
PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS AND CERTAIN OTHER
INFORMATION......................... 64
Unaudited Pro Forma Combined
Condensed Financial Statements... 64
Proposed Strategy for the Surviving
Corporation...................... 72
ADDITIONAL INFORMATION CONCERNING
HOLDINGS............................ 73
General............................. 73
Holdings' Management's Discussion
and Analysis of Financial
Condition and Results of
Operations....................... 78
<CAPTION>
PAGE
----
<S> <C>
Security Ownership of Certain
Beneficial Owners and Management
of Holdings...................... 82
MANAGEMENT OF THE SURVIVING
CORPORATION......................... 83
SELLING STOCKHOLDER................... 85
DESCRIPTION OF
CAPITAL STOCK....................... 86
General............................. 86
New Common Stock.................... 87
Company Preferred Stock............. 87
Warrants............................ 88
Certain Restrictions on Takeovers... 88
Transactions with Affiliates........ 88
COMPARISON OF STOCKHOLDER RIGHTS...... 89
Authorized Capital Stock............ 89
Action by Written Consent of
Stockholders..................... 89
Special Meeting of Stockholders..... 89
Business Conducted at Stockholders'
Meetings......................... 90
Number and Qualifications
of Directors..................... 90
Nomination and Election of
Directors........................ 91
Classification of Board............. 92
Removal of Directors................ 92
Limitation on Liability of
Directors........................ 92
Indemnification..................... 93
Amendment of Governing Documents.... 94
LEGAL OPINIONS........................ 95
EXPERTS............................... 95
STOCKHOLDER PROPOSALS................. 96
MWC HOLDINGS, INC. INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS... F-1
</TABLE>
LIST OF ANNEXES
<TABLE>
<S> <C>
Annex I Agreement and Plan of Merger
Annex II Opinion of Goldman, Sachs & Co.
Annex III Section 262 of the Delaware
General Corporation Law
</TABLE>
v
<PAGE> 17
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus, including the Annexes hereto, or in the
documents incorporated herein by reference. Reference is made to, and this
summary is qualified in its entirety by, the more detailed information contained
in this Proxy Statement/Prospectus, the Annexes hereto and the documents
incorporated by reference herein. Capitalized terms used in the Proxy
Statement/Prospectus and not defined shall have the meanings ascribed to them in
the Merger Agreement.
STOCKHOLDERS OF THE COMPANY AND HOLDINGS ARE URGED TO READ THIS PROXY
STATEMENT/PROSPECTUS, THE ANNEXES HERETO AND THE DOCUMENTS INCORPORATED HEREIN
BY REFERENCE, IN THEIR ENTIRETY. STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH BELOW UNDER THE HEADING "RISK FACTORS" BEGINNING ON PAGE
15 HEREOF.
THE COMPANIES
The Company. The Company is a world leader in the manufacture, design and
supply of wheels to original equipment manufacturers ("OEMs") of passenger cars
and light trucks. The Company believes it is the largest supplier of cast
aluminum wheels in Europe, the second largest supplier of cast aluminum wheels
in North America and the largest independent supplier of fabricated steel and
aluminum wheels in North America. The Company also operates in Europe through a
wholly-owned subsidiary in Italy and a 45% owned joint venture in the Czech
Republic.
Substantially all of the Company's wheels are produced for sale to OEMs
that manufacture passenger cars and light trucks. A portion of the remainder of
its wheels are produced for sale in the after-market as replacement parts that
are sold to the service systems of OEMs and their dealers and to other
customers. The Company's cast aluminum wheels produced in the United States are
sold to General Motors, Ford, Chrysler and foreign manufacturers operating in
America and are also exported to automobile manufacturers in Japan. The Company
manufactures cast aluminum wheels in Italy and Spain for sale to various
automobile manufacturers in Europe, including BMW, Fiat, Ford of Europe and
Renault. The Company supplies cast aluminum motorcycle wheels to BMW in Europe.
The Company's fabricated wheels are currently produced in the United States for
North American manufacturers (principally General Motors, Ford and Chrysler) and
in the Czech Republic for European manufacturers.
The Company's principal executive offices are located at 38481 Huron River
Drive, Romulus, Michigan 48174 and its telephone number is (313) 941-2000. For
further information concerning the Company, see "AVAILABLE INFORMATION,"
"INCORPORATION OF DOCUMENTS BY REFERENCE," and "-- Company Selected Historical
Consolidated Financial Information."
Holdings. Holdings is a holding company, substantially all of the assets of
which consist of all of the capital stock of Motor Wheel. Motor Wheel is a
leading designer and producer of brakes for the automotive and commercial
highway truck and trailer markets. In addition, Motor Wheel designs,
manufactures and sells steel wheels to the automotive and commercial highway
truck and trailer markets. Motor Wheel supplies automotive steel wheels and
brakes primarily to OEMs located in North America, including Chrysler, Ford, and
General Motors as well as foreign manufacturers in North America. In addition,
Motor Wheel exports steel styled wheels to Toyota in Japan. Motor Wheel supplies
wheels, rims, and brake components for commercial highway vehicles to a large
number of North American truck, trailer and bus manufacturers. Through Aluminum
Wheel Technology, Inc., an unconsolidated corporate joint venture that is 50%
owned by Motor Wheel ("Alumitech"), Motor Wheel also participates in the
automotive aluminum wheel market. Holdings' principal executive offices are
located at 2501 Woodlake Circle, Okemos, Michigan 48864, and its telephone
number is (517) 337-5700. For further information concerning Holdings and Motor
Wheel, see "AVAILABLE INFORMATION," "-- Holdings Selected Historical
Consolidated Financial Information," "ADDITIONAL INFORMATION CONCERNING HOLDINGS
- -- General" and "-- Holdings' Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<PAGE> 18
COMPANY SPECIAL MEETING
Time, Date and Place; Matters to be Considered. The Company Special Meeting
will be held at The Fairlane Club, 5000 Fairlane Woods Drive, Dearborn,
Michigan, on Tuesday, July 2, 1996, at 10:00 a.m., local time, to consider and
vote upon (i) a proposal to approve and adopt the Merger Agreement and (ii) such
other matters as may be properly brought before the meeting. Only holders of
record of shares of Company Common Stock at the close of business on May 30,
1996 (the "Company Record Date") are entitled to receive notice of and to vote
at the Company Special Meeting.
Required Vote; Quorum. At the close of business on the Company Record Date,
there were 17,574,000 shares of Company Common Stock outstanding, each of which
entitles the registered holder thereof to one vote. At the close of business on
the Company Record Date, Varity was the beneficial owner of 8,144,000 shares
(approximately 46.3%) of Company Common Stock then outstanding, which are owned
directly by K-H. As of the Company Record Date, directors and executive officers
of the Company (other than, with respect to the Varity Shares, directors who are
designees of Varity) owned an aggregate of 10,382 (less than 1%) of the shares
of Company Common Stock then outstanding.
Approval and adoption of the Merger Agreement will require the affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock. A failure to vote shares, either by abstention or non-vote (including a
broker non-vote), will have the same effect as a vote against the approval and
adoption of the Merger Agreement. A majority of the outstanding shares of
Company Common Stock entitled to vote, represented in person or by proxy, will
constitute a quorum at the Company Special Meeting. Pursuant to the Stock Option
Agreement, Varity caused K-H to grant, and K-H granted, to certain directors of
Holdings an irrevocable proxy (the "Varity Proxy") to vote the Varity Shares for
the approval and adoption of the Merger Agreement (without any amendment thereto
unless consented to by Varity) and against any proposal or transaction which
could prevent or delay the consummation of the transactions contemplated by the
Merger Agreement, and Holdings has agreed to cause its representatives to attend
and vote at the Company Special Meeting in accordance with the Varity Proxy. In
addition, the directors and executive officers of the Company (other than, with
respect to the Varity Shares, directors who are designees of Varity), who owned
an aggregate of 10,382 shares (less than 1%) of Company Common Stock on the
Company Record Date, have indicated to the Company that they intend to vote
their shares in favor of the Merger. See "COMPANY SPECIAL MEETING -- Record
Date; Voting Rights and Vote Required" and "-- Proxies; Revocation of Proxies."
HOLDINGS SPECIAL MEETING
Time, Date and Place; Matters to be Considered. The Holdings Special
Meeting is scheduled to be held at the offices of Skadden, Arps, Slate, Meagher
& Flom, 919 Third Avenue, 43rd floor, New York, New York on Tuesday, July 2,
1996 at 10:00 a.m., local time. At the Holdings Special Meeting, holders of
shares of Holdings Common Stock will be asked to consider and vote upon (i) a
proposal to approve and adopt the Merger Agreement and (ii) such other matters
as may be properly brought before the meeting. Only holders of shares of
Holdings Common Stock of record at the close of business on May 30, 1996 (the
"Holdings Record Date") will be entitled to notice of and to vote at the
Holdings Special Meeting.
Required Vote; Quorum. At the close of business on the Holdings Record
Date, there were 379.6275 shares of Holdings Common Stock outstanding, each of
which entitles the registered holder thereof to one vote. At the close of
business on the Holdings Record Date, JLL owned 281.4815 shares of Holdings
Common Stock, or approximately 74.1% of the then outstanding shares of Holdings
Common Stock, and Holdings' directors and executive officers (other than, with
respect to shares beneficially owned by JLL, directors who are designees of JLL)
beneficially owned an additional 12.717 shares of Holdings Common Stock, or
approximately 3.3% of the then outstanding shares of Holdings Common Stock.
The affirmative vote of the holders of a majority of the outstanding shares
of Holdings Common Stock is required to approve the Merger Agreement. A failure
to vote shares, either by abstention or non-vote, will have the same effect as a
vote against the approval and adoption of the Merger Agreement. A majority of
the outstanding shares of Holdings Common Stock entitled to vote, represented in
person or by proxy, will constitute a quorum at the Holdings Special Meeting.
JLL has granted an irrevocable proxy (the "JLL Proxy") to certain
representatives of Varity and K-H to vote JLL's shares of Holdings Common Stock
for
2
<PAGE> 19
approval and adoption of the Merger Agreement and against any proposal or
transaction which could prevent or delay the consummation of the transactions
contemplated by the Merger Agreement, and Varity and K-H have agreed to cause
their representatives to attend and vote at the Holdings Special Meeting in
accordance with the JLL Proxy. In addition, the directors and executive officers
of Holdings (other than, with respect to shares beneficially owned by JLL,
directors who are designees of JLL), who owned an aggregate of 12.717 shares
(approximately 3.3%) of Holdings Common Stock on the Holdings Record Date, have
indicated that they intend to vote their shares in favor of the Merger. See
"HOLDINGS SPECIAL MEETING -- Record Date; Voting Rights and Votes Required" and
"-- Proxies; Revocation of Proxies."
RISK FACTORS
In considering whether to approve the Merger Agreement, the stockholders of
Holdings and the Company should consider that: (i) the Surviving Corporation
will have a high degree of leverage; (ii) if a court were to determine that the
Company or the Surviving Corporation was insolvent, undercapitalized, or unable
to pay its debts at the time of or after giving effect to the Merger and the
Transactions contemplated by the Merger Agreement, the court could require that
persons receiving consideration in the Merger return such consideration; (iii)
the Company's and Holdings' businesses depend on certain key customers and are
cyclical in nature; (iv) following the Merger, JLL will own approximately 43.3%
of the New Common Stock and will have the ability to exert substantial influence
over the Company; (v) there may be a more limited public market for the shares
of New Common Stock and no public market for the Warrants; (vi) no dividends are
anticipated to be paid on shares of New Common Stock; and (vii) certain other
risk factors set forth under "RISK FACTORS" apply to the Merger and the related
transactions.
THE MERGER AND THE MERGER AGREEMENT
General. At the Effective Time, Holdings will be merged with and into the
Company, with the Company as the Surviving Corporation. As a result of the
Merger, the separate corporate existence of Holdings will cease, the Company, as
the Surviving Corporation, will succeed to all the rights of and be responsible
for all of the obligations of Holdings in accordance with the Delaware General
Corporation Law (the "DGCL") and Motor Wheel will become a wholly-owned
subsidiary of the Surviving Corporation. Subject to the terms and conditions of
the Merger Agreement, (a) each outstanding share of Company Common Stock, other
than any shares held by the Company or its subsidiaries (which will be
cancelled) and shares as to which dissenters' rights are perfected under
Delaware law, will be converted into (i) $28.80 in cash (the "Cash
Consideration") and (ii) one-tenth of one share of New Common Stock (the
"Company Stock Consideration" and, together with the Cash Consideration, the
"Merger Consideration"), (b) each outstanding share of Company Preferred Stock
will be converted into 31.25 shares of New Common Stock, and (c) each
outstanding share of Holdings Common Stock, other than shares held by Holdings
or its subsidiaries (which will be cancelled) and shares as to which dissenters'
rights are perfected under Delaware law, will be converted into (i) 8,231.76
shares of New Common Stock and (ii) 3,029.29 Warrants. Cash will be paid in lieu
of fractional shares of New Common Stock. See "THE MERGER -- General" and
"STOCKHOLDERS' RIGHTS OF APPRAISAL." Upon consummation of the Merger, an
aggregate of approximately 11,132,400 shares of New Common Stock are expected to
be issued and outstanding, of which approximately 1,757,400 shares
(approximately 15.8%) will be issued to existing holders of Company Common
Stock, 6,250,000 shares (approximately 56.1%) will be issued to the New
Investors who will purchase shares of Company Preferred Stock immediately prior
to the Merger and 3,125,000 shares (approximately 28.1%) will be issued to
existing holders of Holdings Common Stock. See "THE MERGER -- Ownership of New
Common Stock after the Effective Time."
The closing of the transactions contemplated by the Merger Agreement will
take place as promptly as practicable after the conditions precedent to the
Merger set forth in the Merger Agreement are satisfied or waived (the "Closing
Date"). The Merger will become effective upon the filing of a Certificate of
Merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware (or such later date and time as the Certificate of Merger shall
specify). It is currently expected that the Merger will be consummated no later
than August 15, 1996. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT --
Termination."
Recommendation of the Company Board. The Company Board has unanimously
determined that the Merger is fair to and in the best interests of the
stockholders of the Company and has approved the Merger
3
<PAGE> 20
Agreement. THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AT THE COMPANY SPECIAL MEETING. See "THE MERGER -- Company's Reasons
for the Merger; Recommendation of the Company Board."
Opinion of Company's Financial Advisor. Goldman, Sachs & Co. ("Goldman
Sachs") acted as financial advisor to the Company in connection with the Merger
and delivered its written opinion to the Company Board that, as of the date of
such opinion, the Merger Consideration to be received by the holders of Company
Common Stock pursuant to the Merger Agreement is fair to such holders. The full
text of the written opinion of Goldman Sachs, which sets forth assumptions made,
matters considered and limitations on the review undertaken in connection with
the opinion, is attached hereto as Annex II and is incorporated herein by
reference. HOLDERS OF COMPANY COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY. See "THE MERGER -- Opinion of the Financial Advisor to
the Company Board."
Recommendations of the Holdings Board. The Holdings Board has unanimously
determined that the Merger is advisable and fair to and in the best interests of
Holdings and its stockholders and has approved the Merger Agreement. THE
HOLDINGS BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF HOLDINGS VOTE IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AT THE HOLDINGS SPECIAL
MEETING. See "THE MERGER -- Holdings' Reasons for the Merger; Recommendation of
the Holdings Board."
Certain Transactions; Interests of Certain Persons in the Merger. The
directors and executive officers of the Company and Holdings have interests in
the Merger in addition to their interests as stockholders of the Company and
Holdings. Such interests relate to, among other things, (i) provisions in the
Merger Agreement regarding the acceleration of the exercisability of outstanding
options to purchase Company Common Stock or the exchange of such options for
exercisable options to purchase shares of New Common Stock, (ii) the terms of
certain severance agreements between the Company and twelve officers and key
employees providing for cash payments and other benefits upon and, under certain
circumstances, following a change of control of the Company (which would include
the Merger), (iii) the terms of a proposed stock option plan to be adopted by
the Company prior to the Effective Time providing for the granting of stock
options to purchase shares in an aggregate amount not to exceed 10% of the
shares of New Common Stock to certain officers and key employees of the Company
and, after the Effective Time, of the Surviving Corporation and (iv) the terms
of an employment agreement with the President of Holdings. The Company has also
entered into (i) a Registration Rights Agreement with Varity and K-H providing
for certain registration rights with respect to the sale or disposition of the
shares of New Common Stock to be received by Varity or K-H pursuant to the
Merger and (ii) Stock Subscription Agreements with the New Investors providing
for the issuance and sale of Company Preferred Stock, as a result of which the
New Investors will receive shares of New Common Stock (and no cash
consideration) in consideration for their Company Preferred Stock upon
consummation of the Merger. In addition, Varity, K-H and Holdings entered into a
Stock Option Agreement providing Holdings with the Option to purchase the Varity
Shares upon the occurrence of certain events and conditions. In the event that
the Option is exercised, K-H will receive all of its consideration for the
Varity Shares in cash and will not receive any shares of New Common Stock in
exchange therefor. Holdings currently anticipates that, should the Option become
exercisable and should Holdings decide to exercise the Option, Holdings would
obtain the required funds from its general corporate funds and amounts which may
become available under potential future debt or equity financings, the terms of
which have not yet been determined. No assurances can be given that Holdings
will be able to obtain sufficient funds to exercise the Option should it become
exercisable. See "CERTAIN OTHER AGREEMENTS -- Stock Option Agreement."
See "THE MERGER -- Certain Transactions; Interests of Certain Persons in
the Merger" and "CERTAIN OTHER AGREEMENTS -- Registration Rights Agreement;
Irrevocable Proxy."
Governance. The Merger Agreement provides that, upon consummation of the
Merger, the Board of Directors of the Surviving Corporation will be comprised of
nine directors, which are expected to consist of the Chief Executive Officer of
the Company, four designees of JLL, one designee of TSG Capital Fund II, L.P.
("TSG"), and three individuals who are not affiliated with the Company or the
New Investors. The Stockholders Agreement (as hereinafter defined) will provide
that the respective rights of JLL and TSG to
4
<PAGE> 21
designate directors will terminate if any such entity ceases to own at least 50%
of its initial investment in the Company. The officers of the Company at the
Effective Time will be the initial officers of the Surviving Corporation,
including Ranko Cucuz, President and Chief Executive Officer of the Company, who
will continue in such position and is expected to become Chairman of the Board
of Directors of the Surviving Corporation. In addition, it is currently expected
that John S. Rodewig and Kenneth L. Way, currently directors of the Company,
will continue as directors of the Surviving Corporation, and that Mr. Richard
Tuley, currently the President of Holdings, will become the Executive Vice
President of the Surviving Corporation following the Merger. See "MANAGEMENT OF
THE SURVIVING CORPORATION."
Conditions to the Merger. The obligations of the Company and Holdings to
effect the Merger are subject to various conditions, including but not limited
to: (i) the approval of the Merger Agreement and the transactions contemplated
thereby by the requisite vote of the stockholders of the Company and Holdings;
(ii) obtaining certain requisite governmental approvals or the expiration of
statutory waiting periods; (iii) the absence of any preliminary or permanent
injunction or other order by any court or governmental entity which prevents the
Merger; (iv) the receipt of the funds necessary to consummate the transactions
contemplated by the Merger Agreement on the terms set forth in the Merger
Agreement; (v) the receipt by the Company and Holdings of a mutually acceptable
opinion from a nationally recognized investment banking firm or valuation firm
that, after giving effect to the Merger and the transactions contemplated by the
Merger Agreement, the Surviving Corporation will be solvent, adequately
capitalized and able to pay its debts as they become due (the "Solvency
Opinion"); and (vi) there not being any event or occurrence which has had, or
would reasonably be expected to have, a material adverse effect on the Company.
Houlihan Lokey Howard & Zukin, Inc. will deliver the Solvency Opinion prior to
the consummation of the Merger. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT."
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the Effective Time by mutual consent of the Company and
Holdings, or by either party if: (i) the Merger has not been consummated on or
before August 15, 1996; (ii) either of the requisite stockholders' approvals are
not obtained; or (iii) any permanent injunction or action by any governmental
entity preventing consummation of the Merger becomes final and nonappealable,
unless in the case of (i) or (ii) above, such failure is a result of the action
or failure to act of the party seeking to terminate, where such action or
failure to act constitutes a breach of the Merger Agreement. In addition, the
Merger Agreement may be terminated by the Company under certain circumstances,
including (i) the Company Board receiving a Superior Proposal (as hereinafter
defined) and the Company promptly thereafter, after providing notice and certain
information to Holdings, entering into a definitive acquisition, merger or
similar agreement to effect such proposal or (ii) the breach in any material
respect by Holdings of any representation, warranty, covenant or agreement in
the Merger Agreement, which breach has not been cured within 30 days after
notice is given or is incapable of being cured. The Merger Agreement may be
terminated by Holdings if (i) the Company breaches any material representation,
warranty, covenant or agreement in any material respect in the Merger Agreement,
which breach cannot be cured or has not been cured within 45 days after notice
is given or (ii) the Company Board withdraws or modifies in a manner adverse to
Holdings its approval or recommendation of the Merger or fails to reconfirm such
recommendation within 5 business days of a reasonable written request for such
confirmation by Holdings. In the event the Merger Agreement is terminated under
certain circumstances, the Company will be obligated to pay Holdings a fee of
$20 million in cash plus Holdings' out-of-pocket expenses (not to exceed $5
million) in connection with the Merger Agreement. See "CERTAIN PROVISIONS OF THE
MERGER AGREEMENT -- No Solicitation" and "-- Termination."
No Solicitation. The Company has agreed in the Merger Agreement that prior
to the Effective Time neither it nor any of its subsidiaries or affiliates, will
directly or indirectly solicit or initiate any Acquisition Transaction (as
hereinafter defined) or negotiate or discuss any Acquisition Transaction, except
the Company may, in response to an unsolicited written Superior Proposal of a
third party, furnish information to or negotiate or engage in discussions with
such third party if the Company Board concludes in good faith, after
consultation with its financial advisor and based upon advice of outside
counsel, that its fiduciary duties to the Company's stockholders under
applicable law require such action. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- No Solicitation."
5
<PAGE> 22
Stock Exchange Listing. The Company and Holdings have agreed in the Merger
Agreement to use reasonable best efforts to cause the shares of New Common Stock
to be issued in connection with the Merger to be listed on the NYSE. It is
anticipated that the shares of New Common Stock will be traded on the NYSE under
the symbol "HAY," and that if the shares of New Common Stock are not eligible to
be traded on the NYSE, the Company and Holdings will apply to have such shares
listed on the NASDAQ National Market.
Accounting Treatment. The Merger will be accounted for as a
recapitalization of the Company, with the assets of the Company carried forward
at their book value, and a purchase by the Company of Holdings under the
purchase method of accounting in accordance with generally accepted accounting
principles. Therefore, the aggregate consideration paid to Holdings'
stockholders in connection with the Merger will be allocated to Holdings' assets
and liabilities based on their fair market values with any excess being treated
as goodwill. The assets and liabilities and results of operations of Holdings
will be consolidated into the assets and liabilities and results of operations
of the Company subsequent to the Effective Time. See "THE MERGER -- Accounting
Treatment" and "PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AND CERTAIN OTHER INFORMATION."
Regulatory Approvals Required. Certain aspects of the Merger required
notifications to, and/or approvals from, certain federal authorities. Pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the Company and certain of the New Investors filed with the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") a Notification and
Report Form with respect to the Merger on April 12, 1996 and requested early
termination of the applicable waiting period thereunder. The FTC granted such
early termination on May 7, 1996 and the HSR Act waiting period was terminated
on such date. However, at any time before or after consummation of the Merger,
notwithstanding the termination of the waiting period under the HSR Act, the
FTC, the Antitrust Division, a state or a private person or entity could seek
under federal or state antitrust laws, among other things, to enjoin or rescind
the Merger. See "THE MERGER -- Approvals and Consents."
Securities Law Considerations. The shares of New Common Stock and Warrants
to be issued pursuant to the Merger Agreement will be freely transferable under
the Securities Act, except that shares of New Common Stock and Warrants issued
to any person who is deemed to be an "affiliate" (as used in paragraphs (c) and
(d) of Rule 145 under the Securities Act, including, without limitation,
directors and certain executive officers) of the Company or Holdings for
purposes of such Rule 145 may not be resold except in transactions permitted by
such Rule 145 or as otherwise permitted under the Securities Act. The Company
has entered into a Registration Rights Agreement with Varity and K-H providing
for certain registration rights with respect to the shares of New Common Stock
to be received by Varity or K-H pursuant to the Merger. This Proxy
Statement/Prospectus will constitute the prospectus for resales of the New
Varity Shares. See "THE MERGER -- Resales of New Common Stock and Warrants" and
"CERTAIN OTHER AGREEMENTS -- Registration Rights Agreement."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Skadden, Arps, Slate, Meagher & Flom, special counsel to Holdings, has
delivered to Holdings its opinion, based upon the customary representations of
Holdings and the Company, that the Merger will qualify as a tax free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"). Accordingly, no gain or loss will be recognized by the
Company or Holdings solely as a result of the merger of Holdings into the
Company pursuant to the Merger Agreement.
In the opinion of Skadden, Arps, Slate, Meagher & Flom, pursuant to the
Merger, holdings stockholders will recognize no loss upon the deemed transfer of
Holdings Common Stock for New Common Stock and Warrants and will recognize a
gain equal to the lesser of the fair market value of the Warrants received or
the gain realized by such stockholder on the exchange. The deemed exchange of
Company Preferred Stock for New Common Stock will be a tax free recapitalization
under Section 368 of the Code. Accordingly, no gain or loss will be recognized
by the Company or by the holders of Company Preferred Stock in the exchange.
6
<PAGE> 23
Altheimer & Gray, counsel to the Company, has delivered to the Company its
opinion that pursuant to the Merger, holders of Company Common Stock will have
exchanged their Company Common Stock for Cash Consideration and New Common
Stock. Holders of Company Common Stock will recognize no loss upon the exchange
and will recognize gain to the extent of the lesser of the Cash Consideration
received or the gain realized by such stockholders on the exchange. See "CERTAIN
FEDERAL INCOME TAX CONSIDERATIONS."
SOURCE AND AMOUNT OF FUNDS
Financing. Approximately $901.4 million will be required to (i) fund the
payment of the Cash Consideration, (ii) repay or repurchase certain existing
indebtedness of the Company and Motor Wheel, (iii) pay the fees and expenses
incurred in connection with the Merger and the Financing (as defined below) and
(iv) provide working capital for the Surviving Corporation. It is currently
contemplated that the transactions contemplated by the Merger Agreement will be
funded by (A) the proceeds of the sale of $200 million of Company Preferred
Stock and Warrants to the New Investors, (B) approximately $451.4 million of
bank borrowings by the Company pursuant to senior secured credit facilities with
a group of banks led by Canadian Imperial Bank of Commerce ("CIBC") and Merrill
Lynch Capital Corporation ("Merrill", and, together with CIBC, the "Managing
Agents"), which facilities are expected to provide for aggregate commitments of
up to $645 million (the "Senior Secured Credit Facilities") and (C) the proceeds
of a public offering by the Company of $250 million of senior subordinated notes
(the "Senior Subordinated Notes") (collectively, the "Financing"). See "SOURCE
AND AMOUNT OF FUNDS." It is a condition to the consummation of the Merger that
the Company has received sufficient funds to consummate the transactions
contemplated by the Merger Agreement on the terms contemplated by the Merger
Agreement. There can be no assurance that the Financing will be obtained. The
parties to the Merger Agreement have agreed to use their reasonable best efforts
to satisfy the conditions to consummation of the Merger, including the financing
condition, under the Merger Agreement. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- Conditions to Consummation of the Merger" and "RISK
FACTORS -- Leverage and Liquidity."
The Company and Holdings have entered into Subscription Agreements, each
dated as of March 28, 1996 (the "Subscription Agreements"), with each of the New
Investors, including JLL, CIBC WG Argosy Merchant Fund 2, L.L.C. ("Argosy") and
TSG, to issue and sell immediately prior to the Merger (i) an aggregate of
200,000 shares of Company Preferred Stock, which upon consummation of the Merger
will be converted into an aggregate of 6,250,000 shares of New Common Stock, and
(ii) 150,000 Warrants, which will remain outstanding upon consummation of the
Merger. Under the respective Subscription Agreements, each New Investor has
agreed to purchase a portion of the Company Preferred Stock and Warrants, which
will result in an aggregate investment in the Company of $200 million.
JLL is a limited partnership, the managing general partner of which is
Joseph, Littlejohn & Levy. Joseph, Littlejohn & Levy is a private investment
partnership whose business includes making strategic investments in
consolidating industries and investing in corporate divestitures,
recapitalizations, and restructurings. TSG is a Delaware limited partnership
which provides equity capital to companies in a variety of industries. The
general partner of TSG is TSG Associates II, L.P., a Delaware limited
partnership, whose general partner is TSG Associates II, Inc. Argosy is a
private equity investment fund managed by CIBC Wood Gundy Securities Corp., an
affiliate of CIBC. Argosy makes equity and other investments in a wide range of
industries.
Redemption; Debt Tender Offer and Consent Solicitation. In connection with
the Merger and subject to the consummation thereof, Holdings intends to repay or
redeem all of Motor Wheel's $125 million principal amount of 11 1/2% Senior
Notes due 2000 (the "Motor Wheel Senior Notes") pursuant to their terms, and the
Company has commenced an offer (the "Debt Tender") to purchase all of the
Company's $100 million principal amount of 9 1/4% Senior Notes due 2002 (the
"Company Senior Notes") and a related consent solicitation to eliminate
substantially all of the restrictive covenants relating to any Company Senior
Notes that remain outstanding. See "SOURCE AND AMOUNT OF FUNDS."
7
<PAGE> 24
STOCKHOLDERS' RIGHTS OF APPRAISAL
Holders of shares of Company Common Stock or Holdings Common Stock who do
not vote in favor of the Merger and who perfect their appraisal rights in
accordance with Section 262 of the DGCL will be entitled to receive, in lieu of
the Merger Consideration, following a statutory appraisal proceeding in the
Delaware Court of Chancery, cash in the amount of the fair value of their shares
of Holdings Common Stock or Company Common Stock, as applicable (exclusive of
any element of value arising from the accomplishment or expectation of the
Merger) as determined by the court in such appraisal proceeding. See
"STOCKHOLDERS' RIGHTS OF APPRAISAL" and Annex III hereto. Because of the
complexity of the procedures for exercising these rights, stockholders who
consider exercising such rights are urged to seek the advice of counsel.
Stockholders electing to exercise their appraisal rights must not vote for the
approval and adoption of the Merger Agreement. If a stockholder returns a signed
proxy but does not specify a vote against the approval and adoption of the
Merger Agreement or a direction to abstain, the proxy will be voted FOR the
approval and adoption of the Merger Agreement, which will have the effect of
waiving that stockholder's appraisal rights. FAILURE TO TAKE ANY REQUIRED STEP
ON A TIMELY BASIS IN CONNECTION WITH THE EXERCISE OF APPRAISAL RIGHTS MAY RESULT
IN THE TERMINATION OR WAIVER OF SUCH RIGHTS. See "STOCKHOLDERS' RIGHTS OF
APPRAISAL." Pursuant to the Subscription Agreements entered into by the New
Investors, holders of Company Preferred Stock will have waived any appraisal
rights in connection with the Merger.
CERTAIN OTHER AGREEMENTS
In connection with the Merger and the transactions contemplated by the
Merger Agreement, certain agreements were or will be entered into by various
parties, including a Stockholders Agreement, a Registration Rights Agreement and
a Warrant Agreement and the Stock Option Agreement, which may affect the rights
of such parties and the holders of shares of New Common Stock. For a description
of such agreements, see "CERTAIN OTHER AGREEMENTS."
Pursuant to the Stock Option Agreement, Varity caused K-H to grant to
Holdings the Option to purchase the Varity Shares, which represent approximately
46.3% of the outstanding shares of Company Common Stock as of the Company Record
Date, at a price of $32.00 per share or such higher price as may be paid to
holders of Company Common Stock pursuant to the Merger. The Option becomes
exercisable by Holdings only upon the occurrence of certain events, including
the acquisition or proposed acquisition by a third party of 15% or more of the
outstanding shares of Company Common Stock, the public withdrawal, modification
or failure to reconfirm by the Company Board the Company Board's recommendation
of the Merger, or material breach by Varity or K-H under the Stock Option
Agreement. The Stock Option Agreement will terminate upon the earlier of (i) the
Effective Time, (ii) 5 business days after the termination of the Merger
Agreement in accordance with its terms, (iii) the termination of the Merger
Agreement pursuant to its terms if Holdings is not entitled to the payment of
termination fees thereunder, (iv) any material modification, amendment,
alteration or supplement of the Merger Agreement, or any failure of Holdings to
terminate the Merger Agreement in violation of the provisions of the Stock
Option Agreement or (v) 12:01 a.m. on August 16, 1996. K-H also granted to
certain directors of Holdings the Varity Proxy to vote the Varity Shares in
connection with the Merger. See "CERTAIN OTHER AGREEMENTS -- Stock Option
Agreement; Irrevocable Proxy."
Pursuant to a letter agreement, dated March 28, 1996 (the "Letter
Agreement"), among the New Investors and Holdings, the New Investors and
Holdings agreed, among other things, that (i) if Holdings determines to exercise
the Option, each New Investor will have the right to purchase from Holdings its
pro rata share of the Varity Shares and (ii) no documentation with respect to
the Financing may be entered into, and neither such documentation nor the Merger
Agreement may be amended, modified or supplemented, and no condition thereto may
be waived, without the prior consent of New Investors subscribing for not less
than $161 million of Company Preferred Stock.
8
<PAGE> 25
HAYES WHEELS INTERNATIONAL, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information of the
Company with respect to each year in the five-year period ended January 31,
1996, is derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company for each of the years in the
three-year period ended January 31, 1996, are included in documents incorporated
by reference in this Proxy Statement/Prospectus. Such consolidated financial
statements have been audited by KPMG Peat Marwick LLP, independent certified
public accountants. The selected historical consolidated financial information
should be read in conjunction with the consolidated financial statements and the
notes thereto of the Company incorporated by reference herein. See "AVAILABLE
INFORMATION" and "INCORPORATION OF DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31,
----------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................................ $611.1 $537.6 $428.2 $408.7 $398.9
Cost of good sold................................................ 513.4 441.4 344.4 336.4 342.7
------ ------ ------ ------ ------
Gross profit................................................... 97.7 96.2 83.8 72.3 56.2
Marketing, general and administration.............................. 29.7 28.6 26.3 26.1 21.1
Engineering and product development................................ 4.7 5.1 4.0 5.8 5.1
Other income, net.................................................. (1.5) (0.8) (2.3) (1.2) (2.9)
Nonrecurring charges............................................... 3.6 -- -- -- 1.7
------ ------ ------ ------ ------
Earnings from operations......................................... 61.2 63.3 55.8 41.6 31.2
Interest expense, net.............................................. 15.0 13.4 13.6 33.8 33.7
------ ------ ------ ------ ------
Earnings (loss) before taxes on income, minority interest and
cumulative effect of changes in accounting principles.......... 46.2 49.9 42.2 7.8 (2.5)
Income tax provision............................................... 17.8 20.0 17.6 4.2 (3.2)
------ ------ ------ ------ ------
Earnings (loss) before minority interest and cumulative effect of
changes in accounting principles............................... 28.4 29.9 24.6 3.6 (5.7)
------ ------ ------ ------ ------
Minority Interest................................................ -- -- -- -- 0.6
------ ------ ------ ------ ------
Earnings (loss) before cumulative effect of changes in
accounting principles........................................ 28.4 29.9 24.6 3.6 (6.3)
Cumulative effect of changes in accounting principles.............. -- -- 24.6 -- --
------ ------ ------ ------ ------
Net income (loss).............................................. $ 28.4 $ 29.9 $ -- $ 3.6 $ (6.3)
====== ====== ====== ====== ======
OTHER DATA:
EBITDA(1).......................................................... 97.5 92.9 80.6 63.8 54.6
Depreciation and amortization...................................... 32.7 29.6 24.8 22.2 21.7
Capital expenditures, tooling and dunnage.......................... 49.1 43.7 35.6 28.9 31.1
Cash flow provided from (used by):
Operations....................................................... 44.9 22.4 52.6 18.5 (1.1)
Investing activities............................................. (52.4) (40.9) (48.6) (38.2) (25.2)
Financing activities............................................. 8.8 13.5 (15.7) 34.8 23.1
Ratio of earnings to fixed charges................................. 3.6x 4.2x 3.9x 1.2x --(2)
PER SHARE DATA:
Income (loss) before cumulative effect of changes in
accounting principles.......................................... $1.62 $1.70 $ 1.40 $0.40 $(0.77)
Cumulative effect of changes in accounting principles.............. -- -- -- --
------ ------ (1.40) ------ ------
1.62 1.70 0.40 (0.77)
Primary............................................................ ====== ====== -- ======
======
1.62 1.70 0.40 (0.77)
Fully diluted...................................................... ====== ====== -- ======
======
17,574 17,574 9,101 8,144
Weighted average shares outstanding (in thousands)................. ====== ====== 17,574 ====== ======
======
BALANCE SHEET DATA (AT PERIOD END):
$633.9 $589.6 $527.6 $499.9 $475.4
Total assets.......................................................
133.1 123.0 107.7 122.0 255.0
Total debt.........................................................
245.4 216.4 184.8 191.9 60.0
Stockholders' equity...............................................
</TABLE>
- -------------------------
(1) EBITDA represents the sum of income before interest expense, preferred
dividends of subsidiary and income taxes, plus depreciation and
amortization, nonrecurring charges, and other non-cash income and expense.
EBITDA should not be construed as a substitute for income from operations,
net income or cash flow from operating activities, for the purpose of
analyzing the Company's operating performance, financial position and cash
flows. The Company has presented EBITDA because it is commonly used by
investors to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service debt.
(2) Earnings were insufficient to cover fixed charges by $2.5 million for the
fiscal year ended January 31, 1992.
9
<PAGE> 26
MWC HOLDINGS, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information of
Holdings with respect to each fiscal year in the five-year period ended December
31, 1995, is derived from the consolidated financial statements of Holdings. The
consolidated financial statements of Holdings for each of the years in the
three-year period ended December 31, 1995 are included elsewhere in this Proxy
Statement/Prospectus. Such consolidated financial statements have been audited
by Ernst & Young LLP, independent auditors. The financial data for the three
months ended March 31, 1996 and March 31, 1995 are unaudited, but in the opinion
of Holdings reflect all adjustments necessary for fair presentation of such
data. Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the fiscal year
ended December 31, 1996. The selected consolidated financial information
provided below should be read in conjunction with "ADDITIONAL INFORMATION
CONCERNING HOLDINGS -- Holdings' Management's Discussion and Analysis of
Financial Condition and Results of Operations" and its consolidated financial
statements and notes thereto included elsewhere in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- --------- --------- -------- ------ --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................................... $ 79.6 $ 105.6 $ 357.2 $ 405.2 $ 368.0 $309.7 $ 288.6
Cost of goods sold............................ 73.5 91.8 324.0 361.5 325.7 267.8 258.1
---- ----- --------- --------- -------- ------ --------
Gross profit.................................. 6.1 13.8 33.2 43.7 42.3 41.9 30.5
Selling, administrative and general........... 4.1 4.6 18.2 18.5 17.0 17.2 15.4
Research and development...................... 1.3 1.9 6.9 6.9 6.7 6.3 7.0
Plant closure costs........................... -- -- 33.0 31.6 -- -- --
Interest expense.............................. 4.3 4.5 17.9 17.2 16.5 17.0 18.6
Preferred dividends of subsidiary............. -- 0.5 1.6 1.9 1.9 1.9 2.0
Other expense (income)(1)..................... 0.6 (0.4) 3.6 2.8 1.6 (3.9) (10.8)
Patent defense costs.......................... -- -- -- 1.7 -- -- --
Income (loss) before income taxes............. (4.2) 2.7 (48.0) (36.9) (1.4) 3.4 (1.7)
---- ----- --------- --------- -------- ------ --------
Provision for income taxes.................... -- -- 4.2 0.5 0.7 2.3 1.2
Income (loss) before extraordinary items...... (4.2) 2.7 (52.2) (37.4) (2.1) 1.1 (2.9)
---- ----- --------- --------- -------- ------ --------
Extraordinary items net of income taxes(2).... -- -- -- -- (3.2) -- 1.7
---- ----- --------- --------- -------- ------ --------
Net income (loss)............................. $ (4.2) $ 2.7 $ (52.2) $ (37.4) $ (5.3) $ 1.1 $ (1.2)
==== ===== ========= ========= ======== ====== ========
OTHER DATA:
EBITDA(3)..................................... 5.5 12.2 27.5 37.7 37.2 37.2 24.9
Depreciation and amortization................. 4.5 4.9 19.0 19.3 17.5 14.9 15.1
Nonrecurring expense (income)................. -- -- 33.2 33.3 -- -- (12.1)
Noncash expense (income)...................... 0.9 (0.4) 3.8 2.9 2.7 -- 3.0
Capital expenditures, tooling and dunnage..... 2.5 4.1 14.2 18.4 15.8 12.5 9.6
Cash flow provided from (used by):
Operations.................................. (5.9) (4.3) 7.2 18.0 25.3 21.1 12.0
Investing activities........................ (2.5) (4.1) (14.1) (18.3) (16.0) (11.0) (8.8)
Financing activities........................ 7.3 7.8 7.2 1.3 (9.3) (10.1) (3.3)
Ratio of earnings to fixed charges(4)......... -- 1.5x -- -- -- 1.1x --
PER SHARE DATA:
Income (loss) per common share:
Before extraordinary items.................. (11.183) 16.316 $(267,912) $(230,314) $(12,741) $6,590 $(17,822)
Extraordinary items......................... -- -- -- -- (19,982) -- 10,458
Net income (loss)............................. (11.183) 16.316 (267,912) (230,314) (32,723) 6,590 (7,364)
BALANCE SHEET DATA (AT PERIOD END):
Total assets.................................. 167.1 213.0 $ 169.6 $ 208.9 $ 217.1 $198.5 $ 206.6
Total debt.................................... 137.0 139.6 130.0 131.8 128.7 126.1 136.2
Shareholders' equity (deficit)................ (81.8) (49.5) (77.6) (52.2) (14.1) (9.0) (10.3)
</TABLE>
- -------------------------
(1) Includes $12.1 million of income in 1991 reflecting favorable settlement of
patent infringement litigation.
(2) Reflects impact of loss on debt extinguishment in 1993 and an income tax
credit from utilization of foreign net operating loss carryforward in 1991.
(3) EBITDA represents the sum of income before interest expense, preferred
dividends of subsidiary and income taxes, plus depreciation and
amortization, nonrecurring charges, and non-cash other income and expense.
EBITDA should not be construed as a substitute for income from operations,
net income or cash flow from operating activities, for the purpose of
analyzing Holdings' operating performance, financial position and cash
flows. Holdings has presented EBITDA because it is commonly used by
investors to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service debt.
(4) Earnings were insufficient to cover fixed charges by approximately $4.2
million in the first quarter of 1996 and by $48.6 million, $37.6 million,
$2.5 million and $2.6 million in 1995, 1994, 1993 and 1991, respectively.
10
<PAGE> 27
RECENT DEVELOPMENTS
On May 23, 1996, the Company announced net earnings of $6.1 million, or 35
cents per share, for its fiscal first quarter ended April 30, 1996. This
compares to net earnings of $8.3 million, or 47 cents per share, for the same
period last year. First quarter 1996 net sales decreased 2 percent to $156.2
million, compared to $159.7 million for the first quarter of 1995. First quarter
sales were significantly affected by the 17-day General Motors strike.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain unaudited pro forma combined
financial data for the Company as of and for the year ended January 31, 1996 and
certain financial ratios derived therefrom which are presented to reflect the
pro forma effect of the transactions contemplated by the Merger Agreement,
including the Financing (the "Transactions") and the Holdings 1995
Recapitalization (as hereinafter defined). The pro forma financial data do not
reflect any cost savings of Holdings' plant closures and capacity
rationalizations that have been completed or are substantially underway
(collectively, the "Motor Wheel Restructuring") or synergies that are expected
to result from the Transactions. See Note 1(J) to the pro forma combined
condensed financial statements included in "PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS AND CERTAIN OTHER INFORMATION."
The selected income statement data gives pro forma effect to the
Transactions and the Holdings 1995 Recapitalization as if they had occurred on
February 1, 1995 and the selected balance sheet data gives pro forma effect to
the Transactions as if they had occurred on January 31, 1996. The selected
unaudited pro forma combined financial data do not purport to be indicative of
the results of operations or financial position of the Company that would have
actually been obtained had the Transactions and the Holdings 1995
Recapitalization been completed as of the assumed dates and for the period
presented, or which may be obtained in the future. The selected unaudited pro
forma combined financial data (i) have been derived from and should be read in
conjunction with the Unaudited Pro Forma Combined Condensed Financial Statements
and the notes thereto included elsewhere in this Proxy Statement/Prospectus and
(ii) should be read in conjunction with the separate historical consolidated
financial statements of the Company and Holdings, and the notes thereto, and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" of the two companies appearing elsewhere in or incorporated by
reference into this Proxy Statement/Prospectus.
11
<PAGE> 28
HAYES WHEELS INTERNATIONAL, INC.
SUMMARY PRO FORMA COMBINED DATA (UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<S> <C>
INCOME STATEMENT DATA:
Net sales......................................................... $ 968.3
Gross profit...................................................... 136.2
Earnings from operations.......................................... 43.9
Interest expense.................................................. 71.3
Net income (loss)................................................. $ (16.7)
BALANCE SHEET DATA:
Cash.............................................................. 78.2
Working capital................................................... 124.7
Total assets...................................................... 1,129.3
Long-term debt.................................................... 675.0
Stockholders' equity.............................................. $ 17.7
OPERATING AND OTHER DATA:
Gross margin...................................................... 14.1%
EBITDA............................................................ 133.2(1)(2)
EBITDA margin..................................................... 13.8
Cash interest expense............................................. 68.2
Capital expenditures, tooling and dunnage......................... 63.3
Depreciation and amortization..................................... $ 48.9
Cash flow provided from (used by):
Operations..................................................... $ 55.8
Investing activity............................................. (66.5)
Financing activity............................................. 16.0
Ratio of earnings to fixed charges................................ --(3)
</TABLE>
See Notes included in "PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS AND
CERTAIN OTHER INFORMATION."
- -------------------------
(1) EBITDA represents the sum of income before interest expense, preferred
dividends of subsidiary and income taxes, plus depreciation and
amortization, nonrecurring charges, and other non-cash income and expense.
EBITDA should not be construed as a substitute for income from operations,
net income or cash flow from operating activities, for the purpose of
analyzing the Company's operating performance, financial position and cash
flows. The Company has presented EBITDA because it is commonly used by
investors to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service debt.
(2) Does not reflect certain anticipated cost savings or the elimination of
non-recurring charges associated with the Motor Wheel Restructuring. For
information on the anticipated effects of the Motor Wheel Restructuring and
non-recurring charges on pro forma combined EBITDA, see Note 1(J) to the pro
forma combined condensed financial statements included in "PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS AND CERTAIN OTHER INFORMATION."
(3) On a pro forma basis, earnings were insufficient to cover fixed charges by
$27.4 million for the year ended January 31, 1996.
12
<PAGE> 29
COMPANY COMMON STOCK PRICES AND DIVIDENDS
Company Common Stock is listed and traded on the NYSE under the symbol
"HAY." The following table sets forth, for the periods indicated, the high and
low sales prices per share of Company Common Stock as reported on the NYSE and
dividends paid by the Company.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------- ------- ---------
<S> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 31, 1994
First Quarter..................................... $24.875 $18.125 $.015
Second Quarter.................................... 26.080 19.500 .015
Third Quarter..................................... 28.250 22.375 .015
Fourth Quarter.................................... 33.000 23.250 .015
FISCAL YEAR ENDED
JANUARY 31, 1995
First Quarter..................................... $35.500 $25.250 $.015
Second Quarter.................................... 30.125 24.750 .015
Third Quarter..................................... 27.250 21.000 .015
Fourth Quarter.................................... 23.625 15.625 .015
FISCAL YEAR ENDED
JANUARY 31, 1996
First Quarter..................................... $20.250 $14.250 $.015
Second Quarter.................................... 24.500 16.750 .015
Third Quarter..................................... 27.250 20.250 .015
Fourth Quarter.................................... 26.750 22.625 .015
FISCAL YEAR TO END
JANUARY 31, 1997
First Quarter..................................... $30.750 $18.500 $.015
Second Quarter (May 1, 1996
through May 30, 1996)........................... 31.250 30.375 --
</TABLE>
On March 28, 1996, the last trading day before the public announcement of
the execution of the Merger Agreement, the closing price of Company Common Stock
was $24.75 per share as reported on the NYSE. On May 30, 1996, the last trading
day before the date of this Proxy Statement/Prospectus, the last sale price of
Company Common Stock was $31.125 per share as reported on the NYSE. The market
price of shares of Company Common Stock is subject to fluctuation. As a result,
holders of Company Common Stock are urged to obtain current market quotations.
Holdings Common Stock is not listed, traded or quoted on any stock exchange
or quotation system and Holdings does not pay any dividends thereon.
On the Company Record Date and the Holdings Record Date, there were
approximately 120 holders of record of Company Common Stock and approximately 18
holders of record of Holdings Common Stock, respectively.
It is presently contemplated that no dividends will be paid on shares of
New Common Stock following the Merger.
13
<PAGE> 30
COMPARATIVE PER SHARE DATA
Set forth below are historical earnings before the cumulative effect of
accounting changes, cash dividends and book value per common share data of each
of the Company and Holdings, pro forma per share data for the Company following
the Merger and equivalent pro forma per share data for Holdings. The pro forma
data give effect to (i) the Transactions and the Holdings 1995 Recapitalization
for statement of operations purposes as if they had occurred at the beginning of
the period presented and (ii) the Transactions for balance sheet purposes, as if
they had occurred on January 31, 1996. The pro forma data have been derived from
and should be read in conjunction with the unaudited Pro Forma Combined
Condensed Financial Statements and the notes thereto included elsewhere in this
Proxy Statement/Prospectus. The information set forth below also should be read
in conjunction with the audited consolidated financial statements of Holdings,
including the notes thereto, appearing elsewhere in this Proxy
Statement/Prospectus, the audited consolidated financial statements of the
Company, including the notes thereto, incorporated herein by reference, and
"ADDITIONAL INFORMATION CONCERNING HOLDINGS -- Holdings' Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
HOLDINGS HISTORICAL:
Book value per share............................................. $ (205,501)
Income (loss) per share.......................................... (267,912)
Cash dividends declared per share................................ -0-
<CAPTION>
YEAR ENDED
JANUARY 31,
1996
------------
<S> <C>
COMPANY HISTORICAL:
Book value per share............................................. $13.96
Income (loss) per share.......................................... 1.62
Cash dividends per share......................................... 0.06
COMPANY PRO FORMA (FULLY DILUTED):
Book value per share............................................. $1.59
Income (loss) per share.......................................... (1.50)
Cash dividends per share......................................... -0-
HOLDINGS PRO FORMA EQUIVALENT:
Book value per share............................................. $ 13,088.50
Income (loss) per share.......................................... (12,253.96)
Cash dividends per share......................................... -0-
</TABLE>
14
<PAGE> 31
RISK FACTORS
In considering whether to approve the Merger Agreement in addition to the
other matters set forth or incorporated by reference in this Proxy
Statement/Prospectus, the stockholders of the Company and Holdings should
consider the following matters.
LEVERAGE AND LIQUIDITY
In connection with the Transactions, the Company will enter into the
Financing to finance the Cash Consideration to be paid to the holders of Company
Common Stock in the Merger, to refinance certain outstanding indebtedness of the
Company and Holdings, to pay expenses relating to the Merger and to provide for
the Surviving Corporation's working capital requirements. Upon completion of the
Financing, the Surviving Corporation's consolidated indebtedness will exceed
$700 million. The increased indebtedness and higher debt-to-equity ratio of the
Surviving Corporation in comparison to that of the Company and Holdings on a
historical basis may reduce the flexibility of the Surviving Corporation to
respond to changing business and economic conditions, as well as limit capital
expenditures of the Surviving Corporation. Although the definitive terms of the
debt instruments to be issued in connection with the Financing have not been
finalized as of the date of this Proxy Statement/Prospectus, the Company expects
that such terms will include significant operating and financial restrictions,
such as limits on the Surviving Corporation's ability to incur indebtedness.
It is anticipated that the Surviving Corporation will be in compliance with
all applicable covenants contained in the agreements governing its outstanding
indebtedness following the Merger. Nevertheless, the Surviving Corporation's
high degree of leverage may have important consequences for the Surviving
Corporation: (i) the ability of the Surviving Corporation to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, if necessary, may be impaired or such financing may not be on terms
favorable to the Surviving Corporation; (ii) a substantial portion of the
Surviving Corporation's cash flow will be used to pay the Surviving
Corporation's interest expense, which will reduce the funds that would otherwise
be available to the Surviving Corporation for its operations and future business
opportunities; (iii) a substantial decrease in net operating cash flows or an
increase in expenses of the Surviving Corporation could make it difficult for
the Surviving Corporation to meet its debt service requirements and force it to
modify its operations; (iv) the Surviving Corporation may be more highly
leveraged than its competitors which may place it at a competitive disadvantage;
and (v) the Surviving Corporation's high degree of leverage may make it more
vulnerable to a downturn in its business or the economy generally. Any inability
of the Surviving Corporation to service its indebtedness or obtain additional
financing, as needed, would have a material adverse effect on the Surviving
Corporation and the market value of the shares of New Common Stock.
INCREASE IN VARIABLE INTEREST RATES
A substantial portion of the indebtedness to be incurred by the Surviving
Corporation to finance the Transactions is expected to bear interest at variable
rates. While it is anticipated that the Surviving Corporation will enter into
one or more interest rate protection agreements to limit its exposure to
increases in such interest rates, such agreements will not eliminate such
exposure to variable rates. Any increase in the interest rates on the Surviving
Corporation's indebtedness will reduce funds available to the Surviving
Corporation for its operations and future business opportunities and will
exacerbate the consequences of the Surviving Corporation's leveraged capital
structure.
FRAUDULENT TRANSFER CONSIDERATIONS
The payment of the consideration in the Merger to the stockholders of the
Company pursuant to the Merger may be subject to review under federal or state
fraudulent transfer laws. Under such laws, if a court in a lawsuit by a creditor
or a representative of creditors of the Company or the Surviving Corporation,
such as a trustee in bankruptcy or one of such entities as debtor-in-possession,
were to find that, at the time of or after and giving effect to the
Transactions, the Company or the Surviving Corporation (i) was insolvent or
rendered
15
<PAGE> 32
insolvent thereby, (ii) was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, (iii) intended to
incur, or believed that it would incur, debts beyond its ability to pay as they
matured, or (iv) intended to hinder, delay or defraud creditors and, in the case
of clauses (i), (ii) and (iii), that the Company or the Surviving Corporation
did not receive reasonably equivalent value or fair consideration in the
Transactions, such court could avoid all or a part of the payment of the
consideration in the Merger and require that the stockholders, including
stockholders exercising appraisal rights, return such consideration to the
Company or the Surviving Corporation or to a fund for the benefit of their
respective creditors. In addition, if a court were to find that the Company or
the Surviving Corporation came within any of clauses (i) through (iv) above, the
Company or the Surviving Corporation, or their respective creditors or trustees
in bankruptcy, could seek to avoid the grant of security interests to the
Managing Agents under the Senior Secured Credit Facilities. This would result in
an event of default with respect to such indebtedness which, under the terms of
such indebtedness (subject to applicable law), would allow the Managing Agents
to terminate their obligations thereunder and to accelerate payment of such
indebtedness.
The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction which is being applied. There can be no
certainty as to what law a court would apply pursuant to applicable choice of
law provisions, although it is likely that a court would apply the law of the
state of incorporation of the Company and Holdings, federal bankruptcy law, the
law of the jurisdiction in which the headquarters of the Company or Holdings is
located or the law of the jurisdiction in which the Merger is deemed to have
occurred. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of such company's debts is greater than all
such company's property at a fair valuation, or if the present fair saleable
value of such company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
matured. For the fiscal year ended January 31, 1996, the pro forma ratio of
earnings to fixed charges of the Company was 0.6 to 1 (with earnings
insufficient to cover fixed charges by $27.4 million) after giving effect to the
Transactions as if the Transactions had occurred at the beginning of such fiscal
year. It is a condition to consummation of the Merger that the Company and
Holdings receive a mutually acceptable Solvency Opinion, which will be delivered
by Houlihan Lokey Howard & Zukin, Inc. There can, however, be no assurance that
a court would not determine that the Company or the Surviving Corporation, as
the case may be, was insolvent at the time of or after and giving effect to the
Transactions. In addition, there can be no assurance that a court would not
determine, regardless of whether any of the foregoing entities was solvent, that
the Transactions constituted a fraudulent transfer on another of the grounds
listed above. Management believes that the Company will be solvent following the
consummation of the Transactions, and the receipt of a Solvency Opinion is a
condition to the Merger Agreement. While such condition may be waived by the
Company and Holdings under the Merger Agreement, the receipt of such opinion is
also a condition to the Lenders obligation to fund under the Senior Secured
Credit Facilities, and the Company does not have the ability to waive such
condition thereunder.
DEPENDENCE ON MAJOR CUSTOMERS
The Company derived approximately 80% of its revenues from General Motors,
Ford and Chrysler in its fiscal year ended January 31, 1996; Holdings derived
approximately 58% of its revenues from these three customers in its fiscal year
ended December 31, 1995. The Company and Holdings, which have been suppliers to
these companies for many years, continually engage in efforts to improve and
expand on their relations with each of such companies. However, there can be no
assurance that the Surviving Corporation will maintain or improve these
relationships or that the Surviving Corporation will continue to supply these
customers at current levels. The loss of a significant portion of sales to
General Motors, Ford or Chrysler could have a material adverse effect on the
Surviving Corporation's business. Furthermore, General Motors and Ford
manufacture a significant portion of their steel wheel requirements and Ford, to
a limited extent, manufactures aluminum wheels for its own use. Although General
Motors and Ford have indicated that they will continue to rely on outside
suppliers, General Motors and Ford may increase their purchases of wheels from
captive manufacturers, which could reduce the market for the Surviving
Corporation's products and have an adverse effect on the Surviving Corporation.
16
<PAGE> 33
CYCLICAL NATURE OF AUTOMOTIVE INDUSTRY
The principal operations of the Company and Motor Wheel are, and the
principal operations of the Surviving Corporation will be, directly related to
domestic and foreign automotive and commercial highway vehicle production.
Industry sales and production are cyclical and can be affected by the strength
of the economy generally, or in specific regions such as North America or
Europe, by prevailing interest rates and by other factors which may have an
effect on the level of the Surviving Corporation's sales.
LABOR RELATIONS
Approximately 20% of the Company's domestic employees and 68% of Holdings'
employees are unionized. The Company's two domestic collective bargaining
agreements expire in February 1997 and June 1998, while Holdings' collective
bargaining agreements expire between March 1996 and October 1997. While the
Company and Holdings believe that their relations with their employees are
satisfactory, a dispute between the Surviving Corporation and its employees, or
between any of its major customers and such customers' employees could have a
material adverse effect on the Surviving Corporation. Substantially all of the
Company's overseas employees are members of state-sponsored unions.
CHALLENGES OF BUSINESS INTEGRATION
The full benefits of a business combination of the Company and Holdings
will require the integration of each company's administrative, finance, sales
and marketing organizations, the coordination of each company's sales efforts,
and the implementation of appropriate operations, financial and management
systems and controls in order to capture the efficiencies and the cost
reductions that are expected to result from the Merger. This will require
substantial attention from the Surviving Corporation's management team, which
has minimal experience integrating the operations of companies the size of the
Company and Holdings. The diversion of management attention, as well as any
other difficulties which may be encountered in the transition and integration
process, could have an adverse impact on the revenue and operating results of
the Surviving Corporation. There can be no assurance that the Surviving
Corporation will be able to integrate the operations of the Company and Holdings
successfully.
POTENTIAL CONTROL BY JLL
Upon completion of the Merger, approximately 43.3% of the outstanding
shares of New Common Stock will be owned by JLL. In addition, immediately after
the Effective Time, the Surviving Corporation will enter into the Stockholders
Agreement (as hereinafter defined) with the New Investors (which, in the
aggregate, will own approximately 33.7% of the outstanding shares of New Common
Stock, excluding shares of New Common Stock owned by JLL), which will provide,
among other things, the New Investors will vote their shares of New Common Stock
so that the Board of Directors of the Surviving Corporation will consist of nine
members, of which one member will be the Chief Executive Officer of the Company,
four members will be designees of JLL, one member will be a designee of TSG and
three members will be selected by the Surviving Corporation Board and not be
affiliated with the Surviving Corporation or any of the New Investors. The New
Investors will be free to vote their shares as they deem fit with respect to all
other matters. Accordingly, JLL will have significant influence over the
Surviving Corporation and will have the right to designate four of its nine
directors. See "THE MERGER -- Ownership of New Common Stock after the Effective
Time" and "CERTAIN OTHER AGREEMENTS -- Stockholders Agreement."
MORE LIMITED PUBLIC MARKET FOR SHARES OF NEW COMMON STOCK AND ABSENCE OF PUBLIC
MARKET FOR WARRANTS
The number of outstanding shares of New Common Stock to be publicly traded
after the Merger will be substantially less than the number of currently
outstanding shares of Company Common Stock currently publicly traded, a fact
which could adversely affect the liquidity of the shares of New Common Stock
held by the public. In addition, the Company does not intend to list the
Warrants on any national securities exchange or to seek the admission of the
Warrants to trading in any Nasdaq quotation system. There is no existing
17
<PAGE> 34
market for the Warrants. Accordingly, there can be no assurance as to the
liquidity of any market that may develop for the shares of New Common Stock or
the Warrants. To the extent there is any market for the Warrants, they could
trade at prices that may fluctuate depending on many factors, including the
trading price for shares of New Common Stock, prevailing interest rates and the
market for similar securities.
DISCONTINUATION OF DIVIDENDS
Following the Merger, no dividends on shares of New Common Stock are
presently contemplated. In addition, it is anticipated that the terms of any
debt instruments to be entered into in connection with the Financing will
prohibit or otherwise restrict such payment of dividends.
COMPANY SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of
Company Common Stock as of the Company Record Date in connection with the
solicitation of proxies by the Company Board for use at the Company Special
Meeting to be held on Tuesday, July 2, 1996 at 10:00 a.m., local time, at The
Fairlane Club, 5000 Fairlane Woods Drive, Dearborn, Michigan, and at any
adjournment or postponement thereof.
At the Company Special Meeting, holders of Company Common Stock as of the
Company Record Date will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement. Company stockholders also will consider
and vote upon such other matters as may properly come before the Company Special
Meeting.
The Company Board has unanimously determined that the Merger is fair to and
in the best interests of the Company and its stockholders and has approved the
Merger Agreement. THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
OF THE COMPANY VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "THE
MERGER -- Company's Reasons for the Merger; Recommendation of the Company
Board."
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
The Company Board has fixed the close of business on May 30, 1996 as the
Company Record Date for the determination of holders of Company Common Stock
entitled to notice of, and to vote at, the Company Special Meeting. Only holders
of record of Company Common Stock at the close of business on the Company Record
Date will be entitled to notice of, and to vote at, the Company Special Meeting.
The Company Common Stock was the only outstanding class of voting securities of
the Company on the Company Record Date, and each share of Company Common Stock
is entitled to one vote on each matter to be acted upon or which may come before
the Company Special Meeting. Votes may be cast at the Company Special Meeting in
person or by properly executed proxy. See "-- Proxies."
At the close of business on the Company Record Date, directors and
executive officers of the Company (other than, with respect to the Varity
Shares, directors who are designees of Varity) owned an aggregate of 10,382
(less than 1%) of the shares of Company Common Stock then outstanding. Varity
beneficially owned 8,144,000 (approximately 46.3%) of the outstanding shares of
Company Common Stock as of the Company Record Date. Pursuant to the Stock Option
Agreement, Varity caused K-H to grant, and K-H granted, to certain
representatives of Holdings an irrevocable proxy to vote the Varity Shares for
approval and adoption of the Merger Agreement (without any amendment thereto
unless consented to by Varity). Holdings has agreed to cause such
representatives to attend the Company Special Meeting and to vote the Varity
Shares in favor of the Merger Agreement.
The presence at the Company Special Meeting, either in person or by proxy,
of the holders of a majority of the shares of Company Common Stock entitled to
vote on the Merger Agreement is necessary to constitute a quorum to transact
business at the Company Special Meeting. Abstentions of shares that are present
at the Company Special Meeting and broker non-votes (i.e., shares held by
brokers in street name that are not
18
<PAGE> 35
entitled to a vote at the Company Special Meeting due to the absence of specific
instructions from the beneficial owners of such shares) are counted for the
purpose of determining the presence of a quorum for the transaction of business.
If a quorum is not present at the Company Special Meeting, the stockholders who
are present and entitled to vote at the Company Special Meeting may, by majority
vote, adjourn the Company Special Meeting from time to time without notice or
other announcement until a quorum is present.
Approval and adoption of the Merger Agreement and the Merger will require
the affirmative vote of a majority of the outstanding shares of Company Common
Stock. Because approval and adoption of the Merger Agreement requires the
affirmative vote of a majority of the outstanding shares of Company Common
Stock, abstentions and broker non-votes will have the same effect as a vote
against approval and adoption of the Merger Agreement. PURSUANT TO THE STOCK
OPTION AGREEMENT, HOLDINGS HAS THE POWER TO, AND HAS AGREED TO CAUSE ITS
REPRESENTATIVES TO, VOTE THE VARITY SHARES FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT. In addition, the directors and executive officers of the
Company (other than, with respect to the Varity Shares, directors who are
designees of Varity), who owned an aggregate of 10,382 shares (less than 1%) of
Company Common Stock on the Company Record Date, have indicated to the Company
that they intend to vote their shares in favor of the Merger. The Company Board
encourages you to vote for approval and adoption of the Merger Agreement by
signing and returning the enclosed proxy or attending the Company Special
Meeting.
PROXIES; REVOCATION OF PROXIES
Shares of Company Common Stock represented by properly executed proxies
received prior to or at the Company Special Meeting and not revoked will be
voted in accordance with the instructions indicated in such proxies. If a
stockholder does not return a properly executed proxy, and does not attend and
vote at the Company Special Meeting, such stockholder's shares will not be
voted, which will have the same effect as a vote against approval and adoption
of the Merger Agreement. If signed and returned, the proxy will authorize the
persons named as proxy to vote on the matters referred to therein. It is not
expected that any matter other than those referred to herein will be brought
before the Company Special Meeting; however, if other matters are properly
presented, the persons named as proxies will vote shares subject to such proxies
in accordance with their judgment with respect to such matters. EXECUTED PROXIES
THAT CONTAIN NO INSTRUCTIONS TO THE CONTRARY WILL BE VOTED FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Any stockholder who executes and returns a proxy may revoke it at any time
before it is voted at the Company Special Meeting by (i) delivering to the
Secretary of the Company at the Company's principal offices before the Company
Special Meeting an instrument of revocation bearing a later date or time than
the date or time of the proxy being revoked; (ii) submitting a duly executed
proxy bearing a later date or time than the date or time of the proxy being
revoked; or (iii) voting in person at the Company Special Meeting. A
stockholder's attendance at the Company Special Meeting will not by itself
revoke a proxy given by such stockholder.
The Company Special Meeting may be adjourned or postponed by the Company
for any reason, including for purposes of obtaining a quorum or necessary
regulatory approvals. At any subsequent reconvening of the Company Special
Meeting, all proxies will be voted in the same manner as such proxies would have
been voted at the original convening of the meeting (except for any proxies
which theretofore have been effectively revoked or withdrawn), notwithstanding
that they may have been effectively voted on the same or any other matter at a
previous meeting.
The cost of soliciting proxies from stockholders of the Company will be
borne entirely by the Company. In addition to soliciting proxies by mail,
proxies may be solicited by the Company's directors, officers and other
employees by personal interview, telephone and telegram. Such persons will
receive no additional compensation for such services, but may receive
reimbursement for out-of-pocket expenses incurred in connection therewith. If
undertaken, the expense of such solicitation would be nominal. The Company has
retained Georgeson & Company Inc. to aid in the solicitation of proxies from its
stockholders. The fees of Georgeson & Company Inc. to be paid by the Company are
estimated to be less than $7,500 plus reimbursement of out-of-pocket expenses.
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK
CERTIFICATES WILL BE MAILED TO STOCKHOLDERS SHORTLY AFTER THE EFFECTIVE TIME.
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<PAGE> 36
STOCKHOLDERS' RIGHTS OF APPRAISAL
Holders of Company Common Stock have the right to demand judicial appraisal
of, and obtain a cash payment for, the "fair value" of their shares of Company
Common Stock (exclusive of any element of value arising from the accomplishment
or expectation of the Merger), pursuant to Section 262 of the DGCL. In order to
exercise such rights, such holders of Company Common Stock must not vote in
favor of the Merger and must comply with the procedural requirements of Section
262 of the DGCL. The full text of Section 262 of the DGCL is attached hereto as
Annex III, and any stockholder of the Company desiring to exercise dissenters'
rights of appraisal in connection with the Merger should consult with legal
counsel prior to taking any action in order to ensure that the stockholder
complies with the applicable statutory provision. Failure to take any of the
steps required under Section 262 of the DGCL on a timely basis may result in the
loss of appraisal rights. Holders of Company Preferred Stock have waived any
appraisal rights in connection with the Merger. See "STOCKHOLDERS' RIGHTS OF
APPRAISAL" and Annex III hereto.
HOLDINGS SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of
Holdings Common Stock as of the Holdings Record Date in connection with the
solicitation of proxies by the Holdings Board for use at the Holdings Special
Meeting to be held on Tuesday, July 2, 1996 at 10:00 a.m., local time, at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, 43rd floor,
New York, New York and at any adjournment or postponement thereof.
At the Holdings Special Meeting, holders of Holdings Common Stock as of the
Holdings Record Date will be asked to consider and vote upon a proposal to
approve and adopt the Merger Agreement. Holdings stockholders also will consider
and vote upon such other matters as may properly come before the Holdings
Special Meeting.
The Holdings Board has unanimously determined that the Merger is advisable
and in the best interests of Holdings and its stockholders and has approved the
Merger Agreement. THE HOLDINGS BOARD UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF HOLDINGS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
See "THE MERGER -- Holdings' Reasons for the Merger; Recommendation of the
Holdings Board."
RECORD DATE, VOTING RIGHTS AND VOTE REQUIRED
The Holdings Board has fixed the close of business on May 30, 1996 as the
Holdings Record Date for the determination of holders of Holdings Common Stock
entitled to notice of, and to vote at, the Holdings Special Meeting. Only
holders of record of Holdings Common Stock at the close of business on the
Holdings Record Date will be entitled to notice of, and to vote at, the Holdings
Special Meeting. On the Holdings Record Date, 379.6275 shares of Holdings Common
Stock were outstanding and were held by 18 holders of record. On the Holdings
Record Date, 281.4815 shares of Holdings Common Stock, or approximately 74.1% of
the outstanding shares of Holdings Common Stock, were owned by JLL. Accordingly,
JLL can approve the Merger Agreement without the vote of any other stockholder.
At the close of business on the Holdings Record Date, Holdings' directors and
executive officers (other than, with respect to shares beneficially owned by
JLL, directors who are designees of JLL) beneficially own an additional 12.717
shares of Holdings Common Stock, or approximately 3.3% of the then outstanding
shares of Holdings Common Stock. JLL has granted the JLL Proxy to
representatives of Varity to vote JLL's shares of Holdings Common Stock in favor
of the Merger Agreement. Varity has agreed to cause its representatives to
attend the Holdings Special Meeting and to vote such shares in favor of the
Merger Agreement. Holdings Common Stock is the only outstanding class of voting
securities of Holdings, and each share of Holdings Common Stock is entitled to
one vote on each matter to be acted upon or which may come before the Holdings
Special Meeting. Votes may be cast at the Holdings Special Meeting in person or
by properly executed proxy. See "-- Proxies; Revocation of Proxies."
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<PAGE> 37
The presence at the Holdings Special Meeting, either in person or by proxy,
of the holders of a majority of the shares of Holdings Common Stock entitled to
vote on the Merger Agreement is necessary to constitute a quorum to transact
business at the Holdings Special Meeting. Abstentions of shares that are present
at the Holdings Special Meeting are counted for the purpose of determining the
presence of a quorum for the transaction of business. If a quorum is not present
at the Holdings Special Meeting, the stockholders who are present and entitled
to vote at the Holdings Special Meeting may, by majority vote, adjourn the
Holdings Special Meeting from time to time without notice or other announcement
until a quorum is present.
Approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority of the outstanding shares of Holdings Common Stock.
In determining whether the Merger Agreement has received the requisite number of
votes under the DGCL, abstentions and non-votes will be counted and will have
the same effect as a vote against approval and adoption of the Merger Agreement.
PURSUANT TO THE JLL PROXY, VARITY HAS THE POWER TO, AND HAS AGREED TO CAUSE ITS
REPRESENTATIVES TO, VOTE JLL'S SHARES OF HOLDINGS COMMON STOCK FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. THEREFORE, VARITY HAS THE POWER TO ENSURE THAT
THERE WILL BE A QUORUM AT THE HOLDINGS SPECIAL MEETING AND SUFFICIENT VOTES CAST
FOR APPROVAL OF THE MERGER AGREEMENT TO ENSURE ITS PASSAGE WITHOUT THE VOTE OF
ANY OTHER STOCKHOLDER. In addition, the directors and executive officers of
Holdings (other than, with respect to shares beneficially owned by JLL,
directors who are designees of JLL), who owned an aggregate of 12.717 shares
(approximately 3.3%) of Holdings Common Stock on the Holdings Record Date, have
indicated to Holdings that they intend to vote their shares in favor of the
Merger. Nonetheless, the Board encourages you to vote on approval and adoption
of the Merger Agreement by signing and returning the enclosed proxy or attending
the Holdings Special Meeting.
