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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HAYES LEMMERZ INTERNATIONAL, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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[HAYES LEMMERZ LOGO]
May 8, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Hayes Lemmerz International, Inc. (the "Meeting"), to be held at The
Ritz-Carlton, 300 Town Center Drive, Dearborn, Michigan 48126 on June 11, 1998,
at 10:00 a.m. The doors will open at 9:00 a.m.
At the meeting you will be asked to: (i) elect three (3) Class 2 directors
to serve until the 2001 Annual Meeting of Stockholders; (ii) approve the
adoption of the Company's Annual Performance Plan; and (iii) ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent auditors for
the fiscal year ending January 31, 1999. Each of these items is discussed in
full in the attached proxy statement and you are urged to read the attached
proxy statement in its entirety.
Your Board of Directors has considered each of these items and recommends
that you vote FOR the election of the Board of Directors' nominees as Class 2
directors, FOR the adoption of the Company's Annual Performance Plan and FOR the
ratification of the appointment of KPMG as the Company's independent auditors
for the fiscal year ending January 31, 1999.
It is important that your shares be voted, regardless of whether you are
able to attend the Meeting. To be sure that your shares are represented, please
sign and mail the enclosed proxy card promptly. This will not prevent you from
voting your shares in person if you choose to do so.
I look forward to meeting with you this year.
Very truly yours,
Ranko Cucuz
Ranko Cucuz
Chairman of the Board of Directors
and Chief Executive Officer
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[HAYES LEMMERZ INTERNATIONAL, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Hayes Lemmerz International, Inc. (the "Company") will be held at
The Ritz-Carlton, 300 Town Center Drive, Dearborn, Michigan 48126, on June 11,
1998, at 10:00 a.m. (Eastern Standard Time) for the following purposes:
1. To elect three (3) Class 2 directors of the Company, each to serve
for a term of three years;
2. To approve the adoption of the Company's Annual Performance Plan;
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent auditors for the fiscal year ending January 31, 1999;
4. To transact such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on May 4, 1998 are
entitled to notice of and to vote at the Meeting and at any and all adjournments
or postponements thereof. A list of stockholders entitled to vote at the Meeting
will be available for inspection for at least ten days prior to the Meeting, and
will also be available for inspection at the Meeting.
By Order of the Board of Directors,
Daniel M. Sandberg
Daniel M. Sandberg
Secretary
Romulus, Michigan
May 8, 1998
YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE
ENCLOSED PROXY TO THE COMPANY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT
PREVENT YOU FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU SO DESIRE.
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HAYES LEMMERZ INTERNATIONAL, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 11, 1998
PROXY STATEMENT
This Proxy Statement is being furnished to the stockholders of Hayes
Lemmerz International, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at the 1998 Annual Meeting of Stockholders of the Company (the
"Meeting"), to be held at 10:00 a.m. (Eastern Standard Time) on June 11, 1998 at
The Ritz-Carlton, 300 Town Center Drive, Dearborn, Michigan 48126, and at any
and all adjournments or postponements thereof. At the Meeting, stockholders of
the Company are being asked to consider and vote upon: (i) the election of three
(3) Class 2 directors, each to serve for a term of three years; (ii) the
adoption of the Company's Annual Performance Plan (the "Annual Performance
Plan"); and (iii) a proposal to ratify the appointment of KPMG Peat Marwick LLP
("KPMG") as the Company's independent auditors for the fiscal year ending
January 31, 1999 ("fiscal 1998").
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of the Company on or about May 8, 1998.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Common Stock and the Nonvoting Common Stock
at the close of business on May 4, 1998 (the "Record Date") are entitled to
notice of the Meeting. Holders of Common Stock are entitled to vote on all
matters submitted to a vote of stockholders at the Meeting. Holders of Nonvoting
Common Stock are not entitled to vote on any of the foregoing matters submitted
to a vote of stockholders at the Meeting. At the close of business on the Record
Date, there were 27,441,819 shares of Common Stock and 2,649,026 shares of
Nonvoting Common Stock issued and outstanding. The presence, either in person or
by proxy, of the holders of a majority of the shares of Common Stock outstanding
on the Record Date is necessary to constitute a quorum at the Meeting. All
abstentions and broker non-votes will be counted as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
Meeting.
Each stockholder will be entitled to one vote, in person or by proxy, for
each share held in such stockholder's name as of the Record Date on any matter
submitted to a vote of stockholders at the Meeting upon which such shares are
entitled to vote.
The election of the Class 2 Directors will require the vote of a plurality
of the shares of Common Stock represented and voting in person or by proxy and
entitled to vote at the Meeting. Under applicable Delaware law, in tabulating
the vote, broker non-votes will be disregarded and will have no effect on the
outcome of such vote.
Approval of the proposals to adopt the Annual Performance Plan and to
ratify the appointment of KPMG as the Company's independent auditors for fiscal
1998 will each require the affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy and entitled to vote at
the Meeting. Under applicable Delaware law, in determining whether such
proposals have received the requisite number of affirmative votes, abstentions
and broker non-votes will be counted and will have the same effect as a vote
against the proposal, except that broker non-votes will not be counted as votes
cast with respect to any proposal as to which the broker does not have
discretionary authority and has not received voting instructions from the
beneficial owners and will have no effect on the outcome of that vote.
Shares of Common Stock represented by properly executed proxies received in
time for voting at the Meeting will, unless such proxy has previously been
revoked, be voted in accordance with the instructions indicated thereon. In the
absence of specific instructions to the contrary, the persons named in the
accompanying form of proxy intend to vote all properly executed proxies received
by them (i) FOR the
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election of the Board of Directors' nominees as Class 2 Directors, (ii) FOR the
adoption of the Annual Performance Plan, and (iii) FOR the ratification of KPMG
as the Company's independent auditors for fiscal 1998. No business other than as
set forth in the accompanying Notice of Annual Meeting is expected to come
before the Meeting, but should any other matter requiring a vote of stockholders
be properly brought before the Meeting, it is the intention of the persons named
in the enclosed form of proxy to vote such proxy in accordance with their best
judgment on such matters. For information with respect to advance notice
requirements applicable to stockholders who wish to propose any matter for
consideration or nominate any person for election as a director at an annual
meeting, see "Stockholder Proposals for 1999 Annual Meeting."
Execution of the enclosed proxy will not prevent a stockholder from
attending the Meeting and voting in person. Any proxy may be revoked at any time
prior to the exercise thereof by delivering in a timely manner a written
revocation or a new proxy bearing a later date to the Secretary of the Company,
at the principal executive offices of the Company, located at 38481 Huron River
Drive, Romulus, Michigan 48174, or by attending the Meeting and voting in
person. Attendance at the Meeting will not, however, in and of itself constitute
a revocation of a proxy.
This solicitation is being made by the Company. The cost of this
solicitation will be borne by the Company. Solicitation will be made by mail,
and may be made personally or by telephone by officers and other employees of
the Company who will not receive additional compensation for solicitation.
PROPOSAL 1
ELECTION OF CLASS 2 DIRECTORS
The Board of Directors of the Company is divided into three classes,
designated Class 1, Class 2 and Class 3, serving staggered three-year terms. The
Charter requires that such classes be as nearly equal in number as possible;
accordingly, Class 1 is currently composed of three directors and Classes 2 and
3 are each currently composed of four directors (although there is one vacancy
on the Board among the Class 2 Directors). At each annual meeting of
stockholders, successors to the class of directors whose terms expire at that
annual meeting will be elected by stockholders for a three-year term and until
their successors are duly elected and qualified. Any director elected to fill a
vacancy resulting from an increase in any class or from the removal from office,
death, disability, resignation or disqualification of a director or other cause
will hold office for the remaining term of the class in which such vacancy
existed.
In connection with the series of related transactions in July 1996 pursuant
to which the Company acquired Motor Wheel Corporation (the "Motor Wheel
Transactions"), Joseph Littlejohn & Levy Fund II, L.P. ("JLL Fund II"), TSG
Capital Fund II, L.P. ("TSG"), CIBC WG Argosy Merchant Fund 2, L.L.C.
