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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 6, 1997
HAYES WHEELS INTERNATIONAL, INC.
<TABLE>
<S> <C> <C>
DELAWARE 1-11592 13-3384636
(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification Number)
of Incorporation)
38481 HURON RIVER DRIVE, ROMULUS, MICHIGAN 48174
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's Telephone number, including area code (313) 941-2000
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THIS REPORT CONTAINS 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. THESE FORWARD
LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE
GIVEN THAT ANY OF 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) COMPETITIVE
PRESSURE IN THE COMPANY'S INDUSTRY INCREASES SIGNIFICANTLY; (2) GENERAL ECONOMIC
CONDITIONS ARE LESS FAVORABLE THAN EXPECTED; (3) THE COMPANY'S DEPENDENCE ON THE
AUTOMOTIVE INDUSTRY (WHICH HAS HISTORICALLY BEEN CYCLICAL); (4) CHANGES IN THE
FINANCIAL MARKETS AFFECTING THE COMPANY'S FINANCIAL STRUCTURE AND THE COMPANY'S
COST OF CAPITAL AND BORROWED MONEY; (5) THE UNCERTAINTIES INHERENT IN
INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS; AND (6) DIFFICULTIES
WHICH MAY BE ENCOUNTERED IN THE INTEGRATION OF THE OPERATIONS OF HAYES AND
LEMMERZ. THE COMPANY HAS NO DUTY UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 TO UPDATE THE FORWARD LOOKING STATEMENTS IN THIS OFFERING MEMORANDUM
AND THE COMPANY DOES NOT INTEND TO PROVIDE SUCH UPDATES.
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ITEM 5. OTHER EVENTS.
Unless the context otherwise requires, "Hayes" refers to Hayes Wheels
International, Inc. and its subsidiaries, before the acquisition of Lemmerz
reported herein (the "Lemmerz Acquisition"), the term "Lemmerz" refers to
Lemmerz Holding GmbH and its subsidiaries, the term the "Company" refers to
Hayes and its subsidiaries (including Lemmerz) on a combined basis after the
Lemmerz Acquisition, the term "Transactions" refers to the Lemmerz Acquisition
and the financing therefor and the term "Motor Wheel Transactions" refers to the
series of related transactions pursuant to which Motor Wheel Corporation ("Motor
Wheel") became a subsidiary of Hayes. All references to fiscal years of Hayes in
this Report refer to years commencing on February 1 of such year and ending
January 31 of the following year.
Unless otherwise indicated, financial information in this Report with
respect to Lemmerz is expressed in dollars or in Deutsche Mark ("marks" or
"DM"). Amounts stated in dollars, unless otherwise indicated, have been
translated from marks in accordance with United States generally accepted
accounting principles consistently applied and should not be construed as
representations that the mark amounts actually represent such dollar amounts or
could have been converted into dollars at the rate indicated. Assets and
liabilities denominated in marks are translated at the rate of exchange in
effect on the balance sheet date and income and expenses are translated at the
average rates of exchange prevailing during the year.
THE LEMMERZ ACQUISITION
On June 6, 1997, Hayes, Cromodora, S.p.A., Lemmerz and the shareholders of
Lemmerz entered into a definitive acquisition agreement (the "Acquisition
Agreement"), pursuant to which Hayes will purchase the capital stock of Lemmerz
for (i) $200 million in cash and (ii) convertible preferred stock of Hayes,
which following stockholder approval, will automatically convert into 5 million
shares of Hayes common stock (the "Common Stock"). The cash portion of the
consideration, the refinancing of existing Lemmerz debt and the fees and
expenses of the Lemmerz Acquisition will be financed with new senior bank debt
and the proceeds from the offering of $200 million of senior subordinated notes
of Hayes due 2007 (the "Notes"). Upon completion of the Lemmerz Acquisition,
existing Lemmerz shareholders will own approximately 18.3% of the Common Stock,
after giving effect to the conversion of their preferred stock.
In connection with the Acquisition Agreement, Hayes entered into consulting
agreements (the "Consulting Agreements") with Horst Kukwa-Lemmerz, a shareholder
and managing director of Lemmerz, and an affiliate of Mr. Kukwa-Lemmerz pursuant
to which, among other things, upon consummation of the Lemmerz Acquisition (i)
Mr. Kukwa-Lemmerz will retire from all positions held with Lemmerz and its
subsidiaries, (ii) Hayes will pay an aggregate of $500,000 annually during the
five-year period for which certain consulting services are provided and (iii)
Hayes will grant Mr. Kukwa-Lemmerz options to purchase 250,000 shares of Common
Stock at an exercise price of $16 per share, such options to become exercisable
at the rate of 20% annually on each of the first through fifth anniversaries of
the consummation of the Lemmerz Acquisition.
A copy of the Acquisition Agreement and each Consulting Agreement is filed
as an exhibit hereto. The foregoing descriptions are qualified in their entirety
by reference to such exhibits.
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The estimated sources and uses of funds in connection with the Lemmerz
Acquisition are presented in the following table, assuming the Lemmerz
Acquisition occurred as of January 31, 1997 (dollars in millions):
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Term Loan Facility (a).............................................................. $100.0
Notes............................................................................... 200.0
Issuance of Hayes convertible preferred stock (b)................................... 107.5
------
Total Sources of Funds............................................................ $407.5
======
USES OF FUNDS:
Cash consideration for Lemmerz Acquisition.......................................... $200.0
Equity consideration for Lemmerz Acquisition (b).................................... 107.5
Repayment of existing Hayes obligations............................................. 17.6
Repayment of existing Lemmerz obligations (c)....................................... 62.4
Fees and expenses................................................................... 20.0
------
Total Uses of Funds............................................................... $407.5
======
</TABLE>
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(a) Represents the U.S. dollar equivalent of DM-denominated borrowings.
(b) Assumes conversion of the preferred stock into 5 million shares of the
Common Stock at a price based upon the 30-day average closing bid price on
The NASDAQ Stock Market of the Common Stock of $21.50.
(c) Assumes Lemmerz mortgage loans of $21.7 million remain outstanding.
Hayes is currently seeking consents from the holders of outstanding senior
subordinated notes of Hayes (the "Existing Notes") to certain language
clarifications and changes to certain of the covenants contained in the
indenture governing the Existing Notes (the "Existing Notes Indenture"). Hayes
believes that while the proposed amendments to the Existing Notes Indenture are
not necessary to consummate the Lemmerz Acquisition, such amendments, if
approved, will clarify and amend certain provisions and allow the Company to
maintain its existing financial flexibility.
THE COMPANY
Hayes is a world leader in the design, manufacture and supply of wheels and
brake components to original equipment manufacturers ("OEMs") of passenger cars,
light trucks and commercial highway vehicles. Lemmerz is the leading full-line
designer and manufacturer of wheels for passenger cars, light trucks and
commercial highway vehicles in Europe. Lemmerz also produces a variety of
non-wheel cast aluminum products for the automotive, heating equipment and
construction industries. The combination of Hayes and Lemmerz will create the
world's largest manufacturer of automotive wheels, producing approximately 30%
and 23% of the automotive wheels in North America and Europe, respectively, and
will result in an entity that will be the largest global supplier of wheels to
OEMs of passenger cars, light trucks and commercial highway vehicles.
As automotive suppliers continue to consolidate worldwide, the merger of
Hayes and Lemmerz is expected to strengthen and expand the Company's leadership
position in meeting the global sourcing, quality and engineering requirements of
its customers. The Lemmerz Acquisition is expected to create significant revenue
growth opportunities for the Company, resulting from the following: (i) the
combination of Hayes' strengths in steel and aluminum wheel manufacturing in
North America and Europe with Lemmerz's steel and cast aluminum wheel
manufacturing expertise in Europe; (ii) the complementary nature of Hayes' and
Lemmerz's respective customer bases; (iii) the combination of Hayes' commercial
highway vehicle business in North America with Lemmerz's in Europe; and (iv) the
expansion of the Company's full product line resulting from the ability to share
innovative products and processes across passenger cars, light trucks and
commercial highway vehicles worldwide.
In addition to revenue enhancement opportunities expected to result from
the Lemmerz Acquisition, management believes that the combination of Hayes and
Lemmerz will result in annual cost savings of at least
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$21 million, primarily as a result of capacity optimization, raw material
purchasing savings and overhead savings. These anticipated Lemmerz
Acquisition-related cost savings are in addition to savings related to the
rationalization efforts identified as part of the Motor Wheel Transactions. The
savings anticipated to be realized from the Motor Wheel Transactions, including
those initially targeted and subsequently identified, total $42 million and
comprise the following: (i) $11 million related to a reduction in selling,
general and engineering costs; (ii) $10 million related to rationalization
efforts at Hayes' brake facilities; and (iii) $21 million related to
rationalization efforts at Hayes' steel wheel facilities, which includes $12
million of savings related to the closure of Hayes' Romulus, Michigan facility.
Hayes announced the closure of the Romulus facility in January 1997 and expects
that the production from the facility will be shifted to Hayes' other existing
facilities by the end of 1997. Approximately $13 million of the aggregate $42
million of savings related to the Motor Wheel Transactions have been realized
through the end of the first quarter of fiscal 1997. Management expects the
remaining $29 million of savings related to the Motor Wheel Transactions to be
fully reflected in the Company's fiscal 1998 financial results, with the
additional $21 million of cost savings related to the Lemmerz Acquisition to be
fully reflected in the Company's fiscal 1999 financial results.
The Company's principal customers for wheel and brake products consist of
every major OEM in North America, Europe and Japan, including General Motors,
Ford, Chrysler (the three of which comprised approximately 57% of the Company's
pro forma combined 1996 revenues), BMW, Renault, Fiat, Volkswagen, Porsche,
Mercedes-Benz, Audi, Volvo, Toyota, Mazda, Nissan, Honda, Mitsubishi, Suzuki and
Isuzu. The Company will also have over 300 commercial highway vehicle customers
in North America and Europe, including Trailmobile, Dana/Mack, Mercedes-Benz,
Iveco, Strick, Great Dane Trailers, Freightliner, PACCAR, Volvo/GM, Renault and
Western Star.
A significant trend toward the use of lighter, more highly-styled wheels
for passenger cars and light trucks has increased the demand for and use of
aluminum wheels. North American automotive aluminum wheel penetration (in terms
of new vehicle installations) has increased from approximately 3% in 1980 to
approximately 44% in 1996, and management estimates such penetration will reach
approximately 55% by 2000 due primarily to new aluminum wheel product
innovations, including the Company's fabricated aluminum wheels and Full Face
Cast ("FFC(TM)") wheels. Automotive aluminum wheel penetration in Europe in 1996
was approximately 21% and continues to display a similar growth pattern as that
experienced in North America. The Company believes that its cast aluminum
manufacturing technology and innovative new aluminum wheels, where the Company
is the only significant manufacturer, will enable it to capitalize on these
trends and increase its sales of aluminum wheels in North America and in Europe.
OEMs have pursued outsourcing opportunities in which automobile component
manufacturing requirements (including wheel and brake products) are met by
independent suppliers. Outsourcing has increased in response to competitive
pressures on OEMs to improve quality and technology and reduce capital outlays,
production costs, overhead and inventory levels. The Company believes that it is
well-positioned to benefit from any future outsourcing opportunities. In
addition to increasing the percentage of parts that are outsourced, OEMs are
increasingly transferring the primary responsibility for design, engineering and
testing of components to suppliers with proven capabilities in these areas. The
Company believes that its early involvement in the design and engineering of new
wheel and brake products as a Tier I supplier has afforded it a competitive
advantage in securing new business and will continue to do so in the future. The
Company expects to be able to offer new and innovative products to its
newly-broadened customer base subsequent to the Lemmerz Acquisition.
Hayes and Lemmerz have each developed a number of new products and
proprietary manufacturing processes which have provided them with a competitive
advantage and served to further expand their respective product lines. For
example, Hayes is a major producer of fabricated aluminum wheels, which are 20%
lighter than cast aluminum wheels. Hayes has also recently introduced FFC(TM)
wheels, which are lightweight, highly-styled wheels that combine a cast aluminum
face with a fabricated aluminum rim. Lemmerz is responsible for several steel
wheel product and process innovations, including the development and
introduction of a lightweight steel wheel, which is 10% to 15% lighter than a
traditional steel wheel. The Company intends to continue its efforts to develop
innovative wheel and brake products and manufacturing
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processes to better serve customers globally and improve the Company's product
mix with higher margin wheel and brake products.
Sales of automotive wheel and brake products comprise approximately 76% of
the Company's pro forma combined net sales (69% wheels and 7% brake components),
with the remaining 24% comprised of commercial highway wheel and brake products
(18%) and non-wheel aluminum castings (6%). The following table sets forth the
Company's estimated pro forma combined market position for its primary products
in North America and Europe in 1996:
<TABLE>
<CAPTION>
MARKET
POSITION
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<S> <C>
NORTH AMERICA
Automotive Steel Wheels -- Including Production by OEMs.............. #1
Automotive Cast Aluminum Wheels...................................... #2
Automotive Fabricated Aluminum Wheels................................ #1
Automotive Brake Rotors and Drums -- Excluding Production by OEMs.... #2
Automotive Brake Rotors and Drums -- Including Production by OEMs.... #3
Commercial Highway Wheels............................................ #2
Commercial Highway Brake Hubs and Drums.............................. #1
EUROPE
Automotive Steel Wheels -- Including Production by OEMs.............. #2
Automotive Cast Aluminum Wheels...................................... #1
Commercial Highway Wheels............................................ #2
</TABLE>
In October 1996, Hayes increased its ownership in Hayes Wheels Autokola NH,
a.s. ("Autokola"), a strategic low-cost manufacturing joint venture in the Czech
Republic, from 45% to 58%. The Company believes that its Autokola facility will
increase the Company's flexibility and improve its economies in serving its
combined European steel wheel customer base. Hayes maintains additional
strategic manufacturing joint ventures in Mexico, Brazil, Venezuela and the
United States, as well as a technical relationship in Thailand and a sales and
engineering office in Japan. Lemmerz has strategic joint venture interests in
Thailand, India, Brazil, Canada, Turkey and Portugal, as well as a technical
relationship in South Africa. The Company believes that its expanded worldwide
manufacturing and strategic joint venture presence will enhance its ability to
meet the global souring needs of its customers.
BUSINESS STRATEGY
The Company believes that it is well-positioned to realize growth in sales
and EBITDA (as defined herein) following the Lemmerz Acquisition, despite the
potential for cyclical declines in automotive and commercial highway vehicle
production. The Company will continue to build upon its position as a leading
full-line supplier of wheels and brake components to the global transportation
industry, and expects to enhance this position by combining the European
operations of Hayes and Lemmerz. In addition to creating significant anticipated
cost savings and other efficiencies, the Lemmerz Acquisition is expected to
provide the Company with the opportunity to materially extend its automotive and
commercial highway wheel and brake product offerings in Europe. The Company
expects to maintain its leadership position by continuing to offer innovative
new products to increase sales and enhance operating results. The Company
expects to continue its growth and enhance its market leadership by continuing
to implement a strategy based on the following elements:
- MAINTAINING AND ENHANCING STRONG RELATIONSHIPS WITH OEMS. The Company has
developed and intends to continue to build upon strong relationships with
its OEM customers to enable it to identify business opportunities in the
early stages of vehicle design. The Company has established a leadership
position as an OEM supplier of automotive and commercial highway wheels
and brakes by maintaining an excellent reputation for quality, service and
innovation. As a result of its strong relationships with OEMs, the Company
has secured contracts to be the wheel and brake supplier for anticipated
high volume vehicle model platforms in upcoming years. The Company's
enhanced global presence
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following the Lemmerz Acquisition should strengthen its ability to offer
worldwide souring options to its customers.
- CONTINUING FOCUS ON NEW PRODUCT INNOVATION. The Company believes that
both Hayes and Lemmerz have established reputations for developing product
and manufacturing process innovations. The Company intends to continue to
seek to develop such innovative products and proprietary processes that
are expected to enhance the Company's leadership position in the worldwide
automotive and commercial highway wheel and brake component markets,
increase the Company's portfolio of higher margin products and result in
the Company being awarded contracts for additional vehicle platforms.
- PURSUING NEW CONTRACTS. The Company has obtained significant firm orders
on a number of platforms from periods 1997 through 2000 for incremental
new business in North America and Europe, fueled by the introduction of
new, innovative wheel and brake products. Management believes that the
complementary nature of Hayes' and Lemmerz customer bases and product
lines strengthen the Company's ability to pursue new vehicle platform
contracts in the future.
- IMPLEMENTING RATIONALIZATION PROGRAMS. The implementation of facility
rationalization programs announced prior to the Motor Wheel Transactions,
including the closing of the Mendota, Illinois and Ypsilanti, Michigan
facilities and Motor Wheel's former headquarters in Okemos, Michigan, has
been substantially completed. The Company subsequently identified further
cost rationalization programs including the closing of its Romulus,
Michigan wheel plant. The savings related to the Motor Wheel Transactions,
including those initially targeted and subsequently identified, total $42
million, approximately $13 million of which have been realized through the
end of the first quarter of fiscal 1997. Management expects the remaining
$29 million of such savings to be fully reflected in the Company's fiscal
1998 financial results. In addition, management expects actions undertaken
in connection with the Lemmerz Acquisition to result in annual cost
savings of at least $21 million, and anticipates such savings to be fully
reflected in the Company's fiscal 1999 financial results. The Company will
continue to optimize the use of its manufacturing capacity and seek
further cost savings.
- CAPITALIZING ON COMPLEMENTARY NATURE OF BUSINESSES. The Lemmerz
Acquisition provides opportunities to expand sales and increase market
penetration due to the complementary nature of Hayes' and Lemmerz
businesses. The Company intends to improve its future performance by: (i)
utilizing Lemmerz complementary customer relationships to increase the
sales of Hayes' innovative fabricated aluminum and FFC(TM) wheels in
Europe; (ii) utilizing Lemmerz in-depth knowledge in the design and
manufacture of steel wheels to meet the demanding requirements for wheel
performance in Europe; (iii) drawing on Lemmerz expertise in the design
and manufacture of lightweight steel wheels to achieve weight reductions
of 10% to 15% over standard steel wheels; (iv) drawing on Hayes' expertise
in the design and manufacture of lightweight aluminum wheels to bring
greater efficiencies to Lemmerz aluminum wheel operations; (v)
capitalizing on Lemmerz leadership position in the design and manufacture
of wheels for commercial highway vehicles in the European market to
increase the Company's sales of such products in both Europe and North
America; (vi) attaining additional automotive wheel and brake component
sales to OEMs worldwide by building on the Company's existing
relationships and enhanced global position; and (vi) reducing costs of
materials through further economies of scale.
- BENEFITTING FROM CONTINUED INDUSTRY CONSOLIDATION. The worldwide wheel
manufacturing industry is fragmented, particularly in Europe where
independent producers dominate. The Company believes that as OEM
outsourcing continues, there will be opportunities for further
consolidation of this industry. Management believes that, through its
established presence in these markets which will significantly improve as
a result of the Lemmerz Acquisition, it is in a favorable position to take
advantage of future industry consolidation. The Company intends to examine
future industry consolidation opportunities in North America, Europe,
South America and Asia, that would further expand its product offerings or
geographical reach and to pursue opportunities that are compatible with
its business strategy.
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RECENT DEVELOPMENTS
HAYES
On May 21, 1997, Hayes reported its financial results for the fiscal
quarter ended April 30, 1997. Hayes' sales and earnings from operations during
this period increased significantly as compared to the same period in 1996,
primarily as a result of operating improvements and the inclusion of the
financial results from Motor Wheel, which was acquired by Hayes in July 1996.
Hayes' pro forma financial results, assuming the Motor Wheel Transactions
occurred at the beginning of the 1996 fiscal year, also reflected increased
sales and significantly improved EBITDA (as defined below).
Hayes' improved pro forma performance is attributable to several factors
including: (i) increased unit volume and sales (despite lower unit selling
prices due to pass-throughs of lower raw material prices); (ii) increased
productivity in its North American and European aluminum wheel businesses; and
(iii) lower selling, administrative and engineering expenses as a percentage of
net sales resulting from the Motor Wheel Transactions. The restructuring and
rationalization efforts related to the Motor Wheel Transactions continue on
schedule, and Hayes has announced additional rationalization efforts including
the closing of its Romulus, Michigan facility.
Hayes' actual financial results for the quarters ended April 30, 1996 and
April 30, 1997, together with Hayes' adjusted pro forma financial results for
the year ended January 31, 1997, the quarter ended April 30, 1996 and the twelve
months ended April 30, 1997 are set forth below.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL PRO FORMA
YEAR ENDED FOR THE QUARTER ENDED APRIL 30, TWELVE MONTHS
JANUARY ------------------------------- ENDED
31, PRO FORMA APRIL 30,
1997(A) 1996 1996(A) 1997 1997(A)
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(DOLLARS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $ 913.1 $ 156.2 $ 237.3 $ 250.2 $ 926.0
Gross profit(b).......................... 129.1 22.6 31.1 38.0 136.0
Earnings from operations(c).............. 81.5 13.5 15.3 25.2 91.4
Net income (loss)(d)..................... 1.7 6.1 (1.4) 3.8 6.9
SHARE DATA:
Earnings (loss) per share(d)............. $ 0.08 $ 0.17 $ (0.06) $ 0.17 $ 0.31
Average common shares (in thousands)..... 22,390 35,148 22,390 22,390 22,390
OTHER DATA:
Gross margin(b).......................... 14.1% 14.5% 13.1% 15.2% 14.7%
EBITDA(e)................................ $ 133.6 $ 22.3 $ 28.0 $ 40.0 $ 145.6
EBITDA margin(e)......................... 14.6% 14.3% 11.8% 16.0% 15.7%
</TABLE>
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(a) Includes the results of Motor Wheel for the period prior to its acquisition
by Hayes.
(b) Adjusted to exclude $11.9 million for one-time, non-cash charges incurred in
the second quarter of 1996.
(c) Adjusted to exclude $21.5 million for one-time, non-cash charges incurred in
the second quarter of 1996 and a $109.0 million one-time restructuring
charge for the Romulus plant closing incurred in the fourth quarter of 1996.
(d) Adjusted to exclude after tax amounts of $12.9 million for one-time,
non-cash charges incurred in the second quarter of 1996, $7.4 million for
extraordinary items incurred in the second quarter of 1996, and a $69.6
million one-time restructuring charge for the Romulus plant closing incurred
in the fourth quarter of 1996.
(e) "EBITDA" represents the sum of income before interest expense and income
taxes, plus depreciation and amortization, non-recurring charges, and
certain other non-cash income and expense items. 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.
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Hayes recently announced that all 15 of its worldwide manufacturing plants
have been QS 9000 and ISO 9001 registered, signifying the satisfaction of an
extensive set of standards with respect to quality systems in the design,
engineering and manufacture of wheels and brake components.
LEMMERZ
While Lemmerz has not historically announced or compiled quarterly
earnings, Hayes' and Lemmerz's management have prepared Lemmerz's unaudited
financial results for the quarter ended March 31, 1997, and have estimated
financial results for the quarter ended March 31, 1996, each on a U.S. GAAP
basis. Based on such unaudited and estimated amounts, Lemmerz's 1997 first
quarter U.S. dollar-denominated net sales decreased approximately 8% (as
compared to an approximate 3% DM-denominated increase) versus the same period in
1996, while 1997 first quarter EBITDA increased approximately 10% (as compared
to an approximate 24% DM-denominated increase) versus the same period in 1996.
In spite of the significant negative currency comparison caused by the
strengthening of the U.S. dollar versus the DM, Lemmerz's U.S.
dollar-denominated EBITDA for the latest twelve-month period ended March 31,
1997, reflects an approximate 2% improvement (as compared to an approximate 6%
DM-denominated improvement) versus 1996 year end results.
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SUMMARY HISTORICAL FINANCIAL INFORMATION
The following summary historical financial information is derived from the
consolidated historical financial statements of Hayes and Lemmerz and the
unaudited pro forma financial information is derived from the "Pro Forma
Combined Condensed Financial Data" of the Company included elsewhere in this
Report. The historical consolidated financial statements of Hayes for each year
in the three year period ended January 31, 1997 were audited by KPMG Peat
Marwick LLP. The historical consolidated financial statements of Lemmerz for
each year in the two year period ended December 31, 1996 were audited by KPMG
Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft. The financial information of Lemmerz for the
year ended December 31, 1994, is unaudited, but in the opinion of management,
reflects all adjustments necessary for a fair presentation of such information.
See "Recent Developments" for a discussion of first quarter financial results.
HAYES
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<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------------
PRO FORMA
1995 1996 1997 1997(A)
------ ------ -------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................ $537.6 $611.1 $ 778.2 $ 913.1
Cost of goods sold(b).................................... 441.4 513.4 675.2 795.9
Marketing, general and administration(c)................. 28.6 29.7 35.9 43.6
Engineering and product development(c)................... 5.1 4.7 7.2 8.1
Depreciation and amortization............................ 29.6 32.7 44.4 50.9
Other income, net........................................ (0.8) (1.5) (4.5) (5.3)
Interest expense, net(d)................................. 13.4 15.0 48.5 73.6
Net income (loss)........................................ 29.9 28.4 (72.9) (88.2)
OTHER DATA:
EBITDA(e)(f)............................................. $ 92.9 $ 97.5 $ 120.7 $ 133.6
Capital expenditures..................................... 39.9 43.4 71.4 73.3
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................................. $589.6 $633.9 $1,183.1 $1,183.1
Total debt............................................... 123.0 133.1 715.8 715.8
Stockholders' equity (deficit)........................... 216.4 245.4 (41.1) (41.1)
</TABLE>
LEMMERZ
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -------------------------------
1995 1996 1994 1995 1996
----- ----- ----------- ------ ------
(UNAUDITED)
1994
-----------
(UNAUDITED) (U.S. GAAP AND DOLLARS
(U.S. GAAP AND DM (g) IN MILLIONS)
IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... 639.0 671.2 691.4 $ 394.0 $468.1 $459.8
Cost of goods sold...................... 518.5 545.8 567.9 319.7 380.7 377.7
Marketing, general and administration... 89.6 82.6 75.5 55.2 57.6 50.2
Engineering and product development..... 11.4 12.8 12.6 7.0 8.9 8.4
Depreciation and amortization........... 45.6 44.3 44.0 28.1 30.9 29.3
Interest expense, net................... 17.5 11.2 8.0 10.8 7.8 5.3
Net income.............................. 22.7 23.8 13.8 14.0 16.6 9.2
OTHER DATA:
EBITDA(e)............................... 77.8 91.9 87.7 $ 47.9 $ 64.1 $ 58.3
Capital expenditures.................... 69.3 70.4 44.2 42.7 42.8 25.0
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................ 638.4 649.8 641.8 $ 412.2 $453.3 $412.8
Total debt.............................. 172.2 120.3 130.8 111.2 83.9 84.1
Shareholders' equity.................... 138.2 163.1 170.4 89.2 113.8 109.6
</TABLE>
(see footnotes on the following page)
10
<PAGE> 11
- -------------------------
(a) Represents full year results assuming the Motor Wheel Transactions occurred
on February 1, 1996.
(b) Pro forma data includes a $4.6 million adjustment as a result of the
acquisition of Motor Wheel related to the effects of purchase accounting
adjustments and adjustments to reflect adoption of Hayes' accounting
policies and pension and post-retirement benefit cost assumptions.
(c) Pro forma data includes a $0.4 million adjustment related to savings from
personnel reductions at Motor Wheel's Okemos, Michigan corporate
headquarters announced and implemented prior to the consummation of the
Motor Wheel Transactions and the effects of purchase accounting
adjustments.
(d) Pro forma data reflects the pro forma interest expense assuming the Motor
Wheel Transactions occurred on February 1, 1996.
(e) 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.
(f) Pro forma data includes a $3.1 million adjustment related to savings from
personnel reductions at Motor Wheel's Okemos, Michigan corporate
headquarters announced and implemented prior to the consummation of the
Motor Wheel Transactions and the effects of purchase accounting
adjustments.
(g) Statement of Operations and Other Data were translated using the average
DM/U.S. dollars exchange rate for the respective year (1.6218 for 1994;
1.4338 for 1995; 1.5037 for 1996). Balance Sheet Data were translated using
the ending DM/U.S. dollar exchange for the respective year (1.5488 for
1994; 1.4335 for 1995; 1.5548 for 1996).
11
<PAGE> 12
SUMMARY PRO FORMA FINANCIAL DATA
The following table sets forth certain unaudited pro forma financial data
for the Company for the year ended January 31, 1997 which are presented to
reflect the pro forma effect of (i) the Transactions and (ii) the Motor Wheel
Transactions. The unaudited pro forma statement of operations data give effect
to the Transactions and the Motor Wheel Transactions as if they had occurred on
February 1, 1996. The unaudited pro forma balance sheet data give effect to the
Transactions as if they had occurred on January 31, 1997. The 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 Motor Wheel Transactions been completed as
of February 1, 1996, or which may be obtained in the future. The unaudited pro
forma combined financial data (i) have been derived from and should be read in
conjunction with the "Pro Forma Combined Condensed Financial Data" and the notes
thereto included elsewhere in this Report and (ii) should be read in conjunction
with the separate historical consolidated financial statements of Hayes and
Lemmerz and the notes thereto. See "Recent Developments" for a discussion of
first quarter financial results.
<TABLE>
<CAPTION>
COMPANY PRO FORMA
YEAR ENDED
JANUARY 31, 1997(a)
--------------------
(dollars in
millions)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................................................. $1,372.9
Cost of goods sold......................................................... 1,158.7
Marketing, general and administration...................................... 98.5
Engineering and product development........................................ 16.5
Depreciation and amortization.............................................. 70.0
Interest expense, net...................................................... 98.7
Net loss................................................................... (69.5)
OTHER DATA:
EBITDA(b).................................................................. $ 191.9
Cash interest expense...................................................... 93.0
Capital expenditures....................................................... 98.3
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................................................... $1,801.3
Total debt................................................................. 1,019.9
Stockholders' equity(c).................................................... 53.9
</TABLE>
- -------------------------
(a) The pro forma financial data do not reflect (i) any cost savings related to
or synergies that are expected to result from the Lemmerz Acquisition, (ii)
future unrealized cost savings related to, or synergies that are expected to
result from the Motor Wheel Transactions or (iii) any cost savings related
to the closing of Hayes' Romulus facility. See "Recent Developments" for a
discussion of first quarter financial results.
(b) 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.
(c) Assumes issuance of the preferred stock for $107.5 million.
12
<PAGE> 13
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of the Company (a) on an
actual basis and (b) on a pro forma basis as adjusted to give effect to the
Transactions as if they had occurred on January 31, 1997. This table should be
read in conjunction with "Pro Forma Combined Condensed Financial Data" and the
notes thereto included elsewhere in this Report and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Hayes' and
Lemmerz's consolidated financial statements and the notes thereto.
<TABLE>
<CAPTION>
COMPANY
PRO FORMA
HAYES ACTUAL LEMMERZ ACTUAL AS ADJUSTED
JANUARY 31, DECEMBER 31, PRO FORMA JANUARY 31,
1997 1996 ADJUSTMENTS 1997
------------ -------------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Revolving Credit Facility(a)................. $ -- $ -- $ -- $ --
Term Loan A-1................................ 198.5 -- (17.6) 180.9
New Term Loan A-2 (DM equivalent)............ -- -- 100.0 100.0
Term Loan B.................................. 125.0 -- -- 125.0
Term Loan C.................................. 100.0 -- -- 100.0
Existing Notes............................... 251.5 -- -- 251.5
Notes........................................ -- -- 200.0 200.0
Other debt................................... 40.8 84.1 (62.4) 62.5
------------ ------- ----------- -----------
Total debt.............................. 715.8 84.1 220.0 1,019.9
Stockholders' equity (deficit)(b)............ (41.1) 109.6 (14.6) 53.9
------------ ------- ----------- -----------
Total capitalization.................... $674.7 $193.7 $ 205.4 $ 1,073.8
========= ============ ========= =========
</TABLE>
- -------------------------
(a) $270 million Revolving Credit Facility which the Company anticipates to be
undrawn at the closing of the Transactions.
(b) See Notes (b) and (e) to the unaudited pro forma balance sheet included in
the "Pro Forma Combined Condensed Financial Data."
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Lemmerz
The following discussion of Lemmerz's consolidated historical results of
operations and financial condition should be read in conjunction with the
consolidated financial statements of Lemmerz and the notes thereto included
elsewhere herein. The following discussion and analysis covers periods before
completion of the Transactions.
GENERAL
While Lemmerz has not historically announced or compiled quarterly
earnings, Hayes' and Lemmerz's management have prepared Lemmerz's unaudited
financial results for the quarter ended March 31, 1997, and have estimated
financial results for the quarter ended March 31, 1996, each on a U.S. GAAP
basis. Based on such unaudited and estimated amounts, Lemmerz's 1997 first
quarter U.S. dollar-denominated net sales decreased approximately 8% (as
compared to an approximate 3% DM-denominated increase) versus the same period in
1996, while 1997 first quarter EBITDA increased approximately 10% (as compared
to an approximate 24% DM-denominated increase) versus the same period in 1996.
In spite of the significant negative currency comparison caused by the
strengthening of the U.S. dollar versus the DM, Lemmerz's U.S.
dollar-denominated EBITDA for the latest twelve-month period ended March 31,
1997, reflects an approximate 2% improvement (as compared to an approximate 6%
DM-denominated improvement) versus 1996 year end results.
RESULTS OF OPERATIONS OF LEMMERZ
Fiscal 1996 Compared to Fiscal 1995
Lemmerz's net sales decreased 1.8% from $468.1 million to $459.8 million in
1996. The decrease was due to the disposal of the U.K.-based tractor wheel
business in early 1995 and the devaluation of the DM versus the U.S. dollar. The
decrease was partially offset by increases in the cast aluminum wheel business.
Lemmerz's gross profit for fiscal 1996 decreased to $82.1 million, or 17.9%
of net sales, compared with $87.4 million, or 18.7% of net sales, for the same
period in 1995. The decrease in gross margin percentage is attributable to
operating problems in the cast aluminum wheel business, partially offset by
improved profitability in the steel wheel business as a result of lower steel
prices and ongoing productivity improvement programs through automation.