PROXIES; REVOCATION OF PROXIES
Shares of Holdings Common Stock represented by properly executed proxies
received prior to or at the Holdings Special Meeting and not revoked will be
voted in accordance with the instructions indicated in such proxies. If a
stockholder does not return a properly executed proxy, and does not attend and
vote at the Holdings Special Meeting, such stockholder's shares will not be
voted, which will have the same effect as a vote against approval and adoption
of the Merger Agreement. If signed and returned, the proxy will authorize the
persons named as proxy to vote on the matters referred to therein. It is not
expected that any matter other than those referred to herein will be brought
before the Holdings Special Meeting; however, if other matters are properly
presented, the persons named as proxies will vote shares subject to such proxies
in accordance with their judgment with respect to such matters. EXECUTED PROXIES
THAT CONTAIN NO INSTRUCTIONS TO THE CONTRARY WILL BE VOTED FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT.
Any stockholder who executes and returns a proxy may revoke it at any time
before it is voted at the Holdings Special Meeting by (i) delivering to the
Secretary of Holdings at Holdings' principal offices before the Holdings Special
Meeting an instrument of revocation bearing a later date or time than the date
or time of the proxy being revoked; (ii) submitting a duly executed proxy
bearing a later date or time than the date or time of the proxy being revoked;
or (iii) voting in person at the Holdings Special Meeting. A stockholder's
attendance at the Holdings Special Meeting will not by itself revoke a proxy
given by such stockholder.
The Holdings Special Meeting may be adjourned or postponed by Holdings for
any reason, including for purposes of obtaining a quorum or necessary regulatory
approvals. At any subsequent reconvening of the Holdings Special Meeting, all
proxies will be voted in the same manner as such proxies would have been voted
at the original convening of the meeting (except for any proxies which
theretofore have been effectively revoked or withdrawn), notwithstanding that
they may have been effectively voted on the same or any other matter at a
previous meeting.
The cost of soliciting proxies from stockholders of Holdings will be borne
by Holdings, except that the Company will pay the cost of preparing and printing
this Proxy Statement/Prospectus, including related filing fees. In addition to
soliciting proxies by mail, proxies may be solicited by Holdings' directors,
officers and other employees by personal interview, telephone and telegram. Such
persons will receive no additional compensation for such services.
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<PAGE> 38
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK
CERTIFICATES WILL BE MAILED TO STOCKHOLDERS SHORTLY AFTER THE EFFECTIVE TIME.
STOCKHOLDERS' RIGHTS OF APPRAISAL
Holders of Holdings Common Stock have the right to demand judicial
appraisal of, and obtain a cash payment for, the "fair value" of their shares of
Holdings Common Stock (exclusive of any element of value arising from the
accomplishment or expectation of the Merger), pursuant to Section 262 of the
DGCL. In order to exercise such rights, such holders of Holdings Common Stock
must not vote in favor of the Merger and must comply with the procedural
requirements of Section 262 of the DGCL. The full text of Section 262 of the
DGCL is attached hereto as Annex III, and any stockholder of Holdings desiring
to exercise dissenters' rights of appraisal in connection with the Merger should
consult with legal counsel prior to taking any action in order to ensure that
the stockholder complies with the applicable statutory provision. Failure to
take any of the steps required under Section 262 of the DGCL on a timely basis
may result in the loss of appraisal rights. See "STOCKHOLDERS' RIGHTS OF
APPRAISAL" and Annex III hereto.
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<PAGE> 39
SOURCE AND AMOUNT OF FUNDS
Approximately $901.4 million will be required to finance the Transactions.
It is currently contemplated that the Transactions will be financed with (i) the
proceeds of the sale of $200 million of Company Preferred Stock and Warrants to
the New Investors, including JLL, immediately prior to the Effective Time, (ii)
approximately $451.4 million of bank borrowings pursuant to Senior Secured
Credit Facilities with a group of banks led by the Managing Agents which provide
for aggregate commitments of up to $645 million and (iii) the proceeds of a
public offering by the Company of $250 million of Senior Subordinated Notes. It
is a condition to the obligations of the parties to effect the Merger that,
pursuant to the Financing or otherwise, sufficient funds have been received to
pay the consideration in the Merger and to consummate the transactions
contemplated by the Merger Agreement. The parties to the Merger Agreement have
agreed to use their reasonable best efforts to satisfy the conditions, including
the financing condition, under the Merger Agreement. There can be no assurance
that the Financing or other sufficient funding will be obtained. See "CERTAIN
PROVISIONS OF THE MERGER AGREEMENT -- Conditions to Consummation of the Merger."
Holdings and the Company currently have no specific plans or arrangements
for the repayment of the funds borrowed under the Senior Secured Credit
Facilities and the Senior Subordinated Notes, but expect to be able to repay
such borrowings out of internally generated funds of the Surviving Corporation.
See "RISK FACTORS -- Leverage and Liquidity." The approximate sources and uses
of funds in connection with the Transactions, assuming that the Transactions
occurred as of January 31, 1996, are presented in the following table:
SOURCES AND USES OF FUNDS
(IN MILLIONS)
<TABLE>
<S> <C>
SOURCES OF FUNDS
- ---------------------------------------------------------------------------------------------
Revolving Facility(a)............................................................... $ 26.4
Senior Term Debt.................................................................... 425.0
Senior Subordinated Notes........................................................... 250.0
New Investors' cash investment(b)................................................... 200.0
------
Total Sources.................................................................. $901.4
======
USES OF FUNDS
- ---------------------------------------------------------------------------------------------
Payment of Cash Consideration....................................................... $506.1
Refinance outstanding domestic indebtedness of the Company(c)....................... 136.9
Refinance outstanding obligations of Holdings(d).................................... 137.2
Retire the Company and Holdings management stock options............................ 5.2
Working capital..................................................................... 75.0
Estimated fees and expenses......................................................... 41.0
------
Total Uses..................................................................... $901.4
======
</TABLE>
- -------------------------
(a) $26.4 million is the portion that is estimated would have been drawn from
the $220 million Revolving Facility (as hereinafter defined) if the
Transactions occurred as of January 31, 1996. Pursuant to the Commitment
Letter, up to $100 million may be drawn from the Revolving Facility on the
Closing Date. The actual amount of the Revolving Facility to be drawn on the
Closing Date will depend upon the working capital requirements of the
Company and Holdings at that time, but is expected to exceed $26.4 million.
The actual amount of the Revolving Facility to be drawn is also contingent
upon (i) the net proceeds obtained from the sale of Senior Subordinated
Notes which, pursuant to the Commitment Letter (as hereinafter defined), may
be of an aggregate principal amount as low as $225 million, (ii) the sale of
an aggregate of $200 million of Company Preferred Stock and Warrants and
(iii) the actual amount borrowed through the Facilities (as hereinafter
defined).
(b) Cash equity investments exclude the value of New Common Stock which will be
issued to the pre-Merger common stockholders of the Company and Holdings.
(c) Approximately $108.0 million is estimated to be used to repurchase the
Company Senior Notes and approximately $28.9 million is estimated to be used
to pay the full amounts due under the Company's existing credit agreement
(the "Existing Company Credit Agreement") as of January 31, 1996, which bore
interest at a rate of 6.17% as of January 31, 1996 and has a maturity date
of March 31, 2000.
(d) Approximately $132.2 million is estimated to be used to redeem the Motor
Wheel Senior Notes and approximately $5.0 million is estimated to be used to
pay the full amounts due under Motor Wheel's existing credit agreement as of
December 31, 1995, which bore interest at a rate of 8.44% as of December 31,
1995 and has a maturity date of March 31, 1998.
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<PAGE> 40
SENIOR SECURED CREDIT FACILITIES
General. Pursuant to a commitment letter, dated as of March 28, 1996, among
the Company, Holdings and the Managing Agents (the "Commitment Letter"), and
subject to the negotiation, execution and delivery of definitive documentation
(the "Credit Agreement"), the Managing Agents have committed to lend to the
Company at the time of the Merger up to $425 million in the form of a senior
secured term loan facility, such aggregate amount to be allocated among (i) a
Tranche A Term Loan Facility in an aggregate principal amount of up to $200
million (the "Tranche A Facility"), (ii) a Tranche B Term Loan Facility in an
aggregate principal amount of up to $125 million (the "Tranche B Facility") and
(iii) a Tranche C Term Loan Facility in an aggregate principal amount of up to
$100 million (the "Tranche C Facility") (collectively, the "Facilities"), and up
to $220 million in the form of a senior secured revolving credit facility (the
"Revolving Facility," and, together with the Facilities, the "Loans"). Pursuant
to the Letter Agreement among the New Investors and Holdings, no documentation
with respect to the Financing may be entered into, amended, modified or
supplemented, and no condition thereto may be waived, without the prior consent
of New Investors subscribing for not less than $161 million of Company Preferred
Stock.
Pursuant to the Commitment Letter, CIBC has agreed to provide $387 million
of the aggregate principal amount of the Loans and Merrill has agreed to provide
$258 million of such aggregate principal amount, each commitment to be divided
pro rata among the Loans. Each of the Managing Agents reserves the right to
syndicate all or a portion of its commitment to one or more financial
institutions (the "Lenders"), such institutions being subject to the Company's
approval. Upon the acceptance of the commitment of any Lender to provide a
portion of the Loans, each of CIBC and Merrill will be released from a portion
of its commitment in an amount equal to its pro rata share of the commitment of
such Lender. In addition, CIBC agrees to serve as administrative and syndication
agent (the "Agent") in connection with the Loans, as well as fronting bank in
connection with the letters of credit issued under the Revolving Facility.
Merrill has agreed to serve as documentation agent in connection with the Loans.
The following terms and descriptions of the Loans are based upon the terms
set forth in the Commitment Letter and are subject to the final negotiation and
execution of the Credit Agreement and related documents. As a result, the final
terms of the Financing may vary from those set forth below. A copy of the
Commitment Letter is filed as an exhibit to the Registration Statement and the
description thereof is qualified in its entirety by reference to the full text
thereof.
Use of Proceeds; Maturity. The Facilities and up to $100 million of the
Revolving Facility are expected to be made available to the Company and its
subsidiaries at the time of the Merger, to finance in part the Merger and
certain related costs and expenses and to refinance certain existing
indebtedness of the Company and Holdings and their subsidiaries. The full amount
to be borrowed under the Facilities must be drawn in a single drawing on the
date the Facilities are closed, which is expected to be the date on which the
Effective Time occurs (the "Loan Closing Date"). The Revolving Facility is
expected to be available at the Effective Time and thereafter to finance
(including through the making of revolving loans and the issuance of letters of
credit) working capital requirements and general corporate purposes of the
Surviving Corporation and its subsidiaries. The Facilities have maturity
schedules as follows: (i) the Tranche A Facility will mature on the sixth
anniversary of the Loan Closing Date, and will amortize in quarterly
installments under a schedule to be agreed upon; (ii) the Tranche B Facility
will mature on the seventh anniversary of the Loan Closing Date, and will
amortize in quarterly installments under a schedule to be agreed upon; and (iii)
the Tranche C Facility will mature on the eighth anniversary of the Loan Closing
Date, and will amortize in quarterly installments under a schedule to be agreed
upon. The Revolving Facility will mature on the sixth anniversary of the Loan
Closing Date. The Credit Agreement will require the Surviving Corporation to
reduce the amount outstanding under the Revolving Facility to a level to be
agreed upon during a period to be agreed upon each year.
Prepayments. Loans under the Facilities are required to be prepaid with (a)
75% of excess cash flow, (b) 100% of the net cash proceeds of all
non-ordinary-course asset sales or other dispositions of the property by the
Surviving Corporation and its subsidiaries (including insurance and condemnation
proceeds), subject to limited exceptions to be agreed upon, and (c) 100% of the
net proceeds of issuances of debt obligations of the Surviving Corporation and
its subsidiaries, subject to limited exceptions to be agreed upon. Such
mandatory
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<PAGE> 41
prepayments will be allocated pro rata among the Facilities and, within each
such Facility, applied pro rata to the remaining amortization payments under
such Facility. However, the holders of loans under the Tranche B Facility and
the Tranche C Facility may, so long as loans are outstanding under the Tranche A
Facility, decline to accept any mandatory prepayment described above and, under
such circumstances, all amounts that would otherwise be used to prepay loans
under the Tranche B Facility and the Tranche C Facility will be used to prepay
loans under the Tranche A Facility.
Voluntary prepayments will be permitted in whole or in part, at the option
of the Surviving Corporation, in minimum principal amounts to be agreed upon,
without premium or penalty, subject to reimbursement of the Lenders'
redeployment costs in the case of prepayment of Adjusted LIBOR borrowings other
than on the last day of the relevant interest period. All voluntary prepayments
under the Facilities will be allocated pro rata among the Facilities and, within
each such Facility, applied pro rata to the remaining amortization payment under
such Facility.
Interest and Fees. The interest rates under the Loans will be, at the
option of the Surviving Corporation, as follows:
(a) Revolving Facility and Tranche A Facility: Adjusted LIBOR plus
2.50% per annum or the rate which is equal to the highest of CIBC's prime
rate, the federal funds rate plus 1/2 of 1% and the base certificate of
deposit rate plus 1% ("ABR") plus 1.50% per annum. Following the first
anniversary of the Closing Date, the spreads above the Adjusted LIBOR and
ABR set forth above will decrease in increments to be agreed upon if the
Surviving Corporation satisfies performance tests to be agreed upon and no
event of default under the Credit Agreement exists. The Credit Agreement
will require the Surviving Corporation to reduce the amount outstanding
under the Revolving Facility to a level to be agreed upon during a
specified period each year.
(b) Tranche B Facility: Adjusted LIBOR plus 3.00% per annum or ABR
plus 2.00% per annum, with such spreads to remain in effect throughout the
term of the Facilities.
(c) Tranche C Facility: Adjusted LIBOR plus 3.50% per annum or ABR
plus 2.50% per annum, with such spreads to remain in effect throughout the
term of the Facilities.
The Surviving Corporation may elect interest periods of 1, 2, 3 or 6 months
for Adjusted LIBOR borrowings. Calculation of interest will be on the basis of
actual number of days elapsed in a year of 360 days (or 365 or 366 days, as the
case may be, in the case of ABR loans based on the Prime Rate) and interest will
be payable at the end of each interest period and, in any event, at least every
3 months.
The Commitment Letter provides for payment by the Surviving Corporation in
respect of outstanding letters of credit (i) a per annum fee equal to the spread
over Adjusted LIBOR for Revolving Facilities from time to time in effect, (ii) a
facing fee to be negotiated with the issuing bank, plus (iii) customary issuing
fees and expenses. The Surviving Corporation will also pay a commitment fee
equal to one half of one percent per annum on (i) the undrawn portion of
available commitments in respect of the commitments for all the Loans,
commencing to accrue, with respect to the commitments of CIBC, Merrill and each
other Lender, on the date such commitment is accepted and payable on the Closing
Date (or the earlier termination of such commitment in which case such fees will
be payable by Holdings in accordance with the Fee Letter) and (ii) the undrawn
portion of the Revolving Facility, quarterly in arrears after the Closing Date.
Collateral and Guarantees. The Facilities will be guaranteed by all of the
Surviving Corporation's existing and future direct and indirect domestic
subsidiaries. The Facilities will be secured by a first priority lien in
substantially all of the properties and assets of the Surviving Corporation and
its direct and indirect domestic subsidiaries, now owned or acquired later,
including a pledge of all of the shares of their respective existing and future
domestic subsidiaries and 65% of the shares of their respective existing and
future foreign subsidiaries.
Conditions Precedent. The Commitment Letter provides that the Credit
Agreement will contain certain conditions precedent to the initial borrowing of
funds under the Facilities, including (i) the prior or simultaneous consummation
of the Merger and related transactions on terms satisfactory to the Lenders, and
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<PAGE> 42
with fees and expenses not in excess of designated amounts, (ii) the receipt by
the Company of at least $225 million in gross cash proceeds from the issuance of
its Senior Subordinated Notes, with terms satisfactory to the Lenders, (iii)
receipt by the Lenders of a pro forma consolidated balance sheet of the
Surviving Corporation as of the Closing Date, after giving effect to the Merger
and all other related transactions, (iv) repurchase of at least $51 million of
outstanding Company Senior Notes and amendment of any such Notes not so
purchased on terms and conditions reasonably satisfactory to the Agent, (v)
redemption by the Surviving Corporation of all outstanding Motor Wheel Senior
Notes, (vi) full repayment of amounts due under the Existing Company Credit
Agreement, (vii) full repayment of all amounts due under the existing credit
agreement of Motor Wheel, (viii) receipt by the Lenders of a satisfactory
Solvency Opinion and (ix) receipt by the Lenders from each domestic subsidiary
of the Surviving Corporation of a guarantee of the Facilities and a pledge of
substantially all of its assets.
Representations and Warranties, Covenants. The Commitment Letter provides
that the Credit Agreement documentation will contain certain customary
representations and warranties by the Company including, without limitation,
representations and warranties relating to: (i) the accuracy of financial
statements and other information, (ii) the absence of any material adverse
change, (iii) the absence of litigation and violations of any agreements or
instruments, (iv) compliance with laws and inapplicability of the Investment
Company Act of 1940, (v) regulatory approvals, (vi) payment of taxes, (vii)
ownership of properties, (viii) solvency, (ix) labor and environmental matters,
and (x) priority and perfection of security interests. In addition, the
Commitment Letter provides that the Credit Agreement will contain covenants
restricting the ability of the Surviving Corporation and its subsidiaries to,
among others, (i) declare dividends or redeem or repurchase capital stock, (ii)
prepay, redeem or purchase debt, (iii) incur liens and engage in sale-leaseback
transactions, (iv) make loans and investments, (v) issue more debt, (vi) amend
or otherwise alter debt and other material agreements, (vii) make capital
expenditures, (viii) engage in mergers, acquisitions and asset sales, (ix)
transact with affiliates and (x) alter the business it conducts. The Surviving
Corporation must also make certain customary indemnifications of the Managing
Agents and their respective agents and will also be required to comply with
financial covenants with respect to: (i) a maximum leverage ratio, (ii) a
minimum interest coverage ratio and (iii) a minimum fixed charge coverage ratio.
The Surviving Corporation is also required to make certain customary affirmative
covenants.
Events of Default. Events of default under the Credit Agreement will
include (i) the Surviving Corporation's failure to pay principal or interest
when due, (ii) the Surviving Corporation's material breach of any covenant,
representation or warranty contained in the loan documents, (iii) customary
cross-default provisions, (iv) events of bankruptcy, insolvency or dissolution
of the Surviving Corporation or its subsidiaries, (v) the levy of certain
judgments against the Company, its subsidiaries, or their assets, (vi) certain
adverse events under ERISA plans of the Surviving Corporation or its
subsidiaries, (vii) the actual or asserted invalidity of security documents or
guarantees of the Surviving Corporation or its subsidiaries and (viii) a change
of control of the Surviving Corporation.
SENIOR SUBORDINATED NOTES
The Company and Holdings currently contemplate the issuance of $250 million
in Senior Subordinated Notes at the Effective Time as part of the Financing. The
receipt of $225 million in proceeds from such offering is a condition to the
funding by the Managing Agents under the Commitment Letter. The following
summary of certain provisions of the Senior Subordinated Notes and the indenture
with respect thereto (the "Senior Subordinated Note Indenture") is a description
of the currently expected terms of such provisions. The terms of the Senior
Subordinated Notes and the Senior Subordinated Note Indenture have not been
finally negotiated, and accordingly their definitive terms may vary from those
described in the following summary. The Senior Subordinated Notes are expected
to be unsecured obligations of the Surviving Corporation, and be subordinated in
right of payment to all existing and future senior indebtedness of the Surviving
Corporation, including the obligations of the Surviving Corporation and its
subsidiaries under the Senior Secured Credit Facilities. The Senior Subordinated
Notes are expected to mature on the tenth anniversary of the date of the Senior
Subordinated Note Indenture.
The Senior Subordinated Notes will be unconditionally guaranteed, on a
senior subordinated basis, as to the payment of principal, premium, if any, and
interest, jointly and severally (the "Guarantees"), by the
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Surviving Corporation's material U.S. subsidiaries (the "Guarantors"). The
Guarantees will be subordinate to all senior indebtedness of the respective
Guarantors.
The Senior Subordinated Notes will be redeemable at the option of the
Surviving Corporation, in whole or in part, at any time on or after five years
from the date of the Senior Subordinated Note Indenture, at the redemption
prices to be agreed upon and set forth in the Senior Subordinated Note
Indenture, together with accrued and unpaid interest thereon to the date of
redemption. In addition, the Surviving Corporation, at its option, may redeem in
the aggregate up to 35% of the original principal amount of Senior Subordinated
Notes at any time prior to three years from the date of the Senior Subordinated
Note Indenture, at the redemption price to be agreed upon and set forth in the
Senior Subordinated Note Indenture plus accrued and unpaid interest thereon to
the redemption date with the net cash proceeds of one or more equity offerings;
provided, however, that at least $162.5 million aggregate principal amount of
Senior Subordinated Notes remain outstanding and that such redemption occurs
within 90 days following the closing of any such equity offering.
In the event of a Change of Control (to be defined in the Senior
Subordinated Note Indenture), the Surviving Corporation will be required to make
an offer to purchase all outstanding Senior Subordinated Notes at a price equal
to 101% of the principal amount thereof, plus accrued and unpaid interest to the
date of purchase. The Senior Secured Credit Facilities, however, will prohibit
the purchase of the Senior Subordinated Notes in the event of a Change of
Control, unless and until such time as the indebtedness under the Senior Secured
Credit Facilities is paid in full.
The Senior Subordinated Note Indenture will contain covenants for the
benefit of the holders of the Senior Subordinated Notes that, among other
things, restrict the ability of the Surviving Corporation and its subsidiaries
to: (i) incur additional indebtedness; (ii) pay dividends and make distributions
and certain other payments; (iii) issue stock of subsidiaries; (iv) make certain
investments; (v) repurchase stock; (vi) create liens; (vii) enter into
transactions with affiliates; (viii) merge or consolidate the Surviving
Corporation or the Guarantors; and (ix) transfer or sell assets. These covenants
will be subject to a number of important exceptions.
SUBSCRIPTION AGREEMENTS
The Company and Holdings have entered into the Subscription Agreements with
each of the New Investors, including JLL, Argosy and TSG, to issue and sell
immediately prior to the Merger (i) an aggregate of 200,000 shares of Company
Preferred Stock, which upon consummation of the Merger will be converted into an
aggregate of 6,250,000 shares of New Common Stock, and (ii) 150,000 Warrants,
which will remain outstanding upon consummation of the Merger. Under the
respective Subscription Agreements, each New Investor has agreed to purchase a
portion of the Company Preferred Stock and Warrants, resulting in an aggregate
investment in the Company of $200 million.
JLL is a limited partnership, the general managing partner of which is
Joseph, Littlejohn & Levy. Joseph Littlejohn & Levy is a private investment
partnership whose business includes making strategic investments in
consolidating industries and investing in corporate divestitures,
recapitalizations, and restructurings. TSG is a Delaware limited partnership
which provides equity capital to companies in a variety of industries. The
general partner of TSG is TSG Associates II, L.P., a Delaware limited
partnership, whose general partner is TSG Associates II, Inc. Argosy is a
private equity investment fund managed by CIBC Wood Gundy Securities Corp., an
affiliate of Canadian Imperial Bank of Commerce. Argosy makes equity and other
investments in a wide range of industries.
The representations and warranties made by each of the Company and Holdings
in the Merger Agreement are incorporated by reference into the Subscription
Agreements. In addition, the Company represents and warrants, among other
things, (i) as to the respective ownership of New Common Stock owned by each
Subscriber upon consummation of the Merger, (ii) that the shares of Company
Preferred Stock and Warrants when issued and delivered, will be duly and validly
issued, and (iii) as to certain ERISA matters. Each New Investor makes
representations and warranties to the Company and Holdings, including that (i)
such New Investor will, within seven days of signing the applicable Subscription
Agreement, make all necessary filings in connection and in compliance with the
provisions of the HSR Act, (ii) either (a) such
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<PAGE> 44
New Investor is not funding the securities with certain ERISA plan assets or (b)
to the New Investors knowledge, the purchase under its Subscription Agreement
will be exempt from or not subject to certain provisions of ERISA or the Code,
(iii) the securities to be acquired by it under the Subscription Agreement are
being acquired for its own account with no intention of distributing or
reselling if such disposition would violate state or federal securities laws,
(iv) such New Investor is an accredited investor and can bear the financial risk
of holding the securities indefinitely, and (v) such New Investor has had access
to certain financial information as provided by the Company. Each New Investor
also agrees to waive any appraisal rights applicable to the Company Preferred
Stock in connection with the Merger.
Conditions to the closing of the transactions contemplated by the
Subscription Agreements include (i) the Merger Agreement being in full force and
effect, (ii) the waiting period under the HSR Act having expired or having been
terminated, (iii) no governmental entity having enforced or entered any law,
rule, or order which would make the issuance and sale of the securities or any
transactions contemplated by the Subscription Agreements illegal or otherwise
prohibited, (iv) all of the conditions in the Merger Agreement having been
satisfied or waived by Holdings or the Company, as applicable (other than the
financing condition to the extent it applies to the Subscription Agreements) and
(v) the Company having received Subscription Agreements representing commitments
to purchase an aggregate of 200,000 shares of Company Preferred Stock.
Each Subscription Agreement will terminate and be of no force and effect
immediately upon termination or expiration of the Merger Agreement, and may be
terminated by a New Investor after August 15, 1996 if the transactions
contemplated by the Merger Agreement have not been consummated prior to such
date.
The Company and Holdings agreed in the Subscription Agreements to indemnify
each New Investor against liabilities relating to the Merger, the Subscription
Agreements or the documents related to the Senior Secured Credit Facilities or
the Senior Subordinated Notes. In addition, the Company has agreed in the
Subscription Agreements that, subject to and upon consummation of the Merger,
the Company will promptly reimburse New Investors for all costs and expenses
incurred in connection with the Subscription Agreements.
The Company Preferred Stock to be purchased by the New Investors pursuant
to the Subscription Agreements will be designated as Series A Preferred Stock,
will have no voting rights except as required by law, and will have a
liquidation preference of $1,000 per share. The Company Preferred Stock will be
subject to mandatory redemption for $1,000 per share in cash if the Merger is
not consummated within two business days of purchase by the New Investors of
such Company Preferred Stock. See "DESCRIPTION OF CAPITAL STOCK -- Company
Preferred Stock." For a description of the Warrants, see "CERTAIN OTHER
AGREEMENTS -- Warrant Agreement; DESCRIPTION OF CAPITAL STOCK -- Warrants."
REDEMPTION, DEBT TENDER OFFER AND CONSENT SOLICITATION
In connection with the Merger, the Company has commenced an offer to
purchase all $100 million of the outstanding Company Senior Notes and a related
consent solicitation to eliminate substantially all of the restrictive covenants
relating to the Company Senior Notes. The consummation of the Debt Tender will
be conditioned upon, among other things, there having been validly tendered and
not withdrawn, and consents having been received from, the holders of at least a
majority in aggregate principal amount of Company Senior Notes and the
consummation of the Merger and the Financing. In connection with the Merger, it
is also expected that substantially all other outstanding domestic indebtedness
of the Company and Motor Wheel, including all $125 million of the Motor Wheel
Senior Notes, and all bank debt of the Company and Motor Wheel will be redeemed,
repaid or terminated pursuant to the terms thereof, unless retained by the
Surviving Corporation on terms satisfactory to it and the relevant debtholders.
MISCELLANEOUS
The Company and Holdings expect that the Senior Secured Credit Facilities
and Senior Subordinated Notes will be repaid from the cash flow generated by the
operations of the Surviving Corporation. See "RISK FACTORS -- Leverage and
Liquidity," "-- Increase in Variable Interest Rates," "PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS AND CERTAIN OTHER INFORMATION" and
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"ADDITIONAL INFORMATION CONCERNING HOLDINGS -- Holdings' Management's Discussion
and Analysis of Financial Condition and Results of Operations." Subject to the
terms of the Merger Agreement, each of Holdings and the Company reserves the
right to alter one or more of the financing mechanisms described above and to
issue its equity securities (including common stock) to other parties.
The Company and Holdings believe that the Financing will comply with
federal margin regulations, including Regulations G, T, U and X of the Federal
Reserve System, because the contemplated Financing will not be directly or
indirectly secured by "margin stock" under applicable regulations and
interpretations.
The foregoing description is qualified in its entirety by the full text of
the principal documents for the Financing, which are filed as exhibits to the
Registration Statement and copies of which may be obtained under the procedures
described in "AVAILABLE INFORMATION."
THE MERGER
The discussion in this Proxy Statement/Prospectus of the Merger and the
description of the Merger Agreement's principal terms are subject to and
qualified in their entirety by reference to the Merger Agreement, a copy of
which is attached to this Proxy Statement/Prospectus as Annex I and is
incorporated herein by reference.
GENERAL
At the Effective Time, Holdings will be merged with and into the Company,
with the Company as the Surviving Corporation. As a result of the Merger, the
separate corporate existence of Holdings will cease, the Company, as the
Surviving Corporation, will succeed to all the rights of and be responsible for
all of the obligations of Holdings in accordance with the DGCL and Motor Wheel
will become a wholly-owned subsidiary of the Surviving Corporation. Subject to
the terms and conditions of the Merger Agreement, (a) each outstanding share of
Company Common Stock, other than any shares held by the Company or its
subsidiaries (which will be cancelled) and shares as to which dissenters' rights
are perfected under Delaware law, will be converted into (i) $28.80 in cash and
(ii) one-tenth of one share of New Common Stock, (b) each outstanding share of
Company Preferred Stock will be converted into 31.25 shares of New Common Stock,
and (c) each outstanding share of Holdings Common Stock, other than shares held
by Holdings or its subsidiaries (which will be cancelled) and shares as to which
dissenters' rights are perfected under Delaware law, will be converted into (i)
8,231.76 shares of New Common Stock and (ii) 3,029.29 Warrants, with each
Warrant entitling the holder thereof to purchase one share of New Common Stock
at a price of $48.00 during the period commencing on the fourth anniversary of
the Effective Time and ending on the seventh anniversary thereof. Cash will be
paid in lieu of fractional shares of New Common Stock.
The closing of the Transactions will take place as promptly as practicable
after the conditions precedent to the Merger set forth in the Merger Agreement
are satisfied or waived. The Merger will become effective upon the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware or
such later date as is specified in the Certificate of Merger.
BACKGROUND OF THE MERGER
In December 1992, the Company consummated the initial public offering of
the Company Common Stock (the "IPO"). Prior to the IPO, the Company was a
wholly-owned subsidiary of K-H, an indirect wholly-owned subsidiary of Varity.
Prior to the IPO, the non-wheel businesses and assets of the Company, including
the automotive brake systems business conducted by it, were transferred,
together with the liabilities related thereto, to a wholly-owned subsidiary of
the Company, the capital stock of which was thereafter transferred by the
Company to K-H as an extraordinary dividend. Upon completion of the IPO, Varity
(through K-H) owned 8,144,000 shares of Company Common Stock representing 46.3%
of the outstanding Company Common Stock. Upon completion of the IPO, the Company
Board consisted of five directors: two Varity representatives (including the
Chairman of the Company Board), the Chief Executive Officer of the Company and
two Independent Directors (as defined in the Company's By-laws, see "COMPARISON
OF STOCKHOLDER RIGHTS -- Number and Qualifications of Directors"). Except for
the replacement of
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one of the Varity representatives, the composition of the Company Board has
remained unchanged since the IPO.
As disclosed in the prospectus for the IPO and in each of the Company's
proxy statements since the IPO, in connection with the IPO, the Company Board
adopted a resolution providing that the Company will not enter into any
transaction with or pay any fee to an affiliate or associate (as such terms are
defined under Rule 12b-2 under the Exchange Act) of the Company (other than any
subsidiary or associate of the Company in which no direct or indirect parent
company of the Company has any interest otherwise than through the Company),
unless (i) the transaction or fee is as fair to the Company as would be the case
if such transaction or fee had been negotiated on an arm's-length basis with an
unaffiliated third party and (ii) the transaction or fee (if the value or costs
thereof to the Company is $10 million or more) is approved by a majority of the
Company's Independent Directors.
On September 26, 1995, the Company Board received a proposal from Varity
for a business combination pursuant to which all of the Company's stockholders,
other than Varity, would receive $25.00 in cash in exchange for each of their
shares of Company Common Stock and the Company would become a wholly owned
subsidiary of Varity. In its proposal, Varity indicated that its proposed
transaction was subject to the preparation and execution of a mutually
satisfactory definitive agreement with terms customary in such transactions and
that its proposal was not subject to any financing conditions or contingencies.
In its proposal, Varity indicated that its 8,144,000 shares of Company Common
stock were not for sale. Varity requested that the Company Board appoint a
special committee consisting of independent directors who are not employees of
the Company or Varity to consider Varity's proposal.
On September 27, 1995, the Company Board met and appointed a special
committee of the Company Board (the "Special Committee"), consisting of the two
Independent Directors, to consider Varity's proposal and to take certain other
actions, including consideration of alternatives to the Varity proposal. In this
connection, the Special Committee retained legal counsel and interviewed several
investment banks before selecting Goldman Sachs as the Special Committee's
financial advisor.
Following the public announcement of the Varity proposal, litigation was
commenced in the Delaware Chancery Court against the Company, its directors and
Varity by several purported stockholders of the Company (but has been
voluntarily dismissed, without prejudice, by the plaintiffs pursuant to a
stipulation executed in early April 1996). In addition, in October 1995, Varity
made filings under the HSR Act with respect to its proposed business combination
with the Company.
Subsequent to its appointment as the Special Committee's financial advisor,
Goldman Sachs commenced its due diligence with respect to the Company in order
to assist the Special Committee in its evaluation of Varity's proposal and
alternatives thereto. At the direction of the Special Committee, Goldman Sachs
contacted parties which Goldman Sachs and the Special Committee believed might
be interested in pursuing a transaction involving the Company. In addition,
during the period between October 1995 and March 1996, Goldman Sachs was
contacted by certain parties who indicated a potential interest in pursuing a
transaction involving the Company. As a result of these contacts, the Company
entered into confidentiality agreements with certain parties and provided
confidential, non-public information to the parties that entered into
confidentiality agreements.
One of the parties contacted by Goldman Sachs was JLL, and JLL entered into
a confidentiality agreement with the Company and received confidential,
non-public information with respect to the Company. In November 1995, JLL
acquired its interest in Holdings as a result of the Holdings 1995
Recapitalization (as hereinafter defined). In late November 1995, JLL indicated
to the Special Committee's advisors that it might be interested in pursuing a
recapitalization transaction involving the Company and Holdings pursuant to
which the Company's stockholders would receive $25.00 in cash and an interest in
the combined companies which JLL indicated had a value of $5.00 per share. JLL
indicated that any proposal it would make would be subject to a number of
conditions, including, without limitation, satisfactory completion of due
diligence. In this connection, Motor Wheel and the Company entered into mutual
confidentiality agreements, supplied each other with non-public information
regarding each of their respective businesses, and the Company undertook due
diligence of Holdings and Motor Wheel while JLL and Holdings undertook due
diligence of the
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Company. JLL also met with the Special Committee to discuss the proposal it
might be prepared to make and the conditions under which it would be willing to
proceed with a transaction involving the Company.
In connection with the Special Committee's evaluation of the proposal made
by Varity, Goldman Sachs met with representatives of Varity and Varity's
financial advisors in order to obtain additional information regarding Varity's
proposal. In this connection, Varity's financial advisor entered into a
confidentiality agreement with the Company, reviewed confidential, non-public
information with respect to the Company's operations, and undertook due
diligence with respect to the Company's business.
In November 1995, the Special Committee approved the Company entering into
severance agreements with twelve Company officers, managers or key employees.
See "-- Certain Transactions; Interests of Certain Persons in the Merger --
Company Employee Benefit Arrangements; Severance Agreements."
In late January 1996, after a number of meetings and contacts between
representatives of Varity and representatives of the Special Committee and a
meeting between the Special Committee and representatives of Varity to discuss
the Varity proposal, in response to a request from the Special Committee, Varity
indicated to the Special Committee that it was not prepared to increase the
price it was prepared to pay for the Company above the $25.00 per share
contained in its September 1995 proposal. The Special Committee then informed
Varity that it had been contacted by a third party who was interested in
pursuing a transaction with the Company that offered greater value to the
Company's stockholders than the Varity proposal.
On February 5, 1996, Varity publicly announced that it had withdrawn its
proposal for a business combination with the Company. In addition, Varity also
announced that it had no intention of taking the Company private or of acquiring
any additional Company Common Stock.
In mid-February 1996, at the request of the Special Committee, the Company
Board met with representatives of Varity and its advisors and JLL. After this
meeting, representatives of Varity requested additional information from Goldman
Sachs and JLL regarding JLL's proposal to combine the Company and Holdings in a
recapitalization transaction.
In February and March 1996, representatives of Varity, the Company,
Holdings and JLL undertook additional due diligence with respect to the
businesses and operations of Motor Wheel and the Company. In addition,
representatives of Varity, the Company, JLL and the Special Committee had a
number of discussions regarding the structure of a potential transaction
involving the combination of the Company and Holdings and the value that would
be received by the Company's stockholders in such a transaction. Beginning in
mid-March 1996, senior members of the Company's management as well as
representatives of the Special Committee, the Company, Varity, JLL, Holdings and
the New Investors commenced negotiations with respect to the detailed terms,
provisions, and conditions of the Merger Agreement, the Stock Option Agreement
and the Subscription Agreements, the Registration Rights Agreement and other
related agreements (the "Other Agreements") and the terms of the financing for
the proposed Transactions. The Merger Consideration, the exchange ratio for the
Holdings Common Stock and the resulting relative ownership of the stockholders
of the Company, the New Investors and the stockholders of Holdings in the
Surviving Corporation were determined on the basis of arms-length negotiations
among the Company, the Special Committee, Varity, JLL, Holdings and the New
Investors, and their respective representatives. As a result of the discussions
and negotiations among the various parties, JLL and Holdings increased the
amount of cash Holdings would be willing to pay to the Company's stockholders in
a recapitalization transaction from $25 to $28.80 per share of Company Common
Stock. During the course of the negotiations of the Merger Agreement, the Stock
Option Agreement, and the Other Agreements and the terms of the financing for
the proposed Transactions, Varity was represented by its own legal and financial
advisors, while the legal and financial advisors for the Company and the Special
Committee considered the interests of the stockholders of the Company other than
Varity. At the same time, representatives of the Company, Holdings, Varity and
JLL completed their respective due diligence of the Company's and Motor Wheel's
businesses and operations.
A special meeting of the Holdings Board was held on March 28, 1996 to
consider the terms of the Transactions, including the Merger, and the Holdings
Board received presentations concerning, and reviewed
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<PAGE> 48
the terms of, the Merger and the Transactions with its legal counsel. The
Holdings Board then unanimously determined that the Merger is advisable and fair
to, and in the best interests of, Holdings and its stockholders, approved the
Merger Agreement, the Stock Option Agreement and the Other Agreements, and
recommended that Holdings' stockholders vote for approval and adoption of the
Merger Agreement. See "-- Holdings' Reasons for the Merger; Recommendation of
the Holdings Board."
At a special meeting of the Special Committee held on March 28, 1996, the
Special Committee was updated by the Company's management and legal and
financial advisors regarding developments since the Special Committee meeting
held earlier that week, concerning the negotiations with Varity and JLL, and the
proposed terms of the Merger and the Transactions, including the financing
thereof.
At a special meeting of the Company Board held on March 28, 1996
immediately after the Special Committee meeting, the Company Board received
presentations from the Company's management and the Company's financial and
legal advisors as to the negotiations with Varity, JLL and Holdings, and the
terms, conditions and provisions of the Merger Agreement, the Stock Option
Agreement, the Registration Rights Agreement, the Subscription Agreements, and
the related agreements, as well as the terms of the financing for the
Transactions, including the Merger. The Company Board also received a
presentation from Goldman Sachs as to the financial aspects of the Merger and
Goldman Sachs delivered its opinion that, as of the date thereof, the Merger
Consideration to be received by the Company's stockholders pursuant to the
Merger Agreement is fair to such stockholders. The Company Board then determined
that the Merger Agreement and the transactions contemplated thereby are fair to
and in the best interests of the Company and its stockholders, and accordingly,
the Company Board unanimously approved the Stock Option Agreement, the Merger
Agreement, the Registration Rights Agreement, the Subscription Agreements, and
the transactions contemplated thereby and resolved to recommend that the
stockholders of the Company vote for approval and adoption of the Merger
Agreement at a special meeting of the Company's stockholders to be held for such
purpose. See "-- The Company's Reasons for the Merger; Recommendation of the
Company Board."
After the special meetings of the Holdings Board and the Company Board, the
Merger Agreement, the Stock Option Agreement, the Registration Rights Agreement,
and the Subscription Agreements were executed and on March 29, 1996, the Company
and Holdings issued a joint press release announcing the Merger.
THE COMPANY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY'S BOARD
At its meeting on March 28, 1996, the Company Board unanimously determined
that the Merger Agreement is fair to and in the best interests of the Company
and its stockholders and recommended that holders of Company Common Stock vote
in favor of the approval and adoption of the Merger Agreement. This
determination was made by the entire Company Board at such meeting. As described
under "-- Background of the Merger," as a result of the Varity proposal made in
September 1995 (which was withdrawn on February 5, 1996), the Special Committee
engaged in a process which resulted in the proposal made by Holdings which was
reflected in the Merger Agreement and considered by the Company Board on March
28, 1996. At the meeting, the Company Board heard reports from management and
its financial and legal advisors regarding the Transactions, including the
Merger, and alternatives thereto. The Company Board's decision to enter into the
Merger Agreement was based, in large part, upon balancing the risks and benefits
of the merger against the risks and benefits of the other alternatives available
to the Company and Varity's position with respect to the Merger. See "--
Background of the Merger."
THE RECOMMENDATION BY THE COMPANY BOARD THAT THE COMPANY'S STOCKHOLDERS
APPROVE AND ADOPT THE MERGER AGREEMENT, IS NOT, AND SHOULD NOT BE CONSIDERED TO
BE, A RECOMMENDATION THAT THE COMPANY'S STOCKHOLDERS ELECT TO RETAIN OR,
ALTERNATIVELY, THAT THE COMPANY'S STOCKHOLDERS SELL SHARES OF NEW COMMON STOCK
RECEIVED BY THEM IN THE MERGER.
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In its deliberations and in making its determination, with the assistance
of its legal and financial advisors, the Company Board considered a number of
factors including, without limitation, the following:
(i) The Company Board's knowledge of the business, operations,
properties, assets, competitive positions, financial condition, operating
results, managements, strategic objectives and prospects of the Company and
Holdings;
(ii) The Company Board's judgment as to the future prospects of the
Company and Holdings in light of management's and Goldman Sachs' analysis
of the wheel industry (including the continuing consolidation of suppliers
to OEMs) and the complementary nature of certain of the Company's and
Holdings' product lines;
(iii) The oral and written presentations of Goldman Sachs and the
opinion of Goldman Sachs that, as of March 28, 1996, the Merger
Consideration to be received by the stockholders of the Company in the
Merger is fair to such stockholders. See "-- Opinion of the Financial
Advisor to the Company Board" for a discussion of the factors considered in
rendering the opinion. Such opinion, which is subject to limitations,
qualifications and assumptions, is included as Annex II hereto and should
be read in its entirety;
(iv) The terms and conditions of the Merger Agreement, the Stock
Option Agreement and the Other Agreements. The Company Board considered, in
particular, the "no-solicitation" provision of the Merger Agreement, the
fees and expense reimbursements payable to Holdings (which could require
payments of up to $25 million in the aggregate under certain circumstances
and which provisions were negotiated at arm's length between the parties)
and the termination provisions of the Merger Agreement, the Stock Option
Agreement and the Other Agreements. The Company Board considered the impact
of the "no-solicitation" provision of the Merger Agreement on the Company's
ability to negotiate with the third parties interested in acquiring the
Company. The Company Board sought to balance the interests of JLL and the
New Investors, which the Company Board believed had made an attractive
offer for the Company, in limiting the Company's right to consider other
offers against the interests of the Company's stockholders in obtaining the
best price for their Company Common Stock. The Company Board was careful to
negotiate provisions in the Merger Agreement that would allow it to fulfill
its fiduciary duties in the event an unsolicited offer from a third party
was received. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT -- No
Solicitation." While the Merger Agreement prohibits the Company from
soliciting third-party offers, it does not prohibit the Company from
considering unsolicited third-party offers. Also, the Company Board
negotiated provisions in the Merger Agreement that would result in the
termination thereof in the event an offer more favorable to the Company and
its stockholders than the Merger is received from a third party. In such
event, the Company would be required to pay Holdings a termination fee of
$20,000,000 and to reimburse Holdings for its expenses up to $5,000,000.
The Company Board concluded that the aggregate amount of such fees and
expense reimbursements would not preclude a third-party from making an
offer that was materially more favorable to the Company's stockholders. The
Company Board also considered the effect of the Stock Option Agreement on
third parties who might be interested in pursuing a transaction involving
the Company.
(v) The conditions included in the Merger Agreement, including the
financing contingency. The Company Board considered that JLL had completed
similar transactions, which fact mitigates the risk that the financing
contingency clause will be exercised;
(vi) Varity's willingness to enter into the Stock Option Agreement and
Varity's expressed support for the Merger, as well as the fact that Varity
would receive the same Merger Consideration as the public stockholders of
the Company;
(vii) The fact that Varity's $25 per share proposal to acquire the
Company Common Stock it did not already own has been public since September
1995 and that in the intervening period no third party has made a proposal
to acquire the Company that offered more value to the Company's
stockholders than the Merger;
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(viii) Possible alternatives to the Merger, including continuing to
operate the Company as an independent public company (even though Varity
had indicated its view that it favored entering into the Merger Agreement),
as well as the impact, short term and long term, of such alternatives on
the value of the Company;
(ix) The historical market price of the Company Common Stock, which
had ranged from $16.75 per share to $27.25 per share during the year ended
March 28, 1996, the last trading day prior to the public announcement of
the signing of the Merger Agreement, and from $15.25 per share to $27.25
per share during the three years ended March 28, 1996;
(x) The fact that the consideration to be received by the Company's
stockholders in the Merger represents an approximately 30% premium over the
closing price of Company Common Stock of $24.75 per share on March 28,
1996, the last trading day prior to the announcement of the signing of the
Merger Agreement;
(xi) The fact that the Merger Consideration to be received by the
stockholders of the Company in the Merger will consist of approximately 90%
cash, and that the Company's stockholders would also continue to have an
equity interest in the Surviving Corporation (although the Company Board
considered the risk that the market value of the New Common Stock might
decline after the Merger); and
(xii) The taxable nature of the transaction with respect to the cash
received in the Merger (as opposed to a transaction that would be tax-free
to the Company's stockholders). The Company Board evaluated the potential
tax consequences of the transaction and concluded that the transaction was
attractive to the Company's stockholders even though they would be taxed on
the cash received. This was in part because the total consideration to be
received represents a substantial premium over $24.75, the closing price of
the Company Common Stock on March 28, 1996, and is payable primarily in
cash at the time the Merger is consummated.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger, the Company Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Company Board
may have given different weights to different factors.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
OPINION OF THE FINANCIAL ADVISOR TO THE COMPANY BOARD
On March 28, 1996, Goldman Sachs delivered its opinion to the Company Board
that, as of the date of such opinion, the Merger Consideration to be received by
the holders of Company Common Stock pursuant to the Merger Agreement is fair to
such holders.
The full text of the written opinion of Goldman Sachs, which sets forth
assumptions made, matters considered and limitations on the review undertaken in
connection with the opinion, is attached hereto as Annex II and is incorporated
herein by reference. HOLDERS OF COMPANY COMMON STOCK ARE URGED TO, AND SHOULD,
READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Merger Agreement; Annual Reports to Stockholders and Annual Reports on Form
10-K of the Company for the three fiscal years ended January 31, 1995; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company; Annual Reports on Form 10-K of Motor Wheel for the two fiscal years
ended December 31, 1995 and certain Quarterly Reports on Form 10-Q of Motor
Wheel; certain other communications from the Company to its stockholders; and
certain internal financial analyses and forecasts for the Company and Holdings
prepared by their respective managements. Goldman Sachs also held discussions
with members of the senior management of the Company and Holdings regarding the
past and current business operations,
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financial condition and future prospects of their respective companies and for
the companies as combined pursuant to the Merger Agreement. In addition, Goldman
Sachs reviewed the reported price and trading activity for the Company Common
Stock, compared certain financial and stock market information for the Company
with similar information for certain other companies, the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In addition, Goldman Sachs has not made an independent
evaluation or appraisal of the assets and liabilities of the Company or Holdings
or any of their subsidiaries and has not been furnished with any such evaluation
or appraisal. In providing its opinion, Goldman Sachs is not expressing any view
as to the price at which the New Common Stock will trade following the Merger.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its opinion to the Company Board on
March 28, 1996.
(a) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Company Common Stock.
(b) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to the Company to corresponding
financial information, ratios and public market multiples for eleven (11)
selected publicly traded companies (the "Selected Companies"), consisting
of: (i) two (2) aluminum wheel manufacturers (Superior Industries
International and Amcast Industrial Corporation) (collectively, the "AWM
Group") and (ii) nine (9) larger automotive components suppliers (Breed
Technologies, Inc.; Magna International Inc.; Lear Seating; Modine
Manufacturing Company; Dana Corp.; Masco Tech, Inc.; Borg-Warner
Automotive, Inc.; Arvin Industries Inc.; and GenCorp Inc.) (collectively,
the "ACS Group"). The Selected Companies were chosen because they are
publicly-traded companies with operations that for purposes of analysis may
be considered most similar to the Company. Goldman Sachs calculated and
compared various financial multiples and ratios regarding the Company and
the Selected Companies. The multiples of the Company were calculated using
a closing price on the NYSE on September 26, 1995 (the trading day prior to
announcement of the Varity proposal) of $20.88 per share of Company Common
Stock. The multiples and ratios for the Company were based on information
provided by the Company management and the multiples for each of the
Selected Companies were based on the most recent publicly available
information. With respect to the Selected Companies, Goldman Sachs'
consideration included levered market capitalization (i.e., market value of
common equity plus estimated market value of debt less cash) as a multiple
of latest twelve months ("LTM") earnings before interest, taxes,
depreciation and amortization ("EBITDA") and as a multiple of LTM earnings
before interest and taxes ("EBIT"). Goldman Sachs' analyses of the Selected
Companies indicated levered multiples of LTM EBITDA, which ranged from 4.3x
to 6.3x for the AWM Group and from 4.7x to 8.7x for the ACS Group; and LTM
EBIT, which ranged from 6.7x to 8.0x for the AWM Group and from 5.4x to
14.3x for the ACS Group; compared to LTM EBITDA and LTM EBIT levered
multiples for the Company of 5.1x and 7.6x, respectively. Goldman Sachs
also considered for the Selected Companies LTM price/earnings ("P/E")
multiples, which ranged from 8.1x to 13.2x for the AWM Group and from 8.3x
to 20.1x for the ACS Group, compared to a multiple for the Company of
12.1x; estimated calendar year 1996 P/E multiples, which ranged from 8.2x
to 12.4x for the AWM Group and from 8.7x to 15.6x for the ACS Group,
compared to a multiple for the Company of 9.6x; and estimated calendar year
1997 P/E multiples, which ranged from 7.6x to 11.2x for the AWM Group and
from 7.6x to 13.8x for the ACS Group, compared to a multiple for the
Company of 8.7x.
(c) Discounted Cash Flow Sensitivity Analysis. Goldman Sachs performed
a discounted cash flow sensitivity analysis using the Company's management
projections. Goldman Sachs calculated equity value per share of Company
Common Stock using various growth rates and EBIT margins for the years 1997
through 2001, a discount rate of 11% (representing the discount rate used
by management for its own discounting calculations) and an EBITDA multiple
of 5.2x (representing the mean EBITDA
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multiple for the AWM Group and approximating the LTM EBITDA multiple for
the Company based on the September 26, 1995 closing price of the Company
Common Stock). Using a five-year historical average EBIT margin for the
Company of approximately 11% and historical and projected sales growth
rates for the Company of 8% to 10%, this analysis indicated a range of
implied equity values per share of Company Common Stock of between $26.61
and $29.70. Using the Company management's projected EBIT margins, which
over the five-year projection period (1997- 2001) range from approximately
1.5% to 4.5% greater than the historical average EBIT margin for the
Company and the same sales growth rates for the Company as the foregoing,
the analysis indicated a range of implied equity values per share of
Company Common Stock of between $29.95 and $41.11.
(d) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to over 80 selected transactions in the automotive
components industry since 1987, none of which, individually, was material
to the analysis of Goldman Sachs (the "Selected Transactions"). Such
analysis indicated that for the Selected Transactions levered aggregate
consideration as a multiple of (i) LTM revenues ranged from .28x to 1.7x;
(ii) LTM EBITDA ranged from 3.2x to 16.1x; and (iii) LTM EBIT ranged from
4.6x to 36.3x. This analysis also indicated that for certain larger, more
comparable transactions, levered aggregate consideration as a multiple of
(i) LTM revenues ranged from .54x to 1.29x; (ii) LTM EBITDA ranged from
5.6x to 8.1x; and (iii) LTM EBIT ranged from 7.5x to 10.9x. The comparable
transaction multiples for the Company were 1.13x, 7.1x and 10.6x
respectively.
(e) Analysis at Various Prices for the Company. Goldman Sachs
calculated alternative values for the levered aggregate consideration to be
paid by Holdings based on the following per share prices for the Company
Common Stock: $29.00, $30.00, $31.00, $32.00, $33.00 and $34.00 (the
"Comparable Share Prices"). These calculations yielded levered aggregate
consideration values ranging from $633 million to $721 million for the
Company. Goldman Sachs calculated such per share price considerations as a
multiple of (i) EBITDA, (ii) EBIT and (iii) net income, in each case based
on financial information and estimates supplied by management. With respect
to EBITDA, this analysis indicated that (i) multiples for 1996 EBITDA of
$93.9 million for the Comparable Share Prices ranged from 6.7x to 7.7x and
(ii) multiples for estimated 1997 EBITDA of $124.5 million for the
Comparable Share Prices ranged from 5.1x to 5.8x. With respect to EBIT,
this analysis indicated that (i) multiples for 1996 EBIT of $61.2 million
for the Comparable Share Prices ranged from 10.3x to 11.8x and (ii)
multiples for estimated 1997 EBIT of $85.6 million for the Comparable Share
Prices ranged from 7.4x to 8.4x. With respect to net income, this analysis
indicated that (i) multiples for 1996 net income of $28.4 million for the
Comparable Share Prices ranged from 17.9x to 21.0x and (ii) multiples for
estimated 1997 net income of $41.3 million for the Comparable Share Prices
ranged from 12.3x to 14.5x.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is identical to the
Company or Holdings or the contemplated transaction. The analyses were prepared
solely for purposes of Goldman Sachs' providing its opinion to the Company Board
as to the fairness of the Merger Consideration to be received by the holders of
Company Common Stock pursuant to the Merger Agreement and do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control the parties or their respective advisors, none of the
Company, Holdings, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast. As described above,
Goldman Sachs' opinion to the Company Board was one of many factors taken into
consideration by the Company Board in making its determination to approve the
Merger Agreement. The foregoing summary does not purport to be a complete
description of the analysis performed by Goldman Sachs and is qualified by
reference to the written opinion of Goldman Sachs set forth in Annex II hereto.
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Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. The Company selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions similar
to the Merger. Goldman Sachs is familiar with the Company having provided
certain investment banking services to the Company from time to time, including
having acted as co-manager in connection with the Company's public debt
financing and initial public offering in 1992 and having acted as financial
advisor to the Company in connection with, and having participated in certain of
the negotiations leading to, the Merger Agreement. Goldman Sachs has also acted
as financial advisor to a special committee of the Company Board considering a
prior proposal to acquire the Company made by Varity, the largest stockholder of
the Company. In addition, Goldman Sachs has also acted as financial advisor to
Varity from time to time, including acting as co-manager in connection with
equity financings for Varity.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of the Company and/or Holdings for its own account and for the
account of customers. As of the date hereof, Goldman Sachs holds for its own
account 59,800 shares of Company Common Stock.
Pursuant to a letter agreement dated October 10, 1995 (the "Engagement
Letter"), a special committee of the Company Board engaged Goldman Sachs to act
as its financial advisor in connection with the transactions contemplated
therein. Pursuant to the terms of the Engagement Letter, the Company has agreed
to pay Goldman Sachs upon consummation of the Merger a transaction fee of
$1,000,000 plus (i) 2% of the amount by which the aggregate value of the
consideration paid pursuant to the Merger exceeds $27.00 times the number of
shares of Company Common Stock included therein (the "Relevant Shares") and (ii)
5% of the amount by which the aggregate value of such consideration exceeds
$28.00 times the Relevant Shares; provided, however, that the fee payable
pursuant to clauses (i) and (ii) of this paragraph does not exceed 3% of the
amount by which such consideration exceeds $25.00 times the Relevant Shares
(resulting in an effective fee, for purposes of these clauses (i) and (ii), of
2% of aggregate value paid per share above $27.00 and up to and including
$28.00, plus 5% of aggregate value paid per share above $28.00, but subject to
the 3% maximum set forth above).
Pursuant to the Engagement Letter, the Company has also agreed to reimburse
Goldman Sachs for its reasonable out-of-pocket expenses, including attorney's
fees, and to indemnify Goldman Sachs against certain liabilities, including
certain liabilities under the federal securities laws.
HOLDINGS' REASONS FOR THE MERGER; RECOMMENDATION OF THE HOLDINGS BOARD
At a special meeting of the Holdings Board held on March 28, 1996, the
Holdings Board received presentations concerning, and reviewed the terms of, the
Merger Agreement with its legal counsel. At the meeting, the Holdings Board
unanimously determined that the Merger is advisable, and in the best interests
of, Holdings and its stockholders. Accordingly, the Holdings Board has
unanimously adopted the Merger Agreement and unanimously recommends that the
holders of outstanding shares of Holdings Common Stock vote FOR approval and
adoption of the Merger Agreement at the Holdings Special Meeting. See "--
Background of the Merger."
In reaching its determination, the Holdings Board consulted with Holdings'
management, as well as its legal counsel, and considered a number of factors,
including, without limitation, the following:
(i) The consideration to be received by Holdings' stockholders in the
Merger, including the fact that the per share consideration of 8,231.76
shares of New Common Stock and the 3,029.29 Warrants to purchase New Common
Stock represents a 100% premium over the price of $135,000 per share that
JLL and certain other investors paid for Holdings Common Stock in
connection with the Holdings 1995 Recapitalization in November 1995.
Likewise, the Holdings Board considered the risk that the market value of
shares of New Common Stock might decrease subsequent to the Merger. See
"THE MERGER -- General."
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(ii) The fact that the issuance of shares of New Common Stock in the
Merger would be registered under the Securities Act and that the shares of
New Common Stock were expected to be traded on the NYSE, greatly increasing
the liquidity of Holdings' stockholders.
(iii) The ability of Holdings' stockholders to continue to participate
in the growth of the business conducted by Holdings and the Company after
the Merger and to benefit from the potential appreciation in the value of
the New Common Stock, while obtaining tax-free treatment to the extent that
they receive shares of New Common Stock. See "CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS."
(iv) The Company's and Holdings' respective businesses (including,
without limitation, the range of services provided), assets, liabilities,
managements, strategic objectives, competitive positions and prospects. See
"ADDITIONAL INFORMATION CONCERNING HOLDINGS."
(v) The uncertainties of the automotive and light-truck components
industry, including the likelihood of continuing consolidation of the
industry and the possibility that changes in the industry, depending on
their nature, could be disadvantageous to Holdings. The Holdings Board
believed that the combined company would be better able to respond to the
changes in the industry and to take advantage of the opportunities that
such changes might bring.
(vi) The complementary nature of certain product lines of the Company
and Holdings and the strategic growth opportunities available to Holdings
absent the Merger.
(vii) The fact that stockholders of Holdings may receive an additional
benefit of any future growth in the value of their equity in the shares of
New Common Stock pursuant to their ownership of the Warrants.
The foregoing discussion of information and factors considered and given
weight by the Holdings Board is not intended to be exhaustive. In view of the
wide variety of factors considered in connection with its evaluation of the
terms of the Merger, the Holdings Board did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching their determinations. In addition, individual
members of the Holdings Board may have given different weights to different
factors.
THE BOARD OF DIRECTORS OF HOLDINGS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
HOLDINGS COMMON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
CERTAIN TRANSACTIONS; INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of the Company and Holdings, as well as
others, have interests in the Merger in addition to their interests solely as
stockholders of the Company and Holdings, as described below.
Officers and Directors of the Surviving Corporation
The Merger Agreement provides that the officers of the Company immediately
prior to the Effective Time will become the officers of the Surviving
Corporation, including Ranko Cucuz, President and Chief Executive Officer of the
Company, who will continue in such position and is expected to become Chairman
of the Board of Directors of the Surviving Corporation. Pursuant to the Merger
Agreement, Holdings has agreed that the Chief Executive Officer of the Company
will be appointed to the Board of Directors of the Surviving Corporation as of
the Effective Time, to serve until the next annual election of directors of the
Surviving Corporation. It is also currently expected that John S. Rodewig and
Kenneth L. Way, currently directors of the Company, will become directors of the
Surviving Corporation following the Merger, and that Mr. Richard Tuley,
currently the President of Holdings, will become the Executive Vice President of
the Surviving Corporation following the Merger.
The Merger Agreement provides that, upon consummation of the Merger, the
Board of Directors of the Surviving Corporation will be comprised of nine
directors, consisting of the Chief Executive Officer of the Company (currently,
Ranko Cucuz), four designees of JLL (currently, Timothy J. Clark, Peter A.
Joseph,
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Paul S. Levy and Marcos A. Rodriquez), one designee of TSG (currently, Cleveland
A. Christophe), and three individuals who are not affiliated with the Company or
the New Investors (currently expected to be Messrs. Rodewig and Way and one
additional independent director). The Stockholders Agreement will provide that
the respective rights of JLL and TSG to designate directors pursuant to such
agreement will terminate if any such entity ceases to own at least 50% of its
initial investment in the Company. See "MANAGEMENT OF THE SURVIVING
CORPORATION."
Company Options
The Merger Agreement provides that all options of the Company outstanding
at the Effective Time under the Company's stock option plans (a "Company
Option"), including those held by directors and executive officers, will
automatically vest and, at the option of the holder, be converted into (i) the
right to receive $32 less the exercise price of such option or (ii) an equal
number of options to purchase shares of New Common Stock. Each Company Option
will thereafter constitute an option to acquire, upon the same terms and
conditions as under the applicable stock option plan of the Company (except as
to vesting), a number of shares of New Common Stock equal to the number of
shares of Company Common Stock subject to each Company Option. See "-- Treatment
of Stock Options." The number of Company Options held by each of the five most
highly compensated executive officers of the Company is: Ranko Cucuz (171,400),
Giancarlo Dallera (72,250), William S. Linski (53,800), Daniel M. Sandberg
(20,350), and William D. Shovers (70,500). The aggregate number of outstanding
Company Options is 475,600.
In addition, it is anticipated that the Company will adopt a new stock
option plan prior to the Effective Time providing for the granting of options to
purchase shares in an aggregate amount not to exceed 10% of the shares of New
Common Stock, to certain officers and key employees of the Company and, after
the Effective Time, of the Surviving Corporation.
Company Employee Benefit Plans; Severance Agreements
The Merger Agreement provides that the Surviving Corporation will honor and
assume the Company's employee benefit plans and employee programs, arrangements
and agreements as disclosed pursuant to the Merger Agreement (the "Company
Employee Plans"). The Surviving Corporation will be free to amend or terminate
the Company Employee Plans to the extent permitted by their terms, but not
during the first year following the Closing Date if the result would be that the
employee benefit plans, programs, arrangements and agreements for the benefit of
employees of the Surviving Corporation would be, in the aggregate, less
favorable than the Company Employee Plans.
The Merger Agreement also provides that Holdings will cause the Surviving
Corporation to honor severance agreements between the Company and nine executive
officers and three other big employees of the Company, including Messrs. Cucuz,
Dallera, Linski, Sandberg and Shovers (the "Covered Individuals"). The Company
entered into separate letter agreements (the "Company Severance Agreements")
with each Covered Individual on or about November 6, 1995, pursuant to which,
upon a change of control of the Company (as defined therein), each Covered
Individual, including Covered Individuals whose employment with the Company is
terminated in anticipation of a change of control, is entitled to an immediate
payment of all earned but unpaid compensation, including any unpaid bonuses for
previous fiscal years and a pro rata bonus payment (based on Highest
Compensation (as defined below) and the greater of normative bonus percentage
and estimated projected bonus percentage) for the current fiscal year under any
bonus plan for which he is eligible.
In addition, the Company Severance Agreements provide that each Covered
Individual whose employment with the Company is terminated (i) by the Company
upon a change of control or in anticipation of a change of control, (ii) by the
Company, other than for cause or as a result of death or disability, within
three years following a change of control or (iii) voluntarily by such Covered
Individual, within three years following a change of control, because of a
change in the material terms of his employment, such as compensation or
responsibilities, is entitled to a lump sum cash payment, payable within 30 days
of such termination, in the aggregate amount of: (a) for all Covered
Individuals, earned but unpaid compensation, less
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any payment previously made in respect of such amount, (b) for all Covered
Individuals, the product of the individual's Highest Compensation, his highest
normative bonus percentage in the immediately preceding three fiscal years and
the fraction of the current fiscal year expired at the time of such termination,
less any payments previously made in respect of such amounts upon such change of
control, (c) with respect to eight Covered Individuals (including the five
currently most highly compensated executive officers), three times, with respect
to one Covered Individual two times, and with respect to three Covered
Individuals one time the sum of (x) the individual's Highest Compensation and
(y) the product of his Highest Compensation and his highest normative bonus
percentage in the immediately preceding three fiscal years, (d) 20% of Highest
Compensation with respect to three Covered Individuals, 40% of Highest
Compensation with respect to one Covered Individual, and with respect to eight
Covered Individuals (including the five currently most highly compensated
executive officers), the greater of 60% of the individual's Highest Compensation
and $100,000 and (e) with respect to all Covered Individuals, an amount equal to
any accrued but unvested account balances as of the date of termination and the
actuarial present value of any accrued but unvested benefits other than account
balances that as a result of termination are forfeited under any qualified or
nonqualified Company retirement or pension plan. The Company Severance
Agreements also provide that each such Covered Individual is also entitled to
have the Company (i) continue for at least three years with respect to eight
Covered Individuals (including the five currently most highly compensated
executive officers), at least two years with respect to one Covered Individual
and at least one year with respect to three Covered Individuals, all welfare
benefit programs, such as medical and life, provided by the Company and its
affiliated companies, (ii) with respect to eight Covered Individuals (including
the five currently most highly compensated executive officers), timely pay or
provide any other amounts, including reimbursable expenses incurred prior to the
date of termination, or benefits required or permitted under any plan, program,
policy, practice, contract or agreement of the Company and its affiliated
companies (subject to limitations), (iii) provide the title to the individual's
Company automobile with respect to eight Covered Individuals (including the five
currently most highly compensated executive officers), or make a cash payment
equal to the value of such automobile in certain cases and (iv) with respect to
all Covered Individuals, provide key executive level outplacement services.
The Company Severance Agreements define Highest Compensation as twelve
times a Covered Individual's highest monthly cash compensation (not including
any bonus), whether current or deferred, at any time during the period
commencing on the first day of the calendar month containing the 365th day prior
to the day a change of control occurs and ending on the day of termination of
such Covered Individual's employment.
The Company Severance Agreements also contain provisions regarding
termination of employment upon disability, death, and other certain
circumstances. In addition, if any payments or benefits paid to the Covered
Individuals under the Company Severance Agreements or any other plan,
arrangement or agreement with the Company are subject to the federal excise tax
on excess parachute payments or any similar state or local tax, or any interest
or penalties are incurred with respect thereto, the Company will pay to the
Covered Individuals an additional amount so that the net amount retained by the
Covered Individuals after deduction or payment of those taxes will be as if no
such tax, interest or penalty were imposed.
The Merger will constitute a change of control under the Company Severance
Agreements. Consequently, the Covered Individuals who are parties to the Company
Severance Agreements will be entitled to certain cash payments described above
at the Effective Time in approximate amounts of: Mr. Cucuz, $74,163, Mr.
Dallera, $38,213, Mr. Linski, $30,000, Mr. Sandberg, $26,816, Mr. Shovers,
$34,190, and in the aggregate, $329,030.
Employment Agreement
Richard W. Tuley, President of Holdings, entered into an employment
agreement in November 1995 with Holdings and Motor Wheel which has an initial
term ending on November 1, 2000 (the "Employment Agreement"). The Employment
Agreement provides for (i) the payment of an initial base salary of $300,000 per
year to be adjusted to an annual rate of $350,000 commencing August 1, 1996,
subject to periodic increases thereafter as may be determined by the Board of
Directors of the Company; (ii) the payment of an annual bonus of up to 100% of
the base salary, as determined by the Board of Directors of Motor Wheel (the
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"Motor Wheel Board"); (iii) participation in all Motor Wheel benefit plans and
programs in effect for salaried employees or senior executives of Motor Wheel
including the Motor Wheel Salaried Pension Plan; (iv) the continuation of normal
compensation for a period of sixty months after termination for disability; and
(v) the use by Mr. Tuley of an automobile provided by Motor Wheel and the
reimbursement of country club dues and personal income tax services. Under the
Employment Agreement, within twelve months after the occurrence of a Change in
Control (as defined in the Employment Agreement), upon the occurrence of (i) the
sale, lease or other transfer of all or substantially all of Motor Wheel's
assets to an entity which has not entered into a mutually satisfactory
employment contract with Mr. Tuley, (ii) a material change in the duties or
responsibilities of Mr. Tuley or (iii) a liquidation or dissolution of Motor
Wheel, Mr. Tuley will be entitled to terminate his employment and receive (A)
the base salary and medical coverage for the remainder of the term of the
Employment Agreement, (B) the pro rata portion of the bonus payable, if any, as
determined by the Motor Wheel Board for the then current fiscal year and (C)
vesting of the Tuley Option (as defined below) except that such option will not
vest as to shares for which the performance targets were not met for a
particular period. In the event that the employment of Mr. Tuley is terminated
Without Cause (as defined in the Employment Agreement), Mr. Tuley will be
entitled to (i) receive the base salary for the remainder of the term of the
Employment Agreement; (ii) receive the pro rata portion of the bonus payable, if
any, as determined by the Motor Wheel Board and (iii) exercise the Tuley Option
prior to the earlier of the period ending three months following termination of
employment and the expiration date of the Tuley Option, but only to the extent
such option is exercisable at the time of termination of employment.
Pursuant to the Employment Agreement, Mr. Tuley was also granted a stock
option (the "Tuley Option") to purchase 16.371 shares of Holdings Common Stock,
vesting ratably over a five-year period commencing December 31, 1996 through
December 31, 2000, at $135,000 per share, and contingent on Motor Wheel
achieving certain performance targets mutually agreed upon by the Holdings Board
and Mr. Tuley. At the Effective Time, the Tuley Option will be converted into
options to acquire shares of New Common Stock.
Indemnification
Pursuant to the Merger Agreement, the Surviving Corporation will maintain
for a period of eight years after the Effective Time the indemnification
policies and agreements of the Company in effect as of the Effective Time with
respect to the directors, officers, employees or agents of the Company or its
subsidiaries. The Surviving Corporation has also agreed that for three years
after the Effective Time, it will provide to the Company's current directors and
officers liability insurance protection of the same kind and scope as that
provided by the Company's existing directors' and officers' liability insurance
policies, except that in no event will the Surviving Corporation be required to
expend in any one year an amount in excess of 200% of the annual premiums
currently paid by the Company for such insurance (but the Surviving Corporation
will be obligated to obtain a policy with the greatest coverage available for a
cost not exceeding such amount).
Pursuant to the terms of the Stockholders Agreement, the Surviving
Corporation will enter into certain indemnification agreements with the officers
and directors of the Surviving Corporation providing for the indemnification of
such officers and directors to the fullest extent permitted under Delaware law.
Registration Rights
The Company has entered into a Registration Rights Agreement with Varity
and K-H providing for certain registration rights with respect to the shares of
New Common Stock to be received by K-H pursuant to the Merger. This Proxy
Statement/Prospectus constitutes the prospectus for resales of the New Varity
Shares. In addition, the New Investors will have certain registration rights
pursuant to the Stockholders Agreement. See "-- Resales of New Common Stock and
Warrants" and "CERTAIN OTHER AGREEMENTS."
Stock Option Agreement
Pursuant to the Stock Option Agreement, K-H granted Holdings an irrevocable
option to purchase all of the Varity Shares upon the occurrence of certain
events and subject to certain conditions, at a price of $32.00 per share.
Holdings currently anticipates that, should the Option become exercisable and
should Holdings decide to exercise the Option, Holdings would obtain the
required funds from its general corporate funds and
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<PAGE> 58
amounts which may become available under potential future debt or equity
financings, the terms of which have not yet been determined. No assurances can
be given that Holdings will be able to obtain sufficient funds to exercise the
Option should it become exercisable. In the event the Option is exercised
(whether or not the Merger is consummated), K-H will receive all of the
consideration for the Varity Shares in cash and will not receive any shares of
New Common Stock in exchange therefor.
Stock Subscription Agreements
Pursuant to the Merger Agreement and the Stock Subscription Agreements, the
Company will issue and sell to the New Investors Company Preferred Stock. Upon
consummation of the Merger, the New Investors will receive shares of New Common
Stock in consideration for their Company Preferred Stock and will not receive
any cash consideration in respect thereof.
OWNERSHIP OF NEW COMMON STOCK AFTER THE EFFECTIVE TIME
The following table sets forth the expected ownership of New Common Stock
by each entity which is expected to own more than 5% of the outstanding shares
of New Common Stock immediately after the Effective Time.