("Argosy"), Nomura Holding America, Inc. ("Nomura") and Chase Equity Associates
L.P. ("Chase") (collectively, the "New Investors"), which collectively owned in
excess of 70% of the outstanding shares of the Company's Common Stock upon
completion of the Motor Wheel Transactions, entered into a stockholders
agreement with the Company (the "Stockholders Agreement"). Subsequently, on June
30, 1997, in connection with the Company's acquisition of Lemmerz Holding GmbH
(the "Lemmerz Acquisition"), the Company, the New Investors and the former
shareholders of Lemmerz (Marianne Lemmerz, Horst Kukwa-Lemmerz, Inge
Kruger-Pressl and Renate Kukwa-Lemmerz) (the "Lemmerz Shareholders") entered
into an Amended and Restated Stockholders Agreement (the "Amended Stockholders
Agreement") to provide, among other things, that the Board of Directors would be
increased to eleven members and that certain of the New Investors and all of the
Lemmerz Shareholders will vote their shares of Common Stock so that the Board of
Directors of the Company will be comprised of the Chief Executive Officer of the
Company (currently, Mr. Ranko Cucuz), four designees of JLL Fund II (currently,
Messrs. Timothy J. Clark, Paul S. Levy, Jeffrey Lightcap and David Ying), one
designee of TSG (currently, Mr. Cleveland A. Christophe), two designees of the
Lemmerz Shareholders (currently, Messrs. Horst Kukwa-Lemmerz and Wienand
Meilicke), and three individuals determined by the Board who are not affiliated
with the Company or any of the parties to the Amended Stockholders Agreement
other than one member that may be affiliated with Argosy (currently, Messrs.
Andrew R. Heyer and John S. Rodewig and one vacancy). The Amended Stockholders
Agreement
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also provides, among other things, for certain transfer restrictions and
registration rights for the stockholder parties thereto.
Except as described above, there are no arrangements or understandings
between any director and any other person pursuant to which he was selected as a
director.
The terms of the Company's current Class 2 Directors expire at the Meeting.
Each person nominated as a Class 2 Director, if elected, will serve a three-year
term expiring at the 2001 Annual Meeting or until his successor is elected and
qualified, or his earlier death, resignation or removal. Currently, the Class 2
directors are Ranko "Ron" Cucuz, Andrew R. Heyer and David Ying. The Board of
Directors has nominated all of such persons for re-election as Class 2
Directors. Each of the three nominees has consented to serve as a Director if
elected at the Meeting and, to the best knowledge of the Board of Directors,
each of such nominees is and will be able to serve if so elected. In the event
that any of such nominees should be unavailable to stand for election before the
Meeting, the persons named in the accompanying proxy intend to vote for such
other person, if any, as may be designated by the Board of Directors, in the
place of a nominee unable to serve.
The Class 2 Directors will be elected by a plurality of the votes cast in
the election of directors at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
COMPANY'S NOMINEES AS CLASS 2 DIRECTORS.
Set forth below is a brief biography of each nominee for election as a
Class 2 Director and of all other members of the Board of Directors who will
continue in office:
NOMINEES FOR ELECTION AS CLASS 2 DIRECTORS
TERM EXPIRING IN 2001
Ranko ("Ron") Cucuz, age 54, was elected Chairman of the Board of Directors
of the Company in July 1996, and has been Chief Executive Officer and a Director
of the Company since October 1992. He also serves as Chairman of the Management
Board of Hayes Lemmerz Autokola, a.s., the Company's subsidiary located in the
Czech Republic, as a director of Hayes Lemmerz, S.p.A. (Italy) and Hayes Lemmerz
Barcelona, S.A. (Spain), the Company's wholly owned subsidiaries, and serves as
Chairman of each of the Company's North American Aluminum Wheel Group
subsidiaries. Mr. Cucuz is also a director of National-Standard Company.
Andrew R. Heyer, age 40, has been a director of the Company since April
1997. Mr. Heyer has been a Managing Director and co-head of the High Yield Group
of CIBC Oppenheimer Corp. since August 1995. From February 1990 until July 1995,
Mr. Heyer was a founder and the Managing Director of The Argosy Group, an
investment banking firm. Mr. Heyer is Chairman of the Board of Hain Food Group,
Inc. and a director of Niagara Corporation, Heating Oil Partners, L.P. and
Argosy Heating Partners, Inc.
David Ying, age 43, has been a director of the Company since June 1997. Mr.
Ying has been a partner of Joseph Littlejohn & Levy ("JLL") (the managing
general partner of JLL Fund II) since June 1997. From January 1993 until May
1997, Mr. Ying was a Managing Director of Donaldson Lufkin & Jenrette, an
investment banking firm.
INCUMBENT CLASS 1 DIRECTORS
TERM EXPIRING IN 2000
Timothy J. Clark, age 34 has been a director of the Company since July
1996. Mr. Clark is a principal of JLL, which he joined in 1993. Prior to that
time, Mr. Clark was corporate planning manager of Edgcomb Metals Company and a
financial analyst at the Blackstone Group.
Horst Kukwa-Lemmerz, age 55, was appointed to his present position as Vice
Chairman of the Company's Board of Directors upon consummation of the Lemmerz
Acquisition in June 1997. Mr. Kukwa-Lemmerz served as CEO and President of
Lemmerz from June 1993 through June 1997 and as Personal
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Liable Partner, President and CEO of Lemmerz Werke KGaA from April 1977 until
June 1993. He also acted as Chairman of Lemmerz Espanola from 1980 through the
closing of the Lemmerz Acquisition (the "Closing") and as Vice President of
Borlem S.A. Empreendimentos Industriais, the Company's joint venture in Brazil,
from 1980 through the Closing.
Jeffrey Lightcap, age 39, has been a director of the Company since October
1997. Mr. Lightcap has been a partner of JLL since June 1997. From February 1993
until May 1997, Mr. Lightcap was employed by Merrill Lynch & Co., an investment
banking firm, first as a Director and then, commencing in 1994, as a Managing
Director.
INCUMBENT CLASS 3 DIRECTORS
TERM EXPIRING IN 1999
Cleveland A. Christophe, age 52, has been a director of the Company since
July 1996. Mr. Christophe has been a Managing Partner and major shareholder of
TSG Capital Group, L.L.C. since January 1995, and a director and the President
of TSG Associates II, Inc. since January 1995. He served as a principal, a
director and the Executive Vice President of TSG Ventures Inc. (formerly known
as Equico Capital Corporation), a private equity investment firm, from May 1992
until December 1997 and as Executive Vice President and Treasurer of TSG
Management Co., L.L.C., a private equity investment firm, since December 1997.
Mr. Christophe is also a director of Envirotest Systems Corporation, Midwest
Stamping, Inc., The Ashley Stewart Group, Ltd., PAR Radio Holdings, L.L.C. and
Vista Outdoor Advertising, Inc.
Paul S. Levy, age 50, has been a director of the Company since July 1996.
Mr. Levy has been a partner of JLL from its inception in 1988. Mr. Levy has
served as Chairman of the Board of Directors and Chief Executive Officer of
Lancer Industries, Inc. since July 1989. Mr. Levy is also a director of
Fairfield Manufacturing Co., Inc. and Peregrine Incorporated.
Wienand Meilicke, age 52, has been a director of the Company since the
consummation of the Lemmerz Acquisition in June 1997. Mr. Meilicke is an
attorney admitted to practice in Bonn, Germany and has, during the last five
years, been a partner of Meilicke & Partner, a law firm located in Bonn,
Germany. Mr. Meilicke is also a member of the supervisory boards of WABCO
Standard GmbH and Breuniger Beteilgungs GmbH.
John S. Rodewig, age 64, has been a director of the Company since December
1992. He served as President of Eaton Corporation and as its Chief Operating
Officer -- Vehicle Components from 1992 until his retirement on January 1, 1996.
Mr. Rodewig also serves as Chairman of the Board of Directors of Eaton Limited
(United Kingdom) and as a director of FKI plc.
DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors met eight times and took action by unanimous consent
eight times during the fiscal year ended January 31, 1998 ("fiscal 1997"). Of
the total number of Board meetings and meetings of Board committees held in
fiscal 1997, each current director attended at least 75% of such meetings held
during the period in which he served as a director or member of such committee.
The Board of Directors has established a standing Audit Committee, Compensation
Committee and Executive Committee, which are the only committees of the Board of
Directors. The membership and functions of the standing committees of the Board
of Directors are as follows:
EXECUTIVE COMMITTEE: The Executive Committee has responsibility for (i)
reviewing and monitoring on a regular basis the financial results of the Company
in comparison to the business plans and budgets approved by the Board of
Directors, (ii) determining and making recommendations on questions of general
policy with regard to the business of the Company, and (iii) performing and
exercising such other powers as may be lawfully delegated to the Executive
Committee by the Board of Directors, not in conflict with the specific powers
conferred by the Board of Directors upon any other committee. The current
members of the Executive Committee are Messrs. Cucuz, Kukwa-Lemmerz and Ying.