Fiscal 1995 Compared to Fiscal 1994
Lemmerz's net sales increased 18.8%, from $394.0 million in 1994 to $468.1
million in 1995. The increase was due to the appreciation of the DM versus the
U.S. dollar, increased volumes in truck wheels and an increase in sales of
automotive steel wheels, primarily to Nissan and Opel, partially offset by the
disposal of the U.K.-based tractor wheel business in early 1995.
Lemmerz's gross profit for fiscal 1995 increased to $87.4 million, or 18.7%
of net sales, compared with $74.3 million, or 18.9% of net sales, for the same
period in 1994. The increase in gross profit was driven by higher sales. Gross
profit as a percentage of net sales decreased, primarily as a result of a 7%
increase in steel prices, not all of which was passed on to customers.
The Company
CAPITAL RESOURCES AND LIQUIDITY
Pro Forma Capital Resources and Liquidity for the Company
General. Following the consummation of the Lemmerz Acquisition, the
Company's liquidity needs will arise primarily from principal and interest
payments under the outstanding indebtedness, and from the funding
14
<PAGE> 15
of its capital expenditures. After completion of the Lemmerz Acquisition, the
Company expects to have outstanding approximately $1.0 billion of indebtedness,
consisting of $200 million principal amount of the Notes, $250 million principal
amount of the Existing Notes and $520.5 million in term loan borrowings under
the Amended Credit Agreement and other term loan agreements.
Debt Service. Principal and interest payments under the Amended Credit
Agreement and interest payments on the Notes and the Existing Notes will
represent significant liquidity requirements for the Company. It is expected
that with respect to the $499 million in Term Loan Facilities to be borrowed
under the Amended Credit Agreement, the Company will be required to make
scheduled principal payments of approximately $17 million in 1998, $40 million
in 1999, $57 million in 2000, $62 million in 2001 and an aggregate of $323
million thereafter. The Revolving Credit Facility will mature in July 2003. The
loans under the Amended Credit Agreement will bear interest at floating rates
based upon the interest rate option elected by the Company. In addition, the
Company will have scheduled principal payments under other term loans of
approximately $11 million per year for the year 1997 through 2000 and
approximately $12 million in the aggregate thereafter.
Capital Expenditures. Capital expenditures for 1997 will relate principally
to new vehicle platforms, cost reduction programs and maintenance. The Company
estimates that for 1997, capital expenditures will be approximately $114
million.
Future Financing Sources and Cash Flow. The amount under the Revolving
Credit Facility that will remain undrawn following the completion of the Lemmerz
Acquisition, currently estimated to be $270 million, will be available to meet
future working capital and other business needs of the Company. The Company
believes that cash generated from operations, together with amounts available
under the Revolving Credit Facility and any other available financing sources,
will be adequate to permit the Company to meet its debt service obligations,
capital expenditure program requirements, ongoing operating costs and working
capital needs, although no assurance can be given in this regard. The Company's
future operating performance and ability to service or refinance the Existing
Notes and the Notes and to repay, extend or refinance the Amended Credit
Agreement will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the Company's control.
15
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
(a) Financial Statement of Business to be Acquired:
Audited Financial Statements of Lemmerz Holding GmbH and Subsidiaries
Report of KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Consolidated Balance Sheets at December 31, 1996 and 1995
Consolidated Statements of Earnings for the Years Ended December 31,
1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity for the Years
Ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996 and 1995
Notes to Consolidated Financial Statements for the Years Ended December
31, 1996 and 1995
(b) Pro Forma Financial Information:
Pro Forma Combined Condensed Financial Data
Unaudited Pro Forma Combined Statement of Operations for the Year Ended
January 31, 1997
Notes to Unaudited Pro Forma Combined Statement of Operations
Unaudited Pro Forma Combined Balance Sheet at January 31, 1997
Notes to Unaudited Pro Forma Combined Balance Sheet
(c) Exhibits
<TABLE>
<S> <C>
(2) Purchase Agreement among Hayes Wheels International, Inc., Cromodora Wheels
S.p.A., Lemmerz Holding GmbH and the Shareholders of Lemmerz Holding GmbH
dated as of June 6, 1997
(10.1) Consulting Agreement dated as of June 6, 1997 between Hayes Wheels
International, Inc. and H.K.L., L.L.C.
(10.2) Consulting Agreement dated as of June 6, 1997 between Hayes Wheels
International, Inc. and Horst Kukwa-Lemmerz
(23) Consent of KPMG Deutsche Treuhand - Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
(99) Press Release of Hayes Wheels International, Inc. with respect to the Lemmerz
Acquisition dated June 6, 1997
</TABLE>
16
<PAGE> 17
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEMMERZ HOLDING GMBH AND SUBSIDIARIES:
AUDITED FINANCIAL STATEMENTS
Report of KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft
Wirtschaftsprufungsgesellschaft.................................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995............................ F-3
Consolidated Statements of Earnings for the Years Ended December 31, 1996 and 1995... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended
December 31, 1996 and 1995......................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996 and
1995............................................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended December 31, 1996 and
1995............................................................................... F-7
PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Financial Data.......................................... F-16
Unaudited Pro Forma Combined Statement of Operations for the Year Ended January 31,
1997............................................................................... F-17
Notes to Unaudited Pro Forma Combined Statement of Operations........................ F-18
Unaudited Pro Forma Combined Balance Sheet at January 31, 1997....................... F-21
Notes to Unaudited Pro Forma Combined Balance Sheet.................................. F-22
</TABLE>
F-1
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lemmerz Holding GmbH
We have audited the accompanying consolidated balance sheets of Lemmerz
Holding GmbH and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of earnings, changes in shareholders' equity, and cash
flows for each of the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. 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 financial position of Lemmerz
Holding GmbH and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years then ended in
conformity with United States generally accepted accounting principles.
KPMG Deutsche Treuhand - Gesellschaft
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
Cologne, Germany
May 21, 1997
F-2
<PAGE> 19
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 4,647 $ 19,581
Certificates of deposit................................... 7,721 5,146
Receivables (less allowances of $886 at December 31, 1996
and $1,554 at December 31, 1995)....................... 78,954 77,969
Inventories............................................... 54,659 61,214
Prepaid expenses and other................................ 8,579 9,667
-------- --------
Total current assets.............................. 154,560 173,577
Property, plant, and equipment, net......................... 154,704 170,175
Investments in affiliates................................... 45,486 35,953
Deferred income taxes....................................... 50,110 63,540
Other assets................................................ 7,960 10,012
-------- --------
Total assets...................................... $412,820 $453,257
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................................... $ 41,115 $ 40,478
Current portion of long-term debt......................... 17,975 9,858
Current portion of capital lease obligations.............. 1,333 1,312
Accounts payable and accrued liabilities.................. 95,992 126,195
-------- --------
Total current liabilities......................... 156,415 177,843
Long-term debt, less current portion........................ 25,000 33,588
Capital lease obligations, less current portion............. 3,982 5,510
Deferred income taxes....................................... 5,443 5,391
Pension and other long-term liabilities..................... 106,893 111,447
-------- --------
Total liabilities................................. 297,733 333,779
Minority interests.......................................... 5,496 5,673
Shareholders' equity:
Share capital............................................. 57,927 57,927
Retained earnings......................................... 43,576 38,234
Cumulative translation adjustment......................... 8,088 17,644
-------- --------
Total shareholders' equity........................ 109,591 113,805
-------- --------
Total liabilities and shareholders' equity........ $412,820 $453,257
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 20
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Net sales................................................... $ 459,841 $ 468,122
Cost of goods sold.......................................... 377,728 380,694
--------- ---------
Gross profit........................................... 82,113 87,428
Marketing, general, and administrative...................... 50,205 57,605
Engineering and product development......................... 8,466 8,852
Other income, net........................................... (5,528) (12,358)
--------- ---------
Earnings from operations............................... 28,970 33,329
Interest expense, net....................................... 5,269 7,810
--------- ---------
Earnings before income taxes, minority interests, and
equity in income (loss) of affiliates................. 23,701 25,519
Income tax provision........................................ 14,838 7,833
--------- ---------
Earnings before minority interests and equity in income
(loss) of affiliates.................................. 8,863 17,686
Equity in income (loss) of affiliates....................... 1,040 (635)
Minority interests.......................................... (702) (402)
--------- ---------
Net income............................................. $ 9,201 $ 16,649
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 21
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
CUMULATIVE
SHARE RETAINED TRANSLATION
CAPITAL EARNINGS ADJUSTMENT TOTAL
------- -------- ----------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1995.............................. $57,927 $21,585 $ 9,718 $ 89,230
Net income............................................ -- 16,649 -- 16,649
Foreign currency translation adjustment............... -- -- 7,926 7,926
------- ------- ------- --------
Balance, December 31, 1995............................ 57,927 38,234 17,644 113,805
Dividend distribution................................. -- (3,859) -- (3,859)
Net income............................................ -- 9,201 -- 9,201
Foreign currency translation adjustment............... -- -- (9,556) (9,556)
------- ------- ------- --------
Balance, December 31, 1996............................ $57,927 $43,576 $ 8,088 $109,591
======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 22
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 9,201 $ 16,649
Adjustments to reconcile net income to net cash provided
by operations:
Gain on sale of subsidiaries and assembly line......... (415) (10,792)
Depreciation of property, plant, and equipment......... 28,733 29,933
Depreciation of intangible assets...................... 528 926
Equity in (income) loss of affiliates.................. (1,040) 635
Change in deferred taxes............................... 9,411 5,789
Decrease in inventories................................ 7,340 4,761
Decrease (increase) in receivables and other assets.... 2,425 (1,489)
Increase (decrease) in accounts payable and accrued
liabilities........................................... (21,459) 2,502
--------- --------
Net cash provided by operating activities......... 34,724 48,914
--------- --------
Cash flows from investing activities:
Proceeds from sale of subsidiaries and assembly line...... 415 18,097
Proceeds from sale of property, plant, and equipment...... 2,270 4,710
Repayment of long-term loans and receivables.............. 1,013 882
Acquisition of property, plant, and equipment............. (24,967) (42,828)
Investment in affiliated enterprises...................... (12,186) (5,154)
Investment in certificates of deposit..................... (2,218) (5,145)
Other changes............................................. -- (5,686)
--------- --------
Cash used for investment activities............... (35,673) (35,124)
--------- --------
Cash flows from financing activities:
Payment of dividends...................................... (3,859) --
Repayment of long-term debt and capital lease
obligations............................................ (11,312) (13,836)
Proceeds from borrowings.................................. 10,971 12,882
Repayment of shareholder loan............................. (9,028) --
--------- --------
Cash used for financing activities................ (13,228) (954)
--------- --------
Translation adjustment for cash............................. (757) 505
--------- --------
Net increase (decrease) in cash and cash equivalents........ (14,934) 13,341
Cash and cash equivalents at beginning of year.............. 19,581 6,240
--------- --------
Cash and cash equivalents at end of year.................... $ 4,647 $ 19,581
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 23
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Lemmerz Holding GmbH and subsidiaries ("Lemmerz" or the "Company") is a
manufacturer and distributor of steel and aluminum wheels principally to
European automotive manufacturers for use on passenger cars, light trucks and
commercial highway vehicles.
Basis of Presentation
The Company's consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP"). All amounts herein are shown in thousands of United States dollars
("$").
Consolidation Methods
All material companies in which Lemmerz has legal or effective control are
fully consolidated. Minority interest represents minority shareholders'
proportionate share of the equity in certain of the Company's consolidated
subsidiaries. Significant investments in which Lemmerz has an ownership interest
in the range of 20 percent to 50 percent are accounted for using the equity
method of accounting. The effects of intercompany transactions have been
eliminated.
Foreign Currency Translation
For purposes of the accompanying consolidated financial statements, the
reporting currency of the Company is the United States dollar. In general, the
functional currency of each of the Company's subsidiaries is the local currency
of the country in which the subsidiary is located. The balance sheets of non-
U.S. dollar functional currency subsidiaries have been translated into U.S.
dollars using exchange rates as of the balance sheet dates while the statements
of income and cash flows have been translated using average exchange rates
during each period.
Financial Instruments
Unrealized gains and loses on interest rate swap and currency exchange
contracts purchased to hedge existing assets, liabilities or firm commitments
are deferred and recognized along with the effects of the underlying hedged
transaction. Unrealized gains and losses on other derivative financial
instruments are recognized in income at each balance sheet date.
Revenue Recognition
Revenue is recognized when title passes or services are rendered net of
discounts, customer bonuses, and rebates granted.
Research and Development
Research and development costs are expensed as incurred. Research and
development costs amount to $3,495 and $3,775 in 1996 and 1995, respectively.
Cash and cash equivalents
Cash and cash equivalents represents cash and highly liquid investments
with original maturities of three months or less.
F-7
<PAGE> 24
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(1) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Inventory Valuation
Inventory is valued at the lower of cost or market, cost being determined
on the basis of an average or first-in, first-out method. Manufacturing costs
comprise direct material and labor and applicable manufacturing overheads,
including depreciation charges.
Property, Plant, and Equipment
Property, plant, and equipment is valued at cost and depreciated using the
straight-line depreciation method over the assets' useful lives as follows:
buildings -- 20 to 33.5 years; leasehold improvements -- 15 to 25 years; factory
machinery and equipment -- 2.5 to 25 years. Expenditures for renewals or
betterments are capitalized. Expenditures for repairs and maintenance are
charged to operations as incurred.
Income Taxes
Deferred tax assets and liabilities are provided for the expected future
tax consequences of temporary differences between the carrying amount and tax
basis of the Company's assets and liabilities.
Major Customers and Concentration of Credit Risk
The Company's financial condition and results of operations depend on a
number of European automotive manufacturers. Mercedes-Benz and General Motors,
each representing individually more than 10 percent of the Company's
consolidated revenues, aggregated approximately 24.6 percent and 23.6 percent of
the Company's consolidated revenues during the years ended December 31, 1996 and
1995, respectively. At December 31, 1996 and 1995, 18.5 percent and 16.9
percent, respectively, of the Company's accounts receivable were outstanding
from such automotive manufacturers.
Use of estimates
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent amounts at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Raw materials and manufacturing supplies................... $17,558 18,102
Work in progress........................................... 18,084 19,662
Finished goods, parts, and goods purchased for resale...... 21,079 25,213
------- -------
56,721 62,977
Reserves................................................... (2,062) (1,763)
------- -------
$54,659 61,214
======= =======
</TABLE>
F-8
<PAGE> 25
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(3) PROPERTY, PLANT, AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Costs:
Land................................................. $ 14,038 $ 18,160
Buildings............................................ 88,609 91,957
Machinery and equipment.............................. 401,334 425,471
Leasehold improvements............................... 7,797 7,937
Construction in progress............................. 7,696 8,163
--------- ---------
519,474 551,688
Accumulated depreciation............................. (364,770) (381,513)
--------- ---------
$ 154,704 $ 170,175
========= =========
</TABLE>
The foregoing amounts include machinery and equipment capitalized under
capital lease agreements, as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Machinery and equipment................................ $ 7,797 $ 7,937
Accumulated depreciation............................... (1,063) (603)
--------- ---------
$ 6,734 $ 7,334
========= =========
</TABLE>
Depreciation expense, including depreciation on assets under capital lease
arrangements, charged in the statements of earnings was $28,733 in 1996 and
$29,333 in 1995.
(4) INVESTMENTS IN AFFILIATES
The Company's investments in affiliates for the year ended December 31,
1995, mainly consist of approximately a 49 percent interest in Continental
Lemmerz (Portugal), a 44 percent interest in Borlem S.A. (Brazil), a 25 percent
interest in Reynolds-Lemmerz (Canada) and a 25 percent interest in the Jantas
(Turkey). The investments in 1996 consist of each of the above companies and, in
addition, a 25 percent interest each in Kalyani Lemmerz Ltd. (India), and Siam
Lemmerz Co. Ltd. (Thailand).
Summarized financial information of the unconsolidated affiliates follows:
Balance sheet information:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Current assets......................................... $ 74,782 $ 53,572
Non-current assets..................................... 117,169 101,354
Current liabilities.................................... 77,634 40,999
Non-current liabilities................................ 18,858 27,461
Equity................................................. 95,448 86,466
</TABLE>
F-9
<PAGE> 26
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(4) INVESTMENTS IN AFFILIATES -- (CONTINUED)
Statement of income information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues................................................. $229,067 $209,462
Net income............................................... 7,492 3,590
</TABLE>
(5) INCOME TAXES
For the years ended December 31, 1996 and 1995, pre-tax income of $13,071
and $8,992, respectively, relate to the Company's operations in Germany while
the remainder was earned by operations outside Germany.
The provisions for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Currently payable:
Germany................................................ $ 3,326 $ 48
Non-German............................................. 2,101 1,996
------- ------
5,427 2,044
------- ------
Deferred taxes:
Germany................................................ 9,159 5,283
Non-German............................................. 252 506
------- ------
9,411 5,789
------- ------
$14,838 $7,833
======= ======
</TABLE>
German corporate tax law applies a split-rate imputation system with regard
to the taxation of the income of a corporation and its stockholders. In general,
retained corporate income is initially subject to a federal corporation tax of
45 percent plus a surcharge of 7.5 percent on the federal corporate tax rate.
After giving effect to the surcharge, the federal corporate tax rate increases
to 48.375 percent. Upon distribution of retained earnings to stockholders, the
corporate income tax rate on the distributed earnings is adjusted to 30 percent
by receiving a refund for taxes previously paid on income in excess of 30
percent. After giving effect to the surcharge, the distributed earnings
corporate tax rate increases to 32.25 percent. This refund is passed on to the
stockholders through a gross up of the dividend from the corporation.
F-10
<PAGE> 27
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(5) INCOME TAXES -- (CONTINUED)
A reconciliation of income taxes determined using the German federal
statutory rate of 48.375 percent is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
---- ----
<S> <C> <C>
Expected provisions for income taxes....................... $11,465 $12,347
Trade taxes, net of corporate benefit...................... 749 533
Foreign tax rate differential.............................. (354) (834)
Non-deductible expenses/(non-taxable income)............... 640 (573)
Write-down of investment for tax purposes.................. (4,607) (3,070)
Increase (decrease) in valuation allowance................. 9,011 (440)
Benefit from corporate tax audit........................... (1,226) --
Other...................................................... (840) (130)
------- -------
Actual provision for income taxes..................... $14,838 $ 7,833
======= =======
Effective rate........................................ 62.6% 30.7%
======= =======
</TABLE>
Deferred income tax assets and liabilities are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets relating to:
Fixed assets........................................... $ 19,073 $ 24,928
Inventory.............................................. 287 319
Pension liability...................................... 11,035 10,439
Tax loss carryforwards................................. 43,544 46,533
-------- --------
73,939 82,219
Valuation allowance.................................... (22,109) (17,635)
-------- --------
51,830 64,584
-------- --------
Deferred tax liabilities relating to:
Fixed assets........................................... 4,943 3,944
Pension liability...................................... 202 663
Other accruals......................................... 1,720 1,044
Inventory.............................................. 298 784
-------- --------
7,163 6,435
-------- --------
Deferred tax (liability) asset per balance
sheet.......................................... $ 44,667 $ 58,149
======== ========
</TABLE>
At December 31, 1996, the Company had net operating losses ("NOLs") and tax
credit carryforwards mainly in Germany and Belgium amounting to approximately
$97,391. The majority of the NOLs have an unlimited carryforward period.
At December 31, 1996, the Company had established deferred tax valuation
allowances, including allowances of $7,097 and $11,410 in Germany and Belgium,
respectively. The valuation allowances were established principally against the
Belgian and German companies' NOLs. The Belgian deferred tax valuation allowance
was deemed to be necessary by Company management since realization of the
Belgian NOL
F-11
<PAGE> 28
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(5) INCOME TAXES -- (CONTINUED)
depends primarily on the generation of taxable income in the entity which
generated the loss. Such entity has had a history of losses. The valuation
allowance of the German company was established in 1996 as a result of the
Company's determination that a risk as to the acceptability of a portion of the
loss existed.
(6) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
---- ----
<S> <C> <C>
Accounts payable trade...................................... $36,985 $ 40,530
------- --------
Other current liabilities................................... 38,679 66,690
------- --------
Accrued liabilities:
Employee benefits and social costs........................ 9,709 9,963
Provisions for taxes...................................... 5,313 2,551
Estimated future losses on open contracts................. 1,492 1,168
Severance programs........................................ 547 3,365
Other accruals............................................ 3,267 1,928
------- --------
20,328 18,975
------- --------
$95,992 $126,195
======= ========
</TABLE>
Other current liabilities include at December 31, 1995, an amount of $9,028
advanced from one of the Company's shareholders. The amount bore interest at
6.25 percent. During 1996, such amount was repaid.
(7) SHORT-TERM BORROWINGS
At December 31, 1996 and 1995, the Company had outstanding $41,115 and
$40,478, respectively, under short-term lines of credit. Under the terms of the
lines of credit, the Company may borrow up to $119,217. The lines of credit bear
interest at varying interest rates based upon published indices plus varying
margins.
At December 31, 1996 and 1995, certain of such borrowings were secured by a
mortgage conveyance and liens of approximately $4,563 and $4,482, respectively.
(8) LONG-TERM DEBT
At December 31, 1996 and 1995, the Company's long-term debt of $42,975 and
of $43,446 consisted principally of amounts borrowed from financial
institutions. Such borrowings mature between 1997 and 2013 and carry varying
fixed and variable interest rates. At December 31, 1996 and 1995, the average
interest rate on long-term debt was 6.6 percent, respectively. At December 31,
1996 and 1995, $17,975 and $9,858, respectively, of such long-term debt was due
within one year.
The Company's debt is secured by mortgage conveyance and liens of
approximately $41,239 in 1996 and $38,524 in 1995.
Aggregate maturities of the Company's debt during the next five years and
thereafter are as follows: 1997 -- $17,975; 1998 -- $4,613; 1999 -- $4,857;
2000 -- $3,862; 2001 -- $3,394 and thereafter -- $8,274.
At December 31, 1996, the Company had available to it noncancelable
long-term credit lines of $43,656 of which $21,934 was unused.
F-12
<PAGE> 29
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(8) LONG-TERM DEBT -- (CONTINUED)
At December 31, 1996 and 1995, the book value of the Company's debt
approximated fair value.
(9) RETIREMENT PLANS
The Company provides defined benefit pension benefits to certain of its
employees based upon years of service and final monthly salary. Consistent with
normal practice in the Federal Republic of Germany, the Company's pension
benefits are unfunded.
The funded status of the Company's principal retirement plans, in which
accumulated benefits exceed assets, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefits:
Vested.................................................... $ 74,488 $ 78,852
Nonvested................................................. 23,284 24,273
-------- --------
Accumulated benefit obligation............................ 97,772 103,125
Effect of projected future salary increase.................. 1,506 1,775
-------- --------
Projected benefit obligations.......................... 99,278 104,900
Unrecognized transition obligation.......................... (10,983) (13,614)
Unrecognized net gains...................................... 10,578 11,775
-------- --------
Pension liability...................................... $ 99,873 $103,061
======== ========
</TABLE>
The projected benefit obligation was calculated each period using assumed
discount rates and rates of increase in remuneration in 1996 and 1995 of 6.5
percent and 7.0 percent, respectively, and 3.0 percent and 3.0 percent,
respectively.
The net periodic pension cost for the major retirement plans comprised:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Service cost: present value of benefits earning during the
year...................................................... $ 876 $ 819
Interest cost on projected benefit obligation............... 7,150 6,818
Net amortization............................................ 1,228 1,534
-------- --------
Net periodic pension cost.............................. $ 9,254 $ 9,171
======== ========
</TABLE>
In addition to the foregoing principal retirement plans, certain of the
Company's subsidiaries provide retirement benefits to employees. The recorded
pension liability for such plans at December 31, 1996 and 1995, was $6,104 and
$6,080, respectively. Pension expense for such plans was not material.
F-13
<PAGE> 30
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(10) OTHER INCOME, NET
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1995
---- ----
<S> <C> <C>
License fees, royalties, other fees......................... $2,116 $ 2,420
Foreign currency gains...................................... 381 356
Gain from disposal Lemmerz United Kingdom................... -- 8,064
Gain from disposal of assembly line......................... 415 2,728
Government export subsidies................................. 64 158
Sales of fixed assets....................................... (118) 237
Early retirement and other social costs..................... (291) (178)
Severance payment/provision................................. 155 (3,290)
Commissions, earned......................................... 513 436
Other....................................................... 2,293 1,427
------ -------
$5,528 $12,358
====== =======
</TABLE>
During the year ended December 31, 1995, the Company sold to third parties
its subsidiary in the United Kingdom for cash proceeds of $15,369 and its
assembly line for the production of certain off-road wheels for cash proceeds of
$2,728.
(11) COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and machinery and equipment under
operating lease contracts. Total rentals under operating leases, charged as an
expense in the statements of earnings amounted to $838 and $2,056 in the years
ended December 31, 1996 and 1995, respectively. Future minimum lease payments
under operating leases that have initial or remaining terms in excess of one
year at December 31, 1996, are as follows: 1997: $641; 1998: $318.
Various legal actions, governmental investigations, proceedings and claims
are pending or may be instituted or asserted in the future against the Company,
including those arising out of alleged defects in the Company's products,
governmental regulations relating to safety, emissions and fuel economy,
intellectual property rights, product warranties, and environmental matters.
Litigation is subject to many uncertainties; the outcome of individual
litigated matters is not predictable with assurance; and it is reasonably
possibly that some of the foregoing matters could be decided unfavorably to the
Company. Although the amount of liability at December 31, 1996, with respect to
these matters cannot be ascertained, the Company believes that the resulting
liability, if any, should not materially affect the consolidated financial
position or results of operations of the Company.
(12) RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Company recorded
$3,164 and $4,370, respectively, of sales of scrap materials to a company for
which the chairman of the Company's supervisory board was the managing director.
(13) FINANCIAL INSTRUMENTS
The Company has only limited involvements with derivative financial
instruments and uses them only for hedging purposes. They are used to manage
interest rate and currency exchange risks.
F-14
<PAGE> 31
LEMMERZ HOLDING GMBH AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
(THOUSANDS OF UNITED STATES DOLLARS, UNLESS OTHERWISE INDICATED)
(13) FINANCIAL INSTRUMENTS -- (CONTINUED)
The Company was a party to $14,230 and $6,767 nominal value of interest
rate swaps with terms of up to four years at December 31, 1996 and 1995,
respectively. The agreements entitle the Company to receive from the
counterparties fixed interest payments and to make payments equal to three
months LIBOR plus varying basis points. Such agreements have been purchased as a
hedge of certain of the Company's long-term loans.
At December 31, 1996 and 1995, the Company had outstanding $22,431 and
$22,746 nominal value of forward currency exchange contracts. The contracts were
principally for the exchange of Deutsche Marks for Japanese Yen, British Pounds,
and Swiss Francs.
At December 31, 1996 and 1995, $10,944 and $12,876, respectively, of such
contracts were not accounted for as hedges of underlying transactions and
accordingly $655 and $(120), respectively, of unrealized gains or losses were
recognized. The balance of such contracts were purchased to hedge purchases,
assets and liabilities denominated in currencies other than Deutsche Marks. The
fair value of the derivative financial instruments accounted for using hedge
accounting was not material.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties (only major European banks) to its interest rate swap and
currency forward agreements. The Company anticipates, however, that each of the
counterparties will be able to fully satisfy their obligations under the
contracts.
(14) INFORMATION BY GEOGRAPHIC AREA
Geographic information with respect to the Group's sales, net income and
identifiable assets follows:
<TABLE>
<CAPTION>
1996 GERMANY SPAIN NETHERLANDS BELGIUM TURKEY OTHER ELIMINATIONS CONSOLIDATED
---- ------- ----- ----------- ------- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales (by operations):
To unaffiliated customers....... $197,094 $82,735 $74,478 $ 96,947 $ 6,541 $ 2,046 $ -- $459,841
Transfers between geographic
areas......................... 5,036 4,710 47 5,186 1,878 99 (16,956) --
-------- ------- ------- -------- ------- ------- --------- --------
Total sales............... $202,130 $87,445 $74,525 $102,133 $ 8,419 $ 2,145 $ (16,956) $459,841
======== ======= ======= ======== ======= ======= ========= ========
Net income (loss)................. $ (126) $ 4,142 $ 2,786 $ (8,166) $ 1,379 $ 659 $ 8,527 $ 9,201
======== ======= ======= ======== ======= ======= ========= ========
Identifiable assets............... $305,785 $60,729 $59,860 $ 63,171 $15,066 $22,082 $(113,873) $412,820
======== ======= ======= ======== ======= ======= ========= ========
1995
----
Sales (by operations):
To unaffiliated customers....... $229,614 $74,989 $72,041 $ 81,981 $ 3,447 $ 6,050 $ -- $468,122
Transfers between geographic
areas......................... 1,197 4,769 -- 5,313 2,916 970 (15,165) --
-------- ------- ------- -------- ------- ------- --------- --------
Total sales............... $230,811 $79,758 $72,041 $ 87,294 $ 6,363 $ 7,020 $ (15,165) $468,122
======== ======= ======= ======== ======= ======= ========= ========
Net income (loss)................. $ (1,251) $ 5,234 $ 2,168 $ (3,061) $ 597 $ 609 $ 12,353 $ 16,649
======== ======= ======= ======== ======= ======= ========= ========
Identifiable assets............... $364,554 $58,477 $62,198 $ 74,286 $16,430 $53,096 $(175,784) $453,257
======== ======= ======= ======== ======= ======= ========= ========
</TABLE>
Sales of products and services between geographic regions are generally
based upon third-party sales prices. For the years ended December 31, 1996 and
1995, $109,226 and $102,713, respectively, of the Company's sales were derived
from the export of products manufactured in Germany.
F-15
<PAGE> 32
PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The Unaudited Pro Forma Combined Statement of Operations of the Company for
the fiscal year ended January 31, 1997 (the "Pro Forma Statements of
Operations"), and the Unaudited Pro Forma Combined Balance Sheet of the Company
as of January 31, 1997 (the "Pro Forma Balance Sheet" and, together with the Pro
Forma Statements of Operations, the "Pro Forma Financial Statements"), have been
prepared to illustrate the estimated effect of the Transactions and the Motor
Wheel Transactions. The Pro Forma Financial Statements do not reflect any
anticipated cost savings from the Lemmerz Acquisition, or any synergies that are
anticipated to result from the Lemmerz Acquisition, and there can be no
assurance that any such cost savings or synergies will occur. The Pro Forma
Statements of Operations give pro forma effect to the Motor Wheel Transactions
and the Transactions as if they had occurred on February 1, 1996. The Pro Forma
Balance Sheet gives pro forma effect to the Transactions as if they had occurred
on January 31, 1997. 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 Hayes and
Lemmerz believe are reasonable. The Pro Forma Financial Statements should be
read in conjunction with the separate historical consolidated financial
statements of Hayes and Lemmerz and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
The Lemmerz Acquisition will be accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price (including the
market value of the Hayes securities issued to the Lemmerz shareholders) will be
allocated to the tangible and intangible assets and liabilities of Lemmerz based
upon their respective fair values as of the effective time of the Lemmerz
Acquisition 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 Hayes'
management's preliminary determination of purchase accounting adjustments and
are based upon available information and certain assumptions that Hayes believes
to be reasonable. Consequently, the amounts reflected in the Pro Forma Financial
Statements are subject to change, and the final amounts may differ
substantially.
F-16
<PAGE> 33
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(YEAR ENDED JANUARY 31, 1997)
<TABLE>
<CAPTION>
HAYES MOTOR WHEEL
YEAR ENDED FIVE MONTHS LEMMERZ
JANUARY ENDED PRO FORMA YEAR ENDED PRO FORMA
31, JUNE 30, MOTOR WHEEL COMBINED DECEMBER 31, LEMMERZ COMBINED
1997 1996 ADJUSTMENTS HAYES 1996 ADJUSTMENTS COMPANY (A)
---------- ----------- ----------- --------- ------------ ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $ 778.2 $ 134.9 $ -- $ 913.1 $459.8 $ -- $ 1,372.9
Cost of goods sold... 675.2 125.3 (4.6)(b) 795.9 377.7 (14.9)(c) 1,158.7
---------- ----------- ----------- --------- ------ ----------- -----------
Gross profit........ 103.0 9.6 4.6 117.2 82.1 14.9 214.2
Marketing, general
and
administration...... 35.9 6.4 1.3(b)(d) 43.6 50.2 4.7(c) 98.5
Engineering and
product development
costs............... 7.2 1.8 (0.9)(d) 8.1 8.4 -- 16.5
Equity in (earnings)
loss of
subsidiaries........ 2.5 1.9 -- 4.4 (1.0) -- 3.4
Other income, net.... (4.5) (0.8) -- (5.3) (5.5) -- (10.8)
Nonrecurring
charges............. 115.4 -- -- 115.4 -- -- 115.4
---------- ----------- ----------- --------- ------ ----------- -----------
Earnings (loss) from
operations........ (53.5) 0.3 4.2 (49.0) 30.0 10.2 (8.8)
Interest expense,
net................. 48.5 7.3 17.8(e) 73.6 5.3 19.8(f) 98.7
---------- ----------- ----------- --------- ------ ----------- -----------
Earnings (loss)
before taxes on
income, minority
interest and
extraordinary
items............. (102.0) (7.0) (13.6) (122.6) 24.7 (9.6) (107.5)
Income tax provision
(benefit)......... (36.7) 0.1 (5.3)(g) (41.9) 14.8 (19.1)(g) (46.2)
---------- ----------- ----------- --------- ------ ----------- -----------
Earnings (loss)
before minority
interest and
extraordinary
items............. (65.3) (7.1) (8.3) (80.7) 9.9 9.5 (61.3)
Minority interest.... 0.2 (0.1) -- 0.1 0.7 -- 0.8
---------- ----------- ----------- --------- ------ ----------- -----------
Earnings (loss)
before
extraordinary
items............. (65.5) (7.0) (8.3) (80.8) 9.2 9.5 (62.1)
Extraordinary items,
net of tax.......... 7.4 -- -- 7.4 -- -- 7.4
---------- ----------- ----------- --------- ------ ----------- -----------
Net income (loss)... $ (72.9) $ (7.0) $ (8.3) $ (88.2) $ 9.2 $ 9.5 $ (69.5) (h)
============ ============== ============== =========== ============== ============= ==============
OPERATING AND OTHER
DATA:
EBITDA*.............. $ 120.7 $ 9.8 $ 3.1 $ 133.6 $ 58.3 $ -- $ 191.9
Depreciation and
amortization........ 44.4 7.6 (1.1) 50.9 29.3 (10.2) 70.0
Capital
expenditures........ 71.4 1.9 -- 73.3 25.0 -- 98.3
Cash interest
expense, net........ 45.3 7.0 16.7 69.0 5.3 18.7 93.0
SELECTED RATIOS:
Ratio of earnings to
fixed charges (i)... --
PRO FORMA
RECONCILIATION OF
EBITDA:
Earnings (loss) from
operations.......... $ (53.5) $ 0.3 $ 4.2 $ (49.0) $ 30.0 $ 10.2 $ (8.8)
Add: Non-recurring
charges............. 115.4 -- -- 115.4 -- -- 115.4
Equity in (earnings)
loss of
subsidiaries...... 2.5 1.9 -- 4.4 (1.0) -- 3.4
One-time non-cash
charges, net...... 11.9 -- -- 11.9 -- -- 11.9
Depreciation and
amortization...... 44.4 7.6 (1.1) 50.9 29.3 (10.2) 70.0
---------- ----------- ----------- --------- ------ ----------- -----------
EBITDA*.............. $ 120.7 $ 9.8 $ 3.1 $ 133.6 $ 58.3 $ -- $ 191.9
============ ============== ============== =========== ============== ============= ==============
CASH FLOW PROVIDED BY
(USED FOR):
Operating
activities........ $ 71.2 $ 6.9 $ (8.6) $ 69.5 $ 34.7 $ (1.8) $ 102.4
Investing
activities........ (65.1) 1.5 -- (63.6) (35.7) -- (99.3)
Financing
activities........ 39.6 (2.4) -- 37.2 (13.2) -- 24.0
</TABLE>
- -------------------------
* 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
Hayes' 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.