<TABLE>
<CAPTION>
PERCENT OF OWNERSHIP PERCENT OF OWNERSHIP
OF SHARES OF OF SHARES OF
SHARES OF NEW NEW COMMON STOCK NEW COMMON STOCK
NAME COMMON STOCK(A) WARRANTS(B) (EXCLUDING WARRANTS)(C) (INCLUDING WARRANTS)(D)
- --------------------------------- --------------- ----------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Joseph Littlejohn & Levy Fund II,
L.P. .......................... 4,817,086 912,688 43.3% 46.1%
TSG Capital Fund II, L.P. ....... 1,406,250 33,750 12.6 11.6
CIBC WG Argosy Merchant Fund 2,
L.L.C.......................... 1,250,000 30,000 11.2 10.3
Varity Corporation(e)............ 814,400 -- 7.3 6.6
Chase Equity Associates, L.P..... 625,000 15,000 5.6 5.1
</TABLE>
- -------------------------
(a) In addition, 943,000 shares of New Common Stock will be owned by current
Company stockholders other than Varity, constituting an ownership of
approximately 8.5% of the shares of New Common Stock (excluding Warrants and
Options) and approximately 7.6% (including Warrants and Options).
(b) The Warrants will be exercisable from the fourth anniversary of the
Effective Time until the seventh anniversary thereof.
(c) Excludes options to purchase shares of New Common Stock held by certain
officers and directors of the Company and Holdings and Warrants to purchase
1,300,000 shares of New Common Stock.
(d) Excludes options to purchase shares of New Common Stock held by certain
officers and directors of the Company and Holdings and includes Warrants to
purchase 1,300,000 shares of New Common Stock.
(e) Varity owns its shares through K-H, its indirect wholly-owned subsidiary.
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<PAGE> 59
TREATMENT OF STOCK OPTIONS
The Merger Agreement provides that each holder of a Company Option which is
outstanding and unexercised prior to the Effective Time may elect to receive, in
whole or in part, either (i) an amount in cash equal to the difference between
(a) the product of $32 and the number of shares of Company Common Stock subject
to the Company Option and (b) the aggregate exercise price of the Company Option
or (ii) a vested option to purchase shares of New Common Stock in the same
amount and at the same exercise price as for the Company Option, and otherwise
subject to the same terms (other than as to vesting) as the Company's 1992 Stock
Incentive Plan and the agreements thereunder. Notwithstanding the foregoing, a
holder will receive a vested option to purchase shares of New Common Stock if
the holder has held his Company Option for less than six months prior to the
Effective Time or fails to make a timely election (as provided in the preceding
sentence). Stock options held by certain executive officers of Holdings will
convert into options to purchase shares of New Common Stock pursuant to their
terms.
STOCK EXCHANGE LISTING
The Company and Holdings have agreed in the Merger Agreement to use
reasonable best efforts to cause the shares of New Common Stock to be issued in
connection with the Merger to be listed on the NYSE. It is anticipated that the
shares of New Common Stock will be traded on the NYSE under the symbol "HAY." It
is anticipated that if the shares of New Common Stock are not eligible to be
traded on the NYSE, the Company and Holdings will apply to have such shares
listed on the NASDAQ National Market.
CERTAIN PROJECTIONS
In connection with preliminary discussions between Holdings and the Company
concerning the feasibility of a business combination and Holdings' and the
Company's due diligence investigations, Holdings and its representatives
discussed with the Company and its representatives certain matters regarding the
business, assets and financial condition of the Company and Motor Wheel.
Holdings and the Company also furnished each others' advisors with certain
projected financial information concerning the Company and Motor Wheel,
respectively, which is summarized below and which Holdings and the Company
believe is not publicly available (the "Projections").
Neither the Company nor Holdings, as a matter of course, makes public
forecasts as to future revenues, EBIT or EBITDA. The Projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections and forecasts.
The Projections are included in this Proxy Statement/Prospectus only because
such information was made available to Holdings and the Company in connection
with their consideration of the Transactions, and the Company and Holdings,
therefore, wish to make the same information available to the stockholders of
the Company and Holdings.
While the Company and Holdings considered the Projections in their
respective analyses of the Transactions, the Projections constituted only one
component of such analyses. The Company and Holdings caution all the
stockholders of the Company and Holdings that the Projections are speculative
and should not be given undue weight (if any weight is to be given to them at
all) in deciding how to vote their shares of Company Common Stock at the Company
Special Meeting and shares of Holdings Common Stock at the Holdings Special
Meeting, as the case may be. Neither the Company nor Holdings nor any of their
respective affiliates, financial advisors, directors or officers, nor any of
their independent auditors or attorneys, assumes any responsibility for the
accuracy of the Projections. Neither the Company's nor Holdings' independent
auditors have examined or compiled the Projections or applied any procedure with
respect to this information. Accordingly, they have not expressed any opinion or
any other form of assurance on such information.
The Projections are based on numerous estimates and assumptions, some of
which are described below, with respect to general business and economic
conditions and many other matters, most of which are beyond the control of the
Company and Holdings.
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<PAGE> 60
Because the estimates and assumptions underlying the Projections are
inherently subject to significant economic, business and competitive
uncertainties and contingencies which are difficult or impossible to predict
accurately (and many of which are beyond the control of the Company and
Holdings), the Projections are not necessarily indicative of future performance.
It is therefore likely that there will be material differences between actual
results and those set forth below. The Projections should not be regarded in any
respect as a representation by the Company, Holdings or any other person or
entity that the results stated in the Projections can be achieved.
The Company's Projections show the following financial and other
information:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
North American automotive and
light truck industry
volume...................... 14.0 13.5 13.2 12.6 13.2 13.9
Revenues...................... $611.0 $690.0 $770.1 $881.3 $938.5 $978.0
EBIT.......................... 61.2 85.6 108.9 127.2 142.8 152.5
EBITDA........................ 93.7 124.0 155.0 182.0 200.0 212.0
</TABLE>
For purposes of the Company's Projections, EBITDA represents the sum of
income before interest expense and income taxes, plus depreciation and
amortization, nonrecurring charges, and other non-cash income and expense.
The increase in revenues is based on assumed growth in the fabricated, full
face modular and clad cover wheels (based substantially upon growth in new
vehicle platforms that the Company has been awarded and will commence during
1996-1998), European cast aluminum wheels and the Company's aftermarket
business, as well as the consolidation of financial results from the Autokola
Czech joint venture in 1998 and beyond. An economic recession in North America
is assumed during the 1997-1998 period, with industry volume returning to
pre-1995 levels by 2000. The increases in EBIT and EBITDA reflect operating
leverage on increased sales and operating improvement plans to raise
productivity and reduce costs in the North American aluminum wheel business.
Motor Wheel's Projections show the following financial information:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $357.2 $312.9 $310.0 $334.4 $360.5 $387.3
EBIT............................. 8.3 6.2 28.8 38.6 45.3 51.9
EBITDA........................... 29.1 27.7 44.0 55.0 62.0 68.0
</TABLE>
For purposes of Motor Wheel's Projections, EBITDA represents the sum of
income before taxes and interest expense, plus depreciation and amortization,
non-cash postretirement benefits (including pension expenses), certain non-cash
items included in other income and expense of Motor Wheel's consolidated income
statement, other miscellaneous non-cash items and other nonrecurring charges.
Revenues are projected to decline in 1996 and 1997 because of an assumed
industry recession in the automotive and truck and trailer markets and the loss
of automotive steel wheel business on certain light truck platforms. The
assumptions as to North American automotive and light truck industry volume used
by Motor Wheel differed from those of the Company. Revenues are projected to
increase after 1997 primarily because of assumed growth in the automotive brake
and commercial highway brake segments. The increase in EBIT and EBITDA reflects
(i) plant closures of Motor Wheel plants in Lansing, Michigan and Luckey, Ohio
during 1995, (ii) selling, general and administrative cost reduction programs at
corporate headquarters implemented in February 1996, and (iii) anticipated cost
savings in connection with plant closures at Ypsilanti, Michigan and Mendota,
Illinois during 1996.
The Projections are stand-alone projections of the Company and Motor Wheel,
respectively, and do not consider any possible effects of the Transactions.
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<PAGE> 61
ACCOUNTING TREATMENT
The Merger will be accounted for as a recapitalization in which the assets
of the Company will be carried forward at book value and the Company will be
deemed to have purchased Holdings under the purchase method of accounting in
accordance with generally accepted accounting principles. Therefore, the
aggregate consideration paid to Holdings' stockholders in connection with the
Merger will be allocated to Holdings' assets and liabilities based on their fair
market values, with any excess being treated as goodwill. The assets and
liabilities and results of operations of Holdings will be consolidated into the
assets and liabilities and results of operations of the Company subsequent to
the Effective Time.
APPROVALS AND CONSENTS
Under the HSR Act and the regulations promulgated thereunder by the FTC,
certain acquisition transactions may not be consummated until notifications have
been given and certain information has been furnished to the FTC and the
Antitrust Division and the applicable waiting period has expired or been
terminated. On April 12, 1996, the Company, JLL, Argosy and TSG filed Premerger
Notification and Report Forms under the HSR Act with the FTC and the Antitrust
Division and requested early termination of the applicable waiting period
thereunder. The FTC granted such early termination on May 7, 1996 and the HSR
waiting period was terminated on such date. However, at any time before or after
consummation of the Merger, notwithstanding the termination of the waiting
period under the HSR Act, the FTC, the Antitrust Division or any state entity
could seek under federal or state antitrust laws, among other things, to enjoin
the consummation of the Merger. In addition, other filings with, notifications
to and authorizations and approvals of various governmental agencies, with
respect to the Transactions, relating primarily to antitrust and securities law
issues, must be made and received prior to the consummation of the Merger.
The respective obligations of the Company and Holdings to consummate the
Merger are also subject to the condition that no court or other governmental
entity having jurisdiction over the Company or Holdings, or any of their
respective subsidiaries, shall have entered any injunction or other order
(whether temporary, preliminary or permanent) which is then in force and has the
effect of making the Merger or the Stock Option Agreement illegal or otherwise
prohibiting consummation of the Merger. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT -- Conditions to Consummation of the Merger."
PROCEDURES FOR EXCHANGE OF COMPANY AND HOLDINGS STOCK CERTIFICATES
The Company has designated Chemical Mellon Shareholder Services to act as
Exchange Agent (the "Exchange Agent") under the Merger Agreement. Immediately
following the Effective Time, the Surviving Corporation will deliver, in trust,
to the Exchange Agent, for the benefit of holders of shares of Company Common
Stock, Holdings Common Stock and Company Preferred Stock: (i) certificates
evidencing the shares of New Common Stock issuable pursuant to the Merger
Agreement in exchange for certificates ("Certificates") representing, prior to
the Effective Time, outstanding shares of Company Common Stock, Holdings Common
Stock and Company Preferred Stock, (ii) certificates evidencing the Warrants
issuable pursuant to the Merger Agreement in exchange for Certificates
representing, prior to the Effective Time, shares of Holdings Common Stock and
(iii) cash in an amount sufficient to make any cash payment due to holders of
Company Common Stock.
As soon as practicable after the Effective Time, the Surviving Corporation
will cause the Exchange Agent to mail to each holder of record of a Certificate
(i) a form of letter of transmittal specifying that delivery will be effected,
and risk of loss and title to such Certificate will pass, only upon proper
delivery of such Certificate to the Exchange Agent and (ii) instructions for use
in surrendering such Certificate in exchange for certificates representing
shares of New Common Stock and, if applicable, cash or Warrants. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, the holder of such Certificate will be
entitled to receive in exchange therefor (A) certificates representing that
number of whole shares of New Common Stock and, if applicable, Warrants into
which the shares of Company Common Stock, Holdings Common Stock or Company
Preferred Stock represented by such Certificate has been converted at the
Effective Time pursuant to the Merger Agreement, (B) in the case of Certificates
representing shares of Company Common Stock, cash in the amount equal to the
number of
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<PAGE> 62
shares represented by such Certificate multiplied by the Cash Consideration, (C)
any dividends or other distributions to which such holder is entitled pursuant
to the Merger Agreement and (D) cash in lieu of any fractional share of New
Common Stock to which such holder is entitled, in each case after giving effect
to any required tax withholdings, and the Certificate so surrendered will be
cancelled. Until surrendered as described above, each Certificate will be deemed
from and after the Effective Time to represent only the right to receive upon
such surrender shares of New Common Stock and, if applicable, Cash
Consideration, Warrants, cash in lieu of any fractional shares of New Common
Stock and any applicable dividends or distributions on New Common Stock in
accordance with the Merger Agreement. In no event will the holder of any such
surrendered Certificate be entitled to receive interest on any of the Cash
Consideration or cash for fractional shares to be received in the Merger.
Neither the Exchange Agent, the Company nor Holdings will be liable to a holder
of shares of Company Common Stock, Holdings Common Stock or Company Preferred
Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
If any Certificate has been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
of such person of a bond in such reasonable amount as the Surviving Corporation
may direct, as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate, the applicable certificate representing
shares of New Common Stock and, if applicable, Warrants, Cash Consideration, any
cash in lieu of fractional shares of New Common Stock and any dividends or other
distributions to which such holder of such lost, stolen or destroyed Certificate
is entitled to receive pursuant to the Merger Agreement.
No dividends or other distributions that are declared on or after the
Effective Time on New Common Stock, or are payable to the holders of record
thereof who became such on or after the Effective Time, will be paid to any
person entitled by reason of the Merger to receive certificates representing
shares of New Common Stock, and no distribution of Cash Consideration and no
cash payment in lieu of any fractional share of New Common Stock will be paid to
any person, until such person has surrendered its Certificate as provided above.
Subject to applicable law, there will be paid to each person receiving a
certificate representing such shares of New Common Stock, at the time of such
surrender or as promptly as practicable thereafter, the amount of any dividends
or other distributions theretofore paid with respect to the shares of New Common
Stock represented by such certificate and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender. In no event will the person entitled to receive such
dividends or other distributions be entitled to receive interest thereon. If any
cash or certificate representing shares of New Common Stock is to be paid to or
issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it is a condition of such exchange that the
Certificate so surrendered be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange pay to the Exchange Agent
any transfer or other taxes required by reason of the issuance of such
certificates representing shares of New Common Stock and the distribution of
such cash payment in a name other than that of the registered holder of the
Certificate so surrendered, or will establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. The Surviving
Corporation or the Exchange Agent will be entitled to deduct and withhold from
the consideration otherwise payable pursuant to the Merger Agreement to any
holder of Company Common Stock, Holdings Common Stock or Company Preferred Stock
such amounts as the Surviving Corporation or the Exchange Agent are required to
deduct and withhold under the Code, or any provision of state, local or foreign
tax law, with respect to the making of such payment. To the extent that amounts
are so withheld by the Surviving Corporation or the Exchange Agent, such
withheld amounts will be treated for all purposes of this Agreement as having
been paid to the holder of the Company Common Stock, Holdings Common Stock or
Company Preferred Stock in respect of whom such deduction and withholding was
made by the Surviving Corporation or the Exchange Agent.
At the Effective Time, the stock transfer books of the Company and Holdings
will be closed, and no transfer of Holdings Common Stock, Company Common Stock
or Company Preferred Stock will thereafter be made. Subject to any applicable
abandoned property, escheat or similar laws, if after the Effective Time,
Certificates are presented to the Surviving Corporation for transfer, they will
be cancelled and exchanged as described in the preceding paragraphs. After the
Effective Time and until surrendered for Certificates as above
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<PAGE> 63
described, Certificates which immediately prior to the Effective Time
represented Holdings Common Stock, Company Common Stock or Company Preferred
Stock converted in the Merger will be deemed for all purposes, other than the
right to receive payments of dividends and distributions and cash in lieu of any
fractional shares, to represent the number of whole shares of New Common Stock,
Cash Consideration and, if applicable, Warrants into which such shares were
converted.
STOCKHOLDERS OF HOLDINGS AND THE COMPANY SHOULD NOT FORWARD THEIR
CERTIFICATES WITH THE ENCLOSED PROXY CARD, NOR SHOULD THEY RETURN THEIR
CERTIFICATES TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL
LETTER.
RESALES OF NEW COMMON STOCK AND WARRANTS
Rule 145. All shares of New Common Stock and Warrants issued in the Merger
will be freely transferable, except that shares and Warrants received by any
person who may be deemed to be an "affiliate," as used in paragraphs (c) and (d)
of Rule 145 under the Securities Act (including, without limitation, directors
and certain executive officers), of the Company and Holdings for purposes of
such Rule 145 may not be resold except in transactions permitted by Rule 145 or
as otherwise permitted under the Securities Act.
The Company has agreed to prepare and deliver to Holdings at least 30 days
prior to the Effective Time a list identifying all persons who may be deemed
"affiliates" (as described in the preceding paragraph) of the Company (a
"Company Affiliate Stockholder") and to use its reasonable best efforts to cause
each person so identified to deliver to Holdings at least 10 days prior to the
Effective Time a written agreement, in the form previously agreed upon by
Holdings and the Company. In such agreement, the Company Affiliate Stockholder
will agree not to sell, transfer or otherwise dispose of any shares of New
Common Stock issued to such person in connection with the Merger in violation of
the Securities Act, its accompanying rules and regulations, and state securities
laws. The Company Affiliate Stockholder will acknowledge that he has been
advised that he may be deemed an affiliate and therefore may not sell, transfer,
or otherwise dispose of stock received in the Merger, unless (i) such sale,
transfer or other disposition has been registered under the Securities Act, (ii)
to the extent applicable, such sale, transfer or other disposition is made in
conformity with the volume and other limitations prescribed by Rule 145
promulgated by the Commission under the Securities Act or is made in a
transaction which, as described in a "no-action" or interpretive letter from the
Commission relating specifically to such transaction, is not required to be
registered under the Securities Act or (iii) in the opinion of counsel
reasonably acceptable to the Surviving Corporation, such sale, transfer or other
disposition is otherwise exempt from registration under the Securities Act. The
Company Affiliate Shareholder will acknowledge that a legend will be placed on
shares of New Common Stock received in the Merger which indicates the stock was
received in a transaction to which Rule 145 applies and may only be transferred
pursuant to the terms of the agreement between the Company Affiliate Stockholder
and Holdings and that the Surviving Corporation has reserved the right to place
a legend on New Common Stock certificates transferred by the Company Affiliate
Stockholder which legend indicates that the shares of New Common Stock are
restricted, unless the transfer has been registered under Securities Act or, to
the extent applicable, is a sale made in conformity with the provisions of Rule
145.
Holdings has also agreed to prepare and deliver to the Company at least 30
days prior to the Effective Time a list identifying all persons who may be
deemed "affiliates" (as described in the second preceding paragraph) of Holdings
and to use its reasonable best efforts to cause each person so identified to
deliver to the Company at least 10 days prior to the Effective Time a written
agreement, in the form previously agreed upon by Holdings and the Company. Such
agreement will be substantially similar to the agreement described in the second
preceding paragraph.
The Stockholders Agreement will provide that no New Investor may transfer
its shares of New Common Stock prior to the second anniversary of the Effective
Time except to certain permitted transferees, which will include the affiliates
of such New Investor and the other New Investors.
Reofferings by the Selling Stockholder Pursuant to this Proxy
Statement/Prospectus. Following the Merger, the New Varity Shares received by
the Selling Stockholder in the Merger may be reoffered or resold pursuant to
this Proxy Statement/Prospectus by the Selling Stockholder during the time
period provided in,
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<PAGE> 64
and subject to the terms of, the Registration Rights Agreement. See "CERTAIN
OTHER AGREEMENTS -- Registration Rights Agreement." If the Surviving Corporation
determines in its reasonable judgment and good faith that the sale of the New
Varity Shares would require disclosure of material information which the Company
has a bona fide business purpose for preserving as confidential or the Surviving
Corporation is unable to comply with SEC requirements, the Selling Stockholder
is required under the Registration Rights Agreement upon notice from the
Surviving Corporation to suspend sales of the New Varity Shares pursuant to this
Proxy Statement/Prospectus until the earlier of (i) the date upon which such
material information is disclosed to the public or ceases to be material or upon
which the Surviving Corporation is able to comply with SEC requirements, or (ii)
30 days after such notice from the Surviving Corporation.
Plan of Distribution. The Selling Stockholder may sell the New Varity
Shares through underwriters or dealers, through brokers or other agents, or
directly to one or more purchasers in transactions on the NYSE, in the
over-the-counter markets, or in privately negotiated transactions, or in a
combination of such transactions. Such transactions may be effected by the
Selling Stockholder at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices, or at fixed
prices, which may be changed. Such underwriters, dealers, brokers or other
agents may receive compensation in the form of discounts or commissions from the
Selling Stockholder and may receive commissions from the purchasers of such
securities for whom they act as agent. In connection therewith, distributors' or
sellers' commissions may be paid or allowed that will not exceed those customary
in the types of transactions involved. If an agent purchases such securities as
principal, such securities may be resold by such agent via any of the methods of
sale described above.
The Selling Stockholder and any dealer, broker or other agent selling New
Varity Shares hereby for the Selling Stockholder or purchasing any such
securities from the Selling Stockholder for purposes of resale may be deemed to
be an underwriter under the Securities Act and any compensation received by such
Selling Stockholder, dealer, broker or other agent may be deemed underwriting
compensation. Neither the Company nor the Selling Stockholder can presently
estimate the amount of such compensation. The Company knows of no existing
arrangements between the Selling Stockholder and any dealer, broker or other
agent.
Under the terms of the Registration Rights Agreement, the Company has
agreed, to the extent requested by Varity, to enter into an underwriting
arrangement with respect to the sale of New Varity Shares through an
underwriter. In the event that any underwriters are used in the sale of any such
securities, a prospectus supplement will be delivered with this Prospectus which
will describe any material arrangements for the distribution of such securities,
including the name or names of any underwriters, the purchase price of such
securities and the proceeds to the Selling Stockholder from any such sale, any
underwriting discounts and other items constituting underwriters' compensation,
any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers, together with other related information.
Agents for the sale or distribution of the New Varity Shares and
underwriters, if any, may engage in transactions with or perform services for
the Surviving Corporation or its affiliates in the ordinary course of business.
To comply with certain states' securities laws, if applicable, the New
Varity Shares may be sold in such states only through brokers or dealers. In
addition, in certain states the securities may not be sold unless they have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
Pursuant to the provisions contained in the Registration Rights Agreement,
the Company is obligated under certain circumstances to indemnify K-H and
Varity, their respective officers, directors, employees and agents, and
controlling persons, and each underwriter in an offering or sale of securities
pursuant to this Proxy Statement/Prospectus, against certain liabilities related
to such sale or disposition, including liabilities arising under the Securities
Act or to contribute to payments which such persons or entities may be required
to make in respect thereof. In accordance with the Registration Rights
Agreement, the Company may, in certain circumstances, also be entitled to
indemnification or contribution by K-H and Varity or underwriters participating
in an offering of the securities to which this Proxy Statement/Prospectus
relates.
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<PAGE> 65
The Company has agreed to pay the expenses incurred in connection with the
preparation and filing of this Proxy Statement/Prospectus and the related
Registration Statement, including the fees and expenses in connection with the
registration and qualification of the New Varity Shares for sale under state
securities laws.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary addresses the material federal income tax
consequences of the Merger to stockholders of both the Company and Holdings. The
summary is based upon current provisions of the Code, existing and proposed
treasury regulations promulgated thereunder, relevant administrative rulings and
applicable judicial decisions, all of which are subject to change, possibly with
retroactive effect.
The summary does not address all aspects of federal income taxation that
may be relevant to particular stockholders and thus, for example, may not be
applicable to stockholders who are not citizens or residents of the United
States or stockholders who are employees and who acquired their stock pursuant
to the exercise of incentive stock options or as compensation; nor does this
summary address the effect of any applicable foreign, state, local or other tax
laws. The discussion assumes that each holder of Holdings Common Stock as well
as each holder of Company Common Stock and Company Preferred Stock holds such
stock as a capital asset within the meaning of Section 1221 of the Code.
No rulings have or will be requested from the Internal Revenue Service (the
"IRS") with respect to any issue discussed herein. Accordingly, there can be no
assurance that the IRS will not challenge the views expressed herein or that a
court would not sustain any such challenge.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PRECISE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PROPOSED
TRANSACTIONS.
TAX CONSEQUENCES OF THE MERGER GENERALLY
Skadden, Arps, Slate, Meagher & Flom, special counsel to Holdings, has
delivered to Holdings its opinion, based upon customary representations of
Holdings and the Company, that the Merger will qualify as a reorganization under
Section 368 of the Code. Accordingly, no gain or loss will be recognized by the
Company or Holdings solely as a result of the merger of Holdings into the
Company pursuant to the Merger and the material federal income tax consequences
to Holdings stockholders will be as follows:
TAX CONSEQUENCES TO HOLDINGS STOCKHOLDERS
In the opinion of Skadden, Arps, Slate, Meagher & Flom, pursuant to the
Merger, Holdings stockholders will be deemed to have exchanged their Holdings
Common Stock for New Common Stock and Warrants. No loss will be recognized upon
the exchange and gain will be recognized to the extent of the lesser of the fair
market value of the Warrants received or the gain realized by such stockholders
on the exchange. The gain so realized is measured by the difference between the
Holdings stockholder's adjusted tax basis in the Holdings Common Stock
surrendered and the aggregate fair market value of the New Common Stock and
Warrants received therefor. Any such gain recognized by a Holdings stockholder
pursuant to the Merger will likely be treated as capital gain provided that the
stockholder held the Holdings Common Stock as a capital asset. Such capital gain
will be long term if the stockholder has held such Holdings Common Stock for
more than one year at the Effective Time.
Holdings stockholders will have a tax basis in the Warrants received equal
to the fair market value of such Warrants at the Effective Time. Holdings
stockholder's aggregate tax basis in the New Common Stock will be equal to the
aggregate tax basis of the Holdings Common stock surrendered in the Merger
increased by any gain recognized as a result of the Merger and decreased by the
fair market value of the Warrants received. Such tax basis will be attributed
separately to each block of New Common Stock and Warrants received in exchange
for each block of Holdings Common Stock surrendered therefor (i.e., shares of
Holdings Common Stock acquired at the same time for the same price).
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The holding period of the Warrants received pursuant to the Merger will
begin on the day following the Effective Time. The holding period of the New
Common Stock received pursuant to the Merger will include the holding period of
the Holdings Common Stock surrendered in exchange therefor, provided such
Holdings Common Stock was held as a capital asset by the Holdings stockholder.
TAX CONSEQUENCES TO HOLDERS OF COMPANY COMMON STOCK
Altheimer & Gray, counsel to the Company, has delivered to the Company its
opinion that pursuant to the Merger, holders of Company Common Stock will be
deemed to have exchanged their Company Common Stock for Cash Consideration and
New Common Stock. No loss will be recognized upon the exchange and gain will be
recognized to the extent of the lesser of the Cash Consideration received or the
gain realized by such stockholders on the exchange. The gain so realized is
measured by the difference between the stockholder's adjusted tax basis in the
Company Common Stock deemed surrendered and the aggregate fair market value of
the New Common Stock and the Cash Consideration received therefor. Any such gain
recognized by a holder of Company Common Stock pursuant to the Merger will be
treated as capital gain provided that such stockholder held the Company Common
Stock as a capital asset. Such capital gain will be long term if the stockholder
has held such Company Common Stock for more than one year at the Effective Time.
Holders of Company Common Stock will have a tax basis in the New Common
Stock deemed received equal to the aggregate tax basis of the Company Common
Stock deemed surrendered in the Merger, increased by any gain recognized as a
result of the Merger and decreased by the Cash Consideration received.
The holding period of the New Common Stock deemed received pursuant to the
Merger will include the holding period of the Company Common Stock deemed
surrendered in exchange therefor, provided such Company Common Stock was held as
a capital asset by the Company stockholder.
TAX CONSEQUENCES TO HOLDERS OF COMPANY PREFERRED STOCK
The opinion of Altheimer & Gray delivered to the Company indicates that the
exchange of Company Preferred Stock for New Common Stock will be a
reorganization under Section 368 of the Code. Accordingly, no gain or loss will
be recognized by the Company or by the holders of Company Preferred Stock in the
exchange.
The tax basis of the New Common Stock received by the holders of Company
Preferred Stock will be the same as the tax basis of the Company Preferred Stock
surrendered in exchange therefor.
The Holding period of the New Common Stock received in exchange for Company
Preferred Stock include the holding period of the Company Preferred Stock
surrendered in exchange therefor, provided such Company Preferred Stock was held
as a capital asset by the Company stockholder.
TAX CONSEQUENCES TO HOLDERS OF COMPANY COMMON STOCK OF CASH RECEIVED IN LIEU OF
FRACTIONAL SHARES OF NEW COMMON STOCK
The opinion of Altheimer & Gray delivered to the Company states that cash
received by Company stockholders in lieu of fractional shares of New Common
Stock will be treated as received in redemption of such fractional interest, and
gain or loss, if any, will be recognized in an amount equal to the difference
between the amount of cash received for such fractional interest and the portion
of the stockholder's tax basis in its Company Common Stock that is properly
allocable to such fractional shares. Such gain or loss will be capital gain or
loss, provided that such fractional shares would have been held by such
stockholders as a capital asset, and will be long-term if the holding period of
the fractional share of New Common Stock considered redeemed for cash is more
than one year at the Effective Time.
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TAX CONSEQUENCES TO HOLDINGS STOCKHOLDERS OF CASH RECEIVED IN LIEU OF FRACTIONAL
SHARES OF NEW COMMON STOCK
In the opinion of Skadden, Arps, Slate, Meagher & Flom, cash received by
Holdings stockholders in lieu of fractional shares of New Common Stock will be
treated as received in redemption of such fractional interest, and gain or loss,
if any, will be recognized in an amount equal to the difference between the
amount of cash received for such fractional interest and the portion of the
stockholder's tax basis in its Holdings Common Stock that is properly allocable
to such fractional shares. Such gain or loss will be capital gain or loss,
provided that such fractional shares would have been held by such stockholders
as a capital asset, and will be long-term if the holding period of the
fractional share of New Common Stock considered redeemed for cash is more than
one year at the Effective Time.
DISSENTING HOLDERS OF COMPANY COMMON STOCK
The opinion of Altheimer & Gray delivered to the Company indicates that a
holder of Company Common Stock who perfects such stockholder's dissenter's
rights under Section 262 of the DGCL will recognize gain or loss equal to the
difference between the amount realized by such stockholder in the statutory
appraisal proceeding and such stockholder's adjusted tax basis in his Company
Common Stock.
DISSENTING HOLDINGS STOCKHOLDERS
In the opinion of Skadden, Arps, Slate, Meagher & Flom, a holder of
Holdings Common Stock who perfects such stockholder's dissenter's rights under
Section 262 of the DGCL will recognize gain or loss equal to the difference
between the amount realized by such stockholder in the statutory appraisal
proceeding and such stockholder's adjusted tax basis in his Holdings Common
Stock.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
Company and Holdings, and with respect to their subsidiaries, relating to, among
other things, the following matters: (i) their due organization, existence, good
standing, organizational documents and similar corporate matters; (ii) their
capitalization; (iii) the authorization, execution, delivery and enforceability
of the Merger Agreement and the transactions contemplated thereby; (iv) their
compliance with applicable laws; (v) the absence of any (A) conflict with their
organizational documents, applicable law or certain contracts, or (B)
governmental or regulatory authorization, consent or approval required to
consummate the Merger; (vi) reports and other documents filed with the
Commission; (vii) the absence of certain changes or events; (viii) the absence
of material pending or threatened litigation; (ix) the absence of undisclosed
liabilities; (x) the validity and enforceability of contracts and the absence of
non-competition agreements; (xi) certain tax matters; (xii) title to property
and effect of leases; (xiii) intellectual properties; (xiv) the accuracy of the
information supplied in the Registration Statement and this Proxy
Statement/Prospectus; (xv) employee benefit plans; (xvi) environmental laws;
(xvii) labor matters; (xviii) certain contracts and affiliate transactions;
(xix) in the case of the Company, the delivery of an opinion of the financial
advisor of the Company as to the fairness of the consideration to be received in
the Merger by the holders of Company Common Stock; (xx) certain matters related
to the financing and Subscription Agreements; (xxi) in the case of Holdings, the
absence of "Interested Stockholders" (as defined in Section 203 of the DGCL) of
the Company; and (xxii) the absence of any brokerage fees. All representations
and warranties of the Company and Holdings expire at the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of the Company and Holdings has agreed (except as expressly
contemplated by the Merger Agreement or to the extent that the other party
otherwise consents in writing, which consent will not be unreasonably withheld)
that, prior to the Effective Time, it and its Subsidiaries will carry on their
respective
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businesses only in the ordinary course of business and consistent with past
practice and will use all reasonable efforts to preserve intact their present
business organizations, keep available the services of their present officers
and key employees and preserve their existing relationships with customers,
suppliers and others having business dealings with it and its Subsidiaries. In
connection therewith, each of the Company and Holdings also agreed that neither
it nor any of its Subsidiaries would: (a) (i) amend its certificate of
incorporation, by-laws or similar organizational documents, (ii) split, combine
or reclassify any of its outstanding capital stock, (iii) declare, set aside or
pay any dividend (except, in the case of the Company, its normal quarterly
dividend of $.015 per share) or other distribution payable in cash, stock or
property with respect to its capital stock or (iv) redeem or otherwise acquire
directly or indirectly any of its capital stock or any of the capital stock of
its Subsidiaries (except to the extent required by applicable law with respect
to directors' qualifying shares); (b) issue, sell or authorize the issuance or
sale of, any shares of its capital stock or shares of its Subsidiaries or
securities convertible into, or options, warrants, commitments, subscriptions or
rights of any kind to acquire, any such shares or convertible securities, other
than the issuance of shares of Company Common Stock upon the exercise of
outstanding stock options or the granting of options to employees in the
ordinary course of business and consistent with past practice; (c) (i) merge,
combine or consolidate with another entity, (ii) acquire or purchase an equity
interest in or a substantial portion of the assets of any business, other than
in the ordinary course of business and consistent with past practice or
otherwise enter into any material contract, commitment or transaction or (iii)
sell, lease, license, waive, release, transfer, encumber or dispose of any of
its material assets other than in the ordinary course of business and consistent
with past practice; (d) (i) incur, assume or prepay any material indebtedness or
any other material liabilities other than in each case in the ordinary course of
business and consistent with past practice, (ii) assume, guarantee, endorse or
become directly, contingently or otherwise liable or responsible for the
obligations of any other party (other than a Subsidiary), in each case, except
in the ordinary course of business and consistent with past practice or (iii)
make any loans, advances or capital contributions to or investments in, any
other person (other than to a Subsidiary); (e) pay, discharge, settle or satisfy
any claim, liabilities or obligations, absolute, contingent or otherwise, other
than in the ordinary course of business and consistent with past practice or in
accordance with mandatory terms of any Contract (as defined in the Merger
Agreement); (f) modify or amend, or waive any benefit of, any non-competition
agreement; (g) make or authorize any capital expenditure not already committed
or budgeted for in 1996 in excess of $2 million individually, or $5 million in
the aggregate; (h) permit any insurance policy naming it or a Subsidiary as a
beneficiary or a loss payee to be cancelled or terminated, except in the
ordinary course of business; (i) (i) adopt, enter into, terminate or amend in
any material respect (except as may be required to comply with applicable law)
any plan for the current or future benefit or welfare of any director or
officer, (ii) grant an increase in the compensation or fringe benefits of, or
pay any bonus to, any director, officer or employee, except for normal increases
in compensation and bonuses and payment of bonuses in the ordinary course of
business and consistent with past practice or as otherwise approved or (iii)
take any action to fund or in any other way secure, or to accelerate or remove
restrictions with respect to any employee plan, agreement, contract, arrangement
or other employee benefit plan other than in the ordinary course of business;
(j) make any material change in its accounting or tax policies or procedures
unless required by law or to comply with generally accepted accounting
principles; or (k) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
EMPLOYEE BENEFITS
The Merger Agreement provides that the Surviving Corporation will honor and
assume the Company Employee Plans. The Surviving Corporation will be free to
amend or terminate the Company Employee Plans to the extent permitted by their
terms, but not during the first year following the Closing Date if the result
would be that the employee benefit plans, programs, arrangements and agreements
for the benefit of employees of the Surviving Corporation would be, in the
aggregate, less favorable than the Company Employee Plans.
Holdings also agreed to cause the Surviving Corporation to honor and assume
the Company Severance Agreements. See "THE MERGER -- Certain Transactions;
Interests of Certain Persons in the Merger."
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INDEMNIFICATION
Holdings and the Company have agreed in the Merger Agreement that all
rights to indemnification in favor of any employee, agent, director or officer
of the Company and each of its Subsidiaries shall be maintained for a period of
eight years from the Effective Time to the same extent and in the same manner as
provided in the respective charters or by-laws of the Company and its
Subsidiaries, or in any agreement between an indemnified party and the Company
or its Subsidiaries, in effect on the date of the Merger Agreement; provided
that in the event any claim or claims are asserted or made within such
eight-year period, all rights to indemnification in respect of any such claim or
claims will continue until final disposition of any and all such claims. The
parties have also agreed in the Merger Agreement that the Surviving Corporation
will indemnify each officer, director, employee or agent of the Company and each
of its Subsidiaries pertaining to actions or omissions in their capacity as an
officer, director, employee or agent or as a trustee or fiduciary for the
benefit of the Company or any of its Subsidiaries, occurring prior to the
Effective Time (including the transactions contemplated by the Merger
Agreement), in each case to the fullest extent permitted by applicable law. The
Company and Holdings have also agreed that if any such action, proceeding or
investigation is brought against any indemnified party, in connection with any
matter occurring prior to, and including, the Effective Time, the Surviving
Corporation will pay such indemnified party's legal and other expenses
(including the cost of any investigation and preparation) incurred by such
indemnified party so long as such party enters into an undertaking to reimburse
the Company for all amounts advanced if a court of competent jurisdiction
determines that indemnification of such party is prohibited by applicable law.
The Merger Agreement also provides that the Surviving Corporation will pay
all expenses, including reasonable attorneys' fees, incurred by an indemnified
party in enforcing the indemnity and other obligations described above.
The Merger Agreement further provides that the Company, and from and after
the Effective Time, the Surviving Corporation, will cause to be maintained for
three years after the Effective Time, the current policies of directors' and
officers' liability insurance or other policies with protection of the same kind
and scope as such current policies, and without any gap in coverage with respect
to matters occurring prior to the Effective Time. The Surviving Corporation will
not be required to pay premiums for such insurance in excess of an amount equal
to 200% of annual premiums currently paid by the Company for such insurance, but
will be required to obtain as much comparable insurance as possible for an
annual premium equal to such maximum amount.
NO SOLICITATION
The Company has agreed in the Merger Agreement that, prior to the Effective
Time, neither it nor any of its Subsidiaries or affiliates, nor any of their
respective officers, directors, employees, agents or representatives will,
directly or indirectly, (i) solicit or initiate (including by way of furnishing
or disclosing non-public information) any inquiries or the making of any
proposal with respect to any merger, consolidation or other business combination
involving the Company or any Subsidiary of the Company or the acquisition of all
or any significant part of the assets or capital stock of the Company or any
Subsidiary of the Company (an "Acquisition Transaction") or (ii) negotiate,
explore or otherwise engage in discussions with any person with respect to an
Acquisition Transaction, or which may reasonably be expected to lead to an
Acquisition Transaction or enter into any agreement, arrangement or
understanding which would require the Company to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by the Merger
Agreement; provided, however, that, prior to the Effective Time, if the Company
Board concludes in good faith, after consultation with its financial advisors
and based upon advice of outside counsel, that its fiduciary duties to the
Company's stockholders under applicable law require such action, the Company
may, in response to an unsolicited written proposal from a third party regarding
a Superior Proposal (as hereinafter defined), furnish information with respect
to, negotiate or otherwise engage in discussions with such third party. The
Company also agreed that, except as may be required pursuant to its fiduciary
duties under applicable law, as of the date of the Merger Agreement, it, its
Subsidiaries and Affiliates, and their respective directors, officers,
employees, agents and their representatives will immediately cease and terminate
any existing activities, discussions or negotiations with any person conducted
prior to the date of the Merger Agreement with respect
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to any Acquisition Transaction. The Company further agreed to promptly advise
Holdings of any inquiries or proposals received by, any such information
requested from, or any negotiations or discussions sought to be initiated or
continued with, the Company, its Subsidiaries or affiliates, or any of their
respective directors, officers, employees, agents or representatives with
respect to an Acquisition Transaction, and the terms thereof, including the
identity of such third party and the general terms of any financing arrangements
or commitment, and except as may be required pursuant to its fiduciary duties
under applicable law, to on an ongoing basis or upon Holdings' reasonable
request update Holdings as to the status of such inquiry or proposal, the
actions taken and other developments with respect thereto. A "Superior Proposal"
means a bona fide written and unsolicited proposal, or offer made by any person
with respect to an Acquisition Transaction on terms which the Company Board
determines in good faith, and in the exercise of reasonable judgment (based on
the advice of independent financial advisors and legal counsel), to be more
favorable to the Company and its stockholders than the transactions contemplated
by the Merger Agreement (including the financing thereof).
THIRD PARTY STANDSTILL AGREEMENTS
The Company has agreed in the Merger Agreement that, prior to the Effective
Time, it will not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its Subsidiaries
is a party, except to the extent that the Company Board determines in good faith
in consultation with outside counsel, that such action is required to comply
with the Company Board's fiduciary duties under applicable law.
EXERCISE OF OPTION
The Merger Agreement provides that, in the event that Holdings exercises
the Option, Holdings agrees that: (i) it will, within one year from the date of
exercise of the Option, commence an offer to purchase (the "Offer") all of the
outstanding shares of Company Common Stock not owned by Holdings for
consideration having a fair market value of not less than $32 per share and will
consummate such offer within 60 days from the date of commencement thereof; (ii)
neither Holdings nor any of its affiliates will acquire beneficial ownership of
any additional shares of Company Common Stock (and will dispose of any other
such shares beneficially owned by Holdings or its affiliates other than the
shares acquired pursuant to the Option) until it has consummated the Offer and
purchased all shares validly tendered pursuant thereto; and (iii) in the event
that the Offer is not commenced and consummated within 425 days following
exercise of the Option and the Company increases the Company Board by two
members and appoints one designee of Holdings to the Company Board, Holdings
will, for a one-year period (the "Standstill Period"), vote all shares in favor
of certain alternative transactions proposed by the Company Board the result of
which will be the receipt by stockholders of the Company of at least $32 per
share in fair market value consideration, cooperate in connection with the
alternative transactions and not attempt to gain further influence over the
Company. All such standstill restrictions will lapse if an alternative
transaction is not consummated during the Standstill Period.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of the Company and Holdings to consummate the Merger are
subject to the satisfaction or waiver of certain conditions, including (i) the
absence of any stop order suspending the effectiveness of the Registration
Statement and any proceedings for that purpose initiated by the Commission; (ii)
the approval of the Merger Agreement by the requisite holders of Company Common
Stock and Holdings Common Stock; (iii) no governmental entity having enacted,
issued, promulgated, enforced or entered any law, rule, regulation or order
which is in effect and which makes the Merger or the Stock Option Agreement
illegal or otherwise prohibits consummation of the Merger; (iv) the applicable
waiting period under the HSR Act having expired or been terminated; (v) no suit,
action or proceeding having been instituted or be pending by any governmental
entity which questions the validity or legality of the transactions contemplated
by the Merger Agreement or the Stock Option Agreement; (vi) the receipt of the
funds necessary to consummate the transactions contemplated by the Merger
Agreement (such condition is not applicable to Holdings with
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respect to any funds represented by the Subscription Agreements if any party is
in breach of its commitment under such agreements); and (vii) the receipt by the
Company and Holdings of a Solvency Opinion.
The obligations of Holdings to consummate the Merger are also subject to
satisfaction or waiver by Holdings of the following conditions: (i) (A) each of
the representations and warranties of the Company contained in the Merger
Agreement being true and correct (except where the failure to be accurate would
not have a material adverse effect on the Company) as of the date of the Merger
Agreement and, except to the extent such representations and warranties refer to
an earlier date, as of the Effective Time as though made at and as of the
Effective Time, and Holdings having received certificates signed by the chief
executive officer or chief financial officer of the Company on behalf of the
Company to such effect, (B) the Company having performed all obligations
required by the Merger Agreement on or prior to the Effective Time (except where
the failure to so perform would not have a material adverse effect on the
Company) and (C) since the date of the Merger Agreement, no event, change or
effect having occurred which would reasonably be expected to have a material
adverse effect on the Company; and (ii) Holdings having received the opinion of
outside counsel to the Company reasonably acceptable to Holdings, dated the
Effective Time, in form and substance reasonably acceptable to Holdings.
The obligations of the Company to consummate the Merger are also subject to
the satisfaction or waiver by the Company of the following conditions: (i) (A)
each of the representations and warranties of Holdings contained in the Merger
Agreement being true and correct (except where the failure to be accurate would
not have a material adverse effect on Holdings) as of the date of the Merger
Agreement and, except to the extent such representations and warranties refer to
an earlier date, as of the Effective Time as though made at and as of the
Effective Time, and the Company having received certificates signed by the chief
executive officer or chief financial officer of Holdings on behalf of Holdings
to such effect and (B) Holdings having performed all obligations required by the
Merger Agreement on or prior to the Effective Time (except where the failure to
so perform would not have a material adverse effect on Holdings); and (ii) the
Company having received the opinion of outside counsel to Holdings reasonably
acceptable to the Company, dated the Effective Time, in form and substance
reasonably acceptable to the Company.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval thereof by stockholders of the Company or
Holdings:
(a) by mutual written consent of the Company and Holdings;
(b) by either Holdings or the Company if (i) the Effective Time does
not occur on or before August 15, 1996 or (ii) the stockholders of the
Company or Holdings do not approve the Merger Agreement at their respective
Special Meeting, unless, in each case, the failure of such event to occur
was caused by the action or failure to act of the party seeking to
terminate the Merger Agreement which action or failure to act constitutes a
breach of such party's obligations under the Merger Agreement;
(c) by Holdings if the Board of Directors of the Company (i) fails to
recommend the approval of the Merger Agreement and the Merger to the
stockholders of the Company, (ii) withdraws, amends or modifies in a manner
adverse to Holdings its approval or recommendation of the Merger Agreement
or the Merger or (iii) fails to reconfirm such recommendation within five
business days of a reasonable written request for such confirmation by
Holdings;
(d) by the Company if the Company Board reasonably determines that any
Acquisition Transaction is a Superior Proposal and, so long as the Company
(i) provides Holdings with written notice of such determination, (ii)
informs Holdings of the material terms and conditions and financing
arrangements of such proposal and the identity of the person making such
proposal within five business days of the date of such notice and (iii)
after such five-business-day period promptly enters into a definitive
acquisition, merger or similar agreement to effect such proposal;
(e) by either Holdings or the Company if a final and nonappealable
injunction, order, decree or ruling has been issued or other action taken
permanently enjoining, restraining or otherwise prohibiting
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the Merger, provided that the party seeking to terminate has used its best
efforts to remove such injunction, order, decree or ruling;
(f) by Holdings in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement which has a material adverse effect on the Company and
which cannot be or has not been cured within 45 days after the giving of
written notice to the Company by Holdings; or
(g) by the Company in the event of a breach by Holdings of any
representation, warranty, covenant or other agreement contained in the
Merger Agreement which has a material adverse effect on Holdings and which
cannot be or has not been cured within 30 days after the giving of written
notice by the Company to Holdings.
Pursuant to the terms of the Stock Option Agreement, Holdings has agreed
that in the event it has the right to terminate the Merger Agreement because of
the events described in paragraphs (b) or (e) above, Holdings will immediately
terminate the Merger Agreement unless Varity and K-H consent in writing to
Holdings not so terminating.
FEES AND EXPENSES
The Merger Agreement requires the Company to pay Holdings a termination fee
in the amount of $20 million plus an amount equal to Holdings' actual,
documented out-of-pocket expenses, not exceeding $5 million, in connection with
the Merger Agreement (including, without limitation, attorneys' fees and fees of
financial advisers) (collectively, the "Termination Payment"), if (i) Holdings
terminates the Merger Agreement, as permitted by the Merger Agreement, as a
result of (x) the failure of the Company Board to recommend the approval of the
Merger Agreement and the Merger to the Company's stockholders in accordance with
the Merger Agreement or (y) the Company Board having withdrawn or amended or
modified in a manner adverse to Holdings its recommendation or approval in
respect of the Merger Agreement or the Merger or having failed to reconfirm such
recommendation within 5 business days of a reasonable written request for such
reconfirmation of Holdings, (ii) a Superior Proposal exists and the Company
terminates the Merger Agreement, as permitted by the Merger Agreement, or (iii)
Holdings or the Company terminates the Merger Agreement, as permitted by the
Merger Agreement, as a result of (x) the Merger not having been consummated on
or before August 15, 1996, or (y) the stockholders of the Company or Holdings
not having approved the Merger Agreement at their respective Special Meetings;
and if (A) such termination was not solely the result of any action or inaction
by Holdings which resulted in the failure of certain conditions to the
respective obligations of Holdings and the Company to effect the Merger and (B)
prior to or within six months after such termination, the Company or any of its
subsidiaries directly or indirectly enters into a definitive agreement for, or
consummates, an Acquisition Transaction in which the consideration per share of
Company Common Stock is equal to or greater than $30. The Company will not be
required to pay the Termination Payment if Holdings or the Company terminates
the Merger Agreement, as permitted by the Merger Agreement, as a result of the
Merger not having been consummated on or before August 15, 1996, if at the time
of such termination either (i) the waiting period under the HSR Act (including
any voluntary extensions of such period) has not expired or (ii) any Government
Entity is asserting an obligation under the Antitrust Laws to the transactions
contemplated by the Merger Agreement.
Except as otherwise provided with respect to the Termination Payment, the
Merger Agreement provides that the Company and Holdings each will bear its own
costs and expenses in connection with the Merger Agreement and the transactions
contemplated thereby, except that (i) Holdings is responsible for any commitment
fees (and any related costs, expenses and reimbursements) required to be paid
pursuant to the Commitment Letter and (b) the Company will pay all SEC filing
fees, printing and mailing costs for the Registration Statement, this Proxy
Statement/Prospectus and any registration statement to be filed in connection
with the Senior Subordinated Debt, and all other filing fees incurred in
connection with the Merger Agreement and the transactions contemplated thereby
(but not more than $90,000 relating to filing fees under the HSR Act). Upon
consummation of the Merger, the Surviving Corporation will reimburse Holdings,
its affiliates and the New Investors for all unreimbursed and documented costs
and expenses.
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None of the provisions in the Merger Agreement regarding payment of fees or
expenses relieves any party from liability for any breach of the Merger
Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended, modified or supplemented by written
agreement by the parties at any time prior to the Effective Time. After approval
of the Merger Agreement by the Company stockholders, no amendment which under
applicable law may not be made without the approval of the stockholders of the
Company may be made without such approval. In addition, (i) the Stock Option
Agreement provides that Holdings will not, without the prior written consent of
Varity and K-H, amend, modify or supplement the Merger Agreement in any manner
and (ii) the Letter Agreement provides that Holdings may not amend or waive any
condition in the Merger Agreement without the prior written consent of New
Investors subscribing for not less than $161 million of Company Preferred Stock.
At any time prior to the Effective Time, the parties may (i) extend the
time for the performance of any of the obligations or other acts of the other
parties; (ii) waive any inaccuracies in the representations and warranties of
the other parties contained in the Merger Agreement or in any document delivered
pursuant thereto; and (iii) waive compliance by the other parties with any of
the agreements or conditions contained therein which may be legally waived.
CERTAIN OTHER AGREEMENTS
STOCK OPTION AGREEMENT; IRREVOCABLE PROXY
Pursuant to the Stock Option Agreement, Varity caused its indirect
wholly-owned subsidiary K-H to grant to Holdings the Option to purchase all the
Varity Shares at a price of $32.00 per share in cash, or such higher price as is
paid to holders of Company Common Stock pursuant to the Merger Agreement,
subject to certain conditions. Under the Stock Option Agreement, K-H has also
granted to certain directors of Holdings the Varity Proxy to vote the shares
owned by K-H (i) in favor of the Merger Agreement and (ii) against any proposal
or transaction which could prevent or delay the consummation of the transactions
contemplated by the Stock Option Agreement or the Merger Agreement.
The Option will become exercisable at any time after the earlier of (i)
Varity's or K-H's breach of any material obligation under the Stock Option
Agreement, (ii) Holdings' discovery of any material misrepresentation or breach
of warranty by Varity or K-H under the Stock Option Agreement, (iii) public
disclosure of, or Holdings learning of (a) certain acquisitions, tender offers
or proposals for acquisition of more than 15% of the outstanding shares of
Company Common Stock or a material portion of the assets of the Company, (b)
certain other agreements regarding a merger, liquidation, recapitalization or
similar transaction involving the Company or (c) the Company Board having
publicly modified or withdrawn its recommendation of the Merger, or failing to
reconfirm its recommendation within two business days of a written request by
Holdings. Pursuant to the Letter Agreement among the New Investors and Holdings,
the New Investors and Holdings agreed that if Holdings determines to exercise
the Option, each New Investor has the right to purchase from Holdings its pro
rata share of the Varity Shares.
Upon any reclassification, split-up, stock dividend, exchange of shares or
other similar change in the outstanding shares of Company Common Stock prior to
the termination of the Stock Option Agreement, the number of shares subject to
the Option and the applicable exercise price will be appropriately adjusted so
that Holdings will receive upon exercise of the Option the equivalent amount of
shares or property that it would have received had it exercised the Option
immediately prior to such event.
Varity and K-H make certain representations in the Stock Option Agreement,
including as to ownership of the Varity Shares and the enforceability of the
terms of the Stock Option Agreement. In addition, Varity and K-H consent that
they will not (i) transfer or agree to transfer the Varity Shares except
pursuant to the Merger, (ii) grant any proxy or power of attorney with respect
to the Varity Shares or (iii) deposit the Varity Shares into a voting trust or
enter into a voting agreement with respect to the Varity Shares.
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<PAGE> 74
Pursuant to the Stock Option Agreement, Varity and K-H have agreed not to
directly or indirectly solicit or participate in any discussions with any party
regarding a takeover proposal for the Company, and to immediately notify
Holdings of any such proposal.
Holdings has agreed with Varity and K-H not to modify the Merger Agreement
without the prior written consent of Varity and K-H, and, in the event Holdings
has the right to terminate the Merger Agreement pursuant to certain provisions
thereof, to immediately so terminate unless Varity and K-H have consented in
writing to not terminate. In the event that the Option is exercised, the Merger
is not consummated and Holdings sells the shares acquired pursuant to the Option
within 12 months of the date such Option is exercised for a price higher than
the exercise price, Holdings has agreed to pay to Varity and K-H a make-whole
amount with respect to each share disposed of equal to the excess of the highest
per share price in such sale over the exercise price.
To the extent Holdings has not otherwise exercised the Option pursuant to
its terms, the Stock Option Agreement will terminate on the earlier of (i) the
Effective Time, (ii) 5 business days after the termination of the Merger
Agreement in accordance with its terms, (iii) the termination of the Merger
Agreement pursuant to its terms if Holdings is not entitled to the payment of
termination fees thereunder, (iv) any modification, amendment, alteration or
supplement of the Merger Agreement, or any failure of Holdings to terminate the
Merger Agreement in violation of the provisions of the Stock Option Agreement or
(v) 12:01 a.m. on August 16, 1996.
STOCKHOLDERS AGREEMENT
Pursuant to the Subscription Agreements, the Company and each of the New
Investors have agreed to enter into the Stockholders Agreement immediately after
the Effective Time on terms summarized in the Subscription Agreements. The
Stockholders Agreement will provide that the New Investors will vote their
shares of New Common Stock received in the Merger so that the Surviving
Corporation Board will consist of nine members, of which four members will be
designated by JLL (currently, Messrs. Clark, Joseph, Levy and Rodriguez), one
member will be designated by TSG (currently, Mr. Cristophe), one member will be
the Chief Executive Officer of the Surviving Corporation (currently, Mr. Cucuz)
and the remaining three members, which may not be affiliated with the Surviving
Corporation or any of the New Investors, will be selected by the Surviving
Corporation Board (currently expected to be Messrs. Rodewig and Way and one
other independent director). The Stockholders Agreement will provide that the
respective rights of JLL and TSG to designate directors will terminate if any
such entity ceases to own at least 50% of its initial investment. Each New
Investor also will agree not to acquire any shares of New Common Stock if, as a
result of such acquisition, such New Investor would own in excess of 50% of the
outstanding shares of New Common Stock. Pursuant to the Merger Agreement, the
Surviving Corporation will assume the rights and obligations of the Company
under the Stockholders Agreement.
Pursuant to the Stockholders Agreement, the New Investors will agree not to
transfer any shares of New Common Stock, other than pursuant to certain
permitted transfers, until the second anniversary of the Merger. The
Stockholders Agreement will give each of the New Investors holding shares of New
Common Stock received in the Merger with an aggregate value of at least $15
million the right (exercisable after the second anniversary of the Effective
Time) to require the Company to register under the Securities Act all or part of
such shares at the Company's expense on two occasions (such right being referred
to herein as a "New Investor Demand Registration"). The Company covenants to
file the reports under the Exchange Act to enable the New Investors to sell
their shares of New Common Stock. The New Investors will be entitled to an
unlimited number of "piggyback registrations," which will allow the New
Investors to include shares of New Common Stock (including shares of New Common
Stock to be issued upon the exercise of Warrants) held by them in certain
registrations of shares of New Common Stock effected by the Company (subject to
customary cut-back provisions). In addition to these registration rights, the
Stockholders Agreement will allow New Investors to participate proportionately
in any sales by JLL of shares of New Common Stock.
The Stockholders Agreement also will provide that the Company will not
repurchase any shares of New Common Stock, other than to fund employee benefit
plans, without the approval of holders of at least 82.5% of
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<PAGE> 75
the shares of New Common Stock subject to the Stockholders Agreement. In
addition, the Company will agree to file all necessary reports with the SEC, if
applicable, and take whatever action any New Investor may reasonably request to
enable such New Investor to sell shares of New Common Stock without registration
under the Securities Act within the limitations provided by Rule 144 thereunder.
The Stockholders Agreement may only be amended with the prior written consent of
the Company and at least 82.5% of the shares of New Common Stock initially
subject thereto. In addition, the Stockholders Agreement will terminate on the
eighth anniversary thereof, unless terminated earlier pursuant to its terms.
REGISTRATION RIGHTS AGREEMENT
Varity and K-H have been advised that because they may be deemed to be
affiliates of the Company at the time the Merger is submitted for a vote of the
stockholders of the Company, they may not sell, transfer or otherwise dispose of
any New Common Stock they receive in the Merger, unless (i) such sale, transfer
or other disposition has been registered under the Securities Act, (ii) to the
extent applicable, such sale, transfer or other disposition is made in
conformity with the volume and other limitations of Rule 145 under the
Securities Act or is made in a transaction which, as described in a "no-action"
or interpretive letter from the Commission relating specifically to such
transaction, is not required to be registered under the Securities Act or (iii)
in the opinion of counsel reasonably acceptable to the Surviving Corporation,
such sale, transfer or other disposition is otherwise exempt from registration
under the Securities Act.
In order to induce Varity and K-H to enter into the Stock Option Agreement,
the Company has agreed to provide Varity and K-H registration rights with
respect to the 814,400 shares of New Common Stock to be issued to K-H (the "New
Varity Shares") upon consummation of the Merger. Pursuant to the Registration
Rights Agreement dated as of March 28, 1996, among the Company, Varity and K-H
(the "Registration Rights Agreement"), the Company has agreed to use its best
efforts to register with the SEC the New Varity Shares for resale pursuant to
the shelf registration provisions of Rule 415 under the Securities Act either
(i) by an initial registration of the New Varity Shares on Form S-4, followed by
a post-effective amendment immediately after the Effective Time causing the New
Varity Shares to be registered on Form S-3 or (ii) in the event the Company is
unable to effect an initial registration of the New Varity Shares on Form S-4,
by a registration statement on Form S-3 prior to or contemporaneously with the
Effective Time. In accordance with the Registration Rights Agreement the New
Varity Shares have been registered for resale pursuant to the Registration
Statement. This Proxy Statement/Prospectus also constitutes the prospectus for
resales of the New Varity Shares during the period required under the
Registration Rights Agreement. See "The MERGER -- Resales of New Common Stock
and Warrants" and "SELLING STOCKHOLDER."
In addition to the initial registration of the New Varity Shares, the
Company has agreed to certain customary registration procedures, including
agreements to supplement the shelf registration statement as required by the
Securities Act or as reasonably requested by Varity and K-H or any underwriter
of the securities and to provide Varity and K-H and their counsel with copies
of, and an opportunity to review, various registration statements, opinions,
agreements and other documents, including but not limited to the underwriting
agreement. All fees associated with a securities offering under the Registration
Rights Agreement will be borne by the Company, except that the Company will bear
the cost of the fees and expenses of only one legal counsel retained by the
holder in connection with such offering and will not be responsible for any
underwriting discounts or commissions or the fees and expenses of any additional
counsel, accountants, agents or experts retained by the holder in connection
with the offering.
The Registration Rights Agreement will terminate on the earliest of (i) the
date that all securities covered by the Registration Rights Agreement have been
sold and (ii) the third anniversary of the Effective Time.
WARRANT AGREEMENT
In contemplation of the issuance of Warrants to purchase up to 1,300,000
shares of New Common Stock, the Company and a warrant agent (the "Warrant
Agent") will enter into a warrant agreement (the "Warrant
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Agreement"), pursuant to which the Warrant Agent will agree to act on behalf of
the Surviving Corporation in connection with the issuance, division, transfer,
exchange and exercise of the Warrants.
Each Warrant initially entitles the holder thereof to purchase one share of
New Common Stock upon payment of the warrant price of $48.00 (the "Warrant
Price"). Warrants may be exercised commencing at any time on or after the fourth
anniversary of the Effective Time until the seventh anniversary thereof. New
Investors will not be permitted for a period of two years from the Effective
Time to transfer the Warrants other than to Permitted Transferees (as defined in
the Stockholders Agreement). Subsequent to the two year period, in addition to
Permitted Transferees, the Warrants may also be transferred by the New Investors
pursuant to (i) Rule 144A of the Securities Act or (ii) an exemption from
registration under the Securities Act.
Payment of the Warrant Price must be made in the form of cash, certified
check or official bank check payable to the Warrant Agent. However, in lieu
thereof, a Warrant holder may instruct the Company, by written notice
accompanying the surrender of the Warrant at the time of exercise, that such
Warrant holder elects to receive that number of shares of New Common Stock which
is equal to the number of shares for which the Warrants are being exercised less
the number of shares having a current market price equal to the Warrant Price.
The Surviving Corporation will not be required to issue fractional shares upon
the exercise of Warrants. Pursuant to the Warrant Agreement, cash will be paid
in lieu of fractional shares. Warrant holders, as such, will not have any voting
nor any other rights as stockholders of the Surviving Corporation.
The number of shares issuable pursuant to the Warrant and the Warrant Price
will be adjusted upon the occurrence of certain events, including but not
limited to (i) the Surviving Corporation paying a dividend in shares of New
Common Stock, (ii) the Surviving Corporation subdividing or combining its
outstanding shares of New Common Stock or (iii) the Surviving Corporation
issuing rights, warrants or options on all outstanding shares of New Common
Stock. No adjustment shall be made for any dividends on any shares of stock
issuable upon exercise of a Warrant.
Upon any merger or consolidation of the Surviving Corporation or of any
sale of all or substantially all the property of the Surviving Corporation, the
Surviving Corporation or such successor or purchasing corporation, as the case
may be, will execute with the Warrant Agent an agreement that each Warrant
holder will have the right upon payment of the Warrant Price to purchase the
kind and amount of shares and other securities and property which he would have
been entitled to receive upon the happening of such consolidation, merger, sale,
transfer or lease had such holder exercised such Warrant immediately prior to
such action.
Modification of the Warrant Agreement
The Warrant Agreement permits the Surviving Corporation and the Warrant
Agent, without the approval of any Warrant holder, to supplement or amend the
Warrant Agreement in order to cure any ambiguity or to correct or supplement any
provision contained therein which may be defective or inconsistent with any
other provision therein, or to make any other provisions in regard to matters or
questions arising thereunder which the Surviving Corporation and the Warrant
Agent may deem necessary or desirable and which are not inconsistent with the
provisions of the Warrants and which do not adversely affect the interests of
the Warrant holders.
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STOCKHOLDERS' RIGHTS OF APPRAISAL
Pursuant to Section 262 of the DGCL ("Section 262"), any holder of Holdings
Common Stock or Company Common Stock who does not wish to accept the
consideration to be paid pursuant to the Merger Agreement may dissent from the
Merger and elect to have the fair value of such stockholder's shares of Holdings
Common Stock or Company Common Stock (exclusive of any element of value arising
from the accomplishment or expectation of the Merger) judicially determined and
paid to such stockholder in cash, together with a fair rate of interest. Holders
of Company Preferred Stock have waived any appraisal rights they may have
pursuant to Section 262. The following discussion is not a complete statement of
the law pertaining to appraisal rights under Delaware law, and is qualified in
its entirety by the full text of Section 262, which is provided in its entirety
as Annex III to this Proxy Statement/Prospectus, and any future amendments
thereto.
Any stockholder who wishes to exercise such appraisal rights or who wishes
to preserve the right to do so should review carefully Annex III to this Proxy
Statement/Prospectus because failure to comply with the procedures specified in
Section 262 timely and properly will result in the loss of appraisal rights.
Moreover, because of the complexity of the procedures for exercising the right
to seek appraisal of the Holdings Common Stock or Company Common Stock, Holdings
and the Company believe that stockholders who consider exercising such rights
should seek the advice of counsel.
Any holder of Holdings Common Stock or Company Common Stock wishing to
exercise the right to dissent from the Merger and demand appraisal under Section
262 must satisfy each of the following conditions:
(i) Such stockholder must deliver to Holdings or the Company, as
applicable, a written demand for appraisal of such stockholder's shares
before the vote on the Merger Agreement at the applicable Special Meeting.
This written demand for appraisal must be in addition to and separate from
any proxy or vote against the Merger Agreement; merely voting against,
abstaining from voting or failing to vote in favor of approval and adoption
of the Merger Agreement will not constitute a demand for appraisal within
the meaning of Section 262.
(ii) Such stockholder must not vote for approval and adoption of the
Merger Agreement. A failure to vote will satisfy this requirement, but a
vote in favor of the Merger Agreement, by proxy or in person, or the return
of a signed proxy that does not specify a vote against approval and
adoption of the Merger Agreement or a direction to abstain in connection
with the proposal, will constitute a waiver of such stockholder's right of
appraisal and will nullify any previously filed written demand for
appraisal because, in the absence of express contrary instructions, such
shares will be voted in favor of the proposal. Accordingly, a stockholder
who desires to perfect appraisal rights with respect to any of such
stockholder's shares must, as one of the procedural steps involved in such
perfection, either (i) refrain from executing and returning the enclosed
proxy card and from voting in person in favor of the proposal to approve
the Merger Agreement or (ii) check either the "Against" or the "Abstain"
box next to the proposal on such card or vote in person against the
proposal or register in person an abstention with respect thereto.
(iii) Such stockholder must continuously hold such shares from the
date of making the demand through the Effective Time. Accordingly, a
stockholder who is the record holder of shares of Holdings Common Stock or
Company Common Stock, as applicable, on the date the written demand for
appraisal is made but who thereafter transfers such shares prior to the
Effective Time will lose any right to appraisal in respect of such shares.
A demand for appraisal should be executed by or on behalf of the
stockholder of record, fully and correctly, as such stockholder's name appears
on such stock certificates, should specify the stockholder's name and mailing
address, the number of shares of Holdings Common Stock or Company Common Stock
owned and that such stockholder intends thereby to demand appraisal of such
stockholder's stock. However, such demand will be sufficient if it reasonably
informs the Company or Holdings of the stockholder's identity and intent to
demand the appraisal of his shares. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares
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are owned of record by more than one person as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all owners. An
authorized agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a stockholder; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, the agent is acting as agent for such owner or owners. A record holder
such as a broker who holds shares as nominee for several beneficial owners may
exercise appraisal rights with respect to the shares held for one or more other
beneficial owners while not exercising such rights with respect to the shares
held for one or more beneficial owners; in such case, the written demand should
set forth the number of shares as to which appraisal is sought, and where no
number of shares is expressly mentioned the demand will be presumed to cover all
shares held in the name of the record owner. Stockholders who hold their shares
in brokerage accounts or other nominee forms and who wish to exercise appraisal
rights are urged to consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a nominee.
A stockholder who elects to exercise appraisal rights should mail or
deliver a written demand: if to the Company, to Hayes Wheels International,
Inc., 38481 Huron River Drive, Romulus, Michigan 48174, Attention: Secretary; if
to Holdings, to MWC Holdings, Inc., 2501 Woodlake Circle, Okemos, Michigan
48864, Attention: Corporate Secretary.
Within ten days after the Effective Time, the Surviving Corporation must
give written notice that the Merger has become effective to each stockholder who
has filed a written demand meeting the requirements of Section 262. Any
stockholder who has complied with Section 262 and is entitled to appraisal
rights may, within 20 days after the date of mailing such notice, demand in
writing from the Surviving Corporation the appraisal of such stockholder's
shares. Within 120 days after the Effective Time, but not thereafter, either the
Surviving Corporation or any stockholder who has complied with the requirements
of Section 262 may file a petition in the Delaware Court of Chancery demanding a
determination of the value of the shares of Holdings Common Stock or Company
Common Stock held by all dissenting stockholders. Neither the Company nor
Holdings presently intends to file such a petition, and stockholders seeking to
exercise appraisal rights should not assume that the Surviving Corporation will
file such a petition or that the Surviving Corporation will initiate any
negotiations with respect to the fair value of such shares. Accordingly,
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
periods and in the manner prescribed in Section 262. Inasmuch as the Surviving
Corporation has no obligation to file such a petition, the failure of a
stockholder to do so within the period specified could nullify such
stockholder's previous written demand for appraisal.
Pursuant to the Merger Agreement, each of the Company and Holdings has
agreed to give the other prompt notice of any demands for appraisal received by
it, and, prior to the Effective Time, (i) Holdings has the right to participate
in and direct all negotiations and proceedings with respect to demands for
appraisal received by the Company and (ii) the Company will not, except with the
prior written consent of Holdings, which shall not be unreasonably withheld,
make any payment with respect to, or offer to settle, any such demands.
Within 120 days after the Effective Time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the Surviving Corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The Surviving Corporation must
mail such statement to the stockholder within 10 days of receipt of such request
or the expiration of the period for delivery of demands for appraisal.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine which stockholders are
entitled to appraisal rights and will appraise the "fair value" of their shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a dissenting
stockholder, the Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection
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with the appraisal proceeding, including, without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all of the shares entitled to appraisal. STOCKHOLDERS
CONSIDERING SEEKING APPRAISAL SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR
SHARES AS DETERMINED UNDER SECTION 262 COULD BE MORE THAN, THE SAME AS OR LESS
THAN THE CONSIDERATION THEY WOULD RECEIVE PURSUANT TO THE MERGER AGREEMENT IF
THEY DID NOT SEEK APPRAISAL OF THEIR SHARES AND THAT INVESTMENT BANKING OPINIONS
ARE NOT OPINIONS AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value, the Delaware Chancery Court is to take into
account all relevant factors. The Delaware Supreme Court has discussed the
factors that can be considered in determining fair value in an appraisal
proceeding, stating that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered, and that "fair price obviously
requires consideration of all relevant factors involving the value of a
company." The Delaware Supreme Court has stated that, in making this
determination of fair value, the court must consider market value, asset value,
dividends, earnings prospects, the nature of the enterprise and any other facts
which could be ascertained as of the date of the merger that throw any light on
future prospects of the merged corporation. The Delaware Supreme Court has also
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or be entitled to the payment of
dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the Effective Time) unless the demand is withdrawn or the appraisal rights
are not perfected.
At any time within 60 days after the Effective Time, any stockholder who
has demanded appraisal rights will have the right to withdraw such demand for
appraisal and to accept the terms offered in the Merger; after this period, the
stockholder may withdraw such demand for appraisal only with the consent of the
Surviving Corporation. If no petition for appraisal is filed with the Delaware
Chancery Court within 120 days after the Effective Time, or if such stockholder
has withdrawn such demand for appraisal as discussed in the preceding sentence,
such stockholder's rights to appraisal shall cease, and all holders of shares of
Holdings Common Stock or Company Common Stock will be entitled to receive the
Merger Consideration applicable thereto. Any stockholder may withdraw such
stockholder's demand for appraisal by delivering to the Surviving Corporation a
written withdrawal of such stockholder's demand for appraisal and acceptance of
the Merger, except that (i) any such attempt to withdraw made more than 60 days
after the Effective Time will require written approval of the Surviving
Corporation and (ii) no appraisal proceeding in the Delaware Chancery Court
shall be dismissed as to any stockholder without the approval of the Delaware
Chancery Court, and such approval may be conditioned upon such terms as the
Delaware Chancery Court deems just.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262
WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY APPRAISAL RIGHTS.
CONSEQUENTLY, ANY STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO
CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
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PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
AND CERTAIN OTHER INFORMATION
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed statement of operations of the
Company for the fiscal year ended January 31, 1996 (the "Pro Forma Statement of
Operations"), and the unaudited pro forma combined condensed balance sheet of
the Company as of January 31, 1996 (the "Pro Forma Balance Sheet" and, together
with the Pro Forma Statement of Operations, the "Pro Forma Financial
Statements"), have been prepared to illustrate the estimated effect of the
Transactions and the Holdings 1995 Recapitalization. The Pro Forma Financial
Statements do not reflect any expected cost savings from the Motor Wheel
Restructuring or synergies that are expected to result from the Transactions,
which could be significant, although there can be no assurance with respect
thereto. The Pro Forma Statement of Operations gives pro forma effect to the
Transactions and the Holdings 1995 Recapitalization as if they had occurred on
February 1, 1995. The Pro Forma Balance Sheet gives pro forma effect to the
Transactions as if they had occurred on January 31, 1996. The Pro Forma
Financial Statements do not purport to be indicative of the results of
operations or financial position of the Company that would have actually been
obtained had such transactions been completed as of the assumed dates and for
the period presented, or which may be obtained in the future. The pro forma
adjustments are described in the accompanying notes and are based upon available
information and certain assumptions that the Company and Holdings believe are
reasonable. The Pro Forma Financial Statements should be read in conjunction
with the separate historical consolidated financial statements of the Company
and Holdings and the notes thereto and "Management's Discussion and Analysis of
Results of Operations and Financial Condition" of the two companies appearing
elsewhere in or incorporated by reference into this Proxy Statement/Prospectus.