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AUDIT COMMITTEE: The Audit Committee has responsibility for (i) reviewing
the scope and results of the annual audit of the Company's financial statements
with the Company's independent auditors, (ii) reviewing the Company's financial
condition and results of operations with management and the Company's
independent auditors, (iii) considering the adequacy of the internal accounting
and control procedures of the Company, (iv) reviewing any non-audit services and
special engagements to be performed by the Company's independent auditors and
considering the effect of such performance on the auditors' independence, (v)
periodically reviewing the Company's environmental compliance and litigation
matters, (vi) reviewing the terms of all material transactions and arrangements
between the Company and its affiliates and (vii) recommending to the Board of
Directors the firm to be selected as independent auditor of the Company's
financial statements and performing services related to the completion of such
audit. The Audit Committee met four times during fiscal 1997. The current
members of the Audit Committee are Messrs. Christophe and Rodewig.
COMPENSATION COMMITTEE: The Compensation Committee has responsibility for
(i) reviewing and making recommendations to the Board of Directors as to
compensation and other terms and conditions of employment of officers of the
Company, (ii) administration of the Company's benefit plans for officers of the
Company, including any incentive compensation plans, stock option plans,
share-price related incentive plans, and long-term incentive plans, (iii) making
recommendations to the Board of Directors as to termination settlements for
officers of the Company, (iv) planning for succession of officers of the Company
and (v) reviewing requests by officers of the Company to join the board of
directors of any entity not affiliated with the Company. The Compensation
Committee met five times during fiscal 1997. The current members of the
Compensation Committee are Messrs. Christophe, Levy and Rodewig. In addition,
Messrs. Cucuz and Kukwa-Lemmerz serve as nonvoting members of the Compensation
Committee.
COMPENSATION OF DIRECTORS AND RELATED MATTERS
The Company's independent directors (those who are not Company employees
and are not affiliated with any of the New Investors or the Lemmerz
Shareholders) receive an annual retainer of $20,000, a fee of $1,000 for each
Board or committee meeting attended, a annual stock gift of 250 shares of Common
Stock and are reimbursed for expenses incurred in attending Board and/or
committee meetings. During fiscal 1997, Mr. Rodewig was the only director who
received such compensation. No other director of the Company receives any
retainer, fee, stock gift or reimbursement for his participation as a director
or member of a committee of the Board.
Mr. Kukwa-Lemmerz is a designee on the Board of Directors of the Lemmerz
Shareholders, who own an aggregate of five million shares of Common Stock. In
connection with the Lemmerz Acquisition, Mr. Kukwa-Lemmerz was elected as (i)
Vice Chairman of the Company's Board of Directors, (ii) a member of the
Executive Committee and a nonvoting member of the Compensation Committee, and
(iii) Chairman of the Board of the Company's subsidiary, HLI (Europe) Ltd. The
Company also entered into consulting agreements (the "Consulting Agreements")
with Mr. Kukwa-Lemmerz and an affiliate of Mr. Kukwa-Lemmerz pursuant to which,
among other things, (i) Mr. Kukwa-Lemmerz retired from all positions held with
Lemmerz and its subsidiaries, (ii) the Company agreed to pay Mr. Kukwa-Lemmerz
and his affiliate an aggregate of $500,000 annually during the five-year period
for which consulting services will be provided, and (iii) the Company granted
Mr. Kukwa-Lemmerz and his affiliate options to purchase an aggregate of 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 June 30, 1998 and each June
30th thereafter during the term of the Consulting Agreements.
PROPOSAL 2
APPROVAL OF THE COMPANY'S
ANNUAL PERFORMANCE PLAN
On April 20, 1998, the Board of Directors approved the Hayes Lemmerz
International, Inc. Annual Performance Plan (the "Annual Performance Plan"),
subject to approval by the stockholders at the Annual Meeting.
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Internal Revenue Code Section 162(m), which was added to the Internal
Revenue Code by the Omnibus Budget Reconciliation Act of 1993, limits the amount
of compensation a corporation may deduct as a business expense. That limit,
which applies to the chief executive officer and the other four most highly
compensated officers, is $1 million per individual per year. This limitation,
however, does not apply to performance-based compensation that is tied to
objective performance standards which have been established by a compensation
committee of the Board of Directors consisting solely of outside directors and
the material terms of which have been approved by the stockholders. The Annual
Performance Plan has been designed by the Compensation Committee to meet these
criteria.
The description of the Annual Performance Plan which follows is not
intended to be complete and is qualified in its entirety by the actual terms of
the Annual Performance Plan, a copy of which is attached hereto as Exhibit A.
Purpose of the Annual Performance Plan. The Annual Performance Plan is
intended to afford an incentive to selected employees of the Company and its
subsidiaries and affiliates by utilizing a direct financial incentive to
encourage such employees to achieve results that lead to a more effective
operation of the business of the Company and its business units ("Business
Units") and to accomplish this purpose with full regard to the Company's
stockholders and earning power.
Participants in the Annual Performance Plan. Participants in the Annual
Performance Plan will be selected employees of the Company, and its present and
future subsidiaries and affiliates, who will be designated and/or approved by
the Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee"). The Compensation Committee takes into account such
factors as it deems relevant in connection with determining the participants in
the Annual Performance Plan, including without limitation those employees who
are expected to have an impact of the current and future financial success of
the Company. Approximately 230 employees currently participate in the Annual
Performance Plan.
Administration of the Annual Performance Plan. The Annual Performance Plan
is administered by the Compensation Committee. All voting members of the
Compensation Committee must be "non-employee directors" within the meaning of
Rule 16b-3 under the Exchange Act, and "outside directors" within the meaning of
Section 162(m) of the Internal Revenue Code. The Compensation Committee has full
authority to establish the rules and regulations relating to the Annual
Performance Plan, to interpret the Annual Performance Plan and those rules and
regulations, and to take all other actions necessary or appropriate for the
proper administration of the Annual Performance Plan.
Performance Criteria. The Annual Performance Plan provides competitive
variable pay opportunities to participants based upon the achievement of targets
established and/or approved by the Compensation Committee in advance relating to
the Company's earnings before interest and taxes ("EBIT"), the Company's cash
flow and the achievement of certain personal objectives by the participant. In
addition, with respect to those participants who are responsible for the
performance of the particular Business Units of the Company, their bonuses are
also based upon the achievement of certain EBIT and cash flow targets for their
respective Business Units. Thus, annual incentive compensation is determined by
the degree to which the Company and, for certain participants, the Business
Units, achieve the annual EBIT and cash flow targets and by the degree to which
each individual participant achieves his personal objectives, all of which
targets and objectives are established and/or approved in advance by the
Compensation Committee. The aggregate bonus amount is established as a
percentage of base salary, with each component of the Annual Performance Plan
comprising a portion of such percentage. The normative amount to be received as
a bonus if the EBIT and cash flow targets and personal objectives are met,
expressed as a percentage of base salary, is established based upon levels of
responsibility for Company or Business Unit performance. This percentage
increases as the level of responsibility increases, which currently ranges from
10% for employees at the entry level of the Annual Performance Plan to 60% for
Business Unit Presidents and the Company's Chief Financial Officer (except for
the Chief Executive Officer only, for whom the percentage is 100%).
If the EBIT and cash flow targets established in advance are met and the
personal objectives established in advance are achieved, 100% of the normative
bonus percentage is paid. If certain minimum EBIT and cash flow targets are met
(set at 75% of each such target), but either of such amounts is less than the
targeted
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amounts, or if the individual performance objectives are not fully realized, the
amount paid for each component of the annual performance plan which is not fully
achieved will be proportionally less than the normative amount. Similarly, if
either the EBIT or cash flow performance exceeds the EBIT or cash flow targets,
respectively, the amount of the bonus attributable to such component of the
annual performance plan will be proportionally more than the normative amount,
up to a aggregate maximum of twice the normative amount. Notwithstanding the
foregoing, if the minimum cash flow target is not met, no bonus is paid, even if
the EBIT target and personal objectives are achieved.
The cost to the Company of the Annual Performance Plan and the amounts to
be paid to participants cannot be determined at this time because payout of
awards is based upon the Company's future financial performance and the number
of participants approved by the Compensation Committee.
Approval of the Annual Performance Plan requires the affirmative vote of
the holders of a majority of the shares of Common Stock present at the Meeting
in person or by proxy and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE ANNUAL PERFORMANCE PLAN.
PROPOSAL 3
APPOINTMENT OF AUDITORS
Subject to stockholder ratification, the Board of Directors has reappointed
the firm of KPMG as independent auditors of the Company for fiscal 1998. KPMG
has served as the Company's independent auditors since 1992.