F-17
<PAGE> 34
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997
(a) The Pro Forma Statement of Operations assumes that the Transactions and the
Motor Wheel Transactions occurred on February 1, 1996. For purposes of the
Pro Forma Statement of Operations for the year ended January 31, 1997, Motor
Wheel's historical statement of operations for the five months ended June
30, 1996 and Lemmerz's historical statement of operations for the year ended
December 31, 1996 were combined with Hayes' historical statement of
operations for the year ended January 31, 1997.
(b) The acquisition of Motor Wheel was accounted for by the purchase method of
accounting. Under purchase accounting, the total purchase price was
allocated to the tangible and intangible assets and liabilities of Motor
Wheel based upon their respective fair values as of the closing date based
upon valuations and other studies. 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 Motor Wheel Statement of Operations for the five months ended June
30, 1996:
<TABLE>
<CAPTION>
COST OF SALES MG&A
------------- ----
<S> <C> <C>
Depreciation.............................................. $(3.4) $ --
Reduction in post retirement benefit costs................ (1.2) --
Amortization of intangibles and goodwill.................. -- 2.3
----- ----
Total increase (decrease)............................ $(4.6) $2.3
===== ====
</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 are being depreciated over estimated useful
lives. Motor Wheel historically depreciated the $215.4 million of historical
cost of its assets appearing on the December 31, 1995 balance sheet over a
composite life of 14 years resulting in $15.4 million of annual
depreciation, accumulated depreciation of $136.4 million and a net book
value of $79.0 million. Upon consummation of the Motor Wheel Transactions,
the fair value of assets acquired was estimated to be approximately $92.0
million. This amount is being depreciated over 25 years for buildings and 12
years for equipment, consistent with Hayes' depreciation policy for used
equipment and Hayes' estimate of the remaining economic life of the assets
($7.2 million of annual depreciation expense). Other intangible assets and
goodwill are being amortized over their estimated useful lives, not to
exceed 40 years. For pro forma purposes, a 35-year composite amortization
life has been used.
(c) The Lemmerz Acquisition 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 Lemmerz
based upon their respective fair values as of the effective time of the
Lemmerz Acquisition based upon 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 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. The following presents the effect of the purchase
adjustments and adjustments to reflect adoption of the Company's accounting
policies on the Pro Forma Statement of Operations:
<TABLE>
<CAPTION>
COST OF SALES MG&A
------------- ----
<S> <C> <C>
Depreciation.............................................. $(14.9) $ --
Amortization of intangibles and goodwill.................. -- 4.7
------ ----
Total increase (decrease)............................ $(14.9) $4.7
====== ====
</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. Lemmerz currently depreciates the $519.5 million of historical
cost of its assets appearing on the December 31, 1996 balance sheet over a
composite life of 18 years resulting in $28.7
F-18
<PAGE> 35
million of annual depreciation in the year ended December 31, 1996, accumulated
depreciation of $364.8 million and a net book value of $154.7 million. Upon
consummation of the acquisition, the fair value of assets acquired is estimated
to be $194.7 million. This amount will be depreciated over 25 years for
buildings and 12 years for equipment, consistent with Hayes' depreciation
policy for used equipment and Hayes' estimate of the remaining economic
life of the assets ($13.8 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.
(d) As part of its restructuring, Motor Wheel 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>
Marketing, general and administrative....................... $(1.0)
Engineering and product development......................... (0.9)
-----
Total savings.......................................... $(1.9)
=====
</TABLE>
(e) Reflects adjustments for additional interest expense assuming the Motor
Wheel Transactions occurred on February 1, 1996. The change in interest
expense, in addition to amortization of deferred financing costs, reflect
changes in long term borrowings and their rates based on a three-month LIBOR
of 6.0% (dollars in millions):
<TABLE>
<CAPTION>
Pro Forma
Interest
Amount Rate Expense
------ ---- ---------
<S> <C> <C> <C>
Revolving Credit Facility........................ $27.0 8.50% $ 1.0
Term Loan A...................................... 198.5 8.50 7.0
Term Loan B...................................... 125.0 9.00 4.7
Term Loan C...................................... 100.0 9.50 4.0
Existing Notes................................... 250.0 11.00 11.4
Unused revolver commitment....................... 1.0
Letter of credit fees............................ 0.5
Administrative fee............................... 0.4
------
30.0
Amortization of capitalized financing fees....... 1.1
------
Total pro forma interest expense............ 31.1
Historical Motor Wheel interest expense.......... (7.3)
Historical Hayes interest expense................ (6.0)
------
Total historical interest expense (including
amortization of financing fees)........... (13.3)
------
Total pro forma interest expense
adjustment................................ $ 17.8
======
</TABLE>
The Company estimates that an increase or decrease in interest rates on
floating debt of 1/8% would increase or decrease annual interest expense by
approximately $563,000. The Company anticipates entering into interest rate
caps and swaps with respect to a portion of the floating rate debt to
mitigate the effect of interest rate fluctuations.
F-19
<PAGE> 36
(f) Reflects adjustments for the additional interest expense assuming the
Lemmerz Acquisition occurred on February 1, 1996. 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 effective time as follows (dollars in millions):
<TABLE>
<CAPTION>
Pro Forma
Interest
Amount Rate Expense
------ ---- ---------
<S> <C> <C> <C>
Term Loan............................................ $100.0 6.25% $ 6.3
Notes offered hereby................................. 200.0 9.25 18.5
Paydown on certain Hayes outstanding obligations..... (17.6) 8.25 (1.5)
-----
23.3
Amortization of capitalized financing fees........... 1.1
Less Adjustment to new financing rates:
Term Loan A.......................................... 198.5 (0.25) (0.5)
Term Loan B.......................................... 125.0 (0.25) (0.3)
Term Loan C.......................................... 100.0 (0.50) (0.5)
-----
Total pro forma interest expenses............... 23.1
Less: Historical Lemmerz interest expense............ (3.3)
-----
Total pro forma interest expense adjustment..... $19.8
=====
</TABLE>
The Company estimates that an increase or decrease in interest rates on
floating debt of 1/8% would increase or decrease annual interest expense by
approximately $375,000. The Company anticipates entering into interest rate
caps and swaps with respect to a portion of the floating rate debt to
mitigate the effect of interest rate fluctuations.
(g) Reflects income tax effects of the pro forma adjustments assuming a combined
effective statutory income tax rate of 43%.
(h) Excluding the effects of one-time and non-recurring charges and
extraordinary items, pro forma net income for the year ended January 31,
1997 would have been $2.5 million.
(i) For the purpose of computing this ratio, earnings consist of earnings before
taxes on income and fixed charges. Fixed charges consists of interest
expense, capitalized interest, amortization of deferred debt issuance costs
and one third of rental expense. On a pro forma combined basis for the
fiscal year ended January 31, 1997, earnings were insufficient to cover
fixed charges by $107.5 million.
F-20
<PAGE> 37
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(January 31, 1997)
<TABLE>
<CAPTION>
HAYES LEMMERZ
JANUARY 31, DECEMBER 31, PRO FORMA PRO FORMA
1997 1996 ADJUSTMENTS COMBINED
----------- ------------ ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
- ---------------------------------------
Cash and cash equivalents.............. $ 47.5 $ 4.6 $ -- $ 52.1
Certificates of deposit................ -- 7.7 -- 7.7
Trade accounts and notes receivable.... 145.2 79.0 -- 224.2
Inventories............................ 82.9 54.7 -- 137.6
Other current assets................... 13.9 8.6 -- 22.5
-------- ------ ------ --------
Current assets.................... 289.5 154.6 -- 444.1
Property, plant and equipment, net..... 486.4 154.7 40.0(a) 681.1
Other noncurrent assets................ 31.3 45.4 -- 76.7
Deferred tax asset..................... 18.0 50.1 -- 68.1
Deferred financing costs............... 29.5 -- 7.5(b) 37.0
Goodwill............................... 328.4 8.0 157.9(a) 494.3
-------- ------ ------ --------
Total assets...................... $1,183.1 $412.8 $205.4 $1,801.3
======== ====== ====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------
Bank borrowings........................ $ 5.6 $ 59.1 $(59.1)(c) $ 5.6
Current portion of bank term loans and
other long term debt................. 23.9 -- -- 23.9
Trade accounts payable................. 160.8 75.7 -- 236.5
Accrued liabilities.................... 84.0 21.6 -- 105.6
-------- ------ ------ --------
Current liabilities............... 274.3 156.4 (59.1) 371.6
Pension and other long-term
liabilities.......................... 255.3 110.9 -- 366.2
Minority interest...................... 8.3 5.5 -- 13.8
Deferred tax liability, net............ -- 5.4 -- 5.4
Bank term loans and other long term
debt less current portion............ 434.8 25.0 (20.9)(b)(c)(d) 438.9
Term loans............................. 100.0(b) 100.0
Senior subordinated debt............... 251.5 -- -- 251.5
Notes offered hereby................... 200.0(b) 200.0
-------- ------ ------ --------
Total liabilities................. 1,224.2 303.2 220.0 1,747.4
Capital stock.......................... 0.2 -- 0.2
Paid in capital........................ 43.6 57.9 37.1(e) 138.6
Retained earnings (deficit)............ (82.2) 43.6 (43.6)(e) (82.2)
Cumulative translation and pension
liability adjustment................. (2.7) 8.1 (8.1)(e) (2.7)
-------- ------ ------ --------
Total stockholders' equity
(deficit)....................... (41.1) 109.6 (14.6) 53.9
-------- ------ ------ --------
Total liabilities and
stockholders' equity
(deficit)....................... $1,183.1 $412.8 $205.4 $1,801.3
======== ====== ====== ========
</TABLE>
F-21
<PAGE> 38
NOTES TO THE PRO FORMA BALANCE SHEET AT JANUARY 31, 1997
(a) The estimated purchase price and preliminary adjustments to historical book
value of Lemmerz as a result of the Transactions are as follows (dollars in
millions):
<TABLE>
<S> <C>
Purchase price:
Estimated value of cash and preferred stock issued........ $ 307.5
Book value of net assets acquired......................... (109.6)
-------
Purchase price in excess of net assets acquired........... $ 197.9
=======
Preliminary allocation of purchase price in excess of net
assets required:
Increase in property, plant and equipment to estimated
fair value............................................. $ 40.0
Estimated goodwill........................................ 157.9
-------
Total..................................................... $ 197.9
=======
</TABLE>
(b) Reflects the estimated sources and uses of funds for the Transactions as
follows, assuming the Transactions occurred as of January 31, 1997 (dollars
in millions):
<TABLE>
<S> <C>
Sources of Funds:
Term Loan Facility........................................ $ 100.0
Notes offered hereby...................................... 200.0
Issuance of Hayes convertible preferred stock............. 107.5
-------
Total Sources of Funds.................................... $ 407.5
=======
Uses of Funds:
Cash consideration for Lemmerz Acquisition................ $ 200.0
Equity consideration for Lemmerz Acquisition.............. 107.5
Repayment of existing Hayes obligations................... 17.6
Repayment of existing Lemmerz obligations................. 62.4
Fees and expenses (including deferred financing costs).... 20.0
-------
Total Uses of Funds....................................... $ 407.5
=======
</TABLE>
(c) Proceeds from the Transactions will be used to repay the following
obligations of Lemmerz (dollars in millions):
<TABLE>
<S> <C>
Current portion debt and notes.............................. $ 59.1
Long-term portion debt...................................... 3.3
-------
Total..................................................... $ 62.4
=======
</TABLE>
(d) Proceeds from the Transactions of approximately $17.6 million will be used
to repay certain outstanding obligations of the Company.
(e) The adjustments to paid-in capital, retained earnings and cumulative
translation and pension liability adjustments as a result of the Lemmerz
Acquisition are as follows (dollars in million):
<TABLE>
<S> <C>
Paid-in capital:
Elimination of Lemmerz paid-in capital.................... $ (57.9)
Value of Hayes convertible preferred stock issued......... 107.5
Estimated professional fees and expenses.................. (12.5)
-------
Total..................................................... $ 37.1
=======
Retained earnings:
Elimination of Lemmerz pre-business combination retained
earnings............................................... $ (43.6)
Cumulative translation and pension liability adjustments:
Elimination of Lemmerz pre-business combination amount.... $ (8.1)
</TABLE>
Assumes issuance of the preferred stock for $107.5 million.
F-22
<PAGE> 39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Hayes Wheels International, Inc.
Date: June 12, 1997 By: /s/ WILLIAM D. SHOVERS
------------------------------------
William D. Shovers
Vice President -- Finance
<PAGE> 40
EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
2 Purchase Agreement among Hayes Wheels
International, Inc., Cromodora Wheels S.p.A.,
Lemmerz Holding GmbH and the Shareholders of
Lemmerz Holding, GmbH dated June 6, 1997.
10.1 Consulting Agreement, made as of June 6, 1997, by and between
Hayes Wheels International, Inc. and H.K.L., L.L.C.
10.2 Consulting Agreement, made as of June 6, 1997, by and between
Hayes Wheels International, Inc. and Horst Kukwa-Lemmerz.
23 Consent of KPMG Deutsche Treuhand - Gesellschaft
Aktiengesellschaft Wirtschaftsprufungsgesellschaft
99 Press Release, dated June 6, 1997.
<PAGE> 1
EXHIBIT 2
PURCHASE AGREEMENT
AMONG
HAYES WHEELS INTERNATIONAL, INC.,
CROMODORA WHEELS S.P.A., LEMMERZ HOLDING GMBH
AND
THE SHAREHOLDERS OF LEMMERZ HOLDING GMBH
DATED AS OF
JUNE 6, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II - PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.1 Sale and Assignment of Lemmerz
Holding Share to Cromodora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.2 Purchase Price of Share Sold to Cromodora . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.3 Sale and Assignment of Lemmerz
Holding Shares to HWI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.4 Purchase Price for Shares Sold to HWI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.5 Sale and Assignment of Newco A Shares and Newco B Shares to HWI . . . . . . . . . . . . . . . . . . . . 19
Section 2.6 Purchase Price for Shares Sold to HWI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.7 Sale and Assignment of Newco A Shares and Newco B Shares to HWI Sub . . . . . . . . . . . . . . . . . . 21
Section 2.8 Purchase Price for Shares Sold to HWI Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.9 Closing; Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF EACH LEMMERZ SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.2 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.3 No Violation; Consents and
Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.4 No Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.5 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.6 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF LEMMERZ HOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.1 Corporate Organization;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.2 Organizational Documents;
Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.4 Authorization; No Violation;
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 4.5 Permits; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.7 Absence of Certain Changes
or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.8 Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.10 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 4.11 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 4.12 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 4.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.15 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 4.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 4.18 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 4.19 Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 4.20 Related Party Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 4.21 Customers/Suppliers; Joint
Venturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 4.22 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 4.23 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF HWI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 5.1 Corporate Organization;
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 5.2 Certificates of Incorporation
and By-Laws; Corporate Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 5.4 Authorization; No Violation;
Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 5.5 Permits; Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Section 5.6 SEC Reports; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 5.7 Absence of Certain Changes
or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 5.8 Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 5.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 5.11 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE VI - CONDUCT OF BUSINESS PENDING
THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 6.1 Conduct of Business by Lemmerz
Parties Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6.2 Conduct of Business by HWI
Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE VII - COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 7.1 HWI Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 7.2 Information from Lemmerz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 7.3 Access and Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 7.4 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 7.5 HWI Board Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 7.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 7.7 HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 7.8 Replacement of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 7.9 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section 7.10 Covenant not to Compete. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 7.11 Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 7.12 Sale and Assignment of Lemmerz
Holding Shares to Newco Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 7.13 Contribution of Lemmerz Holding
Shares to Newco A and Newco B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 7.14 Undertaking of HWI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 7.15 Certain Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 7.16 Exercise of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
ARTICLE VIII - CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 8.1 Conditions to Each Party's
Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 8.2 Conditions to Obligations of HWI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 8.3 Conditions to Obligations of
the Lemmerz Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
ARTICLE IX - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
ARTICLE X - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 10.2 Indemnification by Lemmerz
Shareholders; The Agreement to
Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Section 10.3 Limitation of Lemmerz
Liability as to Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Section 10.4 Limitation of Lemmerz
Liability for Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Section 10.5 Environmental Indemnification
by Lemmerz Shareholders; The
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Section 10.6 Limitation of Lemmerz
Liability for Environmental Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 10.7 Indemnification by HWI; The
Agreement to Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Section 10.8 Limitation of HWI Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Section 10.9 Exception to Limitation of
HWI Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Section 10.10 Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 10.11 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Section 10.12 Remedies Cumulative; No
Subrogation; Andreas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
ARTICLE XI - MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Section 11.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Section 11.2 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Section 11.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Section 11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Section 11.5 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Section 11.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 11.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 11.8 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Section 11.9 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Section 11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 11.12 Forum for Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
</TABLE>
iv
<PAGE> 6
Exhibits
A. Form of Amended and Restated Stockholders Agreement
B. Form of Notarial Deed
C. Form of Spain Agreement
D. Form of Certificate of Designations
E. Form of Letter regarding Employment (Junger)
F. Form of Letter regarding Employment (Koll)
G. Form of Opinion of Counsel for the Lemmerz Shareholders
H. Form of Opinion of Counsel for the Buyers
I. Form of Irrevocable Proxy
J. Form of Consulting Agreement (H.K.L., L.L.C.)
K. Form of Consulting Agreement (Kukwa-Lemmerz)
v
<PAGE> 7
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of June 6, 1997 (the "Agreement"), among:
A. Hayes Wheels International, Inc., a corporation organized
under the laws of the State of Delaware ("HWI");
B. Cromodora Wheels S.p.A., a corporation organized under the
laws of Italy ("Cromodora");
C. Lemmerz Holding GmbH, a limited liability company organized
under the laws of the Federal Republic of Germany ("Lemmerz Holding"); and
D. Marianne Lemmerz, Inge Kruger-Pressl, Renate Kukwa-Lemmerz
and Horst Kukwa-Lemmerz, constituting all of the shareholders (each a "Lemmerz
Shareholder" and, collectively, the "Lemmerz Shareholders") of Lemmerz Holding.
Capitalized terms used and not otherwise defined herein have the
respective meanings set forth in Section 1.1 of this Agreement.
WHEREAS, HWI, Cromodora, Lemmerz Holding and the Lemmerz Shareholders
desire to effect the transactions described in the Notarial Deed (as defined
below), including the acquisition, directly and indirectly, by HWI, Cromodora
<PAGE> 8
and HWI Sub of all of the capital stock of Newco A and Newco B (collectively,
the "Acquired Shares") and of Lemmerz Holding, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, the
capitalized terms below have the following meanings:
"Acquired Shares" has the meaning set forth in the Recitals hereto.
"Acquisition Transaction" has the meaning set forth in Section 7.4(a)
hereof.
"Amended Stockholders Agreement" means the Stockholders Agreement, as
amended and restated, in the form attached as Exhibit A hereto.
"Antitrust Laws" has the meaning set forth in Section 7.7(a) hereof.
"Approval" has the meaning set forth in Section 7.1 hereof.
2
<PAGE> 9
"Certificate of Designations" has the meaning set forth in Section 2.6
hereof.
"Claims" has the meaning set forth in Section 10.7 hereof.
"Cleanup" means all actions required to: (i) cleanup, remove, treat
or remediate Hazardous Materials in the indoor or outdoor environment; (ii)
prevent the continued Release of Hazardous Materials so that they do not
migrate, endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment; (iii) perform pre-remedial studies and investigations
and post-remedial monitoring and care; or (iv) respond to the request of any
Governmental Entity 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.
"Closing" has the meaning set forth in Section 2.9(a) hereof.
"Closing Date" has the meaning set forth in Section 2.9(a) hereof.
"Commercial Register" means a German commercial register and any
equivalent filing or recording office in any other jurisdiction.
3
<PAGE> 10
"Competition" has the meaning set forth in Section 7.10 hereof.
"Confidentiality Agreement" has the meaning set forth in Section 7.3
hereof.
"Consent" has the meaning set forth in Section 3.3(b) hereof.
"Consulting Agreements" has the meaning set forth in Section 8.1(d)
hereof.
"Contracts" has the meaning set forth in Section 4.13 hereof.
"Cromodora" has the meaning set forth in the Preamble hereof.
"Damages" has the meaning set forth in Section 10.2 hereof.
"Employment Letters" has the meaning set forth in Section 2.9(b)(iii)
hereof.
"Environmental Claim" means any public or private claim, action, cause
of action, investigation or notice (written or oral), relating to Lemmerz
Holding or any Lemmerz Subsidiary, by any Person alleging liability or potential
liability (including such liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or administrative, civil, or criminal penalties) arising out
4
<PAGE> 11
of, based on or resulting from (i) the presence, or Release or threat of
Release into the indoor or outdoor environment, of any Hazardous Material at
any location, whether or not currently owned, leased or operated by Lemmerz
Holding or any Lemmerz Subsidiary, or (ii) circumstances forming the basis of
any violation of, or any other liability under, any Environmental Law.
"Environmental Damages" has the meaning set forth in Section 10.5
hereof.
"Environmental Laws" means all Laws, orders, judgments and decrees as
in effect on the date of this Agreement relating to (i) pollution or protection
of human health or the environment, including Laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including ambient air, surface water, groundwater, and surface or
subsurface strata), (ii) the manufacture, processing, distribution, use,
treatment, storage, Release, disposal, transport or handling of Hazardous
Materials, (iii) recordkeeping, notification, disclosure or reporting
requirements respecting Hazardous Materials, or (iv) endangered or threatened
species of fish, wildlife and plants and the management or use of natural
resources.
5
<PAGE> 12
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Financial Statements" has the meaning set forth in Section 4.6(a)
hereof.
"German GAAP" means generally accepted accounting principles
(Grundsatze ordnungsgemaBer Buchfuhrung) in the Federal Republic of Germany.
"Governmental Entity" means any nation or government, or any state or
other political subdivision thereof; any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any government authority, agency,
department, board, commission or instrumentality of the United States, any state
of the United States or any political subdivision thereof, the Federal Republic
of Germany or any political subdivision thereof, or any other nation; or any
court, tribunal or arbitrator.
"Hazardous Materials" means all hazardous substances, wastes
(including Abfall, as defined by the German Kreislaufwirtschafts- und
Abfallgesetz of September 27, 1994, where applicable), oils, pollutants,
chemicals or con-
6
<PAGE> 13
taminants and any other substance or material regulated under any
Environmental Law.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"HWI" has the meaning set forth in the Preamble hereof. "HWI Balance
Sheet" has the meaning set forth in Section 5.6(b) hereof.
"HWI Basket" has the meaning set forth in Section 10.8 hereof.
"HWI Cap" has the meaning set forth in Section 10.8 hereof.
"HWI Cash Consideration" has the meaning set forth in Section 2.8
hereof.
"HWI Common Stock" means the common stock, par value $.01 per share,
of HWI.
"HWI Deductible" has the meaning set forth in Section 10.8 hereof.
"HWI Disclosure Schedule" means the disclosure schedule of HWI
executed by the Parties to this Agreement and dated the date hereof.
"HWI Europe" means HWI (Europe), Ltd., a Delaware corporation.
7
<PAGE> 14
"HWI Group" has the meaning set forth in Section 10.2 hereof.
"HWI Indemnified Claims" has the meaning set forth in Section
10.7 hereof.
"HWI Material Adverse Effect" means any condition, event,
circumstance, change or effect that, individually or in the aggregate, would
result in a material adverse effect on the business, assets, results of
operations or financial condition of HWI and its Subsidiaries, taken as a whole.
"HWI Permits" has the meaning set forth in Section 5.5(a) hereof.
"HWI Preferred Stock" has the meaning set forth in Section 2.6 hereof.
"HWI Preferred Stock Consideration" has the meaning set forth in
Section 2.6 hereof.
"HWI SEC Reports" has the meaning set forth in Section 5.6(a) hereof.
"HWI Stockholders" has the meaning set forth in Section 7.1 hereof.
"HWI Sub" means a limited liability company under the laws of the
Federal Republic of Germany to be formed on or prior to the Closing by HWI
Europe as a wholly owned subsidiary thereof.
8
<PAGE> 15
"HWI Subsidiary" or "HWI Subsidiaries" has the meaning set forth in
Section 5.1 hereof.
"Indemnification Limits" has the meaning set forth in Section
10.11(b)(ii) hereof.
"Indemnified Party" has the meaning set forth in Section 10.10 hereof.
"Indemnifying Party" has the meaning set forth in Section 10.10
hereof.
"Intellectual Property" has the meaning set forth in Section 4.12
hereof.
"Labor Laws" has the meaning set forth in Section 4.17 hereof.
"Law" or "Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, judgments and decrees of any and all Governmental Entities.
"Leased Realty" has the meaning set forth in Section 4.11(a) hereof.
"Leases" has the meaning set forth in Section 4.11(c) hereof.
"Lemmerz Balance Sheet" has the meaning set forth in Section 4.6(a)
hereof.
"Lemmerz Basket" has the meaning set forth in Section 10.4 hereof.
9
<PAGE> 16
"Lemmerz Cap" has the meaning set forth in Section 10.4 hereof.
"Lemmerz Deductible" has the meaning set forth in Section 10.4 hereof.
"Lemmerz Disclosure Schedule" means the disclosure schedule of the
Lemmerz Shareholders and Lemmerz Holding executed by the Parties to this
Agreement and dated the date hereof.
"Lemmerz Environmental Basket" has the meaning set forth in Section
10.6 hereof.
"Lemmerz Environmental Cap" has the meaning set forth in Section 10.6
hereof.
"Lemmerz Environmental Permits" has the meaning set forth in Section
4.16(a) hereof.
"Lemmerz Holding" has the meaning set forth in the Preamble hereof.
"Lemmerz Holding Shares" has the meaning set forth in Section 4.3
hereof.
"Lemmerz Material Adverse Effect" means any condition, event,
circumstance, change or effect that, individually or in the aggregate, would
result in a material adverse effect on the business, assets, results of
operations or financial condition of Lemmerz Holding and the Lemmerz
Subsidiaries, taken as a whole.
10
<PAGE> 17
"Lemmerz Permits" has the meaning set forth in Section 4.5(a) hereof.
"Lemmerz Shareholder" or "Lemmerz Shareholders" has the meaning set
forth in the Preamble hereof. "Lemmerz
Shareholder Expenses" has the meaning set forth in Section 11.3
hereof.
"Lemmerz Subsidiary" means, individually, a Subsidiary of Lemmerz and
"Lemmerz Subsidiaries" means, collectively, the Subsidiaries of Lemmerz.
"Letter Agreement" means the letter dated December 6, 1996 of HWI
listed in Section 5.11 of the HWI Disclosure Schedule.
"Liens" means any and all liens (including Grundstuckslast, dingliche
Grundstucksbelastung), encumbrances, security interests, mortgages or pledges.
"Meeting" has the meaning set forth in Section 7.1 hereof.
"Morgan Stanley" has the meaning set forth in Section 3.7 hereof.
"Morgan Stanley Agreement" has the meaning set forth in Section 3.7
hereof.
"Newco A" means Newco Nr. 17 Vermogensverwaltungs GmbH, a limited
liability company organized under the laws of the Federal Republic of Germany
and registered in depart-
11
<PAGE> 18
ment B of the Commercial Register of the lower court Bonn under registration
number HRB 7490 and having a registered share capital of DM 50,000, which
consists of four shares of the nominal amount of DM 12,500 each, all of which
are held by Newco Holding.
"Newco A Shares" has the meaning set forth in Section 3.2(b) hereof.
"Newco B" means Newco Nr. 18 Vermogensverwaltungs GmbH, a limited
liability company organized under the laws of the Federal Republic of Germany
and registered in department B of the Commercial Register of the lower court
Bonn under registration number HRB 7494 and having a registered share capital of
DM 50,000, which consists of four shares in the nominal amount of DM 12,500
each, all of which are held by Newco Holding.
"Newco B Shares" has the meaning set forth in Section 3.2(c) hereof.
"Newco Holding" means Newco Nr. 27 Vermogensverwaltungs GmbH, a
limited liability company formed pursuant to deed no. 152397 of the notary D.
Kleppi in Bonn on June 5, 1997 (but not yet registered in the Commercial
Register) and organized under the laws of the Federal Republic of Germany.
12
<PAGE> 19
"Notarial Deed" means the notarial deed to be entered into at the
Closing in order to sell, transfer and contribute the shares in the German
limited liability companies sold hereunder in a manner which is valid and
enforceable under the laws of the Federal Republic of Germany, which deed shall
be in the form attached as Exhibit B hereto.
"Notary" has the meaning set forth in Section 2.9(a).
"Notice" has the meaning set forth in Section 10.10 hereof.
"Owned Realty" has the meaning set forth in Section 4.11(a) hereof.
"Party" means, individually, and "Parties" means, collectively, HWI,
Cromodora, Lemmerz Holding and each Lemmerz Shareholder. "Permits" has the
meaning set forth in Section 4.5(a) hereof.
"Permitted Liens" means (i) mechanics', carriers', workmen's,
repairmen's or other similar Liens arising or incurred in the ordinary course of
business with respect to liabilities that are not yet due and payable, (ii)
Liens for taxes, assessments and other governmental charges, which as to any
thereof are not yet due and payable or due but not
13
<PAGE> 20
delinquent or being contested in good faith by appropriate proceedings, (iii)
purchase money security interests or similar Liens relating to retention of
title (Eigentumsvorbehalt) and (iv) Liens that do not, individually or in the
aggregate, materially impair the use, or materially detract from the value, of
the property to which they relate, or otherwise materially impair the operation
by Lemmerz Holding or any Lemmerz Subsidiary of its business.
"Person" means an individual, limited liability company, corporation,
partnership, association, trust, unincorporated organization, other entity or
group.
"Plan" or "Plans" has the meaning set forth in Section 4.15(a) hereof.
"Prime Rate" means the rate of interest publicly announced by
Citibank, N.A. from time to time as its prime or base rate in the United States.
"Proxy Statement" has the meaning set forth in Section 7.1 hereof.
"Real Property" means, collectively, the Owned Realty and all real
property in which Lemmerz Holding or any Lemmerz Subsidiary has a valid and
subsisting leasehold or other interest.
"Related Party Agreement" has the meaning set forth in Section 4.20(b)
hereof.
14
<PAGE> 21
"Related Party Interest" has the meaning set forth in Section 4.20(b)
hereof.
"Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, surface
water, groundwater, soil or property, in each case, other than as permitted by
and in compliance with Environmental Laws or any Permit of a Governmental Entity
issued pursuant to Environmental Laws.
"SEC" has the meaning set forth in Section 5.6(a) hereof.
"Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Shareholder Group" has the meaning set forth in Section 10.7 hereof.
"Shareholder Indemnified Claims" has the meaning set forth in Section
10.2 hereof.
"Spain Agreement" means the Share Purchase Agreement regarding the
sale by Lemmerz Holding of the shares of
15
<PAGE> 22
Lemmerz Espanola, S.L. owned by it to an Affiliate of HWI, substantially in the
form attached as Exhibit C hereto.
"Stockholder Approval Matters" has the meaning set forth in Section
7.1 hereof.
"Stockholders Agreement" means the Stockholders' Agreement dated as of
July 2, 1996 among HWI and certain holders of its capital stock.
"Subsidiary" or "Subsidiaries" of any Person means any limited
liability company, corporation, partnership, association, joint venture or other
entity of which such Person (either alone or through any other Person pursuant
to any agreement, arrangement, contract or other commitment) owns, directly or
indirectly, 50% or more of the capital stock or other equity interests the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such entity.
"Tax Returns" means any and all tax returns, declarations, estimates,
statements, reports, schedules, forms, information returns and other documents
(including any related supporting information), and any amendment to any
thereof, required to be filed with respect to Taxes under any and all Laws.
"Taxes" means any and all taxes, assessments, charges, duties and fees
or similar charges of any kind
16
<PAGE> 23
whatsoever under any and all Laws (whether imposed directly or through
withholding), including income, excise, property, sales, value added, use (or
any similar taxes), transfer, franchise, payroll, withholding, social security,
business license fees, capital duty or other taxes, including any interest,
penalties and additions imposed with respect to such amounts.
"Termination Date" has the meaning set forth in Section 10.3 hereof.
"United States GAAP" means generally accepted accounting principles in
the United States.