The acquisition of Holdings will be accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price will be
allocated to the tangible and intangible assets and liabilities of Holdings
based upon their respective fair values as of the Closing Date based on
valuations and other studies which are not yet available. A preliminary
allocation of the purchase price has been made to major categories of assets and
liabilities in the accompanying Pro Forma Financial Statements based on
available information. The actual allocation of purchase price and the resulting
effect on income from operations may differ significantly from the pro forma
amounts included herein. These pro forma adjustments represent the Company and
Holdings managements' preliminary determination of purchase accounting
adjustments and are based upon available information and certain assumptions
that the Company and Holdings believe to be reasonable. Consequently, the
amounts reflected in the Pro Forma Balance Sheet are subject to change, and the
final amounts may differ substantially.
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HAYES WHEELS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA
COMPANY HOLDINGS ------------------------
YEAR ENDED YEAR ENDED COMBINED
JANUARY 31, DECEMBER 31, ADJUSTMENTS
1996 1995
(SEE NOTE 1)
----------- ------------ ------------------------
<S> <C> <C> <C> <C>
Net sales....................................... $611.1 $357.2 $ -- $968.3
(5.2)(C)
(0.1)(D)
Cost of goods sold.............................. 513.4 324.0 (5.3) 832.1
----------- --------
Gross profit.................................. 97.7 33.2 5.3 136.2
(0.3)(C)
(2.9)(D)
(0.2)(E)
Marketing, general and administration........... 29.7 18.2 (3.4) 44.5
Nonrecurring charges............................ 3.6 33.0 -- 36.6
Engineering and product development costs....... 4.7 6.9 (2.5)(D) 9.1
Other expense (income), net..................... (1.5) 3.6 -- 2.1
----------- --------
Earnings (loss) from operations............... 61.2 (28.5) 11.2 43.9
Interest expense................................ 15.0 17.9 38.4(F) 71.3
Preferred dividends of subsidiary............... -- 1.6 (1.6)(G) --
----------- --------
Earnings (loss) before taxes on income........ 46.2 (48.0) (25.6) (27.4)
Income tax provision (benefit)................ 17.8 4.2 (32.7)(H) (10.7)
----------- --------
Net income (loss)(I).......................... $ 28.4 $(52.2) $ 7.1 $(16.7)
========= =======
Earnings per share.............................. $ 1.62 $ (267,912) $(1.50)
OPERATING AND OTHER DATA:
EBITDA*(I).................................... $97.5 $27.5 $8.2 $133.2
Depreciation and amortization................. 32.7 19.0 (2.8) 48.9
Capital expenditures, tooling and dunnage..... 49.1 14.2 -- 63.3
Cash interest expense......................... 13.9 16.3 38.0 68.2
SELECTED RATIOS:
Ratio of earnings to fixed charges(J)......... 3.6x -- -- --(K)
PRO FORMA RECONCILIATION OF EBITDA
Earnings (loss) from operations............... $61.2 $(28.5) $ 11.2 $ 43.9
Add: Non-cash other expense (income), net....... -- 3.8 -- 3.8
Nonrecurring charges.......................... 3.6 33.2 (0.2) 36.6
Depreciation and amortization................. 32.7 19.0 (2.8) 48.9
--------
EBITDA(I)....................................... $97.5 $ 27.5 $ 8.2 $133.2
=======
Cashflow provided from (used by):
Operations.................................... $44.9 $7.2 $3.7 $55.8
Investing activity............................ (52.4) (14.1) -- (66.5)
Financing activity............................ 8.8 7.2 -- 16.0
</TABLE>
- -------------------------
* EBITDA represents the sum of income before interest expense, preferred
dividends of subsidiary and income taxes, plus depreciation and amortization,
nonrecurring charges, and other non-cash income and expense. EBITDA should not
be construed as a substitute for income from operations, net income or cash
flow from operating activities, for the purpose of analyzing the Company's
operating performance, financial position and cash flows. The Company has
presented EBITDA because it is commonly used by investors to analyze and
compare companies on the basis of operating performance and to determine a
company's ability to service debt.
65
<PAGE> 82
HAYES WHEELS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------- ---------------------------------
COMPANY HOLDINGS COMBINED
JANUARY 31, 1996 DECEMBER 31, 1995 ADJUSTMENTS
(SEE NOTE 2)
---------------- ----------------- ---------------------------------
<S> <C> <C> <C> <C>
Cash........................... $ 1.8 $ 1.4 $ 75.0(A) $ 78.2
Trade accounts and notes
receivable................... 109.6 32.3 141.9
Inventories.................... 58.9 31.9 3.8(B) 94.6
Other current assets........... 9.9 5.6 -- 15.5
------ ------- ------- --------
Current Assets............ 180.2 71.2 78.8 330.2
Property, plant, and
equipment.................... 304.4 79.0 20.0(B) 403.4
Other noncurrent assets........ 35.4 16.4 (13.0)(B),(C) 38.8
Deferred tax................... -- -- 35.6(B) 35.6
Deferred financing costs....... 3.6 3.0 19.4(A),(B),(C) 26.0
Goodwill....................... 110.3 -- 185.0(B) 295.3
------ ------- ------- --------
Total Assets.............. $633.9 $ 169.6 $ 325.8 $1,129.3
====== ======= ======= ========
Current portion of debt and
notes........................ $ 4.2 $ 5.0 $ (5.0)(D) $ 4.2
Trade accounts payable......... 86.8 30.1 -- 116.9
Accrued liabilities............ 38.7 26.1 (6.8)(C) 58.0
Revolving credit facility...... -- -- 26.4(A) 26.4
------ ------- ------- --------
Current liabilities....... 129.7 61.2 14.6 205.5
Restructuring reserve --
noncurrent................... -- 22.9 -- 22.9
Pension and other long-term
liabilities.................. 81.8 38.1 40.2(B) 160.1
Deferred tax liability, net.... 48.1 -- -- 48.1
Senior debt -- less current
portion...................... 128.9 125.0 (253.9)(A),(D) --
Term loans..................... -- -- 425.0(A) 425.0
Senior Subordinated Notes...... -- -- 250.0(A) 250.0
------ ------- ------- --------
Total Liabilities......... $388.5 $ 247.2 $ 475.9 $1,111.6
Paid in capital................ $198.5 $ 30.1 $ 60.4(E),(F) $ 289.0
Preferred stock................ -- -- -- --
Common stock................... 0.2 -- -- 0.2
Retained earnings.............. 49.6 (107.7) (210.5)(C),(F) (268.6)
Currency translation
adjustment................... (2.9) -- -- (2.9)
------ ------- ------- --------
Total stockholders'
equity.................. 245.4 (77.6) (150.1) 17.7
------ ------- ------- --------
Total Liabilities and
Stockholders'
Equity............... $633.9 $ 169.6 $ 325.8 $1,129.3
====== ======= ======= ========
</TABLE>
66
<PAGE> 83
NOTE (1): NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS)
(A) The Pro Forma Statement of Operations assumes that the Transactions and the
Holdings 1995 Recapitalization occurred on February 1, 1995. For purposes of
the Pro Forma Statement of Operations for the year ended January 31, 1996,
Holdings' historical statement of operations for the fiscal year ended
December 31, 1995 was combined with the Company's historical statement of
operations for the fiscal year ended January 31, 1996.
(B) The Company expects to incur a $8.0 million premium to repurchase its $100
million of Senior Notes outstanding, to write off $3.6 million of deferred
debt issuance costs, to write off $2.7 million of deferred licensing fees
to Holdings and to expense $3.1 million of nonrecurring costs in
conjunction with the settlement of outstanding Company management stock
options. These costs and their tax impact have not been included in the Pro
Forma Statement of Operations because they are non-recurring. Holdings
expects to incur a $7.2 million premium associated with the redemption of
its $125 million principal amount of Senior Notes outstanding and to write
off deferred debt issuance costs of $3.0 million which are recorded as
liabilities under purchase accounting in the Pro Forma Balance Sheet at
January 31, 1996.
(C) The acquisition of Holdings will be accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price will be
allocated to the tangible and intangible assets and liabilities of Holdings
based upon their respective fair values as of the Closing Date based on
valuations and other studies which are not yet available. A preliminary
allocation of the purchase price has been made to major categories of assets
and liabilities in the accompanying Pro Forma Financial Statements based on
available information. The actual allocation of purchase price and the
resulting effect on income from operations may differ significantly from the
pro forma amounts included herein. These pro forma adjustments represent the
Company and Holdings management's preliminary determination of purchase
accounting adjustments and are based upon available information and certain
assumptions that the Company and Holdings believe to be reasonable.
Consequently, the amounts reflected in the Pro Forma Balance Sheet are
subject to change, and the final amounts may differ substantially. The
following presents the effect of the purchase adjustments and adjustments to
reflect adoption of the Company's accounting policies and pension and
post-retirement benefit cost assumptions on the Pro Forma Statement of
Operations:
<TABLE>
<CAPTION>
MARKETING, GENERAL
COST OF SALES AND ADMINISTRATION
------------- ------------------
<S> <C> <C>
Depreciation............................................. $(7.8) $ (0.3)
Reduction in postretirement benefit costs................ (2.7) --
Amortization of intangible assets and goodwill........... 5.3 --
----- -----
Total decrease...................................... $(5.2) $ (0.3)
</TABLE>
The adjustments for estimated pro forma depreciation and amortization of
intangible assets and goodwill are based on their estimated fair values.
Property, plant and equipment is expected to be depreciated over estimated
useful lives. Holdings currently depreciates the $215 million of historical
cost of its assets over a composite life of 14 years resulting in $15.3
million of annual depreciation, accumulated depreciation of $136 million
and a net book value of $79 million. Upon consummation of the Transactions,
the fair value of assets acquired is estimated to be $99 million. This
amount will be depreciated over 25 years for buildings and 12 years for
equipment, consistent with the Company's depreciation policy for used
equipment and the Company's estimate of the remaining economic life of the
assets ($7.2 million of annual depreciation expense.) Other intangible
assets and goodwill are expected to be amortized over their estimated
useful lives, not to exceed 40 years. For pro forma purposes, a 35 year
composite amortization life has been used.
67
<PAGE> 84
(D) As part of its restructuring, Holdings permanently terminated approximately
50 corporate positions and eliminated certain salaries and related costs
associated with its Okemos, Michigan corporate headquarters. The savings
related to the elimination of these salaries and related costs are as
follows:
<TABLE>
<S> <C>
Cost of goods sold............................................... $(0.1)
Marketing, general and administration............................ (2.9)
Engineering and product development.............................. (2.5)
-----
Total savings............................................... $(5.5)
</TABLE>
(E) Holdings incurred $0.2 million for settlement of certain management stock
options to be reacquired in connection with the Merger. The cost of these
options has been eliminated.
(F) Reflects adjustments for the additional interest expense assuming the
Transactions occurred on February 1, 1995. The change in interest expense,
in addition to amortization of deferred financing costs, reflects changes
in long term borrowings and their rates expected to be in effect as of the
Closing Date as follows:
<TABLE>
<CAPTION>
PRO FORMA
INTEREST
AMOUNT RATE EXPENSE
------ ------ ---------
<S> <C> <C> <C>
Revolving Credit Facility.................................... $ 26.4 8.50% $ 2.2
Term Loan A.................................................. 200.0 8.50 17.0
Term Loan B.................................................. 125.0 9.00 11.3
Term Loan C.................................................. 100.0 9.50 9.5
Senior Subordinated Notes.................................... 250.0 10.50 26.3
Existing European debt....................................... 4.2 11.50 0.5
Unused revolver commitment................................... 1.0
Administrative fee........................................... 0.4
------
Cash pro forma interest expense.............................. $ 68.2
Amortization of capitalized financing fees................... 3.1
------
Total pro forma interest expense............................. $ 71.3
Less:
Historical Holdings interest expense......................... $ (17.9)
Historical Hayes interest expense............................ (15.0)
------
Total historical interest expense (including amortization of
financing fees)............................................ (32.9)
Total pro forma interest expense adjustment.................. $ 38.4
======
</TABLE>
The Company estimates that an increase or decrease in interest rates on
floating rate debt of 0.125 percent would increase or decrease annual
interest expense by approximately $575,000. The Company anticipates
entering into interest rate caps or swaps with respect to a portion of the
floating rate debt to mitigate the effect of interest rate fluctuations.
(G) Gives effect to the repurchase and retirement of outstanding preferred
stock of Motor Wheel in connection with the Holdings 1995 Recapitalization
which was consummated in November 1995.
(H) Adjustments to reflect income tax effects assuming a combined effective
state and federal statutory income tax rate of 39%.
(I) The historical financial statements of the Company and Holdings include
various nonrecurring charges and charges and cost savings related to the
implementation of the Motor Wheel Restructuring which are currently
underway, the effects of which have not been included in the pro forma
combined statement of
68
<PAGE> 85
operations. The effect of these nonrecurring items on the pro forma
combined statement of operations is as follows (in millions):
<TABLE>
<S> <C>
Pro forma combined net loss........................................... $(16.7)
Supplemental adjustments:
Holdings 1995 plant restructuring(1)................................ 33.0
Plant consolidation cost savings(1)................................. 26.2
Holdings 1995 corporate restructuring(2)............................ 3.1
Nonrecurring Company costs(3)....................................... 3.6
Tax effect of supplemental adjustments @ 39%........................ (25.8)
------
Supplemental pro forma combined net income............................ $ 23.4
======
EBITDA reconciliation:
Pro forma combined EBITDA............................................. $133.2
Plant consolidation cost savings(1)................................... 26.2
------
Supplemental pro forma combined EBITDA................................ $159.4
======
Ratio of supplemental pro forma combined EBITDA to cash interest
expense............................................................. 2.3
</TABLE>
- -------------------------
(1) Holdings has specifically identified additional reductions in cost of
sales related to the consolidation and work force rationalization plans
announced during 1994 and 1995. Holdings anticipates realizing
significant cost savings related to reduced labor costs, head count
reductions, and the elimination of redundant fixed overhead costs
resulting from the closure of certain facilities and the transfer of
production to other Holdings facilities. In 1994, Holdings recorded
provisions related to plant closure matters associated with its
production facilities in Lansing, Michigan and Luckey, Ohio. In 1995,
Holdings recorded additional provisions totaling $33.0 million related
to plant closures of its Mendota, Illinois and Ypsilanti, Michigan
facilities. This plant closure provision has been reflected as a
nonrecurring charge in Holdings' historical financial statements. The
foregoing plant closure provisions are expected to be funded from the
future cash flow of Holdings or, following the Merger, the future cash
flow of the Surviving Corporation. The primary cost savings related to
the four plant closures which are not already reflected in Holdings'
1995 historical financial statements are summarized below:
<TABLE>
<S> <C>
Net payroll and benefit reductions................................ $18.6
Manufacturing fixed cost reductions*.............................. 7.6
-----
Total savings................................................ $26.2
=====
</TABLE>
* Manufacturing fixed cost savings include utilities, repairs and
maintenance, property taxes and other direct costs associated with the
closed facilities.
The foregoing cost savings are not expected to be fully realized prior
to 1997.
(2) During 1995 Holdings also recorded restructuring charges related to
its corporate offices as follows:
<TABLE>
<S> <C>
Write-down of assets to realizable value......................... $ 2.3
Corporate costs related to restructuring......................... 0.8
----
Total charges............................................... $ 3.1
----
</TABLE>
(3) The Company incurred professional fees and other costs of
approximately $2.2 million related to activities of the Special
Committee of the Board of Directors, including its consideration of
Varity's proposal to acquire all of the outstanding shares of the
Company which it did not already own, and investigating alternatives to
such proposal. These fees and costs, together with costs of $1.4
million related to the restructuring of the Company's North American
Aluminum Wheel Group, are nonrecurring.
(J) For the purpose of computing this ratio, earnings consist of earnings before
taxes on income and fixed charges. Fixed charges consist of interest
expense, capitalized interest, amortization of deferred debt issuance costs
and one-third of rental expense.
(K) On a pro forma combined basis for the fiscal year ended January 31, 1996,
earnings were insufficient to cover fixed charges by $27.4 million.
69
<PAGE> 86
NOTE (2): NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN MILLIONS)
(A) Reflects the estimated sources and uses of funds for the Transactions as
follows, assuming the Transactions occurred as of January 31, 1996:
<TABLE>
<S> <C>
Sources of Funds:
Issuance of new common stock................................................. $ 200.0
Term loans................................................................... 425.0
Senior Subordinated Notes.................................................... 250.0
Revolving credit facility.................................................... 26.4
-------
Total Sources........................................................... $ 901.4
=======
Uses of Funds:
Refinance outstanding domestic indebtedness of the Company................... $ 128.9
Repurchase of common stock................................................... 506.1
Estimated financing fees and interest rate cap............................... 26.0
Estimated debt tender premiums............................................... 15.2
Estimated professional fees and expenses..................................... 15.0
Company and Holdings management stock options................................ 5.2
Refinance outstanding obligations of Motor Wheel............................. 130.0
Working capital.............................................................. 75.0
-------
Total Uses.............................................................. $ 901.4
=======
</TABLE>
(B) The estimated purchase price and preliminary adjustments to historical book
value of Holdings are as follows:
<TABLE>
<S> <C>
Purchase price:
Estimated value of stock and warrants issued................................. $ 104.0
Book value of net liabilities acquired....................................... 77.6
-------
Purchase price in excess of net liabilities acquired......................... $ 181.6
=======
Preliminary allocation of purchase price in excess of net liabilities acquired:
Increase in inventory to estimated fair value................................ $ 3.8
Increase in property, plant and equipment to estimated fair value............ 20.0
Increase in pension and post retirement liabilities.......................... (40.2)
Increase in deferred tax assets.............................................. 35.6
Estimated goodwill........................................................... 185.0
Write-off of deferred financing asset........................................ (3.0)
Increase in accrued liabilities to reflect call premium and settlement of
management stock options (see (F) below).................................. (9.3)
Adjustment to other noncurrent assets........................................ (10.3)
-------
Total................................................................... $ 181.6
=======
</TABLE>
(C) Represents:
<TABLE>
<S> <C>
Repurchase of common stock................................................... $(506.1)
Reversal of paid-in capital included in (B) above............................ 198.5
Elimination of deferred licensing fee to Holdings (i)........................ (2.7)
Deferred financing costs (ii)................................................ (3.6)
Estimated tender premium (iii)............................................... (8.0)
Company management stock options (iv)........................................ (3.1)
Add: tax effect related to items (i), (ii), (iii) and (iv)................... 6.8
-------
Total................................................................... $(318.2)
=======
</TABLE>
70
<PAGE> 87
(D) Transaction proceeds will be used to repay the following obligations of
Holdings:
<TABLE>
<S> <C>
Estimated tender premium on debt and management stock options.................. $ 9.3
Current portion of debt and notes.............................................. 5.0
Senior Notes................................................................... 125.0
-------
Total................................................................... $ 139.3
=======
</TABLE>
(E) Represents:
<TABLE>
<S> <C>
Elimination of paid-in capital............................................... $(198.5)
Increase in paid-in capital from issuance of new common stock................ 200.0
Estimated professional fees and expenses..................................... (15.0)
-------
Total................................................................... $ (13.5)
=======
</TABLE>
(F) The adjustments to paid-in capital and retained earnings as a result of the
acquisition of Holdings described in (D) is as follows:
<TABLE>
<S> <C>
Paid in capital:
Elimination of Holdings paid in capital...................................... $ (30.1)
Value of common stock and warrants issued.................................... 104.0
-------
Total................................................................... $ 73.9
=======
Retained earnings:
Elimination of Holding's pre-business combination retained deficit........... $ 107.7
=======
</TABLE>
71
<PAGE> 88
PROPOSED STRATEGY FOR THE SURVIVING CORPORATION
A significant part of the rationale for the Transactions is that the
businesses of the Company and Motor Wheel are complementary. The Company
manufactures and sells a full product line of quality automotive wheels in the
United States and Europe. Motor Wheel has a strong presence in the heavy duty
truck and trailer market, a growing automotive brake business and good
relationships with many Japanese automotive companies. However, Motor Wheel's
market share and sales of automotive steel wheels to the Big Three has been
declining over the last several years due to the continuing growth in demand for
aluminum wheels and the loss of business on certain light trucks. As a result,
Motor Wheel has capacity to manufacture steel wheels for cars and light trucks
in excess of current orders and projected sales. Following the consummation of
the Transactions, the Company expects to improve its future performance by (i)
utilizing Motor Wheel's excess steel wheel capacity to manufacture products
currently on order at the Company, thereby reducing future capital investment
and operating costs, (ii) developing sales opportunities with a broader group of
Japanese customers including Motor Wheel's steel wheel customers, the customers
of Motor Wheel's Alumitech joint venture and the Company's cast aluminum wheel
customers, (iii) distributing Motor Wheel's proprietary truck brake products, as
well as automotive brakes, through the Company's European sales and marketing
network, (iv) exploiting the Company's aluminum technology and Motor Wheel's
truck wheel customer base to introduce new products, such as aluminum truck
wheels and (v) further rationalizing capacity of certain manufacturing
facilities. No assurances can be given that the Surviving Corporation will be
able to implement this strategy or, if implemented, that it will be successful.
See "RISK FACTORS."
72
<PAGE> 89
ADDITIONAL INFORMATION CONCERNING HOLDINGS
GENERAL
Holdings is a holding company, substantially all the assets of which
consist of all of the capital stock of Motor Wheel. Holdings conducts all of its
operations through its wholly-owned subsidiary Motor Wheel, which is a leading
designer and producer of brakes for the automotive and commercial highway truck
and trailer markets. In addition, Motor Wheel designs, manufactures and sells
steel wheels to the automotive and commercial highway truck and trailer markets.
In 1995, sales of automotive products accounted for 62% and sales of commercial
highway products accounted for 38% of Motor Wheel's net sales. Motor Wheel's
three largest customers are, in order, Chrysler, Ford and General Motors.
On November 7, 1995, Holdings consummated a series of transactions intended
to provide liquidity to its stockholders, strengthen its balance sheet and
provide additional equity for future growth (collectively, the "Holdings 1995
Recapitalization"). The Holdings 1995 Recapitalization included the following
transactions:
(1) the purchase by JLL and certain other investors of an aggregate of
296.296 shares of Holdings Common Stock (approximately 78% of the currently
outstanding shares of Holdings Common Stock) for $135,000 per share, or an
aggregate purchase price of $40 million;
(2) a 1 for 1,000 reverse stock split of Holdings Common Stock,
pursuant to which holders who would have been entitled to less than one
share of Holdings Common Stock received cash equal to such holder's
fractional share multiplied by $135,000;
(3) the repurchase by Holdings of an aggregate of 64.652 shares of its
common stock from certain holders for $135,000 per share, or an aggregate
repurchase price of approximately $8.73 million;
(4) the purchase by Holdings of all of Motor Wheel's outstanding
11 1/4% Cumulative Exchange Preferred Shares, without par value (the "Motor
Wheel Preferred Stock") from the holders thereof for $100 per share plus
accrued but unpaid dividends thereon or an aggregate of approximately
$17.07 million;
(5) the contribution by Holdings to Motor Wheel of $8.6 million in
cash to Motor Wheel, which was used to pay down existing bank debt; and
(6) the contribution by Holdings of all of the Motor Wheel Preferred
Stock, which was subsequently retired.
All of the funds necessary to effect the Holdings 1995 Recapitalization
were provided through the proceeds of the sale of Holdings Common Stock by JLL
and certain other investors.
As a result of the Holdings 1995 Recapitalization, JLL owns 74.1% of the
Holdings Common Stock.
Automotive Products
Industry Overview. Motor Wheel's sales of automotive wheels and brake
components are directly affected by the OEMs, automotive production levels and,
more specifically, by the production levels of vehicles for which Motor Wheel
has been designated as a supplier of automotive wheels or brake components. OEMs
typically specify the features of automotive wheel and brake components that
will be used for each vehicle model, either as standard equipment or, in the
case of certain automotive wheels, as an option. Changes in market share
normally occur over an extended period of time and are directly affected by the
OEMs' production levels of such vehicle models and preferences of automotive
purchasers on optional equipment packages. In 1995, according to published
vehicle production statistics, North American OEMs produced approximately 14.9
million passenger cars and light trucks. Management estimates that approximately
48 million steel wheels (including approximately 12 million wheels supplied by
OEM captive wheel manufacturers), 24 million aluminum wheels and 59 million
units of brake components, including drums, hub and drum assemblies and rotors
were sold for the North American automotive market in 1995.
73
<PAGE> 90
Principal Products. Motor Wheel manufactures base steel wheels which
utilize a wheel cover and styled steel wheels, such as Motor Wheel's Full
Face(TM), Full Face(TM) Chrome and Polycast(R) wheels. Through Alumitech, an
unconsolidated corporate joint venture that is 50% owned by Motor Wheel, Motor
Wheel manufactures and sells automotive aluminum wheels. Motor Wheel
manufactures automotive brake components consisting primarily of composite metal
drums and full cast drums for drum-type brakes and cast iron rotors for disc
brakes. Sales of automotive products accounted for approximately 62%, 68% and
72%, respectively, of Motor Wheel's net sales in 1995, 1994 and 1993.
Customers, Distribution and Competition. Motor Wheel supplies automotive
steel wheels primarily to OEMs located in North America, including Chrysler,
Ford, General Motors, Mitsubishi, and Toyota. Alumitech is the principal
supplier of aluminum wheels to Honda of America. Motor Wheel sells its
automotive brake components primarily to North American OEMs with substantially
all of its automotive brake components sold to Chrysler and Ford.
The principal competitors of Motor Wheel for the sale of automotive wheels
include the Company, Superior Industries, Fumagalli (an affiliate of Rockwell
International), Topy Corporation and Central Manufacturing Company. According to
information available to Motor Wheel, management believes that Superior
Industries supplies only aluminum wheels and Fumagalli supplies only steel
wheels while all of the other named competitors supply both aluminum and steel
wheels. Also, Topy Corporation and Central Manufacturing Company are
subsidiaries of Japanese wheel suppliers and predominately supply the North
American operations of Japanese OEMs. Ford and General Motors, two customers of
Motor Wheel, are also significant manufacturers of base steel wheels but solely
for installation on their own vehicles.
The principal competitors of Motor Wheel for the sale of automotive brake
components include Kelsey-Hayes Company, Allied Signal and Varga. According to
information available to Motor Wheel, management believes that Kelsey-Hayes
Company supplies brake drums and rotors as well as anti-lock brake systems while
Allied Signal and Varga are suppliers of brake rotors. General Motors is also a
significant manufacturer of automotive brake components, installed primarily on
General Motors vehicles.
Motor Wheel competes for sales of automotive wheel and brake components on
the basis of cost, delivery, quality and service. The loss of a significant
portion of Motor Wheel's sales to Chrysler, Ford and General Motors could have a
material adverse impact on Motor Wheel. Motor Wheel has been doing business with
each of these OEMs for many years, and sales are composed of a number of
different products and of different models or types of the same products and are
made to individual divisions of such OEMs. Motor Wheel has experienced a net
loss of wheel sales to Chrysler in recent periods, which loss represented 17% of
1995 sales to Chrysler.
Commercial Highway Products
Industry Overview. In the commercial highway vehicle market, Motor Wheel
sells wheels, rims and brake products to OEMs (including replacement parts sold
through OEMs) and aftermarket distributors. Commercial highway wheels, rims,
brake components, and wheel hub and brake drum assemblies are installed
principally on trucks, trailers and buses. In the commercial highway market,
sales to OEMs are attributable to either having products designated as standard
equipment by the OEM or obtaining fleet specifications where purchasers of
commercial highway vehicles specify the component parts to be utilized on
vehicles manufactured for their fleets. Management estimates that in 1995 the
North American production of heavy duty highway trucks and trailers was
approximately 701,000 units representing an increase of approximately 11% from
1994.
Principal Products. Motor Wheel manufactures disc wheels and demountable
rims for commercial highway vehicles. Motor Wheel also manufactures two-piece
Take-Apart wheels for certain special applications, the most significant of
which is for the High Mobility Multiple Purpose Wheeled Vehicle (the "Hummer")
produced by AM General Corporation. Motor Wheel manufactures brake components
for commercial highway vehicles consisting of Centrifuse(R) drums and cast iron
or aluminum hubs which can be assembled together and sold as a unit. Unlike
conventional cast iron brake drums, Centrifuse(R) drums fuse iron to a steel
jacket to combine the advantages of iron and steel to produce a lighter and
stronger brake drum.
74
<PAGE> 91
Motor Wheel has achieved a significant market share for this product which is
supplied to OEMs almost exclusively as a result of fleet specification. Sales of
commercial highway products accounted for approximately 38%, 32% and 28% of
Motor Wheel's net sales for 1995, 1994 and 1993, respectively.
Customers, Distribution and Competition. Motor Wheel's largest customers
for commercial highway wheels and rims include Trailmobile, Strick and Monon
while its largest customers for commercial highway brake components include
Freightliner Corporation, Paccar, Inc. and Volvo-GM. Sales for OEM and service
use constituted approximately 70% and 30%, respectively, of Motor Wheel's
commercial highway net sales in 1995.
Motor Wheel competes for sales of commercial highway wheels, rims and brake
components on the basis of cost, delivery, quality and service. Motor Wheel
spends a considerable amount of effort obtaining fleet specifications where
purchasers of commercial highway vehicles specify to the OEM's the components to
be used. The principal competitors of Motor Wheel for the sale of commercial
highway wheels and rims include Accuride Corporation, ALCOA and Allied Signal.
According to information available to Motor Wheel, management believes Accuride
Corporation predominately supplies steel wheels but also supplies aluminum
wheels while ALCOA supplies aluminum wheels and Allied Signal supplies steel
wheels. Motor Wheel is the only producer of the Centrifuse(R) drum but competes
with several producers of full cast iron drums including Gunite Corporation,
Webb Wheel Products and Dayton-Walther.
Raw Materials
The two principal materials used in Motor Wheel's products are castings
(primarily composite and fullcast drums, Centrifuse(R) drums, rotors and cast
iron hubs) and steel (primarily flat rolled steel for wheels and rims). Although
Motor Wheel has alternate sources for most of its raw materials, Motor Wheel has
developed close relationships with a limited number of suppliers to facilitate
cost efficiencies and quality of materials.
Motor Wheel purchases steel primarily from three suppliers. Motor Wheel
purchases castings from several foundries with one primary long term supplier.
Motor Wheel's contracts with suppliers are generally for a period of twelve
months or less. Motor Wheel's primary long term supplier of castings is a
closely-held company with which Motor Wheel has had a good relationship and is
the sole source of castings for Centrifuse(R) drums. The supply contract for
Centrifuse(R) drums expires in 1996 and Motor Wheel expects to renew or extend
the contract.
Research and Development
Motor Wheel's expenditures for research and development were approximately
$6.9 million, $6.9 million and $6.6 million in 1995, 1994 and 1993,
respectively. Motor Wheel engages in research and development to improve its
technology and products and to develop new products and processes. It focuses
its efforts on working closely with the OEMs to engineer and design specific
products to address OEM needs.
Patents and Trademarks
Motor Wheel holds numerous patents covering certain of Motor Wheel's
products and manufacturing processes. Management of Motor Wheel believes that
many of Motor Wheel's patents describe cost-effective production methods, and,
accordingly, Motor Wheel considers such patents to be important to its business
but not of such importance that the loss or expiration of any individual patent
would materially affect its business considered as a whole.
Motor Wheel has licensed certain of its patents to permit certain companies
to produce, and in certain instances distribute, products under their own name.
Licensees under these arrangements include Ford, General Motors, Accuride, the
Company and wheel manufacturers located in Mexico and South America.
Motor Wheel owns various trademarks, trade names and logos, the most
important of which are its Centrifuse(R), Centrue/Pierce(R), Polycast(R), Full
Face(TM), WHD-8(R), WHD-10(TM), and Centruelight(R) trademarks and related
logos. Although they believe such trademarks, trade names and logos enhance the
name
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<PAGE> 92
recognition of Motor Wheel's products and therefore are important to its
business, management of Motor Wheel believes that Motor Wheel's innovative
products, reputation for quality and relationships with its customers are more
important for the maintenance and growth of its business.
Investments
Motor Wheel has additional interests to the extent described below, in the
following entities:
(i) a 50% interest in Alumitech, a manufacturer of cast aluminum
wheels in Kentucky; and
(ii) a 50% interest in Riviera Die & Tool, Inc., a manufacturer of
stamping dies sold to domestic automobile manufacturers and their
suppliers.
Environmental Matters
Since the acquisition of Motor Wheel from Goodyear Tire & Rubber Company,
Inc. ("Goodyear") in 1986 (the "Acquisition"), Motor Wheel's expenditures with
respect to compliance with applicable environmental laws and regulations have
not had a material impact on Motor Wheel's financial position, operating results
or cash flows. Motor Wheel does not expect to make material capital expenditures
during 1996 or within the foreseeable future for environmental control
facilities.
Some of Motor Wheel's manufacturing processes result in the generation of
hazardous wastes and consequently Motor Wheel is subject to various federal,
state and local laws and regulations relating to environmental protection. Motor
Wheel does not transport hazardous wastes to, or dispose of hazardous wastes or
have hazardous waste storage facilities at, any Motor Wheel-owned facility.
At the time of the Acquisition, Goodyear either retained liability for or
agreed to indemnify Motor Wheel with respect to, all liabilities, claims and
obligations for environmental pollutants, contaminants or other substances
generated prior to December 30, 1986, for the plants then owned by Motor Wheel,
and April 1, 1987, for the plants previously owned by Goodyear. Since the
Acquisition, Motor Wheel has taken steps to ensure that handling and disposal of
all hazardous wastes comply with federal, state or local laws relating to the
protection of the environment. Substantially all of the hazardous wastes
generated by Motor Wheel are disposed of at treatment and disposal facilities
which utilize recycling or incineration rather than landfill disposal. All
off-site hazardous waste disposal sites have been inspected and are periodically
audited. Environmental audits are also performed at each of Motor Wheel's
plants. Goodyear has to date honored its indemnity obligations under the
Acquisition agreement.
Motor Wheel is a party to various environmental clean-up matters and has
been identified by federal and state authorities as a potentially responsible
party for the clean-up of hazardous waste disposal sites which are listed on the
National Priority List of Hazardous Waste Disposal Sites compiled by the United
States Environmental Protection Agency under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"). All occasions where
hazardous wastes were allegedly sent to such sites by Motor Wheel occurred prior
to the Acquisition, and Goodyear has assumed and is expected to continue to
assume responsibility for Motor Wheel's share of any associated clean-up costs.
Because Goodyear has continued to meet its indemnity obligations and has assumed
Motor Wheel's position in all proceedings involving the clean-up of hazardous
waste disposal sites, management of Motor Wheel believes its exposure with
respect to environmental claims resulting therefrom is not material. Because
Goodyear has assumed full responsibility for all proceedings and liabilities
relating to the sites, Motor Wheel has not participated in remediation relating
to such sites and does not have sufficient information to quantify its
proportionate share of the costs of remediation at these sites. If Goodyear
should fail to honor its indemnity obligations and Motor Wheel is required to
participate in clean-up efforts mandated by governmental authorities, Motor
Wheel's expenses with respect to clean-up of such sites in the aggregate would
have a material adverse effect on Motor Wheel's financial condition and results
of operations, capital resources and liquidity. While Motor Wheel cannot
quantify the extent of such effect, management of Motor Wheel believes that it
would be substantial.
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<PAGE> 93
Employees
At December 31, 1995, Motor Wheel employed 1,304 persons. Motor Wheel's
seven manufacturing plants employed 1,150 persons (182 salaried and 968 hourly)
with the balance assigned to Motor Wheel's headquarters in Okemos, Michigan, and
sales offices throughout North America. Currently, collective bargaining
agreements cover approximately 69% of hourly employees and approximately 10% of
salaried employees. Current collective bargaining agreements expire through
October 1997, none of such agreements provide for multi-plant bargaining units.
As part of Motor Wheel's facility rationalization program, Motor Wheel expects
to phase out production at its Ypsilanti, Michigan plant. The collective
bargaining agreement at such facility expired in March of 1996, and negotiations
regarding the termination of such agreement are ongoing. Motor Wheel considers
its employee relations to be satisfactory.
Product Liability
At the time of the Acquisition, Goodyear agreed to be responsible for and
to indemnify Motor Wheel for all costs and liabilities arising from any product
warranty, product liability, other claims or obligations for products
manufactured by Motor Wheel prior to December 30, 1986 and for products
manufactured by Goodyear at the Akron plant prior to April 1, 1987. As to
incidents relating to products manufactured on or before those dates, Goodyear
continues to acknowledge its indemnification obligations under the purchase
agreement and has assumed and is expected to continue to assume the defense of
all such pre-Acquisition product liability cases.
While there have been warranty claims involving products manufactured by
Motor Wheel after these dates, there currently is no pending product liability
action outstanding against Motor Wheel. Currently, Motor Wheel is insured in the
amount of $57 million in the aggregate with a deductible of $500,000 per
occurrence to cover product liability claims relating to its products.
Properties
Motor Wheel operates seven manufacturing facilities in North America.
<TABLE>
<CAPTION>
LOCATION USE OWNED OR LEASED
----------------------------------- --------------------------- ---------------
<S> <C> <C>
Bowling Green, Kentucky............ Automotive Steel Wheels Leased
Mendota, Illinois(1)............... Automotive Steel Wheels Owned
Ypsilanti, Michigan(1)............. Automotive Brakes Owned
Homer, Michigan.................... Automotive Brakes Owned
Monterrey, Mexico.................. Automotive Brakes Leased
Akron, Ohio........................ Commercial Highway Wheels Owned
Berea, Kentucky.................... Commercial Highway Brakes Owned
</TABLE>
- -------------------------
(1) These plants will be closed in 1996. See "-- Holdings' Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Plant Closure Costs."
The lease for the Bowling Green facility expires in January 2008, subject
to two five-year extension options exercisable by Motor Wheel and to a purchase
option exercisable by Motor Wheel upon expiration of the lease. The lease for
the Monterrey facility expires in July 2001, subject to a one-year extension
option exercisable by Motor Wheel and to a purchase option exercisable by Motor
Wheel beginning in July 1998 and extending through the remaining term of the
lease.
Alumitech owns and operates a manufacturing facility located in Somerset,
Kentucky, where it manufactures cast aluminum wheels.
Motor Wheel's headquarters, housing its executive offices and central
accounting, purchasing, marketing and engineering departments, is currently in
Okemos, Michigan. Motor Wheel leases approximately 90% of a building under a
ten-year lease which expires in July 2004.
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<PAGE> 94
Legal Proceedings
Motor Wheel is involved in routine litigation relating to general
liability, employment discrimination, workers' compensation and contract
disputes, none of which management of Motor Wheel considers to be material.
HOLDINGS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Holdings is a holding company, substantially all of the assets of which
consist of the capital stock of Motor Wheel. Holdings conducts all of its
operations through its wholly-owned subsidiary, Motor Wheel. On November 7,
1995, Holdings consummated the 1995 Recapitalization. See "-- General."
Results of Operations
Three Months Ended March 31, 1996 and 1995. Total sales in the first
quarter of 1996 were $79.6 million compared to $105.6 million in the same period
of 1995. Automotive sales were $50.9 million in the first quarter of 1996, a
decrease of $17.0 million from the same period of 1995. This decrease was due
primarily to a resourcing program by one of Holdings' principal customers that
has been and continues to be implemented. This resourcing program only impacts
Holdings' level of automotive wheel sales and was a consideration in Holdings'
decision to close its Mendota, Illinois manufacturing facility. Sales of
automotive brake products also decreased as selected production shutdowns by
customers to control their inventory levels impacted some of Holdings' higher
volume brake components. Commercial highway sales were $28.7 million in the
first quarter of 1996, a decrease of $9.0 million from the same period of 1995.
Such decrease is attributable to a significant downturn in the production of
heavy-duty trucks and trailers compared to record production levels in the first
quarter of 1995.
Holdings' gross profit for the quarter of 1996 was $6.1 million, or 7.7% of
net sales, compared to $13.8 million, or 13.1% of net sales, for the same period
of 1995. The lower sales volume is the primary reason for the decreased level of
gross profit but Holdings has also experienced certain manufacturing
inefficiencies and incurred other transition costs as its previously disclosed
plans to cease operations at certain manufacturing facilities are being
implemented. Closure of the Mendota facility is in process as Holdings is
consolidating all automotive wheel production in its Bowling Green, Kentucky
facility with an anticipated completion by the end of the third quarter of 1996.
In addition, Holdings is implementing certain aspects of its plan to close its
automotive brake manufacturing facility in Ypsilanti, Michigan and continues to
evaluate options with respect to satisfying its expected long-term production
requirements. Military wheel production equipment which was previously located
at Holdings' now closed Lansing, Michigan facility is in the process of being
installed at the Akron, Ohio facility. Management expects that these closings
will result in improvements in financial performance primarily through
reductions in fixed manufacturing costs and lower variable costs.
Selling, administrative and general expense together with research and
development expense decreased to $5.4 million in the first quarter of 1996
compared to $6.5 million in the same period of 1995 as a result of actions
undertaken by Holdings during the fourth quarter of 1995 to adjust this expense
category in line with the lower sales volume.
Interest expense was $4.3 million in the first quarter of 1996 compared to
$4.5 million in the same period of 1995. Other expense was $0.6 million in the
first quarter of 1996 compared to other income of $0.4 million in the same
period of 1995. The primary component of this other category is Holdings' share
of the results of Alumitech.
Holdings had minimal income tax expense and therefore the resulting net
loss for the first quarter of 1996 was $4.2 million compared to net income of
$3.1 million in the same period of 1995.
Twelve Months Ended December 31, 1995, 1994 and 1993. North American
passenger car and light truck production in 1995 declined by 2% from 1994, but
was 8% higher than 1993, while heavy duty truck and
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<PAGE> 95
trailer production in 1995 increased 11% over 1994, which was up 17% from 1993
levels. Holdings' sales levels are as shown below:
<TABLE>
<CAPTION>
% CHANGE % CHANGE
TO PRIOR TO PRIOR
1995 YEAR 1994 YEAR 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Automotive........................ $220,048 (20.6)% $277,111 5.2% $263,476
Commercial Highway................ 137,131 7.1 128,072 22.6 104,494
-------- ----- -------- ---- --------
$357,179 (11.8)% $405,183 10.1% $367,970
======== ===== ======== ==== ========
</TABLE>
Holdings' automotive products sales decreased in 1995 as a result of a
variety of factors including: (i) the continuing growth in demand for aluminum
wheels; (ii) a decrease in automotive brake market share, some of which was
temporary, due to model changeovers by Holdings' customers; (iii) selective
production shutdowns by the automotive manufacturers which impacted shipment
levels of certain of Holdings' higher volume component parts; and (iv) loss of
steel wheel business on certain light trucks due to vehicle platform changes
made by the manufacturers. Automotive product sales in 1994, as compared to
1993, reflect an increase in the sale of automotive styled steel wheels
introduced in the 1994 model year, which was partially offset by the loss of the
Polycast steel wheel business on a vehicle platform discontinued by a customer
at the end of the 1994 model year. Increases in commercial highway product sales
reflect the increase in production of heavy duty trucks and trailers. In 1995,
Holdings maintained market share gains for sales to OEMs which were achieved by
Holdings in 1994, as compared to 1993. Sales to aftermarket distributors in 1995
declined in wheels and rims and were only slightly higher in brake components as
compared to 1994.
Holdings' gross profit for 1995 was $33.2 million, or 9.3%, of net sales
compared to $43.7 million, or 10.8%, of net sales for 1994 and $42.3 million, or
11.5%, of net sales for 1993. The decrease in gross profit in 1995 is largely
attributable to the lower sales volume as manufacturing costs were not reduced
in direct proportion to the decrease in sales. Fixed manufacturing costs were
fairly constant in 1995 compared to 1994 although certain reductions were
realized starting in the fourth quarter of 1995 as automotive wheel production
ceased at Holdings' Lansing, Michigan facility. Additionally, Holdings incurred
temporary incremental costs in the second half of 1995 to develop and qualify
production of automotive wheels transferred to Holdings' Bowling Green, Kentucky
facility. The decrease in the gross margin percentage in 1994 compared to 1993
reflects increases in the costs of steel and cast iron, which were not fully
recovered through increased selling prices. For some products, selling price
reductions unrelated to material cost changes also unfavorably impacted gross
margin percentages. These factors were offset in part by a reduction in
postretirement benefits costs as the result of an agreement reached in August
1993 with one of Holdings' collective bargaining units to limit its retiree
health care obligations.
Selling, administrative and general expense together with research and
development expense was $25.1 million, $25.4 million and $23.7 million in 1995,
1994 and 1993, respectively. In the second half of 1995, Holdings commenced cost
control and reduction measures to bring these costs back in line with the lower
sales volume. Certain of the cost reduction measures resulted in a charge to
1995 results of $0.8 million. The major items affecting the increase in 1994
over 1993 were shipping, sales and marketing costs which were a direct result of
the higher sales volume.
In the fourth quarter of 1995, Holdings recorded provisions for plant
closure costs related to an automotive brake manufacturing facility in
Ypsilanti, Michigan and an automotive wheel manufacturing facility in Mendota,
Illinois. See "-- Plant Closure Costs." These provisions totalled $33.0 million
consisting of: $16.4 million for asset write-downs; $3.5 million for curtailment
costs associated with postretirement benefits; $6.0 million for facility
maintenance costs; and $7.1 million for postemployment benefits.
In 1994, Holdings recorded provisions for plant closure costs related to
the reduction of manufacturing capacity within its automotive wheel operations.
See "-- Plant Closure Costs." These provisions totalled $31.6 million consisting
of: $12.5 million for asset write-downs; $8.9 million for curtailment costs
associated with postretirement benefits; $6.6 million for facility maintenance
costs; and $3.6 for postemployment benefits.
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<PAGE> 96
Interest expense was $17.9 million, $17.2 million and $16.5 million in
1995, 1994 and 1993, respectively. The higher interest expense was the result of
an increase in overall average debt levels. Accrued preferred stock dividends of
Motor Wheel were $1.6 million, $1.9 million and $1.9 million in 1995, 1994 and
1993, respectively. As further discussed below, see "-- Capital Resources and
Liquidity," funds received in connection with the 1995 Recapitalization in
November 1995 were used to reduce the level of existing bank debt.
Other expense was $3.6 million, $2.8 million and $1.6 million in 1995, 1994
and 1993, respectively and includes the following:
Asset write-downs: In 1995 and 1994, Holdings wrote down the value of
certain assets, primarily consisting of the real property owned by its
Canadian subsidiary, by $2.3 million and $1.9 million, respectively, to
updated estimates of realizable value.
Corporate costs: In 1995, Holdings recorded $0.8 million in costs for the
impact of workforce reductions designed to reduce Holdings' level of
selling, general and administrative as well as research and development
costs.
Equity in net loss of affiliates: Total losses recorded were $0.7 million,
$1.0 million and $2.7 million in 1995, 1994 and 1993, respectively.
Patent defense costs of $1.7 million reflect legal expenses incurred in
1994 for the defense of a certain patented manufacturing process of Holdings.
The aforementioned factors resulted in a loss before taxes of $48.0
million, $36.9 million and $1.4 million in 1995, 1994 and 1993, respectively.
Holdings' provision for income taxes was $4.2 million, $0.5 million and
$0.7 million in 1995, 1994 and 1993, respectively. In 1995, Holdings established
additional valuation allowances against deferred tax assets, for additional
information refer to the notes to Holdings' consolidated financial statements
included elsewhere herein. In prior years, the relationship between pretax
income and income taxes was impacted by limitations on recognition of deferred
tax assets on plant closure costs and nondeductible losses from foreign
subsidiaries and equity investments.
Before extraordinary items, there were resulting losses of $52.2 million,
$37.4 million and $2.1 million in 1995, 1994 and 1993, respectively. An
extraordinary charge of $3.2 million was recorded in 1993 in connection with
Holdings' debt refinancing, resulting in a net loss of $5.3 million.
Capital Resources and Liquidity
Holdings' liquidity can be impacted by both the cyclical nature of its
business and levels of net sales with its two major customers. Historically,
Holdings has met its liquidity requirements, working capital (including interest
on debt obligations) and capital expenditures through cash flow provided by
operating activities and short-term borrowings under Motor Wheel's revolving
credit agreement. As discussed above, in November 1995 in connection with the
Holdings 1995 Recapitalization, Motor Wheel received a contribution of $8.6
million from Holdings which was used to reduce the level of existing bank debt
(see "-- General"). Motor Wheel's revolving credit agreement provides borrowing
capacity up to $50 million through March 1998, subject to limitations based on
the value of inventory and receivables. The credit agreement also provides up to
$25 million in letters of credit with the amount of any outstanding letters of
credit applied to reduce Motor Wheel's borrowing capacity thereunder. At March
31, 1996, Holdings had $12.0 million of short-term borrowings and $12.5 million
for letters of credit outstanding and excess availability of $17.1 million.
First Quarter 1996 and 1995. Net cash used for operating activities was
$5.9 million in the first quarter of 1996 as compared to $4.3 million in the
same period of 1995. The principal usage of cash during the first quarter of
1996 was for an inventory build-up program in one of Holdings' plants in
anticipation of the termination of a labor agreement. Cash provided by net
income (loss), as adjusted for non-cash charges, was $2.1 million while cash
requirements to support operating assets and liabilities was $7.7 million. These
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<PAGE> 97
amounts are both lower than the comparable amounts in the same period of 1995
due to the lower sales volume.
Net cash used for investing activities was $2.5 million in the first
quarter of 1996 as compared to $4.1 million for the same period of 1995 as
Holdings has adjusted its plans for investment in property, plant and equipment
to be in line with the lower sales volume.
Net cash provided by financing activities was $7.3 million in the first
quarter of 1996 as compared to $7.8 million for the same period of 1995.
Holdings has utilized borrowings under the revolving credit agreement to support
its cash requirements for operating assets and liabilities.
Twelve Months Ended December 31, 1995, 1994 and 1993. Net cash provided by
operating activities was $7.2 million, $18.0 million and $25.3 million for 1995,
1994 and 1993, respectively. The decrease in 1995 versus 1994 resulted from a
variety of factors, including a deterioration in operating results, start-up of
operations in Mexico, higher interest costs, and payments of plant closure
costs. The decrease in 1994 versus 1993 resulted from higher interest costs,
patent defense costs, higher income tax payments due to alternative minimum tax
and a net increase in operating assets and liabilities due to higher sales
volume.
Net cash used for investing activities was $14.1 million, $18.3 million and
$16.0 million for 1995, 1994 and 1993, respectively. Investing activities in
1995 reflect a variety of programs to expand capacity within certain existing
product lines, add capacity for new product lines and continue Holdings'
emphasis on cost reduction through modernization of production equipment.
Investing activities in prior years include expenditures for equipment and
production tooling in the automotive brake and commercial highway operations in
1994 and expenditures for equipment in the automotive steel wheel operations in
1993.
Net cash provided by financing activities was $7.2 million in 1995 and $1.3
million in 1994, with net cash used for financing activities of $9.4 million in
1993. In 1995, prior to the Holdings 1995 Recapitalization, Holdings increased
its usage of short-term borrowings to support operating activities and capital
expenditures. Funds from the Holdings 1995 Recapitalization were utilized by
Holdings in November 1995 to reduce the level of existing bank debt (see "--
General"). In 1994, Holdings utilized borrowings under the revolving credit
agreement to support increased operating requirements due to higher sales volume
and the higher level of investing activities. In 1993, Holdings completed a
refinancing which included the issuance of $125 million of 11 1/2% Senior Notes,
the retirement of $105 million face value of 11 3/8% Senior Subordinated Notes,
the repayment of outstanding term loans, the payment of $3.4 million of accrued
preferred stock dividends and the payment of other costs related to the
refinancing.
The plant closure costs recorded in 1995 and 1994 along with other non-cash
expenses recorded over the past three years are significant items contributing
to Holdings' net losses for 1995, 1994 and 1993 and the resulting shareholders'
deficit.
Holdings' availability under the revolving credit agreement is expected to
be adequate to support its working capital requirements. Management of Holdings
believes that cash generated by operations will be sufficient to meet Holdings'
expected operating needs (including cash requirements related to plant
closures), planned capital expenditures and interest payments.
Plant Closure Costs
In 1995, Holdings recorded provisions related to two plant closures.
Holdings commenced efforts to address manufacturing capacity and noncompetitive
costs in both its automotive steel wheel and automotive brake operations. As a
result of these efforts, manufacturing operations at both the Mendota, Illinois
and Ypsilanti, Michigan facilities will be terminated. Closure of these
facilities will commence in 1996. Holdings is currently evaluating various
options with respect to satisfying its expected production requirements within
automotive wheel and brake operations.
In 1994, Holdings' recorded provisions related to plant closures associated
with reducing its manufacturing capacity within its automotive wheel operations.
In 1995, transfer of automotive wheel production from Holdings' facility in
Lansing, Michigan to its facility in Bowling Green, Kentucky was completed.
Military
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<PAGE> 98
wheel production at the Lansing facility is also complete and Holdings' is in
the process of transferring equipment and production to the Akron, Ohio
facility. During the second quarter of 1995, Holdings completed the sale of
certain equipment and inventory associated with its Polycast(R) wheel
operations. The buyer is leasing Holdings' property and plant in Luckey, Ohio
and is a supplier to Holdings for Polycast(R) wheels.
Management expects that these closings will result in improvements in
financial performance primarily through reductions in fixed manufacturing costs
and lower variable costs. A significant portion of the fixed costs in Lansing
was eliminated in the fourth quarter of 1995. The portion of the provisions
recorded in 1995 and 1994 which had not been expended as of December 31, 1995
totaled approximately $26.3 million ($16.6 million and $9.7 million related to
1995 and 1994 provisions, respectively) and consist primarily of employee
benefit costs and facility maintenance costs. Management estimates future cash
requirements related to the recorded provisions will approximate $3.0 million
and $7.0 million in 1996 and 1997, respectively. The cash requirements in 1996
relate predominantly to the closure of the Lansing facility as production was
substantially completed at this facility by the end of 1995. The cash
requirements in 1997 increase as production at the Mendota facility is expected
to be completed by the end of 1996, and production at the Ypsilanti facility
will be phased down throughout 1996 with final completion anticipated in the
first quarter of 1997. In 1998 and beyond, cash requirements related to plant
closure costs are expected to decrease significantly and pertain predominantly
to facility maintenance costs and certain postemployment and postretirement
benefit costs. Management expects the facilities in Lansing, Mendota and
Ypsilanti will be sold during the next five-year period. In determining the 1995
and 1994 provisions, no assumption of leasing the affected facilities to outside
parties was made.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF HOLDINGS
The following table sets forth, as of the date of this Proxy
Statement/Prospectus, the beneficial ownership of Holdings Common Stock by each
director of Holdings, each executive officer of Holdings and the directors and
executive officers of Holdings as a group, and each person who beneficially owns
more than 5% of the outstanding shares of Holdings Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OUTSTANDING
OF BENEFICIAL SHARES OF HOLDINGS
NAME OWNERSHIP COMMON STOCK
- ------------------------------------------------------------ ----------------- ------------------
<S> <C> <C>
Joseph Littlejohn & Levy Fund II, L.P. ..................... 281.4815 74.1%
c/o Joseph Littlejohn & Levy
50 Main Street, Suite 1000
White Plains, NY 10606
Guaranty Reassurance Corporation............................ 23.9600 6.3
c/o Crescent Capital Corporation
11100 Santa Monica Boulevard
Suite 2050
Los Angeles, CA 90025
Peter A. Joseph............................................. 281.4815(1) 74.1
Angus C. Littlejohn, Jr. ................................... 281.4815(1) 74.1
Paul S. Levy................................................ 281.4815(1) 74.1
Marcos A. Rodriguez......................................... -- 0.0
Richard W. Tuley(2)......................................... 7.7170 2.0
John R. Kinstler............................................ 5.0000 1.3
Thomas R. Collins........................................... -- 0.0
All directors and executive officers as a group (6
persons).................................................. 294.1985 77.5
</TABLE>
- -------------------------
(1) Messrs. Joseph, Littlejohn and Levy are general partners of Joseph
Littlejohn & Levy, which is the managing general partner of Joseph
Littlejohn & Levy Fund II, L.P. Each of Messrs. Joseph, Littlejohn and Levy
disclaims beneficial ownership of any shares of Holdings Common Stock held
by JLL.
(2) Does not reflect the Tuley Option. See "CERTAIN TRANSACTIONS; INTERESTS OF
CERTAIN PERSONS -- Employment Agreement."
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<PAGE> 99
On November 7, 1995, Holdings completed the Holdings 1995 Recapitalization,
pursuant to which an equity investment was made in Holdings in exchange for a
controlling interest in Holdings.
MANAGEMENT OF THE SURVIVING CORPORATION
The Merger Agreement provides that, upon consummation of the Merger, the
Board of Directors of the Surviving Corporation will be comprised of nine
directors, consisting of the Chief Executive Officer of the Company (currently,
Mr. Cucuz), four designees of JLL (currently, Messrs. Clark, Joseph, Levy and
Rodriguez), one designee of TSG (currently, Mr. Christophe) and three
individuals who are not affiliated with the Company or certain purchasers of
Company Preferred Stock (currently expected to be Messrs. Rodewig and Way and
one other independent director), or such other individuals as may be designated
by Holdings from time to time prior to the Effective Time (except that such
directors must in any case include the Chief Executive Officer of the Company
and not less than two independent directors). Pursuant to the Amended Charter
(as defined below), the Surviving Corporation Board will be divided into three
classes, each consisting, as nearly as may be possible, of one-third of the
total number of directors. Class I directors will serve for a term expiring at
the 1997 Annual Meeting of Stockholders, Class II directors will serve for a
term expiring at the 1998 Annual Meeting of Stockholders and Class III directors
will serve for a term expiring at the 1999 Annual Meeting of Stockholders. See
"COMPARISON OF STOCKHOLDER RIGHTS -- Classification of Board." The Stockholders
Agreement will provide that the respective rights of JLL and TSG to designate
directors will terminate if any such entity ceases to own at least 50% of its
initial investment in the Company.
The following table sets out the names and ages of each of the individuals
that are expected to serve as directors and executive officers of the Surviving
Corporation upon the consummation of the Merger.
<TABLE>
<CAPTION>
NAME AGE POSITION TERM EXPIRES
- ------------------------- --- -------------------------------------------------- ------------
<S> <C> <C> <C>
Ranko "Ron" Cucuz........ 52 Chairman of the Board of Directors; President and 1998
Chief Executive Officer
Richard W. Tuley......... 53 Executive Vice President
William D. Shovers....... 42 Vice President -- Chief Financial Officer and
Principal Accounting Officer
Giancarlo Dallera........ 50 Vice President -- President, European Aluminum
Wheels
Ronald L. Kolakowski..... 49 Vice President -- President, North American
Aluminum Wheels
William S. Linski........ 49 Aluminum Wheels Vice President -- President,
Fabricated Wheels
Larry Karenko............ 46 Vice President -- Human Resources
Daniel M. Sandberg....... 37 Vice President, General Counsel and Secretary
John A. Salvette......... 40 Treasurer
Timothy J. Clark......... 31 Director 1998
Cleveland A.
Christophe............. 50 Director 1999
Peter A. Joseph.......... 44 Director 1997
Paul S. Levy............. 48 Director 1999
John S. Rodewig.......... 62 Director 1999
Marcos A. Rodriguez...... 34 Director 1998
Kenneth L. Way........... 56 Director 1997
</TABLE>
Ranko ("Ron") Cucuz was elected President and Chief Executive Officer and a
Director of the Company in October 1992. He also serves as Chairman of the
Management Board of Hayes Wheels Autokola NH, a.s., the Company's Czech joint
venture, and as a director of Hayes Wheels, S.p.A. (Italy) and FPS Kelsey-Hayes,
S.A. (Spain), the Company's wholly owned subsidiaries, and serves as Chairman of
each of the Aluminum Wheel Subsidiaries. From August 1992 to October 1992, Mr.
Cucuz served as Group President of the Wheels Division of the Company as it
existed prior to the Reorganization. Previously, Mr. Cucuz was
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President, Steel Wheels (renamed Fabricated Wheels) Business Unit from June 1991
to October 1992. Prior to assuming that position, Mr. Cucuz was employed by ACCO
Babcock Industries from 1976 to 1991, serving as President and Chief Executive
Officer of its Automotive Mechanical Cable Controls Group from September 1987 to
June 1991.
Richard W. Tuley will become Executive Vice President of the Surviving
Corporation upon consummation of the Merger. He has been President of Motor
Wheel since May 1995, has been Chief Operating Officer of Motor Wheel since
September 1994 and was Executive Vice President and General Manager --
Commercial Highway products of Motor Wheel since 1991. He has also been a
director of Motor Wheel since 1986.
William D. Shovers has been Vice President, Chief Financial Officer and
Principal Accounting Officer of the Company since February 1993. Mr. Shovers has
also served as a Director of Hayes Wheels, S.p.A. and Autokola since February
1993 and October 1993, respectively. From November 1989 to January 1993, Mr.
Shovers served as Vice President of Finance at Monroe Auto Equipment Company, a
subsidiary of Tenneco, Inc.
Giancarlo Dallera has been Vice President -- President, European Aluminum
Wheels of the Company since 1992. He is also President of Cromodora, S.p.A.
Since October 1992, Mr. Dallera has served as the Managing Director of
Kelsey-Hayes de Espana, S.A. In 1981, Mr. Dallera assumed the post of General
Manager of Hayes Wheels, S.p.A and since 1985 Mr. Dallera has also been a
Director of Hayes Wheels, S.p.A.
Ronald L. Kolakowski has served as Vice President -- President, North
American Aluminum Wheels of the Company since November 1995. Prior to assuming
this position, Mr. Kolakowski was the Plant Manager of the Sedalia Plant since
1992.
William S. Linski has been Vice President -- President, Fabricated Wheels
of the Company since November 1993. In October 1993, he was elected Chairman of
the Supervisory Board of Autokola. From 1992 to October 1993, Mr. Linski was
Vice President of Operations of Fabricated Wheels. Mr. Linski was Plant Manager
of the Sedalia Plant from 1988 to 1992.
Larry Karenko has been Vice President -- Human Resources of the Company
since October 1994. From August 1993 to October 1994, Mr. Karenko was Group
Human Resources Manager of the Chasis Products Operation and from August 1992 to
August 1993, he was Group Human Resources Manager of Powertrain Products
Operation. Mr. Karenko served as Division Human Resources Manager of the
Precision Forged Products Division from June 1986 to August 1992.
Daniel M. Sandberg has been Vice President, General Counsel and Secretary
of the Company since March 1994. Since September 1994, he has been a Director of
Hayes Wheels S.p.A. Prior to joining the Company, Mr. Sandberg was Executive
Vice President and General Counsel of Kelter-Thorner, Inc. from October 1990 to
March 1994. From September 1988 to September 1990, Mr. Sandberg was the General
Counsel and Secretary of Meadowdale Foods, Inc.
John A. Salvette has served as Treasurer of the Company since February
1995. From May 1993 to January 1995, he was Director of Investor Relations and
Business Planning of the Company. Mr. Salvette was Group Controller of the North
American Aluminum Wheel Business from May 1990 to April 1993.
Timothy J. Clark will become a director of the Surviving Corporation upon
consummation of the Transactions. Mr. Clark is a principal of Joseph Littlejohn
& Levy (the managing general partner of JLL), which he joined in 1993. Prior to
that time, Mr. Clark was corporate planning manager of Edgcomb Metals Company
and a financial analyst at the Blackstone Group.
Cleveland A. Christophe will become a director of the Surviving Corporation
upon consummation of the Transactions. Mr. Christophe has been a Managing
Partner and major shareholder of TSG Capital Group, L.L.C. since its inception
in 1994. TSG acts as manager of TSG Capital Fund II, L.P., a $225 million
private equity investment fund. He has served as a principal and a director of
TSG Ventures Inc. (formerly known as Equico Capital Corporation), a private
equity investment firm since May 1992. From February 1990 to May
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1992, Mr. Christophe was a Vice President of Equico Capital Corporation. Mr.
Christophe is also a director of EnviroTest Systems Corp.
Peter A. Joseph will become a director of the Surviving Corporation upon
consummation of the Transactions. Mr. Joseph has been a partner of Joseph
Littlejohn & Levy from its inception in 1988. Prior to that time, Mr. Joseph was
a managing director of Quadrex Securities. Mr. Joseph serves on the Board of
Directors of Foodbrands America, Inc., OrNda HealthCorp, Lancer, Fairfield
Manufacturing Co., Inc. and MWC Holdings, Inc. Mr. Joseph is also President and
Secretary of Lancer and Vice President and Secretary of Fairfield.
Paul S. Levy will become a director of the Surviving Corporation upon
consummation of the Transactions. Mr. Levy has been a partner of Joseph
Littlejohn & Levy from its inception in 1988. Prior to that time, Mr. Levy was a
Managing Director of Drexel Burnham Lambert Incorporated responsible for its
restructuring and exchange offer group. Mr. Levy serves as Chief Executive
Officer and Chairman of the Board of Directors of Lancer and as a member of the
Board of Directors of Foodbrands America, Inc., OrNda HealthCorp, Fairfield
Manufacturing Co. and MWC Holdings, Inc. Mr. Levy is also Vice President and
Assistant Secretary of Fairfield.
John S. Rodewig has been a director of the Company since December 1992 and
is expected to continue to serve in that capacity after consummation of the
Transactions. Mr. Rodewig served as President of Eaton Corporation and as its
Chief Operating Officer -- Vehicle Components from 1992 until his retirement on
January 1, 1996. He served as President of the Truck Components Group of Eaton
Corporation from 1991 to 1992. Mr. Rodewig also serves as Chairman of the Board
of Directors of Eaton Limited (United Kingdom). He also serves as a director of
FKI plc and AP Parts International.
Marcos A. Rodriguez will become a director of the Surviving Corporation
upon consummation of the Transactions. Mr. Rodriguez is a principal of Joseph
Littlejohn & Levy, which he joined in 1989. Prior to that time, Mr. Rodriguez
worked at General Electric Company in various positions. Mr. Rodriguez serves on
the Board of Directors of Holdings.
Kenneth L. Way will become a director of the Surviving Corporation upon
consummation of the Transactions. Mr. Way has been a director of the Company
since December 1992. He has served as Chairman and Chief Executive Officer of
Lear Corporation since September 1988.
SELLING STOCKHOLDER
K-H, the Selling Stockholder, will beneficially own 814,400 New Varity
Shares subsequent to the Merger, and all of such shares may be offered and sold
by the Selling Stockholder pursuant to this Proxy Statement/Prospectus. The
Company has agreed to register the New Varity Shares for resales pursuant to,
and subject to the terms of, the Registration Rights Agreement. Since the
Selling Stockholder may sell all or a portion of its shares of New Common Stock
at any time and from time to time after the date hereof at is sole discretion,
no estimate can be made of the number of shares of New Common Stock that the
Selling Stockholder may retain at any time. See "THE MERGER -- Resales of New
Common Stock and Warrants" and "CERTAIN OTHER AGREEMENTS -- Registration Rights
Agreement."
In addition to sales pursuant to this Proxy Statement/Prospectus, the
Selling Stockholder will be permitted to resell the New Varity shares pursuant
to, and subject to the limitations under, Rule 145 under the Securities Act. See
"THE MERGER -- Resales of New Common Stock and Warrants."
Relationship with K-H and Varity. Prior to the Effective Time, K-H owned
8,144,000 (approximately 46.3%) of the shares of Company Common Stock then
outstanding. In connection with the Merger, K-H received the 814,400 New Varity
Shares. Two individuals who are officers of K-H's parent, Varity, are directors
of the Company.
Prior to December 23, 1992, the Company was a wholly-owned subsidiary of
K-H. At that time, the Company effected a public offering of its shares of
Common Stock and as a result the ownership interest of K-H in the Company's
Common Stock was reduced to approximately 46.3%. At that time, the Company
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entered into various agreements with K-H, one of its subsidiaries, Kelsey-Hayes
Company, and Varity to reflect their relationship after giving effect to the
Company's offering of its shares, including agreements providing for the
transfer of the non-wheel businesses and assets of the Company and the
indemnification of the Company for all liabilities related thereto; a
Distributorship Agreement providing for the appointment of K-H as the
distributor of certain Company products in the after-market; a Non-Competition
Agreement between the Company and Varity Corporation restricting competition by
Varity and its affiliates with the Company; a Management Services Agreement
between K-H and the Company under which K-H agreed to provide certain management
services to the Company; a Tax Sharing Agreement which, in general, allocates
income tax liabilities for periods prior to December 23, 1992 among the Company,
Varity, K-H and K-H's subsidiary Kelsey-Hayes Company; a Michigan Workers'
Compensation Claims Payment Guarantee between the Company and Kelsey-Hayes
Company to share liability for workers' compensation claims by Michigan
employees; and a Lease under which Kelsey-Hayes Company occupies certain space
as the Company's tenant.
DESCRIPTION OF CAPITAL STOCK
The statements set forth under this heading with respect to certain
provisions of the DGCL, the Restated Certificate of Incorporation of the Company
(the "Company Charter"), the Amended and Restated Certificate of Incorporation
of the Company (the "Amended Charter"), the By-laws of the Company (the "Company
By-laws"), the Amended and Restated By-laws of the Company (the "Amended
By-laws") and the Certificate of Designations of Series A Preferred Stock
("Certificate of Designations") are brief summaries thereof and do not purport
to be complete and are qualified in their entirety by reference to the relevant
provisions of the DGCL, the Company Charter, the Amended Charter, the Company
By-laws, the Amended By-laws and the Certificate of Designations, as
appropriate.
GENERAL
The authorized capital stock of the Surviving Corporation will consist of
(i) 100 million shares of New Common Stock and (ii) 25 million shares of
preferred stock, par value $.01 per share ("New Preferred Stock").
Upon consummation of the Merger and based upon the number of shares of
Company Common Stock and Holdings Common Stock outstanding as of the date of the
Merger Agreement and counting the Company Preferred Stock issued immediately
prior to the Merger on an as if converted basis, (i) 11,132,400 shares of New
Common Stock will be issued and outstanding and (ii) 478,900 shares of New
Common Stock will be issuable pursuant to options to acquire shares of New
Common Stock (assuming all holders of Company Options elect to have such Company
Options become options to acquire shares of New Common Stock). In addition, (i)
based upon the number of Warrants issued to the holders of Holdings Common Stock
in accordance with the Merger Agreement and the Warrant Agreement and counting
the Warrants to be issued together with the Company Preferred Stock to the New
Investors immediately prior to the Merger, 1,300,000 shares of New Common Stock
will remain reserved for issuance upon exercise of such Warrants and (ii) 21,100
shares of New Common Stock will be reserved for issuance pursuant to options
under the 1992 Stock Incentive Plan (assuming all holders of Company Options
elect to have such Company Options become options to acquire shares of New
Common Stock). In addition, as discussed in "THE MERGER -- Certain Transactions;
Interests of Certain Persons in the Merger," it is anticipated that a new stock
option plan will be adopted by the Company prior to the Effective Time. Although
there are no present plans or commitments for the use of authorized but unissued
shares, such shares would be available for issuance without further action by
stockholders except as required by law or applicable stock exchange
requirements. The current rules of the NYSE would require stockholder approval
if the number of shares of New Common Stock to be issued would equal or exceed
20% of the number of shares of New Common Stock outstanding immediately prior to
such issuance.
The Surviving Corporation's Board of Directors is authorized to issue New
Preferred Stock, in one or more series and, as to each series, to fix the
designation, the dividend rate (and whether cumulative), liquidation
preferences, conversion rights, redemption rights, and other terms, including
retirement or sinking
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fund provisions. The New Preferred Stock, if issued, could have the effect of
acting as an anti-takeover device to prevent a change of control of the Company.
No shares of New Preferred Stock will be issued or outstanding immediately
following the Merger.
NEW COMMON STOCK
The holders of New Common Stock will be entitled to one vote for each share
of New Common Stock owned on each matter properly submitted to a vote of
stockholders and will not have cumulative voting rights for the election of
directors. Such matters generally require the approval of the holders of a
majority of the shares of New Common Stock voting thereon, except that certain
amendments of the Amended By-laws must be approved by the holders of at least
two-thirds of the shares voting or in some cases 80% of all the outstanding
shares of New Common Stock. See "COMPARISON OF STOCKHOLDER RIGHTS -- Amendment
of Governing Documents." Holders of shares of New Common Stock will be entitled
to any dividends declared by the Board of Directors of the Surviving Corporation
out of legally available funds and, subject to such preferential rights as may
be determined by such Board of Directors in the future in connection with the
issuance of shares of New Preferred Stock, share ratably in any distribution of
the Surviving Corporation's assets, after payment of all debts and other
liabilities, upon liquidation, dissolution or winding up. The holders of shares
of New Common Stock have no preemptive or other subscription or conversion
rights. There are no redemptions or sinking fund provisions applicable to shares
of New Common Stock.
The Board of Directors of the Surviving Corporation will be divided into
three classes of as nearly equal size as possible, and will consist of not less
than 1 nor more than 15 directors elected for three-year staggered terms;
provided, however, that the maximum number of directors may be increased to
reflect the rights of preferred stockholders of the Surviving Corporation. The
Directors are given the authority to determine the exact number of directors
constituting the entire Board of the Surviving Corporation and, subject to the
rights of the holders of any outstanding shares of capital stock of the
Surviving Corporation, to fill vacancies and newly created directorships. Any
directors so elected will hold office until the next election of the class of
which such directors have been elected. For a more detailed discussion on
certain provisions of the Amended Charter and the Amended By-laws relating to
directors, see "COMPARISON OF STOCKHOLDER RIGHTS."
COMPANY PREFERRED STOCK
Immediately prior to the consummation of the Merger, pursuant to the Merger
Agreement and the Stock Subscription Agreements, the Company will issue and sell
to the New Investors 200,000 shares of a new series of Company Preferred Stock,
par value $.01 per share ("Series A Preferred Stock"), and pursuant to the
Warrant Agreement, the Company will issue 150,000 Warrants to purchase shares of
New Common Stock. The Series A Preferred Stock and the Warrants, when issued and
delivered in accordance with the terms of the Subscription Agreements and the
Warrant Agreement, will be duly and validly issued. Pursuant to the Merger, each
share of Series A Preferred Stock will be converted into the right to receive
31.25 shares of New Common Stock.