A representative of KPMG is expected to be present at the Meeting and will
have an opportunity to make a statement if the representative desires to do so
and to respond to questions by stockholders.
Approval of the proposal to ratify the appointment of KPMG requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present at the Meeting in person or by proxy and entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KPMG AS INDEPENDENT AUDITORS OF THE COMPANY FOR FISCAL
1998.
8
<PAGE> 11
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors submits the following
report on executive compensation for fiscal 1997:
This report provides an overview of the Company's compensation
philosophy and executive compensation programs. It also discusses
compensation-related decisions in general, and specifically those relating
to the Company's Chief Executive Officer, for fiscal 1997.
THE ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is responsible
for all matters relating to the compensation of the executive officers of
the Company. It carries out these responsibilities by reviewing all
executive compensation and benefit plans, administering the Company's stock
option and other long-term incentive plans and overseeing succession
planning. To comply with regulations of the Securities and Exchange
Commission and to separate members of management more completely from
compensation decisions, only non-management directors are eligible to serve
as voting members of the Compensation Committee (Messrs. Cucuz and
Kukwa-Lemmerz serve as non-voting members of the Compensation Committee).
OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAMS
The Company's executive compensation programs have been designed to
support the Company's goal of enhancing stockholder value by providing
incentives that will attract, reward and retain highly qualified executives
critical to the long-term success of the Company. The Company's policy is
to establish overall compensation at median competitive levels. Median
competitive levels are determined by an independent consulting firm (in
fiscal 1997, such consulting firm was Mercer & Associates), utilizing
several widely used published compensation surveys. These surveys included
several hundred companies, but the methodology under which compensation was
determined focused on compensation level data from approximately 25
companies in the automotive supply industry (the "Comparison Group").
However, as a result of the relationship between executive compensation and
corporate performance, the Company's executives may be paid more or less in
any particular year than the executives of companies included in the
Comparison Group, depending on the Company's performance. The companies in
the Comparison Group are not the same as those in the peer group utilized
in preparing the Peer Group Index (see "Stock Performance Graph") because
the Committee's independent consultant uses surveys of publicly traded and
privately owed companies in the automotive industry to determine median
compensation levels, whereas the Peer Group Index has been chosen by the
Company to reflect publicly traded automotive parts and accessories
suppliers. The Compensation Committee believes that it would not be
practicable to prepare a compensation survey of the companies included only
in the Peer Group Index.
Following research and assistance from the independent consultant, the
Compensation Committee has determined to structure the Company's short-term
and long-term incentive compensation plans to emphasize corporate financial
performance which the Committee believes will enhance stockholder value. To
implement this approach, commencing in fiscal 1993, the Company has
utilized a compensation plan for its executive officers which comprises an
annual performance plan for its executive officers, with earned short-term
incentive awards being paid out in cash (subject to maximum annual payouts)
plus a stock-based incentive compensation program under the Company's stock
option plans.
AN OVERVIEW OF THE COMPANY'S EXECUTIVE COMPENSATION PLAN
The Company's executive compensation programs have three components:
base salary, annual incentive and long-term incentive. A discussion of the
Committee's decisions regarding executive compensation and an overview of
its various elements are presented below.
9
<PAGE> 12
BASE SALARY PROGRAM
The Company's base salary program is intended to provide base salary
ranges that reflect the median salary levels of the Comparison Group. Base
salaries are periodically adjusted to reflect each executive's performance
and contribution to the overall financial results of the Company, the
executive's length of service with the Company and changes in median salary
levels of the Comparison Group. The Committee, based upon research and
advice provided by its independent consultant, annually reviews and
compares each executive's salary level against comparable executive's
positions in the Comparison Group.
ANNUAL PERFORMANCE PLAN
The fiscal 1997 annual performance plan provided competitive variable
pay opportunities to executive officers based upon the achievement of
established targets based on the Company's earnings before interest and
taxes ("EBIT"), the Company's cash flow and the achievement of certain
personal objectives by the executive. In addition, with respect to those
officers who are responsible for the performance of the particular business
units of the Company, their bonuses are also based upon the achievement of
certain EBIT and cash flow targets for their respective business units.
Thus, annual incentive compensation is determined by the degree to which
the Company and, for certain officers, the business units, achieve the
annual EBIT and cash flow targets established by the Compensation Committee
and by the degree to which each individual officer achieves his personal
objectives. The aggregate bonus amount is established as a percentage of
base salary, which ranged from 40% to 60% (except for the Chief Executive
Officer only, for whom the percentage was 100%) in fiscal 1997, with each
component of the annual performance plan comprising a portion of such
percentage. The normative amount to be received as a bonus if the EBIT and
cash flow targets and personal objectives are met, expressed as a
percentage of base salary, is established based upon levels of
responsibility for Company or business unit performance. This percentage
increases as the level of responsibility increases.
If the EBIT and cash flow targets are met and the personal objectives
are achieved, 100% of the normative bonus percentage is paid. If certain
minimum EBIT and cash flow targets are met (set at 75% of each such
target), but either of such amounts is less than the targeted amounts, or
if the individual performance objectives are not fully realized, the amount
paid for each component of the annual performance plan which is not fully
achieved will be proportionally less than the normative amount. Similarly,
if either the EBIT or cash flow performance exceeds the EBIT or cash flow
targets, respectively, the amount of the bonus attributable to such
component of the annual performance plan will be proportionally more than
the normative amount, up to a aggregate maximum of twice the normative
amount. Notwithstanding the foregoing, if the minimum cash flow target is
not met, no bonus is paid, even if the EBIT target and personal objectives
are achieved. The performance-based component may result in higher than
competitive compensation for superior EBIT and cash flow performance or
lower than competitive compensation for performance not reaching the EBIT
or cash flow targets.
LONG-TERM INCENTIVE PLAN
In the fiscal year ended January 31, 1997 ("fiscal 1996"), in
connection with the Motor Wheel Transactions, the Compensation Committee
approved stock option grants to the executive officers of the Company under
the 1996 Stock Option Plan (the "1996 Plan"), which option grants were
significantly larger than those granted to the executive officers in prior
years. The options granted under the 1996 Plan are divided into tranches
(each, a "Tranche") of an equal number of options. The options in each such
Tranche vest (i.e., become exercisable by the optionee) only when both a
time condition and a stock performance condition tied to the price of the
Company's Common Stock have been met. These time and performance conditions
for such vesting are intended to ensure that the stockholders of the
Company receive a significant return on their investment before the
optionees realize a financial gain therefrom.
The Compensation Committee believes that the option grants under the
1996 Plan, including the terms thereof which cause such options to vest
progressively as certain price and time conditions are met,
10
<PAGE> 13
will align the interests of the Company's executive officers with those of
the stockholders of the Company by creating a long term incentive for such
officers to achieve corporate performance which also enhances stockholder
value. As a result, and because of the size and significance of the option
grants made in fiscal 1996, the Compensation Committee elected not to grant
any additional stock options in fiscal 1997 to the Company's executive
officers (except to those executive officers who became employed by the
Company in fiscal 1997 as a result of the Lemmerz Acquisition).
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code of 1986, as amended,
effective for years beginning after 1993, generally limits to $1,000,000
the amounts deductible by a public company in respect of annual
compensation paid to a "covered employee" (i.e., the chief executive
officer and the four other most highly compensated executive officers of
the company), including, unless an exception applies, compensation
otherwise deductible upon the exercise of compensatory options. Qualifying
performance-based compensation and compensation, including stock options,
that meets other exceptions to the general limitation will not be subject
to the limitation. In order to enable all compensation payable to each of
its "covered employees" to continue to be deductible under Section 162(m),
the Compensation Committee recommends the adoption of the Annual
Performance Plan in accordance with Proposal 2 above.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Fiscal 1997 was a year of continued progress and growth for the
Company, most notably the completion of the Lemmerz Acquisition and the
integration into the Company of the operations of Lemmerz and Motor Wheel.
Based upon the contributions made by Mr. Cucuz to these matters, as well as
certain other considerations, the Compensation Committee approved an
increase in Mr. Cucuz's base salary for fiscal 1997 from $425,000 to
$550,000 per year. In addition, the Compensation Committee continued the
rate of normative bonus compensation for Mr. Cucuz under the Annual
Performance Plan of 100% of his base salary, which is a higher rate than
for the other executive officers.