Section 1.2 Certain Terms.
(a) As used in this Agreement, the terms "Affiliate" and
"Associate" have the respective meanings set forth in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.
(b) As used in this Agreement, (i) "dollars" and "U.S.$" and "$"
each refer to the lawful currency of the United States and (ii) "DM" refers to
the lawful currency of the Federal Republic of Germany.
(c) When used in this Agreement, the word "including" shall be
deemed to be followed by the words "without limitation."
17
<PAGE> 24
(d) As used in this Agreement, "to the knowledge of Lemmerz" means
the actual knowledge, after due inquiry, of the managing directors and
executives of Lemmerz Holding and each Lemmerz Subsidiary.
ARTICLE ARTICLE II
PURCHASE AND SALE
Section 2.1 Sale and Assignment of Lemmerz Holding Share to
Cromodora. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing, pursuant to the Notarial Deed, Horst Kukwa-Lemmerz
shall sell and assign, free and clear of any and all Liens, to Cromodora, and
Cromodora shall purchase and accept from him, one Lemmerz Holding Share in the
nominal amount of DM 10,000.
Section 2.2 Purchase Price of Share Sold to Cromodora. In
consideration of the Lemmerz Holding Share to be sold and assigned pursuant to
Section 2.1 hereof, at the Closing, Cromodora shall pay, or cause to be paid, to
Horst Kukwa-Lemmerz U.S.$28,000.
Section 2.3 Sale and Assignment of Lemmerz Holding Shares to HWI
Sub. Upon the terms and subject to the conditions set forth in this Agreement,
at the Closing, pursuant to the Notarial Deed, the Lemmerz Shareholders
18
<PAGE> 25
shall sell and assign, free and clear of any and all Liens, to HWI Sub, and HWI
Sub shall purchase and accept from them, 3,831 Lemmerz Holding Shares in the
nominal amounts of DM 10,000 each as follows:
(a) Marianne Lemmerz shall sell and assign to HWI Sub, and HWI Sub
shall purchase and accept from her, 339 Lemmerz Holding Shares in the nominal
amount of DM 10,000 each, (b) Renate Kukwa-Lemmerz shall sell and assign to HWI
Sub, and HWI Sub shall purchase and accept from her, 1,126 Lemmerz Holding
Shares in the nominal amount of DM 10,000 each, (c) Inge Kruger-Pressl shall
sell and assign to HWI Sub, and HWI Sub shall purchase and accept from her,
1,030 Lemmerz Holding Shares in the nominal amount of DM 10,000 each, and (d)
Horst Kukwa- Lemmerz shall sell and assign to HWI Sub, and HWI Sub shall
purchase and accept from him, 1,336 shares in the nominal amount of DM 10,000
each.
Section 2.4 Purchase Price for Shares Sold to HWI Sub. In
consideration of the Lemmerz Holding Shares to be sold and assigned pursuant to
Section 2.3 hereof, at the Closing, HWI Sub shall pay, or cause to be paid, to
the Lemmerz Shareholders an aggregate of U.S. $107,268,000.
Section 2.5 Sale and Assignment of Newco A Shares and Newco B
Shares to HWI. Upon the terms and subject to the conditions set forth in this
Agreement, at the Closing,
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<PAGE> 26
pursuant to the Notarial Deed, the Lemmerz Shareholders shall cause Newco
Holding to sell and assign, free and clear of any and all Liens, to HWI, and
HWI shall purchase and accept from Newco Holding:
(i) the first Newco A Share in the nominal amount of DM
12,500;
(ii) the first Newco B Share in the nominal amount of DM
12,500;
(iii) a part share in the nominal amount of DM 10,600 of the
second Newco A Share in the nominal amount of DM 12,500; and
(iv) a part share in the nominal amount of DM 10,600 of the
second Newco B Share in the nominal amount of DM 12,500.
Section 2.6 Purchase Price for Shares Sold to HWI. In
consideration of the Newco A Shares and the Newco B Shares to be sold and
assigned pursuant to Section 2.5 hereof, at the Closing, HWI shall deliver, or
cause to be delivered, to Newco Holding (i) an aggregate of 5,000,000 duly
authorized, validly issued, fully paid and non-assessable shares (the "HWI
Preferred Stock Consideration") of Series A Convertible Participating Preferred
Stock, par value $.01 per share of HWI ("HWI Preferred Stock"), having the
designations, preferences, rights, qualifications and
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<PAGE> 27
restrictions set forth in the form of the certificate attached hereto as
Exhibit D (the "Certificate of Designations"), to be delivered to the Lemmerz
Shareholders by Newco Holding pursuant to the Notarial Deed, and (ii) an
aggregate of DM 110,000.
Section 2.7 Sale and Assignment of Newco A Shares and Newco B
Shares to HWI Sub. Upon the terms and subject to the conditions set forth in
this Agreement, at the Closing, pursuant to the Notarial Deed, the Lemmerz
Shareholders shall cause Newco Holding to sell and assign, free and clear of any
and all Liens, to HWI Sub, and HWI Sub shall purchase and accept from Newco
Holding:
(i) the two remaining Newco A Shares each in the nominal
amount of DM 12,500;
(ii) the two remaining Newco B Shares each in the nominal
amount of DM 12,500;
(iii) the remaining part share in the nominal amount of DM
1,900 of the second Newco A Share in the nominal amount of DM 12,500; and
(iv) the remaining part share in the nominal amount of DM
1,900 of the second Newco B Share in the nominal amount of DM 12,500.
Section 2.8 Purchase Price for Shares Sold to HWI Sub. In
consideration of the Newco A Shares and Newco B
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<PAGE> 28
Shares to be sold and assigned pursuant to Section 2.7 hereof to HWI Sub, at
the Closing HWI Sub shall pay, or cause to be paid, to Newco Holding an
aggregate of U.S. $92,704,000, to be delivered to the Lemmerz Shareholders
pursuant to the Notarial Deed (together with the cash amounts payable pursuant
to Sections 2.4 and 2.6 hereof, the "HWI Cash Consideration").
Section 2.9 Closing; Deliveries at Closing.
(a) Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place simultaneously at the offices of Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York, at 10:00 a.m., local time, and Frank
Hoffmann, Notary, Berlin, Germany (the "Notary") on the second business day
after which all of the conditions set forth in Article VIII are satisfied or, to
the extent permitted by applicable Law, waived, or on such other date and at
such other time and place as HWI and the Lemmerz Shareholders shall agree (the
date on which the Closing actually occurs being referred to herein as the
"Closing Date").
(b) At the Closing, the Lemmerz Shareholders shall cause Newco
Holding to deliver, or cause to be deliv-
22
<PAGE> 29
ered, to HWI or, with respect to the Notarial Deed, to the Notary:
(i) the Notarial Deed, duly executed by the geschaftsfuhrer of
Newco Holding; and
(ii) such other duly executed documents and certificates as may
be required to be delivered by Newco Holding pursuant to the terms of this
Agreement.
(c) At the Closing, the Lemmerz Shareholders shall deliver, or
cause to be delivered, to HWI or, with respect to the Notarial Deed, to the
Notary:
(i) the Notarial Deed, duly executed by each such Lemmerz
Shareholder and the geschaftsfuhrer of Newco A and Newco B;
(ii) the Amended Stockholders Agreement, duly executed by each
such Lemmerz Shareholder;
(iii) the opinions of counsel for Newco Holding and the
Lemmerz Shareholders, substantially in the form attached as Exhibit G hereto;
(iv) the resignations referred to in Section 7.8 hereof, duly
executed by the parties thereto; and
(v) such other duly executed documents and certificates as may
be required to be delivered by each such Lemmerz Shareholder pursuant to the
terms of this Agreement.
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<PAGE> 30
(d) At the Closing, HWI shall deliver, or cause to be delivered, to
the Lemmerz Shareholders or, with respect to the Notarial Deed, to the Notary:
(i) the Notarial Deed, duly executed by or on behalf of HWI
and the geschaftsfuhrer of HWI Sub;
(ii) a certificate or certificates representing the HWI
Preferred Stock Consideration deliverable to the Lemmerz Shareholders;
(iii) the HWI Cash Consideration, together with interest
thereon, if any, from and after July 25, 1997 to and including the Closing Date
at the Prime Rate, payable to the Lemmerz Shareholders, by wire transfer of
immediately available funds to an account or accounts designated in writing by
the Lemmerz Shareholders at least three (3) business days prior to the Closing
Date;
(iv) the Amended Stockholders Agreement, duly executed by or
on behalf of the parties to the Stockholders Agreement (other than the Lemmerz
Shareholders);
(v) the letters regarding employment, in the forms attached
hereto as Exhibits E and F, respectively (collectively, the "Employment
Letters"), addressed by HWI to each of Klaus Junger and Horst Koll, duly
executed by or on behalf of HWI;
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<PAGE> 31
(vi) the Consulting Agreements, duly executed by or on behalf
of HWI;
(vii) the opinion of counsel for HWI, substantially in the
form attached as Exhibit H hereto; and
(viii) such other duly executed documents and certificates as
may be required to be delivered by HWI pursuant to the terms of this Agreement.
(e) At the Closing, Cromodora shall deliver to Horst Kukwa-Lemmerz
or, with respect to the Notarial Deed, to the Notary:
(i) the Notarial Deed, duly executed by or on behalf of
Cromodora; and
(ii) U.S.$28,000 payable to Horst Kukwa-Lemmerz, by wire
transfer of immediately available funds to an account designated in writing by
Herr Kukwa-Lemmerz at least three (3) business days prior to the Closing Date.
ARTICLE ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF EACH LEMMERZ SHAREHOLDER
Each Lemmerz Shareholder, as to herself or himself, hereby represents
and warrants to HWI as follows:
Section 3.1 Authority. Such Lemmerz Shareholder has the requisite
power, capacity and authority to execute
25
<PAGE> 32
and deliver this Agreement, to perform her or his obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Lemmerz Shareholder and, assuming the due
authorization, execution and delivery hereof by HWI and Cromodora, constitutes
the valid and binding obligation of such Lemmerz Shareholder, enforceable
against such Lemmerz Shareholder in accordance with its terms.
Section 3.2 Title to Shares.
(a) Such Lemmerz Shareholder has good and marketable title to the
number of shares of capital stock of Lemmerz Holding set forth opposite such
Lemmerz Shareholder's name in Annex 1, free and clear of any and all Liens; and
such shares constitute all shares of capital stock or other equity interests of
Lemmerz Holding or any Lemmerz Subsidiary owned, whether of record or
beneficially, by such Lemmerz Shareholder.
(b) The authorized capital stock of Newco A consists of shares in
the aggregate nominal amount of DM 50,000, all of which are issued and
outstanding and included among the Acquired Shares ("Newco A Shares"). No
shares of capital stock or other equity interests of Newco A are held in the
treasury of Newco A or are reserved for future issuance pursuant to any option,
warrant or other
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<PAGE> 33
right, agreement, arrangement or commitment. Each issued and outstanding share
of capital stock of Newco A has been duly authorized and validly issued, and is
fully paid and nonassessable, and has not been issued in violation of, and is
not subject to, any preemptive or subscription rights. Newco Holding has good
and marketable title to all of the Newco A Shares, free and clear of any and
all Liens.
(c) The authorized capital stock of Newco B consists of shares in
the aggregate nominal amount of DM 50,000, all of which are issued and
outstanding and included among the Acquired Shares ("Newco B Shares"). No
shares of capital stock or other equity interests of Newco B are held in the
treasury of Newco B or are reserved for future issuance pursuant to any option,
warrant or other right, agreement, arrangement or commitment. Each issued and
outstanding share of capital stock of Newco B has been duly authorized and
validly issued, and is fully paid and nonassessable, and has not been issued in
violation of, and is not subject to, any preemptive or subscription rights.
Newco Holding has good and marketable title to all of the Newco B Shares, free
and clear of any and all Liens.
(d) At the Closing, with respect to the Acquired Shares and Lemmerz
Holding Shares to be sold, assigned, transferred and conveyed by Newco Holding
and such Lemmerz
27
<PAGE> 34
Shareholder, respectively, HWI and HWI Sub, upon delivery and payment to Newco
Holding and such Lemmerz Shareholder, respectively, of the HWI Preferred Stock
Consideration and the HWI Cash Consideration in accordance with Article II
hereof, will acquire good and valid title to the Lemmerz Holding Shares and the
Acquired Shares, free and clear of any and all Liens.
(e) No Lemmerz Shareholder requires, or will require, a consent
under any German statutory marital property regime by reason of the transactions
contemplated by this Agreement and, by execution and delivery of this Agreement,
each of Renate Kukwa-Lemmerz and Horst Kukwa-Lemmerz hereby grant the other such
required consents, if any, under any and all such marital property regimes.
(f) Other than as contemplated by this Agreement, there is no
option, warrant or other right, agreement, arrangement or commitment of any kind
whatsoever to which Newco Holding or such Lemmerz Shareholder is a party
relating to the issued or unissued capital stock or other equity interests of
Lemmerz Holding or any Lemmerz Subsidiary, or any of Newco A or Newco B, or
obligating Newco Holding or such Lemmerz Shareholder to grant, issue or sell any
share of the capital stock or other equity interests of Lemmerz
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<PAGE> 35
Holding or any Lemmerz Subsidiary, or any of Newco A or Newco B, by sale,
lease, license or otherwise.
(g) Except as set forth in Section 3.2(g) of the Lemmerz Disclosure
Schedule, there is no obligation, contingent or otherwise, of Newco Holding or
such Lemmerz Shareholder to (i) repurchase, redeem or otherwise acquire any
share of the capital stock or other equity interests of Lemmerz Holding or any
Lemmerz Subsidiary, or any of Newco A or Newco B, or (ii) provide funds to, or
make any investment in (in the form of a loan, capital contribution or
otherwise), or provide any guarantee with respect to the obligations of Lemmerz
Holding or any Lemmerz Subsidiary, or any of Newco A or Newco B.
(h) There is no voting trust, proxy or other agreement,
arrangement, contract or other commitment of any kind whatsoever to which Newco
Holding or such Lemmerz Shareholder is a party, or by or to which any of its
properties or assets is bound or subject, with respect to the voting of any
share of capital stock or other equity interests of Lemmerz Holding or any
Lemmerz Subsidiary, or any of Newco A or Newco B.
(i) By the performance of its obligation hereunder, and
consummation of the transactions contemplated
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<PAGE> 36
hereby, such Lemmerz Shareholder will not dispose of all or substantially all of
such Party's properties or assets.
Section 3.3 No Violation; Consents and Approvals.
(a) The execution and delivery of this Agreement by such Lemmerz
Shareholder do not, and the performance of this Agreement by such Lemmerz
Shareholder and the consummation of the transactions contemplated hereby will
not, (i) conflict with or violate the certificate or articles of incorporation
or by-laws, or similar charter or organizational documents, in each case as
amended or restated, of Newco Holding, Newco A or Newco B, (ii) conflict with or
violate any Law, order, judgment or decree applicable to Newco Holding or such
Lemmerz Shareholder, or by or to which any of its properties or assets is bound
or subject, or (iii) result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would constitute a default)
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of a Lien
on any of the properties or assets (including any Lemmerz Holding Share or
Acquired Share) of Newco Holding or such Lemmerz Shareholder under, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Newco Holding or
30
<PAGE> 37
such Lemmerz Shareholder is a party or by or to which Newco Holding or such
Lemmerz Shareholder or any of its properties or assets (including any Lemmerz
Holding Share or Acquired Share) is bound or subject.
(b) The execution and delivery of this Agreement by such Lemmerz
Shareholder do not, and the performance by Newco Holding and such Lemmerz
Shareholder of this Agreement and the consummation of the transactions
contemplated hereby will not, require Newco Holding or such Lemmerz Shareholder
to obtain any consent, approval, waiver, authorization or permit of, or to make
any filing or registration with or notification to ("Consent"), any Governmental
Entity or any third party, other than (i) the Consents set forth in Section
3.3(b) of the Lemmerz Disclosure Schedule with respect to Newco Holding or such
Lemmerz Shareholder, each of which has been, or will be prior to the Closing,
obtained or made and (ii) such Consents, the failure of which to obtain or make
could not reasonably be expected to impair Newco Holding's or such Lemmerz
Shareholder's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby or to impair the ability of Lemmerz Holding or
any Lemmerz Subsidiary to conduct its business after the Closing in the manner
it is now being conducted.
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<PAGE> 38
(c) At Closing, Newco Holding and such Lemmerz Shareholder will
have taken all steps necessary to approve and to irrevocably exempt the
transactions contemplated by this Agreement from the provisions of any
applicable Law, certificate or articles of incorporation or by-laws, or similar
charter or organizational document, in each case as amended or restated, or
contractual provision, in each case, containing any restriction on transfer of
any Lemmerz Holding Share or Acquired Share or similar provision, including any
and all contractual or statutory rights of first refusal and preemption
(Andienungsrechte and Vorkaufsrechte).
Section 3.4 No Activity.
(a) Newco Holding was organized on June 5, 1997, Newco A was
organized on January 15, 1997 and Newco B was organized on January 15, 1997.
Neither Newco Holding, Newco A nor Newco B will have, at any time prior to the
Closing, (i) acquired any properties or assets, whether real, personal or mixed,
tangible or intangible, other than (A) the deposit of its stated capital in a
bank account and interest earned thereon and (B) the acquisition by Newco
Holding of the Newco A Shares and the Newco B Shares, (ii) incurred any
liability or obligation, other than current taxes on its stated capital, (iii)
engaged in any business or activity of any kind whatsoever or (iv) entered into,
or become subject
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<PAGE> 39
to or bound by, any agreement, arrangement, contract or other commitment,
except in connection with its organization, the negotiation of this Agreement
and the consummation of the transactions contemplated hereby.
Section 3.5 Absence of Litigation.
(a) There is no claim, action, suit, proceeding or investigation,
at law or in equity (including actions or proceedings seeking injunctive
relief), by or before any Governmental Entity pending or, to the knowledge of
such Lemmerz Shareholder, threatened in writing against Newco Holding or such
Lemmerz Shareholder or affecting any of its properties or assets, including any
Lemmerz Holding Share or Acquired Share.
(b) Neither Newco Holding nor such Lemmerz Shareholder is a party
to or subject to or bound by, or in default under, any judgment, order or decree
of any Governmental Entity which, in any case, could impair the ability of Newco
Holding or such Lemmerz Shareholder to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
Section 3.6 Investment. Newco Holding and such Lemmerz Shareholder
are acquiring the shares of HWI Preferred Stock included in the HWI Preferred
Stock Consideration deliverable to Newco Holding and to such Lemmerz
33
<PAGE> 40
Shareholder hereunder and under the Notarial Deed and, upon conversion thereof,
the shares of HWI Common Stock into which such shares are convertible, for
investment purposes only and not with any intention of distributing or selling
such shares in violation of United States federal or state securities laws.
Such Lemmerz Shareholder acknowledges, on his or her own behalf and on behalf
of Newco Holding, that all such shares of HWI Preferred Stock and HWI Common
Stock shall be subject to the provisions of the Amended Stockholders Agreement,
and that a legend to such effect shall be placed on any and all certificates
representing such shares.
Section 3.7 Brokers. Other than Morgan Stanley & Co. Incorporated
("Morgan Stanley") pursuant to the agreement dated October 30, 1995 between
Morgan Stanley and Lemmerz Holding (the "Morgan Stanley Agreement"), no Person
is entitled to any brokerage, finder's or investment banking fee, commission or
expense in connection with the transactions contemplated hereby by reason of any
action taken by or on behalf of Newco Holding or such Lemmerz Shareholder or any
of Newco Holding's or such Lemmerz Shareholder's representatives or agents.
34
<PAGE> 41
ARTICLE ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF LEMMERZ HOLDING
Lemmerz Holding hereby represents and warrants to HWI as
follows:
Section 4.1 Corporate Organization; Subsidiaries. Lemmerz Holding
is a limited liability company duly organized under the laws of the Federal
Republic of Germany and validly existing in accordance with the Commercial
Register, and its Articles of Association (Gesellschaftsvertrag). The current
Articles of Association of Lemmerz Holding were registered with the Commercial
Register on August 24, 1993, and have not been amended since such date. Each
Lemmerz Subsidiary, together with an indication of its legal form and the
jurisdiction of its organization, is listed in Section 4.1(b) of the Lemmerz
Disclosure Schedule and is duly organized and validly existing in such
jurisdiction. Lemmerz Holding and each Lemmerz Subsidiary has all requisite
corporate power and corporate authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted.
Section 4.2 Organizational Documents; Corporate Records. Lemmerz
Holding and each Lemmerz Subsidiary listed in Section 4.2 of the Lemmerz
Disclosure Schedule has deliv-
35
<PAGE> 42
ered a true, correct and complete copy of its certificate or articles of
incorporation or association and by-laws, or similar charter and
organizational documents, in each case as amended or restated. No resolutions
amending any such certificate or articles, or by-laws, or similar charter or
organizational document, have been adopted other than those registered in the
Commercial Register, and there is no agreement, arrangement, contract or other
commitment relating to the constitution or organization of Lemmerz Holding or
any Lemmerz Subsidiary. Neither Lemmerz Holding nor any Lemmerz Subsidiary is
in violation in any material respect of any provision of its certificate or
articles of incorporation, or by-laws, or similar charter or organizational
document. Lemmerz Holding and each Lemmerz Subsidiary has made available to
HWI for inspection true, correct and complete copies of its available minutes
since January 1, 1987, stock record book and stock ledger, including all
available notarial deeds relating to, or resulting in, the creation or transfer
of its capital stock or other equity interests.
Section 4.3 Capitalization.
(a) The authorized capital stock of Lemmerz Holding consists of
10,000 shares in the aggregate nominal amount of DM 100,000,000, all of which
are issued and outstanding ("Lemmerz Holding Shares"). No shares of capital
36
<PAGE> 43
stock or other equity interests of Lemmerz Holding are held in the treasury of
Lemmerz Holding or are reserved for future issuance pursuant to any option,
warrant or other right, agreement, arrangement or commitment. Each issued and
outstanding share of capital stock of Lemmerz Holding has been duly authorized
and validly issued, and is fully paid and nonassessable, and has not been
issued in violation of, and is not subject to, any preemptive or subscription
rights. At Closing, each Lemmerz Holding Share as is owned by Newco A or Newco
B will be owned, in each case, free and clear of any and all Liens.
(b) Section 4.3(b) of the Lemmerz Disclosure Schedule sets forth a
true, correct and complete list of each Lemmerz Subsidiary; its authorized,
issued and outstanding capital stock or other equity interests; the name of each
record owner of such capital stock or other equity interests, together with the
number of shares of capital stock or other equity interests so owned; such
capital stock or other equity interests held in its treasury; such capital stock
or other equity interests reserved for future issuance pursuant to any option,
warrant or other right, agreement, arrangement or commitment; and the identity
of each party to any such option, warrant or other right, agreement, arrangement
or commitment. Each issued and outstanding share of
37
<PAGE> 44
capital stock or other equity interests of each Lemmerz Subsidiary has been
duly authorized and validly issued, and is fully paid and nonassessable, and
has not been issued in violation of, and, with respect to such shares or
interests as are owned by Lemmerz Holding or any Lemmerz Subsidiary, is not
subject to, any preemptive or subscription rights; and each such share of
capital stock or other equity interests as is owned by Lemmerz Holding or any
Lemmerz Subsidiary is owned free and clear of any and all Liens.
(c) (i) Other than as contemplated by this Agreement, there is no
option, warrant or other right, agreement, arrangement or commitment of any kind
whatsoever to which Lemmerz Holding or any Lemmerz Subsidiary is a party
relating to the issued or unissued capital stock or other equity interests of
Lemmerz Holding or any Lemmerz Subsidiary or obligating Lemmerz Holding or any
Lemmerz Subsidiary to grant, issue or sell any share of the capital stock or
other equity interests of Lemmerz Holding or any Lemmerz Subsidiary by sale,
lease, license or otherwise; (ii) except as set forth in Section 4.3(c) of the
Lemmerz Disclosure Schedule, there is no obligation, contingent or otherwise, of
Lemmerz Holding or any Lemmerz Subsidiary to (A) repurchase, redeem or otherwise
acquire any share of the capital stock or other equity interests of Lemmerz
Holding or any Lemmerz
38
<PAGE> 45
Subsidiary, or (B) make any investment in (in the form of a loan, capital
contribution or otherwise), or provide any guarantee with respect to the
obligations of, any Person other than Lemmerz Holding or any Lemmerz
Subsidiary; (iii) other than the ownership by Lemmerz Holding of the Lemmerz
Subsidiaries and otherwise as set forth in Section 4.3(c) of the Lemmerz
Disclosure Schedule, neither Lemmerz Holding nor any Lemmerz Subsidiary,
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 limited liability company, corporation, partnership, joint
venture or other entity; (iv) except as set forth in Section 4.3(c) of the
Lemmerz Disclosure Schedule; there is no agreement, arrangement, contract or
other commitment of any kind whatsoever (contingent or otherwise) to which
Lemmerz Holding or any Lemmerz Subsidiary is a party pursuant to which any
Person, including any Lemmerz Shareholder, is or may become entitled to receive
any payment based on the revenues or earnings of Lemmerz Holding or any Lemmerz
Subsidiary; and (v) there is no voting trust, proxy or other agreement,
arrangement, contract or other commitment of any kind whatsoever to which
Lemmerz Holding or any Lemmerz Subsidiary is a party, or by
39
<PAGE> 46
which Lemmerz Holding or any Lemmerz Subsidiary or any of their respective
properties or assets is bound or subject, with respect to the voting of any
share of capital stock or other equity interests of Lemmerz Holding or any
Lemmerz Subsidiary.
(d) The contributions with respect to the Lemmerz Holding Shares
have been made in compliance with all statutory and other legal requirements.
Section 4.4 Authorization; No Violation; Consents and Approvals.
(a) Except with respect to proceedings required under the Notarial
Deed and the Spain Agreement, no corporate proceeding on the part of Lemmerz
Holding or any Lemmerz Subsidiary is required to authorize the execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) The execution and delivery of this Agreement do not, and the
performance of this Agreement and the consummation of the transactions
contemplated hereby, will not, (i) conflict with or violate the certificate or
articles of incorporation or by-laws, or similar charter or organizational
documents, in each case as amended or restated, of Lemmerz Holding or any
Lemmerz Subsidiary, (ii) conflict with or violate any Law, judgment, order or
decree appli-
40
<PAGE> 47
cable to Lemmerz Holding or any Lemmerz Subsidiary, or by or to which any of
their respective properties or assets is bound or subject, or (iii) result in
any breach of, or constitute a default (or an event that with notice or lapse
of time or both would constitute a default) under, or give to others any right
of termination, amendment, acceleration or cancellation of, or require payment
under, or result in the creation of a Lien on any of the properties or assets
of Lemmerz Holding or any Lemmerz Subsidiary under, any note, bond, mortgage,
indenture, contract, agreement, arrangement, commitment, lease, license,
permit, franchise or other instrument or obligation to which Lemmerz Holding or
any Lemmerz Subsidiary is a party or by or to which Lemmerz Holding or any
Lemmerz Subsidiary or any of their respective properties or assets is bound or
subject, other than, with respect to clause (iii) above, such conflicts,
violations, breaches and defaults as could not reasonably be expected,
individually or in the aggregate, to impair in any material respect Lemmerz
Holding's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby or to impair in any material respect the
ability of Lemmerz Holding or any Lemmerz Subsidiary to conduct its business
after the Closing in the manner now being conducted.
41
<PAGE> 48
(c) Except with respect to proceedings required under the Notarial
Deed and the Spain Agreement, the execution and delivery of this Agreement do
not, and the performance of this Agreement and the consummation of the
transactions contemplated hereby, will not, require Lemmerz Holding or any
Lemmerz Subsidiary to obtain any Consent of any Governmental Entity, or any
third party, except for (i) applicable requirements, if any, of the HSR Act and
other Antitrust Laws, (ii) filings with the German Federal Cartel Office
(Bundeskartellamt), (iii) the Consents set forth in Section 4.4(c) of the
Lemmerz Disclosure Schedule, each of which has been, or will be prior to the
Closing, obtained or made and (iv) such Consents, the failure of which to obtain
or make could not reasonably be expected, individually or in the aggregate, to
impair in any material respect Lemmerz Holding's ability to perform its
obligations hereunder or to consummate the transaction contemplated hereby or to
impair in any material respect the ability of Lemmerz Holding or any Lemmerz
Subsidiary to conduct its business after the Closing in the manner now being
conducted.
(d) Except with respect to proceedings required under the Notarial
Deed and the Spain Agreement, Lemmerz Holding and each Lemmerz Subsidiary has
taken all steps necessary to approve and to irrevocably exempt the transac-
42
<PAGE> 49
tions contemplated by this Agreement from the provisions of any applicable Law,
certificate or articles of incorporation or by-laws, or similar charter or
organizational document, in each case as amended or restated, or contractual
provision, in each case, containing any restriction on transfer of any Lemmerz
Holding Shares or similar provision, including any and all contractual or
statutory rights of first refusal and preemption (Andienungsrechte and
Vorkaufsrechte).
Section 4.5 Permits; Compliance with Laws.
(a) Except as set forth in Section 4.5(a) of the Lemmerz Disclosure
Schedule, Lemmerz Holding and each Lemmerz Subsidiary possesses all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates and approvals (collectively, "Permits")
necessary to own, lease and operate its properties and assets and to carry on
its business as now being conducted (other than those required under
Environmental Laws, which are governed by Section 4.16 hereof) (collectively,
the "Lemmerz Permits"), and there is no claim, action, suit, proceeding or
investigation pending or, to the knowledge of Lemmerz, threatened in writing
regarding suspension or cancellation of any Lemmerz Permit. None of the Lemmerz
Permits will lapse, terminate or expire, or require transfer, reissuance or
renewal, as a result of the
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execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
(b) Lemmerz Holding and each Lemmerz Subsidiary is, and has been
since January 1, 1995, in compliance in all material respects with its Lemmerz
Permits and all Laws applicable to it or by or to which any of its properties or
assets is bound or subject (other than (w) Environmental Laws, which are
governed by Section 4.16, (x) Laws regarding Taxes, which are governed by
Section 4.14, (y) Labor Laws, which are governed by Section 4.17, and (z) Laws
regarding employee benefit plans, which are governed by Section 4.15). Since
January 1, 1995, neither Lemmerz Holding nor any Lemmerz Subsidiary has received
from any Governmental Entity any notice with respect to any possible conflict,
default or violation of any Lemmerz Permit or Law (other than those specified in
clauses (w)-(z) above, which are governed by the respective Sections set forth
above).
Section 4.6 Financial Statements.
(a) Lemmerz Holding has delivered to HWI true, correct and complete
copies of the audited consolidated annual statements (including balance sheet,
profit and loss account and notes) and management reports of Lemmerz Holding for
the fiscal years ended December 31, 1996, 1995 and 1994 (collectively, the
"Financial Statements"). Each of the
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Financial Statements has been prepared in accordance with German GAAP
consistently applied, and fairly presents the consolidated financial position,
results of operations and cash flows of Lemmerz Holding as of the date and for
the periods indicated therein. To the extent that contingent liabilities were
not required to be included in liabilities reflected on any balance sheet
included in the Financial Statements, such liabilities have been reflected as
below-the-line items on such balance sheet as required by German GAAP. The
audited consolidated balance sheet of Lemmerz Holding as of December 31, 1996
included in the Financial Statements is herein referred to as the "Lemmerz
Balance Sheet."
(b) Neither Lemmerz Holding nor any Lemmerz Subsidiary has incurred
any material liability or obliga- tion (whether direct or indirect, fixed,
contingent or otherwise) other than (i) such as have been reflected on the
Lemmerz Balance Sheet in accordance with German GAAP consistently applied, (ii)
such as have been incurred in the ordinary course of business consistent with
past practice since December 31, 1996, (iii) such as have arisen pursuant to
contracts entered into in the ordinary course of business consistent with past
practice and which were not required to be performed on or prior to December 31,
1996 and (iv) such
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as relate to the environmental matters governed by Section 4.16 hereof. The
reserves for such liabilities and obligations reflected on the Lemmerz Balance
Sheet are adequate, appropriate and reasonable in all material respects.
(c) Inventories of raw materials, work in progress and finished
goods of Lemmerz Holding and the Lemmerz Subsidiaries, taken as a whole, are of
a quantity and quality useable and, with respect to finished goods, saleable in
the ordinary course of business substantially consistent with past practice.
All inventory disposed of by Lemmerz Holding and each Lemmerz Subsidiary since
December 31, 1996 has been sold in the ordinary course of business consistent
with past practice.
(d) All accounts receivable of Lemmerz Holding and each Lemmerz
Subsidiary have, to the knowledge of Lemmerz, arisen from bona fide transactions
in the ordinary course of business consistent with past practice.
(e) The books and records of Lemmerz Holding and each Lemmerz
Subsidiary are complete in all material respects and have been maintained in all
material respects in accordance with good business practices and in accordance
with all applicable accounting principles and Laws.
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Section 4.7 Absence of Certain Changes or Events. Except as set
forth in Section 4.7 of the Lemmerz Disclosure Schedule, since December 31, 1996
(a) Lemmerz Holding and each Lemmerz Subsidiary has conducted its business only
in the ordinary course consistent with past practice and (b) there has not
occurred, nor has there been, any condition, event, circumstance, change or
effect which has had, or would reasonably be expected to have, a Lemmerz
Material Adverse Effect.
Section 4.8 Certain Covenants. Since December 6, 1996, except as
expressly contemplated by this Agreement or as set forth in the respective
subsections of Section 4.8 of the Lemmerz Disclosure Schedule, Lemmerz Holding
has not taken any action, or permitted any Lemmerz Subsidiary to take any
action, which, if taken after the execution and delivery of this Agreement,
would constitute a breach or violation of Section 6.1.
Section 4.9 Litigation. Except as set forth in the respective
subsections of Section 4.9 of the Lemmerz Disclosure Schedule, (a) there is no
claim, action, suit, proceeding or investigation, at law or in equity (including
actions or proceedings seeking injunctive relief), by or before any Governmental
Entity pending or, to the knowledge of Lemmerz, threatened in writing against
Lemmerz Holding or
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any Lemmerz Subsidiary or affecting any of their respective properties or
assets, and (b) neither Lemmerz Holding nor any Lemmerz Subsidiary is in
default under or has failed to satisfy any judgment of any Governmental Entity.