In accordance with the Company Charter, pursuant to the Certificate of
Designations, the holders of Series A Preferred Stock are not entitled to
receive dividends, and except as expressly provided by law, the holders of
shares of Series A Preferred Stock have no voting rights. The Company must
obtain the approval of holders of a majority of the shares of the Series A
Preferred Stock in order to (i) increase or decrease the par value or the
aggregate number of authorized shares of Series A Preferred Stock or (ii) amend
any provisions of the Company Charter in a manner materially prejudicial to
holders of Series A Preferred Stock.
In the event of any liquidation, dissolution or winding up of the affairs
of the Company, holders of shares of Series A Preferred Stock are entitled to
preference over the Company Common Stock and to all other classes and series
issued and outstanding in the amount of $1,000 per share. All shares of Series A
Preferred Stock are to be of equal rank with respect to rights upon liquidation,
winding up and dissolution and all payments are to be made pro rata among the
holders of the then outstanding shares. A consolidation or merger
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of the Company with one or more corporations which does not adversely affect the
rights and preferences of holders of Series A Preferred Stock is not deemed to
be a liquidation, dissolution or winding up.
In the event that the Merger is not consummated within two business days of
the initial issuance of any shares of Series A Preferred Stock, the Company will
immediately redeem the shares for cash at a redemption price of $1,000 per
share. Any shares of Series A Preferred Stock purchased, redeemed or otherwise
acquired by the Company in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such cancelled shares shall revert
to authorized but unissued preferred stock, undesignated as to series and
subject to reissuance by the Company.
WARRANTS
Pursuant to the terms of the Warrant Agreement, each Warrant issued by the
Company entitles the holder thereof to purchase one share of New Common Stock at
a price of $48.00. Warrants may be exercised at any time on or after the fourth
anniversary of the Effective Time until the seventh anniversary thereof and, in
the case of Warrants received by any New Investor, are not transferrable (except
to certain Permitted Transferees(as defined in the Stockholders Agreement))
before the second anniversary of the Effective Time. In the event of any
consolidation with or merger of the Company into another corporation or of any
sale, transfer or lease of all or substantially all of the property of the
Company, the holders of each Warrant will have the same rights with respect to
such Warrants after such event as in effect immediately prior to such event. For
a summary of the provisions applicable to the Warrants, see "CERTAIN OTHER
AGREEMENTS -- Warrant Agreement."
CERTAIN RESTRICTIONS ON TAKEOVERS
As a Delaware corporation, the Surviving Corporation is subject to Section
203 of the DGCL. Section 203 prohibits a public Delaware corporation from
engaging in a Business Combination (as defined below) with an Interested
Stockholder (as defined below) for a period of three years following the date
such person became an Interested Stockholder unless: (i) prior to the date such
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which such stockholder became an
Interested Stockholder or approved the Business Combination, (ii) upon
consummation of such transaction, such Interested stockholder owns at least 85%
of the voting shares of such corporation (excluding stock held by directors who
are also officers and by employee stock ownership plans that do not allow plan
participants to determine confidentially whether to tender shares) or (iii)
following the transaction in which such person became an Interested Stockholder,
the Business Combination is (a) approved by the board of directors of the
corporation and (b) authorized at a meeting of stockholders by the affirmative
vote of the holders of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder. A "Business Combination"
includes (i) mergers, consolidations and sales or other dispositions of 10% or
more of the assets of a corporation to or with an Interested Stockholder, (ii)
certain transactions resulting in the issuance or transfer to an Interested
Stockholder of any stock of such corporation or its subsidiaries and (iii) other
transactions resulting in a disproportionate financial benefit to an Interested
Stockholder. An "Interested Stockholder" is a person who, together with its
affiliates and associates, owns (or within a three-year period did own) 15% or
more of a corporation's stock entitled to vote generally in the election of
directors. The Company Board has approved the Merger Agreement, the Stock Option
Agreement and the other Agreements by the requisite vote so that the provisions
of Section 203 of the DGCL will not apply to Holdings or the New Investors in
connection with the Transactions.
TRANSACTIONS WITH AFFILIATES
The resolutions of the Company Board referred to in the second paragraph of
"THE MERGER -- Background of the Merger" will not be applicable to holders of
New Common Stock following consummation of the Merger.
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COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Merger, stockholders of the Company and Holdings
will become stockholders of the Surviving Corporation, and the rights of all
stockholders of the Surviving Corporation will be governed by applicable
Delaware law ("Delaware Law"), including the DGCL, and by the Amended Charter
and the Amended By-laws.
The following is a summary of certain material differences between the
current rights of the stockholders of Holdings and the Company under their
respective charters and by-laws and their prospective rights as stockholders of
the Surviving Corporation. Since the Company and Holdings are both organized
under the laws of the State of Delaware, such differences arise from differences
between various provisions of the Company Charter and Company By-laws, the
Holdings Charter and Holdings By-Laws, and the Amended Charter and the Amended
By-laws.
The following summary does not purport to be a complete description of the
rights of stockholders of the Company and stockholders of Holdings under, and is
qualified in its entirety by reference to, the DGCL, the Company Charter and the
Company By-Laws, the Holdings Charter and the Holdings By-Laws, and the Amended
Charter and the Amended By-laws. See "DESCRIPTION OF CAPITAL STOCK" for a
summary of certain other rights of stockholders of the Surviving Corporation
after the Merger.
AUTHORIZED CAPITAL STOCK
The authorized capital stock of the Company consists of 50 million shares
of Company Common Stock and 25 million shares of preferred stock, par value $.01
per share, of which 200,000 shares will be designated as Series A Preferred
Stock for issuance in connection with the Subscription Agreement. All shares of
Company Common Stock are identical and have one vote per share.
The authorized capital stock of Holdings consists of one million shares of
Holdings Common Stock. All shares of Holdings Common Stock are identical and
have one vote per share.
As of the Effective Time, the authorized capital stock of the Surviving
Corporation will consist of 100 million shares of New Common Stock and 25
million shares of New Preferred Stock. See "DESCRIPTION OF CAPITAL STOCK."
ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
Under Delaware Law, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken, or which is required
to be taken, at any annual or special meeting of stockholders may be taken
without a meeting and without prior notice, if a consent in writing, setting
forth the action so taken, is signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Any such consent, to be effective, must be signed and
delivered to the corporation within 60 days after the earliest dated consent.
Neither the Company Charter nor the Holdings Charter restricts stockholder
action by written consent in lieu of a meeting.
The Amended Charter prohibits stockholder action without a meeting, and the
powers of stockholders to consent in writing to the taking of any action without
a meeting is specifically denied therein. The provisions of the Amended Charter
restricting stockholder action by written consent may be altered, amended or
repealed only by a majority vote of the Surviving Corporation Board and the
affirmative vote of at least a majority of the holders of outstanding shares of
capital stock of the Surviving Corporation entitled to vote thereon. The
provisions of the Amended Charter prohibiting stockholder action by written
consent may have the effect of delaying considerations of certain stockholder
proposals until a meeting of stockholders has been convened.
SPECIAL MEETING OF STOCKHOLDERS
Under Delaware Law, a special meeting of stockholders may be called by the
board of directors or by any person authorized to do so in the certificate of
incorporation or by-laws.
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The Company By-Laws provide that special meetings of stockholders may be
called by action of the Company Board, the Chairman of the Board or the
President, and shall be called by the Chairman of the Board, the President or
the Secretary of the Company at the written request of a majority of the Company
Board then in office.
The Holdings By-laws provide that special meetings of the stockholders may
be called by the President and shall be called by the President or Secretary at
the request in writing of a majority of the board. The Holdings By-laws further
require a special meeting to be called upon the written request of stockholders
owning a majority of the entire capital stock issued and outstanding and
entitled to vote.
The Amended By-laws provide that special meetings of stockholders may be
called by either (i) the Chairman of the Surviving Corporation, if there is one,
(ii) the President of the Surviving Corporation, (iii) any Vice President of the
Surviving Corporation, if there are any, or (iv) the Secretary of the Surviving
Corporation, and shall be called by any such officer at the request in writing
of a majority of the Surviving Corporation Board.
BUSINESS CONDUCTED AT STOCKHOLDERS' MEETINGS
The Company By-Laws provide that the business permitted to be conducted at
any special meeting of the Company's stockholders is limited to the matters
stated in the notice of call or request for such special meeting. These
provisions of the Company By-Laws may be altered, amended or repealed by the
stockholders of the Company or by the Company Board at any regular meeting of
the Company's stockholders or of the Company Board or at any special meeting of
the Company's stockholders or the Company Board if notice of such alteration,
amendment or repeal is contained in the notice of such special meeting. The
Holdings By-laws do not limit the business permitted to be conducted at any
meeting.
The Amended By-laws provide that to be properly brought before an annual
meeting, business must be either (i) specified in the notice of annual meeting
(or any supplement thereto) given by or at the direction of the Surviving
Corporation Board, (ii) otherwise properly brought before the meeting by or at
the direction of the Surviving Corporation Board or (iii) otherwise properly
brought before the meeting by a stockholder. In addition to any other applicable
requirements for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Surviving Corporation. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Surviving Corporation, not less than 50 days nor more than 75 days prior
to the meeting, except that, in the event that less than 65 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the annual meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary of the Surviving
Corporation must set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class and number of shares of the Surviving
Corporation which are beneficially owned by such stockholder and (iv) any
material interest of the stockholder in such business. If the Chairman of an
annual meeting of the Surviving Corporation's stockholders determines that
business was not properly brought before the meeting in accordance with the
foregoing procedures, such business will not be transacted.
The foregoing provisions of the Amended By-laws may have the effect of
precluding the consideration of stockholder proposals and of discouraging or
deterring a third party from conducting a solicitation of proxies to approve its
proposal.
NUMBER AND QUALIFICATIONS OF DIRECTORS
Under Delaware law, the minimum number of directors is one. Delaware law
permits the board of directors to change the authorized number, or the range, of
directors by amendment to the by-laws, unless the directors are not authorized
in the certificate of incorporation to amend the by-laws or the number of
directors
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is fixed in the certificate of incorporation, in which case a change in the
number directors may be made only upon approval of such change by the
stockholders.
The Company By-laws provide for a variable number of directors between
three and 15, with the exact number currently fixed at five. The Company By-laws
require at least one-third of the members of the Company Board (and in any
event, at least two such members) to be "independent directors". The Company
By-laws define "independent director" as a director who (i) is not and has not
been employed by the Company or its affiliates within the two years immediately
prior to such director's election to the Company Board, (ii) does not have one
or more significant personal service contracts with the Company or its
subsidiaries, (iii) is not (and is not affiliated with or employed by a company
or a firm that is) a holder or beneficial owner of more than 30% of the voting
equity securities of the Company or its subsidiaries and (iv) is not a spouse,
parent, sibling or child, and is not (and has not been within the twelve months
preceding election thereof to the Company Board) an employee, of any person
described in clauses (i) through (iii) above.
The Holdings By-laws provide that the number of directors of the
corporation shall be at least one, the exact number to be determined by
resolution of the board or by the stockholders at an annual meeting or a special
meeting. The current number of directors of Holdings is five. Directors are to
be elected at the annual meeting of stockholders, although a vacancy or newly
created directorship resulting from an increase in the authorized number of
directors may be filled by a majority of the directors then in office. Directors
elected to fill a vacancy hold office until the next annual election and until
their successors are duly elected and qualified.
The Amended By-laws provide for a variable number of directors between one
and 15, with the exact number to be fixed from time to time by the Surviving
Corporation Board pursuant to a resolution adopted by a majority of directors
then in office, provided that such maximum number may be increased from time to
time to reflect the rights, if any, of holders of any shares of New Preferred
Stock to elect directors in accordance with the Amended Charter or in any
resolution or resolutions adopted by a majority of the Surviving Corporation
Board then in office providing for the issuance of any shares of New Preferred
Stock. The Amended By-laws require that at least two members of the Surviving
Corporation Board be independent directors if and so long as such independent
directors are required by the rules of the stock exchange or quotation service
on which the Surviving Corporation's capital stock is traded or quoted. The
Amended By-laws do not define independent directors. The Amended Charter and
Amended By-laws provide for a classified board for the Surviving Corporation.
See "-- Classification of Board."
NOMINATION AND ELECTION OF DIRECTORS
The Company Charter and Company By-laws provide that directors are elected
by the vote of the holders of a plurality of the shares entitled to vote
thereon. Neither the Company Charter nor the Company By-laws allows cumulative
voting for the election of directors. The Company By-laws provide that the power
to fill vacancies on the Company Board is vested in the Company Board (except,
as described below, in connection with the removal of a director), and vacancies
may be filled by a majority of the directors of the Company then in office,
although less than a quorum, or by a sole remaining director unless all
directorships are vacant, in which case the stockholders are required to fill
the then existing vacancies. The Company Charter does not contain advance notice
procedures for the nomination of directors. The Holdings Charter and Holdings
By-laws contain similar provisions regarding nomination and election of
directors.
The Amended Charter and the Amended By-laws provide that directors are
elected at an annual meeting of stockholders by the vote of the holders of a
plurality of the shares represented and entitled to vote thereat. Neither the
Amended Charter nor the Amended By-laws allows cumulative voting for the
election of directors. The Amended By-laws provide for advance notice procedures
with respect to the nomination, other than by or at the direction of the
Surviving Corporation Board, of candidates for election as directors. The
Amended By-laws provide that any stockholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors
only if written notice of such stockholder's intent to make such nomination or
nominations has been delivered to or mailed and received at the principal
executive offices of the Surviving Corporation not less than 50 days nor more
than 75 days prior to the meeting, except if, in the event that less than 65
days' notice or prior public disclosure of the date of the meeting is given or
made
91
<PAGE> 108
to stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary of the Surviving
Corporation must include certain information (i) about the proposed nominee as
would be required to be included in a proxy statement filed pursuant to the
SEC's proxy rules had the nominee been nominated by the Surviving Corporation
Board and (ii) as to the stockholder giving the notice, the name and record
address of the stockholder giving the notice and the class and number of shares
of capital stock of the Surviving Corporation which are beneficially owned by
the stockholder. The Surviving Corporation may require any proposed nominee to
furnish such other information as may reasonably be required by the Surviving
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Surviving Corporation. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director.
CLASSIFICATION OF BOARD
The DGCL provides that a corporation's board of directors may be divided
into various classes with staggered terms of offices. The Amended Charter
provides that from and commencing after the 1996 annual meeting of stockholders,
the Surviving Corporation Board will be divided into three classes, designated
Class 1, Class 2 and Class 3. Each class will consist, as nearly as may be
possible, of one-third of the number of directors constituting the Surviving
Corporation Board. The term of office of the Class 1 Directors will first expire
at the first annual meeting of stockholders after their election; the term of
office of the Class 2 Directors will first expire at the second annual meeting
of stockholders after their election; and the term of office of the Class 3
Directors will first expire at the third annual meeting of stockholders after
their election, and in each case until their successors are duly elected and
qualified. At each annual meeting of stockholders after the initial
classification of directors, successors to the class of directors whose terms
expire at that annual meeting of stockholders will be elected by stockholders
for a three-year term and until their successors are duly elected and qualified.
Any director elected to fill a vacancy resulting from an increase in any class
or from the removal from office, death, disability, resignation or
disqualification of a director or other cause will hold office for the remaining
term of the class in which such vacancy existed.
Classification of directors has the effect of making it more difficult for
a stockholder to change the composition of the board of directors. Neither the
Company Charter nor the Holdings Charter contains a classified board provision.
REMOVAL OF DIRECTORS
Under Delaware Law, a director of a corporation may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at a meeting on election of directors. If a corporation has a classified board,
Delaware law provides that directors may be removed only for cause, unless the
certificate of incorporation otherwise provides. Because the Surviving
Corporation Board will be classified, members of the Surviving Corporation Board
may be removed under Delaware law only for cause.
LIMITATION ON LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its certificate of
incorporation eliminating or limiting the personal liability of a Director to
the corporation or its stockholders for monetary damages for a breach of the
Director's fiduciary duty as a Director, except for liability (i) for any breach
of the Director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, which
concerns unlawful payments of dividends, stock purchases or redemptions or (iv)
for any transaction from which the director derived an improper personal
benefit. Each of the Company Charter, the Holdings Charter and the Amended
Charter contains provisions limiting the liability of their respective
directors, to the fullest extent currently permitted by the DGCL for monetary
damages for breach of their fiduciary duty as directors. The Company Charter
further provides that, if the DGCL is amended to authorize corporation actions
further
92
<PAGE> 109
eliminating or limiting the personal liability of directors, the liability of a
director of the Company will be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended. The Holdings Charter and the Amended
Charter do not include any provisions incorporating future amendments to the
DGCL which further eliminate or limit the personal liability of directors.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
INDEMNIFICATION
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may pay expenses
(including attorneys' fees) incurred by an officer or Director in defending any
civil, criminal, administrative or investigative action (upon receipt of a
written undertaking to reimburse the corporation if indemnification is not
appropriate), and must reimburse a successful defendant for expenses, including
attorney's fees, actually and reasonably incurred, and permits a corporation to
purchase and maintain liability insurance for its directors and officers. The
DGCL provides that indemnification may be made for any claim, issue or matter as
to which a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation, unless and
only to the extent a court determines that the person is entitled to indemnity
for such expenses as the court deems proper.
The Company By-laws provide that, to the fullest extent authorized by the
DGCL, the Company indemnify, hold harmless and advance expenses to each person
(and, where applicable, and whether the person died testate or interstate, the
personal representative of the person, the estate of such person and such
person's legatees and heirs) who is or has served as a director or officer of
the Company or any predecessor of the Company, or any other enterprise at the
request of the Company or of any predecessor of the Company, who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she, or a person of whom he or she as the legal
representative, is or was a director or officer of the Company, or is or was
serving at the request of Company as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan, whether
the basis of such proceeding is alleged action in an official capacity while
serving as a director, officer, employee or agent, provided such proceeding was
authorized by the Company Board. The right to indemnification conferred by the
Company By-Laws includes the right to have paid by the Company the expenses
incurred in defending any such proceeding in advance of its final disposition,
provided that, if required by the DGCL, the payment of such expenses incurred by
a director or officer of the Company in his or her capacity as a director or
officer of the Company (and not in any other capacity in which service was
rendered by such person while a director or officer) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Company of
an undertaking, by or on behalf of such director of officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is or was not so entitled to be indemnified under the Company By-Laws or
otherwise. The indemnification rights conferred by the Company By-Laws are not
exclusive of any other right to which persons seeking indemnification may be
otherwise entitled. The Company By-laws provide that claims for indemnification
shall be liberally construed in favor of indemnification, and create a
rebuttable presumption that the claimant is entitled to indemnification. The
Company Board in its discretion may indemnify any other person made a party to
any suit or proceeding by reason of such person acting on behalf of or serving
at the request of the Company or any predecessor of the Company.
The Holdings Charter and By-laws contain similar provisions regarding
indemnification. In addition, the Holdings By-laws provide that Holdings may,
but is not obligated to, maintain insurance for such indemnifica-
93
<PAGE> 110
tion. The right to indemnification under the Holdings Charter is not exclusive
of any other right which any person may have for indemnification.
The indemnification provisions of the Amended By-laws are substantially
similar to the provisions of those of the Company and Holdings, except that the
Amended By-laws provide (i) that the indemnified party must have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Surviving Corporation and, with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful, (ii) that with
respect to actions brought by or in the right of the Company, the Company will
indemnify such party if he is not adjudged liable to the Company or if the court
in which such action is brought determines that in light of all the
circumstances such person is entitled to indemnity for expenses deemed proper by
such court, and (iii) that such indemnity be authorized (x) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even if
less than a quorum, or (y) if such a quorum is not attainable, or even if
obtainable and a quorum of disinterested directors so direct, by independent
legal counsel in a written opinion, or (z) by the stockholders provided that no
authorization is required to the extent such person has been successful in
defending any action or proceeding for which indemnification is requested or a
court of competent jurisdiction determines such indemnification to be proper
because such party has met the standards of conduct described in clauses (i) and
(ii).
AMENDMENT OF GOVERNING DOCUMENTS
Under Delaware Law, an amendment to a corporation's certificate of
incorporation requires the approval of the board of directors and the approval
of a majority of the outstanding stock entitled to vote thereon and a majority
of the outstanding stock of each class entitled to vote thereon. Under Delaware
Law, the holders of the outstanding shares of a class are entitled to vote as a
separate class on a proposed amendment that would increase or decrease the par
value of the shares of such class, alter or change the powers, preferences or
special rights of the shares of such class so as to affect them adversely or
(unless otherwise provided in the certificate of incorporation prior to the
issuance of any shares of such class or in an amendment to the certificate of
incorporation authorized by the affirmative vote of the holders of a majority of
such class of stock) increase or decrease the aggregate number of authorized
shares of such class. Under Delaware Law, an amendment to a corporation's
by-laws requires the approval of the stockholders, unless the certificate of
incorporation confers the power to amend the by-laws upon the board of
directors. The fact that the power to amend a corporation's by-laws has been
conferred upon the board of directors will not, under Delaware law, direct or
restrict the power of the corporation's stockholders to adopt, amend or repeal
the by-laws. The Holdings Charter and By-laws contain no special provisions
regarding amendment of the Holdings Charter or Holdings By-laws.
The Company Charter does not contain any unique amendment provisions and
may be amended as provided under Delaware law. The Company By-laws provide that
they may be altered, amended or repealed or new By-laws may be adopted by the
stockholders or the Company Board, at any regular meeting of the stockholders or
the Company Board, or by the stockholders or the Company Board at any special
meeting of the stockholders or the Company Board, if notice of such alteration,
amendment, repeal or adoption is contained in the notice of such special
meeting. The Company By-laws require the consent of a majority of the Company's
independent directors then in office for the alteration, amendment or repeal of
certain provisions of the Company By-laws relating to the composition of the
Company Board, the replacement of directors removed by the stockholders of the
Company and the establishment and composition of the Compensation Committee and
Audit Committee of the Company Board, and these provisions may not be amended by
written consent of any stockholder who is an affiliate of the Company.
The Amended Charter provides that the Amended By-laws may be altered,
amended or repealed by the affirmative votes of the holders of at least
two-thirds of the outstanding shares of capital stock of the Surviving
Corporation entitled to vote thereon or by a majority of the Surviving
Corporation Board then in office. The affirmative vote of the holders of at
least 80% of the voting power of all then outstanding shares of stock of the
Surviving Corporation entitled to vote thereon or the affirmative vote of a
majority of the Surviving Corporation Board is required for the adoption,
amendment or repeal of certain portions of the Amended By-laws dealing with
certain advance notice provisions, the bringing of business before annual
meetings of stockholders, actions by written consent of the stockholders, the
number of directors of the Surviving
94
<PAGE> 111
Corporation, classification of the Surviving Corporation Board, nomination of
director candidates and indemnification. Notice of any amendment or replacement
of the Amended By-laws must be contained in the notice of the meeting of
stockholders or directors, as the case may be, at which such action is to be
voted on.
LEGAL OPINIONS
The legality of the New Common Stock and the Warrants offered hereby will
be passed upon for the Company by Altheimer & Gray.
Altheimer & Gray, counsel to the Company, and Skadden, Arps, Slate, Meagher
& Flom, special counsel to Holdings, have delivered opinions concerning certain
federal income tax consequences of the Merger.
EXPERTS
The consolidated financial statements of the Company as of January 31,
1996, and for each of the years in the three-year period ended January 31, 1996
which are incorporated in this Proxy Statement/Prospectus by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1996,
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants, as stated in their report, which refers to a change from the LIFO
method of valuing inventory to the FIFO method and the adoption of the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes, SFAS No.
106, Employers' Accounting for Postretirement Benefits Other Than Pensions and
SFAS No. 112, Employers' Accounting for Postemployment Benefits which are
incorporated by reference, and have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements and related financial statement
schedules of Holdings at December 31, 1995 and 1994, and for each of the three
years in the period ended December 31, 1995, included in this Proxy
Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
Representatives of KPMG Peat Marwick LLP and Ernst & Young LLP are expected
to be present at the Company Special Meeting and the Holdings Special Meeting,
respectively, will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
95
<PAGE> 112
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the Company's next
annual meeting of stockholders, if any, must be received by the Company a
reasonable time before the solicitation of proxies for that meeting. The annual
meeting will be held only if the Merger is not consummated.
96
<PAGE> 113
MWC HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.................................... F-2
Consolidated Financial Statement for the years ended:
December 31, 1995 and December 31, 1994
Consolidated Balance Sheets..................................................... F-3
December 31, 1995, December 31, 1994 and December 31, 1993
Consolidated Statements of Income Statements.................................... F-4
Consolidated Statements of Changes in Shareholders' Equity...................... F-5
Consolidated Statements of Cash Flows........................................... F-6
Notes to Consolidated Financial Statements...................................... F-7
Condensed Consolidated Financial Statements (Unaudited)
for the three months ended March 31, 1995 and March 31, 1996
Condensed Consolidated Balance Sheets........................................... F-18
Condensed Consolidated Statements of Income..................................... F-19
Condensed Consolidated Statements of Cash Flows................................. F-20
Notes to Condensed Consolidated Financial Statements............................ F-21
</TABLE>
F-1
<PAGE> 114
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
MWC Holdings, Inc.
We have audited the accompanying consolidated balance sheets of MWC
Holdings, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. The financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
MWC Holdings, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes G and L to the financial statements, in 1993 the
Company changed its method of accounting for postretirement benefits other than
pensions and its method of accounting for income taxes.
ERNST & YOUNG LLP
Detroit, Michigan
February 23, 1996,
except for Note O, as to which the date is
March 28, 1996
F-2
<PAGE> 115
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS -- Note E
Current assets:
Cash.................................................................. $ 1,351 $ 1,018
Accounts receivable, net of allowance of $250 in 1995 and 1994........ 32,294 44,766
Inventories -- Note B................................................. 31,943 33,187
Prepaid expenses and other current assets............................. 5,581 5,817
-------- --------
Total current assets............................................... 71,169 84,788
Property, plant and equipment -- Note J:
Land and improvements................................................. 4,445 4,445
Buildings............................................................. 26,111 25,569
Machinery and equipment............................................... 178,186 171,791
Construction in progress.............................................. 6,620 7,670
-------- --------
215,362 209,475
Less accumulated depreciation, amortization and valuation allowance... 136,385 110,519
-------- --------
78,977 98,956
Investments in equity affiliates -- Note C.............................. 7,374 8,061
Other assets............................................................ 12,087 17,131
-------- --------
Total assets....................................................... $169,607 $208,936
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................................................... $ 30,123 $ 43,374
Accrued liabilities -- Note D......................................... 26,087 21,247
Short-term borrowings -- Note E....................................... 5,000 6,811
-------- --------
Total current liabilities.......................................... 61,210 71,432
Long-term debt -- Note E................................................ 125,000 125,000
Preferred stock of subsidiary -- Note H................................. -- 15,000
Other long-term liabilities............................................. 60,953 49,655
Shareholders' equity (deficit) -- Notes E and I:
Common stock, $0.01 par value, authorized 500,000 shares, issued 442.5
shares and 162,994 shares at December 31, 1995 and 1994,
respectively....................................................... -- 2
Additional paid-in capital............................................ 38,922 4,164
Retained-earnings deficit............................................. (107,737) (55,541)
Additional minimum pension liability.................................. -- (763)
-------- --------
(68,815) (52,138)
Less treasury stock, 65.1 shares and 428 shares at December 31, 1995
and 1994, respectively............................................. (8,741) (13)
-------- --------
Total shareholders' equity (deficit)............................... (77,556) (52,151)
-------- --------
Total liabilities and shareholders' equity (deficit)............... $169,607 $208,936
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 116
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------
1995 1994 1993
--------- --------- --------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net sales............................................... $ 357,179 $ 405,183 $367,970
Cost of goods sold...................................... 324,012 361,510 325,702
--------- --------- --------
Gross profit....................................... 33,167 43,673 42,268
Selling, administrative and general..................... 18,218 18,471 16,985
Research and development................................ 6,882 6,941 6,647
Plant closure costs -- Note J........................... 32,986 31,589 --
Interest expense........................................ 17,854 17,174 16,466
Preferred dividends of subsidiary -- Note H............. 1,629 1,890 1,908
Other expense (income) -- Note K........................ 3,646 2,808 1,608
Patent defense costs.................................... -- 1,700 --
--------- --------- --------
Loss before taxes.................................. (48,048) (36,900) (1,346)
Provision for income taxes -- Note L.................... 4,168 503 713
--------- --------- --------
Loss before extraordinary item..................... (52,216) (37,403) (2,059)
Loss on debt extinguishment, net of income tax
tax benefit -- Note E................................. -- -- (3,229)
--------- --------- --------
Net loss........................................... $ (52,216) $ (37,403) $ (5,288)
========= ========= ========
Loss per common share -- Note I:
Before extraordinary item............................. $(267,912) $(230,314) $(12,741)
Extraordinary item.................................... -- -- (19,982)
--------- --------- --------
Net loss........................................... $(267,912) $(230,314) $(32,723)
========= ========= ========
194.9 162.4 161.6
Weighted average common shares outstanding -- Note I.... ========= ========= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 117
MWC HOLDINGS, INC. SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL
ADDITIONAL RETAINED- MINIMUM
COMMON PAID-IN EARNINGS PENSION TREASURY
STOCK CAPITAL DEFICIT LIABILITY STOCK TOTAL
------ ---------- --------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992........ $ 2 $ 4,145 $ (13,085) $ -- $ (39) $ (8,977)
Net loss for 1993................. -- -- (5,288) -- -- (5,288)
Accretion on preferred stock of
subsidiary...................... -- -- 164 -- -- 164
--- ------- --------- ----- ------- --------
Balance, December 31, 1993........ 2 4,145 (18,209) -- (39) (14,101)
Sale of treasury stock............ -- 19 -- -- 26 45
Net loss for 1994................. -- -- (37,403) -- -- (37,403)
Accretion on preferred stock of
subsidiary...................... -- -- 71 -- -- 71
Adjustment to additional minimum
pension liability............... -- -- -- (763) -- (763)
--- ------- --------- ----- ------- --------
Balance, December 31, 1994........ 2 4,164 (55,541) (763) (13) (52,151)
Issuance of common stock.......... 3 37,022 -- -- -- 37,025
Purchase of treasury stock and
common shares retired........... -- (2,269) -- -- (8,728) (10,997)
Common stock reverse split........ (5) 5 -- -- -- --
Net loss for 1995................. -- -- (52,216) -- -- (52,216)
Accretion on preferred stock of
subsidiary...................... -- -- 20 -- -- 20
Adjustment to additional minimum
pension liability............... -- -- -- 763 -- 763
--- ------- --------- ----- ------- --------
Balance, December 31, 1995........ $ -- $ 38,922 $(107,737) $ -- $ (8,741) $(77,556)
=== ======= ========= ===== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 118
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
-------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss.................................................... $(52,216) $(37,403) $ (5,288)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Plant closure costs...................................... 32,986 31,589 --
Depreciation and amortization................................. 19,047 19,346 17,454
Postretirement benefits other than pensions -- Note G....... 1,764 2,934 4,985
Deferred income taxes (credit).............................. 5,189 (2,004) (2,573)
Write-down of assets to realizable value.................... 2,263 1,909 --
Preferred dividends of subsidiary........................... 1,629 1,890 1,908
Extraordinary item -- loss on debt extinguishment........... -- -- 4,893
Other....................................................... 1,974 2,127 3,848
Net change in operating assets and liabilities -- Note
M................................................... (5,398) (2,392) 122
-------- -------- ---------
Net cash provided by operating activities.............. 7,238 17,996 25,349
Cash Flows from Investing Activities
Additions to property, plant and equipment:
Capital expenditures..................................... (9,284) (13,069) (12,433)
Tooling and dunnage...................................... (4,959) (5,293) (3,380)
Other.................................................... 190 14 (140)
-------- -------- ---------
Net cash used for investing activities................. (14,053) (18,348) (15,953)
Cash Flows from Financing Activities
Issuance of common stock.................................... 37,025 -- --
Purchase of treasury stock and common stock retired......... (10,977) -- --
Purchase of preferred stock of subsidiary................... (17,069) -- --
Proceeds from (repayment of) revolving credit loans with
financial institutions................................... (1,811) 3,085 3,726
Payment of preferred stock dividends by subsidiary.......... -- (1,800) (4,256)
Sale of treasury stock...................................... -- 45 --
Proceeds from issuance of Motor Wheel Senior Notes.......... -- -- 125,000
Retirement of Subordinated Notes............................ -- -- (107,665)
Repayment of term and revolving credit loans with financial
institutions............................................. -- -- (21,063)
Debt issuance costs......................................... -- -- (5,117)
-------- -------- ---------
Net cash provided by (used for) financing activities... 7,168 1,330 (9,375)
-------- -------- ---------
Increase in cash....................................... 333 978 21
Cash at beginning of year..................................... 1,018 40 19
-------- -------- ---------
Cash at end of year.................................... $ 1,351 $ 1,018 $ 40
======== ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 119
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Description of Business: MWC Holdings, Inc. (the "Company") and its
wholly-owned subsidiary, Motor Wheel, operate primarily in one business segment.
Holdings designs, manufactures and markets wheels, rims and brake components for
passenger cars, light trucks and commercial highway vehicles. Each of Holdings'
plants produces and ships products principally to original equipment
manufacturers in North America and Japan. Substantially all of Holdings'
accounts receivable are from these manufacturers. Holdings has two major
customers. Sales to its largest customer represented 40%, 44% and 37% of net
sales in 1995, 1994 and 1993, respectively. Sales to its second largest customer
represented 13%, 15% and 24% of net sales in 1995, 1994 and 1993, respectively.
Total export sales were $70,580,000, $82,700,000 and $73,470,000 in 1995, 1994
and 1993, respectively, which include sales to unaffiliated customers in Canada
of $45,895,000, $56,065,000 and $59,810,000 in 1995, 1994 and 1993,
respectively, and the remainder predominantly representing sales to unaffiliated
customers in Mexico and Japan.
Principles of Consolidation: The consolidated financial statements include
the accounts of Holdings and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Companies in which
Holdings has stock ownership from 20 to 50 percent are accounted for by the
equity method.
Revenue Recognition: Sales and related costs of goods sold are recognized
when the products are shipped.
Inventories: Inventories are stated at the lower of cost or market. Cost
was determined by the last-in, first-out (LIFO) method for substantially all
inventories at December 31, 1995 and 1994.
Property, Plant and Equipment: Property, plant and equipment are stated on
the basis of cost. Expenditures for major improvements are capitalized while
repairs and maintenance are charged to expense. Depreciation is computed by the
straight-line method based upon the estimated useful lives of the assets, which
range from 20 to 40 years for buildings and land improvements and from 3 to 15
years for machinery and equipment. Expenditures for tooling and dunnage are
included in machinery and equipment and are amortized on a straight-line basis
over the estimated useful lives of the assets which range from 2 to 5 years.
When a tooling or dunnage expenditure is fully amortized, the cost and
accumulated amortization are eliminated from the accounts.
Holdings capitalizes interest costs incurred in constructing major
improvements. Interest costs of $76,000, $66,000 and $461,000 were capitalized
in 1995, 1994, and 1993, respectively. Construction in progress at December 31,
1995 primarily relates to normal ongoing improvements and replacements of
machinery and equipment.
Debt Issuance Costs: Debt issuance costs at December 31, 1995 represent
expenditures associated with the issuance and sale of the 11 1/2% senior notes
(the "Motor Wheel Senior Notes") and the borrowings under Motor Wheel's credit
agreement with financial institutions. These costs are being amortized using the
interest yield method over the terms of the agreements, and the unamortized
balance of $3,134,000 at December 31, 1995 is included in other assets.
Management Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported net income
during the reporting period. Actual results could differ from those estimates.
Long-Lived Assets: In March 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of.
Companies are required to adopt this standard no later than 1996. Holdings
F-7
<PAGE> 120
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
has not completed the analysis of the impact of this standard, but management
does not believe the impact will be significant.
NOTE B -- INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Raw materials and supplies............................... $15,315 $16,860
Work in process.......................................... 6,536 6,578
Finished product......................................... 14,863 12,770
------- -------
36,714 36,208
Less excess of FIFO cost over LIFO....................... (1,971) (1,507)
Less valuation allowance -- Note J....................... (2,800) (1,514)
------- -------
$31,943 $33,187
======= =======
</TABLE>
NOTE C -- EQUITY INVESTMENTS
Holdings has a 50% common stock ownership in Aluminum Wheel Technology,
Inc. ("Alumitech"), a manufacturer of cast aluminum wheels. Alumitech has
$39,881,000 of bank loans which are 50% guaranteed by Holdings.
Holdings has a 50% common stock ownership in Riviera Tool Company, a
manufacturer of stamping dies that are sold to domestic automobile manufacturers
and their suppliers.
Alumitech's fiscal year end is December 31, 1995, and Riviera Tool
Company's fiscal year end is August 31, 1995. Summarized combined financial
information at December 31, 1995 and 1994, and for the three years ended
December 31, 1995 for these equity investments, is as follows:
<TABLE>
<CAPTION>
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
At December 31,
Current assets......................................... $23,582 $25,637
Noncurrent assets...................................... 51,080 55,249
------- -------
Total assets........................................ $74,662 $80,886
======= =======
Current liabilities...................................... $24,494 $30,022
Noncurrent liabilities................................. 36,508 35,850
------- -------
Total liabilities................................... 61,002 65,872
Shareholders' equity................................... 13,660 15,014
------- -------
Total liabilities and shareholders' equity.......... $74,662 $80,886
======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31
-----------------------------
1995 1994 1993
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.......................................... $74,785 $78,495 $67,552
Gross profit....................................... 6,513 6,186 6,994
Operating profit................................... 2,973 2,184 3,694
Net loss........................................... (1,115) (1,803) (2,417)
</TABLE>
F-8
<PAGE> 121
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In 1993, Riviera Tool Company recorded a loss of $2,517,000 to write off an
investment in and receivable from an affiliated company which ceased business
operations during 1994 and sold substantially all of its assets.
For a substantial portion of 1993, Holdings carried a note receivable
balance due from Dotson Wheel Corporation, Inc. ("Dotson"), a manufacturer of
off-highway wheel and rim products in which Holdings also held a 30% common
stock ownership. Dotson ceased business operations during 1993 and sold
substantially all of its assets. Correspondingly, Holdings recorded a $1,289,000
loss in 1993 to write off the note receivable.
NOTE D -- ACCRUED LIABILITIES
Accrued liabilities are comprised of:
<TABLE>
<CAPTION>
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Payroll and compensated absences.......................... $ 5,233 $ 6,093
Interest.................................................. 4,884 4,958
Workers' compensation..................................... 3,363 3,414
Plant closure costs....................................... 3,340 1,000
Other..................................................... 9,267 5,782
------- -------
$26,087 $21,247
======= =======
</TABLE>
NOTE E -- LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of $125,000,000 of
Motor Wheel Senior Notes due March 1, 2000 which are unsecured with interest
payable semiannually on March 1 and September 1 of each year.
Motor Wheel has a revolving credit agreement which provides borrowing
capacity up to $50,000,000 through March 1998, subject to limitations based on
the value of Motor Wheel's inventory and receivables. During 1995, Motor Wheel
negotiated an amendment to its existing revolving credit agreement which
extended the maturity date of the agreement from March 1996 to March 1998,
decreased the interest rates on borrowings under the agreement, eliminated
certain financial covenants and provided an option, at the mutual consent of
Motor Wheel and its lender, for an extension of one year on the maturity date.
The credit agreement also provides up to $25,000,000 in letters of credit with
the amount of any outstanding letters of credit applied to reduce Motor Wheel's
borrowing capacity.
Short-term borrowings outstanding at December 31, 1995 represent borrowings
under this agreement based upon Eurodollar interest rates (8.44% at December 31,
1995). The agreement also provides for borrowings based upon prime interest
rates plus 1%, none of which were outstanding at December 31, 1995. The interest
rate on the short term borrowings outstanding at December 31, 1994 was 10 1/4%.
Interest is payable monthly. Outstanding letters of credit totaled $12,532,000
at December 31, 1995 and included $6,667,000 in standby letters of credit
partially to support Holdings' guarantee of 50% of Alumitech's bank loans (see
Note C). At December 31, 1995, the unused and available portion of commitment
under the credit agreement was approximately $22,300,000.
The liquidity position of Holdings, primarily the level of unused and
available portion of commitment under the credit agreement, is improved over
prior years despite the incurrence of net losses over the past three years and
the resulting shareholders' deficit. The significant items contributing to these
net losses include the plant closure costs and other noncash expenses recorded
over the past three years.
F-9
<PAGE> 122
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
In 1993, Holdings completed a refinancing which included the issuance of
the Motor Wheel Senior Notes, the retirement of $105 million face value of
Senior Subordinated Notes, the repayment of outstanding term loans, the payment
of $3,375,000 of accrued preferred stock dividends and the payment of other
costs related to the refinancing. Holdings recognized an extraordinary charge of
$3,229,000, net of the related income tax effect of $1,664,000, which consisted
primarily of the write-off of unamortized debt issuance costs and the redemption
premium for the 11 3/8% Senior Subordinated Notes.
The indenture relating to the Motor Wheel Senior Notes include covenants
that, among other things, limit Motor Wheel's ability to create or incur
additional indebtedness, create or incur additional liens, sell assets and
engage in certain transactions. The revolving credit agreement includes a limit
on Motor Wheel's annual capital expenditures in the amount of $15,000,000, which
can be exceeded provided that certain minimum levels of borrowing availability
have been maintained. Substantially all accounts receivable and inventory are
collateralized under the credit agreement for short-term borrowings. Although
the remaining assets are not collateralized, under the indenture relating to the
Motor Wheel Senior Notes Holdings has agreed not to pledge these assets as
collateral for other borrowings.
Interest paid was $16,340,000, $16,300,000 and $14,920,000 in 1995, 1994
and 1993, respectively.
The fair value of the Motor Wheel Senior Notes outstanding at December 31,
1995 was approximately 88% of the carrying amount. Based on borrowing rates
currently available to Holdings for bank loans with similar terms, the fair
value of the amounts outstanding under Motor Wheel's credit agreement
approximate the carrying amounts at December 31, 1995.
NOTE F -- PENSIONS
Holdings has defined benefit pension plans covering substantially all
employees. Benefits for plans covered by collective bargaining agreements are
based upon a fixed amount per year of credited service while benefits for other
plans are based upon years of service, compensation and social security
benefits.
Holdings' funding policy is to contribute annually an actuarially
determined amount which includes current and prior service cost. Plan assets
include corporate and government debt securities, marketable equity securities
and cash equivalents.
The following table sets forth the plans' funded status and amounts
recognized in Holdings' consolidated balance sheets at December 31, 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Accumulated benefits obligation including vested benefits
of $80,312 and $71,213 at December 31, 1995 and 1994,
respectively............................................ $83,504 $79,782
======= =======
Projected benefit obligation for service rendered to
date.................................................... $85,789 $82,697
Plan assets at fair value................................. 68,835 61,117
------- -------
Projected benefit obligation in excess of plan assets..... 16,954 21,580
Unrecognized net gain from past experience different from
that assumed............................................ 3,051 504
Unrecognized prior service costs resulting from plan
amendments.............................................. (3,492) (4,581)
Adjustment required to recognize minimum liability........ 2,886 4,595
------- -------
Accrued pension liability................................. $19,399 $22,098
======= =======
</TABLE>
Accrued pension liability is included under the captions "Accrued
liabilities" and "Other long-term liabilities."
F-10
<PAGE> 123
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Intangible assets in the amounts of $2,886,000 and $3,832,000 as of
December 31, 1995 and 1994, respectively, related to the minimum liability
recognized have been included in other assets.
Pension expense consists of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost-benefits earned during the period.... $ 1,868 $ 2,341 $ 2,074
Interest cost on projected benefit obligation..... 6,111 5,796 5,377
Actual (return) loss on assets.................... (14,115) 1,333 (6,176)
Net amortization and deferral..................... 9,909 (5,783) 2,121
-------- ------- -------
$ 3,773 $ 3,687 $ 3,396
======== ======= =======
</TABLE>
In 1995, there were certain curtailment and termination events primarily
relating to work-force reductions which resulted in the recognition of a net
gain of $969,000. In 1994, as part of a provision for plant closure costs (see
Note J), Holdings recognized a loss of $4,527,000.
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7 3/4% at December 31, 1995, 8 1/2% at December
31, 1994 and 7 3/4% at December 31, 1993. The assumed long-term rate of return
on plan assets was 9 1/2%. The rate of increase in future compensation, where
applicable, was 4 1/2%.
Holdings has 401(K) plans covering substantially all domestic employees.
Under these various plans, Holdings provides differing levels of matching
contributions which totaled $497,000, $423,000 and $307,000 in 1995, 1994 and
1993, respectively.
NOTE G -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Holdings provides substantially all employees with health care and life
insurance benefits following retirement with the primary exception being that
these benefits are not extended to the majority of employees hired after
December 31, 1992. Health care benefit levels for all current retirees are based
upon company contributions which are substantially limited to 1992 levels of
health care costs requiring certain levels of contributions by the retirees. The
cost of life insurance benefits is fully paid by Holdings. Postretirement
benefit levels for active plan participants (future retirees) are similar to the
benefit levels for current retirees; however, differences exist for certain
active plan participants who are covered by existing collective bargaining
agreements.
The following table displays the components of Holdings' accumulated
postretirement benefit obligation as of December 31, 1995 and 1994 reconciled to
amounts recognized in the accompanying consolidated balance sheet.
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Retirees................................................. $ 33,970 $ 30,801
Fully eligible active plan participants.................. 9,070 12,123
Other active plan participants........................... 12,273 8,681
-------- --------
55,313 51,605
Unrecognized prior service cost.......................... (1,179) --
Unrecognized net gain (loss)............................. 2,157 5,005
Unrecognized transition obligation....................... (41,201) (44,341)
-------- --------
Accrued postretirement benefit cost...................... $ 15,090 $ 12,269
======== ========
</TABLE>
F-11
<PAGE> 124
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Effective January 1, 1993, Holdings adopted SFAS No. 106, Employer's
Accounting for Postretirement Benefits Other Than Pensions. The estimated
transition obligation as of January 1, 1993 was $78,928,000, measured based upon
the substantive plans in effect as of that date. The transition obligation
represented that portion of future retiree benefit costs related to services
already rendered by both active plan participants and retirees as of January 1,
1993. This obligation is being recognized over an amortization period of 20
years. Since January 1, 1993, Holdings has negotiated reductions in benefit
levels with certain active plan participants who are covered under collective
bargaining agreements. The impact of these lower benefit levels has been
accounted for as reductions to the unamortized transition obligation and a
corresponding reduction in ongoing net periodic postretirement benefit costs.
Net periodic postretirement benefit cost is comprised of:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost......................................... $ 433 $ 674 $ 1,377
Interest cost........................................ 4,280 4,378 6,051
Amortization of transition obligation................ 2,686 2,818 3,435
Amortization of prior service cost................... 43 -- --
------ ------ -------
Net periodic postretirement benefit cost............. $7,442 $7,870 $10,863
====== ====== =======
</TABLE>
The net periodic postretirement benefit cost has exceeded Holdings' cash
disbursements for such benefits by $1,764,000, $2,934,000 and $4,985,000 in
1995, 1994 and 1993, respectively. Holdings expects to continue its policy of
paying postretirement benefits as incurred, so there is no anticipated effect on
the timing of cash disbursements relating to postretirement benefits.
In 1995, there were certain curtailment and termination events primarily
relating to work-force reductions which resulted in the recognition of a net
loss of $215,000. In 1994, as part of a provision for plant closure costs (see
Note J), Holdings recognized a loss of $4,350,000.
The assumed weighted-average health care cost trend rate is 8.0% for 1996
and is assumed to decrease linearly to 4 3/4% for 2001 and remain at that level
thereafter. The health care cost trend rate assumption can have a significant
effect on the amounts reported. Increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1995 by $850,000, and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year ended December 31, 1995 by $130,000.
The assumed weighted average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation was 7 3/4% at
December 31, 1995, 8 1/2% at December 31, 1994 and 7 3/4% at December 31, 1993.
NOTE H -- PREFERRED STOCK
Prior to November 7, 1995 (see Note I), Motor Wheel had 150,000 outstanding
shares of no-par-value Cumulative Exchangeable Preferred Stock ("Motor Wheel
Preferred Stock"). The initial dividend rate was $11.25 per share per annum
through April 1, 1993 and increased thereafter by $0.50 per share each year on
April 1. The accretion of the discount at the time of issuance of the increasing
rate Motor Wheel Preferred Stock of $20,000, $71,000 and $164,000 in 1995, 1994
and 1993, respectively, has been reflected in net loss.
NOTE I -- ISSUANCE OF COMMON STOCK
On November 7, 1995, Holdings completed certain transactions in which an
equity investment was made in Holdings in exchange for a controlling interest in
Holdings. A portion of the proceeds of this investment was used by Holdings to
(i) purchase certain shares of its common stock; (ii) purchase the outstanding
shares of
F-12
<PAGE> 125
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Motor Wheel Preferred Stock; and (iii) pay transaction costs. In conjunction, a
reverse split of the common shares of Holdings was completed whereby holders
received one share for every thousand shares held. The loss per common share
amounts is based on the weighted average number of common shares outstanding,
which are presented on a pro forma basis for all years giving effect to the
reverse split in 1995.
An officer of Holdings has options to purchase 16.371 shares of Holdings'
common stock at an exercise price of $135,000 per share. Such options vest and
become exercisable ratably over a five-year period beginning on December 31,
1996. Vesting of the options is subject to Holdings achieving certain
performance targets but shall vest in full no later than 2003, provided the
officer remains an employee of Holdings.
NOTE J -- PLANT CLOSURE COSTS
In 1995, Holdings recorded provisions related to two plant closure matters.
Holdings commenced efforts to address manufacturing capacity and noncompetitive
costs in both its automotive steel wheel and automotive brake operations. As a
result of these efforts, manufacturing operations at both the Mendota, Illinois,
and Ypsilanti, Michigan, facilities will be terminated. Closure of these
facilities will commence in 1996. Holdings is currently evaluating various
options with respect to satisfying its expected production requirements within
automotive wheel and brake operations.
Holdings has recorded provisions totaling $32,986,000, which consist of the
following estimates:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Asset write-down to estimated realizable values.............. $ 16,396
Curtailment costs associated with postretirement benefits.... 3,525
Facility maintenance costs during estimated holding period... 5,940
Postemployment benefits...................................... 7,125
-------
$ 32,986
=======
</TABLE>
In 1994, Holdings recorded provisions related to plant-closure matters
associated with reducing its manufacturing capacity within its automotive wheel
operations. Holdings recorded provisions totaling $31,589,000, which consisted
of the following estimates:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Asset write-downs to estimated realizable values............. $ 12,541
Curtailment costs associated with postretirement benefits.... 8,877
Facility maintenance costs during estimated holding period... 6,596
Postemployment benefits...................................... 3,575
-------
$ 31,589
=======
</TABLE>
During 1995, Holdings transferred production of automotive steel wheels
from Lansing to another steel wheel facility, reduced employment levels and
commenced efforts to dispose of excess property, plant and equipment. Also in
1995, Holdings completed the sale of certain equipment and inventory associated
with its Luckey manufacturing operations.
As of December 31, 1995, Holdings' recorded liability for the Lansing and
Luckey plant-closure costs was $9,675,000, which consists of facility
maintenance costs and postemployment benefits. Liabilities related to these
plant closures for pensions and postretirement benefits other than pensions are
included in the amounts disclosed in Notes F and G. In addition, remaining
valuation allowances for inventory and property, plant and equipment total
$708,000 and $7,968,000, respectively. There were no significant adjustments
made in 1995 to the plant-closure cost estimates recorded in 1994.
F-13
<PAGE> 126
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE K -- OTHER EXPENSE (INCOME)
Other expense (income) is comprised of:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Write-down of assets to realizable value.............. $2,263 $1,909 $ --
Restructuring costs................................... 846 -- --
Equity in net loss of affiliates -- Note C............ 687 1,024 2,666
License and royalty agreements........................ (124) (341) (411)
Other................................................. (26) 216 (647)
------ ------ ------
$3,646 $2,808 $1,608
====== ====== ======
</TABLE>
NOTE L -- INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Holdings' deferred tax assets and liabilities as of December 31, 1995 and 1994
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- -----------------------
DEFERRED DEFERRED DEFERRED DEFERRED
TAX TAX TAX TAX
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax over book depreciation........................... $ -- $12,603 $ -- $14,680
Plant-closure costs.................................. 17,460 -- 10,740 --
Employee benefit accruals............................ 13,545 -- 10,692 --
Other................................................ 1,430 709 443 604
Net operating loss carryforwards..................... 4,451 -- 2,965 --
-------- ------- -------- -------
36,886 13,312 24,840 15,284
Tax credit carryforwards............................. 5,345 -- 6,373 --
Valuation allowance for deferred tax assets.......... (28,919) -- (10,740) --
-------- ------- -------- -------
Total deferred taxes............................... $ 13,312 $13,312 $ 20,473 $15,284
======== ======= ======== =======
</TABLE>
As disclosed in Note I, certain transactions were completed in 1995 which
resulted in a change in control in the ownership of Holdings. Under certain
provisions of the Internal Revenue Code, a change in control can significantly
impact a taxpayer's ability to utilize net operating loss and tax credit
carryforwards. The change of control has a significant impact on Holdings'
ability to utilize net operating loss and tax credit carryforwards. Holdings
also incurred additional operating losses and provided additional costs for
plant closures in 1995. As a result, Holdings provided a total of $18,179,000 to
increase the valuation allowance against deferred tax assets. Net deferred tax
assets of $5,189,000 at December 31, 1994 include $1,250,000 under the caption
"Prepaid expenses and other current assets" and $3,939,000 under the caption
"Other assets."
F-14
<PAGE> 127
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The provision (credit) for income taxes is comprised of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Deferred expense (credit):
Plant-closure costs............................ $ (6,720) $(10,740) $ --
Employee benefits.............................. (2,853) (962) (1,901)
Depreciation................................... (2,077) (1,126) (706)
Other items, net............................... (882) (381) (19)
-------- -------- -------
(12,532) (13,209) (2,626)
Net operating loss carryforwards............... (1,486) -- --
Tax credit carryforwards....................... 1,028 (1,936) (1,479)
Reinstatement due to utilization of net
operating loss carryforwards................ -- 2,401 1,532
-------- -------- -------
(12,990) (12,744) (2,573)
Adjustment to valuation allowance for deferred
tax assets..................................... 18,179 10,740 --
-------- -------- -------
Total deferred expense (credit)................ 5,189 (2,004) (2,573)
Currently payable (refundable)................... (1,021) 2,507 1,622
-------- -------- -------
4,168 503 (951)
Tax benefit allocated to extraordinary item --
Note E......................................... -- -- 1,664
-------- -------- -------
$ 4,168 $ 503 $ 713
======== ======== =======
</TABLE>
Net income taxes paid were $300,000, $2,078,000 and $1,204,000 in 1995, 1994 and
1993, respectively.
A reconciliation of income taxes calculated at the statutory rate of 34% to
the provision for income taxes follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Credit at Federal statutory rate................ $(16,336) $(12,546) $(458)
Adjustments to taxes at statutory rate:
Adjustment to valuation allowance for deferred
tax assets................................. 18,179 10,740 --
Nondeductible losses from foreign
subsidiaries............................... 1,248 854 259
Nondeductible preferred dividends of
subsidiary................................. 554 643 649
Nondeductible losses from equity
investments................................ 320 391 48
Other items................................... 203 421 215
------
-------- -------- ---
Income taxes.................................. $ 713
$ 4,168 $ 503
=========
======== ========
</TABLE>
For United States tax-reporting purposes, at December 31, 1995, Holdings
has net operating loss carryforwards of approximately $13,091,000, utilization
of which is limited to approximately $250,000 per year through the final year of
expiration in 2010, and tax credit carryforwards of approximately $5,345,000
principally related to alternative minimum tax.
Effective January 1, 1993, Holdings adopted SFAS No. 109, Accounting for
Income Taxes. This adoption did not have a significant impact on the financial
position, results of operations or cash flows of Holdings.
F-15
<PAGE> 128
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE M -- NET CHANGE IN OPERATING ASSETS AND LIABILITIES
The net change in operating assets and liabilities is comprised of:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Accounts receivable............................... $ 12,472 $(6,294) $(5,186)
Inventories....................................... (1,277) 693 (3,496)
Other operating assets............................ (2,732) (2,306) (411)
Operating liabilities............................. (13,861) 5,515 9,215
-------- ------- -------
$ (5,398) $(2,392) $ 122
======== ======= =======
</TABLE>
NOTE N -- COMMITMENTS AND CONTINGENCIES
Holdings leases certain property, plant and equipment under various
noncancelable operating leases. Original lease terms generally expire within
fifteen years but may be renewed by Holdings. Many of the leases provide that
Holdings will pay taxes assessed against leased property and the cost of
insurance and maintenance.
Future minimum lease payments under noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
1996......................................................... $ 3,263
1997......................................................... 2,446
1998......................................................... 1,713
1999......................................................... 1,555
2000......................................................... 1,539
-------
10,516
Thereafter................................................... 6,884
-------
Total future minimum lease payments.......................... $ 17,400
=======
</TABLE>
Total rental expense charged to income was $4,000,000, $4,800,000 and
$4,900,000 in 1995, 1994 and 1993, respectively.
Holdings, in the normal course of business, is involved in various legal
actions. Management, after taking into consideration legal counsel's
evaluations, is of the opinion that the outcome thereof will not have a material
impact on the financial position, operating results or cash flows of Holdings.
In addition, Holdings is party to various environmental cleanup and product
liability matters. Holdings was formed to acquire Motor Wheel from The Goodyear
Tire & Rubber Company ("Goodyear"). At the time of the acquisition of Motor
Wheel from Goodyear in December 1986 (the "Acquisition"), Goodyear agreed to be
responsible for, and to indemnify Holdings with respect to, all liabilities,
claims and obligations for environmental pollutants, or other substances
generated prior to December 30, 1986, for the plants then owned by Motor Wheel,
and April 1, 1987, for the plants previously owned by Goodyear. Also at the time
of the Acquisition, Goodyear agreed to indemnify Holdings for all costs and
liabilities arising from any product warranty, product liability, other claims
or obligations for products manufactured by Motor Wheel prior to December 30,
1986 and for products manufactured by Goodyear at the Akron, Ohio, plant prior
to April 1, 1987. After taking into consideration both the Goodyear
indemnification and actions taken by Holdings since the Acquisition to limit
Holdings's exposure in these matters, management is of the opinion that the
outcome thereof will not have a material impact on the financial position,
operating results or cash flows of Holdings.
F-16
<PAGE> 129
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE O -- SUBSEQUENT EVENT
On March 28, 1996, Holdings signed a definitive Agreement and Plan of
Merger (the "Merger Agreement"), which provides for the merger of Holdings with
and into Hayes Wheels International, Inc. (the "Company"). At the effective time
of the merger, the separate corporate existence of Holdings shall thereupon
cease and the Company shall continue as the surviving corporation. The Board of
Directors of both Holdings and the Company approved the Merger Agreement and the
transactions contemplated thereby at their respective meetings held on March 28,
1996. In connection with the merger and the related financings, it is
anticipated that all of the outstanding Motor Wheel Senior Notes due 2000 of
Holdings will be retired in accordance with their terms.
Consummation of the merger is subject to various conditions, including: (i)
receipt of approval by the stockholders of Holdings and the Company of the
Merger Agreement and the merger; (ii) expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended; (iii) filing and effectiveness of a Proxy and Registration
Statement; (iv) receipt of financing necessary to consummate the transactions;
and (v) satisfaction of certain other conditions. The merger is expected to be
consummated in midsummer 1996.
F-17
<PAGE> 130
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31
------------------------
1996 1995
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................. $ 326 $ 442
Accounts receivable, net of allowance of $250 in 1996 and in
1995.......................................................... 32,018 46,953
Inventories -- Note B............................................ 34,082 35,980
Prepaid expenses and other current assets........................ 4,237 5,630
--------- --------
Total current assets........................................ 70,663 89,005
Property, plant and equipment...................................... 217,148 213,043
Less accumulated depreciation, amortization and valuation
allowance..................................................... 140,241 114,896
--------- --------
76,907 98,147
Investments in equity affiliates................................... 6,499 8,492
Other assets....................................................... 13,034 17,328
--------- --------
Total assets................................................ $ 167,103 $ 212,972
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................. $ 28,519 $ 37,564
Accrued liabilities.............................................. 22,079 18,965
Short-term borrowings............................................ 12,021 14,591
--------- --------
Total current liabilities................................... 62,639 71,120
Long-term debt..................................................... 125,000 125,000
Other long-term liabilities........................................ 60,947 51,338
Shareholders' equity (deficit):
Common stock, outstanding........................................ -- 2
Additional paid-in capital....................................... 39,222 4,164
Retained-earnings deficit........................................ (111,964) (52,876)
Additional minimum pension liability............................. (763)
--------- --------
(72,742) (49,473)
Less treasury stock.............................................. (8,741) (13)
Total shareholders' equity (deficit)........................ (81,483) (49,486)
--------- --------
Total liabilities and shareholders' equity (deficit)........ $ 167,103 $ 212,972
========= ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-18
<PAGE> 131
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------
1996 1995
-------- --------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net Sales............................................................ $ 79,590 $105,605
Costs of goods sold.................................................. 73,497 91,776
-------- --------
Gross profit.................................................. 6,093 13,829
Selling, administrative and general.................................. 4,136 4,626
Research and development............................................. 1,240 1,891
Interest expense..................................................... 4,302 4,513
Other (income) expense............................................... 631 (354)
Preferred dividends of subsidiary.................................... -- 471
Income (loss) before taxes.................................... (4,216) 2,687
Provision for income taxes........................................... 11 29
-------- --------
Net income (loss)............................................. $ (4,227) $ 2,653
======== ========
Income (loss) per common share:
Net income (loss) per common share............................ $(11,183) $ 16,319
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-19
<PAGE> 132
MWC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss)...................................................... $(4,227) $ 3,124
Adjustments to reconcile net income (loss) to net cash used for
operating activities:
Depreciation and amortization............................................ 4,542 4,901
Postretirement benefits other than pensions............................ 710 600
Debt issuance amortization............................................. 208 208
Equity in net (income) loss of affiliates.............................. 875 (431)
Net Change in operating assets and liabilities.................... (7,981) (12,667)
------- --------
Net cash used for operating activities............................ (5,873) (4,265)
Cash Flows from Investing Activities
Additions to property, plant and equipment............................. (2,480) (4,094)
Disposals of property, plant and equipment............................. 7 3
------- --------
Net cash used for investing activities............................ (2,473) (4,091)
Cash Flows from Financing Activities
Issuance of common shares.............................................. 300
Proceeds from revolving credit loans with financial institutions....... 7,021 7,780
------- --------
Net cash provided by financing activities......................... 7,321 7,780
------- --------
Decrease in cash.................................................. (1,025) (576)
Cash at beginning of year................................................ 1,396 966
------- --------
Cash at end of period............................................. $ 371 $ 390
======= ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-20
<PAGE> 133
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. Adjustments consisted of only normal recurring accruals.
Operating results for the three month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
NOTE B -- INVENTORIES
Inventories are comprised of:
<TABLE>
<CAPTION>
MARCH 31,
1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Raw materials and supplies....................... $ 13,441
Work in process.................................. 6,939
Finished product................................. 18,455
-------
38,835
Less excess of FIFO cost over LIFO............... (2,088)
Less valuation allowance......................... (2,665)
-------
$ 34,082
=======
</TABLE>
NOTE C -- INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share amounts are based on the weighted average
number of common shares outstanding and give effect to increasing preferred
stock dividend requirements in 1995. The weighted average number of common
shares outstanding was 1,100 for the periods presented.
NOTE D -- CONTINGENCIES
Holdings, in the normal course of business, is involved in various legal
actions. Management, after taking into consideration legal counsels'
evaluations, is of the opinion that the outcome thereof will not have a material
impact on the financial position, operating results or cash flows of Holdings.
In addition, Holdings is party to various environmental clean-up and
product liability matters. At the time of the acquisition of Holdings from
Goodyear in December 1986 (the "Acquisition"), Goodyear agreed to be responsible
for, and to indemnify Holdings with respect to, all liabilities, claims and
obligations for environmental pollutants, or other substances generated prior to
December 30, 1986, for the plants then owned by Holdings, and April 1, 1987, for
the plants previously owned by Goodyear. Also at the time of the Acquisition,
Goodyear agreed to indemnify Holdings for all costs and liabilities arising from
any product warranty, product liability, other claims or obligations for
products manufactured by Holdings prior to December 30, 1986 and for products
manufactured by Goodyear at the Akron, Ohio plant prior to April 1, 1987. After
taking into consideration both the Goodyear indemnification and actions taken by
Holdings since the Acquisition to limit Holding's exposure in these matters,
management is of the opinion that the outcome thereof will not have a material
impact on the financial position, operating results or cash flows of Holdings.
F-21
<PAGE> 134
MWC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) -- CONTINUED
NOTE E -- OTHER EVENTS
On March 28, 1996, Holdings signed a definitive Agreement and Plan of
Merger (the "Merger Agreement") which provides for the merger of Holdings with
and into Hayes Wheels International, Inc. (the "Company"). At the effective time
of the merger, the separate corporate existence of Holdings shall thereupon
cease and the Company shall continue as the surviving corporation. Pursuant to
the merger, Motor Wheel Corporation will become a wholly-owned subsidiary of the
Company. The Board of Directors of both Holdings and the Company approved the
Merger Agreement and the transactions contemplated thereby at their respective
meetings held on March 28, 1996. In connection with the merger and the related
financings, it is anticipated that all of the outstanding 11 1/2% Senior Notes
due 2000 of the Company will be redeemed in accordance with their terms.
Consummation of the merger is subject to various conditions, including (i)
receipt of approval by the stockholders of Holdings and the Company of the
Merger Agreement and the merger; (ii) expiration or termination of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended; (iii) filing and effectiveness of a Proxy and Registration
Statement; (iv) receipt of financing necessary to consummate the transactions;
and (v) satisfaction of certain other conditions. The merger is expected to be
consummated in mid-summer 1996.
F-22
<PAGE> 135
ANNEXES TO THE
PROXY STATEMENT/PROSPECTUS
<TABLE>
<S> <C>
Annex I Merger Agreement
Annex II Opinion of Goldman, Sachs & Co.
Annex III Section 262 of the Delaware General Corporation Law
</TABLE>
<PAGE> 136
ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
MWC HOLDINGS, INC.
AND
HAYES WHEELS INTERNATIONAL, INC.
DATED AS OF MARCH 28, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 137
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER........................................................... 1
Section 1.1 The Merger........................................................... 1
Section 1.2 Closing.............................................................. 2
Section 1.3 Effective Time....................................................... 2
Section 1.4 Certificate of Incorporation and By-Laws............................. 2
Section 1.5 Directors and Officers............................................... 2
ARTICLE II CONVERSION OF SHARES................................................. 2
Section 2.1 Conversion of Shares................................................. 2
Section 2.2 Exchange Procedures.................................................. 3
Section 2.3 Dividends; Transfer Taxes; Withholding............................... 4
Section 2.4 Fractional Shares.................................................... 5
Section 2.5 Return of Exchange Fund.............................................. 5
Section 2.6 Options.............................................................. 5
Section 2.7 Closing of Company Transfer Books.................................... 6
Section 2.8 Dissenting Shares.................................................... 6
Section 2.9 Further Assurances................................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 6
Section 3.1 Organization and Good Standing....................................... 6
Section 3.2 Certificate of Incorporation and By-Laws............................. 7
Section 3.3 Capitalization....................................................... 7
Section 3.4 Company Subsidiaries................................................. 7
Section 3.5 Corporate Authority.................................................. 8
Section 3.6 Compliance with Applicable Law....................................... 8
Section 3.7 Non-Contravention.................................................... 9
Section 3.8 Government Approvals; Required Consents.............................. 9
Section 3.9 SEC Documents and Other Reports...................................... 9
Section 3.10 Absence of Certain Changes or Events................................. 10
Section 3.11 Actions and Proceedings.............................................. 10
Section 3.12 Absence of Undisclosed Liabilities................................... 10
Section 3.13 Contracts............................................................ 10
Section 3.14 Taxes................................................................ 10
Section 3.15 Title to Properties; Encumbrances.................................... 11
Section 3.16 Intellectual Property................................................ 12
Section 3.17 Information in Disclosure Documents and Registration Statement....... 12
Section 3.18 Employee Benefit Plans; ERISA........................................ 12
Section 3.19 Environmental Matters................................................ 14
Section 3.20 Labor Matters........................................................ 16
Section 3.21 Affiliate Transactions............................................... 16
Section 3.22 Opinion of Financial Advisor......................................... 16
Section 3.23 Brokers.............................................................. 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDINGS........................... 17
Section 4.1 Organization and Good Standing....................................... 17
Section 4.2 Certificate of Incorporation and By-Laws............................. 17
Section 4.3 Capitalization....................................................... 17
Section 4.4 Holdings Subsidiaries................................................ 18
Section 4.5 Corporate Authority.................................................. 18
Section 4.6 Compliance with Applicable Law....................................... 18
Section 4.7 Non-contravention.................................................... 19
Section 4.8 Government Approvals; Required Consents.............................. 19
Section 4.9 SEC Documents and Other Reports...................................... 19
</TABLE>
I-i
<PAGE> 138
<TABLE>
<S> <C> <C>
Section 4.10 Absence of Certain Changes or Events................................. 19
Section 4.11 Actions and Proceedings.............................................. 20
Section 4.12 Absence of Undisclosed Liabilities................................... 20
Section 4.13 Contracts............................................................ 20
Section 4.14 Taxes................................................................ 20
Section 4.15 Title to Properties; Encumbrances.................................... 21
Section 4.16 Intellectual Property................................................ 21
Section 4.17 Information in Disclosure Documents and Registration Statement....... 22
Section 4.18 Employee Benefit Plans; ERISA........................................ 22
Section 4.19 Environmental Matters................................................ 23
Section 4.20 Labor Matters........................................................ 24
Section 4.21 Affiliate Transactions............................................... 25
Section 4.22 Financing............................................................ 25
Section 4.23 Brokers.............................................................. 25
Section 4.24 Holdings Not an Interested Stockholder............................... 26
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER............................... 26
Section 5.1 Conduct of Business by the Company Pending the Merger................ 26
Section 5.2 Conduct of Business by Holdings Pending the Merger................... 27
ARTICLE VI ADDITIONAL AGREEMENTS................................................ 28
Section 6.1 Access and Information............................................... 28
Section 6.2 No Solicitation...................................................... 29
Section 6.3 Third-Party Standstill Agreements.................................... 29
Section 6.4 Registration Statement............................................... 29
Section 6.5 Proxy Statements; Stockholder Approvals.............................. 30
Section 6.6 Compliance with the Securities Act................................... 30
Section 6.7 Reasonable Best Efforts.............................................. 30
Section 6.8 Employee Benefits.................................................... 31
Section 6.9 Public Announcements................................................. 32
Section 6.10 Directors' and Officers' Indemnification and Insurance............... 32
Section 6.11 Expenses............................................................. 32
Section 6.12 Listing Application.................................................. 33
Section 6.13 Supplemental Disclosure.............................................. 33
Section 6.14 Holdings' Stockholders Agreement..................................... 33
Section 6.15 Obligations Upon Exercise of Stock Option Agreement.................. 33
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER............................. 34
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger........... 34
Section 7.2 Conditions to Obligations of Holdings to Effect the Merger........... 34
Section 7.3 Conditions to Obligation of the Company to Effect the Merger......... 35
ARTICLE VIII TERMINATION.......................................................... 35
Section 8.1 Termination.......................................................... 35
Section 8.2 Effect of Termination................................................ 36
ARTICLE IX GENERAL PROVISIONS................................................... 37
Section 9.1 Amendment and Modification........................................... 37
Section 9.2 Waiver............................................................... 37
Section 9.3 Survivability; Investigations........................................ 37
Section 9.4 Notices.............................................................. 37
Section 9.5 Descriptive Headings; Interpretation................................. 38
Section 9.6 Entire Agreement; Assignment......................................... 38
Section 9.7 Governing Law........................................................ 38
Section 9.8 Enforcement.......................................................... 38
Section 9.9 Severability......................................................... 38
</TABLE>
I-ii
<PAGE> 139
<TABLE>
<S> <C> <C>
Section 9.10 Counterparts......................................................... 39
Section 9.11 Third-Party Beneficiaries............................................ 39
Exhibit A Form of Stock Option Agreement
Exhibit B Registration Rights Agreement
Exhibit C Form of Subscription Agreements
Exhibit D Form of Warrant Agreement
Exhibit E JLL Proxy
Exhibit F Amended and Restated Certificate of Incorporation of the Company
Exhibit G Amended and Restated By-laws of the Company
Exhibit H Initial Directors of Surviving Corporation
Exhibit I Certificate of Designation of Company Preferred Stock
Exhibit J Company Affiliates' Letter
Exhibit K Holdings Affiliates' Letter
</TABLE>
I-iii
<PAGE> 140
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 28, 1996 (this
"Agreement"), by and among MWC HOLDINGS, INC., a Delaware corporation
("Holdings") and HAYES WHEELS INTERNATIONAL, INC., a Delaware corporation (the
"Company") (Holdings and the Company being hereinafter collectively referred to
as the "Constituent Corporations").