/s/ Paul S. Levy, Chairman
/s/ Cleveland A. Christophe
/s/ John S. Rodewig
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Messrs. Christophe, Levy and Rodewig. In addition, Messrs. Cucuz and
Kukwa-Lemmerz are non-voting members of the Compensation Committee. On June 30,
1997, the Company consummated the Lemmerz Acquisition in which the Lemmerz
Shareholders, including Mr. Kukwa-Lemmerz, received $200 million in cash and
five million shares of Series A Preferred Stock (which has subsequently
converted into five million shares of Common Stock). In addition, in connection
with the Lemmerz Acquisition, the Company entered into the Consulting Agreements
with Mr. Kukwa-Lemmerz and an affiliate of Mr. Kukwa-Lemmerz. See "Compensation
of Directors and Related Matters."
11
<PAGE> 14
SUMMARY OF COMPENSATION FOR FISCAL 1997
The following summary compensation table sets forth certain information
concerning compensation for services in all capacities awarded to, earned by or
paid to the Company's Chief Executive Officer and the four other most highly
compensated executive officers (the "Named Executive Officers") for fiscal 1997,
fiscal 1996 and fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------- ---------- -------
OTHER ANNUAL SECURITIES LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING PAYOUTS COMPENSATION
NAME YEAR ($) ($) ($) OPTIONS ($) ($)(1)
---- ------ ------ ----- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cucuz, Ranko............. 1997 497,918 774,150 -- -- -- 106,941
Chief Executive Officer 1996 389,502 366,076
1995 322,000 --
Dallera, Giancarlo(2).... 1997 240,833 220,000 -- -- -- --
Vice President -- 1996 228,000 137,902
President, European 1995 215,000 --
Aluminum Wheels
Kolakowski, Ronald L..... 1997 190,002 169,200 -- -- -- 30,367
Vice President -- 1996 163,012 108,641
President, North 1995 124,476 29,003
American Aluminum
Wheels
Sandberg, Daniel M....... 1997 204,585 153,450 -- -- -- 23,163
Vice President -- 1996 168,000 88,240
International Operations, 1995 147,000 --
General Counsel and
Secretary
Shovers, William D....... 1997 239,583 208,000 -- -- -- 36,647
Vice President -- 1996 208,667 129,896
Finance and 1995 190,000 --
Chief Financial Officer
</TABLE>
- -------------------------
(1) For each such officer (except Mr. Dallera), consists of matching
contributions accrued under the Company's Retirement Savings Plan (the
"401(k) Plan") and contributions under the Company's non-tax qualified
supplemental employee retirement plan for the benefit of the Company's
executive officers based in the United States.
(2) Mr. Dallera's salary is paid in Italian lira and his bonus is paid in United
States dollars. The U.S. dollar amount for Mr. Dallera's salary was
calculated using the exchange rate of 1 lira = 0.00064 dollars.
12
<PAGE> 15
STOCK OPTIONS GRANTED IN FISCAL 1997
There were no grants of stock options or stock appreciation rights during
fiscal 1997 to any of the Named Executive Officers.
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND JANUARY 31, 1998 OPTION VALUE(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
JANUARY 31, IN-THE-MONEY OPTIONS
1998 AT JANUARY 31, 1998
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Cucuz, Ranko............. -- -- 301,969/638,761 $2,634,952/$5,030,243
Dallera, Giancarlo....... -- -- 89,634/127,651 $ 871,082/$1,006,039
Kolakowski, Ronald L..... -- -- 54,334 /127,751 $ 607,880/$1,006,039
Sandberg, Daniel M....... -- -- 46,278/106,462 $ 447,779/$ 838,388
Shovers, William D....... -- -- 86,334/127,751 $ 813,368/$1,006,039
</TABLE>
- -------------------------
(1) No stock appreciation rights have been granted in connection with any stock
options.
PENSION PLAN
The Company maintains a defined benefit pension plan covering all persons
who were United States salaried employees of the Company and its subsidiaries on
or before December 31, 1994. Pension income at normal retirement age is
calculated by averaging the participant's highest consecutive 60 months of
compensation out of the final 120 months of compensation and providing 1% of the
first $7,800 thereof and 1 1/3% of the remainder for each of the first 30 years
of service, and 1/2% and 2/3% of such compensation, respectively, for each of
the next 10 years of service. Benefits under the Company's pension plan are
limited by restrictions imposed by the Internal Revenue Code of 1986, as amended
(the "Code"). Prior to the Company's initial public offering in December 1992
(the "IPO"), the eligible United States salaried employees of the Company
participated in a pension plan sponsored by K-H Corporation (K-H"), which at the
time was the parent corporation of the Company. In connection with the IPO, K-H
transferred the assets and liabilities of its plan relating to participants
employed in the Company's wheel business to the Company's pension plan, in
accordance with the requirements of the Employee Retirement Income Security Act
of 1974, as amended. Effective January 1, 1995, (1) certain provisions of the
plan that had frozen final average compensation for purposes of the plan as of
December 31, 1991, were rescinded, (2) no new participants may enter the plan
and (3) for purposes of calculating benefits payable under the plan, no
additional service may be credited under the plan; however, service continues to
be credited under the plan for vesting purposes and to determine eligibility for
retirement benefits under the plan. In addition, increases in compensation will
be recognized under the plan for purposes of determining pensions.
13
<PAGE> 16
The following table illustrates the annual pension benefits payable from
the Company's defined benefit pension plan to a person in the specified earnings
and years of service classifications at normal retirement date.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
COVERED ---------------------------------------------------------
COMPENSATION 10 15 20 25 30 35
------------ -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 6,407 $ 9,610 $12,813 $16,017 $19,220 $20,822
$100,000 $13,073 $19,610 $26,147 $32,683 $39,220 $42,488
$150,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
$200,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
$250,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
$300,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
$350,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
$400,000 $19,740 $29,610 $39,480 $49,350 $59,220 $64,155
</TABLE>
Base salary is the only compensation upon which benefits under this plan are
determined.
All of the individuals named in the Summary Compensation Table, except Mr.
Dallera, are participants in the pension plan described above, and each had
covered compensation and credited years of service (which amounts were frozen as
of December 31, 1994) as set forth below:
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
---- ------------ --------
<S> <C> <C>
Cucuz, Ranko................................................ $150,000 4
Kolakowski, Ronald L........................................ $150,000 2
Sandberg, Daniel M.......................................... $150,000 2
Shovers, William D.......................................... $150,000 2
</TABLE>
The covered compensation amounts set forth in the above table differ from the
amounts set forth in the Summary Compensation Table because of limitations
contained in the Code on compensation permitted to be used for pension plan
purposes.
The Pension Plan Table shows amounts that are payable in the form of a
straight-life annuity; such amounts are not subject to offset for Social
Security or any other payments.
Effective January 1, 1995, the Company adopted a defined contribution
pension plan for its United States salaried employees, under which, the Company
contributes to a retirement account for each eligible employee 5% of his
compensation up to the amount of the Social Security wage base ($65,400 in 1997)
plus 8% of his compensation over the amount of the Social Security wage base.
Compensation, for purposes of this plan, includes salary, bonus and commissions,
but is limited to a maximum of $160,000 under provisions of the Code. The
retirement account is invested at the direction and risk of the employee, who is
entitled, subject to certain vesting requirements, to the contents of his
account when his employment terminates at retirement or otherwise. The Company
does not assure the employee of the amount of his retirement benefit or the
value of this account at any time.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS.
The Company, through its subsidiary, Hayes Lemmerz, S.p.A. ("HLI Italy"),
entered into an employment agreement with Mr. Dallera, dated February 1, 1993,
as amended on June 6, 1996, that provides for his employment as General Manager
of HLI Italy at an initial base salary which automatically increases annually
following increases in an index commonly used to determine the cost of living
increases for senior managers in Italy. For fiscal 1997, Mr. Dallera's base
salary was $240,833 (translated from Italian Lire at the exchange rate of 1 Lira
= 0.00064 US Dollars). Under this agreement, Mr. Dallera is entitled to all HLI
Italy employee benefits; his annual bonus, however, is paid under the Annual
Performance Plan and based upon the
14
<PAGE> 17
criteria established for the other executive officers of the Company. The
agreement expires by its terms on December 31, 2003, or in the event of Mr.
Dallera's death.
On September 25, 1997, the Company, through its subsidiary, Hayes Lemmerz
Holding GmbH ("HLH"), entered into a managing director's service agreement with
Klaus Junger, the Company's Vice President -- President, European Fabricated
Wheels, that provides for his employment as Managing Director of HLH at an
initial base salary which is to be reviewed and adjusted annually based upon
market conditions and the performance of the Company, HLH and Mr. Junger. For
fiscal 1997, Mr. Junger's annualized base salary was $202,248 (translated from
German Deutschemarks at the exchange rate of 1 Deutschemark = .5618 US Dollars).