None of the claims, actions, suits, proceedings or investigations, if adversely
determined, or the judgments, in each case, set forth in Section 4.9 of the
Lemmerz Disclosure Schedule, or any order or decree of any Governmental Entity
to or by which Lemmerz Holding or any Lemmerz Subsidiary is a party or subject
or bound, (i) has had or could reasonably be expected to have a Lemmerz
Material Adverse Effect, (ii) could impair in any material respect Lemmerz
Holding's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby or (iii) could impair in any material respect
the ability of Lemmerz Holding or any Lemmerz Subsidiary to conduct its
business after the Closing in the manner it is now being conducted.
Section 4.10 Personal Property. Lemmerz Holding or one of the
Lemmerz Subsidiaries has good and valid title to, or a valid and enforceable
right to use, all material personal property (whether tangible or intangible)
(other than Intellectual Property which is governed by Section 4.12) reflected
on the Lemmerz Balance Sheet and all such material personal property acquired by
Lemmerz Holding or
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any Lemmerz Subsidiary since December 31, 1996 (except such personal property
as has been disposed of in the ordinary course of business), free and clear of
any and all Liens except Permitted Liens.
Section 4.11 Real Property.
(a) Section 4.11(a) of the Lemmerz Disclosure Schedule sets forth a
list identifying all real property to which Lemmerz Holding or any Lemmerz
Subsidiary has legal or equitable title (the "Owned Realty") and all material
real property in which Lemmerz Holding or any Lemmerz Subsidiary has a valid and
subsisting leasehold or other interest (the "Leased Realty"), and sets forth for
each such Owned Realty and Leased Realty the title or interest held by Lemmerz
Holding or such Lemmerz Subsidiary.
(b) Lemmerz Holding and each Lemmerz Subsidiary has good and
marketable fee title to its Owned Realty, free and clear of any and all Liens
(except (i) Permitted Liens, (ii) Liens recorded in the land register and
construction encumbrance register and (iii) leases, subleases, rights of parties
in possession, easements and encroachments, none of which, individually or in
the aggregate, impairs in any material respect the use or detracts from the
value of the property to which it relates, or otherwise impairs in any
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material respect the conduct by Lemmerz Holding or any Lemmerz Subsidiary of
its business).
(c) Lemmerz Holding and each Lemmerz Subsidiary possesses a valid
and subsisting leasehold or other interest in its Leased Realty pursuant to the
leases or other instruments set forth in Section 4.11(a) of the Lemmerz
Disclosure Schedule (the "Leases"), free and clear of any and all Liens (except
(a) Permitted Liens and (b) subleases, rights of parties in possession,
easements and encroachments, none of which, individually or in the aggregate,
impairs in any material respect the conduct by Lemmerz Holding or any Lemmerz
Subsidiary of its business). Each Lease is in full force and effect, and is the
valid and binding obligation of each party thereto substantially in accordance
with its terms, and there is not under any Lease any existing default under any
material provision thereof by Lemmerz Holding or any Lemmerz Subsidiary or, to
the knowledge of Lemmerz, any other party thereto, or any condition or event
which, with notice or lapse of time or both, would constitute such a default.
Section 4.12 Intellectual Property. Lemmerz Holding and each
Lemmerz Subsidiary owns or has a valid and enforceable right to use all
copyrights, trade names, trademarks, service marks, service names, trade
secrets, designs,
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licenses and patents (including pending applications for any of the foregoing),
and other intellectual property rights, including know-how (whether related to
any of the foregoing or otherwise), used in or necessary to the conduct of its
business as now being conducted, free and clear of any and all Liens except
Permitted Liens (collectively, "Intellectual Property"). Section 4.12 of the
Lemmerz Disclosure Schedule sets forth a true, correct and complete list of the
material Intellectual Property, identifies the owner thereof, the right to use
or other interest therein of Lemmerz Holding and each Lemmerz Subsidiary, and,
with respect to each registration, grant and application, the jurisdiction and
record owner thereof. Except as set forth in Section 4.12 of the Lemmerz
Disclosure Schedule, there is no claim, action, suit, proceeding or
investigation by or before any Governmental Entity pending nor, since January
1, 1995, has there been any such claim, action, suit, proceeding or
investigation made or, to the knowledge of Lemmerz, threatened in writing, nor,
to the knowledge of Lemmerz, is there any basis for any such claim, action,
suit, proceeding or investigation, to the effect that (a) the operations of
Lemmerz Holding or any Lemmerz Subsidiary infringe upon or conflict with the
rights of any Person in respect of any
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Intellectual Property, or (b) any Intellectual Property is invalid or
unenforceable.
Section 4.13 Contracts. Section 4.13 of the Lemmerz Disclosure
Schedule sets forth a true, correct and complete list of any and all agreements,
arrangements, contracts and other commitments under which the mutual obligations
of the parties thereto have not been completely fulfilled and to which Lemmerz
Holding or any Lemmerz Subsidiary is a party or by or to which any of their
respective properties or assets is bound or subject (the "Contracts"), other
than such Contracts as (i) may be terminated at any time without penalty or
premium by such of Lemmerz Holding and each Lemmerz Subsidiary as is a party
thereto upon notice of sixty days or less, (ii) involve aggregate obligations of
Lemmerz Holding and Lemmerz Subsidiaries in any future twelve-month period of DM
650,000 or less, (iii) constitute purchase orders for the sale of products to
third parties in the ordinary course of business consistent with past practice,
(iv) are Plans listed in Section 4.15(a) of the Lemmerz Disclosure Schedule, (v)
are Related Party Agreements listed in Section 4.20(b) of the Lemmerz Disclosure
Schedule or (vi) are Leases listed in Section 4.11(a) of the Lemmerz Disclosure
Schedule, but including the following:
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(a) All agreements and obligations relating to the acquisition,
divestiture, encumbrance or other disposal of real property or interests in real
property;
(b) All agreements relating to the acquisition or the divestiture
of fixed assets (Gegenstande des Anlagevermogens), including intangible assets,
physical fixed assets (with the exception of real estate and real-estate-like
rights) and financial assets, the value of which exceeds DM 650,000.
(c) All lease agreements involving annual payments which exceed DM
400,000.
(d) (i) All exclusive license agreements, whether as licensor or
licensee, and (ii) all non-exclusive license agreements, whether as licensor or
licensee, involving annual payments which exceed DM 200,000.
(e) All credit agreements, whether as lender (other than
non-material loans to employees) or borrower (excluding credit agreements
between or among Lemmerz Holding and the Lemmerz Subsidiaries), with the
exception of customary extensions of the due date of receivables or payables
agreed to in the ordinary course of business, as well as all factoring
arrangements;
(f) All agreements with authorized dealers (Vertragshandler),
commercial agents (Handelsvertreter) or
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other agents as well as all similar distribution agreements, the termination of
which requires either (a) the payment of compensation to any Person or (b) a
notice period in excess of three (3) months;
(g) All employment agreements which provide for an annual aggregate
remuneration (as of the date of this Agreement) of more than DM 150,000 as well
as all agreements with advisors involving annual payments which exceed DM
150,000;
(h) All joint-venture and similar agreements, including any
enterprise contract (Unternehmensvertrage), within the meaning of Sections 291
et seq. of the German Stock Corporation Act; and
(i) All agreements or obligations which have been entered into or
assumed outside the ordinary course of business of the Lemmerz Holding and the
Lemmerz Subsidiaries.
Each Contract listed in Section 4.13 of the Lemmerz Disclosure
Schedule is in full force and effect, and is the valid and binding obligation of
each party thereto substantially in accordance with its terms. Neither Lemmerz
Holding nor any Lemmerz Subsidiary or, to the knowledge of Lemmerz, any other
party thereto is in breach of, or default under, any material provision of any
of the Contracts listed
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in Section 4.13 of the Lemmerz Disclosure Schedule, and no event has occurred
which, with notice or lapse of time or both, would constitute such a breach or
default. Lemmerz Holding and the Lemmerz Subsidiaries have made available to
HWI true, correct and complete copies of each Contract listed in Section 4.13
of the Lemmerz Disclosure Schedule. Except as set forth in Section 4.13 of the
Lemmerz Disclosure Schedule, neither Lemmerz Holding nor any Lemmerz Subsidiary
is a party to, nor are any of their respective properties or assets bound by or
subject to, any agreement, arrangement, contract or other commitment, including
any covenant not to compete or other restrictive covenant, which purports to
limit in any material respect the manner, or the localities, in which Lemmerz
Holding or any Lemmerz Subsidiary is entitled to conduct all or any material
portion of its business.
Section 4.14 Taxes.
(a) Lemmerz Holding and each Lemmerz Subsidiary has duly prepared
and timely filed all Tax Returns required to be filed on or before the date
hereof. All Taxes, social security contributions (Sozialversi-cherungsbeitrage)
and all other public law dues of any kind owed by Lemmerz Holding or any Lemmerz
Subsidiary have been paid when due.
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(b) (i) No material deficiencies for any Taxes have been proposed,
asserted or assessed against Lemmerz Holding or any Lemmerz Subsidiary by any
taxing authority with respect to any liabilities for Taxes of any of them which
have not been fully paid or finally settled and (ii) an adequate reserve in
accordance with German GAAP has been established in the financial statements of
Lemmerz Holding and each Lemmerz Subsidiary with respect to any Taxes which may
be proposed, assessed or asserted against it.
(c) Lemmerz Holding and each Lemmerz Subsidiary has established
adequate reserves in accordance with German GAAP for all Taxes not yet due and
payable.
(d) There is no Lien for Taxes on any of the properties or assets
of Lemmerz Holding or any Lemmerz Subsidiary (other than statutory Liens for
current Taxes not yet due and payable or due but not delinquent or being
contested in good faith by appropriate proceedings).
(e) Lemmerz Holding and each Lemmerz Subsidiary has complied in all
material respects with all with- holding Tax requirements and procedures, based
upon good faith filing positions, and, with respect to employee payroll and
withholding Taxes, has withheld amounts from its employees and, with respect to
such employees, has filed all Tax Returns regarding employee income Tax
withholding and social
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security, unemployment Taxes and all other payroll Taxes in compliance in all
material respects with applicable Tax withholding provisions and, based upon
good faith filing positions, has, in all material respects, made all required
remittances in respect of such amounts withheld.
(f) Except as set forth in Section 4.14(f) of the Lemmerz
Disclosure Schedule, neither Lemmerz Holding or any Lemmerz Subsidiary is a
party to any agreement, arrangement, contract or other commitment providing for
the allocation or apportionment of any liability for Taxes, payments of Taxes or
Tax benefits or refunds.
Section 4.15 Employee Benefit Plans.
(a) Section 4.15(a) of the Lemmerz Disclosure Schedule sets forth a
true, correct and complete list of (i) each bonus, deferred compensation,
incentive compensation, severance or termination pay, hospitalization or other
medical, and supplemental unemployment benefits plan, program, agreement or
arrangement, in each case, for the benefit of any current or former (including
retired) director, officer or employee of Lemmerz Holding or any Lemmerz
Subsidiary having an annual salary exceeding DM 150,000 per annum, and (ii) each
life insurance, material profit-sharing, pension or retirement plan or program,
in each case, sponsored, maintained or contributed to or required to be
contributed
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to by Lemmerz Holding or any Lemmerz Subsidiary, for the benefit of current or
former (including retired) directors, officers, or employees of Lemmerz Holding
or any Lemmerz Subsidiary, (each plan or program described in clause (ii) a
"Plan" and, collectively, the "Plans"). Neither Lemmerz Holding nor any
Lemmerz Subsidiary has any formal plan or commitment, whether legally binding
or otherwise, to create any additional Plan or to modify or change any existing
Plan in a way that would affect any current or former (including retired)
director, officer, or employee of Lemmerz Holding or any Lemmerz Subsidiary,
nor has any intention to do any of the foregoing been communicated to any such
director, officer or employee. None of the Plans is intended or required to be
approved or otherwise qualified by any Governmental Entity or under any Law.
(b) With respect to each of the Plans, Lemmerz Holding and each
Lemmerz Subsidiary has delivered to HWI true, correct and complete copies of
each of the following documents:
(i) a copy of the Plan and all documents describing the Plan
(including all amendments thereto);
(ii) a copy of the annual report, if required under Law, for
each of the last two years;
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(iii) a copy of the actuarial report, if required under Law,
for each of the last two years;
(iv) if the Plan is funded through a trust or any third-party
funding agreement, a copy of such trust or third-party funding agreement
(including all amendments thereto) and the latest financial statements thereof;
and
(v) all material contracts relating to the Plan with respect
to which Lemmerz Holding or any Lemmerz Subsidiary may have any liability,
including insurance contracts, investment management agreements, subscription
and participation agreements and record-keeping agreements.
(c) Except as set forth in Section 4.15(c) of the Lemmerz
Disclosure Schedule, full payment has been made of all amounts which Lemmerz
Holding or any Lemmerz Subsidiary is required to pay under the terms of each
Plan as of the last day of the most recent plan year thereof ended prior to the
date of this Agreement, and all such amounts properly accrued through the date
hereof with respect to the current plan year thereof have been paid by Lemmerz
Holding and each Lemmerz Subsidiary on or prior to the date hereof or have been
properly recorded in the consolidated financial statements of Lemmerz Holding to
the extent required in accordance with German GAAP; and all contributions
required to be made with respect thereto (whether pursuant to the terms of
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any Plan or otherwise) on or prior to the date hereof have been timely made.
(d) Each Plan has, in all material respects, been created,
operated and administered in accordance with its terms and in compliance with
applicable Laws.
(e) Except as set forth in Section 4.15(e) of the Lemmerz
Disclosure Schedule, no Plan provides any benefit, including death or medical
benefits (whether or not insured), to any current or former (including retired)
director, officer or employee of Lemmerz Holding or any Lemmerz Subsidiary
beyond such Person's retirement or other termination of service (other than (i)
coverage mandated by applicable Law, (ii) deferred compensation benefits accrued
as liabilities on the books of Lemmerz Holding or any Lemmerz Subsidiary or
(iii) benefits the full cost of which is borne by such Person (or his
beneficiary)), and neither Lemmerz Holding nor any Lemmerz Subsidiary has ever
represented, promised or contracted (whether in oral or written form) that any
director, officer, or employee, or group of directors, officers, or employees,
would be provided with any such benefit upon their retirement or termination of
employment, except to the extent required by applicable Law.
(f) The execution and delivery of this Agreement do not, and the
performance of this Agreement and the con-
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summation of the transactions contemplated hereby, will not, either alone or in
combination with another event, (i) entitle any current or former (including
retired) director, officer or employee of Lemmerz Holding or any Lemmerz
Subsidiary to severance pay, unemployment compensation or any other payment or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such director, officer or employee.
(g) Except as set forth in Section 4.15(g) of the Lemmerz
Disclosure Schedule, with respect to each Plan that is funded wholly or
partially through an insurance policy, there will be no liability from and after
the Closing of Lemmerz Holding or any Lemmerz Subsidiary under any such
insurance policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to the Closing.
(h) Lemmerz Holding and each Lemmerz Subsidiary has always duly
made the appropriate contributions to the pension insurance fund
(Pensionssicherungsverein) and any similar institution when due and has reserved
for all such contributions in accordance with German GAAP.
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Section 4.16 Environmental Matters.
(a) Except as set forth in Section 4.16(a) of the Lemmerz
Disclosure Schedule, Lemmerz Holding and each Lemmerz Subsidiary is in
compliance in all material respects with all applicable Environmental Laws and
consents of private parties (which compliance includes the possession by Lemmerz
Holding and each Lemmerz Subsidiary of all Permits of all Governmental Entities
and private parties required under applicable Environmental Laws (collectively,
"Lemmerz Environmental Permits"), and compliance in all material respects with
the terms and conditions thereof). Neither Lemmerz Holding nor any Lemmerz
Subsidiary has received any notice (whether written or, to the knowledge of
Lemmerz, oral), whether from a Governmental Entity, citizens group, employee,
private party or otherwise, that alleges that Lemmerz Holding or any Lemmerz
Subsidiary is not in such compliance, and there is no past or present (or, to
the knowledge of Lemmerz, future) condition, event, circumstance, change or
effect that may prevent or interfere with such compliance in the future. All
Lemmerz Environmental Permits now held by Lemmerz Holding and each Lemmerz
Subsidiary are in full force and effect, and no appeal or any other proceeding
is pending to revoke any such Lemmerz Environmental Permit. All Lemmerz
Environmental Permits, as
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of the date indicated therein (which shall not be earlier than May 1, 1997), are
listed in Section 4.16(a) of the Lemmerz Disclosure Schedule.
(b) Except as set forth in Section 4.16(b) of the Lemmerz
Disclosure Schedule, to the knowledge of Lemmerz, no transfer, reissuance or
renewal of any Lemmerz Environmental Permit, or notice to any Governmental
Entity under any Environmental Law, and no additional such Permit, will be
required to permit HWI to conduct the business of Lemmerz Holding and each
Lemmerz Subsidiary in compliance in all material respects with all applicable
Environmental Laws immediately following the Closing.
(c) Except as set forth in Section 4.16(c) of the Lemmerz
Disclosure Schedule, there is no Environ- mental Claim pending or, to the
knowledge of Lemmerz, threatened against Lemmerz Holding, any Lemmerz Subsidiary
or any Person whose liability for any Environmental Claim has been retained or
assumed by Lemmerz Holding or any Lemmerz Subsidiary, whether by agreement or by
operation of Law.
(d) Except as set forth in Section 4.16(d) of the Lemmerz
Disclosure Schedule, there is no past or present (or, to the knowledge of
Lemmerz, future) condition, event, circumstance, change or effect, including the
presence, Release or threatened release of any Hazardous Material, which
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has formed, or could reasonably be expected to form, the basis of any
Environmental Claim against Lemmerz Holding, any Lemmerz Subsidiary or any
Person whose liability for any Environmental Claim has been retained or assumed
by Lemmerz Holding or any Lemmerz Subsidiary, whether by agreement or by
operation of Law.
(e) Lemmerz Holding and each Lemmerz Subsidiary has delivered or
otherwise made available for inspec- tion to HWI true, correct and complete
copies of all reports, studies, analyses, tests and monitoring results since
December 31, 1994 available to Lemmerz Holding or any Lemmerz Subsidiary
pertaining to any Hazardous Material in, on, beneath or adjacent to any Real
Property or pertaining to compliance by Lemmerz Holding or any Lemmerz
Subsidiary with, or liability under, any applicable Environmental Law.
(f) Without limiting the generality of the foregoing, except as set
forth in Section 4.16(f) of the Lemmerz Disclosure Schedule, no Real Property
contains any of the following: underground storage tanks; asbestos;
polychlorinated biphenyls; underground injection wells; radioactive materials
(except as may exist in nature upon any such real property); or septic tanks in
which process wastewater or any Hazardous Material has been discharged or
disposed.
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(g) Except as set forth in Section 4.16(g) of the Disclosure
Schedule, no Lien has been recorded under any Environmental Law with respect to
any property or asset of Lemmerz Holding or any Lemmerz Subsidiary, including
any Real Property.
(h) Except as set forth in Section 4.16(h) of the Lemmerz
Disclosure Schedule, no Real Property is listed or proposed for listing on any
list of contaminated or environmentally damaged properties maintained by any
Governmental Entity having jurisdiction over any such Real Property.
Section 4.17 Labor Matters. Except as set forth in the respective
subsections of Section 4.17 of the Lemmerz Disclosure Schedule, (a) neither
Lemmerz Holding nor any Lemmerz Subsidiary is, as of the date indicated therein
(which shall not be earlier than May 1, 1997), a party to any collective
bargaining agreement, works agreement (Betriebsvereinbarung) or similar
agreement with any labor organization or employee association; (b) no grievance
or arbitration proceeding arising out of or under any collective bargaining,
works agreement or similar agreement is pending and, to the knowledge of
Lemmerz, no such grievance or proceeding is threatened and no claim therefor
exists, other than such grievances, proceedings and claims as could not
reasonably be expected, individually or in the aggre-
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gate, to impair in any material respect Lemmerz Holding's ability to perform
its obligations hereunder or to consummate the transactions contemplated hereby
or to impair in any material respect the ability of Lemmerz Holding or any
Lemmerz Subsidiary to conduct its business after the Closing in the manner now
being conducted; (c) since January 1, 1995, there has not been, nor is there
pending or, to the knowledge of Lemmerz, threatened, any labor dispute between
Lemmerz Holding or any Lemmerz Subsidiary and any labor organization or
employee association, or any strike, slowdown, work stoppage or other similar
organized labor activity involving any employee of, or affecting, Lemmerz
Holding or any Lemmerz Subsidiary; (d) Lemmerz Holding and each Lemmerz
Subsidiary is, and has been since January 1, 1995, in compliance in all
material respects with all Laws regarding labor, employment and employment
practices, conditions of employment, occupational safety and health, and wages
and hours (collectively, "Labor Laws"); (e) neither Lemmerz Holding nor any
Lemmerz Subsidiary has received notice of the intent of any Governmental Entity
responsible for the enforcement of any Labor Law to conduct an investigation
with respect to Lemmerz Holding or any Lemmerz Subsidiary, and, to the
knowledge of Lemmerz, no such investigation is in progress; and (f) there is no
material claim, action,
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suit, proceeding or investigation pending or, to the knowledge of Lemmerz,
threatened between Lemmerz Holding or any Lemmerz Subsidiary and any of its
current or former (including retired) directors, officers or employees,
including any claim for wrongful termination or breach of express or implied
contract of employment or for violation of Labor Laws.
Section 4.18 Insurance Policies. The properties, assets, directors,
officers, employees, businesses and operations of Lemmerz Holding and each
Lemmerz Subsidiary are insured by policies against such risks, casualties and
contingen- cies and of such types and amounts as are necessary for the size and
scope of their respective businesses as now being conducted. Section 4.18 of
the Lemmerz Disclosure Schedules sets forth a true, correct and complete list of
all such policies, as of the date indicated therein (which shall not be earlier
than May 1, 1997). Each such policy is in full force and effect, and is the
valid and binding obligation, substantially in accordance with the terms
thereof, of each party thereto; and all premiums due and payable for such
policies have been timely paid. None of such insurance policies will lapse,
terminate or expire as a result of the execution, delivery and performance of
this
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Agreement or the consummation of the transactions contemplated hereby.
Section 4.19 Product Liability. Section 4.19(a) of the Lemmerz
Disclosure Schedule sets forth a true, correct and complete list of any and all
(a) product liability claims made against Lemmerz Holding or any Lemmerz
Subsidiary since January 1, 1995 and (b) amounts paid by Lemmerz Holding or any
Lemmerz Subsidiary (or any insurance company under any policy issued to any of
them) with respect to any such claim. Section 4.19(b) of the Lemmerz Disclosure
Schedule sets forth a true, correct and complete list of any and all product
liability insurance policies providing coverage for occurrences after January 1,
1990. There is no claim, action, suit, proceeding or investigation by or before
any Governmental Entity pending or, to the knowledge of Lemmerz, threatened in
writing against or involving Lemmerz Holding or any Lemmerz Subsidiary relating
to any product designed, manufactured or sold by Lemmerz Holding or any Lemmerz
Subsidiary and alleged to have been, or to be, defective, or improperly
designed, manufactured or sold.
Section 4.20 Related Party Agreements.
(a) Section 4.20(a) of the Lemmerz Disclosure Schedule sets forth a
true, correct and complete list of the directors and officers of Lemmerz Holding
and each Lemmerz
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Subsidiary and their respective annual salaries, bonuses and other
compensation, including directors' fees.
(b) Except as set forth in Section 4.20(b) of the Lemmerz
Disclosure Schedule, (i) no Lemmerz Shareholder or any Affiliate or Associate of
any Lemmerz Shareholder, or any person who has served as a director (other than
code-termination directors) or officer of Lemmerz Holding since June 1, 1995 or,
(ii) to the knowledge of Horst Kukwa-Lemmerz, after due inquiry, any person who
has served as a director (other than codetermination directors) or officer of
any Lemmerz Subsidiary since June 1, 1995, or any Affiliate or Associate of any
director or officer referred to in clause (i) or (ii) above, at the Closing (y)
will be a party to any agreement, arrangement, contract or other commitment to
which Lemmerz Holding or any Lemmerz Subsidiary will then be a party or by or to
which any of their respective properties or assets will then be bound or subject
("Related Party Agreement"), or (z) will have any interest, whether direct or
indirect, in any agreement, arrangement, contract or other commitment, property
or asset owned by, used in or pertaining to the business of Lemmerz Holding or
any Lemmerz Subsidiary ("Related Party Interest"). Other than those set forth
in Section 4.20(b) of the Lemmerz Disclosure Schedule, all Related Party
Agreements and Related Party
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Interests to which any Lemmerz Shareholder or any Affiliate or Associate of any
Lemmerz Shareholder, or any current or former (including retired) director or
officer of Lemmerz Holding, is a party, and, to the knowledge of Horst
Kukwa-Lemmerz, all other Related Party Agreements and Related Party Interests,
have been, or will be, prior to the Closing, terminated or otherwise cancelled
without any liability or obligation to any member of the HWI Group whatsoever.
Section 4.21 Customers/Suppliers; Joint Venturers.
(a) (i) Section 4.21(a)(i) of the Lemmerz Disclosure Schedule sets
forth a true, correct and complete list of the ten largest customers in each of
the product categories of Lemmerz Holding and each Lemmerz Subsidiary listed in
Section 4.21(a)(i) of the Lemmerz Disclosure Schedule in terms of sales during
each of the years ended December 31, 1996 and 1995, showing the approximate
total sales by Lemmerz Holding and each such Lemmerz Subsidiary to each such
customer during such periods, and (ii) Section 4.21(a)(ii)of the Lemmerz
Disclosure Schedule sets forth a true, correct and complete list of the ten
largest suppliers of Lemmerz Holding and each such Lemmerz Subsidiary in terms
of purchases during each of the years ended December 31, 1996 and 1995, showing
the approximate total purchases by
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Lemmerz Holding and each such Lemmerz Subsidiary from each such supplier during
such periods.
(b) No customer or supplier of Lemmerz Holding or any such Lemmerz
Subsidiary, nor any Person identified in Section 4.3(c) of the Lemmerz
Disclosure Schedule as a holder of capital stock or other equity interests of
any Lemmerz Subsid- iary, nor any holder of capital stock or other equity
interests of any Affiliate of Lemmerz Holding or any such Lemmerz Subsidiary,
has threatened in writing to pursue a course of action having either the purpose
or effect of terminating its relationship with Lemmerz Holding or any Lemmerz
Subsidiary upon consummation of the transactions contemplated by this Agreement.
Section 4.22 Bank Accounts. Section 4.22 of the Lemmerz Disclosure
Schedule sets forth the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which Lemmerz
Holding or any Lemmerz Subsidiary has accounts or safe-deposit boxes and the
names of all Persons authorized to draw thereon or to have access thereto.
Section 4.23 Brokers. Other than Morgan Stanley pursuant to the
Morgan Stanley Agreement, no Person is entitled to any brokerage, finder's or
investment banking fee, commission or expense in connection with the
transactions
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contemplated hereby by reason of any action taken by or on behalf of Lemmerz
Holding or any Lemmerz Subsidiary or any of their respective representatives or
agents.
ARTICLE ARTICLE V
REPRESENTATIONS AND WARRANTIES OF HWI
HWI hereby represents and warrants to the Lemmerz Shareholders as
follows:
Section 5.1 Corporate Organization; Subsidiaries. HWI is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each Subsidiary of HWI (each a "HWI Subsidiary" and,
collectively, the "HWI Subsidiaries"), together with an indication of its legal
form and the jurisdiction of its organization, is listed in Section 5.1(b) of
the HWI Disclosure Schedule and is duly organized and validly existing in such
jurisdiction. HWI and each HWI Subsidiary has all requisite corporate power and
corporate authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted.
Section 5.2 Certificates of Incorporation and By-Laws; Corporate
Records. HWI has delivered to the Lemmerz Shareholders a true, correct and
complete copy of the certificate or articles of incorporation or association and
the
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by-laws, or similar charter and organizational documents, in each case as
amended or restated, of HWI and each HWI Subsidiary. Neither HWI nor any HWI
Subsidiary is in violation in any material respect of any provision of its
certificate or articles of incorporation, or by-laws, or similar charter or
organizational document. HWI has made available to the Lemmerz Shareholders
for inspection true, correct and complete copies of available minutes, stock
record books and stock ledgers of HWI and each HWI Subsidiary.
Section 5.3 Capitalization.
(a) The authorized capital stock of HWI consists of (i) 99,000,000
shares of HWI Common Stock, of which, as of May 1, 1997, 22,231,492 shares were
issued and outstanding, none of which were held in the treasury of HWI and
5,725,972 shares were reserved for future issuance pursuant to options, warrants
or other rights, agreements, arrangements or commitments, (ii) 1,000,000 shares
of Nonvoting Common Stock, par value $.01 per share, of which, as of May 1,
1997, 159,026 shares were issued and outstanding, none of which were held in the
treasury of HWI and 30,000 shares were reserved for future issuance pursuant to
options, warrants or other rights, agreements, arrangements or commitments, and
(iii) 25,000,000 shares of preferred stock, par value $.01 per share, none of
which, as of May 1, 1997, were
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issued and outstanding. Each issued and outstanding share of capital stock of
HWI has been, and each share of HWI Preferred Stock to be issued hereunder (and
each share of HWI Common Stock into which such share is convertible) will be
when issued, duly authorized and validly issued, and is, and each share of HWI
Preferred Stock to be issued hereunder (and each share of HWI Common Stock into
which such share will be convertible) will be when issued, fully paid and
nonassessable, and no such share of capital stock of HWI has been, or will be
when issued, issued in violation of, or is, or will be when issued, subject to,
any preemptive or subscription rights.
(b) Section 5.3(b) of the HWI Disclosure Schedule sets forth a
true, correct and complete list of each HWI Subsidiary; its authorized, issued
and outstanding capital stock or other equity interests; the name of each record
owner of such capital stock or other equity interests, together with the number
of shares of capital stock or other equity interests so owned; such capital
stock or other equity interests held in its treasury; such capital stock or
other equity interests reserved for future issuance pursuant to any option,
warrant or other right, agreement, arrangement or commitment; and the identity
of each party to any such option, warrant or other right, agreement, arrangement
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or commitment. Each issued and outstanding share of capital stock or other
equity interests of each HWI Subsidiary has been duly authorized and validly
issued, and is fully paid and nonassessable, and has not been issued in
violation of, and, with respect to each such share or interest as is owned by
HWI or any HWI Subsidiary, is not subject to, any preemptive or subscription
rights; and, except as set forth in Section 5.3(c) of the HWI Disclosure
Schedule, each such share of capital stock or other equity interests as is owned
by HWI or any HWI Subsidiary is owned free and clear of any and all Liens.
(c) Except as set forth in Section 5.3(c) of the HWI Disclosure
Schedule, (i) other than as contemplated by this Agreement, there is no option,
warrant or other right, agreement, arrangement or commitment of any kind
whatsoever to which HWI or any HWI Subsidiary is a party relating to the issued
or unissued capital stock or other equity interests of HWI or any HWI Subsidiary
or obligating HWI or any HWI Subsidiary to grant, issue or sell any share of the
capital stock or other equity interests of HWI or any HWI Subsidiary by sale,
lease, license or otherwise; (ii) there is no obligation, contingent or
otherwise, of HWI or any HWI Subsidiary to (A) repurchase, redeem or otherwise
acquire any share of the capital stock or other equity interests of
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HWI or any HWI Subsidiary, or (B) make any investment in (in the form of a loan,
capital contribution or otherwise), or provide any guarantee with respect to the
obligations of any Person other than an HWI Subsidiary; (iii) other than the
ownership by HWI of the HWI Subsidiaries or as otherwise set forth in Section
5.3(d) of the HWI Disclosure Schedule, neither HWI nor any HWI Subsidiary,
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 limited liability company, corporation, partnership, joint venture or
other entity; (iv) there is no agreement, arrangement, contract or other
commitment of any kind whatsoever (contingent or otherwise) to which HWI or any
HWI Subsidiary is a party pursuant to which any Person is or may become entitled
to receive any payment based on the revenues or earnings of HWI or any HWI
Subsidiary; and (v) other than the Stockholders Agreement, there is no voting
trust, proxy or other agreement, arrangement, contract or other commitment of
any kind whatsoever to which HWI or any HWI Subsidiary is a party, or by which
HWI or any HWI Subsidiary or any of their respective properties or assets is
bound or subject, with
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respect to the voting of any share of capital stock or other equity interests of
HWI or any HWI Subsidiary. Section
Section 5.4 Authorization; No Violation; Consents and Approvals.
(a) HWI has the requisite corporate power and corporate authority
to execute and deliver this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
perfor- mance of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly authorized by the Board of Directors, or
similar governing body, of HWI, the Board of Directors of HWI has determined to
recommend the Stockholder Approval Matters to HWI's stockholders for approval
and adoption at the Meeting and, except with respect to proceedings required
under the Notarial Deed and the Spain Agreement, no other corporate proceeding
on the part of HWI or any HWI Subsidiary is required to authorize the execution,
delivery and performance hereof, and the consummation of the transactions
contemplated hereby, other than the Approval at the Meeting as set forth in
Section 7.1. This Agreement has been duly executed and delivered by HWI and,
assuming the due authorization, execution and delivery hereof by each Lemmerz
Shareholder, con-
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stitutes the valid and binding obligation of HWI, enforceable against HWI in
accordance with its terms.