WHEREAS, the Board of Directors of Holdings and the Board of Directors of
the Company, have each approved and deem it advisable and in the best interests
of their respective stockholders to consummate the combination of the Company
and Holdings upon the terms and subject to the conditions of this Agreement; and
WHEREAS, it is intended that the combination be accomplished by a merger of
Holdings with and into the Company (the "Merger"); and
WHEREAS, as a condition and an inducement to Holdings' entering into this
Agreement and incurring the obligations set forth herein, concurrently with the
execution and delivery of this Agreement, (i) Holdings is entering into a Stock
Option Agreement with Varity Corporation ("Varity"), a Delaware corporation, and
its wholly-owned subsidiary, K-H Corporation, a Delaware corporation and a
holder of approximately 46.3% of the outstanding shares of Company Common Stock
(as hereinafter defined), in the form of Exhibit A hereto (the "Stock Option
Agreement"), (ii) the Company and Varity are entering into a Registration Rights
Agreement, in the form of Exhibit B hereto (the "Registration Rights Agreement")
and (iii) the Company, Holdings and certain third-party investors are entering
into Stock Subscription Agreements, in the form of Exhibit C hereto (the
"Subscription Agreements"), pursuant to which, among other things, the
third-party investors have subscribed to purchase immediately prior to the
Effective Time (as hereinafter defined), an aggregate of 200,000 shares of
Company Preferred Stock (as hereinafter defined) and warrants to purchase an
aggregate of 150,000 shares of New Company Common Stock (as hereinafter defined)
pursuant to a warrant agreement, substantially in the form of Exhibit D hereto
(the "Warrant Agreement"); and
WHEREAS, as a condition and inducement to the Company entering into this
Agreement and incurring the obligations set forth herein, Joseph Littlejohn &
Levy Fund II L.P. ("JLL," which owns approximately 74% of the outstanding voting
stock of Holdings), concurrently with the execution and delivery of this
Agreement, has granted a proxy, in the form of Exhibit E hereto, to Varity to
vote JLL's shares of Holdings Common Stock (as hereinafter defined) in favor of
the Merger at the meeting of Holdings' stockholders; and
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by this Agreement, the Subscription Agreements and the
Stock Option Agreement in accordance with the provisions of Section 203 and 251
of the Delaware General Corporation Law (the "DGCL"), and has resolved, subject
to the terms of this Agreement, to recommend the approval of the Merger by its
stockholders; and
WHEREAS, the Board of Directors of Holdings has approved the transactions
contemplated by this Agreement and the Subscription Agreements, and has
unanimously resolved, subject to the terms of this Agreement, to recommend the
approval of the Merger by its stockholders; and
WHEREAS, this Agreement shall be submitted to the stockholders of Holdings
and the stockholders of the Company for their approval.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
contained in this Agreement, and in accordance with the DGCL, at the Effective
Time (as hereinafter defined), Holdings shall be merged with and into the
Company, the separate corporate existence of Holdings shall thereupon cease, and
the Company shall continue as the surviving corporation (sometimes here inafter
referred to as the "Surviving
I-1
<PAGE> 141
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware. In accordance with the DGCL, all of the rights, privileges,
powers, immunities, purposes and franchises of the Company and Holdings shall
vest in the Surviving Corporation and all of the debts, liabilities, obligations
and duties of the Company and Holdings shall become the debts, liabilities,
obligations and duties of the Surviving Corporation.
Section 1.2 Closing. Subject to the terms and conditions of this Agreement,
the closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom, 919
Third Avenue, New York, New York, at 10:00 a.m., local time, on the second
business day after which all of the conditions set forth in Article VII are
satisfied or waived or on such other date and at such other time and place as
Holdings and the Company shall agree (the date on which the Closing actually
occurs being referred to herein as the "Closing Date").
Section 1.3 Effective Time. The Merger shall become effective at the time
of filing of, or at such later time specified in, a properly executed
Certificate of Merger, in the form required by and executed in accordance with
the DGCL, filed with the Secretary of State of the State of Delaware, in
accordance with the provisions of Section 251 of the DGCL. Such filing shall be
made contemporaneously with, or immediately after, the Closing. When used in
this Agreement, the term "Effective Time" shall mean the date and time at which
the Merger shall become effective.
Section 1.4 Certificate of Incorporation and By-Laws. At the Effective
Time, the Certificate of Incorporation of the Company, as in effect immediately
prior to the Effective Time, shall be amended as set forth in Exhibit F hereto.
The Certificate of Incorporation of the Company, as so amended at the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended in accordance with applicable law. The By-Laws of the
Company, in effect immediately prior to the Effective Time, shall be amended as
set forth in Exhibit G hereto. The By-Laws of the Company, as so amended at the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with applicable law.
Section 1.5 Directors and Officers. The nine individuals whose names are
set forth on Exhibit H hereto, as the same may be supplemented or amended from
time to time by Holdings prior to the Effective Time (except that any such
supplement or amendment shall not increase the number of directors and Exhibit H
shall include not less than two independent directors and the Chief Executive
Officer of the Company), shall be the initial directors of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation or By-Laws of the Surviving Corporation or as
otherwise provided by law. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation or By-Laws of the Surviving Corporation or as otherwise provided
by law.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of any shares of
Company Common Stock or Company Preferred Stock or any shares of capital stock
of Holdings:
(a) Each share of common stock, par value $.01, of the Company
("Company Common Stock" or "Shares") issued and outstanding immediately
prior to the Effective Time (other than Company Dissenting Shares (as
hereinafter defined) and Shares to be cancelled pursuant to Section 2.1(d)
hereof) shall be converted into the right to receive (i) $28.80 per Share
in cash (the "Cash Consideration"), without any interest thereon and (ii)
one-tenth of one share of duly authorized, validly issued, fully paid and
nonassessable shares of common stock, par value $0.01, of the Surviving
Corporation ("New Company Common Stock").
I-2
<PAGE> 142
(b) Each share of preferred stock, par value $.01, of the Company
("Company Preferred Stock") issued and outstanding immediately prior to the
Effective Time shall be converted into 31.25 shares of New Company Common
Stock. To the extent any holder of Company Preferred Stock is limited by
Applicable Law (as hereinafter defined) in owning voting New Company Common
Stock, such holder may receive shares of a class of non-voting or
reduced-voting common stock, par value $.01 per share, of the Company which
shall be identical in all respects (other than with respect to voting) to
the New Company Common Stock, and references to New Company Common Stock
shall be deemed to refer to such non-voting or reduced-voting common stock
unless the context otherwise requires. All such shares of Company Preferred
Stock when so converted shall automatically be cancelled and retired and
cease to exist and holders of such shares of Company Preferred Stock shall
cease to have any rights as preferred stockholders of the Company, except
the right to receive the consideration set forth in this Section 2.1(b) for
each share of Company Preferred Stock held by them. The Company Preferred
Stock shall have the terms set forth in the Certificate of Designations
substantially in the form of Exhibit I hereto, which shall be filed with
the Secretary of State of Delaware immediately prior to the Closing.
(c) Each share of common stock, par value $.01, of Holdings ("Holdings
Common Stock"), issued and outstanding immediately prior to the Effective
Time (other than Holdings Dissenting Shares (as hereinafter defined) and
shares of Holdings Common Stock to be cancelled pursuant to Section 2.1(d)
hereof) shall be converted into (i) 8,231.76 duly issued, validly
authorized, fully paid and nonassessable shares of New Company Common Stock
and (ii) 3029.29 warrants ("Warrants") to purchase New Company Common
Stock. Each Warrant shall entitle the holder to purchase one duly issued,
validly authorized, fully paid and nonassessable share of New Company
Common Stock at a price of $48.00 per share, subject to the terms and
conditions set forth in the Warrant Agreement. All such shares of Holdings
Common Stock when so converted shall automatically be cancelled and retired
and cease to exist and holders of such shares of Holdings Common Stock
shall cease to have any rights as stockholders of Holdings, except the
right to receive the consideration set forth in this Section 2.1(c) for
each share of Holdings Common Stock held by them.
(d) All Shares that are owned by the Company as treasury stock, all
shares of Holdings Common Stock that are owned by Holdings as treasury
stock, and any Shares, or shares of Holdings Common Stock, owned by any
direct or indirect wholly-owned Subsidiary of the Company or Holdings, as
applicable, shall automatically be cancelled and retired and shall cease to
exist and no cash, New Company Common Stock, Warrants or other
consideration shall be delivered or deliverable in exchange therefor. As
used in this Agreement, a "Subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first person.
(e) All Shares to be converted pursuant to Section 2.1(a), issued and
outstanding immediately prior to the Effective Time, shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist and each holder of a certificate which immediately prior to
the Effective Time represented outstanding Shares (together with the
certificates representing shares of Company Preferred Stock and Holdings
Common Stock, the "Certificates") shall cease to have any rights as
stockholders of the Company, except the right to receive the consideration
set forth in Section 2.1(a) (the "Merger Consideration") for each Share
held by them.
Section 2.2 Exchange Procedures.
(a) The Company shall designate a bank or trust company reasonably
acceptable to Holdings to act as Exchange Agent hereunder (the "Exchange
Agent"). Immediately following the Effective Time, the Surviving
Corporation shall deliver, in trust, to the Exchange Agent, for the benefit
of the holders of Shares and shares of Holdings Common Stock and Company
Preferred Stock, for exchange in accordance with this Article II, through
the Exchange Agent, (i) certificates evidencing the shares of New Company
Common Stock issuable pursuant to Section 2.1 in exchange for outstanding
Shares and shares of Holdings Common Stock and Company Preferred Stock,
(ii) certificates evidencing the
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Warrants issuable pursuant to Section 2.1(c) and (iii) cash in an amount
sufficient to make any cash payment due under Section 2.1(a) (the "Exchange
Fund").
(b) As soon as practicable after the Effective Time, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record
of a Certificate or Certificates (i) a form of letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent and (ii) instructions for use in surrendering such
Certificates in exchange for certificates representing shares of New
Company Common Stock and, if applicable, cash or Warrants. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor (A) certificates representing
that number of whole shares of New Company Common Stock or Warrants, if
any, into which the Shares or shares of Holdings Common Stock or Company
Preferred Stock, as applicable, represented by the surrendered Certificate
have been converted at the Effective Time pursuant to Section 2.1 hereof,
(B) in the case of Certificates representing Shares, cash in the amount
equal to the number of Shares represented by the surrendered Certificate
multiplied by the Cash Consideration pursuant to Section 2.1(a) hereof, (C)
any dividends or other distributions to which such holder is entitled
pursuant to Section 2.3 and (D) cash in lieu of any fractional shares of
New Company Common Stock to which such holder is entitled pursuant to
Section 2.4 hereof, and any amounts to which the holder is entitled
pursuant to Section 2.3 hereof after giving effect to any required tax
withholdings, and the Certificate so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this Section 2.2(b), each
Certificate shall be deemed from and after the Effective Time to represent
only the right to receive upon such surrender the Cash Consideration and/or
shares of New Company Common Stock and, if applicable, Warrants in
accordance with Section 2.1 hereof, cash in lieu of any fractional shares
of New Company Common Stock in accordance with Section 2.4 hereof and any
dividends or distributions on New Company Common Stock in accordance with
Section 2.3 hereof. In no event shall the holder of any such surrendered
Certificates be entitled to receive interest on any of the Cash
Consideration or cash for fractional shares to be received in the Merger.
Neither the Exchange Agent nor any party hereto shall be liable to a holder
of Shares or shares of Holdings Common Stock or Company Preferred Stock for
any amount paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(c) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the applicable certificate representing
shares of New Company Common Stock and Cash Consideration in accordance
with Section 2.1 hereof, any cash in lieu of fractional shares of New
Company Common Stock to which the holders thereof are entitled pursuant to
Section 2.4 hereof and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.3 hereof.
Section 2.3 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on New Company
Common Stock, or are payable to the holders of record thereof who became such on
or after the Effective Time, shall be paid to any person entitled by reason of
the Merger to receive certificates representing shares of New Company Common
Stock, and no distribution of Cash Consideration and no cash payment in lieu of
any fractional share of New Company Common Stock shall be paid to any person
pursuant to Section 2.4 hereof, until such person shall have surrendered its
Certificate(s) as provided in Section 2.2 hereof. Subject to applicable law,
there shall be paid to each person receiving a certificate representing such
shares of New Company Common Stock, at the time of such surrender or as promptly
as practicable thereafter, the amount of any dividends or other distributions
theretofore paid with respect to the shares of New Company Common Stock
represented by such certificate and having a record date on or after the
Effective Time but prior to such surrender and a payment date on or subsequent
to such surrender. In no event shall the person entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or certificate
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representing shares of New Company Common Stock is to be paid to or issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of such certificate
representing shares of New Company Common Stock and the distribution of such
cash payment in a name other than that of the registered holder of the
Certificate so surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable. The Surviving
Corporation or the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Stock, Holdings Common Stock or Company Preferred Stock such
amounts as the Surviving Corporation or the Exchange Agent are required to
deduct and withhold under the Internal Revenue Code of 1986, as amended (the
"Code"), or any provision of state, local or foreign tax law, with respect to
the making of such payment. To the extent that amounts are so withheld by the
Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Company Common Stock, Holdings Common Stock or Company Preferred Stock in
respect of whom such deduction and withholding was made by the Surviving
Corporation or the Exchange Agent.
Section 2.4 Fractional Shares. No certificates or scrip representing
fractional shares of New Company Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution with respect to shares
shall be payable on or with respect to any fractional share and such fractional
share interests shall not entitle the owner thereof to vote or to any other
rights of a stockholder of the Surviving Corporation. In lieu of any such
fractional share of New Company Common Stock, the Surviving Corporation shall
pay to each former stockholder of the Company or Holdings who otherwise would be
entitled to receive a fractional share of New Company Common Stock an amount in
cash (without interest) rounded to the nearest whole cent, determined by
multiplying (i) $32.00 by (ii) the fractional interest in a share of New Company
Common Stock to which such holder would otherwise be entitled.
Section 2.5 Return of Exchange Fund. Any portion of the certificates
representing shares of New Company Common Stock and Cash Consideration issuable
upon conversion of Company Common Stock, Holdings Common Stock or Company
Preferred Stock pursuant to Section 2.1 hereof, together with any cash in lieu
of fractional shares payable in respect thereof pursuant to Section 2.4 hereof
and any dividends or distributions payable in respect thereof pursuant to
Section 2.3 hereof, which remains undistributed to the former holders of Company
Common Stock, Holdings Common Stock or Company Preferred Stock for one year
after the Effective Time shall be delivered to the Surviving Corporation, upon
its request, and any such former holders who have not theretofore surrendered to
the Exchange Agent their Certificate(s) in compliance with this Article II shall
thereafter look only to the Surviving Corporation for payment of their claim for
shares of New Company Common Stock and Cash Consideration, any cash in lieu of
fractional shares of New Company Common Stock and any dividends or distributions
with respect to such shares of New Company Common Stock (in each case, without
interest thereon). The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by the Surviving Corporation, on a daily basis. Any
interest and other income resulting from such investments shall be paid to the
Surviving Corporation.
Section 2.6 Options. Prior to the Effective Time, each holder of an option
granted by the Company to purchase shares of Company Common Stock (each a
"Company Option") which is outstanding and unexercised shall be entitled to
elect to receive, in whole or in part, either (a) an amount in cash equal to the
difference between (i) the product of (1) the number of shares of Company Common
Stock subject to such Company Option and (2) $32, and (ii) the aggregate
exercise price of such Company Option or (b) a vested option to purchase shares
of New Company Common Stock in the same amount and at the same exercise price as
applied to the Company Option, and otherwise subject to the terms (as in effect
as of the date hereof, other than with respect to vesting) of the Company's 1992
Stock Incentive Plan and the agreements thereunder, and except that all
references to the Company shall be deemed to be references to the Surviving
Corporation (each such option, a "New Company Option"); provided, however, that
if a holder of a Company Option has (x) held such Company Option for less than
six months prior to the Effective Time or (y) fails to
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make a timely election as provided in this Section 2.6, then in each such case
such option holder shall receive a New Company Option in accordance with clause
(b) of this sentence.
Section 2.7 Closing of Transfer Books. At the Effective Time, the stock
transfer books of Holdings and the Company shall be closed and no transfer of
shares of Holdings Common Stock, Company Common Stock or Company Preferred Stock
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be cancelled and exchanged as
provided in this Article II.
Section 2.8 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock outstanding immediately prior to
the Effective Time held by a holder (if any) who is entitled to demand, and who
properly demands, appraisal for such shares in accordance with Section 262 of
the DGCL ("Company Dissenting Shares"), and shares of Holdings Common Stock
outstanding immediately prior to the Effective Time held by a holder (if any)
who is entitled to demand, and who properly demands, appraisal for such shares
in accordance with Section 262 of the DGCL ("Holdings Dissenting Shares"), shall
not be converted into a right to receive the Cash Consideration and shares of
New Company Common Stock or shares of New Company Common Stock and Warrants, as
the case may be, unless such holder fails to perfect or otherwise loses such
holder's right to appraisal, if any. If, after the Effective Time, such holder
fails to perfect or loses any such right to appraisal, such Company Dissenting
Shares or Holding Dissenting Shares, as the case may be, shall be treated as if
they had been converted as of the Effective Time into a right to receive the
Cash Consideration and shares of New Company Common Stock or shares of New
Company Common Stock and Warrants, as the case may be. The Company shall give
prompt notice to Holdings of any demands received by the Company for appraisal
of shares of Company Common Stock and Holdings shall have the right to
participate in and direct all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company shall not, except with the
prior written consent of Holdings, which consent shall not be unreasonably
withheld, make any payment with respect to, or settle or offer to settle, any
such demands. Holdings shall give prompt notice to the Company of any demands
received by Holdings for appraisal of shares of Holdings Common Stock.
Section 2.9 Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Holdings or the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of each of
Holdings and the Company or otherwise, all such deeds, bills of sale,
assignments and assurances and to take and do, in such names and on such
behalves or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule delivered by the
Company to Holdings at or prior to the execution of this Agreement (the "Company
Disclosure Schedule") (each section of which qualifies the correspondingly
numbered representation and warranty), the Company represents and warrants to
Holdings as follows:
Section 3.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power and authority to carry on its
business as it is now being conducted. The Company is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified or in good standing would not have a material
adverse effect, individually or in the
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aggregate, on the business, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole, or, if applicable, the ability of
the Company to consummate the Merger and the other transactions contemplated by
this Agreement (a "Company Material Adverse Effect").
Section 3.2 Certificate of Incorporation and By-Laws. Complete and correct
copies of the Certificates of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of the Company and each of
its Subsidiaries have been made available to Holdings. The Certificates of
Incorporation, By-laws and equivalent organizational documents of the Company
and each of its Subsidiaries are in full force and effect. Neither the Company
nor any of its Subsidiaries is in violation of any material provision of its
Certificate of Incorporation, By-laws or equivalent organizational documents.
Section 3.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consisted of 50,000,000 Shares of Company Common Stock, par value of $.01
per share and 25,000,000 shares of preferred stock ("Company Preferred
Stock"). As of the date hereof, (i) 17,574,000 Shares are issued and
outstanding, (ii) no shares of Company Preferred Stock are issued and
outstanding, and (iii) options to acquire 478,900 Shares are outstanding,
and 21,100 options to acquire Shares remain reserved for issuance, under
the Company 1992 Stock Incentive Plan. All of the issued and outstanding
Shares are, and all of the Company Preferred Stock when issued and paid for
pursuant to the Subscription Agreements will be, validly issued, and are,
and in the case of the Company Preferred Stock will be, fully paid,
nonassessable and free of preemptive rights.
(b) Except as described in this Section 3.3 and as contemplated by
this Agreement or the Subscription Agreements: (i) no shares of capital
stock or other equity securities of the Company are authorized, issued or
outstanding, or reserved for issuance, and there are no options, warrants
or other rights (including registration rights), agreements, arrangements
or commitments of any character to which the Company or any of its
Subsidiaries is a party relating to the issued or unissued capital stock or
other equity interests of the Company or any of its Subsidiaries, requiring
the Company or any of its Subsidiaries to grant, issue or sell any shares
of the capital stock or other equity interests of the Company or any of its
Subsidiaries by sale, lease, license or otherwise; (ii) the Company and its
Subsidiaries have no obligations, contingent or otherwise, to repurchase,
redeem or otherwise acquire any shares of the capital stock or other equity
interests of the Company or its Subsidiaries; (iii) except for any Company
pension plan, neither the Company nor any of its Subsidiaries, directly or
indirectly, owns, or has agreed to purchase or otherwise acquire, the
capital stock or other equity interests of, or any interest convertible
into or exchangeable or exercisable for such capital stock or such equity
interests, of any corporation, partnership, joint venture or other entity
which would be material in value to the Company; and (iv) there are no
voting trusts, proxies or other agreements or understandings to which the
Company or any of its Subsidiaries is a party or, to the knowledge of the
Company, is bound with respect to the voting of any shares of capital stock
or other equity interests of the Company or any of its Subsidiaries.
Section 3.4 Company Subsidiaries. The Company Disclosure Schedule sets
forth a list of each Company Subsidiary; its authorized, issued and outstanding
capital stock or other equity interests; the percentage of such capital stock or
other equity interests owned by the Company or any Company Subsidiary, and the
identity of such owner; the capital stock reserved for future issuance pursuant
to outstanding options or other agreements; and the identity of all parties to
any such option or other agreement. Each Subsidiary of the Company is a
corporation or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization. Each
Subsidiary of the Company has all requisite corporate power and authority to
carry on its business as it is now being conducted. Each Subsidiary of the
Company is duly qualified as a foreign corporation or organization authorized to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a Company Material Adverse Effect. All of the
outstanding shares of capital stock or other ownership interests in each of the
Company's Subsidiaries have been validly issued, and are fully paid,
nonassessable and are owned by the Company or another Subsidiary of the Company
free and clear of all pledges, claims,
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options, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens"), and are not subject to preemptive
rights created by statute, such Subsidiary's respective Certificate of
Incorporation or By-laws or equivalent organizational documents or any agreement
to which such Subsidiary is a party.
Section 3.5 Corporate Authority.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and, subject to the approval of the
Company's stockholders with respect to the Merger, to consummate the
transactions contemplated hereby. The execution and delivery by the Company
of this Agreement and the consummation by the Company of the transactions
contemplated hereby, have been duly authorized by its Board of Directors
and, except for the approval of the Company's stockholders with respect to
the Merger, no other corporate action on the part of the Company is
necessary to authorize the execution and delivery by the Company of this
Agreement and the consummation by it of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding agreement of the Company and is
enforceable against the Company in accordance with its terms, except that
(i) such enforcement may be subject to any bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors' rights generally
and (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defense, and to the
discretion of the court before which any proceeding therefor may be
brought. The preparation of the Proxy Statement (as hereinafter defined)
and the Registration Statement (as hereinafter defined) to be filed with
the SEC has been duly authorized by the Board of Directors of the Company.
(b) Prior to execution and delivery of this Agreement, the Board of
Directors of the Company (at a meeting duly called and held) has (i)
approved this Agreement, the Subscription Agreements, the Stock Option
Agreement and the Merger and the other transactions contemplated hereby and
thereby, and such approval is sufficient to render inapplicable to the
acquisition of Company Preferred Stock pursuant to the Subscription
Agreements, the acquisition of Company Common Stock pursuant to the Stock
Option Agreement, the Merger and all of such other transactions the
provisions of Section 203 of the DGCL, (ii) determined that the
transactions contemplated hereby are fair to and in the best interests of
the holders of the Company Common Stock and (iii) except as may be required
to comply with its fiduciary duties under Applicable Law (as hereinafter
defined) as advised by counsel, determined to recommend this Agreement, the
Merger and the other transactions contemplated hereby to the Company's
stockholders for approval and adoption at the stockholders meeting
contemplated by Section 6.5(a) hereof. The affirmative vote of the holders
of a majority of the outstanding shares of Company Common Stock are the
only votes of the holders of any class or series of the Company's capital
stock necessary to approve the Merger.
Section 3.6 Compliance with Applicable Law. Except as disclosed in the
Company SEC Documents (as hereinafter defined), (i) each of the Company and its
Subsidiaries holds, and is in compliance with the terms of, all permits,
licenses, exemptions, orders and approvals of all Governmental Entities (as
hereinafter defined) necessary for the conduct of their respective businesses
("Company Permits"), except for failures to hold or to comply with such permits,
licenses, exemptions, orders and approvals which would not have a Company
Material Adverse Effect, (ii) with respect to the Company Permits, no action or
proceeding is pending or, to the knowledge of the Company, threatened, and, to
the knowledge of the Company, no fact exists or event has occurred, that would
reasonably be expected to have a Company Material Adverse Effect, (iii) the
business of the Company and its Subsidiaries is being conducted in compliance
with all applicable laws, ordinances, regulations, judgments, decrees or orders
("Applicable Law") of any federal, state, local, foreign or multinational court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory authority or administrative agency or commission (a "Governmental
Entity"), except for violations or failures to so comply that would not have a
Company Material Adverse Effect, and (iv) to the knowledge of the Company, no
investigation or review by any Governmental Entity with respect to the Company
or its Subsidiaries is pending or threatened, other than, in each case, those
which would not reasonably be likely to have a Company Material Adverse Effect.
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Section 3.7 Non-Contravention. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, (i) result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under any loan, guarantee of indebtedness
or credit agreement, note, bond, mortgage, indenture, lease, agreement,
contract, instrument, permit, concession, franchise, right or license (any of
the foregoing, a "Contract") applicable to the Company or any of its
Subsidiaries, or result in the creation of any Lien upon any of the properties
or assets of the Company or any of its Subsidiaries, (ii) conflict or result in
any violation of any provision of the Certificate of Incorporation or By-Laws or
other equivalent organizational document, in each case as amended, of the
Company or any of its Subsidiaries, (iii) subject to the governmental filings
discussed in clause (i) of Section 3.8, conflict with or violate any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets (except for any national or supranational Antitrust Laws (as hereinafter
defined) as to which no representation or warranty is being made), other than,
in the case of clauses (i) and (iii), any such violations, conflicts, defaults,
rights, losses or Liens that, individually or in the aggregate, would not have a
Company Material Adverse Effect.
Section 3.8 Government Approvals; Required Consents. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or is necessary for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) except: (i) in connection, or in
compliance, with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Securities Act of 1933, as amended
(the "Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), any state securities or "Blue Sky" law and any requirements of
any foreign or supranational Antitrust Law, (ii) for the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware, (iii) such
consents, approvals, authorizations, permits, filings and notifications listed
in the Company Disclosure Schedule and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 3.9 SEC Documents and Other Reports.
(a) The Company has filed all documents required to be filed prior to
the date hereof by it and its Subsidiaries with the Securities and Exchange
Commission (the "SEC") since January 31, 1993 (the "Company SEC
Documents"). As of their respective dates, or if amended as of the date of
the last such amendment, the Company SEC Documents complied, and all
documents required to be filed by the Company with the SEC after the date
hereof and prior to the Effective Time (the "Subsequent Company SEC
Documents") will comply, in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the
applicable rules and regulations promulgated thereunder and none of the
Company SEC Documents contained, and the Subsequent Company SEC Documents
will not contain, any untrue statement of a material fact or omitted, or
will omit, to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, or are to be made, not misleading. The
consolidated financial statements of the Company included in the Company
SEC Documents fairly present, and included in the Subsequent Company SEC
Documents will fairly present, the consolidated financial position of the
Company and its consolidated Subsidiaries, as at the respective dates
thereof and the consolidated results of their operations and their
consolidated cash flows for the respective periods then ended (subject, in
the case of the unaudited statements, to normal year-end audit adjustments
and to any other adjustments described therein) in conformity with United
States generally accepted accounting principles ("GAAP") (except, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto). Since October 31, 1995, the
Company has not made any change in the accounting practices or policies
applied in the preparation of its financial statements, except as may be
required by GAAP.
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Section 3.10 Absence of Certain Changes or Events. Except to the extent
disclosed in the Company SEC Documents filed with the SEC prior to the date of
this Agreement, since October 31, 1995 the Company and its Subsidiaries have
conducted its businesses and operations in the ordinary and usual course
consistent with past practice and there has not occurred (i) any event,
condition or occurrence having or that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) having or
which would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect; (iii) any declaration, setting aside or payment
of any dividend or distribution of any kind by the Company on any class of its
capital stock, except for regular quarterly dividends not exceeding $.015 per
Share; and (iv) any event during the period from October 31, 1995 through the
date of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 5.1
hereof.
Section 3.11 Actions and Proceedings.
Except as set forth in the Company SEC Documents, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against the Company or any of its Subsidiaries, any of their properties, assets
or business, or, to the knowledge of the Company, any of the Company's or its
Subsidiaries' current or former directors or officers or any other person whom
the Company or any of its Subsidiaries has agreed to indemnify, as such, that
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Except as set forth in the Company SEC
Documents, there are no actions, suits or legal, administrative, regulatory or
arbitration proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, any of their properties, assets
or business, or, to the knowledge of the Company, any of the Company's or its
Subsidiaries' current or former directors or officers or any other person whom
the Company or any of its Subsidiaries has agreed to indemnify, as such, that
relates to the transactions contemplated by this Agreement or would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 3.12 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are (i) accrued or reserved against in the Company's
consolidated financial statements (or reflected in the notes thereto) included
in the Company SEC Documents or (ii) disclosed in the Company SEC Documents,
since December 16, 1992, neither the Company nor any of its Subsidiaries has any
liabilities or obligations (including, without limitation, Tax (as hereinafter
defined) liabilities) (whether absolute, accrued, contingent or otherwise) that
were required to be set forth on a balance sheet which is prepared in
conformance with GAAP, consistently applied and which (either individually or in
the aggregate) would reasonably be expected to have a Company Material Adverse
Effect.
Section 3.13 Contracts. Each Contract entered into by the Company is valid,
binding and enforceable and in full force and effect, except where failure to be
valid, binding and enforceable and in full force and effect would not reasonably
be expected to have a Company Material Adverse Effect and there are no defaults
thereunder, except those defaults that would not reasonably be expected to have
a Company Material Adverse Effect. Except as set forth in the Company SEC
Documents, neither the Company nor any of its Subsidiaries is a party to or
bound by any non-competition agreement or any other agreement or obligation
which purports to limit in any material respect the manner in which, or the
localities in which, the Company or any such Subsidiary is entitled to conduct
all or any material portion of the business of the Company and its Subsidiaries
taken as a whole.
Section 3.14 Taxes. (a) The Company and each of its Subsidiaries has timely
filed, or been included in, all material Federal, state, local and foreign
income, franchise, sales and other Tax Returns (as hereinafter defined) required
to be filed by or with respect to the Company or any of its Subsidiaries; (b) as
of the time of filing, all such Tax Returns were true, correct and complete, in
all material respects, and correctly reflected in all material respects the
facts regarding the income, business, assets, operations, activities and status
of the Company and its Subsidiaries and any other material information required
to be shown therein; (c) the Company and its Subsidiaries have timely paid to
the appropriate taxing authority, or have made provision for, all material Taxes
shown as due on such Tax Returns with respect to the Company and any of its
Subsidiaries; (d) the unpaid Taxes of the Company and its Subsidiaries (x) do
not, as of the date hereof, materially exceed
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the reserves for Taxes (other than reserves for deferred Taxes) reflected on the
books and records of the Company and its Subsidiaries and (y) will not
materially exceed that reserve as adjusted for operations and transactions
through the Effective Time in accordance with GAAP and the past custom and
practice of the Company and its Subsidiaries; (e) neither the Company nor any of
its Subsidiaries has requested any extension of time within which to file or
send any Tax Return, which Tax Return has not since been filed or sent; (f) no
material deficiency for Taxes has been proposed, asserted or assessed against
the Company or any of its Subsidiaries (or any member of any affiliated or
combined group of which the Company or any of its Subsidiaries is or has been a
member for which either the Company or any of its Subsidiaries could be liable)
other than those Taxes being contested in good faith by appropriate proceedings
and set forth in the Company Disclosure Schedule (which shall set forth the
nature of the proceeding, the type of return, the deficiencies proposed,
asserted or assessed and the amount thereof, and the taxable year in question);
(g) to the knowledge of the Company, no material issue has been raised during
the past five years by any federal, state, local or foreign taxing authority
which, if raised with regard to any other period not so examined, could
reasonably be expected to result in a proposed material deficiency for any other
period not so examined; (h) neither the Company nor any of its Subsidiaries has
granted any extension or waiver of the limitation period applicable to any Tax
claims other than those being contested in good faith by appropriate
proceedings; (i) neither the Company nor any of its Subsidiaries is subject to
liability for Taxes of any person (other than the Company or its Subsidiaries)
including, without limitation, liability arising from the application of U.S.
Treasury regulation section 1.1502-6 or any analogous provision of state, local
or foreign law; (j) neither the Company nor any of its Subsidiaries is or has
been a party to any tax sharing agreement with any corporation which is not
currently a member of the affiliated group of which the Company is currently a
member; (k) neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code; (l) there are no liens for Taxes on any assets of
the Company or of any of its Subsidiaries (other than statutory liens for
current Taxes not yet due); (m) the Company and its Subsidiaries have withheld
and paid (and until the Effective Time will withhold and pay) all income, social
security, unemployment and all other material payroll Taxes required (including,
without limitation, pursuant to Sections 1441 and 1442 of the Code or similar
provisions under foreign law) to be withheld and paid in connection with amounts
paid to any employee, independent contractor, creditor, stockholder or other
third party; and (n) neither the Company nor any of its Subsidiaries has
participated in, or cooperated with, an international boycott within the meaning
of Section 999 of the Code. Neither the Company nor any of its Subsidiaries has
made an election under Section 341(f) of the Code.
For purposes of this Agreement, the term "Tax" (or "Taxes") shall mean with
respect to any person (i) all taxes, charges, fees, levies, duties, imposts or
other assessments, including, without limitation, net income, gross income,
gross receipts, excise, property, sales, use, ad valorem, profits, franchise,
capital stock, registration, transfer, gains, license, payroll, withholding,
employment, excise, severance, stamp, occupation, disability, premium,
value-added, windfall profits, social security (or similar), custom duty or
other tax, governmental fee, alternative or add-on minimum, estimated or other
like assessment or charge of any kind whatsoever, together with any interest, or
penalties or additions thereto imposed, or required to be withheld, by a taxing
authority of the United States, or any state, local or foreign government or
subdivision or agency thereof, and (ii) any liability of such person for the
payment of any amount of the type described in clause (i) as a result of such
person's being a member of an affiliated or combined group. For purposes of this
Agreement, the term "Tax Return" shall mean any return, declaration, statement,
report, schedule, certificate, form, information return, or any other document
(including any related or supporting information) required to be supplied to, or
filed with, a taxing authority (foreign or domestic) in connection with Taxes.
Section 3.15 Title to Properties; Encumbrances.
(a) Except as described in the following sentence, each of the Company
and its Subsidiaries has good, valid and, in the case of real property,
marketable title to, or a valid leasehold interest in, all of its material
properties and assets (real, personal, tangible and intangible), including,
without limitation, all such properties and assets reflected in the
consolidated balance sheet of the Company and its Subsidiaries as of
October 31, 1995 included in the Company SEC Documents (except for
properties and assets
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disposed of in the ordinary course of business and consistent with past
practices since October 31, 1995), except for such title or interest the failure
of which to have would not have, individually or in the aggregate, a Company
Material Adverse Effect. None of such properties or assets are subject to any
Liens (whether absolute, accrued, contingent or otherwise), except (i) as set
forth in the Company SEC Documents or (ii) imperfections of title and Liens, if
any, which do not materially detract from the value of the property or assets
subject thereto and do not materially impair the business or operations of the
Company and its Subsidiaries taken as a whole.
(b) Each of the Company and its Subsidiaries has complied with the
terms of all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect except for
failures to comply or be in full force and effect which would not have,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.16 Intellectual Property. The Company and its Subsidiaries own or
have a valid license to use all inventions, patents, trademarks, service marks,
trade names, copyrights, trade secrets, technology and know-how, software and
other intellectual property rights (collectively, the "Company Intellectual
Property") necessary to carry on their respective businesses as currently
conducted; and neither the Company nor any such Subsidiary has received any
notice of infringement of or conflict with, and, to the Company's knowledge,
there are no infringements of or conflicts with, the rights of others with
respect to the use of any of the Company Intellectual Property that, in either
such case, has had or would reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section 3.17 Information in Disclosure Documents and Registration
Statement. None of the information supplied or to be supplied by the Company for
inclusion in (i) the Registration Statement to be filed with the SEC on Form S-4
under the Securities Act for the purpose of registering the shares of New
Company Common Stock and Warrants to be issued in connection with the Merger
(the "Registration Statement") or (ii) the joint proxy statement/prospectus to
be distributed in connection with Holdings' and the Company's meeting of
stockholders to vote upon this Agreement (the "Proxy Statement") will, in the
case of the Registration Statement, at the time it becomes effective or, in the
case of the Proxy Statement or any amendments thereof or supplements thereto, at
the time of the initial mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the meeting of stockholders of Holdings
and the Company to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Registration
Statement, as of its effective date, will comply (with respect to information
relating to the Company) as to form in all material respects with the
requirements of the Securities Act, and the rules and regulations promulgated
thereunder, and as of the date of its initial mailing and as of the date of the
Company's stockholders' meeting, the Proxy Statement will comply (with respect
to information relating to the Company) as to form in all material respects with
the applicable requirements of the Exchange Act, and the rules and regulations
promulgated thereunder. Notwithstanding the foregoing, the Company makes no
representations with respect to any statement in the foregoing documents based
upon information supplied by Holdings for inclusion therein.
Section 3.18 Employee Benefit Plans; ERISA.
(a) The Company Disclosure Schedule sets forth a list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, arrangement or
agreement that is maintained or contributed to, or was maintained or
contributed to at any time on or after December 15, 1992, by the Company or
by any trade or business, whether or not incorporated which together with
the Company would be deemed a "single employer" within the meaning of
Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (each, a "Company ERISA Affiliate"), for the benefit of
any employee or former employee of the Company or any Company ERISA
Affiliate, whether formal or informal and whether legally binding or not,
in connection with which the Company would have liability (the "Company
Plans"). Neither the Company nor any Company ERISA Affiliate has any formal
plan or
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commitment, whether legally binding or not, to create any additional Company
Plan or modify or change any existing Company Plan in a way that would affect
any employee or former employee of the Company or any Company ERISA Affiliate.
(b) With respect to each of the Company Plans, the Company has
heretofore delivered or made available to Holdings true and complete copies
of each of the following documents:
(i) a copy of the Company Plan (including all amendments thereto);
(ii) a copy of the annual report, if required under ERISA, with
respect to each such Company Plan for the last two years;
(iii) a copy of the actuarial report, if required under ERISA, with
respect to each such Company Plan for the last two years;
(iv) a copy of the most recent Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with
respect to such Plan, and all material employee communications relating
to such Company Plan;
(v) if the Company Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof;
(vi) all material contracts relating to the Company Plans with
respect to which the Company or any ERISA Affiliate may have any
liability, including, without limitation, insurance contracts,
investment management agreements, subscription and participation
agreements and record keeping agreements; and
(vii) the most recent determination letter received from the
Internal Revenue Service (the "IRS") with respect to each Company Plan
that is intended to be qualified under Section 401 of the Code.
(c) Each of the Company Plans that is subject to ERISA is and has been
in compliance with ERISA and the Code in all material respects; with
respect to each of the Company Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code either (i) the Company reasonably
believes that such Plan is so qualified or (ii) the Company has received a
favorable opinion of qualified counsel or received a favorable
determination letter from the IRS with respect to such qualification; no
Company Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code; neither the Company nor any Company
ERISA Affiliate has incurred, directly or indirectly, any material
liability (including any material contingent liability) to or on account of
a Company Plan pursuant to Title IV of ERISA; no proceedings have been
instituted to terminate any Company Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(b) of
ERISA for which the thirty-day reporting requirement has not been waived,
has occurred with respect to any Company Plan; and no condition exists that
presents a material risk to the Company or any Company ERISA Affiliate of
incurring a liability to the IRS, the Pension Benefit Guaranty Corporation
(the "PBGC") or to any multiemployer plan (as defined in Section 3(37) of
ERISA) other than payment of premiums pursuant to Title IV of ERISA.
(d) The current value of the assets of each of the Company Plans that
are subject to Title IV of ERISA, based upon the actuarial assumptions (to
the extent reasonable) presently used for funding purposes in the most
recent actuarial report prepared by such Company Plan's actuary with
respect to such Company Plan, exceeds the present value of the accrued
benefits under each such Company Plan; no Company Plan is a multiemployer
pension plan (within the meaning of Section 4001(a)(3) of ERISA); no
Company Plan is a multiple employer plan as defined in Section 413 of the
Code; and all material contributions or other amounts payable by the
Company as of the Effective Time with respect to each Company Plan in
respect of current or prior plan years have been either paid or accrued on
the balance sheet of the Company. To the knowledge of the Company, there
are no material pending,
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threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the Company Plans or any trusts related thereto.
(e) Neither the Company nor any Company ERISA Affiliate, nor any
Company Plan, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which
the Company or any Company ERISA Affiliate, any Company Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any Company Plan or any such trust could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code which would result in
a material liability to the Company. No Company Plan provides death or
medical benefits (whether or not insured), with respect to current or
former employees of the Company or any Company ERISA Affiliate beyond their
retirement or other termination of service other than (i) coverage mandated
by Applicable Law or (ii) death benefits under any "employee pension plan,"
as that term is defined in Section 3(2) of ERISA).
Section 3.19 Environmental Matters.
(a) Definitions
(i) "Cleanup" means all actions required to : (1) cleanup, remove,
treat or remediate Hazardous Materials in the indoor or outdoor
environment; (2) prevent the Release of Hazardous Materials so that they
do not migrate, endanger or threaten to endanger public health or
welfare of the indoor or outdoor environment; (3) perform pre-remedial
studies and investigations and post-remedial monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or potential
cleanup, removal, treatment or remediation of Hazardous Materials in the
indoor or outdoor environment.
(ii) "Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, Cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release into the indoor or outdoor environment, of any
Hazardous Materials at any location, whether or not owned or operated by
the Company or any of its Subsidiaries or Holdings or any of its
Subsidiaries, as applicable, or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law.
(iii) "Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or protection of
human health or the environment, including without limitation, laws
relating to Releases or threatened Releases of Hazardous Materials into
the indoor or outdoor environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, disposal, transport or
handling of Hazardous Materials and all laws and regulations with regard
to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials, and all laws relating to endangered or
threatened species of fish, wildlife and plants and the management or
use of natural resources.
(iv) "Hazardous Materials" means "hazardous substance" (as defined
by the Comprehensive Environmental Response, Compensation, and Liability
Act, as amended), "hazardous waste" (as defined by the Resource
Conservation and Recovery Act, as amended), pesticides, petroleum, crude
oil or any fraction thereof, radioactive material, and any pollutant,
oil, contaminant, hazardous, extremely hazardous, dangerous or toxic
chemical, material, waste or any other substance within the meaning of
any Environmental Law or which could pose a hazard to the environment or
the health and safety of any person.
(v) "Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment (including,
without limitation, ambient air, surface water, groundwater and surface
or subsurface
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strata) or into or out of any property, including the movement of Hazardous
Materials through or in the air, soil, surface water, groundwater or property.
(b) Representations and Warranties
(i) The Company and its Subsidiaries are in compliance in all
material respects with all applicable Environmental Laws (which
compliance includes, but is not limited to, the possession by the
Company and its Subsidiaries of all permits and other governmental
authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof), except for failures
to comply which would not have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any communication (written or oral), whether
from a governmental authority, citizens group, employee or otherwise,
that alleges that the Company or any of its Subsidiaries is not in such
compliance, and there are no past or present (or to the knowledge of the
Company, future) actions, activities, circumstances conditions, events
or incidents that may prevent or interfere with such compliance in the
future. All Permits and other governmental authorizations currently held
by the Company and its Subsidiaries pursuant to applicable Environmental
Laws are identified in the Company Disclosure Schedule.
(ii) No transfers of permits or other governmental authorizations
under Environmental Laws, and no additional permits or other
governmental authorizations under Environmental Laws, will be required
to permit the Surviving Corporation to conduct its business in full
compliance with all applicable Environmental Laws immediately following
the Closing Date, as conducted by the Company and its Subsidiaries
immediately prior to the Closing Date. To the extent that such transfers
or additional permits and other governmental authorizations are
required, the Company and its Subsidiaries agree to cooperate with
Holdings to effect such transfers and obtain such permits and other
governmental authorizations prior to the Closing Date, to the extent
practicable and to the extent that such permits and governmental
authorizations may be obtained or transferred pursuant to Applicable Law
or regulation prior to the Closing Date; provided, however, that
obtaining or transferring such permits and other governmental
authorizations prior to the Closing Date shall not be a condition to
Closing.
(iii) There is no Environmental Claim pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries or, to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of
its Subsidiaries have or may have retained or assumed either
contractually or by operation of law which would reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse
Effect.
(iv) To the knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the Release, emission, discharge,
presence or disposal of any Hazardous Material which could form the
basis of any Environmental Claim against the Company or any of its
Subsidiaries, or to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of
its Subsidiaries has or may have retained or assumed either
contractually or by operation of law which would reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse
Effect.
(v) The Company and its Subsidiaries have not, and to the knowledge
of the Company, no other person has placed, stored, deposited,
discharged, buried, dumped or disposed of Hazardous Materials or any
other wastes produced by, or resulting from, any business, commercial or
industrial activities, operations or processes, on, beneath or adjacent
to any property currently or formerly owned, operated or leased by the
Company or any of its Subsidiaries, except for inventories of such
substances to be used, and wastes generated therefrom, in the ordinary
course of business of the Company and its Subsidiaries (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable Environmental Laws and in a manner such that
there has been no
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Release of any such substances into the indoor or outdoor environment), except
where the Company and its Subsidiaries have failed to comply with Environmental
Laws applicable to the above matters or have failed to store such inventories
and wastes in a manner described above and such failures would not have,
individually or in the aggregate, a Company Material Adverse Effect.
(vi) The Company has delivered or otherwise made available for
inspection to Holdings true, complete and correct copies and results of
any reports, studies, analyses, tests or monitoring possessed or
initiated by the Company or any of its Subsidiaries pertaining to
Hazardous Materials in, on, beneath or adjacent to any property
currently or formerly owned, operated or leased by the Company or any of
its Subsidiaries, or regarding the Company's or any of its Subsidiaries'
compliance with applicable Environmental Laws.
(vii) Without in any way limiting the generality of the foregoing,
any properties currently owned, operated or leased by the Company and
its Subsidiaries do not, to the knowledge of the Company, contain any:
underground storage tanks; asbestos; polychlorinated biphenyls ("PCBs");
underground injection wells; radioactive materials; or septic tanks or
waste disposal pits in which process wastewater or any Hazardous
Materials have been discharged or disposed.
Section 3.20 Labor Matters. Except as disclosed in the Company SEC
Documents, neither the Company nor any of its Subsidiaries has any labor
contracts, collective bargaining agreements or material employment or consulting
agreements with any persons employed by the Company or any persons otherwise
performing services primarily for the Company or any of its Subsidiaries (the
"Company Business Personnel"). Neither the Company nor any of its Subsidiaries
has engaged in any unfair labor practice with respect to Company Business
Personnel, and there is no unfair labor practice complaint pending or, to the
knowledge of the Company, threatened, against the Company or any of its
Subsidiaries with respect to the Company Business Personnel which, in either
such case, would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Except as set forth in the Company
SEC Documents, there is no labor strike, dispute, slowdown or stoppage pending
or, to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries, and neither the Company nor any of its Subsidiaries has
experienced any primary work stoppage or other labor difficulty involving its
employees during the last three years, except for any of the foregoing which
would not have a Company Material Adverse Effect.
Section 3.21 Affiliate Transactions. Except as set forth or as disclosed in
the Company SEC Documents or as contemplated by the transactions contemplated
hereby, there are no material Contracts or other transactions between the
Company or any of its Subsidiaries, on the one hand, and any (i) officer or
director of the Company or any of its Subsidiaries, (ii) record or beneficial
owner of five percent or more of the voting securities of the Company or (iii)
affiliate (as such term is defined in Regulation 12b-2 promulgated under the
Exchange Act) of any such officer, director or beneficial owner, on the other
hand.
Section 3.22 Opinion of Financial Advisor. The Company has received the
oral opinion of Goldman, Sachs & Co. ("Goldman Sachs"), to the effect that the
consideration to be received in the Merger by the holders of Company Common
Stock is fair to such holders. A copy of the written opinion to be delivered by
Goldman Sachs, which opinion shall be included in the Proxy Statement, shall be
delivered to Holdings promptly after receipt by the Company. It is understood
and agreed by the parties hereto that such opinion is provided by Goldman Sachs
solely for the benefit of the Board of Directors of the Company and is not to be
relied upon by Holdings or its Affiliates.
Section 3.23 Brokers. Except for fees, commissions and expenses payable to
its financial advisors, Goldman Sachs, pursuant to a letter agreement dated
October 10, 1995 between the Company and Goldman Sachs, a copy of which has been
furnished to Holdings, no broker, finder or financial advisor retained by the
Company is entitled to any brokerage, finder's or other fee or commission from
the Company or Holdings in connection with the transactions contemplated by this
Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Except as set forth in the Holdings Disclosure Schedule delivered by
Holdings to the Company at or prior to the execution of this Agreement (the
"Holdings Disclosure Schedule") (each section of which qualifies the
correspondingly numbered representation and warranty), Holdings represents and
warrants to the Company as follows:
Section 4.1 Organization and Good Standing. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to carry on its business as
it is now being conducted. Holdings is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or in good standing would not have a material adverse effect,
individually or in the aggregate, on the business, financial condition or
results of operations of Holdings and its Subsidiaries taken as a whole, or, if
applicable, the ability of Holdings to consummate the Merger and the other
transactions contemplated by this Agreement (a "Holdings Material Adverse
Effect").
Section 4.2 Certificate of Incorporation and By-Laws. Complete and correct
copies of the Certificates of Incorporation and By-laws or equivalent
organizational documents, each as amended to date, of Holdings and each of its
Subsidiaries have been made available to the Company. The Certificates of
Incorporation, By-laws and equivalent organizational documents of Holdings and
each of its Subsidiaries are in full force and effect. Neither Holdings nor any
of its Subsidiaries is in violation of any material provision of its Certificate
of Incorporation, By-laws or equivalent organizational documents.
Section 4.3 Capitalization.
(a) As of the date hereof, (i) the authorized capital stock of
Holdings consisted of 1,000,000 shares of Holdings Common Stock, par value
of $0.01 per share, of which 379.6275 shares are issued and outstanding and
no shares are held in the treasury of Holdings and (ii) the authorized
capital stock of Motor Wheel Corporation, a Ohio corporation and
wholly-owned subsidiary of Holdings ("MWC"), consists of (A) 2,500 shares
of Common Stock, no par value ("MWC Common Stock"), of which 1,100 shares
are issued and outstanding, and (B) 300,000 shares of MWC Preferred Stock,
no par value ("MWC Preferred Stock"), of which no shares are issued and
outstanding. All of the issued and outstanding shares of Holdings Common
Stock and MWC Common Stock and Preferred Stock are validly issued, and are
fully paid, nonassessable and free of preemptive rights.
(b) Except as described in this Section 4.3 and as contemplated by
this Agreement: (i) no shares of capital stock or other equity securities
of Holdings or MWC are authorized, issued or outstanding, or reserved for
issuance and there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments of any
character to which Holdings or MWC or any of their respective Subsidiaries
is a party relating to the issued or unissued capital stock or other equity
interests of Holdings or MWC, requiring Holdings or MWC to grant, issue or
sell any shares of the capital stock or other equity interests of Holdings
or MWC or any of their respective Subsidiaries by sale, lease, license or
otherwise; (ii) Holdings and MWC and any of their respective Subsidiaries
have no obligation, contingent or otherwise, to repurchase, redeem or
otherwise acquire any shares of the capital stock or other equity interests
of Holdings or MWC or any of their respective Subsidiaries; (iii) none of
Holdings or MWC or any of their respective Subsidiaries, directly or
indirectly, owns, or has agreed to purchase or otherwise acquire, the
capital stock or other equity interests of, or any interest convertible
into or exchangeable or exercisable for such capital stock or such equity
interests, of any corporation, partnership, joint venture or other entity
which would be material in value to Holdings; and (iv) there are no voting
trusts, proxies or other agreements or understandings to which Holdings or
MWC or any of their respective Subsidiaries is a party or, to the knowledge
of Holdings or MWC, is bound with respect to the voting of any shares of
capital stock or other equity interests of Holdings or MWC or any of their
respective Subsidiaries.
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Section 4.4 Holdings Subsidiaries. The Holdings Disclosure Schedule sets
forth a list of each Holdings Subsidiary; its authorized, issued and outstanding
capital stock or other equity interests; the percentage of such capital stock or
other equity interests owned by Holdings or any Holdings Subsidiary, and the
identity of such owner; the capital stock reserved for future issuance pursuant
to outstanding options or other agreements; and the identity of all parties to
any such option or other agreement. Each Subsidiary of Holdings is a corporation
or partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization. Each Subsidiary of
Holdings has all requisite corporate power and authority to carry on its
business as it is now being conducted. Each Subsidiary of Holdings is duly
qualified as a foreign corporation or organization authorized to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Holdings Material Adverse Effect. All of the
outstanding shares of capital stock or other ownership interests in each of
Holdings' Subsidiaries have been validly issued, and are fully paid,
nonassessable and are owned by Holdings or another Subsidiary of Holdings free
and clear of all Liens, and are not subject to preemptive rights created by
statute, such Subsidiary's respective Certificate of Incorporation or By-laws or
equivalent organizational documents or any agreement to which such Subsidiary is
a party.
Section 4.5 Corporate Authority.
(a) Holdings has the requisite corporate power and authority to
execute and deliver this Agreement and, subject to the approval of
Holdings' stockholders with respect to the Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by Holdings and the consummation by Holdings of the transactions
contemplated hereby have been duly authorized by its Board of Directors
and, except for the approval of Holdings' stockholders with respect to the
Merger, no other corporate action on the part of Holdings is necessary to
authorize the execution and delivery by Holdings of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Holdings and constitutes a valid
and binding agreement of Holdings and is enforceable against Holdings in
accordance with its terms, except that (i) such enforcement may be subject
to any bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defense, and to the discretion of the court before which any proceeding
therefor may be brought. The preparation of the Proxy Statement and the
Registration Statement to be filed with the SEC has been duly authorized by
the Board of Directors of Holdings.
(b) Prior to the execution and delivery of this Agreement, the Board
of Directors of Holdings (at a meeting duly called and held) has (i)
approved this Agreement and the Merger and the other transactions
contemplated hereby, (ii) determined that the transactions contemplated
hereby are fair to and in the best interests of the holders of Holdings
Common Stock and (iii) except as may be required to comply with its
fiduciary duties under Applicable Law as advised by counsel, determined to
recommend this Agreement, the Merger and the other transactions
contemplated hereby to Holdings' stockholders for approval and adoption at
the stockholders meeting contemplated by Section 6.5(a) hereof. The
affirmative vote of the holders of a majority of the outstanding shares of
Holdings Common Stock are the only votes of the holders of any class or
series of Holdings' capital stock necessary to approve the Merger.
Section 4.6 Compliance with Applicable Law. Except as disclosed in the MWC
SEC Documents (as hereinafter defined), (i) each of Holdings and its
Subsidiaries holds, and is in compliance with the terms of, all permits,
licenses, exemptions, orders and approvals of all Governmental Entities
necessary for the conduct of their respective businesses ("Holdings Permits"),
except for failures to hold or to comply with such permits, licenses,
exemptions, orders and approvals which would not have a Holdings Material
Adverse Effect, (ii) with respect to the Holdings permits, no action or
proceeding is pending or, to the knowledge of Holdings, threatened and, to the
knowledge of Holdings, no fact exists or event has occurred that would
reasonably be expected to have a Holdings Material Adverse Effect, (iii) the
business of Holdings and its Subsidiaries is being conducted in compliance with
all Applicable Laws, except for violations or failures to so comply that would
not have a Holdings Material Adverse Effect, and (iv) to the knowledge of
Holdings, no investigation
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or review by any Governmental Entity with respect to Holdings or its
Subsidiaries is pending or threatened, other than, in each case, those which
would not reasonably be likely to have a Holdings Material Adverse Effect.
Section 4.7 Non-contravention. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, (i) result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under any Contract applicable to Holdings
or any of its Subsidiaries , or result in the creation of any Lien upon any of
the properties or assets of Holdings or any of its Subsidiaries, (ii) conflict
or result in any violation of any provision of the Certificate of Incorporation
or By-Laws or other equivalent organizational document, in each case as amended,
of Holdings or any of its Subsidiaries, (iii) subject to the governmental
filings discussed in clause (i) of Section 4.8, conflict with or violate any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Holdings or any of its Subsidiaries or any of their respective properties or
assets (except for any national or supranational Antitrust Laws as to which no
representation or warranty is being made), other than, in the case of clauses
(i) and (iii), any such violations, conflicts, defaults, rights, losses or Liens
that, individually or in the aggregate, would not have a Holdings Material
Adverse Effect.
Section 4.8 Government Approvals; Required Consents. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to Holdings or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Holdings or is
necessary for the consummation of the transactions contemplated hereby
(including, without limitation, the Merger) except: (i) in connection, or in
compliance, with the provisions of the HSR Act, the Securities Act, the Exchange
Act, any state securities or "Blue Sky" law and any requirements of any foreign
or supranational Antitrust Law, (ii) for the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware, (iii) such consents,
approvals, authorizations, permits, filings and notifications listed in the
Holdings Disclosure Schedule and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
obtain or make would not, individually or in the aggregate, have a Holdings
Material Adverse Effect.
Section 4.9 SEC Documents and Other Reports. MWC has filed all documents
required to be filed prior to the date hereof by it and its Subsidiaries with
the SEC since January 1, 1993 (the "MWC SEC Documents"). As of their respective
dates, or if amended as of the date of the last such amendment, the MWC SEC
Documents complied, and all documents required to be filed by MWC with the SEC
after the date hereof and prior to the Effective Time ("Subsequent MWC SEC
Documents") will comply, in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the applicable rules
and regulations promulgated thereunder and none of the MWC SEC Documents
contained, and the Subsequent MWC SEC Documents will not contain, any untrue
statement of a material fact or omitted, or will omit, to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, or are to be made, not
misleading. The consolidated financial statements of MWC included in the MWC SEC
Documents fairly present, and included in the Subsequent MWC SEC Documents will
fairly present, the consolidated financial position of MWC and its consolidated
Subsidiaries, as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the respective periods
then ended (subject, in the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein) in conformity
with GAAP (except, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto). Since September
30, 1995, MWC has not made any change in the accounting practices or policies
applied in the preparation of its financial statements, except as may be
required by GAAP.
Section 4.10 Absence of Certain Changes or Events. Except to the extent
disclosed in the MWC SEC Documents filed with the SEC prior to the date of this
Agreement, since September 30, 1995 Holdings and its Subsidiaries have conducted
its businesses and operations in the ordinary and usual course consistent with
past practice and there has not occurred (i) any event, condition or occurrence
having or that would reasonably be
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expected to have, individually or in the aggregate, a Holdings Material Adverse
Effect; (ii) any damage, destruction or loss (whether or not covered by
insurance) having or which would reasonably be expected to have, individually or
in the aggregate, a Holdings Material Adverse Effect; (iii) any declaration,
setting aside or payment of any dividend or distribution of any kind by Holdings
or MWC on any class of its capital stock; and (iv) any event during the period
from September 30, 1995 through the date of this Agreement that, if taken during
the period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 5.2 hereof.
Section 4.11 Actions and Proceedings. Except as set forth in the MWC SEC
Documents, there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against Holdings or any of its Subsidiaries,
any of their properties, assets or business, or, to the knowledge of Holdings,
any of Holdings' or its Subsidiaries' current or former directors or officers or
any other person whom Holdings or any of its Subsidiaries has agreed to
indemnify, as such, that would reasonably be expected to have, individually or
in the aggregate, a Holdings Material Adverse Effect. Except as set forth in the
MWC SEC Documents, there are no actions, suits or legal, administrative,
regulatory or arbitration proceedings pending or, to the knowledge of Holdings,
threatened against Holdings or any of its Subsidiaries, any of their properties,
assets or business, or, to the knowledge of Holdings, any of Holdings' or its
Subsidiaries' current or former directors or officers or any other person whom
Holdings or any of its Subsidiaries has agreed to indemnify, as such, that
relates to transactions contemplated by this Agreement or would reasonably be
expected to have, individually or in the aggregate, a Holdings Material Adverse
Effect.
Section 4.12 Absence of Undisclosed Liabilities. Except for liabilities or
obligations which are (i) accrued or reserved against in Holdings' consolidated
financial statements (or reflected in the notes thereto) included in the MWC SEC
Documents or (ii) disclosed in the Holdings SEC Documents, neither Holdings nor
any of its Subsidiaries has any liabilities or obligations (including, without
limitation, Tax liabilities) (whether absolute, accrued, contingent or
otherwise) that were required to be set forth on a balance sheet which is
prepared in conformance with GAAP, consistently applied, which (either
individually or in the aggregate) would reasonably be expected to have a
Holdings Material Adverse Effect.
Section 4.13 Contracts. Each Contract entered into by Holdings is valid,
binding and enforceable and in full force and effect, except where failure to be
valid, binding and enforceable and in full force and effect would not reasonably
be expected to have a Holdings Material Adverse Effect and there are no defaults
thereunder, except those defaults that would not reasonably be expected to have
a Holdings Material Adverse Effect. Except as set forth in the MWC SEC
Documents, neither Holdings nor any of its Subsidiaries is a party to or bound
by any non-competition agreement or any other agreement or obligation which
purports to limit in any material respect the manner in which, or the localities
in which, Holdings or any such Subsidiary is entitled to conduct all or any
material portion of the business of Holdings and its Subsidiaries taken as a
whole.
Section 4.14 Taxes. (a) Holdings and each of its Subsidiaries has timely
filed, or been included in, all material Federal, state, local and foreign
income, franchise, sales and other Tax Returns required to be filed by or with
respect to Holdings or any of its Subsidiaries; (b) as of the time of filing,
all such Tax Returns were true, correct and complete, in all material respects,
and correctly reflected in all material respects the facts regarding the income,
business, assets, operations, activities and status of Holdings and its
Subsidiaries and any other material information required to be shown therein;
(c) Holdings and its Subsidiaries have timely paid to the appropriate taxing
authority, or have made provision for, all material Taxes shown as due on such
Tax Returns with respect to Holdings and any of its Subsidiaries; (d) the unpaid
Taxes of Holdings and its Subsidiaries (x) do not, as of the date hereof,
materially exceed the reserves for Taxes (other than reserves for deferred
Taxes) reflected on the books and records of Holdings and its Subsidiaries and
(y) will not materially exceed that reserve as adjusted for operations and
transactions through the Effective Time in accordance with GAAP and the past
custom and practice of Holdings and its Subsidiaries; (e) neither Holdings nor
any of its Subsidiaries has requested any extension of time within which to file
or send any Tax Return, which Tax Return has not since been filed or sent; (f)
no material deficiency for Taxes has been proposed, asserted or assessed against
Holdings or any of its Subsidiaries (or any member of any affiliated or combined
group of which Holdings or any of its Subsidiaries is or has been a member for
which either Holdings or an of its
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Subsidiaries could be liable) other than those Taxes being contested in good
faith by appropriate proceedings and set forth in the Holdings Disclosure
Schedule (which shall set forth the nature of the proceeding, the type of
return, the deficiencies proposed, asserted or assessed and the amount thereof,
and the taxable year in question); (g) to the knowledge of Holdings, no material
issue has been raised during the past five years by any federal, state, local or
foreign taxing authority which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed material
deficiency for any other period not so examined; (h) neither Holdings nor any of
its Subsidiaries has granted any extension or waiver of the limitation period
applicable to any Tax claims other than those being contested in good faith by
appropriate proceedings; (i) neither Holdings nor any of its Subsidiaries is
subject to liability for Taxes of any person (other than Holdings or its
Subsidiaries) including, without limitation, liability arising from the
application of U.S. Treasury regulation section 1.1502-6 or any analogous
provision of state, local or foreign law; (j) neither Holdings nor any of its
Subsidiaries is or has been a party to any tax sharing agreement with any
corporation which is not currently a member of the affiliated group of which
Holdings is currently a member; (k) neither Holdings nor any of its Subsidiaries
is a party to any agreement, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code; (l) there are no liens
for Taxes on any assets of Holdings or of any of its Subsidiaries (other than
statutory liens for current Taxes not yet due); (m) Holdings and its
Subsidiaries have withheld and paid (and until the Effective Time will withhold
and pay) all income, social security, unemployment and all other material
payroll Taxes required (including, without limitation, pursuant to Sections 1441
and 1442 of the Code or similar provisions under foreign law) to be withheld and
paid in connection with amounts paid to any employee, independent contractor,
creditor, stockholder or other third party; and (n) neither Holdings nor any of
its Subsidiaries has participated in, or cooperated with, an international
boycott within the meaning of Section 999 of the Code. Neither Holdings nor any
of its Subsidiaries has made an election under Section 341(f) of the Code.
Section 4.15 Title to Properties; Encumbrances.
(a) Except as described in the following sentence, each of Holdings
and its Subsidiaries has good, valid and, in the case of real property,
marketable title to, or a valid leasehold interest in, all of its material
properties and assets (real, personal, tangible and intangible), including,
without limitation, all such properties and assets reflected in the
consolidated balance sheet of MWC and its Subsidiaries as of September 30,
1995 included in the MWC SEC Documents (except for properties and assets
disposed of in the ordinary course of business and consistent with past
practices since September 30, 1995), except for such title or interest the
failure of which to have would not have, individually or in the aggregate,
a Holdings Material Adverse Effect. None of such properties or assets are
subject to any Liens (whether absolute, accrued, contingent or otherwise),
except (i) as set forth in the MWC SEC Documents or (ii) imperfections of
title and Liens, if any, which do not materially detract from the value of
the property or assets subject thereto and do not materially impair the
business or operations of Holdings and its Subsidiaries taken as a whole.
(b) Each of Holdings and its Subsidiaries has complied with the terms
of all leases to which it is a party and under which it is in occupancy,
and all such leases are in full force and effect except for failures to
comply or be in full force and effect which would not have, individually or
in the aggregate, a Holdings Material Adverse Effect.
Section 4.16 Intellectual Property. The Holdings Disclosure Schedule,
Holdings and its Subsidiaries own or have a valid license to use all inventions,
patents, trademarks, service marks, trade names, copyrights, trade secrets,
technology and know-how, software and other intellectual property rights
(collectively, the "Holdings Intellectual Property") necessary to carry on their
respective businesses as currently conducted; and neither Holdings nor any such
Subsidiary has received any notice of infringement of or conflict with, and, to
Holdings' knowledge, there are no infringements of or conflicts with, the rights
of others with respect to the use of any of the Holdings Intellectual Property
that, in either such case, has had or would reasonably be expected to have,
individually or in the aggregate, a Holdings Material Adverse Effect.
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Section 4.17 Information in Disclosure Documents and Registration
Statement. None of the information supplied or to be supplied by Holdings for
inclusion in (i) the Registration Statement or (ii) the Proxy Statement will, in
the case of the Registration Statement, at the time it becomes effective or, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the initial mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the meeting of
stockholders of Holdings and the Company to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement, as of its effective date, will comply
(with respect to information relating to Holdings) as to form in all material
respects with the requirements of the Securities Act, and the rules and
regulations promulgated thereunder, and as of the date of its initial mailing
and as of the date of Holdings' stockholders' meeting, the Proxy Statement will
comply (with respect to information relating to Holdings) as to form in all
material respects with the applicable requirements of the Exchange Act, and the
rules and regulations promulgated thereunder. Notwithstanding the foregoing,
Holdings makes no representations with respect to any statement in the foregoing
documents based upon information supplied by the Company for inclusion therein.
Section 4.18 Employee Benefit Plans; ERISA.
(a) The Holdings Disclosure Schedule sets forth a list of each of the
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical,
life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, arrangement or
agreement that is maintained or contributed to, or was maintained or
contributed to at any time on or after January 1, 1993, by Holdings or by
any trade or business, whether or not incorporated, which together with
Holdings would be deemed a "single employer" within the meaning of Section
4001 of ERISA (each, a "Holdings ERISA Affiliate") for the benefit of any
employee or former employee of Holdings or any Holdings ERISA Affiliate,
whether formal or informal and whether legally binding or not, in
connection with which Holdings would have liability (the "Holdings Plans").
Neither Holdings nor any Holdings ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional
Holdings Plan or modify or change any existing Holdings Plan in a way that
would affect any employee or former employee of Holdings or any Holdings
ERISA Affiliate.
(b) With respect to each of Holdings Plans, Holdings has heretofore
delivered or made available to the Company true and complete copies of each
of the following documents:
(i) a copy of the Holdings Plan (including all amendments thereto);
(ii) a copy of the annual report, if required under ERISA, with
respect to each such Holdings Plan for the last two years;
(iii) a copy of the actuarial report, if required under ERISA, with
respect to each such Holdings Plan for the last two years;
(iv) a copy of the most recent Summary Plan Description, together
with each Summary of Material Modifications, required under ERISA with
respect to such Plan, and all material employee communications relating
to such Holdings Plan;
(v) if the Holdings Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof;
(vi) all material contracts relating to the Holdings Plans with
respect to which Holdings or any ERISA Affiliate may have any liability,
including, without limitation, insurance contracts, investment
management agreements, subscription and participation agreements and
record keeping agreements; and
(vii) the most recent determination letter received from the IRS
with respect to each Holdings Plan that is intended to be qualified
under Section 401 of the Code.
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(c) Each of the Holdings Plans that is subject to ERISA is and has
been in compliance with ERISA and the Code in all material respects; with
respect to each of the Holdings Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code either (i) Holdings reasonably
believes such Plan is so qualified or (ii) Holdings has received a
favorable opinion of qualified counsel or received a favorable
determination letter from the IRS with respect to such qualification; no
Holdings Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Code; neither Holdings nor any Holdings ERISA
Affiliate has incurred, directly or indirectly, any material liability
(including any material contingent liability) to or on account of a
Holdings Plan pursuant to Title IV of ERISA; no proceedings have been
instituted to terminate any Holdings Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(b) of
ERISA for which the 30 day reporting requirement has not been waived, has
occurred with respect to any Holdings Plan; and no condition exists that
presents a material risk to Holdings or any Holdings ERISA Affiliate of
incurring a liability to the IRS, the PBGC or to any multiemployer plan (as
defined in Section 3(37) of ERISA) other than payment of premiums pursuant
to Title IV of ERISA.
(d) The current value of the assets of each of the Holdings Plans that
are subject to Title IV of ERISA, based upon the actuarial assumptions (to
the extent reasonable) presently used for funding purposes in the most
recent actuarial report prepared by such Holdings Plan's actuary with
respect to such Holdings Plan, exceeds the present value of the accrued
benefits under each such Holdings Plan; no Holdings Plan is a multiemployer
pension plan (within the meaning of Section 4001(a)(3) of ERISA); no
Holdings Plan is a multiple employer plan as defined in Section 413 of the
Code; and all material contributions or other amounts payable by Holdings
as of the Effective Time with respect to each Holdings Plan in respect of
current or prior plan years have been either paid or accrued on the balance
sheet of Holdings. To the knowledge of Holdings, there are no material
pending, threatened or anticipated claims (other than routine claims for
benefits) by, on behalf of or against any of the Holdings Plans or any
trusts related thereto.
(e) Neither Holdings nor any Holdings ERISA Affiliate, nor any
Holdings Plan, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which
Holdings or any Holdings ERISA Affiliate, any Holdings Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any Holdings Plan or any such trust could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code which would result in
a material liability to Holdings. No Holdings Plan provides death or
medical benefits (whether or not insured), with respect to current or
former employees of Holdings or any Holdings ERISA Affiliate beyond their
retirement or other termination of service other than (i) coverage mandated
by Applicable Law or (ii) death benefits under any "employee pension plan,"
as that term is defined in Section 3(2) of ERISA).
Section 4.19 Environmental Matters.
(a) Holdings and its Subsidiaries are in compliance in all material
respects with all applicable Environmental Laws (which compliance includes,
but is not limited to, the possession by Holdings and its Subsidiaries of
all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof),
except for failures to comply which would not have, individually or in the
aggregate, a Holdings Material Adverse Effect. Neither Holdings nor any of
its Subsidiaries has received any communication (written or oral), whether
from a governmental authority, citizens group, employee or otherwise, that
alleges that Holdings or any of its Subsidiaries is not in such compliance,
and there are no past or present (or to the knowledge of Holdings, future)
actions, activities, circumstances conditions, events or incidents that may
prevent or interfere with such compliance in the future. All Permits and
other governmental authorizations currently held by Holdings and its
Subsidiaries pursuant to applicable Environmental Laws are identified in
the Holdings Disclosure Schedule.
(b) No transfers of permits or other governmental authorizations under
Environmental Laws, and no additional permits or other governmental
authorizations under Environmental Laws, will be required
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to permit the Surviving Corporation to conduct its business in full compliance
with all applicable Environmental Laws immediately following the Closing Date,
as conducted by Holdings and its Subsidiaries immediately prior to the Closing
Date. To the extent that such transfers or additional permits and other
governmental authorizations are required, Holdings and its Subsidiaries agree to
cooperate with the Company to effect such transfers and obtain such permits and
other governmental authorizations prior to the Closing Date, to the extent
practicable and to the extent that such permits and governmental authorizations
may be transferred or obtained pursuant to Applicable Law or regulation prior to
the Closing Date; provided, however, that transferring or obtaining such permits
and other governmental authorizations prior to the Closing Date shall not be a
condition to Closing.
(c) There is no Environmental Claim pending or, to the knowledge of
Holdings, threatened against Holdings or any of its Subsidiaries or, to the
knowledge of Holdings, against any person or entity whose liability for any
Environmental Claim Holdings or any of its Subsidiaries have or may have
retained or assumed either contractually or by operation of law which would
reasonably be expected to have, individually or in the aggregate, a
Holdings Material Adverse Effect.
(d) To the knowledge of Holdings there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the Release, emission, discharge, presence or disposal
of any Hazardous Material which could form the basis of any Environmental
Claim against Holdings or any of its Subsidiaries, or to the knowledge of
Holdings, against any person or entity whose liability for any
Environmental Claim Holdings or any of its Subsidiaries has or may have
retained or assumed either contractually or by operation of law which would
reasonably be expected to have, individually or in the aggregate, a
Holdings Material Adverse Effect.