Under this agreement, Mr. Junger is entitled to all HLH employee benefits; his
annual bonus, however, is paid under the Annual Performance Plan and based upon
the criteria established for the other executive officers of the Company. The
agreement may be terminated at any time by either party upon six months prior
written notice. Upon such termination, Mr. Junger has agreed not to compete with
the Company for one year in exchange for the payment by the Company of an amount
equal to one year of his then current base salary.
The Company entered into separate agreements (the "Company Severance
Agreements") with nine executive officers and three other employees of the
Company (the "Covered Individuals"), including Messrs. Cucuz, Dallera,
Kolakowski, Sandberg and Shovers on or about November 6, 1995, pursuant to
which, upon a change of control of the Company (as defined therein), each
Covered Individual, including Covered Individuals whose employment with the
Company is terminated in anticipation of a change of control, is entitled to an
immediate payment of all earned but unpaid compensation, including any unpaid
bonuses for previous fiscal years and a pro rata bonus payment (based on Highest
Compensation (as defined below) and the greater of normative bonus percentage
and estimated projected bonus percentage) for the current fiscal year under any
bonus plan for which he is then eligible.
In addition, the Company Severance Agreements provide that each Covered
Individual whose employment with the Company is terminated (i) by the Company
upon a change of control or in anticipation of a change of control, (ii) by the
Company, other than for cause or as a result of death or disability, within
three years following a change of control, or (iii) voluntarily by such Covered
Individual, within three years following a change of control, because of a
change in the material terms of his employment (such as compensation or
responsibilities), is entitled to a lump sum cash payment, payable within 30
days of such termination, in the aggregate amount of: (a) for all Covered
Individuals, earned but unpaid compensation, less any payment previously made in
respect of such amount, (b) for all Covered Individuals, the product of the
individual's Highest Compensation, his highest normative bonus percentage in the
immediately preceding three fiscal years and the fraction of the current fiscal
year expired at the time of such termination, less any payments previously made
in respect of such amounts upon such change of control, (c) with respect to
eight Covered Individuals (including the five currently most highly compensated
executive officers) three times, with respect to one Covered Individual two
times and with respect to three Covered Individuals one times the sum of (x) the
individual's Highest Compensation and (y) the product of his Highest
Compensation and his highest normative bonus percentage in the immediately
preceding three fiscal years, (d) 20% of Highest Compensation with respect to
three Covered Individuals, 40% of Highest Compensation with respect to one
Covered Individual and with respect to eight Covered Individuals (including the
five currently most highly compensated executive officers), the greater of 60%
of the individual's Highest Compensation and $100,000 and (e) for all Covered
Individuals, an amount equal to any accrued but unvested account balances as of
the date of termination and the actuarial present value of any accrued but
unvested benefits other than account balances that as a result of termination
are forfeited under any qualified or nonqualified Company retirement or pension
plan. The Company Severance Agreements also provide that each such Covered
Individual is also entitled to have the Company (i) continue for at least three
years for eight Covered Individuals (including the five currently most highly
compensated executive officers), at least two years for one Covered Individual
and at least one year for three Covered Individuals, all welfare benefit
programs, such as medical and life, provided by the Company and its affiliated
companies, (ii) for eight Covered Individuals (including the five currently most
highly compensated executive officers), timely pay or provide any other amounts,
including reimbursable expenses incurred prior to the date of termination, or
benefits required or permitted under any plan, program,
15
<PAGE> 18
policy, practice, contract or agreement of the Company and its affiliated
companies (subject to limitations), (iii) provide the title to the individual's
Company automobile for eight Covered Individuals (including the five currently
most highly compensated executive officers), or make a cash payment equal to the
value of such automobile in certain cases and (iv) for all Covered Individuals,
provide key executive level outplacement services.
The Company Severance Agreements define Highest Compensation as twelve
times a Covered Individual's highest monthly cash compensation (not including
any bonus), whether current or deferred, at any time during the period
commencing on the first day of the calendar month containing the 365th day prior
to the day a change of control occurs and ending on the date of the termination
of such Covered Individual's employment with the Company.
The Company Severance Agreements also contain provisions regarding
termination of employment upon disability, death, and other certain
circumstances. In addition, if any payments or benefits paid to the Covered
Individuals under the Company Severance Agreements or any other plan,
arrangement or agreement with the Company are subject to the federal excise tax
on excess parachute payments or any similar state or local tax, or any interest
or penalties are incurred with respect thereto, the Company will pay to the
Covered Individuals an additional amount so that the net amount retained by the
Covered Individuals after deduction or payment of those taxes will be as if no
such tax, interest or penalty were imposed.
CERTAIN RELATED TRANSACTIONS
Mr. Dallera is the President of Cromodora Wheels S.p.A. ("Cromodora").
Prior to June 6, 1996, HLI Italy was a 30% stockholder in Cromodora and Mr.
Dallera was a 35% stockholder in Cromodora. On June 6, 1996, HLI Italy sold
one-third of its equity interest in Cromodora to Cromodora and two-thirds of its
equity interest in Cromodora to Mr. Dallera. The sale price for the Company's
equity interest in Cromodora was an aggregate of approximately $1,437,000, which
amount was offset by the Company's agreement to pay Cromodora and Mr. Dallera
approximately $562,000 for a five year non-competition agreement with the
Company, resulting in net sale proceeds to the Company of approximately
$875,000. This sale price was established based upon an appraisal of Cromodora
performed by KPMG, the Company's independent public accountants. In connection
with this transaction, Mr. Dallera agreed to extend the term of his employment
agreement with the Company so that it will not expire until December 31, 2003
(previously, the expiration date was April 30, 1998).
The Company manufactures and sells castings to Cromodora on a cost-plus
basis, licenses certain aluminum wheel technology from Cromodora and provides
certain marketing services to Cromodora relating to such technology. The Company
does not believe that these arrangements have a material effect on the Company's
operations or financial condition. In addition, for certain tax reasons,
Cromodora is the owner of 0.01% of Lemmerz.
16
<PAGE> 19
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock for the period from July 2, 1996 (the effective date of
the Motor Wheel Transactions) through January 31, 1998 with (i) the cumulative
total return on The NASDAQ National Market System market index through December
17, 1997 (the date on which the Company's Common Stock ceased trading on the
NASDAQ National Market System) and The New York Stock Exchange ("NYSE') market
index from and after December 18, 1997 (the date on which the Company's Common
Stock commenced trading on the NYSE) ("Market Index") and (ii) the cumulative
total return of an industry peer group composed of automotive parts and
accessories suppliers ("Peer Group Index") for the same period. In accordance
with the rules of the Commission, the graph assumes an investment of $100 on
July 2, 1996 in each of the Common Stock, the stocks comprising the Market Index
and the stocks comprising the Peer Group Index, and assumes that all dividends
were reinvested.
<TABLE>
<CAPTION>
HAYES PEER
Measurement Period LEMMERTZ GROUP MARKET
(Fiscal Year Covered) INT'L INDEX INDEX
<S> <C> <C> <C>
07/02/96 100 100 100
07/31/96 97.94 94.99 91.57
10/31/96 109.47 101.13 101.85
01/31/97 133.33 111.09 115.82
04/30/97 151.44 113.43 105.79
07/31/97 204.12 137.51 134.00
10/31/97 222.22 142.58 134.40
01/30/98 157.23 135.71 136.90
</TABLE>
Data respecting the following companies were utilized in calculating the
Peer Group Index in the table above:
Aftermarket Tech Corp.
Amerigon Inc.
Arvin Industries Inc.
Asha Corp.
Autoliv Inc.
Barnes Group Inc.
Bonded Motors Inc.
Borg Warner Automotive
Breed Technologies Inc.
Collins Industries Inc.
Colonels International Inc.
Cragar Industries Inc.
Dana Corp.
Defiance Inc.
Deflecta-Shield Corp.
Delco Remy International, Inc.
Desc S.A. De Cv Adr
Detroit Diesel Corp
Donaldson Co. Inc.
Durakon Industries Inc.
Eaton Corp.
Echlin Inc.
Edelbrock Corp.
Excel Industries Inc.
Federal-Mogul Corp.
Gentex Corp.
Glas-Aire Industries Grp
Hastings Manufacturing
Hilite Industries Inc.
Impco Technologies, Inc.
Jason Inc.
JPE Inc.
Kroll-O'Gara Company
Lund International Holdings
Magna International
Mascotech Inc.
Memtec Ltd Adr
Meritor Automotive Inc.
Modine Manufacturing Co.
Monro Muffler Brake Inc.
Motorcar Parts & Access
Noble International Ltd.