(b) The execution and delivery of this Agreement by HWI do not,
and the performance of this Agreement by HWI and the consummation of the
transactions contemplated hereby, will not, (i) conflict with or violate the
certificate or articles of incorporation or by-laws, or similar charter or
organizational documents, in each case as amended or restated, of HWI or any HWI
Subsidiary, (ii) conflict with or violate any Law, judgment, order or decree
applicable to HWI or any HWI Subsidiary, or by or to which any of their
respective properties or assets is bound or subject, or (iii) except as set
forth in Section 5.4(b) of the HWI Disclosure Schedule, result in any breach of,
or constitute a default (or an event that with notice or lapse of time or both
would constitute a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or require payment under, or result
in the creation of a Lien on any of the properties or assets of HWI or any HWI
Subsidiary under, any note, bond, mortgage, indenture, contract, agreement,
arrangement, commitment, lease, license, permit, franchise or other instrument
or obligation to which HWI or any HWI Subsidiary is a party or by or to which
HWI or any HWI Subsidiary or any of their respective properties or
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assets is bound or subject, other than, with respect to clause (iii) above, such
conflicts, violations, breaches and defaults as could not reasonably be
expected, individually or in the aggregate, to impair in any material respect
HWI's ability to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
(c) Except with respect to proceedings required under the Notarial
Deed and the Spain Agreement, the execution and delivery of this Agreement by
HWI do not, and the performance by HWI of this Agreement and the consummation of
the transactions contemplated hereby, will not, require HWI or any HWI
Subsidiary to obtain any Consent of any Governmental Entity, or any third party,
except for (i) applicable requirements, if any, of the HSR Act and other
Antitrust Laws, (ii) filings with the German Federal Cartel Office
(Bundeskartellamt), (iii) the Consents set forth in Section 5.4(c) of the HWI
Disclosure Schedule, each of which has been, or will be prior to the Closing,
obtained or made, and (iv) such Consents, the failure of which to obtain or make
could not reasonably be expected, individually or in the aggregate, to impair in
any material respect HWI's ability to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
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(d) Except with respect to proceedings required under the Notarial
Deed and the Spain Agreement, HWI and each HWI Subsidiary has taken all steps
necessary to approve and to irrevocably exempt the transactions contemplated by
this Agreement from the provisions of any applicable Law, including Section 203
of the General Corporation Law of the State of Delaware, certificate or articles
of incorporation or by-laws, or similar charter or organizational document, in
each case as amended or restated, or contractual provision, in each case,
containing any change of control, "anti-takeover" or similar provision.
Section 5.5 Permits; Compliance with Laws.
(a) HWI and each HWI Subsidiary possesses all Permits necessary to
own, lease and operate its properties and assets and to carry on its business as
now being conducted (collectively, the "HWI Permits"), and there is no claim,
action, suit, proceeding or investigation pending or, to the knowledge of the
HWI, threatened in writing regarding suspension or cancellation of any of the
HWI Permits. None of the HWI Permits will lapse, terminate or expire, or
require transfer, reissuance or renewal, as a result of the execution, delivery
or performance of this Agreement by the Buyer or the consummation of the
transactions contemplated hereby.
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(b) HWI and each HWI Subsidiary is, and has been since January 1,
1995, in compliance in all material respects with its HWI Permits and all Laws
applicable to it or by or to which any of its properties or assets is bound or
subject. Since January 1, 1995, neither HWI nor any HWI Subsidiary has received
from any Governmental Entity any notice with respect to any possible conflict,
default or violation of any HWI Permit or Law.
Section 5.6 SEC Reports; Financial Statements.
(a) Since February 1, 1994, HWI has filed all forms, reports,
statements and other documents required to be filed with the Securities and
Exchange Commission ("SEC") including all Annual Reports on Form 10-K, all
Quarterly Reports on Form 10-Q, all Reports on Form 8-K, all other reports and
registration statements, and all amendments and supplements to all such reports
and registration statements (collectively, the "HWI SEC Reports"). The HWI SEC
Reports were prepared in accordance with the requirements of all applicable Laws
(including the Securities Act and the Exchange Act) and do not now and did not
as of their respective dates as amended through the date hereof, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made
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therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including the
related notes thereto) of HWI included in the HWI SEC Reports has been prepared
in accordance with United States GAAP consistently applied throughout the
periods involved, except as otherwise noted therein and subject, in the case of
interim financial statements, to normal and recurring year-end audit
adjustments, and fairly presents the consolidated financial position, results of
operations and cash flows of HWI as of the dates and for the periods indicated
therein. The audited consolidated balance sheet of HWI included in the Report
on Form 10-K of HWI filed with the SEC for the year ended January 31, 1997 is
herein referred to as the "HWI Balance Sheet."
Section 5.7 Absence of Certain Changes or Events. Except as set
forth in the respective subsec- tions of Section 5.7 of the HWI Disclosure
Schedule, since January 31, 1997, (a) HWI and each HWI Subsidiary has conducted
its business only in the ordinary course consistent with past practice and (b)
there has not occurred, nor has there been any condition, event, circumstance,
change or effect which has had or would reasonably be expected to have, a HWI
Material Adverse Effect.
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Section 5.8 Certain Covenants. Since December 6, 1996, except as
expressly contemplated by this Agreement or as set forth in the respective
subsections of Section 5.8 of the HWI Disclosure Schedule, HWI has not taken any
action, or permitted any HWI Subsidiary, to take any action, which, if taken
after the execution and delivery of this Agreement, would constitute a breach or
violation of Section 6.2.
Section 5.9 Litigation. Except as set forth in Section 5.9 of the
HWI Disclosure Schedule or in any HWI SEC Report, (a) there is no claim, action,
suit, proceeding or investigation, at law or in equity (including actions or
proceedings seeking injunctive relief), by or before any Governmental Entity
pending or, to the knowledge of HWI, threatened in writing against HWI or any
HWI Subsidiary or affecting any of their respective properties or assets, and
(b) neither HWI nor any HWI Subsidiary is in default under or has failed to
satisfy any judgment of any Governmental Entity. None of the claims, actions,
suits, proceedings or investigations, if adversely determined, or the judgments,
in each case, set forth in Section 5.9 of the HWI Disclosure Schedule, or any
order or decree of any Governmental Entity to or by which HWI or any HWI
Subsidiary is a party or subject or bound, (i) has had or could reasonably be
expected to have a HWI Material Adverse Effect, (ii) could
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impair in any material respect HWI's ability to perform its obligations
hereunder or to consummate the transactions contemplated hereby or (iii) could
impair in any material respect the ability of HWI or any HWI Subsidiary to
conduct its business after the Closing in the manner it is now being conducted.
Section 5.10 Contracts. Each material agreement, arrangement,
contract and other commitment under which the mutual obligations of the parties
thereto have not been completely fulfilled and to which HWI or any HWI
Subsidiary is a party, or by or to which any of their respective properties or
assets is bound, is in full force and effect, and is the valid and binding
obligation of each party thereto substantially in accordance with its terms.
Neither HWI nor any HWI Subsidiary or, to the knowledge of HWI, any other party
thereto, is in breach of, or default under, any material provision of any such
agreement, arrangement, contract or other commitment, and no event has occurred
which, with notice or lapse of time or both, would constitute such a breach or
default.
Section 5.11 Brokers. Except as set forth in Section 5.11 of the
HWI Disclosure Schedule, no Person is entitled to any brokerage, finder's or
investment banking fee, commission or expense in connection with the transac-
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tions contemplated hereby by reason of any action taken by or on behalf of HWI
or any HWI Subsidiary or any of their respective representatives or agents.
ARTICLE ARTICLE VI
CONDUCT OF BUSINESS PENDING THE CLOSING
Section 6.1 Conduct of Business by Lemmerz Parties Pending the
Closing. Between the date hereof and the Closing, unless HWI shall otherwise
agree in writing, or as otherwise expressly contemplated by this Agreement, the
Lemmerz Shareholders shall cause Lemmerz Holding and each Lemmerz Subsidiary (i)
to conduct its business only in the ordinary course consistent with past
practice and (ii) 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 HWI shall otherwise
agree in writing, or as otherwise expressly contemplated by this Agreement,
prior to the Closing no Lemmerz Shareholder shall permit Lemmerz Holding or any
Lemmerz Subsidiary to:
(a) (i) amend its charter or organizational documents, (ii) split,
combine or reclassify any shares of its outstanding capital stock, (iii)
declare, set aside or pay
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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;
(b) authorize for issuance, issue, sell or pledge or agree to
issue, sell or pledge 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 or otherwise enter
into any material contract, commitment or transaction other than in the ordinary
course of business, (iii) sell, lease, license, waive, release, transfer,
encumber or otherwise dispose of any of its material assets other than in the
ordinary course of business, or (iv) enter into any material contract,
commitment or transaction relating to any joint venture or similar arrangement;
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(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, (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 Lemmerz Subsidiary), in each case, other than in
the ordinary course of business, or (iii) make any loans, advances or capital
contributions to, or investments in, any other Person, other than to any Lemmerz
Subsidiary;
(e) pay, satisfy, discharge or settle any material claims,
liabilities or obligations (absolute, accrued, contingent or otherwise), other
than in the ordinary course of business or pursuant to mandatory terms of any
legally binding agreement in effect on the date hereof;
(f) modify or amend, or waive any benefit of, any non-competition
agreement to which any Lemmerz Holding or any Lemmerz Subsidiary is a party;
(g) authorize or make capital expenditures in excess of $2
million, individually, or in excess of $10 million, in the aggregate, except as
have been previously committed or agreed as set forth in the three-year plan,
1997-1999, of Lemmerz Holding previously delivered to HWI;
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(h) permit any insurance policy naming any Lemmerz Holding or any
Lemmerz Subsidiary 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, (ii) enter into
any employment or consulting agreement which provides for aggregate
compensation, including any severance obligation, in excess of $350,000 for any
single employee, or $1,500,000 for all management employees together, (iii)
increase in any manner the compensation (including severance) or fringe benefits
of, or pay any bonus to, any manager or employee (except for normal increases in
salaries compensation and bonuses and payment of bonuses, in each case in the
ordinary course of business), or (iv) 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 Plan, agreement, contract,
arrangement or other 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 mandatory principles of
accounting in the relevant jurisdiction of organization; or
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(k) except as set forth in Section 6.1(k) of the Lemmerz
Disclosure Schedule, enter into any contract, agreement, commitment or
arrangement with respect to any of the foregoing.
Section 6.2 Conduct of Business by HWI Pending the Closing.
Between the date hereof and the Clos- ing, unless Lemmerz Holding shall
otherwise agree in writing, or as otherwise expressly contemplated by this
Agreement, HWI and each HWI Subsidiary shall (a) conduct its business only in
the ordinary course consistent with past practice and (b) use its best efforts
to preserve intact the present business organization, keep available the
services of its present management and key employees, and preserve their
existing business relationships. Without limiting the generality of the
foregoing and except as set forth in Section 6.2 of the HWI Disclosure Sched-
ule, unless Lemmerz Holding shall otherwise agree in writing, prior to the
Closing HWI shall not and shall not permit any HWI Subsidiary to:
(a) (i) amend its Certificate of Incorporation, as amended, or
other charter or organizational documents, (ii) 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
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shares of its capital stock or shares of the capital stock of any HWI
Subsidiary;
(b) authorize for issuance, issue, sell or pledge or agree to
issue, sell or pledge any shares of, or rights to acquire or convertible into
any shares of, its capital stock or shares of the capital stock of any HWI
Subsidiary (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) (other than
pursuant to the exercise of options or similar securities outstanding on
December 6, 1996 and for options proposed to be granted under HWI's proposed
1996 Stock Option Plan);
(c) (i) merge, combine or consolidate with another entity, or (ii)
take any other action that material- ly adversely affects its ability to
consummate the transactions contemplated by this Agreement;
(d) take any action that, if the Amended Stockholders Agreement
were in effect, would require the consent of the Lemmerz Shareholders;
(e) sell, lease, license, waive, release, transfer, encumber or
otherwise dispose of any of its material assets necessary to the operation of
its business, other than in the ordinary course of business; or
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(f) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing.
ARTICLE ARTICLE VII
COVENANTS OF THE PARTIES
Section 7.1 HWI Stockholder Approval. Following the Closing, after
receipt by HWI of the information to be provided by the Lemmerz Shareholders
pursuant to Section 7.2, HWI shall (a)(i) promptly commence the preparation of a
proxy statement (the "Proxy Statement") to be filed with the SEC and (ii) file
the Proxy Statement with, and use its reasonable best efforts to have it cleared
by, the SEC as soon as practicable, and mailed to HWI Stockholders in connection
with the Meeting, (b) acting through its Board of Directors, subject to and in
accordance with applicable Laws and its Restated Certificate of Incorporation,
and its Amended and Restated By- laws, promptly and duly call, give notice of
and hold as soon as practicable an annual or special meeting (the "Meeting") of
the holders of HWI Common Stock ("HWI Stockholders") for the purpose of voting
to approve and adopt, among other things, (i) the issuance of the shares of HWI
Common Stock into which the shares of HWI Preferred Stock issued and delivered
to the Lemmerz Shareholders hereunder will be convertible and (ii) the amendment
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of HWI's Restated Certificate of Incorporation to change the name of HWI to
Hayes Lemmerz International Inc. (collectively, the "Stockholder Approval
Matters") and (c) use its best efforts to obtain the approval and adoption by
HWI Stockholders of the Stockholder Approval Matters (the "Approval"). On and
as of the date hereof, HWI has delivered to the Lemmerz Shareholders irrevocable
proxies in the form of Exhibit I in favor of the approval and adoption of the
Stockholder Approval Matters, duly executed by holders of not less than the
percentage of outstanding HWI Common Stock required to obtain the Approval at
the Meeting.
Section 7.2 Information from Lemmerz. The Lemmerz Shareholders shall
use their respective reasonable best efforts promptly to provide HWI with all
information concerning the Lemmerz Shareholders requested by HWI and required to
be included in the Proxy Statement.
Section 7.3 Access and Information. Prior to the Closing, HWI shall,
and shall cause each HWI Subsidiary, and their directors, officers, employees,
agents and representatives to, and each Lemmerz Shareholder shall, and shall
cause each of Newco Holding, Newco A, Newco B, Lemmerz Holding and each Lemmerz
Subsidiary, and their respective directors, officers, employees, agents and
representatives, to, afford to the other Parties and to such other Parties'
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directors, officers, employees, agents and representatives (except to the extent
not permitted under applicable Law and except as may be limited by any
confidentiality obligation contained in any contract with a third party)
reasonable access during normal business hours to all of such Party's books and
records and its properties, plants and personnel. The Confidentiality Agreement
executed by HWI and Lemmerz Holding dated August 25, 1995 (the "Confidentiality
Agreement") shall survive the execution of this Agreement and the Closing
(except for Section 11 of the Confidentiality Agreement which by its terms shall
terminate at the Closing), shall remain in full force and effect, and shall
continue to be binding on the Lemmerz Shareholders.
Section 7.4 No Solicitation.
(a) Prior to the Closing or earlier termination of this Agreement, no
Lemmerz Shareholder shall, nor shall any Lemmerz Shareholder permit Lemmerz
Holding or any Lemmerz Subsidiary, or any of their respective directors,
officers, employees, agents or representatives, to, 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 Lemmerz Holding or
any Lemmerz Subsidiary or the acqui-
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sition of all or any significant part of the assets (other than sales of
inventory in the ordinary course) or capital stock of Lemmerz Holding or any
Lemmerz Subsidiary (an "Acquisition Transaction") or (ii) negotiate, explore or
otherwise engage in discussions with any Person (other than HWI 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 transactions contemplated by this Agreement.
(b) From and after the date hereof, each Lemmerz Shareholder shall, and
shall cause Lemmerz Holding and each Lemmerz Subsidiary, and their respective
directors, officers, employees, agents and representatives, to, immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person (other than HWI and its representatives) conducted
heretofore with respect to any Acquisition Transaction. The Lemmerz
Shareholders shall promptly (i) advise HWI of any inquiry or proposal received
by, any such information requested from, or any negotiations or discussions
sought to be initiated or continued with, any Lemmerz Shareholder, Lemmerz
Holding, any
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Lemmerz Subsidiary or any of their respective directors, officers, employees,
agents or representatives, in each case, from a Person (other than HWI 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 (ii) update HWI on an ongoing basis regarding the status
thereof, as well as any actions taken or other developments pursuant to this
Section 7.4.
(c) If, prior to the Closing or earlier termination of this Agreement,
HWI, directly or indirectly, through any officer, director, agent or otherwise,
(i) initiates or submits proposals or offers to any potential acquisition target
(other than Lemmerz Holding or any Lemmerz Subsidiary) or to the shareholders of
such target (other than the Lemmerz Shareholders) relating to the purchase of
material assets or securities of such target, or (ii) participates in any
discussions or negotiations regarding the acquisition of material assets or any
securities of such an acquisition target (other than Lemmerz Holding or any
Lemmerz Subsidiary), then HWI shall promptly advise Horst Kukwa-Lemmerz of such
proposals, offers, discussions or negotiations at substantially the same time
that it advises its outside
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directors of the same. Prior to the Closing or earlier termination of this
Agreement, HWI shall not enter into a definitive agreement regarding the
acquisition of material assets or securities of any such acquisition target
without first consulting with Horst Kukwa-Lemmerz.
Section 7.5 HWI Board Representation.
(a) Immediately following the Closing, subject to the terms and
conditions set forth in the Amended Stockholders Agreement, HWI shall elect
Horst Kukwa-Lemmerz as Chairman of the Board of Directors of HWI Europe and as a
director and Vice Chairman of the Board of Directors of HWI. Upon his election
as a director of HWI, Horst Kukwa-Lemmerz shall be appointed a member of the
Executive Committee of the Board of Directors of HWI and a non-voting member of
the Compensation Committee of the Board of Directors of HWI.
(b) Immediately following the Closing, subject to the terms and
conditions set forth in the Amended Stockholders Agreement, HWI shall increase
the size of its Board of Directors to eleven (11) members and shall elect
thereto one (1) designee of the Lemmerz Shareholders (in addition to Horst
Kukwa-Lemmerz), who shall be reasonably acceptable to HWI and shall not be a
director, officer, manager or employee of Lemmerz Holding or any Lemmerz
Subsidiary (provided
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that such designee may otherwise be affiliated with one or more of the Lemmerz
Shareholders).
Section 7.6 Further Assurances. In the event that, prior to or after the
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement, each Party shall take, and shall cause its directors,
officers, managers, employees, representatives and agents, as the case may be,
to take, all such necessary actions including the execution and delivery of such
further instruments and documents as may reasonably be requested by any Party
for such purposes or otherwise to complete or perfect the transactions
contemplated hereby. Without limiting the generality of the foregoing, (a) each
of the Parties shall use its reasonable best efforts to obtain as promptly as
practicable all Consents 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 and (b) if any transfer, reissuance or renewal of any Lemmerz Permit
or Lemmerz Environmental Permit, or additional permit, license or other
authorization under any Law, is required, the Lemmerz Shareholders shall
cooperate with HWI after the Closing, and shall use their respective reasonable
best efforts, to effect all such
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transfers, reissuances and renewals, and to obtain, all such Permits.
Section 7.7 HSR Act.
(a) In furtherance and not in limitation of the foregoing, the Parties
hereto shall use their respective reasonable 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 Governmental Entity, including the
HSR Act ("Antitrust Laws"); provided, however, that neither HWI or any HWI
Subsidiary, nor any Lemmerz Holding or any Lemmerz Subsidiary, shall be required
to dispose of any assets, or commit to any divestiture transaction, which would
reasonably be expected to cause an HWI Material Adverse Effect or a Lemmerz
Material Adverse Effect, or materially impair the ability of HWI or any HWI
Subsidiary, or Lemmerz Holding or any Lemmerz Subsidiary, to conduct its
business after the Closing in the manner it is now being conducted.
(b) Each Party hereto shall promptly inform the other of any material
communication from the United States Federal Trade Commission, the Department of
Justice, the German Federal Cartel Office or any other Governmental Entity
regarding any of the transactions contemplated by
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this Agreement. If any Party or any Affiliate thereof receives a request for
additional information or documentary material from any such Governmental Entity
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 Parties, an appropriate response in compliance with such request.
The Lemmerz Shareholders shall advise HWI promptly in respect of any
understandings, undertakings or agreements (oral or written) which any of them,
or Lemmerz Holding or any Lemmerz Subsidiary, proposes to make or enter into
with the Federal Trade Commission, the Department of Justice, the German Federal
Cartel Office or any other Governmental Entity in connection with the
transactions contemplated by this Agreement.
Section 7.8 Replacement of Members. Effective as of the Closing, the
individuals listed in Section 7.8 of the HWI Disclosure Schedule shall resign
from all positions held, whether as a director, officer, manager, employee or
otherwise, with the Persons listed therein, including Lemmerz Holding and any
Lemmerz Subsidiary.
Section 7.9 Interim Financial Statements. HWI shall provide to the
Lemmerz Shareholders all financial
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statements and other reports filed by it with the SEC after the date hereof and
prior to the Closing.
Section 7.10 Covenant not to Compete. (a) For purposes of this
Agreement, "Competition" by any Lemmerz Shareholder shall mean such Lemmerz
Shareholder's engaging in, or otherwise directly or indirectly being employed by
or acting as a consultant or lender to, or being a director, officer, employee,
principal, licensor, trustee, broker, agent, stockholder, member, owner, joint
venturer or partner of, or permitting her or his name to be used in connection
with the activities of any other business or organization which competes,
directly or indirectly, with the business of HWI, any HWI Subsidiary, Lemmerz
Holding or any Lemmerz Subsidiary as the same is constituted as of the Closing
Date.
(b) For a period of five (5) years following the Closing Date, no Lemmerz
Shareholder shall engage in Competition, as defined above, with HWI, any HWI
Subsidiary, Lemmerz Holding or any Lemmerz Subsidiary in any locality or region
in which any such Person had operations at the time of, or within six (6) months
prior to, the Closing Date, or in which, during the six (6) month period prior
to the Closing Date any such Person had discussed establishing operations in
such locality or region; provided that, it shall
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not be a violation of this Section 7.10(b) for the Lemmerz Shareholders, in the
aggregate, to (i) become the registered or beneficial owners of up to five
percent (5%) of any class of the capital stock of a competing corporation or
(ii) acquire up to five percent (5%) of any issue of publicly-traded debt
securities of a competing corporation, provided, in each case, that no such
Lemmerz Shareholder actively participates in the business of such corporation
until such time as this covenant expires.
(c) Each Lemmerz Shareholder acknowledges that this Agreement is being
entered into in connection with the consummation of the transactions
contemplated by this Agreement, and that a material breach or threatened breach
by him or her of any of the provisions contained in this Section 7.10 will cause
HWI irreparable injury. Each Lemmerz Shareholder therefore agrees that HWI
shall be entitled, in addition to any other right or remedy, to a temporary,
preliminary and permanent injunction, without the necessity of proving the
inadequacy of monetary damages or the posting of any bond or security, enjoining
or restraining such Lemmerz Shareholder from any such violation or threatened
violations.
(d) Each Lemmerz Shareholder further acknowledges and agrees that the
covenants set forth herein are reason-
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able and necessary for the protection of the business and goodwill of HWI; and
it is the intent of the Parties that if in the opinion of any court of competent
jurisdiction any provision set forth in this Section 7.10 is not reasonable in
any respect, such court shall have the right, power and authority to modify any
and all such provisions as to such court shall appear not unreasonable and to
enforce the remainder of this Section 7.10 as so modified.
Section 7.11 Supplemental Disclosure. The Lemmerz Shareholders shall
give prompt notice to HWI, and HWI shall give prompt notice to the Lemmerz
Shareholders, of (a) the occurrence, or non-occurrence, of any event the
occurrence, or non- occurrence, of which would be reasonably likely to cause (i)
any representation or warranty contained in this Agreement to be untrue,
incorrect or incomplete or (ii) any covenant, condition or agreement contained
in this Agreement not to be complied with or satisfied and (b) any failure of
any Party 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 7.11 shall not have any effect for the
purpose of determining the satisfaction of the conditions set forth in Article
VIII of this Agreement or otherwise limit or affect the remedies available
hereun-
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der to any Party; and provided further, that, without the express written
consent of the other Party or Parties, no information contained in any such
notice shall be deemed to have been disclosed as of the date hereof for any
purpose.
Section 7.12 Sale and Assignment of Lemmerz Holding Shares to Newco
Holding. At the Closing, pursuant to the Notarial Deed, the Lemmerz
Shareholders shall sell and assign, free and clear of any and all Liens, to
Newco Holding, and shall cause Newco Holding to purchase and accept from them,
6,168 Lemmerz Holding Shares in the nominal amounts of DM 10,000 each as
follows: (i) Marianne Lemmerz shall sell and assign to Newco Holding, and Newco
Holding shall purchase and accept from her, 1,828 Lemmerz Holding Shares in the
nominal amount of DM 10,000 each, (ii) Renate Kukwa-Lemmerz shall sell and
assign to Newco Holding, and Newco Holding shall purchase and accept from her,
1,670 Lemmerz Holding Shares in the nominal amount of DM 10,000 each, (iii) Inge
Kruger-Pressl shall sell and assign to Newco Holding, and Newco Holding shall
purchase and accept from her, 1,670 Lemmerz Holding Shares in the nominal amount
of DM 10,000 each, and (iv) Horst Kukwa-Lemmerz shall sell and assign to Newco
Holding, and Newco Holding shall purchase and accept from him, 1,000 shares in
the nominal amount of DM 10,000 each.
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Section 7.13 Contribution of Lemmerz Holding Shares to Newco A and Newco
B. At the Closing, the Lemmerz Shareholders shall cause Newco Holding, pursuant
to the Notarial Deed, to contribute 3,084 Lemmerz Holding Shares acquired
pursuant to Section 7.12 to each of Newco A and Newco B. The Lemmerz
Shareholders shall ensure that for the contribution of the 3,084 Lemmerz Holding
Shares to each of Newco A and Newco B pursuant to this Section 7.13, no
consideration shall be paid or delivered to Newco Holding by Newco A or Newco B,
it being understood that the contributions of such Lemmerz Holding Shares shall
be reflected as a contribution to the respective capital reserves of Newco A and
Newco B. The Lemmerz Shareholders shall cause Newco Holding to take all actions
required for the acceptance of the contributions of such shares and its
reflection as a contribution to such capital reserves.
Section 7.14 Undertaking of HWI. At or prior to the Closing, HWI shall
form, or cause to be formed by an Affiliate of HWI, HWI Sub and shall cause HWI
Sub to consummate the transactions referred to in Sections 2.3 and 2.7.
Section 7.15 Certain Restrictions. Prior to obtaining the Approval, HWI
shall not (A) authorize for issuance, issue or sell, or agree to issue or sell,
shares of, or rights to acquire or convertible into, shares of HWI
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Common Stock or any other voting stock of HWI in such number or (B) take any
other action, including entering into a merger or acquisition transaction, which
in either case, would result in the irrevocable proxies delivered by HWI to the
Lemmerz Shareholders simultaneously herewith representing, in the aggregate,
less than a majority of the HWI voting shares then outstanding and entitled to
vote on the Stockholder Approval Matters.
Section 7.16 Exercise of Proxies. Horst Kukwa-Lemmerz hereby agrees that
from the date hereof until the conversion of the HWI Preferred Stock or the
earlier termination of the proxies delivered pursuant to Section 7.1, he shall
attend all meetings of the stockholders of HWI and vote all shares of HWI Common
Stock that are subject to the proxies delivered pursuant to Section 7.1 hereof
in accordance with the terms of such proxies.
ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 Conditions to Each Party's Obligation. The respective
obligations of each Party to consummate the transactions contemplated hereby
shall be subject to the satisfaction or, to the extent permitted by applica-
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ble Law, waiver at or prior to the Closing of the following conditions:
(a) HSR and Other Antitrust Approvals. The waiting periods (and any
extension thereof) applicable to the consummation of the transactions
contemplated hereby under the HSR Act and other applicable Antitrust Laws, if
any, shall have expired or been terminated, other than any applicable waiting
period with respect to Marianne Lemmerz under the HSR Act.
(b) No Injunction. No Governmental Entity having jurisdiction over any
Party or any of their respec- tive 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 any of the transactions
contemplated hereby illegal or otherwise prohibiting consummation of any such
transaction.
(c) Amended Stockholders Agreement. The Amended Stockholders Agreement
shall have been duly executed and delivered by HWI; and the Amended Stockholder
Agreement shall be in full force and effect and the valid and binding obligation
of each such party.
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(d) Employment and Consulting Agreements. The Consulting Agreement,
dated as of the date hereof, between HWI and H.K.L., L.L.C., a Florida limited
liability company, in the form attached hereto as Exhibit J, and the Consulting
Agreement, dated as of the date hereof, between HWI and Horst Kukwa-Lemmerz, in
the form attached hereto as Exhibit K (together, the "Consulting Agreements"),
and each of the Employment Letters, shall have been duly executed and delivered
by HWI; and the Consulting Agreements and each such Employment Letter shall be
in full force and effect and the valid and binding obligation of each such
party.
(e) Litigation. There shall not have been instituted or 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.
Section 8.2 Conditions to Obligations of HWI. The obligations of HWI
and HWI Sub to effect the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing of the following additional
conditions, unless, to the extent permitted by applicable Law, waived in writing
by HWI:
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(a) Representations and Warranties. The representations and warranties
of the Lemmerz Shareholders and Lemmerz Holding that are qualified with
reference to materiality shall be true, correct and complete, and the
representations and warranties that are not so qualified shall be true, correct
and complete in all material respects, in each case as of the date hereof, and,
except to the extent such representations and warranties refer to a specific
date, as of the Closing Date as though made on the Closing Date; provided that
this paragraph (a) shall be deemed satisfied so long as the failure of all such
representations and warranties to be true, correct and complete in the aggregate
does not have a Lemmerz Material Adverse Effect. HWI shall have received a
certificate signed on behalf of the Lemmerz Shareholders and Lemmerz Holding to
such effect.
(b) Performance of Obligations. Newco Holding, each Lemmerz Shareholder
and Lemmerz Holding shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing, including the obligations referred to in Sections 7.12 and 7.13
hereof, and HWI shall have received a certificate signed on behalf of Newco
Holding, the Lemmerz Shareholders and Lemmerz Holding to such effect.
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(c) Opinion of Newco Holding's and Lemmerz Shareholders' Counsel. HWI
shall have received an opinion of counsel to Newco Holding and the Lemmerz
Shareholders, dated the Closing Date, substantially in the form attached as
Exhibit H hereto, which opinion shall provide that the financing sources of HWI
may rely on such opinion as if addressed to them.
(d) Material Adverse Change. Since December 31, 1996, there shall have
been no event or occurrence which has had, or would reasonably be expected to
have, a Lemmerz Material Adverse Effect; and HWI shall have received a
certificate signed on behalf of Lemmerz Holding to such effect.
(e) Consents. Newco Holding, the Lemmerz Shareholders and Lemmerz
Holding shall have provided HWI with evidence, in form and substance reasonably
satisfactory to HWI, that each Consent set forth in Section 8.2 of the Lemmerz
Disclosure Schedule has been obtained or made, or that the requirement for such
Consent has been, to the extent permitted by applicable Law, waived.
(f) Certain Transactions. The Spain Agreement shall have been duly
executed and delivered by each party thereto (other than HWI); and such
agreement shall be in full force and effect and the valid and binding obligation
of each party thereto (other than HWI).
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Section 8.3 Conditions to Obligations of the Lemmerz Shareholders. The
obligation of the Lemmerz Shareholders to effect the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Closing of the
following additional conditions, unless, to the extent permitted by applicable
Law, waived in writing by the Lemmerz Shareholders:
(a) Representations and Warranties. The representations and warranties
of HWI that are qualified with reference to materiality shall be true, correct
and complete, and the representations and warranties that are not so qualified
shall be true, correct and complete in all material respects, in each case as of
the date hereof, and, except to the extent such representations and warranties
refer to a specific date, as of the Closing Date as though made on and as of the
Closing Date provided that this paragraph (a) shall be deemed to be satisfied so
long as the failure of all such representations and warranties to be true,
correct and complete in the aggregate does not have an HWI Material Adverse
Effect. The Lemmerz Shareholders shall have received a certificate signed on
behalf of HWI by an officer of HWI to such effect.
(b) Performance of Obligations. HWI shall have performed in all
material respects all obligations required
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to be performed by it under this Agreement at or prior to the Closing, and the
Lemmerz Shareholders shall have received a certificate signed on behalf of HWI
by an officer of HWI to such effect.
(c) Opinion of Counsel. The Lemmerz Shareholders shall have received an
opinion of counsel to HWI, dated the Closing Date, substantially in the form
attached as Exhibit G hereto.
(d) Material Adverse Change. Since January 31, 1997, there shall have
been no event or occurrence which has had, or would reasonably be expected to
have, an HWI Material Adverse Effect; and the Lemmerz Shareholders shall have
received a certificate signed on behalf of HWI by an officer of HWI to such
effect.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Closing:
(a) by mutual written consent of HWI and the Lemmerz Shareholders;
(b) by either HWI or the Lemmerz Shareholders, if the Closing shall
not have occurred on or before Septem-
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ber 30, 1997 (unless, in the case of any such termination pursuant to this
Section 9.1(b), the failure of the Closing to occur shall have been caused by
any action or failure to act of the Party or Parties seeking to terminate this
Agreement, which action or failure to act constitutes a breach of such Party's
or Parties' obligations under this Agreement);
(c) by HWI or the Lemmerz Shareholders, if any permanent injunction,
order, decree or ruling by any Governmental Entity of competent jurisdiction
preventing the consummation of the transactions contemplated hereby shall have
become final and nonappealable; provided, however, that the Party or Parties
seeking to terminate this Agreement pursuant to this Section 9.1(c) shall have
used reasonable best efforts to remove such injunction or overturn such action;
(d) by HWI, if there has been a breach of any of the representations or
warranties, covenants or agreements of Newco Holding, any Lemmerz Shareholder or
Lemmerz Holding, the effect of which is a Lemmerz Material Adverse Effect, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by HWI to the Lemmerz Shareholders; and
(e) by the Lemmerz Shareholders if there has been a breach of any of the
representations or warranties, cove-
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nants or agreements of HWI, the effect of which is a HWI Material Adverse
Effect, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the Lemmerz Shareholders to HWI.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement pursuant to this Article IX, this Agreement and the transactions
contemplated hereby shall be deemed abandoned and this Agreement shall forthwith
become void, except that the provisions of this Section 9.2, Article XI and the
Confidentiality Agreement shall survive any termination of this Agreement;
provided, however, that nothing in this Agreement shall relieve any party from
liability for any willful breach of this Agreement.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival. The representations and warranties contained in
this Agreement (other than those contained in Sections 3.2(a), 3.2(b), 3.2(c),
3.2(d), 3.2(f), 3.2(i), 3.4, 4.3(a), 4.20(b) and 5.3(a)) shall survive the
Closing and shall continue in full force and effect until the second anniversary
of the Closing Date; provided that the representations and warranties contained
in Section 4.20(b) shall survive the Closing and shall continue in full
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force and effect until the fourth anniversary of the Closing Date; and the
representations and warranties contained in Sections 3.2(a), 3.2(b), 3.2(c),
3.2(d), 3.2(f), 3.2(i), 3.4, 4.3(a) and 5.3(a) shall survive the Closing and
continue in full force and effect indefinitely; and the covenants and agreements
contained in this Agreement shall survive the Closing and shall continue in full
force and effect thereafter in accordance with their terms.