(e) Holdings and its Subsidiaries have not, and to the knowledge of
Holdings, no other person has placed, stored, deposited, discharged,
buried, dumped or disposed of Hazardous Materials or any other wastes
produced by, or resulting from, any business, commercial or industrial
activities, operations or processes, on, beneath or adjacent to any
property currently or formerly owned, operated or leased by Holdings or any
of its Subsidiaries, except for inventories of such substances to be used,
and wastes generated therefrom, in the ordinary course of business of
Holdings and its Subsidiaries (which inventories and wastes, if any, were
and are stored or disposed of in accordance with applicable Environmental
Laws and in a manner such that there has been no Release of any such
substances into the indoor or outdoor environment), except where Holdings
and its Subsidiaries have failed to comply with Environmental Laws
applicable to the above matters or have failed to store such inventories
and wastes in a manner described above and such failures would not have,
individually or in the aggregate, a Holdings Material Adverse Effect.
(f) Holdings has delivered or otherwise made available for inspection
to the Company true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated by
Holdings or any of its Subsidiaries pertaining to Hazardous Materials in,
on, beneath or adjacent to any property currently or formerly owned,
operated or leased by Holdings or any of its Subsidiaries, or regarding
Holdings' or any of its Subsidiaries' compliance with applicable
Environmental Laws.
(g) Without in any way limiting the generality of the foregoing, any
properties currently owned, operated or leased by Holdings and its
Subsidiaries do not, to the knowledge of Holdings, contain any: underground
storage tanks; asbestos; PCBs; underground injection wells; radioactive
materials; or septic tanks or waste disposal pits in which process
wastewater or any Hazardous Materials have been discharged or disposed.
Section 4.20 Labor Matters. Except as disclosed in the MWC SEC Documents,
neither Holdings nor any of its Subsidiaries has any labor contracts, collective
bargaining agreements or material employment or consulting agreements with any
persons employed by Holdings or any persons otherwise performing services
primarily for Holdings or any of its Subsidiaries (the "Holdings Business
Personnel"). Neither Holdings nor any of its Subsidiaries has engaged in any
unfair labor practice with respect to Holdings Business Personnel, and there is
no unfair labor practice complaint pending or, to the knowledge of Holdings,
threatened, against
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Holdings or any of its Subsidiaries with respect to Holdings Business Personnel
which, in either such case, would reasonably be expected to have, individually
or in the aggregate, a Holdings Material Adverse Effect. Except as set forth in
the MWC SEC Documents, there is no labor strike, dispute, slowdown or stoppage
pending or, to the knowledge of Holdings, threatened against Holdings or any of
its Subsidiaries, and neither Holdings nor any of its Subsidiaries has
experienced any primary work stoppage or other material labor difficulty
involving its employees during the last three years, except for any of the
foregoing which would not have a Holdings Material Adverse Effect.
Section 4.21 Affiliate Transactions. Except as set forth or as disclosed in
the MWC SEC Documents or as contemplated by the transactions contemplated
hereby, there are no material Contracts or other transactions between Holdings
or any of its Subsidiaries, on the one hand, and any (i) officer or director of
Holdings or any of its Subsidiaries, (ii) record or beneficial owner of five
percent or more of the voting securities of Holdings or (iii) affiliate (as such
term is defined in Regulation 12b-2 promulgated under the Exchange Act) of any
such officer, director or beneficial owner, on the other hand.
Section 4.22 Financing.
(a) Holdings and the Company have previously received a letter from
Canadian Imperial Bank of Commerce and Merrill Lynch Capital Corporation
(the "Bank Commitment Letter") confirming their commitment, subject to the
terms and conditions thereof, to lend up to $645 million to the Company.
The proceeds from the financing pursuant to the Bank Commitment Letter may
be used by the Company for purposes of, among other things, consummating
the Merger and the transactions contemplated hereby, refinancing
outstanding indebtedness of Holdings and the Company and providing working
capital to the Company. Holdings and the Company have received Subscription
Agreements (together with the Bank Commitment Letter, the "Financing
Commitments") providing for subscriptions, subject to the terms and
conditions thereof, to purchase an aggregate of 200,000 shares of Company
Preferred Stock and warrants to purchase 150,000 shares of New Company
Common Stock for an aggregate subscription price of $200 million. A true
and complete copy of the Financing Commitments have been delivered to the
Company.
(b) At the Effective Time, the borrowings available to the Company
pursuant to the Bank Commitment Letter, together with the amounts
subscribed to purchase Company Preferred Stock pursuant to the Subscription
Agreements and $200 million of subordinated indebtedness (the "Subordinated
Debt") to be issued by the Company in a public offering or private
placement, will be sufficient to consummate the Merger and the transactions
contemplated hereby on the terms contemplated hereby and to pay all
expenses to be incurred by Holdings and the Company in connection with the
transactions contemplated by this Agreement. Nothing contained herein shall
preclude Holdings from causing the Company to (i) incur an additional $50
million of senior debt or subordinated debt or (ii) substitute an equal
amount of senior debt for subordinated debt or subordinated debt for senior
debt if to do so, in Holdings' reasonable judgement, would be in the best
interests of the Company and Holdings.
(c) As of the date hereof, Holdings, based on conditions that are now
prevailing and that have been brought to Holdings' attention, knows of no
circumstance or condition that it expects will prevent the availability at
the Closing of the requisite financing to consummate the transactions
contemplated by this Agreement on the terms set forth herein, as provided
in the Financing Commitments. In the event any or all of the borrowings or
amounts subscribed pursuant to the Financing Commitments or to be made
available pursuant to the Subordinated Debt are unavailable for any reason
in amounts sufficient to permit consummation of the Merger under the terms
of this Agreement, Holdings will use its best efforts to obtain replacement
financing from alternative sources on terms and conditions that are
commercially reasonable.
Section 4.23 Brokers. No broker, finder or financial adviser is entitled to
any brokerage, finder's or other fee or commission from the Company or Holdings
in connection with the transactions contemplated by this Agreement.
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Section 4.24 Holdings Not an Interested Stockholder. As of the date of this
Agreement, neither Holdings nor any of its affiliates is an "Interested
Stockholder" of the Company as such term is defined in Section 203 of the DGCL.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business by the Company Pending the Merger. Prior to
the Effective Time, unless Holdings shall otherwise agree in writing (which
agreement shall not be unreasonably withheld and shall be deemed made if given
by the Chief Executive Officer or any director of Holdings), or as otherwise
expressly contemplated by this Agreement, including, without limitation, Article
III hereof, or as set forth in Section 5.1 of the Company Disclosure Schedule,
the Company shall conduct, and cause each of its Subsidiaries to conduct, its
business only in the ordinary and usual course consistent with past practice,
and the Company shall use, and cause each of its Subsidiaries to use, its
reasonable best efforts to preserve intact the present business organization,
keep available the services of its present officers and key employees, and
preserve their existing business relationships. Without limiting the generality
of the foregoing, unless Holdings shall otherwise agree in writing (which
agreement shall not be unreasonably withheld and shall be deemed made if given
by the Chief Executive Officer or any director of Holdings), or as otherwise
expressly contemplated by this Agreement, including, without limitation, Article
III hereof, or as set forth in Section 5.1 of the Company Disclosure Schedule,
prior to the Effective Time the Company shall not, nor shall it permit any of
its Subsidiaries to:
(a)(i) amend its Certificate of Incorporation, as amended, By-Laws or
other organizational documents, (ii) split, combine or reclassify any
shares of its outstanding capital stock, (iii) declare, set aside or pay
any dividend (other than its normal quarterly cash dividend not exceeding
$.015 per share) or other distribution payable in cash, stock or property,
or (iv) directly or indirectly redeem or otherwise acquire any shares of
its capital stock or shares of the capital stock of any of its Subsidiaries
(except to the extent required by Applicable Law with respect to director's
qualifying shares);
(b) authorize for issuance, issue (except upon the exercise of
outstanding stock options) or sell or agree to issue or sell any shares of,
or rights to acquire or convertible into any shares of, its capital stock
or shares of the capital stock of any of its Subsidiaries (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise), except for the granting of options
pursuant to the Company's 1992 Stock Incentive Plan, as in effect on the
date hereof, to current or new employees in the ordinary course of business
and consistent with past practice;
(c)(i) merge, combine or consolidate with another entity, (ii) acquire
or purchase an equity interest in or a substantial portion of the assets of
another corporation, partnership or other business organization or
otherwise acquire any assets outside the ordinary course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the ordinary course of business
and consistent with past practice or (iii) sell, lease, license, waive,
release, transfer, encumber or otherwise dispose of any of its material
assets outside the ordinary course of business and consistent with past
practice;
(d)(i) incur, assume or prepay any material indebtedness or any other
material liabilities other than in each case in the ordinary course of
business and consistent with past practice, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person other than a
Subsidiary of the Company, in each case other than in the ordinary course
of business and consistent with past practice or (iii) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to any Subsidiary of the Company;
(e) pay, satisfy, discharge or settle any material claim, liabilities
or obligations (absolute, accrued, contingent or otherwise), other than in
the ordinary course of business and consistent with past practice or
pursuant to mandatory terms of any Company Contract in effect on the date
hereof;
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(f) modify or amend, or waive any benefit of, any non-competition
agreement to which the Company or any of its Subsidiaries is a party;
(g) authorize or make capital expenditures in excess of $2,000,000
individually, or in excess of $5,000,000 in the aggregate, except with
respect to those already committed or those included in the Company's 1996
budget as previously provided to Holdings;
(h) permit any insurance policy naming the Company or any Subsidiary
of the Company as a beneficiary or a loss payee to be cancelled or
terminated other than in the ordinary course of business;
(i)(i) adopt, enter into, terminate or amend in any material respect
(except as may be required by Applicable Law) any plan for the current or
future benefit or welfare of any director or officer, (ii) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases in salaried
compensation and bonuses and payment of bonuses, in each case in the
ordinary course of business and consistent with past practice or as
otherwise approved by the Compensation Committee of the Company's Board of
Directors in an aggregate amount not in excess of the amount set forth in
Section 5.1 the Company Disclosure Schedule) or (iii) take any action to
fund or in any other way secure, or to accelerate or otherwise remove
restrictions with respect to, the payment of compensation or benefits under
any employee plan, agreement, contract, arrangement or other Company Plan
other than in the ordinary course of business;
(j) make any material change in its accounting or tax policies or
procedures, except as required by law or to comply with GAAP; or
(k) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
Section 5.2 Conduct of Business by Holdings Pending the Merger. Prior to
the Effective Time, unless the Company shall otherwise agree in writing (which
agreement shall not be unreasonably withheld and shall be deemed made if given
by the Chief Executive Officer of the Company), or as otherwise expressly
contemplated by this Agreement, including, without limitation, Article III
hereof, or as set forth in Section 5.2 of the Holdings Disclosure Schedule,
Holdings shall conduct, and cause each of its Subsidiaries to conduct, its
business only in the ordinary and usual course consistent with past practice,
and Holdings shall use, and cause each of its Subsidiaries to use, its
reasonable best efforts to preserve intact the present business organization,
keep available the services of its present officers and key employees, and
preserve their existing business relationships. Without limiting the generality
of the foregoing, unless the Company shall otherwise agree in writing (which
agreement shall not be unreasonably withheld and shall be deemed made if given
by the Chief Executive Officer of the Company), or as otherwise expressly
contemplated by this Agreement, including, without limitation, Article III
hereof, or as set forth in Section 5.2 of the Holdings Disclosure Schedule,
prior to the Effective Time Holdings shall not, nor shall it permit any of its
Subsidiaries to:
(a)(i) amend its Certificate of Incorporation, as amended, By-Laws or
other organizational documents, (ii) split, combine or reclassify any
shares of its outstanding capital stock, (iii) declare, set aside or pay
any dividend or other distribution payable in cash, stock or property, or
(iv) directly or indirectly redeem or otherwise acquire any shares of its
capital stock or shares of the capital stock of any of its Subsidiaries
(except to the extent required by Applicable Law with respect to redeeming
director's qualifying shares);
(b) authorize for issuance, issue (except upon the exercise of
outstanding stock options) or sell or agree to issue or sell any shares of,
or rights to acquire or convertible into any shares of, its capital stock
or shares of the capital stock of any of its Subsidiaries (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise);
(c)(i) merge, combine or consolidate with another entity, (ii) acquire
or purchase an equity interest in or a substantial portion of the assets of
another corporation, partnership or other business organization or
otherwise acquire any assets outside the ordinary course of business and
consistent with past practice or otherwise enter into any material
contract, commitment or transaction outside the
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ordinary course of business and consistent with past practice or (iii) sell,
lease, license, waive, release, transfer, encumber or otherwise dispose of any
of its material assets outside the ordinary course of business and consistent
with past practice;
(d)(i) incur, assume or prepay any material indebtedness or any other
material liabilities other than in each case in the ordinary course of
business and consistent with past practice, (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person other than a
Subsidiary of Holdings, in each case other than in the ordinary course of
business and consistent with past practice or (iii) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to any Subsidiary of Holdings;
(e) pay, satisfy, discharge or settle any material claim, liabilities
or obligations (absolute, accrued, contingent or otherwise), other than in
the ordinary course of business and consistent with past practice or
pursuant to mandatory terms of any Holdings Contract in effect on the date
hereof;
(f) modify or amend, or waive any benefit of, any non-competition
agreement to which Holdings or any of its Subsidiaries is a party;
(g) authorize or make capital expenditures in excess of $2,000,000
individually, or in excess of $5,000,000 in the aggregate, except with
respect to those already committed or those included in Holdings' 1996
budget as previously provided to the Company;
(h) permit any insurance policy naming Holdings or any Subsidiary of
Holdings as a beneficiary or a loss payee to be cancelled or terminated
other than in the ordinary course of business;
(i)(i) adopt, enter into, terminate or amend in any material respect
(except as may be required by Applicable Law) any plan for the current or
future benefit or welfare of any director or officer, (ii) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases in salaried
compensation and bonuses and payment of bonuses, in each case in the
ordinary course of business and consistent with past practice or as
otherwise approved by the Compensation Committee of Holdings' Board of
Directors in an aggregate amount not in excess of the amount set forth in
Section 5.2 the Holdings Disclosure Schedule) or (iii) take any action to
fund or in any other way secure, or to accelerate or otherwise remove
restrictions with respect to, the payment of compensation or benefits under
any employee plan, agreement, contract, arrangement or other Holdings Plan
other than in the ordinary course of business;
(j) make any material change in its accounting or tax policies or
procedures, except as required by law or to comply with GAAP; or
(k) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information. Each party hereto shall (and shall
cause its Subsidiaries and its and their respective officers, directors,
employees, auditors and agents to) afford to the other party and to such other
party's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives (except to the extent not permitted under
Applicable Law as advised by counsel and except as may be limited by any
confidentiality obligation contained in any contract with a third party)
reasonable access during normal business hours throughout the period prior to
the Effective Time to all of its books and records and its properties, plants
and personnel and, during such period, shall furnish promptly to the other party
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws. Unless otherwise
required by law, each party hereto agrees that it shall hold in confidence all
non-public information so acquired in accordance with the terms of the
confidentiality
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agreements between the Company and Holdings, dated November 9, 1995 and between
JLL and the Company dated October 27, 1995.
Section 6.2 No Solicitation.
(a) Prior to the Effective Time, the Company agrees that neither it,
any of its respective Subsidiaries or affiliates, nor any of the respective
directors, officers, employees, agents or representatives of the foregoing,
will, directly or indirectly, (i) solicit or initiate (including by way of
furnishing or disclosing non-public information) any inquiries or the
making of any proposal with respect to any merger, consolidation or other
business combination involving the Company or any Subsidiary of the Company
or the acquisition of all or any significant part of the assets or capital
stock of the Company or any Subsidiary of the Company (an "Acquisition
Transaction") or (ii) negotiate, explore or otherwise engage in discussions
with any person (other than Holdings and its representatives) with respect
to any Acquisition Transaction, or which may reasonably be expected to lead
to a proposal for an Acquisition Transaction or enter into any agreement,
arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this
Agreement; provided, however, that, the Company may, in response to an
unsolicited written proposal from a third party regarding a Superior
Proposal (as hereinafter defined), furnish information to, negotiate or
otherwise engage in discussions with such third party, if the Board of
Directors of the Company determines in good faith, after consultation with
its financial advisors and based upon the advice of outside counsel that
such action is required for the Board of Directors to comply with its
fiduciary duties under Applicable Law.
(b) Except as may be required pursuant to the fiduciary duties of the
Company's Board of Directors under Applicable Law, the Company agrees that,
as of the date hereof, it, its Subsidiaries and affiliates, and the
respective directors, officers, employees, agents and representatives of
the foregoing, shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any person (other
than Holdings and its representatives) conducted heretofore with respect to
any Acquisition Transaction. The Company agrees to promptly advise Holdings
of any inquiries or proposals received by, any such information requested
from, or any negotiations or discussions sought to be initiated or
continued with, the Company, its Subsidiaries or affiliates, or any of the
respective directors, officers, employees, agents or representatives of the
foregoing, in each case from a person (other than Holdings and its
representatives) with respect to an Acquisition Transaction, and the terms
thereof, including the identity of such third party and the general terms
of any financing arrangement or commitment in connection with such
Acquisition Transaction, and, except as may otherwise be required pursuant
to the fiduciary duties of the Company's Board of Directors under
Applicable Law, to update on an ongoing basis or upon Holdings' reasonable
request, the status thereof, as well as any actions taken or other
developments pursuant to this Section 6.2. As used herein, "Superior
Proposal" means a bona fide, written and unsolicited proposal or offer made
by any person (or group) (other than Holdings or any of its Subsidiaries)
with respect to an Acquisition Transaction (i) on terms which the Board of
Directors of the Company determines in good faith, and in the exercise of
reasonable judgment (based on the advice of independent financial advisors
and legal counsel), to be more favorable to the Company and its
stockholders than the transactions contemplated hereby (including taking
into account the financing thereof).
Section 6.3 Third-Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, except to the extent the
Board of Directors of the Company determines in good faith in consultation with
outside counsel, that such action is required for the Board of Directors to
comply with its fiduciary duties under Applicable Law, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its Subsidiaries is a party.
Section 6.4 Registration Statement. As promptly as practicable, Holdings
and the Company shall in consultation with each other prepare and file with the
SEC the Proxy Statement in preliminary form. Each of the Company and Holdings
shall use its reasonable best efforts to have the Proxy Statement cleared by the
SEC and the Registration Statement declared effective as soon as practicable.
The Company shall furnish
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Holdings with all information concerning the Company and the holders of its
capital stock and shall take such other action Holdings may reasonably request
in connection with the Registration Statement and the issuance of shares of New
Company Common Stock. If at any time prior to the Effective Time any event or
circumstance relating to the Company, any Subsidiary of the Company or Holdings,
any of their respective Subsidiaries, or their respective officers or directors,
should be discovered by such party which should be set forth in an amendment or
a supplement to the Registration Statement or Proxy Statement, such party shall
promptly inform the other thereof and take appropriate action in respect
thereof.
Section 6.5 Proxy Statements; Stockholder Approvals.
(a) The Company, acting through its Board of Directors, shall, subject
to and in accordance with Applicable Law and its Certificate of
Incorporation, as amended, and its By-Laws, promptly and duly call, give
notice of, convene and hold as soon as practicable following the date upon
which the Registration Statement becomes effective a meeting of the holders
of Company Common Stock for the purpose of voting to approve and adopt this
Agreement and the transactions contemplated hereby, and, (i) except as
required to comply with the fiduciary duties of the Board of Directors as
advised by outside counsel, recommend approval and adoption of this
Agreement and the transactions contemplated hereby, by the stockholders of
the Company and include in the Proxy Statement such recommendation and (ii)
except as required to comply with the fiduciary duties of the Board of
Directors as advised by outside counsel, take all reasonable action to
solicit and obtain such approval. Holdings, acting through its Board of
Directors, shall, subject to and in accordance with Applicable Law and its
Certificate of Incorporation, as amended, and its By-Laws, promptly and
duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Registration Statement becomes effective
a meeting of the holders of Holdings Common Stock for the purpose of voting
to approve and adopt this Agreement and the transactions contemplated
hereby, and, (i) except as required to comply with the fiduciary duties of
the Board of Directors of Holdings as advised by outside counsel, recommend
approval and adoption of this Agreement and the transactions contemplated
hereby, by the stockholders of Holdings and include in the Proxy Statement
such recommendation and (ii) except as required to comply with the
fiduciary duties of the Board of Directors of Holdings as advised by
outside counsel, take all reasonable action to solicit and obtain such
approval.
(b) Each of Holdings and the Company, as promptly as practicable (or
with such other timing as they mutually agree), shall cause the definitive
Proxy Statement to be mailed to their respective stockholders.
Section 6.6 Compliance with the Securities Act.
(a) At least 30 days prior to the Effective Time, the Company shall
cause to be delivered to Holdings a list identifying all persons who are
"Affiliates" as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act (such person with respect to any party hereto,
collectively the "Affiliates") of the Company.
(b) The Company shall use its reasonable best efforts to cause each
person who is identified as one of its Affiliates in its list referred to
in Section 6.6(a) above to deliver to Holdings, at least 10 days prior to
the Effective Time, a written agreement, in the form attached hereto as
Exhibit J.
(c) At least 30 days prior to the Effective Time, Holdings shall cause
to be delivered to the Company a list identifying all persons who are
Affiliates of Holdings.
(d) Holdings shall use its reasonable best efforts to cause each
person who is identified as one of its Affiliates in its list referred to
in Section 6.6(c) above to deliver to the Company, at least 10 days prior
to the Effective Time, a written agreement, in the form attached hereto as
Exhibit K.
Section 6.7 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein provided and applicable
legal requirements, each of the parties hereto agrees to use its reasonable
best efforts to take, or cause to be taken, all action, and to do, or cause
to be done, consistent with the fiduciary duties of its Board of Directors,
and to assist and
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cooperate with the other parties hereto in doing, as promptly as practicable,
all things necessary, proper or advisable under applicable laws and regulations
to ensure that the conditions set forth in Article VII are satisfied and to
consummate and make effective the transactions contemplated by this Agreement.
(b) Each of the parties will use its reasonable best efforts to obtain
as promptly as practicable all consents, waivers, approvals, authorizations
or permits of, or registration or filing with or notification to (any of
the foregoing being a "Consent"), of any Governmental Entity or any other
person required in connection with, and waivers of any violations, defaults
or breaches that may be caused by, the consummation of the transactions
contemplated by this Agreement.
(c) In furtherance and not in limitation of the foregoing, Holdings
shall use its best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated by this Agreement
under any antitrust, competition or trade regulatory laws, rules or
regulations of any domestic or foreign government or governmental authority
or any multinational authority ("Antitrust Laws"); provided, however, that
neither Holdings nor the Company shall be required to dispose of any
assets, or commit to any divestiture transaction, which in Holdings'
reasonable judgment would reasonably be expected to cause a material
adverse effect on the business, results of operations or financial
condition of the Company and Holdings and their respective Subsidiaries
taken as a whole or materially limit the ability of the Surviving
Corporation to operate its business following the Closing.
(d) Each party hereto shall promptly inform the other of any material
communication from the United States Federal Trade Commission, the
Department of Justice, the European Economic Area or any other Governmental
Entity regarding any of the transactions contemplated by this Agreement. If
any party or any affiliate thereof receives a request for additional
information or documentary material from any such government or authority
with respect to the transactions contemplated by this Agreement, then such
party will cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance
with such request. Holdings will advise the Company promptly in respect of
any understandings, undertakings or agreements (oral or written) which
Holdings proposes to make or enter into with the Federal Trade Commission,
the Department of Justice, the European Economic Area or any other
Governmental Entity in connection with the transactions contemplated by
this Agreement.
(e) From and after the date of this Agreement, and through the
Effective Time, the Company and Holdings shall cause their respective
employees, accountants, counsel and other representatives to reasonably
cooperate with each other and the employees, accountants, counsel and other
representatives in carrying out the transactions contemplated in this
Agreement and in delivering all documents and instruments deemed reasonably
necessary by Holdings (including providing standard accountants' "comfort"
letters and legal opinions and otherwise cooperating and assisting in
satisfying the conditions to the Financing Commitments and assisting with
the syndication or marketing of the financing contemplated thereby) and
taking all other actions reasonably necessary in connection with the
issuance of the Subordinated Debt.
Section 6.8 Employee Benefits. Holdings agrees to cause the Surviving
Corporation and its Subsidiaries to honor and assume, and the Surviving
Corporation agrees to honor and assume, the Company's employee benefit plans and
employee programs, arrangements and agreements listed in the Company Disclosure
Schedule, copies of which have previously been made available to Holdings.
Nothing in this Agreement shall prohibit Holdings, the Surviving Corporation or
its Subsidiaries from amending or terminating any such plan, program,
arrangement or agreement at any time in accordance with Applicable Law (except
as to benefits already vested thereunder) and subject to the terms of such
plans, programs or arrangements or other agreements between the Company and its
employees; provided, however, that any such amendment or termination prior to
the first anniversary of the Closing Date shall not result in employee benefit
plans and employee programs, arrangements and agreements for the benefit of the
employees of the Surviving Corporation which are less favorable, in the
aggregate, than the Company's employee benefit plans and employee programs,
arrangements and agreements listed in the Company Disclosure Schedule. The
Surviving
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Corporation shall honor the terms of, and assume, the severance agreements,
dated as of November 6, 1995, between the Company and twelve officers of the
Company.
Section 6.9 Public Announcements. Each of Holdings and the Company agrees
that, except as may be required by Applicable Law as advised by counsel, it will
not issue any press release or otherwise make any public statement with respect
to this Agreement (including the Exhibits hereto) or the transactions
contemplated hereby (or thereby) without having consulted the other party.
Section 6.10 Directors' and Officers' Indemnification and Insurance.
(a) Holdings and the Company agree that all rights to indemnification
now existing in favor of any employee, agent, director or officer of the
Company and its Subsidiaries (the "Indemnified Parties") as provided in
their respective charters or by-laws, or in an agreement between an
Indemnified Party and the Company or one of its Subsidiaries set forth in
Section 6.10 of the Company Disclosure Schedule shall survive the Merger
and shall continue in full force and effect for a period of eight years
from the Effective Time; provided that in the event any claim or claims are
asserted or made within such eight-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims. The Surviving Corporation
shall agree to indemnify all Indemnified Parties to the fullest extent
permitted by Applicable Law with respect to all acts and omissions arising
out of such individuals' services as officers, directors, employees or
agents of the Company or any of its subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees, or otherwise on
behalf of, the Company or any of its Subsidiaries, occurring prior to the
Effective Time including, without limitation, the transactions contemplated
by this Agreement. Without limitation of the foregoing, in the event any
such Indemnified Party is or becomes involved in any capacity in any
action, proceeding or investigation in connection with any matter,
including, without limitation, the transactions contemplated by this
Agreement, occurring prior to, and including, the Effective Time, the
Surviving Corporation will pay as incurred such Indemnified Party's legal
and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith so long as such party shall
enter into an undertaking with the Surviving Corporation to reimburse the
Surviving Corporation, to the extent required by Applicable Law, for all
amounts advanced if a court of competent jurisdiction shall ultimately
determine that indemnification of such officer or director is prohibited by
Applicable Law. The Surviving Corporation shall pay all expenses, including
reasonable attorneys' fees, that may be incurred by any Indemnified Party
in enforcing the indemnity and other obligations provided for in this
Section 6.10.
(b) Holdings agrees that the Company, and from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for
three years from the Effective Time the current policies of the directors'
and officers' liability insurance maintained by the Company; provided that
the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are no less
advantageous to the Indemnified Parties and provided that such substitution
shall not result in any gaps or lapses in coverage with respect to matters
occurring prior to the Effective Time; and provided, further, that the
Surviving Corporation shall not be required to pay an annual premium in
excess of 200% of the last annual premium paid by the Company prior to the
date hereof (which premium is disclosed in Section 6.10 of the Company
Disclosure Schedule) and if the Surviving Corporation is unable to obtain
the insurance required by this Section 6.11(b) it shall obtain as much
comparable insurance as possible for an annual premium equal to such
maximum amount.
Section 6.11 Expenses. Except as otherwise set forth in Section 8.2(b),
each party hereto shall bear its own costs and expenses in connection with this
Agreement and the transactions contemplated hereby, except that (a) Holdings
shall be responsible for any commitment fees (and any related costs, expenses
and reimbursements) required to be paid pursuant to the Bank Commitment Letter
and (b) the Company shall pay all SEC filing fees, printing and mailing costs
for the Registration Statement, Proxy Statement and the registration statement
to be filed in connection with the Subordinated Debt, and all other filing fees
incurred in connection with this Agreement and the transactions contemplated
hereby (but not more than $90,000 relating to filing fees under the HSR Act);
provided, however, that, upon consummation of the Merger, the
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Surviving Corporation will reimburse Holdings, its Affiliates and the third
party investors who have entered into Subscription Agreements for all
unreimbursed and documented costs and expenses.
Section 6.12 Listing Application. The Company and Holdings shall each use
its reasonable best efforts to cause the shares of New Company Common Stock to
be issued pursuant to this Agreement in the Merger to be listed for trading on
the NYSE.
Section 6.13 Supplemental Disclosure. The Company shall give prompt notice
to Holdings, and Holdings shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Holdings, as the case may be, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.13 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VII of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
Section 6.14 Holdings' Stockholders Agreement. Holdings shall use its best
efforts to cause the current Stockholders Agreement, dated as of November 7,
1995, among the stockholders of Holdings to be terminated by all of the parties
thereto on or prior to the Effective Time.
Section 6.15 Obligations Upon Exercise of Stock Option Agreement.
(a) In the event that Holdings exercises its right to purchase Shares
from K-H pursuant to the Stock Option Agreement, Holdings agrees, and in
the event of the assignment by Holdings of any of its rights under the
Stock Option Agreement, Holdings will cause any assignee thereof to agree,
that: (i) it will, within one year from the date of the purchase of the
Shares pursuant to the Stock Option Agreement (the "Purchase"), commence an
offer pursuant to Section 13(e)(4) or 14(d) of the Exchange Act (the
"Offer") to purchase all of the then outstanding Shares not owned by
Holdings for consideration with a fair market value of not less than $32
per share and will consummate such offer within 60 days from the date of
commencement thereof; (ii) neither Holdings nor any of its Affiliates will
acquire (or propose to acquire other than pursuant to clause (i) above)
beneficial ownership (as the term "beneficial ownership" is used in Rule
13d-3 under the Exchange Act) of any additional Shares (and shall dispose
of any other Shares beneficially owned by Holdings or its Affiliates other
than the Shares acquired pursuant to the Purchase) unless and until it has
consummated the Offer and purchased all Shares validly tendered pursuant
thereto; and (iii) in the event that (x) the Offer is not commenced and
consummated within 425 days following the Purchase and (y) the Company
increases the Board of Directors by two members and appoints one designee
of Holdings to the Company's Board of Directors (provided, that in no event
will Holdings or its Affiliates have more than one representative on the
Company's Board of Directors if the event in clause (x) above occurs),
Holdings will, for the 365-day period following the 425-day period referred
to above (the "Standstill Period"), (I) vote all of its Shares in favor of
any transaction proposed by the Company's Board of Directors pursuant to
which each stockholder of the Company will receive consideration with a
fair market value of not less than $32 per Share (as adjusted for any stock
splits, stock dividends, reclassifications or the like occurring after the
date hereof) (an "Alternative Transaction"), (II) cooperate with the
Company in connection with any Alternative Transaction and (III) not
influence or control or seek or propose to influence or control the
management or the policies of the Company (other than through its designee
on the Board of Directors) or seek to obtain additional representation on
the Board of Directors of the Company, or solicit, or participate in the
solicitation of, any proxies or consents with respect to any securities of
the Company, or make any public announcement with respect to any of the
foregoing or request permission to do any of the foregoing.
(b) The Company agrees that in the event that an Alternative
Transaction is not consummated during the Standstill Period, upon the
expiration of the Standstill Period, all restrictions on Holdings and its
Affiliates pursuant to this Section 6.15 shall automatically terminate and
be of no further force or effect.
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ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver at or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite
vote (as described in Section 6.6) of the stockholders of Holdings and the
Company in accordance with Applicable Law.
(b) HSR and Other Antitrust Approvals. The waiting periods (and any
extension thereof) applicable to the consummation of the Merger and the
transactions contemplated hereby under the HSR Act shall have expired or
been terminated.
(c) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act.
No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall
have been initiated by the SEC.
(d) No Injunction. No Governmental Entity having jurisdiction over the
Company or Holdings, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making the Merger or the Stock Option Agreement illegal or
otherwise prohibiting consummation of the Merger.
(e) Litigation. There shall not have been instituted or be pending any
suit, action or proceeding by any Governmental Entity as a result of this
Agreement or any of the transactions contemplated hereby which questions
the validity or legality of the transactions contemplated by this Agreement
or the Stock Option Agreement.
(f) Financing. The Company shall have obtained, pursuant to the
Financing Commitments or otherwise, the funds necessary to consummate the
transactions contemplated by this Agreement on the terms set forth herein,
except this condition shall not be applicable to Holdings with respect to
any portion of the Financing Commitment represented by the Subscription
Agreements if any party to a Subscription Agreement shall be in breach of
its commitment with respect to the portion of the Financing that such party
shall have committed to provide.
(g) Solvency Opinion. Holdings and the Company shall have received a
solvency opinion, in form and substance reasonably satisfactory to Holdings
and the Company, from a nationally recognized investment banking or
valuation firm, with respect to the solvency of the Surviving Corporation
after giving effect to the Merger and the transactions contemplated by this
Agreement.
Section 7.2 Conditions to Obligations of Holdings to Effect the Merger. The
obligations of Holdings to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived in writing by Holdings:
(a) Representations and Warranties. The representations and warranties
of the Company that are qualified with reference to a Company Material
Adverse Effect shall be true and correct and the representations and
warranties that are not so qualified shall be true and correct except where
the failure to be true and correct would not have a Company Material
Adverse Effect, in each case as of the date hereof, and, except to the
extent such representations and warranties speak as of an earlier date, as
of the Effective Time as though made at and as of the Effective Time, and
Holdings shall have received a certificate signed on behalf of the Company
by the chief executive officer or the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Effective Time except where
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the failure to so perform would not have a Company Material Adverse Effect, and
Holdings shall have received a certificate signed on behalf of the Company by
the chief executive officer or the chief financial officer of the Company to
such effect.
(c) Opinion of Company Counsel. Holdings shall have received an
opinion of outside counsel to the Company reasonably acceptable to
Holdings, dated the Effective Time, in form and substance reasonably
acceptable to Holdings.
(d) Material Adverse Change. Since the date of this Agreement, there
shall have been no event or occurrence which has had, or would reasonably
be expected to have, a Company Material Adverse Effect; and Holdings shall
have received a certificate signed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company to such
effect.
Section 7.3 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions, unless waived in writing by the Company:
(a) Representations and Warranties. The representations and warranties
of Holdings that are qualified with reference to a Holdings Material
Adverse Effect shall be true and correct and the representations and
warranties that are not so qualified shall be true and correct except where
the failure to be true and correct would not have a Holdings Material
Adverse Effect, in each case as of the date hereof, and, except to the
extent such representations and warranties speak as of an earlier date, as
of the Effective Time as though made on and as of the Effective Time, and
the Company shall have received a certificate signed on behalf of Holdings
by the chief executive officers or the chief financial officers of Holdings
to such effect.
(b) Performance of Obligations of Holdings. Holdings shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Effective Time except where the failure to so
perform would not have a Holdings Material Adverse Effect, and the Company
shall have received a certificate signed on behalf of Holdings by the chief
executive officer or the chief financial officer of Holdings to such
effect.
(c) Opinion of Holdings' Counsel. The Company shall have received an
opinion of outside counsel to Holdings reasonably acceptable to the
Company, dated the Effective Time, in form and substance reasonably
acceptable to the Company.
ARTICLE VIII
TERMINATION
Section 8.1 Termination. This Agreement may be terminated, and the Merger
and the other transactions contemplated hereby may be abandoned, at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company or Holdings:
(a) by mutual written consent of Holdings and the Company;
(b) by either Holdings or the Company, if (i) the Merger shall not
have been consummated on or before August 15, 1996 or (ii) the stockholders
of the Company or the Stockholders of Holdings do not approve this
Agreement by the requisite vote at a meeting duly convened therefor or any
adjournment thereof (unless, in the case of any such termination pursuant
to this Section 8.1(b), the failure of such event to occur shall have been
caused by the action or failure to act of the party seeking to terminate
this Agreement, which action or failure to act constitutes a breach of such
party's obligations under this Agreement);
(c) by either Holdings or the Company, if any permanent injunction,
order, decree or ruling by any Governmental Entity of competent
jurisdiction preventing the consummation of the Merger shall have become
final and nonappealable; provided, however, that the party seeking to
terminate this Agreement
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pursuant to this Section 8.1(c) shall have used reasonable best efforts to
remove such injunction or overturn such action;
(d) by Holdings, if (i) there has been a breach of any of the
representation or warranties, covenants or agreements the effect of which
is a Company Material Adverse Effect set forth in this Agreement on the
part of the Company, which breach is not curable or, if curable, is not
cured within 45 days after written notice of such breach is given by
Holdings to the Company, or (ii) the Board of Directors of the Company (x)
fails to recommend the approval of this Agreement and the Merger to the
Company's stockholders in accordance with Section 6.5(a) hereof, or (y)
withdraws or amends or modifies in a manner adverse to Holdings its
recommendation or approval in respect of this Agreement or the Merger or
fails to reconfirm such recommendation within 5 business days of a
reasonable written request for such confirmation by Holdings;
(e) by the Company if the Board of Directors of the Company shall
reasonably determine that a proposal for an Acquisition Transaction
constitutes a Superior Proposal; provided, however, that the Company may
not terminate this Agreement pursuant to this clause (e) unless (i) 5
business days shall have elapsed after delivery to Holdings of a written
notice of such determination by such Board of Directors and, during such
5-business-day period, the Company shall have informed Holdings of the
material terms and conditions and financing arrangements of such proposal
for an Acquisition Transaction and the identity of the person or group
making such proposal for an Acquisition Transaction and (ii) at the end of
such 5-day-business period, such Board of Directors shall continue
reasonably to believe that such proposal for an Acquisition Transaction
constitutes a Superior Proposal and promptly thereafter the Company shall
enter into a definitive acquisition, merger or similar agreement to effect
such Superior Proposal; and
(f) by the Company, if there has been a breach of any of the
representations or warranties, covenants or agreements the effect of which
is a Holdings Material adverse Effect set forth in this Agreement on the
part of Holdings, which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by the Company
to Holdings.
Section 8.2 Effect of Termination.
(a) In the event of termination of this Agreement pursuant to this
Article VIII, the Merger shall be deemed abandoned and this Agreement shall
forthwith become void, except that the provisions of the last sentence of
Section 6.1, Section 6.11 and Section 6.15 shall survive any termination of
this Agreement; provided, however, that nothing in this Agreement shall
relieve any party from liability for any breach of this Agreement.
(b) If (x) Holdings shall have terminated this Agreement pursuant to
Section 8.1(d)(ii) or (y) the Company shall have terminated this Agreement
pursuant to Section 8.1(e), or (z) Holdings or the Company shall have
terminated this Agreement pursuant to Section 8.1(b) and such termination
was not solely the result of any action or inaction by Holdings which
resulted in the failure of the conditions in Section 7.1(b),(d),(e),(f) or
(g) or Section 7.3, and, prior to or within six months after any
termination described in this clause (z), the Company (or any of its
Subsidiaries) shall have directly or indirectly entered into a definitive
agreement for, or shall have consummated, an Acquisition Transaction, in
which the equivalent per Share consideration received by the Company or its
stockholders is equal to or greater than $30 then, in any of such cases,
the Company shall pay Holdings (A) a termination fee of $20 million, plus
(B) an amount equal to Holdings' actual, documented out-of-pocket expenses,
not exceeding $5 million, in connection with this Agreement (including,
without limitation, attorneys' fees and fees of financial advisors);
provided, however, no fees shall be payable or expenses reimbursed pursuant
to this Section 8.2(b) if at the time of termination of this Agreement
pursuant to Section 8.1(b)(i) either (aa) the waiting period under the HSR
Act (including any voluntary extension of such period) shall not have
expired or (bb) any Governmental Entity is asserting an objection under the
Antitrust Laws to the transactions contemplated by this Agreement. Any fees
or amounts payable under this Section 8.2(b) shall be paid in same day
funds contemporaneous with a termination described in either clause (x) or
(y) of this Section 8.2(b), and no notice of termination pursuant to such
sections
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shall be effective and this Agreement shall not terminate, until such
termination fee is received by Holdings, or concurrently with or prior to
the entering into of the definitive agreement for, or the consummation of,
such Acquisition Transaction, in the case of a termination described in
clause (y) of this Section 8.2(b).
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Amendment and Modification. At any time prior to the Effective
Time, this Agreement may be amended, modified or supplemented only by written
agreement (referring specifically to this Agreement) of Holdings and the Company
with respect to any of the terms contained herein; provided, however, that after
any approval and adoption of this Agreement by the stockholders of the Company,
no such amendment, modification or supplementation shall be made which under
Applicable Law requires the approval of such stockholders, without the further
approval of such stockholders.
Section 9.2 Waiver. At any time prior to the Effective Time, Holdings, on
the one hand, and the Company, on the other hand, may (i) extend the time for
the performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and warranties of the other contained
herein or in any documents delivered pursuant hereto and (iii) waive compliance
by the other with any of the agreements or conditions contained herein which may
legally be waived. Any such extension or waiver shall be valid only if set forth
in an instrument in writing specifically referring to this Agreement and signed
on behalf of such party.
Section 9.3 Survivability; Investigations. The respective representations
and warranties of Holdings, on the one hand, and the Company, on the other hand,
contained herein or in any certificates or other documents delivered prior to or
as of the Effective Time (i) shall not be deemed waived or otherwise affected by
any investigation made by any party hereto and (ii) shall not survive beyond the
Effective Time. The covenants and agreements of the parties hereto (including
the Surviving Corporation after the Merger) shall survive the Effective Time,
without limitation (except for those which, by their terms, contemplate a
shorter survival period).
Section 9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(a) If to Holdings to:
MWC Holdings, Inc.
2501 Woodlake Circle
Okemos, Michigan 48864
Attention: General Counsel
Telecopier: (517) 337-5886
with copies to:
Joseph Littlejohn & Levy
450 Lexington Avenue
New York, New York 10022
Attention: Paul S. Levy
Telecopier: (212) 286-8626
and
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Skadden, Arps, Slate, Meagher & Flom
One Rodney Square
Wilmington, Delaware 19801
Attention: Robert B. Pincus, Esq.
Telecopier: (302) 651-3001
(b) if to the Company, to:
Hayes Wheels International, Inc.
38481 Huron River Drive
Romulus, Michigan 48174
Attention: General Counsel
Telecopier: (313) 942-5199
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: David A. Katz, Esq.
Telecopier: (212) 403-2000
Section 9.5 Descriptive Headings; Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. References in this Agreement to
Sections, Exhibits or Articles mean a Section, Exhibit or Article of this
Agreement unless otherwise indicated. References to this Agreement shall be
deemed to include the Exhibits hereto, unless the context otherwise requires.
The term "person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, a Governmental Entity or an unincorporated
organization.
Section 9.6 Entire Agreement; Assignment. This Agreement (including the
Exhibits and other documents and instruments referred to herein), together with
the three Confidentiality Agreements, constitute the entire agreement and
supersede all other prior agreements and understandings, both written and oral,
among the parties or any of them, with respect to the subject matter hereof.
This Agreement is not intended to confer upon any person not a party hereto any
rights or remedies hereunder. This Agreement shall not be assigned by operation
of law or otherwise.
Section 9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 9.8 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
Section 9.9 Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
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Section 9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 9.11 Third-Party Beneficiaries. Nothing in this Agreement, except
for the provisions of Section 6.10 to the extent they apply to directors and
officers of the Company, is intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
IN WITNESS WHEREFORE, each of Holdings and the Company has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
MWC HOLDINGS, INC.
By: /s/ R.W. Tuley
--------------------------------------
Name: R.W. Tuley
Title: President
HAYES WHEELS INTERNATIONAL, INC.
By: /s/ Daniel M. Sandberg
--------------------------------------
Name: Daniel M. Sandberg
Title: Vice President
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ANNEX II
GOLDMAN SACHS
PERSONAL AND CONFIDENTIAL
March 28, 1996
The Board of Directors
Hayes Wheels International, Inc.
38481 Huron River Drive
Romulus, MI 48174
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of
Hayes Wheels International, Inc. (the "Company") of the $28.80 per Share in
cash, together with one-tenth of a share of common stock, par value $.01 per
share, of the surviving corporation ("New Common Stock" and, together with the
$28.80 per share in cash, the "Consideration"), to be received by such holders
pursuant to the Agreement and Plan of Merger dated as of March 28, 1996 between
MWC Holdings, Inc. ("MWC") and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as co-manager in connection with the
Company's public debt financing and initial public offering in 1992 and having
acted as financial advisor to the Company in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We also
have acted as financial advisor to a special committee of the Board of Directors
of the Company considering a prior proposal to acquire the Company made by
Varity Corp. ("Varity"), the largest stockholder of the Company. In addition, we
also have acted as financial advisor to Varity from time to time, including
having acted as co-manager in connection with equity financings for Varity.
In connection with this opinion, we have reviewed, among other things, the
Agreement, including the exhibits thereto; Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company for the three fiscal years ended
January 31, 1995; certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of the Company; Annual Reports on Form 10-K of Motor Wheel
Corporation, a wholly-owned subsidiary of MWC ("Motor Wheel"), for the two
fiscal years ended December 31, 1994 and certain Quarterly Reports on Form 10-Q
of Motor Wheel; certain other communications from the Company to its
stockholders; and certain internal financial analyses and forecasts for the
Company and MWC prepared by their respective managements. We also have held
discussions with members of the senior management of the Company and MWC
regarding the past and current business operations, financial condition and
future prospects of their respective companies and for the companies as combined
pursuant to the Agreement. In addition, we have reviewed the reported price and
trading activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations and performed such other studies and
analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company and MWC or
any of their
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The Board of Directors
Hayes Wheels International, Inc.
Page Two
subsidiaries and we have not been furnished with any such evaluation or
appraisal. In providing our opinion, we are not expressing any view as to the
price at which the New Common Stock may trade following the consummation of the
transactions contemplated by the Agreement. Our advisory services and the
opinion expressed herein are provided for the information of the Board of
Directors of the Company in its evaluation of the transactions contemplated by
the Agreement and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- ---------------------------------------------------------
(GOLDMAN, SACHS & CO.)
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ANNEX III
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
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. (Last amended by Ch.
299, L. '95, eff. 2-1-96.)
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") permits a
Delaware corporation to indemnify officers, directors, employees and agents for
actions taken in good faith and in a manner they reasonably believed to be in,
or not opposed to, the best interests of the corporation, and with respect to
any criminal action, which they had no reasonable cause to believe was unlawful.
The DGCL provides that a corporation may pay expenses (including attorneys'
fees) incurred by an officer or Director in defending any civil, criminal,
administrative or investigative action (upon receipt of a written undertaking to
reimburse the corporation if indemnification is not appropriate), and must
reimburse a successful defendant for expenses, including attorney's fees,
actually and reasonably incurred, and permits a corporation to purchase and
maintain liability insurance for its directors and officers. The DGCL provides
that indemnification may be made for any claim, issue or matter as to which a
person has been adjudged by a court of competent jurisdiction, after exhaustion
of all appeals therefrom, to be liable to the corporation, unless and only to
the extent a court determines that the person is entitled to indemnity for such
expenses as the court deems proper.
The Company By-Laws provide, among other things, that, to the fullest
extent authorized by the DGCL, the Company indemnify, hold harmless and advance
expenses to each person (and, where applicable, and whether the person died
testate or interstate, the personal representative of the person, the estate of
such person and such person's legatees and heirs) who is or has served as a
director or officer of the Company or any predecessor of the Company, or any
other enterprise at the request of the Company or of any predecessor of the
Company, who was or is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she, or a
person of whom he or she as the legal representative, is or was a director or
officer of the Company, or is or was serving at the request of Company as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan, whether the basis of such proceeding is alleged action in
an official capacity while serving as a director, officer, employee or agent,
provided such proceeding was authorized by the Company Board. The right to
indemnification conferred by the Company By-Laws includes the right to have paid
by the Company the expenses incurred in defending any such proceeding in advance
of its final disposition, provided that, if required by the DGCL, the payment of
such expenses incurred by a director or officer of the Company in his or her
capacity as a director or officer of the Company (and not in any other capacity
in which service was rendered by such person while a director or officer) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Company of an undertaking, by or on behalf of such director of
officer, to repay all amounts so advanced if it shall ultimately be determined
that such director or officer is or was not so entitled to be indemnified under
the Company By-Laws or otherwise. The indemnification rights conferred by the
Company By-Laws are not exclusive of any other right to which persons seeking
indemnification may be otherwise entitled. The Company By-Laws provide that
claims for indemnification shall be liberally construed in favor of
indemnification, and create a rebuttable presumption that the claimant is
entitled to indemnification. The Company Board in its discretion may indemnify
any other person made a party to any suit or proceeding by reason of such person
acting on behalf of or serving at the request of the Company or any predecessor
of the Company.
The DGCL permits a Delaware corporation to include a provision in its
certificate of incorporation eliminating or limiting the personal liability of a
Director to the corporation or its stockholders for monetary damages for a
breach of the Director's fiduciary duty as a Director, except for liability (i)
for any breach of the Director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions or (iv) for any transaction from which the director derived an
improper personal benefit. Each of the Company Charter, the Holdings Charter and
the Amended Charter contains provisions limiting the liability of their
respective directors, to the fullest extent currently permitted by the DGCL for
monetary damages for breach of their fiduciary duty as
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<PAGE> 186
directors. The Company Charter further provides that, if the DGCL is amended to
authorize corporation actions further eliminating or limiting the personal
liability of directors, the liability of a director of the Company will be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended. The Holdings Charter and the Amended Charter do not include any
provisions incorporating future amendments to the DGCL which further eliminate
or limit the personal liability of directors.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of Exhibits included as part of this
Registration Statement. Company agrees to furnish supplementally a copy of any
omitted schedule to the SEC upon request. Items marked with an asterisk are
filed herewith.
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger, dated as of March 28, 1996, between MWC Holdings,
Inc. and Hayes Wheels International, Inc. (included as Annex I to the Joint Proxy
Statement/Prospectus)
3.1(a)** Restated Certificate of Incorporation of Hayes Wheels International, Inc.
(incorporated by reference from Hayes Wheels International, Inc. Registration
Statement No. 33-53780 on Form S-1, filed with the SEC on October 27, 1992, as
amended)
3.1(b)*,** Amended and Restated Certificate of Incorporation of Hayes Wheels International,
Inc.
3.2(a)** By-Laws of Hayes Wheels International, Inc. (incorporated by reference from Hayes
Wheels International, Inc. Registration Statement No. 33-53780 on Form S-1, filed
with the SEC on October 27, 1992, as amended)
3.2(b)*,** Amended and Restated By-Laws of Hayes Wheels International, Inc.
4.1 Indenture, dated as of November 15, 1992, between Hayes Wheels International,
Inc. and Manufacturers and Traders Trust Company, as Trustee ($100,000,000
principal amount of 9 1/4% Senior Notes due 2002), including all exhibits thereto
(incorporated by reference to Exhibit 4.2 of the Form 10-K for the year ended
January 31, 1993 of Hayes Wheels International, Inc. (File No. 1-11592))
4.2* Certificate of Designation of Series A Preferred Stock of Hayes Wheels
International, Inc.
5.1* Opinion of Altheimer & Gray to Hayes Wheels International, Inc., regarding the
legality of the securities being registered
8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom, as to certain United States
federal income tax consequences of the Merger
8.2* Opinion of Altheimer & Gray, as to certain United States federal income tax
consequences of the Merger
10.1 Form of Subscription Agreements, each dated March 28, 1996, between each Investor
and Hayes Wheels International, Inc. (incorporated by reference to Exhibit 10.1
to the Hayes Wheels International, Inc. Form 8-K, dated March 28, 1996)
10.2 Form of Warrant Agreement, to be entered into between Hayes Wheels International,
Inc. and the Warrant Agent (incorporated by reference to Exhibit 10.2 to the
Hayes Wheels International, Inc. Form 8-K, dated March 28, 1996)
10.3 Stock Option Agreement, dated as of March 28, 1996, by and among Varity
Corporation, K-H Corporation and MWC Holdings, Inc. (incorporated by reference to
Exhibit 10.3 to the Hayes Wheels International, Inc. Form 8-K, dated March 28,
1996)
</TABLE>
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<TABLE>
<S> <C>
10.4 Registration Rights Agreement, dated as of March 28, 1996 among Hayes Wheels
International, Inc., Varity Corporation and K-H Corporation (incorporated by
reference to Exhibit 10.4 to the Hayes Wheels International, Inc. Form 8-K, dated
March 28, 1996)
10.5 Letter Agreement, dated March 28, 1996, among MWC Holdings, Inc., Joseph
Littlejohn & Levy Fund II LP, TSG Capital Fund II, L.P., CIBC WG Argosy Merchant
Fund 2, L.L.C., Chase Equity Associates, L.P. and Nomura Holding America, Inc.
(incorporated by reference to Exhibit 1E to the Hayes Wheels International, Inc.
Schedule 13D, dated April 8, 1996)
10.6 Credit Agreement, dated as of November 30, 1992, and amended and restated as of
November 30, 1993, June 10, 1994 and March 24, 1995, between Hayes Wheels
International, Inc., the Subsidiary Guarantors (as defined therein), the Banks
named on the signature pages thereof, The Chase Manhattan Bank (National
Association) as Agent, and the Bank of Nova Scotia, as Co-Agent (incorporated by
reference to Exhibit 4.4 to Hayes Wheels International, Inc. Form 10-K for the
year ended January 31, 1995 (File No. 1-11592))
10.7 Employment Agreement, among Richard W. Tuley, MWC, Holdings, Inc. and Motor Wheel
Corporation, dated November 7, 1995 (incorporated by reference to Exhibit
10(h)(iii)(1) to Motor Wheel Corporation Form 10-K for the year ended December
31, 1995 (File No. 33-11958))
10.8* Senior Secured Credit Facilities Commitment Letter, among Canadian Imperial Bank
of Commerce, Merrill Lynch Capital Corporation, Hayes Wheels International, Inc.
and MWC Holdings, Inc., dated March 28, 1996
12.1* Calculation of Ratio of Earnings to Fixed Charges
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Ernst & Young LLP
23.4 Consent of Altheimer & Gray (included in its opinion filed as Exhibit 5.1 hereto)
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom (included in its opinion filed as
Exhibit 8.1 hereto)
23.6 Consent of Altheimer & Gray (included in its opinion filed as Exhibit 8.2 hereto)
23.7* Consent of Houlihan Lokey Howard & Zuken, Inc.
24.1 Powers of Attorney (see signature page)
99.1* Form of proxy card to be mailed to holders of Hayes Wheels International, Inc.
99.2* Form of proxy card to be mailed to holders of MWC Holdings, Inc.
</TABLE>
- -------------------------
* Items marked with an asterisk are filed herewith.
** Prior to or at the Effective Time of the Merger, the Restated Certificate of
Incorporation and By-Laws of Hayes Wheels International, Inc. will be
amended to read as set forth in Exhibits 3.1(b) and 3.2(b).
(b) Not applicable.
(c) The opinion of Goldman, Sachs & Co. is included as Annex II to the Joint
Proxy Statement/Prospectus.
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<PAGE> 188
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post- effective amendment to
this registrant statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
(c) (1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registration in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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<PAGE> 189
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form S-4, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE> 190
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Romulus,
State of Michigan, on this 30th day of May 1996.
HAYES WHEELS INTERNATIONAL, INC.
By: /S/ WILLIAM D. SHOVERS
-------------------------------------
Name: William D. Shovers
Title: Vice President -- Finance
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Daniel M. Sandberg and Barry Miller, and each of
them, each with full power to act without the other, his true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for such person and in his name, place and stead, in any and all
capacities, to sign any or all further amendments or supplements (including
post-effective amendments) to this Form S-4 Registration Statement and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully as to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or his substitutes, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- --------------------------- ------------------
<C> <S> <C>
/S/ JOHN E. UTLEY Chairman of the Board of May 30, 1996
- --------------------------------------------- Directors
John E. Utley
/S/ RANKO CUCUZ President and Chief May 30, 1996
- --------------------------------------------- Executive Officer
Ranko Cucuz (Principal Executive
Officer); Director
/S/ WILLIAM D. SHOVERS Chief Financial Officer May 30, 1996
- --------------------------------------------- (Principal Accounting
William D. Shovers Officer and Principal
Financial Officer)
/S/ J. ANTHONY GILROY Director May 30, 1996
- ---------------------------------------------
J. Anthony Gilroy
/S/ JOHN S. RODEWIG Director May 30, 1996
- ---------------------------------------------
John S. Rodewig
/S/ KENNETH L. WAY Director May 30, 1996
- ---------------------------------------------
Kenneth L. Way
</TABLE>
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<PAGE> 191
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------- ------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of March 28, 1996, between
MWC Holdings, Inc. and Hayes Wheels International, Inc. (included
as Annex I to the Joint Proxy Statement/Prospectus)
3.1(a)** Restated Certificate of Incorporation of Hayes Wheels
International, Inc. (incorporated by reference from Hayes Wheels
International, Inc. Registration Statement No. 33-53780 on Form
S-1, filed with the SEC on October 27, 1992, as amended)
3.1(b)*, ** Amended and Restated Certificate of Incorporation of Hayes Wheels
International, Inc.
3.2(a)** By-Laws of Hayes Wheels International, Inc. (incorporated by
reference from Hayes Wheels International, Inc. Registration
Statement No. 33-53780 on Form S-1, filed with the SEC on October
27, 1992, as amended)
3.2(b)*, ** Amended and Restated By-Laws of Hayes Wheels International, Inc.
4.1 Indenture, dated as of November 15, 1992, between Hayes Wheels
International, Inc. and Manufacturers and Traders Trust Company, as
Trustee ($100,000,000 principal amount of 9 1/4% Senior Notes due
2002), including all exhibits thereto (incorporated by reference to
Exhibit 4.2 of the Form 10-K for the year ended January 31, 1993 of
Hayes Wheels International, Inc. (File No. 1-11592))
4.2* Certificate of Designation of Series A Preferred Stock of Hayes
Wheels International, Inc.
5.1* Opinion of Altheimer & Gray to Hayes Wheels International, Inc.,
regarding the legality of the securities being registered
8.1* Opinion of Skadden, Arps, Slate, Meagher & Flom, as to certain
United States federal income tax consequences of the Merger
8.2* Opinion of Altheimer & Gray, as to certain United States federal
income tax consequences of the Merger
10.1 Form of Subscription Agreements, each dated March 28, 1996, between
each Investor and Hayes Wheels International, Inc. (incorporated by
reference to Exhibit 10.1 to the Hayes Wheels International, Inc.
Form 8-K, dated March 28, 1996)
10.2 Form of Warrant Agreement, to be entered into between Hayes Wheels
International, Inc. and the Warrant Agent (incorporated by
reference to Exhibit 10.2 to the Hayes Wheels International, Inc.
Form 8-K, dated March 28, 1996)
10.3 Stock Option Agreement, dated as of March 28, 1996, by and among
Varity Corporation, K-H Corporation and MWC Holdings, Inc.
(incorporated by reference to Exhibit 10.3 to the Hayes Wheels
International, Inc. Form 8-K, dated March 28, 1996)
10.4 Registration Rights Agreement, dated as of March 28, 1996 among
Hayes Wheels International, Inc., Varity Corporation and K-H
Corporation (incorporated by reference to Exhibit 10.4 to the Hayes
Wheels International, Inc. Form 8-K, dated March 28, 1996)
</TABLE>
<PAGE> 192
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ------------------------------------------------------------------- ------------
<S> <C> <C>
10.5 Letter Agreement, dated March 28, 1996, among MWC Holdings, Inc.,
Joseph Littlejohn & Levy Fund II LP, TSG Capital Fund II, L.P.,
CIBC WG Argosy Merchant Fund 2, L.L.C., Chase Equity Associates,
L.P. and Nomura Holding America, Inc. (incorporated by reference to
Exhibit 1E to the Hayes Wheels International, Inc. Schedule 13D,
dated April 8, 1996)
10.6 Credit Agreement, dated as of November 30, 1992, and amended and
restated as of November 30, 1993, June 10, 1994 and March 24, 1995,
between Hayes Wheels International, Inc., the Subsidiary Guarantors
(as defined therein), the Banks named on the signature pages
thereof, The Chase Manhattan Bank (National Association) as Agent,
and the Bank of Nova Scotia, as Co-Agent (incorporated by reference
to Exhibit 4.4 to Hayes Wheels International, Inc. Form 10-K for
the year ended January 31, 1995 (File No. 1-11592))
10.7 Employment Agreement, among Richard W. Tuley, MWC, Holdings, Inc.
and Motor Wheel Corporation, dated November 7, 1995 (incorporated
by reference to Exhibit 10(h)(iii)(1) to Motor Wheel Corporation
Form 10-K for the year ended December 31, 1995 (File No. 33-11958))
10.8* Senior Secured Credit Facilities Commitment Letter, among Canadian
Imperial Bank of Commerce, Merrill Lynch Capital Corporation, Hayes
Wheels International, Inc. and MWC Holdings, Inc., dated March 28,
1996
12.1* Calculation of Ratio of Earnings to Fixed Charges
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Ernst & Young LLP
23.4 Consent of Altheimer & Gray (included in its opinion filed as
Exhibit 5.1 hereto)
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom (included in its
opinion filed as Exhibit 8.1 hereto)
23.6 Consent of Altheimer & Gray (included in its opinion filed as
Exhibit 8.2 hereto)
23.7* Consent of Houlihan Lokey Howard & Zuken, Inc.
24.1 Powers of Attorney (see signature page)
99.1* Form of proxy card to be mailed to holders of Hayes Wheels
International
99.2* Form of proxy card to be mailed to holders of MWC Holdings, Inc.
</TABLE>
- -------------------------
* Items marked with an asterisk are filed herewith.
** Prior to or at the Effective Time of the Merger, the Restated Certificate of
Incorporation and By-Laws of Hayes Wheels International, Inc. will be amended
to read as set forth in Exhibits 3.1(b) and 3.2(b).
<PAGE> 1
EXHIBIT 3.1(b)
RESTATED
CERTIFICATE OF INCORPORATION
OF
HAYES WHEELS INTERNATIONAL, INC.
FIRST: The name of the Corporation is HAYES WHEELS
INTERNATIONAL, INC. (hereinafter the "Corporation").
SECOND: The address of the registered office of the
Corporation in the State of Delaware is 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code (the "GCL").
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is ___________shares of Common
Stock, each having a par value of one cent ($.01) and _______ shares of
Preferred Stock, each having a par value of one cent ($.01)(1).
The Board of Directors is expressly authorized to provide for
the issuance of all or any shares of the Preferred Stock in one or more classes
or series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences
and relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the
____________________
(1) In the event that any stockholder of the Corporation is limited pursuant
to applicable governmental regulations in holding or owning voting Common
Stock of the Corporation, this Article may be amended to provide for a class
of non-voting or reduced-voting Common Stock.
<PAGE> 2
issuance of such class or series and as may be permitted by the GCL, including,
without limitation, the authority to provide that any such class or series may
be (i) subject to redemption at such time or times and at such price or prices;
(ii) entitled to receive dividends (which may be cumulative or non-cumulative)
at such rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
or any other series; (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation; or (iv) convertible
into, or exchangeable for, shares of any other class or classes of stock, or of
any other series of the same or any other class or classes of stock, of the
Corporation at such price or prices or at such rates of exchange and with such
adjustments; all as may be stated in such resolution or resolutions.
FIFTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of the Corporation,
and for further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
(1) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the
stockholders to make, alter, amend, change, add to or repeal the
By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as
from time to time fixed by, or in the manner provided in, the By-Laws
of the Corporation. Election of directors need not be by written
ballot unless the By-Laws so provide.
(4) No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal
or modification of this Article FIFTH by the stockholders of the
Corpo-
2
<PAGE> 3
ration shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such
repeal or modification.
(5) In addition to the powers and authority hereinbefore or
by statute expressly conferred upon them, the directors are hereby
empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation, subject, nevertheless,
to the provisions of the GCL, this Certificate of Incorporation, and
any By-Laws adopted by the stockholders; provided, however, that no
By-Laws hereafter adopted by the stockholders shall invalidate any
prior act of the directors which would have been valid if such By-Laws
had not been adopted.
SIXTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL) outside
the State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the By-Laws of the Corporation.
SEVENTH: No stockholder action required to be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing without
a meeting to the taking of any action is specifically denied.
EIGHTH: From and commencing after the [1996] annual meeting
of stockholders, the Board of Directors shall be divided into three classes,
designated Class 1, Class 2 and Class 3. Each class shall consist, as nearly
as may be possible, of one-third of the number of directors constituting the
Board of Directors. The term of office of the Class 1 Directors will first
expire at the first annual meeting of stockholders after their election; the
term of office of the Class 2 Directors will first expire at the second annual
meeting of stockholders after their election; and the term of office of the
Class 3 Directors will first expire at the third annual meeting
3
<PAGE> 4
of stockholders after their election, and in each case until their successors
are duly elected and qualified. At each annual meeting of stockholders after
the initial classification of Directors, successors to the class of Directors
whose terms expire at that annual meeting of stockholders shall be elected by
stockholders for a three-year term and until their successors are duly elected
and qualified. Any Director elected to fill a vacancy resulting from an
increase in any class or from the removal from office, death, disability,
resignation or disqualification of a Director or other cause shall hold office
for the remaining term of the class in which such vacancy existed. Except as
otherwise provided herein, no decrease in the size of the Board of Directors
shall have the effect of removing or shortening the term of any incumbent
Director. Except as otherwise provided herein, increases in the size of the
Board of Directors will be distributed among the classes so as to render the
classes as nearly equal in size as practicable. Whenever the holders of shares
of any series of Serial Preferred Stock issued pursuant to the resolution or
resolutions adopted by a majority of the Board of Directors then in office
providing for the issue of shares of Serial Preferred Stock shall have the
right, voting as a separate class, to elect Directors, the election, term of
office, filling of vacancies and other terms of such directorships shall be
governed by the terms of such resolution or resolutions, as the case may be,
and such directorships shall not be divided into serial classes or otherwise
subject to this Article EIGHTH unless expressly so provided therein.
NINTH: The By-Laws may be altered, amended or repealed, in
whole or in part, or new By-Laws may be adopted by the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors as the case may be. All such
alterations, amendments or repeals must be approved by an affirmative vote of
the holders of at least two-thirds of the outstanding shares of capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office, except that any amendment of (i) Sections 2 and 6 of Article II of
the By-Laws, (ii) Sections 1, 2 and 3 of Article III of the By-Laws and (iii)
Article VIII of the By-Laws shall require either (x) the affirmative vote of
4
<PAGE> 5
the holders of at least 80% of the outstanding shares of capital stock entitled
to vote thereon or (y) the affirmative vote of a majority of the Board of
Directors.
TENTH: Notwithstanding anything contained in this Certificate
of Incorporation or the By-Laws to the contrary, any provision herein or in the
By-Laws which provides for more than a majority vote for any action may only be
amended or repealed by a supermajority vote equal to the supermajority vote
called for in such provision.
ELEVENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
5
<PAGE> 1
EXHIBIT 3.2(b)
AMENDED AND RESTATED
BY-LAWS
OF
HAYES WHEELS INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Annual Meetings. The Annual Meetings of
Stockholders shall be held on such date and at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting, at which meetings the stockholders shall elect by a plurality vote a
Board of Directors, and transact such other business as may properly be brought
before the meeting. Written notice of the Annual Meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than sixty days before the date
of the meeting.
To be properly brought before the Annual Meeting, business
must be either (a) specified in the notice of Annual Meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an Annual Meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or
2
<PAGE> 3
mailed and received at the principal executive offices of the Corporation, not
less than 50 days nor more than 75 days prior to the meeting; provided,
however, that in the event that less than 65 days' notice or prior public
disclosure of the date of the Annual Meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the 15th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure was made,
whichever first occurs. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the Annual
Meeting (i) a brief description of the business desired to be brought before
the Annual Meeting and the reasons for conducting such business at the Annual
Meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at the Annual Meeting except in accordance with the
procedures set forth in this Section 2, provided, however, that nothing
3
<PAGE> 4
in this Section 2 shall be deemed to preclude discussion by any stockholder of
any business properly brought before the Annual Meeting.
The Chairman of an Annual Meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 2, and if
he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Section 3. Special Meetings. Unless otherwise prescribed by
law or by the Certificate of Incorporation, Special Meetings of Stockholders,
for any purpose or purposes, may be called by either (i) the Chairman, if there
be one, (ii) the President, (iii) any Vice President, if there be one or (iv)
the Secretary, and shall be called by any such officer at the request in
writing of a majority of the Board of Directors. Such request shall state the
purpose or purposes of the proposed meeting. Written notice of a Special
Meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten nor
more than sixty days before the date of the
4
<PAGE> 5
meeting to each stockholder entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation, the holders of a majority of the capital
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
5
<PAGE> 6
Section 5. Voting. Unless otherwise required by law, the
Certificate of Incorporation or these By-Laws, any question brought before any
meeting of stockholders shall be decided by the vote of the holders of a
majority of the stock represented and entitled to vote thereat. Each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy but no proxy
shall be voted on or after three years from its date, unless such proxy
provides for a longer period. The Board of Directors, in its discretion, or
the officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. No
stockholder action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing without a meeting
to the taking of any action is specifically denied.
6
<PAGE> 7
Section 7. List of Stockholders Entitled to Vote. The
officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder of the Corporation who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 7 of this Article II or the
7
<PAGE> 8
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
ARTICLE III
DIRECTORS
Section 1. Number of Directors. The Board of Directors shall
consist of not less than one nor more than fifteen members, the exact number to
be fixed from time to time by the Board of Directors pursuant to a resolution
adopted by a majority of Directors then in office; provided, however, that such
maximum number may be increased from time to time to reflect the rights, if
any, of holders of any series of Serial Preferred Stock of the Corporation to
elect Directors in accordance with the Certificate of Incorporation of the
Corporation or in any resolution or resolutions adopted by a majority of the
Board of Directors then in office providing for the issue of any series of
Serial Preferred Stock. At least two of the members of the Board shall be
independent directors if and so long as such independent directors are required
by the rules of the stock exchange or quotation service on which the
Corporation's capital stock is traded or quoted.
8
<PAGE> 9
Section 2. Election and Term of Office. From and commencing
after the 1996 annual meeting of stockholders, the Board of Directors shall be
divided into three classes, designated Class 1, Class 2 and Class 3. Each
class shall consist, as nearly as may be possible, of one-third of the number
of directors constituting the Board of Directors. The term of office of the
Class 1 Directors will first expire at the first annual meeting of stockholders
after their election; the term of office of the Class 2 Directors will first
expire at the second annual meeting of stockholders after their election; and
the term of office of the Class 3 Directors will first expire at the third
annual meeting of stockholders after their election, and in each case until
their successors are duly elected and qualified. At each annual meeting of
stockholders after the initial classification of Directors, successors to the
class of Directors whose terms expire at that annual meeting of stockholders
shall be elected by stockholders for a three-year term and until their
successors are duly elected and qualified. Any Director elected to fill a
vacancy resulting from an increase in any class or from the removal from
office, death, disability, resignation or disqualification of a Director or
other cause shall hold office for the remain-
9
<PAGE> 10
ing term of the class in which such vacancy existed. Except as otherwise
provided herein or in the Certificate of Incorporation of the Corporation, no
decrease in the size of the Board of Directors shall have the effect of
removing or shortening the term of any incumbent Director. Except as otherwise
provided herein or in the Certificate of Incorporation of the Corporation,
increases in the size of the Board of Directors will be distributed among the
classes so as to render the classes as nearly equal in size as practicable.
Whenever the holders of shares of any series of Serial Preferred Stock issued
pursuant to the resolution or resolutions adopted by a majority of the Board of
Directors then in office providing for the issue of shares of Serial Preferred
Stock pursuant to the Certificate of Incorporation of the Corporation shall
have the right, voting as a separate class, to elect Directors, the election,
term of office, filling of vacancies and other terms of such directorships
shall be governed by the terms of such resolution or resolutions, as the case
may be, and such directorships shall not be divided into serial classes or
otherwise subject to this Section 2 unless expressly so provided therein.
10
<PAGE> 11
Section 3. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors. Nominations of persons for election to the Board of the
Corporation at the Annual Meeting may be made at a meeting of stockholders by
or at the direction of the Board of Directors by any nominating committee or
person appointed by the Board or by any stockholder of the Corporation entitled
to vote for the election of Directors at the meeting who complies with the
notice procedures set forth in this Section 3. Such nominations, other than
those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 50 days nor more
than 75 days prior to the meeting; provided, however, that in the event that
less than 65 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the 15th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was
11
<PAGE> 12
made, whichever first occurs. Such stockholder's notice to the Secretary shall
set forth (a) as to each person whom the stockholder proposes to nominate for
election or re-election as a Director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for election of Directors pursuant to Rule 14a under
the Securities Exchange Act of 1934, as amended; and (b) as to the stockholder
giving the notice (i) the name and record address of the stockholder and (ii)
the class and number of shares of capital stock of the Corporation which are
beneficially owned by the stockholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be
required by the Corporation to determine the eligibility of such proposed
nominee to serve as a Director of the Corporation. No person shall be eligible
for election as a Director of the Corporation unless nominated in accordance
with the procedures set forth herein.
12
<PAGE> 13
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
Section 4. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office for the remaining term of the class in which such vacancy existed and
until their successors are duly elected and qualified, or until their earlier
resignation or removal.
Section 5. Duties and Powers. The business of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
Section 6. Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and spe-
13
<PAGE> 14
cial, either within or without the State of Delaware. Regular meetings of the
Board of Directors may be held without notice at such time and at such place as
may from time to time be determined by the Board of Directors. Special meetings
of the Board of Directors may be called by the Chairman, if there be one, the
President or any director. Notice thereof stating the place, date and hour of
the meeting shall be given to each director either by mail not less than
forty-eight (48) hours before the date of the meeting, by telephone or telegram
on twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 7. Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-Laws, at all
meetings of the Board of Directors, a majority of the entire Board of Directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to
14
<PAGE> 15
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 8. Actions of Board. Unless otherwise provided by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee.