Orbital Engine Cp Ltd.
R&B Inc.
Safety Components International
Schawk Inc.
Simpson Industries Inc.
Smith Ao Corp.
Sparton Corp.
SPX Corp.
SRS Labs Inc.
Standard Motor Products
Standard Products Co.
Stoneridge, Inc.
Superior Industries International
Tesma International
Top Source Technologies
Transpro Inc.
TRW Inc.
Turbodyne Technologies
U.S. Automotive Manufacturing Inc.
Universal Manufacturing
Unova Inc.
Valley Forge Corp.
Westcast Industries Inc.
Westinghouse Air Brake
Williams Controls Inc.
Wynn's International Inc.
17
<PAGE> 20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and certain officers to file
with the Commission and the NYSE initial reports of ownership and reports of
changes in ownership of the Company's Common Stock. Copies of all such Section
16(a) reports are required to be furnished to the Company. These filing
requirements also apply to holders of more than 10% of the Company's Common
Stock. To the Company's knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to the Company during fiscal 1997, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, all Section 16(a) filing requirements applicable to the Company's
officers and directors and beneficial owners of more than 10% of the Common
Stock were complied with on a timely basis.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, the outstanding Common Stock was held of record by
102 stockholders. The following table sets forth, as of the Record Date, certain
information concerning the beneficial ownership of Common Stock by each
stockholder who is known by the Company (based on filings with the Commission)
to own beneficially in excess of 5% of the outstanding Common Stock. Except as
otherwise indicated, each stockholder listed below has (i) sole voting power and
investment power with respect to its shares of Common Stock, except to the
extent that authority is shared by spouses under applicable law, and (ii) record
and beneficial ownership with respect to its shares of Common Stock.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
OWNERSHIP OF OWNERSHIP OF
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS SHARES OF (EXCLUDING (INCLUDING
OF BENEFICIAL OWNER COMMON STOCK WARRANTS(1) WARRANTS)(2) WARRANTS)(3)
------------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Joseph Littlejohn & Levy Fund II,
L.P. .................................. 9,634,176 1,825,376 32.0% 35.0%
450 Lexington Avenue
Suite 3350
New York, New York 10017
Marianne Lemmerz......................... 3,000,002 -- 10.0% 9.2%
Ladestrasse
D-53639 Konigswinter
Federal Republic of Germany
TSG Capital Fund II, L.P. ............... 2,812,500 67,500 9.3% 8.8%
177 Broad Street
12th Floor
Stamford, Connecticut 06901
CIBC WG Argosy Merchant.................. 2,500,000(4) 60,000 5.9% 5.4%
Fund 2, L.L.C.
425 Lexington Avenue, Third Floor
New York, New York 10017
Horst Kukwa-Lemmerz...................... 1,775,000(5) -- 5.9% 5.4%
Ladestrasse
D-53639 Konigswinter
Federal Republic of Germany
</TABLE>
- -------------------------
(1) Each Warrant allows the holder thereof to acquire one share of Common Stock
for a purchase price of $24.00. The Warrants are exercisable from July 2,
2000 through July 2, 2003.
18
<PAGE> 21
(2) Excludes options to purchase Common Stock held by certain officers and
directors of the Company and also excludes Warrants to purchase 2,600,000
shares of Common Stock.
(3) Excludes options to purchase Common Stock held by certain officers and
directors of the Company, but includes Warrants to purchase 2,600,000 shares
of Common Stock.
(4) All of the shares of Common Stock owned by Argosy are Nonvoting Common
Stock. Does not include 713,000 shares of Common Stock (2.3% of the Common
Stock) owned by CIBC Oppenheimer Corp., an affiliate of Argosy; Argosy
disclaims beneficial ownership of all such shares.
(5) Consists of 1,750,000 shares of Common Stock owned by Mr. Kukwa-Lemmerz and
25,000 shares of Common Stock owned by Renate Kukwa-Lemmerz, his wife. Such
shares represent 5.9% of the outstanding Common Stock. In addition, Mr.
Kukwa-Lemmerz is the trustee of a trust established by Marianne Lemmerz for
the benefit of her grandchildren, which trust owns 199,998 shares (less than
1%) of Common Stock. Mr. Kukwa-Lemmerz disclaims beneficial ownership of all
shares of Common Stock owned by his wife and such trust.
SECURITY OWNERSHIP OF MANAGEMENT AND THE BOARD OF DIRECTORS
The following table sets forth, as of the Record Date, without giving
effect to the Warrants, the beneficial ownership (as defined by the Commission)
of the Company's Common Stock by each of the Directors and the Named Executive
Officers of the Company and by the Directors and executive officers of the
Company as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES(1)(2)
------------------------ ----------------------
<S> <C>
Cucuz, Ranko............................................. 351,804
Dallera, Giancarlo....................................... 110,698
Kolakowski, Ronald L..................................... 54,394
Sandberg, Daniel M....................................... 50,568
Shovers, William D....................................... 107,388
Christophe, Cleveland A.(3).............................. --
Clark, Timothy J.(4)..................................... --
Heyer, Andrew R.(5)...................................... --
Kukwa-Lemmerz, Horst(6).................................. 1,775,000
Levy, Paul S.(4)......................................... 9,634,176
Lightcap, Jeffrey(4)..................................... 9,634,176
Meilicke, Wienand........................................ 200
Rodewig, John S.......................................... 60
Ying, David Y.(4)........................................ 9,644,936
All directors and officers as a group (18 persons)....... 12,282,716
</TABLE>
- -------------------------
(1) Includes the following shares of Common Stock issuable upon the exercise of
options granted under the Company's 1992 Stock Incentive Plan (the "1992
Plan") and the 1996 Plan which are exercisable within 60 days of the Record
Date (assuming that no additional options vest during that period) and
shares of Common Stock purchased under the Company's 401(k) Plan:
<TABLE>
<CAPTION>
ISSUABLE UPON ISSUABLE UPON
EXERCISE OF EXERCISE OF
OPTIONS OPTIONS PURCHASED
GRANTED UNDER GRANTED UNDER UNDER
NAME 1992 PLAN 1996 PLAN 401(K) PLAN
---- ------------- ------------- -----------
<S> <C> <C> <C>
Cucuz, Ranko......................................... 180,300 121,669 565
Dallera, Giancarlo................................... 65,300 24,334 --
Kolakowski, Ronald L................................. 30,000 24,334 --
Sandberg, Daniel M................................... 26,000 20,278 190
Shovers, William D................................... 62,000 24,334 --
All Directors and Executive Officers as a Group...... 452,100 291,499 4,207
</TABLE>
19
<PAGE> 22
(2) In each case, except as to Messrs. Kukwa-Lemmerz, Levy, Lightcap and Ying
and "All Directors and Executive Officers as a Group," less than 1% of the
outstanding shares of Common Stock.
(3) Mr. Christophe is associated with TSG, which owns 9.3% of the Common Stock
of the Company; he disclaims any beneficial ownership of such Common Stock.
See "Item 12. Security Ownership of Certain Beneficial Owners and
Management -- Ownership of Certain Beneficial Owners."
(4) Messrs. Clark, Levy, Lightcap and Ying are all associated with JLL Fund II,
which owns 32.0% of the Common Stock of the Company. Mr. Clark disclaims any
beneficial ownership of such Common Stock. Messrs. Levy, Lightcap and Ying
are general partners of JLL Associates II, L.P., the general partner of JLL
Fund II, and, as a result, each of them may be deemed to beneficially own
all of the shares of Common Stock of JLL Fund II. See "Item 12. Security
Ownership of Certain Beneficial Owners and Management -- Ownership of
Certain Beneficial Owners." In addition, Mr. Ying directly owns an
additional 10,760 shares of Common Stock.
(5) Mr. Heyer is associated with Argosy, which owns 8.3% of the Common Stock of
the Company (all of which shares are Nonvoting Common Stock), and CIBC
Oppenheimer Corp., which owns 2.2% of the Common Stock of the Company; he
disclaims any beneficial ownership of all such Common Stock. See "Item 12.
Security Ownership of Certain Beneficial Owners and Management -- Ownership
of Certain Beneficial Owners."
(6) Consists of 1,750,000 shares of Common Stock owned by Mr. Kukwa-Lemmerz and
25,000 shares of Common Stock owned by Renate Kukwa-Lemmerz, his wife. Such
shares represent 5.9% of the outstanding Common Stock. In addition, Mr.
Kukwa-Lemmerz is the trustee of a trust established by Marianne Lemmerz for
the benefit of her grandchildren, which trust owns 199,998 shares of Common
Stock. Mr. Kukwa-Lemmerz disclaims beneficial ownership of all shares of
Common Stock owned by his wife and such trust.