Section 10.2 Indemnification by Lemmerz Shareholders; The Agreement to
Indemnify. From and after the Closing, the Lemmerz Shareholders shall, jointly
and severally, indemnify, defend and hold harmless HWI, the HWI Subsidiaries,
Lemmerz Holding, the Lemmerz Subsidiaries and their respective successors and
permitted assigns, directors, officers, managers, employees, representatives and
agents (collectively, the "HWI Group") from and against any and all losses,
deficiencies, suits, actions, demands, judgments, liabilities, costs, expenses
(including reasonable attorneys' fees and expenses), claims and damages
(collectively, "Damages") asserted against, resulting to, imposed upon or
suffered by the HWI Group, or any of them, arising out of or relating to (a) any
breach of any representation or warranty (without regard to any qualification or
other limitation as to materiality) of any Lemmerz Shareholder or
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Lemmerz Holding contained in this Agreement (other than those contained in
Section 4.16 or 4.20(b) hereof); (b) any breach of any covenant or agreement of
Newco Holding, any Lemmerz Shareholder or Lemmerz Holding contained in this
Agreement; (c) to the fullest extent permitted by applicable Law, the Proxy
Statement, to the extent that such Damages arise out of or are based upon an
untrue statement or omission or alleged omission made in the Proxy Statement in
reliance upon and in conformity with written information furnished expressly for
use therein to HWI by any Lemmerz Shareholder or, if furnished prior to the
Closing, by Lemmerz Holding or any Lemmerz Subsidiary; (d) the Lemmerz
Shareholder Expenses; (e) Taxes on any constructive dividend paid or otherwise
distributed by Lemmerz Holding or any Lemmerz Subsidiary to or for the benefit
of any Lemmerz Shareholder prior to the Closing; and (f) any breach of the
representation and warranty set forth in Section 4.20(b) (collectively,
"Shareholder Indemnified Claims").
Section 10.3 Limitation of Lemmerz Liability as to Time.
Notwithstanding the foregoing, the liability of the Lemmerz Shareholders to
indemnify the HWI Group against Shareholder Indemnified Claims pursuant to (i)
Section 10.2(a) or Section 10.2(b) (with respect to the covenants or agreements
contained in Sections 6.1, 7.3, 7.4, 7.7, 7.8 and
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7.11 hereof) shall be limited to Shareholder Indemnified Claims as to which the
HWI Group has given to the Lemmerz Shareholders written notice thereof at or
prior to the second anniversary of the Closing Date (the "Termination Date"),
whether or not any Damages have then actually been sustained, (ii) Section
10.2(f) shall be limited to Shareholder Indemnified Claims as to which the HWI
Group has given to the Lemmerz Shareholders written notice thereof at or prior
to the fourth anniversary of the Closing Date, whether or not any Damages have
then been actually sustained, and (iii) Sections 10.2(c), (d) and (e) shall not
be limited as to time.
Section 10.4 Limitation of Lemmerz Liability for Damages.
Notwithstanding any provision hereof to the contrary, (i) the provisions for
indemnification contained in Section 10.2(a) and 10.2(c) hereof shall be
effective only after the aggregate amount of all Shareholder Indemnified Claims
in excess of U.S.$50,000 (the "Lemmerz Deductible"), for which the Lemmerz
Shareholders are liable thereunder exceeds U.S.$1,000,000 (the "Lemmerz
Basket"), and then only to the extent of the excess over $1,000,000 and (ii) in
no event shall the Lemmerz Shareholders be liable pursuant to Section 10.2 for
Shareholder Indemnified Claims arising under the provisions for indemnification
contained in Sec-
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tion 10.2(a) or Section 10.2(c) which, in the aggregate, exceed the Lemmerz
Basket by more than U.S.$2,000,000 (the "Lemmerz Cap"); provided, however, that
(y) the provisions of Section 10.3 hereof regarding the Termination Date and (z)
the provisions of this Section 10.4 regarding the Lemmerz Deductible, the
Lemmerz Basket and the Lemmerz Cap, in each case, shall not apply to any
Shareholder Indemnity Claim for any breach of any representation or warranty of
any Lemmerz Shareholder or Lemmerz Holding contained in Section 3.2(a), 3.2(b),
3.2(c), 3.2(d), 3.2(f), 3.2(i), 3.4, 4.3(a) or 4.20(b).
Section 10.5 Environmental Indemnification by Lemmerz Shareholders; The
Agreement to Indemnify. From and after the Closing, the Lemmerz Shareholders
shall, jointly and severally, indemnify, defend and hold harmless the HWI Group
from and against any and all Damages asserted against, resulting to, imposed
upon or suffered by the HWI Group, or any of them, arising out of or relating to
any breach of any representation or warranty (without regard to any
qualification or other limitation as to materiality) of Lemmerz Holding
contained in Section 4.16 hereof (collectively, "Environmental Damages").
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Section 10.6 Limitation of Lemmerz Liability for Environmental Damages.
Notwithstanding any provision hereof to the contrary, the liability of the
Lemmerz Shareholders to indemnify the HWI Group against Environmental Damages
pursuant to Section 10.5 hereof shall be limited to Environmental Damages as to
which the HWI Group has given to the Lemmerz Shareholders written notice thereof
at or prior to the Termination Date, whether or not any Environmental Damages
have then actually been sustained; and the provisions for indemnification
contained in Section 10.5 hereof shall be effective only after the aggregate
amount of all Environmental Damages for which the Lemmerz Shareholders are
liable thereunder exceeds U.S.$5,000,000 (the "Lemmerz Environmental Basket");
provided, however, that in no event shall the Lemmerz Shareholders be liable
pursuant to Section 10.5 for Environmental Damages which, in the aggregate,
exceed the Lemmerz Environmental Basket by more than U.S.$4,000,000 (the
"Lemmerz Environmental Cap"). For clarification purposes, the Lemmerz
Deductible, the Lemmerz Basket and the Lemmerz Cap shall not be applicable to
any Environmental Damages.
Section 10.7 Indemnification by HWI; The Agreement to Indemnify. From
and after the Closing, HWI shall indemnify, defend and hold harmless the Lemmerz
Sharehold-
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ers, their respective successors and permitted assigns, representatives and
agents (collectively, the "Shareholder Group") from and against any and all
Damages asserted against, resulting to, imposed upon or suffered by the
Shareholder Group, or any of them, arising out of or relating to (a) any breach
of any representation or warranty (without regard to any qualification or other
limitation as to materiality) of HWI contained in this Agreement; (b) any breach
of any covenant or agreement of HWI contained in this Agreement; or (c) to the
fullest extent permitted by applicable Law, the Proxy Statement (collectively,
"HWI Indemnified Claims" and, together with Shareholder Indemnified Claims and
Environmental Damages, "Claims").
Section 10.8 Limitation of HWI Liability. Notwithstanding the
foregoing, subject to Section 10.9 hereof, the liability of HWI to indemnify the
Shareholder Group against HWI Indemnified Claims pursuant to Section 10.7(a)
hereof or 10.7(b) hereof (with respect to the covenants or agreements contained
in Sections 6.2, 7.3, 7.4, 7.7, 7.9 and 7.11 hereof) shall be limited to HWI
Indemnified Claims as to which the Lemmerz Shareholders have given to HWI
written notice thereof at or prior to the Termination Date, whether or not any
Damages have then actually been sustained; and the provisions for
indemnification contained in Section
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10.7(a) hereof shall be effective only after the aggregate amount of all HWI
Indemnified Claims in excess of U.S.$50,000 (the "HWI Deductible") for which HWI
is liable thereunder exceeds U.S.$1,000,000 (the "HWI Basket"), and then only to
the extent of such excess; provided, however, that in no event shall HWI be
liable pursuant to Section 10.7 for (a) HWI Indemnified Claims arising under the
provisions for indemnification contained in Section 10.7(a) which, in the
aggregate, exceed the HWI Basket by more than U.S.$2,000,000 (the "HWI Cap") or
(b) HWI Indemnified Claims arising under the provisions for indemnification
contained in Section 10.7(c), to the extent that Damages arise out of or are
based upon an untrue statement or omission or alleged omission made in the Proxy
Statement in reliance upon and in conformity with written information furnished
expressly for use therein to HWI by any Lemmerz Shareholder or, if furnished
prior to the Closing, by Lemmerz Holding or any Lemmerz Subsidiary.
Section 10.9 Exception to Limitation of HWI Liability. Notwithstanding
any provision hereof to the contrary, the provisions of Section 10.8 hereof
regarding the Termination Date, the HWI Deductible, the HWI Basket and the HWI
Cap shall not apply to any HWI Indemnified Claim for
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any breach of any representation or warranty of HWI contained in Section 5.3(a).
Section 10.10 Notice of Claims. The Persons seeking indemnification
hereunder, or any of them (the "Indemnified Party"), shall give the Party from
whom such indemnification is sought hereunder (the "Indemnifying Party") prompt
notice ("Notice") of any Claim, whether by third parties or otherwise, which
Notice shall set forth in reasonable detail the basis of the Claim and the
amount thereof (or if not then determinable by the Indemnified Party, a
reasonable good faith estimate of the amount thereof).
Section 10.11 Conditions of Indemnification.
(a) With respect to any Claim by a Party against any other Party, the
costs and expenses incurred by the Indemnified Party in successfully proving its
entitlement to indemnification hereunder shall be the liability of, and be paid
by, the Indemnifying Party and shall not be included in the applicable
Indemnification Limits.
(b) The obligations and liabilities of the Indemnifying Party under this
Article X with respect to Claims made by third parties against the Indemnified
Party (other than with respect to Environmental Damages) shall be subject to the
following terms and conditions:
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(i) The Indemnifying Party shall have twenty (20) business days, after
Notice of any such Claim has been given, to notify the Indemnified Party whether
or not it shall defend the Indemnified Party against such Claim.
(ii) If the Indemnifying Party notifies the Indemnified Party that it
shall defend the Indemnified Party against such Claim:
(A) and the Claim is in excess of the HWI Cap, the Lemmerz Cap or the
Lemmerz Environmental Cap, as the case may be (the "Indemnification Cap"), the
Indemnifying Party and the Indemnified Party shall mutually agree on counsel to
defend such Claim by appropriate proceedings, and each Party shall keep the
other Parties fully informed of, and cooperate fully in, such Claim's defense.
Subject to the limitations set forth in this Article X, all costs and expenses
incurred by the parties in defending such Claim, and the amount of any judgment
awarded in the event such defense is unsuccessful, shall be the liability of,
and shall be paid by: (x) first, the Indemnified Party up the maximum amount of
the HWI Basket, the Lemmerz Basket or the Lemmerz Environmental Basket, as the
case may be, (y) second, the Indemnifying Party up to the maximum amount of the
Indemnification Cap, and (z) third, the Indemnified Party with respect to any
amounts remaining;
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(B) and the Claim is within the Indemnification Cap, subject to the
limitations set forth in this Article X, all costs and expenses incurred by the
Indemnifying Party in defending such Claim, and the amount of any judgment
awarded in the event such defense is unsuccessful, shall be the liability of,
and shall be paid by, the Indemnifying Party; provided, however, that the amount
of such costs, expenses and judgment, if any, shall be included in the Lemmerz
Basket, the Lemmerz Cap, the Lemmerz Environmental Basket, the Lemmerz
Environmental Cap, the HWI Basket and the HWI Cap, as the case may be
(collectively, "Indemnification Limits"). If any Indemnified Party desires to
participate in any such defense, it may do so at its sole cost and expense. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry of any
judgment unless such settlement, compromise or judgment provides only for the
payment of money in an amount that will be paid or reimbursed in its entirety by
the Indemnifying Party and that includes as a term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of an unconditional release
from any and all liability in respect of such Claim.
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<PAGE> 130
(iii) If (A) the Indemnifying Party notifies the Indemnified
Party that it will not defend the Indemnified Party against such Claim or (B)
the Indemnifying Party fails to give notice of its intention to defend the
Indemnified Party against such Claim within the twenty (20) business day period
set forth in clause (i) above, the Indemnified Party shall have the right to
undertake the defense, compromise or settlement of such Claim. Upon reasonable
request, the Indemnified Party shall send the Indemnifying Party copies of all
pleadings, notices, briefs and other similar papers received, served or filed
relating to such Claim and shall, from time-to-time upon reasonable request of
the Indemnifying Party, advise the Indemnifying Party of the status of such
Claim and any defense, action, suit, proceeding or investigation related thereto
and any discussions relating to the compromise or settlement thereof. If the
Indemnifying Party so requests, the Indemnifying Party shall be afforded the
opportunity to participate, at its sole cost and expense, in all meetings,
hearings or other sessions relating to the defense, compromise or settlement of
such Claim, including the opportunity to appear before any Governmental Entity.
By declining to assume the defense against such Claim or otherwise failing to
give notice of its intention to defend the Indemnified Party against such
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Claim, the Indemnifying Party does not waive any rights or defenses it might
have with respect to such Claim and the Indemnifying Party shall not be liable
under this Article X for (y) any costs and expenses incurred by the Indemnified
Party in defending such Claim or (z) the amount of any judgment awarded in the
event such defense is unsuccessful, or any amount paid in compromise or
settlement of such Claim without its prior written consent, unless, in each
case, and only to the extent that, a court of competent jurisdiction has
determined that the Indemnified Party was entitled to indemnification hereunder
by the Indemnifying Party for such Claim, it being understood that any costs and
expenses incurred by the Indemnified Party in successfully proving such
entitlement to indemnification shall be the liability of, and be paid by, the
Indemnifying Party and shall not be included in the applicable Indemnification
Limits.
(c) The HWI Group shall have the right to defend, compromise or settle,
and control, any and all actions by third parties relating to any and all
Environmental Damages, including any and all such actions as may give rise to
indemnification pursuant to Section 10.5; provided that the HWI Group shall
provide the Lemmerz Shareholders with (i) reasonable advance notice of, and an
opportunity to consult regarding, all such actions, (ii) access to all available
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information, data and studies with respect to all such actions and (iii) an
opportunity to participate, at its sole cost and expense, in all meetings,
hearings or other sessions relating to the defense, compromise or settlement of
such Claim, including the opportunity to appear before any Governmental Entity.
Notwithstanding the foregoing, in the event that HWI and the Lemmerz
Shareholders agree in writing that any such action, if adversely determined,
would result solely in the payment or reimbursement of money in an amount that
will be paid or reimbursed in its entirety by the Lemmerz Shareholders, then the
obligations and liabilities of the Lemmerz Shareholders shall be subject to the
terms and conditions set forth in Section 10.11(b) hereof.
Section 10.12 Remedies Cumulative; No Subrogation. Except as herein
expressly provided, the remedies provided herein shall be cumulative and shall
not preclude assertion by any Party of any other rights or the seeking of any
other remedies against any other Party; provided, however, that the remedy of
rescission shall not be available to any Party. Neither the Lemmerz
Shareholders, their insurers nor any party claiming through the Lemmerz
Shareholders shall have any right of recourse, subrogation or similar rights
against Lemmerz Holding or any Lemmerz Subsidiary for any amount paid pursuant
to Article X
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hereof. The fact that Lemmerz Holding may not be liable for a misrepresentation
or breach of warranty because of capital maintenance requirements shall have no
effect on the right of any member of the HWI Group to be indemnified by the
Lemmerz Shareholders.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Amendment and Modification. Subject to applicable Law,
this Agreement may be amended, modified or supplemented only by written
agreement of all Parties.
Section 11.2 Waiver of Compliance. Any Party hereto may waive
compliance by the other Party or Parties with any of the agreements, covenants,
obligations or conditions contained herein. Any such waiver shall be valid only
if set forth in a written instrument signed by the Party or Parties to be bound
thereby.
Section 11.3 Expenses. Each Party shall be solely responsible for and
bear all the costs and expenses incurred by it in connection with the
transactions contemplated by this Agreement (except that HWI shall be solely
responsible for and bear all the costs and expenses incurred by Lemmerz Holding
and the Lemmerz Shareholders in connection with the transactions contemplated by
the Spain Agree-
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<PAGE> 134
ment); provided, however, that, subject to the Letter Agreement, if the
transactions contemplated hereby are consummated, (a) HWI shall, or shall cause
Lemmerz Holding to, be responsible for and bear all reasonable costs and
expenses of Lemmerz Holding and each Lemmerz Shareholder, other than such costs
and expenses of investment banking firms and attorneys retained by Lemmerz
Holding or any Lemmerz Shareholder, except that HWI shall be responsible for and
bear the reasonable fees and expenses of Cleary, Gottlieb, Steen & Hamilton, and
(b) the Lemmerz Shareholders shall be responsible for and bear all costs and
expenses (the "Lemmerz Shareholder Expenses") of (i) Lemmerz Holding and (ii)
each Lemmerz Shareholder, in each case, for costs and expenses of investment
banking firms and attorneys retained by Lemmerz Holding or any Lemmerz
Shareholder, other than Cleary, Gottlieb, Steen & Hamilton. Notwithstanding the
foregoing, HWI shall, or shall cause HWI Sub to, bear the notarial fees for the
recording (Beurkundung) of this Agreement and the recording of the actions to be
taken at the Closing pursuant to the Notarial Deed; provided, however, that the
Lemmerz Shareholders shall reimburse HWI or HWI Sub, as the case may be, for the
aggregate amount of such fees, net of value added tax, in excess of DM 40,000.
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<PAGE> 135
Section 11.4 Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given on the date delivered, if delivered personally, on the fifth business day
after being mailed by registered or certified international airmail (postage
prepaid, return receipt requested) or on the second business day after being
sent by reputable overnight courier (delivery prepaid), in each case, to the
parties at the following addresses, or on the date sent and confirmed by
electronic transmission to the telecopier number specified below (or at such
other address or telecopier number for a party as shall be specified by notice
given in accordance with this Section):
(a) if to any Lemmerz Shareholder or Lemmerz Holding, to:
Herrn Horst-Kukwa Lemmerz
c/o Lemmerz Holding GmbH
Postfach 1125
53621 Konigswinter
Federal Republic of Germany
Tel: +49-2223-71-0
Fax: +49-2223-71-620
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<PAGE> 136
with a copy to:
Meilicke & Partner
Attention: Dr. Wienand Meilicke
Poppelsdorfer Allee 106
53115 Bonn,
Federal Republic of Germany
Tel: +49-228-72543-0
Fax: +49-228-72543-10
and
Cleary, Gottlieb, Steen & Hamilton
Attention: William A. Groll, Esq.
1 Liberty Plaza
New York, New York 10006
U.S.A.
Tel: +1-212-225-2142
Fax: +1-212-225-3999
(b) if to HWI to:
Hayes Wheels International, Inc.
Attention: Daniel M. Sandberg, Esq.
38481 Huron River Drive
Romulus, Michigan 48174
U.S.A.
Tel: +1-313-941-2000
Fax: +1-313-942-7783
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Attention: Robert B. Pincus, Esq.
One Rodney Square
Wilmington, Delaware 19801
U.S.A.
Tel: +1-302-651-3000
Fax: +1-302-651-3001
and
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<PAGE> 137
Bruckhaus Westrick Stegemann
Attention: Dr. Andreas Fabritius
60329 Frankfurt Am Main
Taunusanlage 11
Federal Republic of Germany
Tel: +49-69-273-080
Fax: +49-69-232-664
(c) If to Cromodora, to:
Cromodora Wheels S.p.A.
Attention: Giancarlo Dallera
Via Montichiari, 20
25016 Ghedi (BS) Italy
Tel: +39-30-903-1821
Fax: +39-30-901-061
Section 11.5 Parties in Interest; Assignment. This
Agreement shall be binding upon and inure solely to the benefit of each Party
hereto and its respective successors and permitted assigns, and no provision of
this Agreement, express or implied, is intended to or shall confer upon any
other Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, directly or indirectly, by
any Party without the prior written consent of the other Parties; provided,
however, that the rights, interests and obligations of HWI, or any portion
thereof, may be assigned by HWI to one or more (a) of its wholly owned
Subsidiaries or (b) banks or other lending institutions, but no such assignment
shall release HWI from its obligations hereunder.
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<PAGE> 138
Section 11.6 Publicity. No Party shall make or issue, or cause to
be made or issued, any announcement or statement, whether written or oral,
concerning this Agreement or the transactions contemplated hereby for
dissemination to the general public without the prior written consent of the
other Parties. Notwithstanding the foregoing, this provision shall not apply to
any such announcement or statement required to be made (a) by Law or the rules
or regulations of any stock exchange, except that the Party required to make
such announcement shall, whenever practicable, consult with the other Parties
concerning the timing and content of such announcement before such announcement
is made, or (b) in connection with financing the transactions contemplated by
this Agreement.
Section 11.7 Counterparts. This Agreement may be executed in
counterparts, and by the different Parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
Section 11.8 Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the Parties and shall not in any way affect the meaning
or interpretation of this Agreement. The disclosure of any
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matter in any Section of a Disclosure Schedule hereto shall not be deemed to
constitute an admission by any Party or to otherwise imply that any such matter
is material for the purposes of this Agreement.
Section 11.9 Entire Agreement. This Agreement (together with the
Annexes and Exhibits attached hereto, including the Amended Stockholders
Agreement, the Spain Agreement, the Lemmerz Disclosure Schedule and the HWI
Disclosure Schedule) and the Letter Agreement constitute the entire agreement of
the Parties and supersede all prior agreements and undertakings, both written
and oral, between or among the Parties, or any of them, with respect to the
subject matter hereof. For clarification purposes, the parties confirm that the
Confidentiality Agreement, however, continues to apply to the extent not
modified by this Agreement.
Section 11.10 Severability. If any term or other provision of this
Agreement, or any portion thereof, is invalid, illegal or incapable of being
enforced by any rule of Law or public policy, all other terms and provisions of
this Agreement, or the remaining portions thereof, shall nevertheless remain in
full force and effect. Upon such determination that any such term or other
provision, or any portion thereof, is invalid, illegal or incapable of being
enforced, the Parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable
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manner to the end that the transactions contemplated hereby are consummated to
the fullest possible extent.
Section 11.11 Governing Law. This Agreement, including the form,
enforceability and survival of the representations and warranties of the Parties
set forth herein, shall be governed by the laws of the State of New York,
without regard to conflicts of law principles; provided, however, that the
transfer of the Lemmerz Holding Shares and the Acquired Shares shall be governed
by the laws of the Federal Republic of Germany.
Section 11.12 Forum for Dispute Resolution. The forum for the
resolution of any claim, action, suit or proceeding arising out of or related to
this Agreement or the transactions contemplated hereby shall be (i) the
Landgericht Bonn for any action brought against any Lemmerz Shareholder or
(prior to Closing) Lemmerz Holding, and (ii) the United States District Court,
Eastern District of Michigan, Southern Division, for any action brought against
HWI. Notwithstanding the foregoing, counterclaims may be asserted by a Party in
the forum in which the initial claim, action, suit, proceeding or investigation
shall have been filed or brought.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, HWI, Cromodora, Lemmerz Holding and each Lemmerz
Shareholder has duly executed and delivered this Purchase Agreement as of the
day and year first written above.
HAYES WHEELS INTERNATIONAL, INC.
By:_____________________________
Name:
Title:
CROMODORA WHEELS S.P.A.
By:_____________________________
Name:
Title:
LEMMERZ HOLDING GMBH
By:_____________________________
Horst Kukwa-Lemmerz
Geschaftsfuhrer
________________________________
Marianne Lemmerz
________________________________
Inge Kruger-Pressl
________________________________
Renate Kukwa-Lemmerz
________________________________
Horst Kukwa-Lemmerz
<PAGE> 142
Annex 1
LEMMERZ HOLDING SHARES
NUMBER OF SHARES LEMMERZ SHAREHOLDER
---------------- -------------------
2,167 Marianne Lemmerz
2,700 Inge Kruger-Pressl
2,796 Renate Kukwa-Lemmerz
2,337 Horst Kukwa-Lemmerz
A-1
<PAGE> 143
[TRANSLATION FROM GERMAN]
Role of Deeds No. 134/1997
RECORDED
AT BERLIN-DAHLEM ON JUNE 6, 1997
BEFORE THE UNDERSIGNED NOTARY
FRANK HOFFMANN
HABELSCHWERDTER ALLEE 20,
14195 BERLIN
appeared today
1. Attorney-at-law Dr. Wienand Meilicke, with his business address at
Poppeldorfer Allee 106,53115 Bonn,
2. Attorney-at-law Dr. Tim Oliver Brandi, with his business address at
Taunusanlage 11,60329 Frankfurt/Main.
<PAGE> 144
The notarial protocol and the following attachments:
A. Form of Amended and Restated Stockholders Agreement
B. Form of Notarial Deed
C. Form of Spain Agreement
D. Form of Certificate of Designations
E. Form of Letter regarding Employment (Junger)
F. Form of Letter regarding Employment (Koll)
G. 2 Forms of Opinion of Counsels for the Lemmerz Shareholders
H. Form of Opinion of Counsel for the Buyers
I. Form of Irrevocable Proxy
J. Form of Consulting Agreement (H.K.L.,L.L.C.)
K. Form of Consulting Agreement (Kukwa-Lemmerz)
Lemmerz Disclosure Schedule
Hayes Wheels International Inc. Disclosure Schedule
have been read by the notary to the persons appearing, have been approved and
signed by them and the notary in their own hands:
(signature Dr. Wienand Meilicke)
(signature Dr. Tim Oliver Brandi)
(signature notary Frank Hoffmann)
<PAGE> 1
Exhibit 10.1
CONSULTING AGREEMENT
CONSULTING AGREEMENT, made as of June 6, 1997 ("Agreement"), by and
between Hayes Wheels International, Inc., a Delaware corporation (the
"Company"), and H.K.L., L.L.C., a Florida limited liability company
("Consultant").
WITNESSETH:
WHEREAS, the Company is engaged in the business of designing,
manufacturing, selling and distributing (i) automobile and truck wheels and
(ii) brake parts and components (the "Business");
WHEREAS, in connection with and subject to the consummation of the
transactions contemplated by the Purchase Agreement of even date herewith among
the Company, Cromodora, S.p.A., Lemmerz Holding GmbH ("Lemmerz Holding") and
the shareholders of Lemmerz Holding (the "Lemmerz Shareholders") (the "Purchase
Agreement"), the Company wishes to engage Consultant upon the terms and subject
to the conditions set forth herein; and
WHEREAS, in connection with and subject to the consummation of the
transactions contemplated by the Purchase Agreement, Consultant wishes to be so
engaged by the Company upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Company and Consultant agree as follows:
1. Service to be Provided. The Company hereby agrees to engage
Consultant, and Consultant hereby agrees to serve solely within the United
States, upon the terms and subject to the conditions set forth in this
Agreement, as a consultant of the Company. Consultant shall consult with the
Company on such subjects and at such times and locations solely within the
United States as are from time to time reasonably requested of Consultant by
the senior executive officers or the Board of
<PAGE> 2
Directors of the Company, including assisting in the development of the
Company's strategy for its worldwide businesses. All such services shall be
provided on behalf of Consultant only by Horst Kukwa-Lemmerz and such other
employees of Consultant that have been expressly approved in writing by the
Company.
2. Term. The term of Consultant's engagement under this Agreement
shall commence on the Closing Date (as defined in the Purchase Agreement) and,
unless earlier terminated pursuant to Section 7, shall continue in effect for
a period of five years thereafter (such period, as may be earlier terminated,
the "Term"). There shall be no extension of this Agreement other than by
written instrument duly executed and delivered by both parties hereto.
3. Compensation. During the Term, the Company shall pay Consultant
U.S. $300,000 per annum, payable in equal monthly installments (subject to
proration for any partial month) on the last day of each month during the Term
to an account in the United States designated in writing by Consultant.
4. Expenses. The Company shall reimburse Consultant for reasonable and
necessary business expenses of Consultant for travel, meals and similar items
incurred in connection with the performance of Consultant's duties hereunder,
and which are consistent with such guidelines as the Board of Directors of the
Company may from time to time establish. All payments for reimbursement of
such expenses shall be made to Consultant only upon the presentation to the
Company of appropriate vouchers or receipts.
5. Stock Option. The Company hereby grants Consultant, effective
from and after the Closing, an option (the "Option") to purchase 100,000 shares
of Common Stock, par value $.01 per share, of the Company (the "Common Shares"),
subject to the following terms and conditions:
(a) The Option is not intended to qualify as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code, as
amended.
2
<PAGE> 3
(b) The exercise price of the Option is $16 per Common Share (the
"Exercise Price"). The Exercise Price shall be paid to the Company in full, at
the time of exercise, in cash.
(c) The Option shall become exercisable at the annual rate of
twenty percent (20%) of the Common Shares underlying the Option on each of the
first through fifth anniversary of the Closing Date during the Term, so long
as this Agreement remains in effect on such anniversary. The Option may be
exercised as to any or all Common Shares as to which the Option has become
exercisable by written notice delivered in person or by mail to the Secretary
of the Company, specifying the number of Common Shares with respect to which
the Option is being exercised. For purposes of the preceding sentence, the
date of exercise shall be deemed to be the date upon which the Secretary of
the Company receives such notification. Unless sooner exercised or terminated,
the Option shall be cancelled and be of no further force and effect after the
tenth anniversary of the date hereof (the "Expiration Date").
(d) The Option is not transferrable by Consultant other than to
Horst Kukwa-Lemmerz or a successor in the interest of Horst Kukwa-Lemmerz by
will or by the laws of descent and distribution.
(e) In the event that following the Closing, the Company effects a
dividend or other distribution (whether in the form of cash, capital stock of
the Company or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, spinoff, combination, repurchase
or share exchange, or other similar corporate transaction or event that affects
the Common Shares such that an adjustment is appropriate to prevent dilution or
enlargement of the rights of Consultant with respect to the Option, the Company
shall make equitable changes or adjustments as are consistent with such changes
or adjustments as are made to options granted under the Company's 1996 Stock
Option Plan to any or all of (i) the number and kind of shares of capital stock
that may be issued or issuable pursuant to the Option and (ii) the Exercise
Price. The parties hereto acknowledge and understand that additional issuances
of capital stock by the Company for cash or
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<PAGE> 4
property shall not result in an adjustment under this Section 5(e).
6. Confidentiality, Non-Competition.
(a) Consultant acknowledges, on its own behalf and on behalf
of each of its employees, that: (i) the Business is intensely competitive and
that Consultant's engagement by the Company will require that Consultant and
its employees have access to and knowledge of confidential information of the
Company, including, but not limited to, (A) the identity of the Company's
customers, (B) the identity of the representatives of customers with whom the
Company has dealt, (C) the kinds of products and services provided by the
Company to customers and offered to be provided for potential customers, (D)
the manner in which such products and services are provided or offered, (E) the
product and service needs of actual or prospective customers, (F) pricing
information, (G) information concerning the design, manufacture, sale and
distribution of products and services, including, but not limited to, (1)
technical and other engineering know-how, designs and information and (2)
manufacturing methods, practices, procedures, processes and formulae, (H)
customer maintenance listings, (I) computer software applications and other
programs, (J) personnel information and (K) other trade secrets (the
"Confidential Information"); (ii) the direct and indirect disclosure of any
such Confidential Information to existing or potential competitors of the
Company would place the Company at a competitive disadvantage and would do
damage, monetary or otherwise, to the Company's business; and (iii) the
engaging by Consultant or its employees in any of the activities prohibited by
this Section 6 may constitute improper appropriation and/or use of such
information and trade secrets. Consultant, on its own behalf and on behalf of
each of its employees, expressly acknowledges the trade secret status of the
Confidential Information and that the Confidential Information constitutes a
protectible business interest of the Company.
(b) For purposes of this Section 6, the Company shall be
construed to include the Company and its parents, subsidiaries and affiliates
engaged in the Business, including, but not limited to, Lemmerz Holding and
its subsidiaries.
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<PAGE> 5
(c) During the Term of this Agreement and at all times after
the termination of Consultant's engagement upon expiration of the Term or
otherwise, neither Consultant nor any of its employees shall, directly or
indirectly, whether individually, as a director, stockholder, owner, partner,
employee, principal or agent of any business, or in any other capacity, make
known, disclose, furnish, make available or utilize any of the Confidential
Information, other than in the proper performance of the duties contemplated
herein, or as required by a court of competent jurisdiction or other
administrative or legislative body; provided that, prior to disclosing any of
the Confidential Information to a court or other administrative or legislative
body, Consultant or any such employee shall promptly notify the Company so that
the Company may seek a protective order or other appropriate remedy. Consultant
agrees to, and to cause each of its employees to, return all Confidential
Informa- tion, including all photocopies, extracts and summaries thereof, and
any such information stored electronically on tapes, computer disks or in any
other manner to the Company at any time upon request by the Company and upon
the termination of his engagement for any reason.
(d) Neither Consultant nor any of its employees shall, so long as
Consultant is engaged by the Company hereunder, engage in Competition (as
defined below) with the Company. For purposes of this Agreement, "Competition"
by Consultant or its employees shall mean Consultant's engaging in, or
otherwise directly or indirectly being employed by or acting as a consultant or
lender to, or being a director, officer, employee, principal, licensor,
trustee, broker, agent, stockholder, member, owner, joint venturer or partner
of, or permitting his name to be used in connection with the activities of any
other business or organization which competes, directly or indirectly, with the
business of the Company as the same shall be constituted as of the date hereof
and, to the extent, but only to the extent that Consultant or such employee is
not so engaged at such time consistent with the terms of this Agreement, as the
same shall be expanded or otherwise changed at any time during his engagement
provided that, it shall not be a violation of this Section 6 for Horst
Kukwa-Lemmerz, together with the Lemmerz Shareholders, in the aggregate, to (i)
become the registered or beneficial owners of up
5
<PAGE> 6
to five percent (5%) of any class of the capital stock of a publicly traded
competing corporation, or (ii) acquire up to five percent (5%) of any issue of
publicly traded debt securities of a competing corporation, provided that Mr.