Section 9. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors of the Corporation, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section 9 shall constitute presence in person at such meeting.
Section 10. Committees. The Board of Directors may, by
resolution passed by a majority of the
15
<PAGE> 16
entire Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
any such committee. In the absence or disqualification of a member of a
committee, and in the absence of a designation by the Board of Directors of an
alternate member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
absent or disqualified member. Any committee, to the extent allowed by law and
provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. Each committee
shall keep regular minutes and report to the Board of Directors when required.
Section 11. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed
16
<PAGE> 17
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 12. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a
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majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (ii) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, a Secretary and a
Treasurer. The Board of Directors, in its discretion, may also choose a
Chairman of the Board of Directors (who must be a director) and one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number
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<PAGE> 19
of offices may be held by the same person, unless otherwise prohibited by law,
the Certificate of Incorporation or these By-Laws. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The Board of Directors at its first
meeting held after each Annual Meeting of Stockholders shall elect the officers
of the Corporation who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time
to time by the Board of Directors; and all officers of the Corporation shall
hold office until their successors are chosen and qualified, or until their
earlier resignation or removal. Any officer elected by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the Board
of Directors. Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation.
Powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relat-
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<PAGE> 20
ing to securities owned by the Corporation may be executed in the name of and
on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by
proxy at any meeting of security holders of any corporation in which the
Corporation may own securities and at any such meeting shall possess and may
exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from time to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman
of the Board of Directors, if there be one, shall preside at all meetings of
the stockholders and of the Board of Directors. He shall be the Chief
Executive Officer of the Corporation, and except where by law the signature of
the President is required, the Chairman of the Board of Directors shall possess
the same power as the President to sign all contracts, certificates and other
instruments of the Corporation which may be authorized by the Board of
Directors. During the absence or
20
<PAGE> 21
disability of the President, the Chairman of the Board of Directors shall
exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the
control of the Board of Directors and, if there be one, the Chairman of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors
or the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. If there be no Chairman of the
Board of Directors, the
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President shall be the Chief Executive Officer of the Corporation. The
President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 6. Vice Presidents. At the request of the President
or in his absence or in the event of his inability or refusal to act (and if
there be no Chairman of the Board of Directors), the Vice President or the Vice
Presidents if there is more than one (in the order designated by the Board of
Directors) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers as the Board of Directors from time to time may prescribe. If
there be no Chairman of the Board of Directors and no Vice President, the Board
of Directors shall designate the officer of the Corporation who, in the absence
of the President or in the event of the inability or refusal of the President
to act, shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President.
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Section 7. Secretary. The Secretary shall attend all
meetings of the Board of Directors and all meetings of stockholders and record
all the proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there
be no Assistant Secretary, then either the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to
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<PAGE> 24
attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody
of the corporate funds and securities and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation,
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<PAGE> 25
in case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise
provided in these By-Laws, Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned
to them by the Board of Directors, the President, any Vice President, if there
be one, or the Secretary, and in the absence of the Secretary or in the event
of his disability or refusal to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the President, any Vice
President, if there be one, or the Treasurer, and in the absence of the
Treasurer or in the event of his disability or refusal to act, shall perform
the duties of the Treasurer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the
25
<PAGE> 26
Treasurer. If required by the Board of Directors, an Assistant Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in his possession
or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
26
<PAGE> 27
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in
the Corporation shall be entitled to have a certificate signed, in the name of
the Corporation (i) by the Chairman of the Board of Directors, the President or
a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the
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<PAGE> 28
person claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-Laws. Transfers
of stock shall be made on the books of the Corporation only by the person named
in the certificate or by his attorney lawfully constituted in writing and upon
the surrender of the certificate therefor, which shall be cancelled before a
new certificate shall be issued.
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Section 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty days nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound
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<PAGE> 30
to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is
required by law, the Certificate of Incorporation or these By-Laws, to be given
to any director, member of a committee or stockholder, a waiver thereof in
writing, signed, by the person or persons entitled to
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<PAGE> 31
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money
and notes of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to time
designate.
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<PAGE> 32
Section 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or
Proceedings other Than Those by or in the Right of the Corporation. Subject to
Section 3 of this Article VIII, the Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director or officer of
the Corporation, or is or was a director or officer of the Corporation serving
at the
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request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the Corporation. Subject to Section 3 of
this Article VIII, the Corporation shall indemnify any person who was or is a
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<PAGE> 34
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
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Section 3. Authorization of Indemnification. Any
indemnification under this Article VIII (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if such a quorum is not obtainable, or even if obtainable a quorum of
disinterested directors so direct, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any
determination under Section 3 of this Article
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VIII, a person shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action or proceeding, to have had
no reasonable cause to believe his conduct was unlawful, if his action is based
on the records or books of account of the Corporation or another enterprise, or
on information supplied to him by the officers of the Corporation or another
enterprise in the course of their duties, or on the advice of legal counsel for
the Corporation or another enterprise or on information or records given or
reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or another enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise of
which such person is or was serving at the request of the Corporation as a
director, officer, employee or agent. The provisions of this Section 4 shall
not be deemed to be exclusive or to limit in any way the circumstances in which
a person may be deemed to have met the
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applicable standard of conduct set forth in Sections 1 or 2 of this Article
VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to any court of competent jurisdiction in the
State of Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by a
court shall be a determination by such court that indemnification of the
director or officer is proper in the circumstances because he has met the
applicable standards of conduct set forth in Sections 1 or 2 of this Article
VIII, as the case may be. Neither a contrary determination in the specific
case under Section 3 of this Article VIII nor the absence of any determination
thereunder shall be a defense to such application or create a presumption that
the director or officer seeking indemnification has not met any applicable
standard of conduct. Notice of any application for indemnification pursuant to
this Section 5 shall be given to the Corporation promptly upon the filing of
such application. If successful, in whole or in part, the director or officer
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seeking indemnification shall also be entitled to be paid the expense of
prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by
a director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement
of Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that
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indemnification of the persons specified in Sections 1 and 2 of this Article
VIII shall be made to the fullest extent permitted by law. The provisions of
this Article VIII shall not be deemed to preclude the indemnification of any
person who is not specified in Sections 1 or 2 of this Article VIII but whom
the Corporation has the power or obligation to indemnify under the provisions
of the General Corporation Law of the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director or officer
of the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article
VIII, references to "the Corporation"
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shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or officers, so that
any person who is or was a director or officer of such constituent corporation,
or is or was a director or officer of such constituent corporation serving at
the request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, shall stand in the same position under the
provisions of this Article VIII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued. For purposes of this Article VIII,
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; and a person who
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acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding
anything contained in this Article VIII to the contrary, except for proceedings
to enforce rights to indemnification (which shall be governed by Section 5
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
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Section 12. Indemnification of Employees and Agents. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. The By-Laws may be altered, amended
or repealed, in whole or in part, or new By-Laws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alteration, amendment, repeal or adoption of new By-Laws be contained in
the notice of such meeting of stockholders or Board of Directors as the case
may be. All such alterations, amendments or repeals must be approved by an
affirmative vote of the holders of at least two-thirds of the outstanding
shares of capital stock entitled to vote thereon or by a majority of the entire
Board of Directors then in office, except that any amendment of (i) Sections 2
and 6 of Article II, (ii) Sections 1, 2 and 3 of Article III and (iii) Article
VIII shall require
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the affirmative vote of the holders of at least 80% of the outstanding shares
of capital stock entitled to vote thereon.
Section 2. Entire Board of Directors. As used in this
Article IX and in these By-Laws generally, the term "entire Board of Directors"
means the total number of directors which the Corporation would have if there
were no vacancies.
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EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS
OF
SERIES A PREFERRED STOCK
OF
HAYES WHEELS INTERNATIONAL, INC.
_________________________
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
_________________________
The undersigned DOES HEREBY CERTIFY that the following
resolution was duly adopted by the Board of Directors of Hayes Wheels
International, Inc., a Delaware corporation (the "Corporation"), at a meeting
duly convened and held at which a quorum was present and acting throughout:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorporation, a new series of Series A Preferred Stock
of the Corporation is hereby created and designated as the Series A Preferred
Stock.
The designation, amount, voting powers, preferences and
rights, of the shares of the Series A Stock, and the qualifications,
limitations or restrictions thereof are as set forth below. Capitalized terms
used herein and not otherwise defined have the meanings set forth in Section 7
hereof.
1. Designation and Amount. 200,000 shares of Series A
Stock, par value $.01 per share, are hereby con-
<PAGE> 2
stituted as a series thereof having the designation Series A Preferred Stock
(the "Series A Stock").
2. Rank. The Series A Stock shall, with respect to
rights on liquidation, winding up and dissolution, rank senior to the
Corporation's Common Stock, par value $.01 per share, and to all other classes
and series of stock of the Corporation now or hereafter authorized, issued or
outstanding. All shares of the Series A Stock shall be of equal rank with each
other with respect to rights on liquidation, winding up and dissolution
pursuant to Section 5.
3. Voting Rights. Except as specifically required by
law, the Series A Stock shall have no voting powers whatsoever.
4. Dividends. No dividends shall be paid on the shares
of Series A Stock.
5. Liquidation. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, whether voluntary
or involuntary, before any payment or distribution of the assets of the
Corporation shall be made to or set apart for the holders of any other shares
of capital stock of the Corporation, the holders of Series A Stock shall be
entitled to receive, out of the assets of the Corporation, whether such assets
are capital or surplus, $1,000 per share, (the "Liquidation Value"); and such
holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding up of the affairs of the Corporation, the
assets of the Corporation shall be insufficient to pay in full the preferential
amount aforesaid, then such assets shall be distributed among the holders of
Series A Stock so that an equal amount (rounded to the nearest whole cent) is
paid with respect to each outstanding share of Series A Stock. For purposes of
this Section 5, a consolidation or merger of the Corporation with one or more
corporations which does not adversely affect the rights and preferences of the
Series A Stock shall not be deemed to be a liquidation, dissolution or winding
up. All payments of the Liquidation Value shall be made pro rata among the
holders of the then outstanding shares of Series A Stock. Nothing herein
contained shall be deemed to prevent redemption of shares of the Series A Stock
in the manner provided in Section 6 hereof.
2
<PAGE> 3
After payment shall have been made in full to the
holders of the Series A Stock as provided in this Section 5, all remaining
assets of the Corporation shall be paid or distributed to the holders of other
shares of capital stock of the Corporation in accordance with the respective
terms and conditions applicable thereto, and the holders of Series A Stock
shall not be entitled to share therein.
6. Redemption.
(a) Mandatory Redemption. In the event that the
Merger is not consummated within two (2) Business Days of the initial issuance
of any shares of Series A Stock, the Corporation shall immediately redeem the
shares of the Series A Stock, at a redemption price of $1,000 per share (the
"Redemption Price"), payable only in cash.
(b) Redemption Procedure. In the event that the
Merger is not consummated within two (2) Business Days of the initial issuance
of any shares of Series A Stock, the holders of Series A Stock shall tender
each certificate therefor to the Corporation. Within one (1) day of a holder's
tender of a certificate or certificates for shares of Series A Stock, the
Corporation shall pay the Redemption Price to such holder by wire transfer of
immediately available funds.
(c) Reacquired Shares. Any shares of the Series
A Stock purchased, redeemed or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares, upon compliance with any applicable provisions of
the laws of the State of Delaware, shall be cancelled and shall revert to
authorized but unissued preferred stock, undesignated as to series and subject
to reissuance by the Corporation as shares of preferred stock of any one or
more series, subject to the conditions and restrictions on issuance set forth
herein. Such shares may not be reissued as Series A Stock.
3
<PAGE> 4
7. Definitions.
(a) Business Day shall mean any day other than a
Saturday, Sunday or federal or state holiday or day on which the banks in
Delaware, Connecticut or New York are required or permitted by law to be
closed.
(b) Merger shall mean the merger of MWC Holdings,
Inc., a Delaware corporation, with and into the Corporation pursuant to the
terms of the Merger Agreement, dated as of March 28, 1996 by and between MWC
Holdings, Inc. and the Corporation, as such agreement may be amended from time
to time pursuant to its terms.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed in its name and on its behalf and attested on this __
day of _________, 1996 by duly authorized officers of the Corporation.
HAYES WHEELS INTERNATIONAL, INC.
By:_________________________
[ ]
President and Chief
Executive Officer
ATTEST:
By: __________________
[ ]
Secretary
4
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF ALTHEIMER & GRAY]
May 31, 1996
Hayes Wheels International, Inc.
38481 Huron River Drive
Romulus, Michigan 48174
Re: Registration of 11,611,300 Shares of Common Stock and 1,150,000
Warrants to Purchase Common Stock
Ladies and Gentlemen:
We have acted as counsel to Hayes Wheels International, Inc., a
Delaware corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company's
registration statement on Form S-4 (the "Registration Statement") relating to
the registration of 11,611,300 shares of common stock, $.01 par value, of the
Company (the "New Common Stock") and 1,150,000 warrants, each warrant entitling
the holder thereof to purchase one share of Common Stock at a price of $48.00
during the period commencing on the fourth anniversary of the effective time
(the "Effective Time") of the proposed merger of MWC Holdings, Inc., a Delaware
corporation ("Holdings"), with and into the Company (the "Merger") and ending
on the seventh anniversary of the Effective Time (the "Warrants"). The New
Common Stock and Warrants are to be issued pursuant to the terms of the
Agreement and Plan of Merger dated as of March 28, 1996 (the "Merger
Agreement") between the Company and Holdings providing for the Merger. The
terms of the Warrants are set forth in the Warrant Agreement to be dated as of
the date of the Effective Time, the form of which is filed as Exhibit 10.2 to
the Registration Statement.
We are familiar with the proceedings to date with respect to the
proposed issuance of the New Common Stock and the Warrants in the Merger and
have examined such records, documents and questions of law, and satisfied
ourselves as to such matters of law as we have considered relevant and
necessary as a basis for this opinion. Based on the foregoing, it is our
opinion that:
1. The Shares of New Common Stock, when issued in
accordance with the Merger Agreement, will be legally issued, fully paid
and non-assessable.
2. The Warrants, when issued in accordance with the Merger
Agreement and the Warrant Agreement, will be legal,
<PAGE> 2
Hayes Wheels International, Inc.
May 31, 1996
Page 2
valid and binding obligations of the Company enforceable in accordance
with their terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer or similar
laws, now or hereafter in effect, relating to or affecting creditors'
rights generally and by general principals of equity.
3. The shares of New Common Stock issuable upon exercise of the
Warrants, when issued in accordance with the Warrants and the Warrant
Agreement, will be legally issued, fully paid and non-assessable (assuming
no change in the applicable law or facts).
This opinion is being furnished in accordance with Item 601(b)(5) of
Regulation S-K under the Securities Act. This opinion is limited to the
federal laws of the United States of America and the General Corporation Law of
the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the caption "Legal
Matters" is the prospectus contained therein.
Very truly yours,
ALTHEIMER & GRAY
/s/ Altheimer & Gray
<PAGE> 1
[LETTERHEAD OF SKADDEN, ARPS,
SLATE, MEAGHER & FLOM]
EXHIBIT 8.1
May 31, 1996
MWC Holdings, Inc.
2501 Woodlake Circle
Okemos, Michigan 48864
Re: Merger of MWC Holdings, Inc., ("Holdings")
with and into Hayes Wheels International,
Inc. (the "Company").
Dear Sirs:
We have acted as counsel to you, Holdings, a Delaware
corporation, in connection with the proposed merger (the "Merger") of Holdings
with and into the Company, a Delaware corporation.
In rendering our opinion, we have examined the Agreement and
Plan of Merger dated March 28, 1996 (the "Merger Agreement"), by and between
Holdings and The Company, the Joint Proxy Statement/Prospectus which is
included in the Registration Statement on Form S-4 (the "Registration
Statement") filed on May 31, 1996 with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and such other documents
(including the representations made by an authorized officer of Holdings and
the Company, respectively, dated the date hereof and addressed to us) as we
deem relevant for purposes of this opinion.
In rendering our opinion, we have assumed that the Merger will
be consummated in accordance with the terms of the Merger Agreement and that
none of the terms and conditions contained therein have been waived or modified
in any respect. We have also assumed that the Joint Proxy Statement/Prospectus
reflects the material facts of the Merger and those involving Holdings and the
Company. In addition, as to any facts material to our opinion which we did not
independently establish or verify, we
<PAGE> 2
MWC HOLDINGS, INC.
May 31, 1996
Page 2
have relied upon statements and representations of officers and other
representatives of Holdings and the Company and others. Any material changes
in the facts set forth or assumed herein or the Joint Proxy Statement/
Prospectus or the representations referred to above may affect the conclusions
stated herein.
We have assumed the genuineness of all signatures, the legal
capacity of all natural persons, the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such documents. We have also assumed that the Merger qualifies as
a statutory merger under the laws of the State of Delaware.
In rendering our opinion, we have considered the applicable
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations promulgated thereunder by the Treasury Department (the
"Regulations"), pertinent judicial authorities, rulings of the Internal Revenue
Service (the "Service") and such other authorities as we have considered
relevant. It should be noted that such laws, Code, Regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A material change in any
of the authorities upon which our opinion is based could affect our conclusions
herein.
Opinion
Based solely upon and subject to the foregoing, we are of the
opinion that for federal income tax purposes:
1. the Merger will constitute a reorganization within
the meaning of section 368(a)(1) of the Code;
2. the consequences of the Merger to Holdings
stockholders will be as forth in the Joint Proxy Statement/Prospectus under the
headings "Tax Consequences to Holdings Stockholders," "Tax Consequences to
Holdings
<PAGE> 3
MWC HOLDINGS, INC.
May 31, 1996
Page 3
Stockholders of Cash Received in Lieu of Fractional Shares of New Common
Stock" and "Dissenting Holdings Stockholders."
Except as expressly set forth above, we express no other
opinion. Any material changes in the facts set forth or assumed herein, or the
Registration Statement or the representations referred to above may affect the
conclusions stated herein.
Very truly yours,
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
/s/ Skadden, Arps, Slate, Meagher & Flom
<PAGE> 1
[LETTERHEAD OF ALTHEIMER & GRAY]
EXHIBIT 8.2
May 31, 1996
Hayes Wheels International
38481 Huron River Drive
Romulus, Michigan 48174
RE: Merger of MWC Holdings, Inc. ("Holdings") with and into
Hayes Wheels International, Inc. ("The Company")
Dear Ladies and Gentlemen:
We have acted as counsel to you, The Company, a Delaware corporation, in
connection with the proposed merger (the "Merger") of Holdings, a Delaware
corporation, with and into The Company.
In rendering our opinion, we have examined the Agreement and Plan of
Merger dated March 28, 1996 (the "Merger Agreement"), by and among Holdings and
The Company, the Joint Proxy Statement/Prospectus which is included in the
Registration Statement on Form S-4 (the "Registration Statement") filed on May
31, 1996 with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and such other documents as we deem relevant for purposes
of this opinion. Capitalized terms used herein but not defined shall have the
meanings assigned to them in the Registration Statement unless otherwise
indicated.
In rendering our opinion, we have assumed that the Merger will be
consummated in accordance with the terms of the Merger Agreement and that none
of the terms and conditions contained therein have been waived or modified
in any respect. We have also assumed that the Registration Statement
reflects the material facts of the Merger and those involving Holdings and
The Company. In addition, as to any facts material to our opinion which we did
not independently establish or verify, we have relied upon statements and
representations of officers and other representatives of Holdings and
The Company and others. Any material changes in the facts set forth or
assumed herein or the Registration Statement may affect the conclusions
stated herein.
We have assumed the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the
<PAGE> 2
Hayes Wheels International
May 31, 1996
Page 2
originals of such documents. We have also assumed that the Merger qualifies as
a statutory merger under the laws of the State of Delaware.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations promulgated thereunder by the Treasury Department (the
"Regulations"), pertinent judicial authorities, rulings of the Internal Revenue
Service (the "Service") and such other authorities as we have considered
relevant. It should be noted that such laws, Code, Regulations, judicial
decisions and administrative interpretations are subject to change at any time
and, in some circumstances, with retroactive effect. A material change in any
of the authorities upon which our opinion is based could affect our conclusions
herein.
Opinion
Based solely upon and subject to the foregoing, we are of the opinion
that for federal income tax purposes:
1. Holders of common stock of The Company ("Company Common Stock")
will be deemed to have exchanged their Company Common Stock for Cash
Consideration and New Common Stock in a transaction which is a reorganization
within the meaning of section 368(a)(1) of the Code.
2. No loss will be recognized upon such exchange and gain will be
recognized to the extent of the lesser of the Cash Consideration received or
the gain realized by such stockholders on the exchange. The gain so realized is
measured by the difference between the Company stockholder's adjusted tax basis
in the Company Common Stock deemed surrendered and the aggregate fair market
value of the New Common Stock and the Cash Consideration received therefor.
3. Any such gain recognized by a Company stockholder pursuant to
the Merger will be treated as capital gain provided that the stockholder held
the Company Common Stock as a capital asset. Such capital gain will be long
term if the stockholder has held such Company Common Stock for more than one
year at the Effective Time.
<PAGE> 3
Hayes Wheels International
May 31, 1996
Page 3
4. Company stockholders will have a tax basis in the New Common
Stock deemed received equal to the aggregate tax basis of the Company
Common Stock deemed surrendered in the Merger increased by any gain
recognized as a result of the Merger and decreased by the Cash
Consideration received.
5. The holding period of the New Common Stock deemed received
pursuant to the Merger will include the holding period of the Company
Common Stock deemed surrendered in exchange therefor, provided such
Company Common Stock was held as a capital asset by the Company
stockholder.
6. The exchange of Company Preferred Stock for New Common Stock
will constitute a reorganization within the meaning of section 368(a)(1)
of the Code.
7. The tax basis of the New Common Stock received by the holders
of Company Preferred Stock will be the same as the tax basis of the Company
Preferred Stock surrendered in exchange therefor.
8. The holding period of the New Common Stock received in exchange
for Company Preferred Stock will include the holding period of the Company
Preferred Stock surrendered in exchange therefor, provided such Company
Preferred Stock was held as a capital asset by the Company stockholder.
9. The cash received by Company stockholders in lieu of fractional
shares of New Common Stock will be treated as received in redemption of
such fractional interests.
10. Gain or loss will be recognized by each Company stockholder in
an amount equal to the difference between the amount of cash received for
such fractional interest and the portion of the stockholder's tax
basis in such stockholder's Company Stock or Company Preferred Stock that
is properly allocable to such fractional shares.
11. Any such gain or loss recognized by a Company stockholder will
be capital gain or loss, provided that such fractional share was held by the
Company stockholder as a capital asset. Such gain or loss will be
long-term if the holding period of the fractional share
<PAGE> 4
Hayes Wheels International
May 31, 1996
Page 4
of New Common Stock considered redeemed for cash is more than one year
at the Effective Time.
12. A Company stockholder who perfects dissenter's rights under
Section 262 of the Delaware General Corporate Law will recognize gain or
loss equal to the difference between the amount in a statutory appraisal
proceeding and such stockholder's adjusted tax basis in the stockholder's
Company Common Stock.
Except as expressly set forth above, we express no other opinion. Any
material changes in the facts set forth or assumed herein, or the Registration
Statement may affect the conclusion stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us included in the Registration
Statement.
Very truly yours,
ALTHEIMER & GRAY
/s/ Altheimer & Gray
<PAGE> 1
EXHIBIT 10.8
March 28, 1996
Hayes Wheels International, Inc.
38481 Huron River Drive
Romulus, MI 48174
Attention of President and Chief
Executive Officer
MWC Holdings, Inc.
2501 Woodlake Circle
Okemos, MI 48864-5955
Attention of President and Chief
Executive Officer
HAYES WHEELS INTERNATIONAL
SENIOR SECURED CREDIT FACILITIES
COMMITMENT LETTER
Ladies and Gentlemen:
You have advised Canadian Imperial Bank of Commerce ("CIBC") and Merrill
Lynch Capital Corporation ("ML" and, together with CIBC, the "Managing Agents")
that, MWC Holdings, Inc., a Delaware corporation ("Holdings"), which is
controlled by Joseph Littlejohn & Levy ("JLL") and certain other investors
(together with JLL, the "MWC Investors"), will merge (the "Merger") with and
into Hayes Wheels International, Inc., a Delaware corporation (the "Borrower"),
pursuant to the Agreement and Plan of Merger dated as of March 28, 1996 (the
"Merger Agreement"), between Holdings and the Borrower, pursuant to which the
Borrower will be the surviving corporation and (a) JLL and certain other
investors arranged by JLL (such investors, together with JLL, the "New Borrower
Investors") will purchase in the aggregate 200,000 newly issued shares of
preferred stock, liquidation value $1,000 per share (the "Borrower Preferred
Stock"), of the Borrower, and warrants (the "Borrower Warrants") to purchase New
Common Stock (as defined below) of the Borrower at a price of $48.00 per share
(of which 80,000 shares of Borrower Preferred Stock and 60,000 Borrower Warrants
will be purchased by JLL) and (b) the Borrower will be recapitalized in a
transaction in which (i) each outstanding share of existing Common Stock of the
Borrower will be converted into a right to receive $28.80 in cash and one-tenth
of one share of a new series of Common Stock of the Borrower (the "New Common
Stock") and, (ii) each outstanding share of Borrower Preferred Stock held by any
New Borrower Investor will be converted into 31.25 shares of New Common Stock.
In connection with the Merger, each MWC Investor will receive approximately
8,232 shares of New Common Stock and approximately 3,080 Borrower Warrants in
exchange for each share of Holdings owned by such MWC Investor. After giving
effect to the Merger, JLL will own not less than 40% of the outstanding New
Common Stock, and the New Borrower Investors will own not less than 51% of the
outstanding New Common Stock. The transactions described above are herein
referred to collectively as the "Transactions". The sources and uses of the
funds necessary to consummate the Transactions are set forth on Annex II to the
Summary of Principal Terms and Conditions attached hereto as Exhibit A (the
"Term Sheet").
You have further advised CIBC and ML that, in connection with the
Transactions, (a) the Borrower will issue not less than $225,000,000 nor more
than $250,000,000 aggregate principal amount of its subordinated notes (the
"Subordinated Notes") in a public offering or Rule 144A offering or other
private placement and (b) the Borrower will obtain the senior secured credit
facilities in an aggregate principal amount of $645,000,000 (the "Facilities")
described in the Term Sheet. You have requested that the Managing Agents commit
to provide the entire principal amount of the Facilities and that CIBC, in
coordination with ML, agree to structure, arrange and syndicate the Facilities.
In connection with the foregoing, (a) CIBC is pleased to advise you of its
commitment to provide $387,000,000 principal amount of the Facilities and (b) ML
is pleased to advise you of its commitment to
<PAGE> 2
provide $258,000,000 principal amount of the Facilities, each such commitment to
be allocated pro rata among the Facilities, all upon the terms and subject to
the conditions set forth or referred to in this commitment letter (the
"Commitment Letter") and in the Term Sheet.
It is agreed that CIBC will act as the sole and exclusive administrative
agent and syndication agent for the Facilities and will perform the duties and
exercise the authority customarily associated with such roles and that ML will
act as the Documentation Agent. It is further agreed that no additional agents,
co-agents or arrangers will be appointed and no Lender (as defined below) will
receive compensation outside the terms contained herein and in the Fee Letter
referred to below in order to obtain its commitment to participate in the
Facilities, in each case unless you and we so agree.
Each of the Managing Agents reserves the right, prior to or after the
execution of definitive documentation for the Facilities, to syndicate all or a
portion of its commitment hereunder to one or more financial institutions
reasonably satisfactory to CIBC, ML and you. Upon the acceptance of the
commitment of any Lender to provide a portion of the Facilities, CIBC and ML
shall be released from a portion of its commitment hereunder in an amount equal
to its pro rata share of the commitment of such Lender. You agree actively to
assist CIBC and ML in achieving a timely syndication that is satisfactory to
CIBC, ML and you. This syndication will be accomplished by a variety of means,
including direct contact during the syndication (at times mutually agreed upon)
among the senior officers, representatives and advisors of the Borrower,
Holdings, an Ohio corporation you have identified to us as Motor Wheel
Corporation ("Motor Wheel"), which is a wholly owned subsidiary of Holdings, and
JLL, on the one hand, and prospective Lenders, on the other hand. Such
assistance shall also include your using your best efforts to have CIBC's
syndication efforts benefit materially from the existing lending relationships
of the Borrower, Holdings, Motor Wheel and JLL.
It is understood and agreed that CIBC and ML shall be entitled, prior to
the effectiveness of the Facilities but only with your prior approval (which
shall not be unreasonably withheld), to change the allocation of commitments
among the Tranche A Facility, the Tranche B Facility and the Tranche C Facility
(as such terms are defined in the Term Sheet) in order to facilitate the
successful syndication of the Facilities (provided that the aggregate principal
amount of the Facilities remains the same).
CIBC, in coordination with ML, will manage all aspects of the syndication,
including selection of Lenders, determination of when potential Lenders will be
approached, any naming rights and the final allocations of the commitments among
the Lenders. To assist CIBC and ML in their syndication efforts, you agree (a)
promptly to provide all financial and other information in your possession with
respect to the Borrower, Holdings, Motor Wheel, the Transactions and any other
transactions contemplated hereby, including but not limited to financial
projections (the "Projections") relating to the foregoing, and (b) to assist,
and to cause your affiliates and advisors to assist, CIBC in the preparation of
a Confidential Information Memorandum and other marketing materials to be used
in connection with the syndication.
As consideration for commitments of the Managing Agents hereunder and the
agreement of CIBC to structure, arrange and syndicate the Facilities, each of
Holdings and the Borrower agree to pay to the Managing Agents the respective
fees as set forth in the Term Sheet and in the Fee Letter dated the date hereof
and delivered herewith (the "Fee Letter"). Once paid, such fees shall not be
refundable under any circumstances.
The commitment of the Managing Agent hereunder and the agreement of CIBC to
provide the services described herein are subject to the condition that (a) all
information (other than the Projections and information of a general economic
nature) concerning the Borrower, Holdings, Motor Wheel, the Transactions and the
other transactions contemplated hereby (the "Information") that has been or will
be made available to CIBC or ML by you or them or any of your or their
representatives in connection with the transactions contemplated hereby is or
will be complete and correct in all material respects and does not or will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements are made
and (b) the Projections that have been or will be made available to CIBC or ML
by you or them or any of your or their representatives in connection with the
transactions contemplated hereby have been and will be prepared in good faith
based upon assumptions believed by you to be reasonable.
2
<PAGE> 3
The commitment of each Managing Agent hereunder and the agreement of CIBC
to provide the services described herein are also subject to (a)(i) each of the
Managing Agents being afforded the opportunity to supplement its due diligence
investigation of the Borrower, Holdings and their respective subsidiaries and
(ii) neither of the Managing Agents having discovered or otherwise becoming
aware of information not previously disclosed to it that such Managing Agent
believes to be materially inconsistent with its understanding, based on the
information provided to it prior to the date hereof, of the assets, business,
properties, financial condition, results of operations or contingent liabilities
of the Borrower, Holdings and their respective subsidiaries, (b) there not
having occurred any material adverse change in the business, assets, operations,
properties, financial condition, contingent liabilities, prospects or material
agreements of the Borrower and its subsidiaries, taken as a whole, since January
31, 1996, or of Holdings and its subsidiaries, taken as a whole, since December
31, 1995, (c) there not having occurred and being continuing any material
disruption of or material adverse change in financial, banking or capital
markets that could, in our reasonable judgment, materially impair the
syndication of the Facilities, (d) our satisfaction that, prior to and during
the syndication of the Facilities, there shall be no competing issues of debt
securities (other than the Subordinated Notes) or commercial bank facilities of
the Borrower, Motor Wheel or any of their respective subsidiaries being offered,
placed or arranged and (e) the other conditions set forth herein and in the Term
Sheet.
In addition, the commitment of each Managing Agent hereunder is subject to
the negotiation, execution and delivery of definitive documentation with respect
to the Facilities satisfactory to such Managing Agent. Such documentation shall
contain such indemnities, covenants, representations and warranties, events of
default (including but not limited to Change in Control (to be defined)),
conditions precedent, security arrangements and other terms and conditions as
shall be consistent with the Term Sheet and otherwise as shall be satisfactory
to the Managing Agents and to you.
The Borrower and Holdings, jointly and severally, agree to indemnify and
hold harmless CIBC, ML and the other Lenders and their respective officers,
directors, employees, affiliates, agents and controlling persons from and
against any and all losses, claims, damages, liabilities and expenses, joint or
several, to which any such person may become subject arising out of or in
connection with this Commitment Letter, the Fee Letter, the Term Sheet, the
Transactions, the Facilities, the use of proceeds of the loans thereunder or any
related transaction or any claim, litigation, investigation or proceeding
relating to any of the foregoing, regardless of whether any of such indemnified
parties is a party thereto, and to reimburse each of such indemnified parties
upon demand for any legal or other expenses incurred in connection with
investigating or defending any of the foregoing, (it being agreed that any
settlement of claims for monetary damages involving Lenders, CIBC or ML shall be
by mutual agreement between the Lenders, CIBC or ML, as the case may be, and
you), provided that the foregoing indemnity will not, as to any indemnified
party, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found in a final judgment of a court of competent jurisdiction
to have resulted primarily from the willful misconduct or gross negligence of
such indemnified party or its agents and representatives, Holdings agrees to
reimburse CIBC or ML from time to time on demand for all out-of-pocket expenses
(including but not limited to expenses of their due diligence investigation,
consultants' fees (if such consultants are engaged with your consent),
syndication expenses, travel expenses and reasonable fees, disbursements and
other charges of one counsel), in each case incurred in connection with the
Facilities and the preparation of this Commitment Letter, the Term Sheet, the
Fee Letter, the definitive documentation for the Facilities and the security
arrangements in connection therewith. No indemnified person shall be liable for
any indirect or consequential damages in connection with its activities related
to the Facilities.
This Commitment Letter and commitments of the Managing Agents hereunder
shall not be assignable by you without the prior written consent of CIBC and ML,
and any purported assignment without such consent shall be void. This Commitment
Letter may not be amended or any provision hereof waived or modified except by
an instrument in writing signed by CIBC, ML, you and Holdings. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one agreement.
Delivery of an executed counterpart of a signature page of this Commitment
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart of this Commitment Letter. This Commitment Letter is
intended to be solely for the benefit of the parties hereto and is not intended
to confer any benefits upon, or create any rights in favor of, any person other
3
<PAGE> 4
than the parties hereto. This Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
You agree that you will not disclose this Commitment Letter, the Term
Sheet, the contents of any of the foregoing or the activities of CIBC or ML
pursuant hereto or thereto to any person without the prior approval of the
Managing Agents (which shall not be unreasonably withheld), except that you may
disclose this Commitment Letter, the Term Sheet and the contents hereof and
thereof (a) to the New Borrower Investors, the MWC Investors, Holdings, Motor
Wheel, Varity Corporation, a Delaware corporation ("Varity"), (b) to your, the
New Borrower Investors', the MWC Investors', Holdings', Motor Wheel's and
Varity's respective officers, directors, accountants, employees, attorneys and
advisors on a confidential basis and (c) as required by applicable law or
compulsory legal process, including without limitation, in any proxy statement,
registration statement, offer to purchase or similar document issued in
connection with the Transactions, in each case based on the reasonable advice of
your legal counsel. You further agree that you will not disclose the Fee Letter
or the contents thereof, except as expressly permitted by the Fee Letter. The
provisions contained in this paragraph shall remain in full force and effect
notwithstanding the termination of this Commitment Letter or the commitments of
the Managing Agents hereunder.
Your obligations under this Commitment Letter, other than those arising
under the fifth and seventh paragraphs of this Commitment Letter, shall
automatically terminate and be superseded by the provisions of the definitive
documentation for the Facilities upon the closing of the Facilities and the
consummation of the Transactions.
Please indicate your acceptance of the terms hereof and of the Term Sheet
and the Fee Letter by returning to us executed counterparts of this Commitment
Letter and the Fee Letter not later than 11:59 p.m., New York City time, on
March 28, 1996. The commitments of the Managing Agents hereunder and the
agreement of CIBC to provide the services described herein will automatically
terminate at such time in the event that we have not received such executed
counterparts in accordance with the immediately preceding sentence. In the event
that the initial borrowing in respect of the Facilities does not occur on or
before August 15, 1996, then this Commitment Letter, the commitments of the
Managing Agents hereunder and the agreement of CIBC to provide the services
described herein shall automatically terminate unless CIBC and ML shall, in
their discretion, agree to an extension. Subject to the provisions of the
immediately preceding paragraph, the compensation, reimbursement and
indemnification provisions contained herein and in the Fee Letter shall remain
in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the
termination of this Commitment Letter or the commitments of the Managing Agents
hereunder.
4
<PAGE> 5
CIBC and ML are pleased to have been given the opportunity to assist you in
connection with the financing for the Transactions.
Very truly yours,
CANADIAN IMPERIAL BANK OF COMMERCE
by /s/ BRIAN E. O'CALLAHAN
------------------------------------
Name: Brian E. O'Callahan
Title: Director
MERRILL LYNCH CAPITAL CORPORATION
by /s/ JOHN F. YANG
------------------------------------
Name: John F. Yang
Title: Director
5
<PAGE> 6
Accepted and agreed to as of the date first above written:
HAYES WHEELS INTERNATIONAL, INC.
by /s/ W.D. SHOVERS
----------------------------------------
Name: William D. Shovers
Title: Vice President and Chief
Financial Officer
MWC HOLDINGS, INC.
by /s/ MARCOS A. RODRIGUEZ
----------------------------------------
Name: Marcos A. Rodriguez
Title: Director
6
<PAGE> 7
EXHIBIT A
HAYES WHEELS INTERNATIONAL
SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
BORROWER: Hayes Wheels International, Inc., a Delaware
corporation (the "Borrower").
TRANSACTIONS: MWC Holdings, Inc. a Delaware corporation
("Holdings"), which is controlled by Joseph
Littlejohn & Levy ("JLL") and certain other
investors (together with JLL, the "MWC
Investors"), will merge (the "Merger") with and
into the Borrower pursuant to the Agreement and
Plan of Merger dated as of March 28, 1996 (the
"Merger Agreement"), between Holdings and the
Borrower, pursuant to which the Borrower will
be the surviving corporation, and (a) JLL and
certain other investors arranged by JLL (such
investors, together with JLL, the "New Borrower
Investors") will purchase in the aggregate
200,000 newly issued shares of preferred stock,
liquidation value $1,000 per share (the
"Borrower Preferred Stock"), of the Borrower
and warrants (the "Borrower Warrants") to
purchase New Common Stock (as defined below) of
the Borrower at a price of $48.00 per share (of
which 80,000 shares of Borrower Preferred Stock
and 60,000 Borrower Warrants will be purchased
by JLL) and (b) the Borrower will be
recapitalized (the "Recapitalization") in a
transaction in which (i) each outstanding share
of existing Common Stock of the Borrower will
be converted into a right to receive $28.80 in
cash and one-tenth of one share of a new series
of Common Stock of the Borrower (the "New
Common Stock") and (ii) each outstanding share
of Borrower Preferred Stock held by any New
Borrower Investor will be converted into 31.25
shares of New Common Stock. In addition, the
Borrower will (a) issue in a public offering or
Rule 144A Offering or other private placement
not less than $225,000,000 nor more than
$250,000,000 in aggregate principal amount of
its senior subordinated notes (the
"Subordinated Notes") and (b) obtain the
Facilities (as defined below). In connection
with the Merger, each MWC Investor will receive
approximately 8,232 shares of New Common Stock
and approximately 3,080 Borrower Warrants in
exchange for each share of Holdings owned by
such MWC Investor. After giving effect to the
Merger, JLL will own not less than 40% of the
outstanding New Common Stock, and the New
Borrower Investors will own not less than 51%
of the outstanding New Common Stock. The
transactions described above are herein
referred to collectively as the "Transactions".
The sources and uses of the funds necessary to
consummate the Transactions are set forth on
Annex II attached hereto.
FACILITIES: (A) Three Senior Secured Term Loan Facilities
in an aggregate principal amount of up to
$425,000,000 (the "Term Facilities"), such
aggregate principal amount to be allocated
among (a) a Tranche A Term Loan Facility in an
aggregate principal amount of up to
$200,000,000 (the "Tranche A Facility"), (b) a
Tranche B
A-1
<PAGE> 8
Term Loan Facility in an aggregate principal
amount of up to $125,000,000 (the "Tranche B
Facility") and (c) a Tranche C Term Loan
Facility in an aggregate principal amount of up
to $100,000,000 (the "Tranche C Facility");
provided, however, that, on the closing date of
the Debt Tender Offer (as defined below), in
the event the aggregate principal amount of
Borrower Notes (as defined below) that remains
outstanding (the "Outstanding Amount")
immediately following the consummation of the
Debt Tender Offer exceeds $1,000,000, the
aggregate principal amount of the Tranche A
Facility shall be permanently reduced by an
amount equal to the Outstanding Amount.
(B) Senior Secured Revolving Credit Facility
(the "Revolving Facility" and, together with
the Term Facilities, the "Facilities"), in an
aggregate principal amount of up to
$220,000,000, of which up to an amount to be
determined will be available in the form of
letters of credit.
MANAGING AGENTS: Canadian Imperial Bank of Commerce ("CIBC") and
Merrill Lynch Capital Corporation ("ML").
AGENT: CIBC will act as sole administrative agent and
syndication agent (collectively, the "Agent")
for a syndicate of financial institutions
reasonably satisfactory to the Managing Agents
and the Borrower (the "Lenders"), and will
perform the duties and exercise the authority
customarily associated with such roles.
ARRANGER: CIBC will act as advisor and arranger for the
Facilities, and, in coordination with ML, will
perform the duties and exercise the authority
customarily associated with such roles.
PURPOSE: (A) The proceeds of the Term Facilities will be
used by the Borrower, together with a portion
of the Revolving Facility to be drawn on the
date of the initial borrowing under the
Facilities (the "Closing Date"), solely (a) to
pay a portion of the cash amount to be paid to
the holders of the existing Common Stock in
connection with the Recapitalization, (b) to
pay for cancellation of management options, (c)
to pay the repayment, redemption or repurchase
amount to be paid in connection with the Debt
Refinancing (as defined below) and (d) to pay
related fees and expenses. The amount of the
Revolving Facility to be drawn on the Closing
Date will depend on where in the Borrower's and
Motor Wheel's (as defined below) working
capital cycle the Closing Date occurs, but will
not exceed $100,000,000.
(B) Except as provided in the immediately
preceding paragraph, the proceeds of loans
under the Revolving Facility will be used
solely for general corporate purposes.
(C) Letters of credit will be used by the
Borrower solely for ordinary course purposes.
AVAILABILITY: (A) The full amount of the Term Facilities must
be drawn in a single drawing on the Closing
Date. Amounts repaid under the Term Facilities
may not be reborrowed.
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<PAGE> 9
(B) Loans under the Revolving Facility will be
available at any time prior to the final
maturity of the Revolving Facility. Amounts
repaid under the Revolving Facility may be
reborrowed. The Revolving Facility will include
a mutually acceptable annual clean-down
requirement.
(C) Letters of Credit will be available at any
time before the fifth business day prior to the
final maturity of the Revolving Facility.
DEFAULT RATE: The applicable interest rate plus 2% per annum.
LETTERS OF CREDIT: Letters of Credit under the Revolving Facility
will be issued by CIBC, as fronting bank (in
such capacity, the "Fronting Bank"). Each
letter of credit shall expire no later than the
earlier of (a) 12 months after its date of
issuance and (b) the fifth business day prior
to the final maturity of the Revolving
Facility.
Drawings under any letter of credit shall be
reimbursed by the Borrower on the same business
day. To the extent that the Borrower does not
reimburse the Fronting Bank on the same
business day, the Lenders under the Revolving
Facility shall be irrevocably obligated to
reimburse the Fronting Bank pro rata based upon
their respective Revolving Facility
commitments, with the amount of such
reimbursement payment being deemed to be a
drawing under the Revolving Facility.
The issuance of all letters of credit shall be
subject to the customary procedures of the
Fronting Bank.
FINAL MATURITY AND
AMORTIZATION: (A) Tranche A Facility. The Tranche A Facility
will mature on the sixth anniversary of the
Closing Date, and will amortize in quarterly
installments under a schedule to be agreed
upon.
(B) Tranche B Facility. The Tranche B Facility
will mature on the seventh anniversary of the
Closing Date, and will amortize in quarterly
installments under a schedule to be agreed
upon.
(C) Tranche C Facility. The Tranche C Facility
will mature on the eighth anniversary of the
Closing Date, and will amortize in quarterly
installments under a schedule to be agreed
upon.
(D) Revolving Facility. The Revolving Facility
will mature on the sixth anniversary of the
Closing Date.
GUARANTEES: All obligations of the Borrower under the
Facilities will be unconditionally guaranteed
by Motor Wheel Corporation, an Ohio corporation
("Motor Wheel") and a wholly owned subsidiary
of Holdings on the date hereof, and each other
existing and each subsequently acquired or
organized domestic subsidiary of the Borrower.
SECURITY: The Facilities will be secured by substantially
all the assets of the Borrower, Motor Wheel and
each other existing and each subsequently
acquired or organized domestic subsidiary of
the Borrower (collectively, the "Collateral"),
including but not limited to (a) a first
priority pledge of the capital stock of each
existing and each subsequently acquired or
organized domestic or first-tier foreign
A-3
<PAGE> 10
subsidiary of the Borrower (which pledge, in
the case of any foreign subsidiary, shall be
limited to 65% of the capital stock of such
foreign subsidiary to the extent, and for so
long as, the pledge of any greater percentage
would have adverse tax consequences for the
Borrower) and (b) perfected first priority
security interests in, and mortgages on,
substantially all tangible and intangible
assets of the Borrower and each existing and
each subsequently acquired or organized
domestic subsidiary of the Borrower (including
but not limited to accounts receivable,
inventory, equipment, intellectual property,
general intangibles, real property, cash and
proceeds of the foregoing); provided, however,
that certain non-material real property to be
agreed upon shall not be required to be
mortgaged.
All the above-described pledges, security
interests and mortgages shall be created on
terms, and pursuant to documentation,
satisfactory to the Lenders, and none of the
Collateral shall be subject to any other
pledges, security interests or mortgages (other
than customary permitted liens).
INTEREST RATES AND FEES: As set forth on Annex I hereto.
MANDATORY PREPAYMENT: Loans under the Term Facilities shall be
prepaid with (a) 75% of Excess Cash Flow (to be
defined), (b) 100% of the net cash proceeds of
all non-ordinary-course asset sales or other
dispositions of property by the Borrower and
its subsidiaries (including insurance and
condemnation proceeds), subject to limited
exceptions to be agreed upon, and (c) 100% of
the net proceeds of issuances of debt
obligations of the Borrower and its
subsidiaries, subject to limited exceptions to
be agreed upon.
The above-described mandatory prepayments shall
be allocated among the Term Facilities pro
rata, subject to the provisions set forth below
under the caption "Special Application
Provisions". Within each Term Facility,
prepayments shall be applied pro rata to the
remaining amortization payments under such
Facility.
SPECIAL APPLICATION
PROVISIONS: Holders of loans under the Tranche B Facility
and the Tranche C Facility may, so long as
loans are outstanding under the Tranche A
Facility, decline to accept any mandatory
prepayment described above and, under such
circumstances, all amounts that would otherwise
be used to prepay loans under the Tranche B
Facility and the Tranche C Facility shall be
used to prepay loans under the Tranche A
Facility.
VOLUNTARY PREPAYMENT: Voluntary prepayments will be permitted in
whole or in part, at the option of the
Borrower, in minimum principal amounts to be
agreed upon, without premium or penalty,
subject to reimbursement of the Lenders'
redeployment costs in the case of prepayment of
Adjusted LIBOR borrowings other than on the
last day of the relevant Interest Period.
All voluntary prepayments under the Term
Facilities shall be allocated pro rata among
the Term Facilities and, within each such
Facility, applied pro rata to the remaining
amortization payments under such Facility.
A-4
<PAGE> 11
REPRESENTATIONS AND
WARRANTIES: Usual for facilities and transactions of this
type and others to be reasonably specified by
the Managing Agents, including but not limited
to accuracy of financial statements; no
material adverse change; absence of litigation;
no violation of agreements or instruments;
compliance with laws (including ERISA, margin
regulations and environmental laws); payment of
taxes; ownership of properties; inapplicability
of the Investment Company Act; solvency;
effectiveness of regulatory approvals; labor
matters; environmental matters; accuracy of
information; and validity, priority and
perfection of security interests in the
Collateral.
CONDITIONS PRECEDENT TO
INITIAL BORROWING: Usual for facilities and transactions of this
type, those specified below and others to be
reasonably specified by the Managing Agents,
including but not limited to delivery of
satisfactory legal opinions, audited financial
statements and other financial information;
first-priority perfected security interests in
the Collateral; policies of title insurance,
legal surveys and other customary opinions and
documents in connection with any real estate
collateral; accuracy of representations and
warranties; absence of defaults, prepayment
events or creation of liens under debt
instruments or other agreements as a result of
the transactions contemplated hereby; evidence
of authority; consents of all persons;
compliance with applicable laws and regulations
(including ERISA, margin regulations and
environmental laws); absence of material
adverse change in the business, assets,
operations, properties, financial condition,
contingent liabilities, prospects or material
agreements of the Borrower and its
subsidiaries, taken as a whole; payment of fees
and expenses; and obtaining of satisfactory
insurance.
The Transactions shall have been consummated or
shall be consummated simultaneously with the
closing of the Facilities in accordance with
applicable law and on other terms reasonably
satisfactory to the Lenders, and the Lenders
shall be satisfied (a) with the terms and
conditions of any amendments or modifications
to the Merger Agreement (or any other change to
the structure of the Transactions from that set
forth herein) and the terms and conditions of
the other agreements to be entered into in
connection with the Transactions and (b) that
the aggregate level of fees and expenses to be
paid in connection with the Transactions, the
financing therefor and the other transactions
contemplated hereby shall not exceed
$41,000,000.
The Borrower shall have received at least
$225,000,000 in gross cash proceeds from the
issuance of its Subordinated Notes. The terms
and conditions (including but not limited to
terms and conditions relating to the interest
rate, fees, amortization, maturity,
subordination, covenants, events of default and
remedies) of the Subordinated Notes shall be
satisfactory in all respects to the Lenders.
Prior to or simultaneously with the closing of
the Facilities, the Borrower shall have (a)
purchased not less than $51,000,000 aggregate
principal amount of the issued and outstanding
9 1/4%
A-5
<PAGE> 12
Senior Notes due November 15, 2002 of the
Borrower (the "Borrower Notes"), pursuant to an
offer to repurchase all such Borrower Notes
(the "Debt Tender Offer") at prices reasonably
satisfactory to CIBC, ML and the Borrower (and,
if fewer than 100% of all outstanding Borrower
Notes shall have been so purchased, the
indenture governing the Borrower Notes shall
have been amended in a manner reasonably
satisfactory to the Agent, which amendment
shall, among other things, eliminate the
significant negative covenants contained
therein and shall make such other changes as
shall be necessary so that, after giving effect
thereto and to the consummation of the
Transactions, the financing therefor and the
other transactions contemplated hereby, no
default or event of default would exist
thereunder), and (b) redeemed all outstanding
11 1/2% Senior Notes due March 1, 2000 of Motor
Wheel (the "Motor Wheel Notes"), pursuant to a
contractual redemption of all such Motor Wheel
Notes (together with the Debt Tender Offer, the
"Specified Debt Redemptions") all in accordance
with applicable law and on terms reasonably
satisfactory to the Lenders.
All loans outstanding under, and all other
amounts due in respect of, (a) the Credit
Agreement dated as of December 15, 1992, as
amended and restated as of November 30, 1993,
and June 10, 1994 (the "Existing Borrower
Credit Agreement"), among the Borrower, The
Chase Manhattan Bank, N.A., as agent bank, The
Bank of Nova Scotia, as co-agent, and the Banks
party thereto and (b) Motor Wheel's existing
credit agreement (together with the Existing
Borrower Credit Agreement, the "Existing Credit
Agreements") shall have been repaid in full;
the commitments under the Existing Credit
Agreements shall have been permanently
terminated and all obligations under the
Existing Credit Agreements and security
interests relating thereto shall have been
discharged; and the Agent shall have received
satisfactory evidence of such repayment,
termination and discharge.
After giving effect to the Transactions and the
consummation of the Specified Debt Redemptions,
the refinancing of the Existing Credit
Agreements and the repayment by the Borrower
and Motor Wheel of other existing indebtedness
(collectively, the "Debt Refinancing"), the
Borrower and the Borrower's subsidiaries shall
have outstanding no indebtedness or preferred
stock other than (a) the loans under the
Facilities, (b) the Subordinated Notes, (c) any
Borrower Notes not purchased in the Debt Tender
Offer and (d) other limited indebtedness or
preferred stock disclosed to, and in amounts
and on terms satisfactory to, the Lenders.
The Lenders shall have received a pro forma
consolidated balance sheet of the Borrower as
of the closing of the Facilities, after giving
effect to the Transactions, the financing
therefor and the consummation of the other
transactions contemplated hereby, which shall
not be materially inconsistent with the
forecasts previously provided to the Lenders.
The Lenders shall have received a solvency
letter, in form and substance and from an
independent evaluation firm satisfactory to
A-6
<PAGE> 13
the Lenders, together with such other evidence
reasonably requested by the Lenders of the
solvency of the Borrower and its subsidiaries
on a consolidated basis after giving effect to
the Transactions, the financing therefor and
the consummation of the other transactions
contemplated hereby.
All requisite governmental authorities and
third parties shall have approved or consented
to the Transactions, the financing therefor and
the other transactions contemplated hereby to
the extent required, all applicable waiting
periods shall have expired and there shall be
no governmental or judicial action, actual or
threatened, that has or could have a reasonable
likelihood of restraining, preventing or
imposing burdensome conditions on the
Transactions or the other transactions
contemplated hereby.
AFFIRMATIVE COVENANTS: Usual for facilities and transactions of this
type and others to be reasonably specified by
the Managing Agents (to be applicable to the
Borrower and the Borrower's subsidiaries),
including but not limited to maintenance of
corporate existence and rights; performance of
obligations; delivery of audited financial
statements, other financial information and
notices of default, litigation and material
adverse change; maintenance of properties in
good working order; maintenance of satisfactory
insurance; compliance with laws; inspection of
books and properties; further assurances; and
payment of taxes.
The Borrower will also be required to maintain
interest rate protection arrangements with
respect to a portion of the Facilities to be
agreed upon.
NEGATIVE COVENANTS: Usual for facilities and transactions of this
type and others to be reasonably specified by
the Managing Agents (to be applicable to the
Borrower and the Borrower's subsidiaries),
including but not limited to prohibition of
dividends, redemptions and repurchases of
capital stock; prohibition of prepayments,
redemptions and repurchases of debt;
limitations on liens and sale-leaseback
transactions; limitations on loans and
investments; limitations on debt; limitations
on capital expenditures; limitations on
mergers, acquisitions and asset sales;
limitations on transactions with affiliates;
limitations on changes in business conducted by
the Borrower and its Subsidiaries; and
limitations on amendment of debt and other
material agreements.
SELECTED FINANCIAL COVENANTS: The credit agreement relating to the Facilities
(the "Credit Agreement") will contain financial
covenants appropriate in the context of the
proposed transaction based upon the financial
information provided to the Managing Agents,
including but not limited to (a) a maximum
leverage ratio, (b) a minimum interest coverage
ratio and (c) a minimum fixed charge coverage
ratio (definitions and levels to be agreed
upon).
EVENTS OF DEFAULT: Usual for facilities and transactions of this
type and others to be reasonably specified by
the Managing Agents, including but not limited
to nonpayment of principal or interest,
violation of covenants, incorrectness of
representations and warranties in any material
respect, cross default and cross acceleration,
bankruptcy,
A-7
<PAGE> 14
material judgments, ERISA, actual or asserted
invalidity of security documents or guarantees
and Change in Control (the definition of which
will be agreed upon).
VOTING: Amendments and waivers of the Credit Agreement
and the other definitive credit documentation
will require the approval of Lenders holding
more than 50% of the aggregate amount of the
loans and commitments under the Facilities,
except that (a) the consent of each Lender
adversely affected thereby shall be required
with respect to, among other things, (i)
increases in commitments, (ii) reductions of
principal, interest or fees, (iii) extensions
of scheduled amortization or final maturity and
(iv) releases of any substantial part of the
Collateral (other than in connection with any
disposition of Collateral permitted by the
Credit Agreement) and (b) the consent of
Lenders holding more than 50% of each tranche
of the Term Facilities shall be required with
respect to any amendment that changes the
allocation among the Term Facilities of any
prepayments of loans under the Term Facilities
(or the application of such prepayments to the
remaining amortization payment under the Term
Facilities).
COST AND YIELD PROTECTION: Usual for facilities and transactions of this
type.
ASSIGNMENTS AND PARTICIPATION: The Lenders will be permitted to assign loans,
notes and commitments to other financial
institutions with the consent of the Borrower,
not to be unreasonably withheld. The Agent will
receive a processing and recordation fee of
$3,500, payable by the assignor and/or the
assignee, with each assignment. Assignments
will be by novation and shall not be required
to be pro rata among the Facilities.
The Lenders will be permitted to participate
loans, notes and commitments without
restriction. Voting rights of participants
shall be limited to matters in respect of (a)
reductions of principal, interest or fees, (b)
extensions of scheduled amortization or final
maturity and (c) certain releases of
collateral.
EXPENSES AND INDEMNIFICATION: All out-of-pocket expenses (including but not
limited to expenses incurred in connection with
due diligence) of the Managing Agents, CIBC, ML
and the Agent associated with the syndication
of the Facilities and with the preparation,
execution and delivery, administration, waiver
or modification and enforcement of the Credit
Agreement and the other documentation
contemplated hereby and thereby (including the
reasonable fees, disbursements and other
charges of one counsel) are to be paid by
Holdings. In addition, all out-of-pocket
expenses of the Lenders for enforcement costs
and documentary taxes associated with the
Facilities are to be paid by the Borrower.
The Borrower will indemnify the Managing
Agents, the Agent, CIBC and the other Lenders
and hold them harmless from and against all
costs, expenses (including reasonable fees,
disbursements and other charges of counsel) and
liabilities of the Managing Agents, the Agent,
CIBC, ML and such other Lenders arising out of
or relating to any claim or any litigation or
other proceedings (regardless of whether the
Managing Agents, the Agent, CIBC,
A-8
<PAGE> 15
ML or any such other Lender is a party thereto)
that relates to the proposed transactions,
including the financing contemplated hereby,
the Transactions or any transactions connected
therewith, provided that none of the Managing
Agents, the Agent, CIBC, ML or any such other
Lender will be indemnified or held harmless for
its gross negligence or willful misconduct.
GOVERNING LAW AND FORUM: New York.
COUNSEL TO AGENT, MANAGING
AGENTS: Simpson Thacher & Bartlett.
A-9
<PAGE> 16
ANNEX I
INTEREST RATES: The interest rates under the Facilities will
be, at the option of the Borrower, as follows:
Revolving Facility and Tranche A Facility
Adjusted LIBOR plus 2.50% per annum or ABR plus
1.50% per annum. Following the first
anniversary of the Closing Date, the spreads
above Adjusted LIBOR and ABR set forth above
will decrease in increments to be agreed upon
if the Borrower satisfies performance tests to
be agreed upon and no Event of Default exists.
Tranche B Facility
Adjusted LIBOR plus 3.00% per annum or ABR plus
2.00% per annum, with such spreads to remain in
effect throughout the term of the Facilities.
Tranche C Facility
Adjusted LIBOR plus 3.50% per annum or ABR plus
2.50% per annum, with such spreads to remain in
effect throughout the term of the Facilities.
All Facilities
The Borrower may elect interest periods of 1,
2, 3 or 6 months for Adjusted LIBOR borrowings.
Calculation of interest shall be on the basis
of actual number of days elapsed in a year of
360 days (or 365 or 366 days, as the case may
be, in the case of ABR loans based on the Prime
Rate) and interest shall be payable at the end
of each interest period and, in any event, at
least every 3 months.
ABR is the Alternate Base Rate, which is the
highest of CIBC Prime Rate, the Federal Funds
Effective Rate plus 1/2 of 1% and the Base CD
Rate plus 1%.
Adjusted LIBOR and the Base CD Rate will at all
times include statutory reserves (and, in the
case of the Base CD Rate, FDIC assessment
rates).
LETTER OF CREDIT FEE: A per annum fee equal to the spread over
Adjusted LIBOR for Revolving Loans from time to
time in effect will accrue on the aggregate
face amount of outstanding letters of credit
under the Revolving Facility, payable in
arrears at the end of each quarter and upon the
termination of the Revolving Facility, in each
case for the actual number of days elapsed over
a 360-day year. Such fees shall be distributed
to the Lenders participating in the Revolving
Facility pro rata in accordance with the amount
of each such Lender's Revolving Facility
commitment. In addition, the Borrower shall pay
to the Fronting Bank, for its own account, (a)
a per annum fee to be agreed upon on the
aggregate face amount of outstanding letters of
credit, payable in arrears at the end of each
quarter and upon the termination of the
Revolving Facility, in each
I-1
<PAGE> 17
case for the actual number of days elapsed over
a 360-day year, and (b) the Fronting Bank's
customary issuing fees and expenses.
COMMITMENT FEES: 1/2 of 1% per annum on the undrawn portion of
the commitments in respect of the Facilities,
commencing to accrue, with respect to the
commitments of CIBC, ML and each other Lender,
on the date such commitment is accepted and
payable on the Closing Date (or the earlier
termination of such commitment (in which case
such fees shall be payable by Holdings in
accordance with the Fee Letter)) and quarterly
in arrears after the Closing Date.
I-2
<PAGE> 18
ANNEX II
SOURCES AND USES OF FUNDS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
USE OF FUNDS SOURCES OF FUNDS
- ------------------------------------- -------------------------------------
<S> <C> <C> <C>
Purchase of Old Common Stock and
related payments................... $506.1 Equity Contributions................. $200.0
Refinancing of Existing
Indebtedness....................... 287.0 Senior Term Debt..................... 425.0
Transaction Expenses................. 41.0 Revolving Facility(1)................ 34.1
------
Working Capital...................... 75.0 Subordinated Notes................... 250.0
------ ------
Total Uses........................... $909.1 Total Sources........................ $909.1
====== ======
</TABLE>
- -------------------------
(1) Represents the portion of the $220,000,000 Revolving Facility that would
have been drawn on the Closing Date if the Closing Date had occurred on June
30, 1996. The actual amount of the Credit Facility to be drawn on the
Closing Date will depend on where in the Borrower's and Motor Wheels'
working capital cycle the Closing Date occurs, but will not exceed
$100,000,000.
II-1
<PAGE> 1
EXHIBIT 12.1
HAYES WHEELS INTERNATIONAL, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
JAN. 31, JAN. 31, JAN. 31, JAN. 31, JAN. 31, JAN. 31,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- ---------
(MILLIONS OF DOLLARS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings before taxes on income and
minority interest....................... $ (2.5) $ 7.8 $ 42.2 $ 49.9 $ 46.2 $ (27.4)
Interest expense:
Bank borrowings and long-term debt......... 33.7 33.8 13.6 13.4 15.0 71.3
Rentals (1)................................ 0.5 0.5 1.0 2.0 2.6 3.5
-------- -------- -------- -------- -------- ---------
34.2 34.3 14.6 15.4 17.6 74.8
Earnings before interest expense, taxes on
income and minority interest............... $ 31.7 $ 42.1 $ 56.8 $ 65.3 $ 63.8 $ 47.4
====== ====== ====== ====== ====== ========
Fixed charges:
Bank borrowings and long-term debt......... 33.7 33.8 13.6 13.4 15.0 71.3
Rentals (1)................................ 0.5 0.5 1.0 2.0 2.6 3.5
-------- -------- -------- -------- -------- ---------
Total fixed charges..................... $ 34.2 $ 34.3 $ 14.6 $ 15.4 $ 17.6 $ 74.8
====== ====== ====== ====== ====== ========
Ratio of earnings to fixed charges........... 0.93 1.23 3.89 4.24 3.63 0.63
====== ====== ====== ====== ====== ========
Coverage deficiency on fixed charges......... $ 2.5 N/A N/A N/A N/A $ 27.4
====== ====== ====== ====== ====== ========
</TABLE>
- -------------------------
(1) Estimated interest component of rent expense
<PAGE> 2
MWC HOLDINGS, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(MILLIONS OF DOLLARS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Earnings:
Earnings before taxes on income and minority
interest....................................... $ (1.7) $ 3.4 $ (1.4) $(36.9) $(48.0)
Interest expense:
Bank borrowings and long-term debt................ 18.8 17.2 17.0 17.3 18.0
Capitalized interest.............................. (0.2) (0.2) (0.5) (0.1) (0.1)
Preferred dividends of subsidiary................. 2.0 1.9 1.9 1.9 1.6
Rentals (1)....................................... 2.0 1.8 1.6 1.6 1.3
----- ----- ----- ------ ------
22.6 20.7 20.0 20.7 20.8
Earnings before interest expense, taxes on income
and minority interest............................. $ 20.9 $ 24.1 $ 18.6 $(16.2) $(27.2)
===== ===== ===== ====== ======
Fixed charges:
Bank borrowings and long-term debt................ 18.8 17.2 17.0 17.3 18.0
Preferred dividends of subsidiary................. 2.0 1.9 1.9 1.9 1.6
Preferred dividends tax gross-up.................. 0.7 0.6 0.6 0.6 0.5
Rentals (1)....................................... 2.0 1.8 1.6 1.6 1.3
----- ----- ----- ------ ------
Total fixed charges............................ $ 23.5 $ 21.5 $ 21.1 $ 21.4 $ 21.4
===== ===== ===== ====== ======
Ratio of earnings to fixed charges.................. 0.89 1.12 0.88 (0.76) (1.27)
===== ===== ===== ====== ======
Coverage deficiency on fixed charges................ $ 1.7 N/A $ 1.4 $ 36.9 $ 48.0
===== ===== ===== ====== ======
</TABLE>
- -------------------------
(1) Estimated interest component of rent expense
<PAGE> 3
MWC HOLDINGS, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
MAR. 31, MAR. 31,
1995 1996
-------- --------
(MILLIONS OF DOLLARS
EXCEPT RATIOS)
<S> <C> <C>
Earnings:
Earnings before taxes on income and minority interest.................. $2.7 $ (4.2)
Interest expense:
Bank borrowings and long-term debt..................................... 4.5 4.3
Capitalized interest................................................... 0 0
Preferred dividends of subsidiary...................................... 0.5 0
Rentals (1)............................................................ 0.4 0.3
---- ----
5.4 4.6
Earnings before interest expense, taxes on income and minority
interest............................................................... $8.1 $ 0.4
==== ====
Fixed charges:
Bank borrowings and long-term debt..................................... 4.5 4.3
Preferred dividends of subsidiary...................................... 0.5 0
Preferred dividends tax gross-up....................................... 0.2 0
Rentals (1)............................................................ 0.4 0.3
---- ----
Total fixed charges................................................. $5.6 $ 4.6
==== ====
Ratio of earnings to fixed charges....................................... 1.45 0.09
==== ====
Coverage deficiency on fixed charges..................................... N/A $ 4.2
==== ====
</TABLE>
- -------------------------
(1) Estimated interest component of rent expense
<PAGE> 1
EXHIBIT 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Hayes Wheels International, Inc.:
We consent to the use of our report dated February 23, 1996 except as to
Note 17, which is as of March 28, 1996, related to the consolidated balance
sheets of Hayes Wheels International, Inc. and subsidiaries as of January 1,
1996 and 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended January 31, 1996, incorporated herein by reference and to the
reference of our firm under the heading "Experts" in the Registration Statement
and Prospectus. Our report refers to a change from the LIFO method of valuing
inventory to the FIFO method and the adoption of the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112,
"Employer's Accounting for Postemployment Benefits."
/s/ KPMG Peat Marwick LLP
Detroit, Michigan
May 31, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP
We consent to the reference to our firm under the captions "Experts" and
"Summary -- MWC Holdings, Inc. Selected Historical Consolidated Financial
Information" and to the use of our report dated February 23, 1996, except for
Note O, as to which the date is March 28, 1996, with respect to the financial
statements of MWC Holdings, Inc. included in the Registration Statement (Form
S-4) and the related Prospectus of Hayes Wheels International, Inc. for the
registration of 11,611,300 shares of common stock of Hayes Wheels International,
Inc. and 1,150,000 warrants to purchase shares of common stock.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
May 31, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF HOULIHAN LOKEY HOWARD & ZUKIN, INC.
We hereby consent to the reference to our firm under the caption
"Summary--The Merger and The Merger Agreement -- Conditions to the
Merger" and "Risk Factors -- Fraudulent Transfer Considerations" in the
Registration Statement on Form S-4 of Hayes Wheels International, Inc. (the
"Registrant") to be filed on May 31, 1996 in connection with the merger of MWC
Holdings, Inc. with and into the Registrant.
HOULIHAN LOKEY HOWARD & ZUKIN, INC.
By: /s/ Leland J. Lewis
Title: Director
New York, New York
May 30, 1996
<PAGE> 1
EXHIBIT 99.1
HAYES WHEELS INTERNATIONAL, INC.
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS ON TUESDAY, JULY 2, 1996
The undersigned holder of shares of Common Stock of Hayes Wheels International,
Inc. hereby appoints Daniel M. Sandberg and Barry J. Miller, and each of them,
with full power of substitution, as proxies to vote all shares owned by the
undersigned at the Special Meeting of Stockholders to be held at The Fairlane
Club, 5000 Fairlane Woods Drive, Dearborn, Michigan on Tuesday, July 2, 1996 at
10:00 a.m., local time, and any adjournment or postponement thereof. A majority
of said proxies, or any substitute or substitutes, who shall be present and act
at the meeting (or if only one shall be present and act, then that one) shall
have all the powers of said proxies hereunder.
Please mark, date and sign the proxy and return it promptly in the accompanying
business reply envelope, which requires no postage if mailed in the United
States. If you plan to attend the meeting, please so indicate in the space
provided on the reverse side.
This Proxy, if signed and returned, will be voted as specified on the reverse
side. If no specification is made, your shares will be voted FOR approval and
adoption of the Agreement and Plan of Merger and the transactions
contemplated thereby.
IMPORTANT: PLEASE MARK AND SIGN ON THE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER.
(SEE REVERSE SIDE)
<TABLE>
<S><C>
Please mark
/X/ your vote as in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
FOR AGAINST ABSTAIN MARK HERE IF YOU PLAN TO
ATTEND THE MEETING / /
1. To approve and adopt the Agreement and Plan of Merger,
dated as of March 28, 1996, between MWC Holdings, Inc. and / / / / / /
Hayes Wheels International, Inc., and the transactions con-
templated thereby. The undersigned acknowledges receipt
of the Notice of Special Meeting of
Stockholders to be held on Tuesday,
2. In their discretion upon such other matters as may July 2, 1996 and the related Joint
properly come before the meeting. Proxy Statement/Prospectus.
Please sign exactly as name(s)
appear hereon. Joint owners should
each sign. Executors, administrators,
trustees, etc., should give full
title as such. If signer is a
______ corporation, please sign full
| corporate name by duly authorized
| officer. PLEASE SIGN, DATE AND MAIL
THIS PROXY PROMPTLY whether or not
you expect to attend the meeting. You
may nevertheless vote in person if you
do attend.
SIGNATURE(S) _______________________________________________________________________________________ DATE _________________
</TABLE>
<PAGE> 1
EXHIBIT 99.2
MWC HOLDINGS, INC.
2501 WOODLAKE CIRCLE
OKEMOS, MICHIGAN 48864
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS ON TUESDAY, JULY 2, 1996
The undersigned holder of shares of Common Stock of MWC Holdings, Inc. hereby
appoints Paul S. Levy, Marcos A. Rodriguez and Richard W. Tuley, and each of
them, with full power of substitution, as proxies to vote all shares owned by
the undersigned at the Special Meeting of Stockholders to be held at the offices
of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, 43rd Floor, New York,
New York on Tuesday, July 2, 1996 at 10:00 a.m., local time, and any adjournment
or postponement thereof. A majority of said proxies, or any substitute or
substitutes, who shall be present and act at the meeting (or if only one shall
be present and act, then that one) shall have all the powers of said proxies
hereunder.
Please mark, date and sign the proxy and return it promptly in the accompanying
business reply envelope, which requires no postage if mailed in the United
States. If you plan to attend the meeting, please so indicate in the space
provided on the reverse side.
This Proxy, if signed and returned, will be voted as specified on the reverse
side. If no specification is made, your shares will be voted FOR approval and
adoption of the Agreement and Plan of Merger and the transactions contemplated
thereby.
IMPORTANT: PLEASE MARK AND SIGN ON THE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
AGREEMENT AND PLAN OF MERGER.
(SEE REVERSE SIDE)
<TABLE>
<S><C>
Please mark
your vote as /X/
in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
FOR AGAINST ABSTAIN
1. To approve and adopt the Agreement and Plan of Merger, / / / / / / MARK HERE IF YOU PLAN TO ATTEND
dated as of March 28, 1996, between MWC Holdings, Inc. THE MEETING / /
and Hayes Wheels International, Inc., and the transactions
contemplated thereby.
The undersigned acknowledges receipt
2. In their discretion upon such other matters as may of the Notice of Special Meeting of
properly come before the meeting. Stockholders to be held on Tuesday,
July 2, 1996 and the related Joint
Proxy Statement/Prospectus.
Please sign exactly as name(s) appear
hereon. Joint owners should each
sign. Executors, administrators,
trustees, etc., should give full title
as such. If signer is a corporation,
please sign full corporate name by
______ duly authorized officer. PLEASE SIGN,
| DATE AND MAIL THIS PROXY PROMPTLY
| whether or not you expect to attend
the meeting. You may nevertheless
vote in person if you do attend.
Signature(s) ____________________________________________________________________________________ Date______________________
</TABLE>