Kukwa-Lemmerz may not actively participate in the business of such corporation
until such time as this covenant expires.
(e) During the Term, Consultant agrees, on its own behalf and
on behalf of each of its employees, that it will not, directly or indirectly,
for its benefit or for the benefit of any other person, firm or entity, do any
of the following:
(i) solicit from any customer doing business with the
Company business of the same or of a similar nature to the Business
with such customer;
(ii) solicit from any known potential customer of the
Business, business of the same or of a similar nature to that which has
been the subject of a known written or oral bid, offer or proposal by
the Company, or of substantial preparation with a view to making such a
bid, proposal or offer;
(iii) solicit the employment or services of, or hire, any
person who is known to be employed by or is a known consultant to the
Company, (other than investment advisors, accountants or attorneys);
(iv) otherwise interfere with the Business or accounts of
the Company including the making of any statements or comments of a
defamatory or disparaging nature to third parties regarding the Company
or its officers, directors, personnel or products.
(f) Consultant, on its own behalf and on behalf of each of its
employees, acknowledges that this Agreement is being entered into in
connection with the consummation of the transactions contemplated by the
Purchase Agreement, that the services to be rendered by him to the Company are
of a special and unique character, which gives this Agreement a peculiar value
to the Company, the loss of which may not be reasonably or adequately
6
<PAGE> 7
compensated for by damages in an action at law, and that a material breach or
threatened breach by him of any of the provisions contained in this Section 6
will cause the Company irreparable injury. Consultant, on its own behalf and
on behalf of each of its employees, therefore agrees that the Company shall be
entitled, in addition to any other right or remedy, to a temporary, preliminary
and permanent injunction, without the necessity of proving the inadequacy of
monetary damages or the posting of any bond or security, enjoining or
restraining Consultant or any of its employees from any such violation or
threatened violations.
(g) Consultant, on its own behalf and on behalf of each of its
employees, further acknowledges that the provisions of this Section 6 are in
addition to the noncompetition provisions granted by the Lemmerz Shareholders
pursuant to the Purchase Agreement and to the extent provisions set forth
herein are more restrictive than those set forth in the Purchase Agreement,
the provisions of this Section 6 shall govern.
(h) Consultant, on its own behalf and on behalf of each of its
employees, further acknowledges and agrees that due to the uniqueness of his
services and confidential nature of the information he will possess, the
covenants set forth herein are reasonable and necessary for the protection of
the business and goodwill of the Company; and it is the intent of the parties
hereto that if in the opinion of any court of competent jurisdiction any
provision set forth in this Section 6 is not reasonable in any respect, such
court shall have the right, power and authority to modify any and all such
provisions as to such court shall appear not unreasonable and to enforce the
remainder of this Section 6 as so modified.
7. Termination.
(a) Notwithstanding any provision of this Agreement to the
contrary, the engagement of Consultant hereunder after the Closing shall
terminate on the first to occur of the following dates (each of which, to the
extent applicable, the "Date of Termination"):
(i) the date that the Company and Consultant mutually
agree to such termination;
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<PAGE> 8
(ii) the date of Horst Kukwa-Lemmerz's death or adjudicated
incompetency or Horst Kukwa-Lemmerz's or Consultant's adjudicated
bankruptcy;
(iii) the date on which the Company shall give Consultant
notice of termination for Cause (as defined below);
(iv) the date on which the Consulting Agreement between
the Company and Horst Kukwa-Lemmerz of even date herewith, is terminated
pursuant to the provisions of Section 7(a)(iii) thereof; or
(v) the expiration of the Term.
(b) Upon termination of Consultant's engagement after the
Closing (other than pursuant to clause (i) or (v) above), Consultant shall be
entitled to the following:
(i) upon termination pursuant to clause (a)(ii) above,
Consultant shall be entitled to (A) receive any unpaid consulting fees to
the Date of Termination and (B) to the extent exercisable on the Date of
Termination pursuant to Section 5(c) hereof, exercise the Option at any
time prior to the Expiration Date; or
(ii) upon termination pursuant to clause (a)(iii) or (iv)
above, Consultant shall be entitled to receive any unpaid consulting fees
to the Date of Termination. The Option, whether or not exercisable,
shall immediately terminate and Consultant shall not be entitled to
exercise the Option on or after the Date of Termination.
(c) For purposes of this Agreement, "Cause" shall mean the
occurrence of any of the following:
(i) the willful failure, neglect or refusal by Consultant
or any of its employees to perform its duties hereunder;
(ii) any willful, intentional or grossly negligent act by
Consultant or any of its
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<PAGE> 9
employees having the effect of injuring the interest, business or
reputation of the Company, any of its parents, subsidiaries or affiliates;
(iii) Consultant's or any of its employees rendering
services hereunder commission of any felony or a misdemeanor involving
moral turpitude (including entry of a nolo contendere plea);
(iv) any misappropriation or embezzlement of the property
of the Company and its affiliates and subsidiaries (whether or not a
misdemeanor or felony); and
(v) a material breach of any one or more of the provisions
of this Agreement by Consultant or any of its employees which, to the
extent curable, has not been cured within 30 days after notice thereof is
received by the Consultant.
8. Return of Company Property. Consultant on its own behalf and on
behalf of its employees, agrees that following the termination of its
engagement for any reason, it shall return all property of the Company, its
subsidiaries, affiliates and any divisions thereof which is then in or
thereafter comes into its possession, including, but not limited to,
documents, contracts, agreements, plans, photographs, books, notes,
electronically stored data and all copies of the foregoing as well as any
automobile or other materials or equipment supplied by the Company to
Consultant or any of its employees.
9. Effectiveness; Survival.
(a) Notwithstanding any provision hereof to the contrary, it is
the intention of the parties hereto that: (i) this Agreement shall become
effective on the Closing Date; and (ii) from and after the termination of the
Purchase Agreement in accordance with its terms at any time prior to the
Closing, the engagement contemplated hereby shall be deemed abandoned and this
Agreement shall forthwith become void.
(b) Upon termination of Consultant's engagement for any reason
after the Closing, this Agreement shall terminate and the Company shall have
no further obligation to Consultant; provided that the provisions
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<PAGE> 10
set forth in Sections 5 (subject to the termination provisions of Section
7(b)), 6, 7(b), 8 and 10 through 17 hereof shall remain in full force and
effect after the termination of Consultant's engagement, notwithstanding the
expiration or termination of this Agreement.
10. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute
the parties hereto as partners or as joint venturers, or either as agent of the
other, or as employer and employee. By virtue of the relationship described
herein Consultant's relationship to the Company during the term of this
Agreement shall only be that of an independent contractor and Consultant shall
perform all services pursuant to this Agreement as an independent contractor.
(b) Subject only to such specific limitations as are contained
in this Agreement, the manner, means, details or methods by which Consultant
performs its obligations under this Agreement shall be solely within the
discretion of Consultant. The Company shall not have the authority to, nor
shall it, supervise, direct or control the manner, means, details or methods
utilized by Consultant to perform its obligations under this Agreement and
nothing in this Agreement shall be construed to grant the Company any such
authority.
11. Entire Agreement; Termination of Prior Agreement. This
Agreement sets forth the entire agreement between the parties with respect to
its subject matter and merges and supersedes all prior discussions, agreements
and understandings of every kind and nature between any of them, and neither
party shall be bound by any term or condition other than as expressly set
forth or provided for in this Agreement. This Agreement may not be changed or
modified except by an agreement in writing, signed by the parties hereto.
12. Waiver. The failure of any party to this Agreement to enforce
any of its terms, provisions or covenants shall not be construed as a waiver
of the same or of the right of such party to enforce the same. Waiver by any
party hereto of any breach or default by any other party of any term or
provision of this Agree-
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<PAGE> 11
ment shall not operate as a waiver of any other breach or default.
13. Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remainder of
the Agreement shall not in any way be affected or impaired thereby. Moreover,
if any one or more of the provisions contained in this Agreement shall be held
to be excessively broad as to duration, activity or subject, such provisions
shall be construed by limiting and reducing them so as to be enforceable to
the maximum extent allowed by applicable law.
14. Notices. Any notice given hereunder shall be in writing and
shall be deemed to have been given when delivered by messenger or courier
service (against appropriate receipt), or mailed by registered or certified mail
(return receipt requested), addressed as follows:
If to the Company:
Hayes Wheels International, Inc.
Attention: General Counsel
38481 Huron River Drive
Romulus, Michigan 48174
U.S.A.
If to Consultant:
H.K.L., L.L.C.
at such address as is
supplied subsequently
With a copy to:
Herrn Horst Kukwa-Lemmerz
Postfach 1125
53621 Konigswinter
Federal Republic of Germany
or at such other address as shall be indicated to either party in writing.
Notice of change of address shall be effective only upon receipt.
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<PAGE> 12
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, without regard
to conflicts of law principles.
16. Descriptive Headings. The section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original for all purposes but which,
together, shall constitute one and the same instrument.
18. Forum. The forum for the resolution of any claim, action,
suit or proceeding arising out of or related to this Agreement shall be (i)
the United States District Court, District of Florida, for any action brought
against Consultant and (ii) the United States District Court, Eastern District
of Michigan, Southern Division, for any action brought against the Company.
Notwithstanding the foregoing, counterclaims may be asserted by a party in the
forum in which the initial claim, action, suit, proceeding or investigation
shall have been filed or brought.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement as of the date first written above.
HAYES WHEELS INTERNATIONAL, INC.
By: /s/ Tim Oliver Brandi
----------------------------
Name:
Title:
H.K.L., L.L.C.
BY: /s/ Wienand Meilicke
----------------------------
Horst Kukwa-Lemmerz
Title:
13
<PAGE> 1
Exhibit 10.2
CONSULTING AGREEMENT
CONSULTING AGREEMENT, made as of June 6, 1997 ("Agreement"), by and between
Hayes Wheels International, Inc., a Delaware corporation (the "Company"), and
Horst Kukwa-Lemmerz ("Consultant").
WITNESSETH:
WHEREAS, the Company is engaged in the business of designing, manufacturing,
selling and distributing (i) automobile and truck wheels and (ii) brake parts
and components (the "Business");
WHEREAS, in connection with and subject to the consummation of the
transactions contemplated by the Purchase Agreement of even date herewith among
the Company, Cromodora, S.p.A., Lemmerz Holding GmbH ("Lemmerz Holding") and
the shareholders of Lemmerz Holding (the "Lemmerz Shareholders"), including,
but not limited to, Consultant (the "Purchase Agreement"), the Company wishes
to engage Consultant upon the terms and subject to the conditions set forth
herein; and
WHEREAS, in connection with and subject to the consummation of the
transactions contemplated by the Purchase Agreement, Consultant wishes to be so
engaged by the Company upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Company and Consultant agree as follows:
1. Service to be Provided. The Company hereby agrees to engage Consultant,
and Consultant hereby agrees to serve outside the United States, upon the terms
and subject to the conditions set forth in this Agreement, as a consultant of
the Company. Consultant shall consult with the Company on such subjects and at
such times and locations outside the United States as are from time to time
reasonably requested of Consultant by the senior executive officers or the
Board of Directors of
<PAGE> 2
the Company, including assisting in the development of the Company's strategy
for its European businesses.
2. Term. The term of Consultant's engagement under this Agreement shall
commence on the Closing Date (as defined in the Purchase Agreement) and, unless
earlier terminated pursuant to Section 7, shall continue in effect for a period
of five years thereafter (such period, as may be earlier terminated, the
"Term"). There shall be no extension of this Agreement other than by written
instrument duly executed and delivered by both parties hereto.
3. Compensation. During the Term, the Company shall pay Consultant
U.S.$200,000 plus value added tax, if any, per annum, payable in equal monthly
installments (subject to proration for any partial month) on the last day of
each month during the Term to an account in the United States designated in
writing by Consultant. Consultant hereby acknowledges and agrees that, except
as set forth in this Section 3 and as set forth in Section __ of the
Termination Agreement (as defined below), neither the Company nor any
subsidiary or affiliate of the Company shall have any responsibility to pay any
amounts in respect of salary, bonus, benefits or other compensation to
Consultant by reason of any position or office held by Consultant from and
after the Closing Date with any such person, including as a director thereof,
whether hereunder, under the Prior Agreement (as defined below) or otherwise.
4. Expenses. The Company shall reimburse Consultant for reasonable and
necessary business expenses of Consultant for travel, meals and similar items
incurred in connection with the performance of Consultant's duties hereunder,
and which are consistent with such guidelines as the Board of Directors of the
Company may from time to time establish. All payments for reimbursement of
such expenses shall be made to Consultant only upon the presentation to the
Company of appropriate vouchers or receipts.
5. Stock Option. The Company hereby grants Consultant, effective from and
after the Closing, an option (the "Option") to purchase 100,000 shares of
Common Stock, par value $.01 per share, of the Company
2
<PAGE> 3
(the "Common Shares"), subject to the following terms and conditions:
(a) The Option is not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Internal Revenue Code, as amended.
(b) The exercise price of the Option is $16 per Common Share (the
"Exercise Price"). The Exercise Price shall be paid to the Company in full, at
the time of exercise, in cash.
(c) The Option shall become exercisable at the annual rate of twenty
percent (20%) of the Common Shares underlying the Option on each of the first
through fifth anniversary of the Closing Date during the Term, so long as this
Agreement remains in effect on such anniversary. The Option may be exercised
as to any or all Common Shares as to which the Option has become exercisable by
written notice delivered in person or by mail to the Secretary of the Company,
specifying the number of Common Shares with respect to which the Option is
being exercised. For purposes of the preceding sentence, the date of exercise
shall be deemed to be the date upon which the Secretary of the Company receives
such notification. Unless sooner exercised or terminated, the Option shall be
cancelled and be of no further force and effect after the tenth anniversary of
the date hereof (the "Expiration Date").
(d) The Option is not transferrable by Consultant except by will or the
laws of descent and distribution.
(e) In the event that following the Closing, the Company effects a
dividend or other distribution (whether in the form of cash, capital stock of
the Company or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, spinoff, combination, repurchase
or share exchange, or other similar corporate transaction or event that affects
the Common Shares such that an adjustment is appropriate to prevent dilution or
enlargement of the rights of Consultant with respect to the Option, the Company
shall make equitable changes or adjustments as are consistent with such changes
or adjustments as are made to options granted under the Company's 1996 Stock
3
<PAGE> 4
Option Plan to any or all of (i) the number and kind of shares of capital stock
that may be issued or issuable pursuant to the Option and (ii) the Exercise
Price. The parties hereto acknowledge and understand that additional issuances
of capital stock by the Company for cash or property shall not result in an
adjustment under this Section 5(e).
(f) During the term of this Agreement, the Company shall provide to
Consultant.
(i) the use of a representative office in a location determined by
the Company not more than 50 kilometers from Konigswinter (preferably in
or close to Cologne);
(ii) a full-time secretary, provided that the chief financial
officer or other comparable officer of the Company or any of its
subsidiaries shall be entitled to utilize the services of such secretary
when she is not being utilized by Consultant. As long as Mrs. Thill-Lausen
is prepared to serve as secretary to Consultant, the Company shall cause
Mrs. Thill-Lausen to be employed by the Company or one of its subsidiaries
for services to be rendered to Consultant. Mrs. Thill-Lausen shall be
compensated for her services under no less favorable conditions than she is
presently employed by Lemmerz Holding, and she shall receive adjustments to
her compensation in line with adjustments received by comparable employees
of the Company in Germany;
(iii) a Company car Mercedes-Benz 600 SEL V12 or equivalent which
Consultant may use for private purposes. The Company shall bear all costs
resulting from the use of the Company car;
(iv) a full-time driver. As long as Mr. Marcel Ried is prepared to
serve as driver to Consultant, the Company shall cause Mr. Marcel Ried to
be employed by the Company or one of its subsidiaries for services to be
rendered to Consultant. Mr. Marcel Ried shall be compensated for his
services under no less favorable conditions then he is presently employed
by Lemmerz Holding, and he shall receive adjustments to his compensation in
line with adjustments received by comparable employees of the Company in
Germany.
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<PAGE> 5
6. Confidentiality, Non-Competition.
(a) Consultant acknowledges that: (i) the Business is intensely
competitive and that Consultant has, and his engagement by the Company will
require that Consultant continue to have, access to and knowledge of
confidential information of the Company, including, but not limited to, (A) the
identity of the Company's customers, (B) the identity of the representatives of
customers with whom the Company has dealt, (C) the kinds of products and
services provided by the Company to customers and offered to be provided for
potential customers, (D) the manner in which such products and services are
provided or offered, (E) the product and service needs of actual or prospective
customers, (F) pricing information, (G) information concerning the design,
manufacture, sale and distribution of products and services, including, but not
limited to, (1) technical and other engineering know-how, designs and
information and (2) manufacturing methods, practices, procedures, processes and
formulae, (H) customer maintenance listings, (I) computer software applications
and other programs, (J) personnel information and (K) other trade secrets (the
"Confidential Information"); (ii) the direct and indirect disclosure of any
such Confidential Information to existing or potential competitors of the
Company would place the Company at a competitive disadvantage and would do
damage, monetary or otherwise, to the Company's business; and (iii) the
engaging by Consultant in any of the activities prohibited by this Section 6
may constitute improper appropriation and/or use of such information and trade
secrets. Consultant expressly acknowledges the trade secret status of the
Confidential Information and that the Confidential Information constitutes a
protectible business interest of the Company.
(b) For purposes of this Section 6, the Company shall be construed to
include the Company and its parents, subsidiaries and affiliates engaged in the
Business, including, but not limited to, Lemmerz Holding and its subsidiaries.
(c) During the Term of this Agreement and at all times after the
termination of Consultant's engagement upon expiration of the Term or
otherwise, Consultant shall not, directly or indirectly, whether individually,
as a director, stockholder, owner, partner, employee, principal or agent of any
business, or in any other capacity, make known, disclose, furnish, make
5
<PAGE> 6
available or utilize any of the Confidential Information, other than in the
proper performance of the duties contemplated herein, or as required by a court
of competent jurisdiction or other administrative or legislative body; provided
that, prior to disclosing any of the Confidential Information to a court or
other administrative or legislative body, Consultant shall promptly notify the
Company so that the Company may seek a protective order or other appropriate
remedy. Consultant agrees to return all Confidential Information, including
all photocopies, extracts and summaries thereof, and any such information
stored electronically on tapes, computer disks or in any other manner to the
Company at any time upon request by the Company and upon the termination of his
engagement for any reason.
(d) Consultant shall not, so long as he is engaged by the Company
hereunder, engage in Competition (as defined below) with the Company. For
purposes of this Agreement, "Competition" by Consultant shall mean Consultant's
engaging in, or otherwise directly or indirectly being employed by or acting as
a consultant or lender to, or being a director, officer, employee, principal,
licensor, trustee, broker, agent, stockholder, member, owner, joint venturer or
partner of, or permitting his name to be used in connection with the activities
of any other business or organization which competes, directly or indirectly,
with the business of the Company as the same shall be constituted as of the
date hereof and, to the extent, but only to the extent that Consultant is not
so engaged at such time consistent with the terms of this Agreement, as the
same shall be expanded or otherwise changed at any time during his engagement
provided that, it shall not be a violation of this Section 6 for the
Consultant, together with the Lemmerz Shareholders, in the aggregate, to (i)
become the registered or beneficial owners of up to five percent (5%) of any
class of the capital stock of a publicly traded competing corporation, or (ii)
acquire up to five percent (5%) of any issue of publicly traded debt securities
of a competing corporation, provided that Consultant may not actively
participate in the business of such corporation until such time as this
covenant expires.
(e) During the Term, Consultant agrees that he will not, directly or
indirectly, for his benefit or for the benefit of any other person, firm or
entity, do any of the following:
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<PAGE> 7
(i) solicit from any customer doing business with the Company business
of the same or of a similar nature to the Business with such customer;
(ii) solicit from any known potential customer of the Business,
business of the same or of a similar nature to that which has been the
subject of a known written or oral bid, offer or proposal by the Company, or
of substantial preparation with a view to making such a bid, proposal or
offer;
(iii) solicit the employment or services of, or hire, any person who
is known to be employed by or is a known consultant to the Company, (other
than investment advisors, accountants or attorneys);
(iv) otherwise interfere with the Business or accounts of the Company
including the making of any statements or comments of a defamatory or
disparaging nature to third parties regarding the Company or its officers,
directors, personnel or products.
(f) Consultant acknowledges that this Agreement is being entered into
in connection with the consummation of the transactions contemplated by the
Purchase Agreement, that the services to be rendered by him to the Company are
of a special and unique character, which gives this Agreement a peculiar value
to the Company, the loss of which may not be reasonably or adequately
compensated for by damages in an action at law, and that a material breach or
threatened breach by him of any of the provisions contained in this Section 6
will cause the Company irreparable injury. Consultant therefore agrees that
the Company shall be entitled, in addition to any other right or remedy, to a
temporary, preliminary and permanent injunction, without the necessity of
proving the inadequacy of monetary damages or the posting of any bond or
security, enjoining or restraining Consultant from any such violation or
threatened violations.
(g) Consultant further acknowledges and agrees that the provisions of
this Section 6 are in addition to the noncompetition provisions granted by the
Lemmerz Shareholders pursuant to the Purchase Agreement and, to the extent that
the provisions set forth herein
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<PAGE> 8
are more restrictive than those set forth in the Purchase Agreement, the
provisions of this Section 6 shall govern.
(i) Consultant further acknowledges and agrees that due to the
uniqueness of his services and confidential nature of the information he
will possess, the covenants set forth herein are reasonable and necessary
for the protection of the business and goodwill of the Company; and it is
the intent of the parties hereto that if in the opinion of any court of
competent jurisdiction any provision set forth in this Section 6 is not
reasonable in any respect, such court shall have the right, power and
authority to modify any and all such provisions as to such court shall
appear not unreasonable and to enforce the remainder of this Section 6 as
so modified.
7. Termination.
(a) Notwithstanding any provision of this Agreement to the
contrary, the engagement of Consultant hereunder after the Closing shall
terminate on the first to occur of the following dates (each of which, to the
extent applicable, the "Date of Termination"):
(i) the date that the Company and Consultant mutually agree to such
termination;
(ii) the date of Consultant's death, adjudicated incompetency or
adjudicated bankruptcy;
(iii) the date on which the Company shall give Consultant notice of
termination for Cause (as defined below);
(iv) the date on which the Consulting Agreement between the
Company and H.K.L., L.L.C., a Florida corporation, of even date herewith,
is terminated pursuant to the provisions of Section 7(a)(iii) thereof; or
(v) the expiration of the Term.
(b) Upon termination of Consultant's engagement after the Closing (other
than pursuant to clause (i) or (v) above), Consultant shall be entitled to the
following:
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(i) upon termination pursuant to clause (a)(ii) above, Consultant
or Consultant's heirs, as the case may be, shall be entitled to (A) receive
any unpaid consulting fees to the Date of Termination and (B) to the extent
exercisable on the Date of Termination pursuant to Section 5(c) hereof,
exercise the Option at any time prior to the Expiration Date; or
(ii) upon termination pursuant to clause (a)(iii) or (iv) above,
Consultant shall be entitled to receive any unpaid consulting fees to the
Date of Termination. The Option, whether or not exercisable, shall
immediately terminate and Consultant shall not be entitled to exercise the
Option on or after the Date of Termination.
(c) For purposes of this Agreement, "Cause" shall mean the occurrence of
any of the following:
(i) the willful failure, neglect or refusal by Consultant to
perform his duties hereunder (including, without limitation, Consultant's
inability to perform such duties as a result of alcohol or drug abuse, chronic
alcoholism or drug addiction);
(ii) any willful, intentional or grossly negligent act by
Consultant having the effect of injuring the interest, business or reputation
of the Company, any of its parents, subsidiaries or affiliates;
(iii) Consultant's commission of any felony or a misdemeanor
involving moral turpitude (including entry of a nolo contendere plea);
(iv) any misappropriation or embezzlement of the property of the
Company and its affiliates and subsidiaries (whether or not a misdemeanor or
felony); and
(v) a material breach of any one or more of the provisions of this
Agreement by Consultant which, to the extent curable, has not been cured
within 30 days after notice thereof is received by the Consultant.
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8. Return of Company Property. Consultant agrees that following the
termination of his engagement for any reason, he shall return all property of
the Company, its subsidiaries, affiliates and any divisions thereof which is
then in or thereafter comes into his possession, including, but not limited to,
documents, contracts, agreements, plans, photographs, books, notes,
electronically stored data and all copies of the foregoing as well as any
automobile or other materials or equipment supplied by the Company to
Consultant; provided that Consultant shall be entitled at such time to purchase
any automobile provided hereunder at its then current market value as reflected
in the then current Schwacke list.
9. Effectiveness; Survival.
(a) Notwithstanding any provision hereof to the contrary, it is the
intention of the parties hereto that: (i) this Agreement shall become
effective on the Closing Date; and (ii) from and after the termination of the
Purchase Agreement in accordance with its terms at any time prior to the
Closing, the engagement contemplated hereby shall be deemed abandoned and this
Agreement shall forthwith become void.
(b) Upon termination of Consultant's engagement for any reason after the
Closing, this Agreement shall terminate and the Company shall have no further
obligation to Consultant; provided that the provisions set forth in Sections 5
(subject to the termination provisions of Section 7(b)), 6, 7(b), 8 and 10
through 17 hereof shall remain in full force and effect after the termination
of Consultant's engagement, notwithstanding the expiration or termination of
this Agreement.
10. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent of the
other, or as employer and employee. By virtue of the relationship described
herein Consultant's relationship to the Company during the term of this
Agreement shall only be that of an independent contractor and Consultant shall
perform all services pursuant to this Agreement as an independent contractor.
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(b) Subject only to such specific limitations as are contained in this
Agreement, the manner, means, details or methods by which Consultant performs
his obligations under this Agreement shall be solely within the discretion of
Consultant. The Company shall not have the authority to, nor shall it,
supervise, direct or control the manner, means, details or methods utilized by
Consultant to perform his obligations under this Agreement and nothing in this
Agreement shall be construed to grant the Company any such authority.
11. Entire Agreement; Termination of Prior Agreement.
(a) This Agreement sets forth the entire agreement between the parties
with respect to its subject matter and merges and supersedes all prior
discussions, agreements and understandings of every kind and nature between any
of them, and neither party shall be bound by any term or condition other than
as expressly set forth or provided for in this Agreement. This Agreement may
not be changed or modified except by an agreement in writing, signed by the
parties hereto.
(b) Without limiting the generality of the foregoing, the Company and
Consultant hereby acknowledge and confirm that: (i) the employment agreement
dated June 9, 1993 between Lemmerz Holding and Consultant (the "Prior
Agreement") has, subject to the occurrence of the Closing, been irrevocably
terminated and, from and after the Closing, the Prior Agreement shall be of no
further force or effect; and (ii) from and after the Closing Date, neither the
Company nor any subsidiary or affiliate of the Company, including, but not
limited to, Lemmerz Holding, shall have any liability or obligation to
Consultant or any person or entity under the Prior Agreement, except as
provided in the termination agreement attached hereto as Exhibit A (the
"Termination Agreement").
12. Waiver. The failure of any party to this Agreement to enforce any of
its terms, provisions or covenants shall not be construed as a waiver of the
same or of the right of such party to enforce the same. Waiver by any party
hereto of any breach or default by any other party of any term or provision of
this Agreement shall not operate as a waiver of any other breach or default.
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13. Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the Agreement shall
not in any way be affected or impaired thereby. Moreover, if any one or more
of the provisions contained in this Agreement shall be held to be excessively
broad as to duration, activity or subject, such provisions shall be construed
by limiting and reducing them so as to be enforceable to the maximum extent
allowed by applicable law.
14. Notices. Any notice given hereunder shall be in writing and shall be
deemed to have been given when delivered by messenger or courier service
(against appropriate receipt), or mailed by registered or certified mail
(return receipt requested), addressed as follows:
If to the Company:
Hayes Wheels International, Inc.
Attention: General Counsel
38481 Huron River Drive
Romulus, Michigan 48174
U.S.A.
If to Consultant:
Herrn Horst Kukwa-Lemmerz
Postfach 1125
53621 Konigswinter
Federal Republic of Germany
or at such other address as shall be indicated to either party in writing.
Notice of change of address shall be effective only upon receipt.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without regard to conflicts
of law principles.
16. Descriptive Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an
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original for all purposes but which, together, shall constitute one and the
same instrument.
18. Forum. The forum for the resolution of any claim, action, suit or
proceeding arising out of or related to this Agreement shall be (i) the
Landgericht Bonn for any action brought against Consultant and (ii) the United
States District Court, Eastern District of Michigan, Southern Division, for any
action brought against the Company. Notwithstanding the foregoing,
counterclaims may be asserted by a party in the forum in which the initial
claim, action, suit, proceeding or investigation shall have been filed or
brought.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement as of the date first written above.
HAYES WHEELS INTERNATIONAL, INC.
By: /s/ Tim Oliver Brandi
---------------------------
Name:
Title:
CONSULTANT
/s/ Wienand Meilicke
-------------------------------
Horst Kukwa-Lemmerz
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EXHIBIT 23
The Board of Directors
Hayes Wheels International, Inc.:
We consent to the inclusion of our report dated May 21, 1997, with respect to
the consolidated balance sheets of Lemmerz Holding GmbH and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
earnings, changes in shareholders' equity, and cash flows for each of the years
then ended, which report appears in the Form 8-K of Hayes Wheels International,
Inc. dated June 6, 1997.
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft Wirtschaftsprtifungsgesellschaft
Cologne, Germany
June 6, 1997
<PAGE> 1
EXHIBIT 99
HAYES WHEELS INTERNATIONAL SIGNS DEFINITIVE AGREEMENT
TO ACQUIRE LEMMERZ HOLDING
COMBINED COMPANY IS WORLD'S LARGEST WHEEL MANUFACTURER
ROMULUS, Mich., June 6, 1997--Hayes Wheels International, Inc. (NASDAQ:
HAYS) has signed a definitive agreement to acquire 100 percent of Lemmerz
Holding GmbH, Europe's leading full-line wheel supplier, in a cash and stock
transaction valued at approximately $390 million.
The combined company, which, subject to shareholder approval, will be named
Hayes Lemmerz International, Inc., will have estimated annual sales of
approximately $1.4 billion. The merger of the two companies will enhance Hayes'
leadership as the largest wheel supplier to the global transportation industry.
Under the agreement, Lemmerz shareholders will receive $200 million in cash
and shares of Hayes preferred stock, which will be convertible into 5.0 million
shares of Hayes common stock. Hayes will also refinance approximately $80
million of Lemmerz' existing debt. The cash portion of the purchase price will
be financed through the company's senior bank credit facilities and the issuance
of $200 million in new senior subordinated notes.
The transaction, which has been approved by the company's Board of
Directors, is expected to be completed by the end of the second quarter, at
which time Lemmerz will become a wholly owned subsidiary of Hayes. Ron Cucuz,
52, chairman and chief executive officer of Hayes, will continue as president,
chairman and chief executive officer. Horst Kukwa-Lemmerz, 53, who will retire
from his position as president of Lemmerz Holding, will serve as vice chairman
of Hayes and as chairman of Hayes Europe. Klaus Junger will be president of
Hayes' European Fabricated Wheels Group and Giancarlo Dallera will continue to
serve as president of Hayes' European Aluminum Wheels Group. The company will
continue to be traded on the NASDAQ stock exchange under the symbol "HAYS".
"The merger of these two companies establishes the largest and most
experienced manufacturer of wheels to the worldwide automotive and commercial
highway markets," said Cucuz. "Combining our product offerings and technological
capabilities with those of Lemmerz is expected to result in synergies in all
aspects of our business operations, including design, engineering,
manufacturing, sales and purchasing.
"The acquisition of Motor Wheel, completed one year ago, has been very
successful, as evidenced by our first quarter financial results, and we are on
target to deliver the major savings originally identified," continued Cucuz.
"Now the Lemmerz acquisition significantly enhances our global position and
provides additional opportunities for growth in sales and profits. We expect
this transaction to be accretive for our shareholders.
"In addition, by joining the geographically diverse customer bases of both
companies, as well as our complementary product lines, we solidify our position
as the leading full-line wheel supplier to the global transportation industry.
Together we will supply virtually every major vehicle producer in the world."
Hayes' automotive customers include Chrysler, Ford, General Motors, BMW,
Fiat, GM-Opel, Honda, Isuzu, Mercedes-Benz, Mitsubishi, Nissan, Porsche, PSA,
Renault, Suzuki, Toyota, the Volkswagen Group and Volvo. Heavy-duty customers
include DAF/Leyland, Dana/Mack, Freightliner, Great Dane, Heavy Duty America,
Iveco, Mercedes-Benz, PACCAR, Renault, Strick, Trailmobile, Volvo/GM and Western
Star.
Based in Romulus, Michigan, Hayes Wheels International designs and
manufactures steel and aluminum wheels and brake drums and rotors for the
automotive and commercial highway markets. The company, with 1996 pro-forma
sales of $913 million, has 4,500 employees at manufacturing facilities in the
United States, Mexico, Italy and Spain. Hayes Wheels also has joint ventures in
the Czech Republic, Venezuela, Mexico and Brazil.
Lemmerz, a privately owned company since its inception in 1919, is based in
Konigswinter, Germany, and designs and produces steel and aluminum wheels for
automobiles and heavy-duty vehicles. The company's 3,000 employees are located
at facilities in Germany, Spain, Belgium, Switzerland, the Netherlands and
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Turkey. Lemmerz also has joint ventures in Canada, Thailand, Brazil, India and
Portugal. The company recorded 1996 sales of $460 million.
Contacts: Dennis Richardville
Hayes Wheels International, Inc.
(313) 942-8716
Lee Ann Welsh
Franco Public Relations Group
(313) 567-5087
Klaus Junger
Lemmerz Holding GmbH
011-49-2223-71191