As of the Record Date, all Directors and executive officers of the Company
as a group may be deemed beneficially to own approximately 39.8% of the
outstanding Common Stock.
STOCKHOLDER PROPOSALS FOR THE 1999 MEETING
In accordance with Rule 14a-8 under the Exchange Act, any stockholder
proposals intended to be presented at the 1999 Annual Meeting of Stockholders
must be received by the Company no later than January 15, 1999 in order to be
considered for inclusion in the Proxy Statement and form of proxy relating to
that meeting.
Section 3 of Article III of the Company's By-Laws provides that, in order
for a stockholder to nominate a person for election to the Board of Directors at
an annual meeting of the Company, such stockholder must have given timely prior
written notice to the Secretary of the Company of such stockholders's intention
to make such nomination before the meeting. To be timely, notice must be
received by the Company not less than fifty days nor more than seventy-five days
prior to the date of the annual meeting; provided, however, that in the event
less than sixty-five days' notice or prior public disclosure of the date of the
meeting is given to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the fifteenth day following
the date on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs. Such notice must contain certain information about the person whom
the stockholder proposes to nominate and the stockholder giving the notice,
including the name, age, residence and business address, occupation, and class
and number of shares of Common Stock owned beneficially or of record by the
proposed nominee, and the name, record address and class and number of shares of
Common Stock beneficially owned by such stockholder. In addition, such notice
must contain any other information related to the proposed nominee or such
stockholder that would be required to be disclosed in a proxy statement.
In addition, Section 2 of Article II of the Company's By-Laws provides
that, in order for a stockholder to propose any matter for consideration at an
annual meeting of the Company, such stockholder must have given timely prior
written notice to the Secretary of the Company of such stockholder's intention
to bring such business before the meeting. To be timely, notice must be received
by the Company not less than fifty days nor
20
<PAGE> 23
more than seventy-five days prior to the date of the annual meeting; provided,
however, that in the event less than sixty-five days' notice or prior public
disclosure of the date of the meeting is given to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs. Such notice must contain
certain information about such business and the stockholder who proposes to
bring the business before the meeting, including the name and record address of
such stockholder, a brief description of the business the stockholder proposes
to bring before the meeting, the reasons for conducting such business at the
annual meeting, the class and number of shares of the Company beneficially or of
record owned by such stockholder and any material interest of such stockholder
in the business so proposed.
OTHER MATTERS
As of this date, the Board of Directors does not know of any business to be
brought before the Meeting other than as specified above. However, if any other
matters properly come before the Meeting, it is the intention of the persons
named as proxies in the enclosed form of proxy to vote such proxy in accordance
with their judgment on such matters.
SOLICITATION OF PROXIES
The Company intends to request banks and brokers who hold shares in their
names or custody, or in the name of nominees for others, to forward copies of
the proxy material to those persons for whom they hold such shares and to
request authority for the execution of proxies.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. The reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and are available at the Commission's Regional Offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies of such materials may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov that contains reports, proxy statements and other
information. In addition, such materials may be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10012.
21
<PAGE> 24
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference pursuant to the Exchange Act
the Company's Annual Report on Form 10-K for the fiscal year ended January 31,
1998 as filed with the Commission.
All documents and reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement
and before the Meeting shall be deemed to be incorporated by reference into this
Proxy Statement and to be a part hereof from the dates of filing of such
documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed document deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Proxy Statement is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such documents (unless such exhibits are specifically incorporated by reference
into such documents). Requests should be directed to the Company, 38481 Huron
River Drive, Romulus, Michigan 48174, Attention: Director of Investor Relations,
telephone (734) 942-8716.
By order of the Board of Directors,
Daniel M. Sandberg
Daniel M. Sandberg
Secretary
Romulus, Michigan
May 8, 1998
22
<PAGE> 25
EXHIBIT A
HAYES LEMMERZ INTERNATIONAL, INC.
ANNUAL PERFORMANCE PLAN
SECTION 1
NAME
The name of the plan is the Hayes Lemmerz International, Inc. Annual
Performance Plan (the "Plan").
SECTION 2
EFFECTIVE DATE OF PLAN
The effective date of the plan is July 1, 1996. The fiscal year of the Plan
("Plan Year") and the measurement period shall be the seven consecutive month
period ending on January 31, 1997 and each twelve month period thereafter(1).
The Plan will continue indefinitely until terminated pursuant to Section 12.
SECTION 3
PURPOSE
The purpose of the Plan is to compensate officers and key employees by
utilizing a direct financial incentive to encourage such officers and key
employees to achieve results that lead to a more effective operation of the
business of Hayes Lemmerz International, Inc. (the "Company") and its business
units ("Business Units") and to accomplish this purpose with full regard to
shareholders and the Company's earning power.
SECTION 4
ADMINISTRATION
The Plan is administered by the Compensation Committee (the "Committee") of
the Company's Board of Directors (the "Board"). In applying and interpreting the
provisions of the Plan, the decisions of the Committee, pursuant to the
authority granted by the Board, shall be final.
SECTION 5
ELIGIBILITY FOR PARTICIPATION
Participants in the Plan shall be key employees of the Company who are
recommended for participation and whose participation is approved by the
Committee at its discretion. Eligibility requirements for participation by key
employees shall be in accordance with rules established by the Committee and
shall be effective as of the date of approval by the Committee. At the beginning
of each Plan Year, the Human Resources department of the Company will present a
list of all employees eligible for participation in the Plan by classification
(CEO, Executive Group, Group I, II, III or IV) to the Committee. Nomination to
the list is at the sole discretion of the applicable Business Unit or corporate
function within the guidelines established by the Company's Executive Committee
(Management). Management will review this list and make any changes it deems
appropriate. The list will then be approved by the Committee.
An employee joining the Company during the year or who is promoted to
replace a Participant shall, upon approval of Management, participate in the
Plan. Any other new employee that Management determines should be a Participant
will be presented to the Committee at the next available meeting of the
Committee.
- ---------------
(1) European Operations will be based on BU Cash Flow and BUEBIT results for the
period beginning January 1 and ending December 31.
A-1
<PAGE> 26
Participation will be approved or denied effective with the date requested by
Management. There will be no additions to the eligibility list after November 30
of said Plan Year.
SECTION 6
DEFINITIONS
Earnings From Operations ("EBIT") -- the earnings attributable to the
operations of the Company as shown in the audited financial statements of the
Company as filed with the Securities and Exchange Commission in the Company's
Annual Report on form 10-K as approved by the Company's auditors. Earnings from
operations include local foreign exchange gains and losses, however, it does not
include any foreign exchange gains or losses generated from the translation of
financial results into U.S. dollars at the consolidated level of the Company.
Business Unit Earnings From Operations ("BUEBIT") -- the earnings
attributable to the operations of the business unit to which the employee is
assigned. BUEBIT for each business unit is approved by the Committee may be
adjusted by the Committee in consideration of certain nonrecurring charges or
gains.
EBIT Normative Bonus Goal -- is the EBIT level established annually by the
Committee necessary to receive the normative rate of an individual award whose
calculation is EBIT dependent. Such EBIT Normative Bonus Goals are established
at the Company or Business Unit Level.
EBIT Bonus Threshold -- is the amount of EBIT established by the Committee
that is necessary to receive any portion of an individual bonus award whose
calculation is EBIT dependent. Such EBIT Threshold may be calculated at the
Company or Business Unit Level. The EBIT Bonus Threshold has been established at
75% of the EBIT Normative Bonus Goal.
Cash Flow -- Cash flow is defined to be the cash provided from (or used by)
operating activities plus or minus cash provided from (or used by) investing
activities consistent with the provisions of the Financial Accounting Standards
Board Statement No. 95 "Statement of Cash Flows."
Business Unit Cash Flow ("BU Cash Flow") -- the cash provided from (or used
by) operating activities plus or minus cash provided from (or used by) investing
activities of the business unit to which the employee is assigned. BU Cash Flow
for each business unit is approved by the Committee may be adjusted by the
Committee as appropriate.
Cash Flow Normative Bonus Goal -- is the amount of Cash Flow established
annually by the Committee necessary to receive the normative rate of an
individual award whose calculation is Cash Flow dependent. Such Cash Flow
Normative Bonus Goals are established at the Company or Business Unit Level.
Cash Flow Bonus Threshold -- is the level of Cash Flow necessary to receive
any portion of an individual bonus award whose calculation is Cash Flow
dependent. Such Cash Flow Threshold may be calculated at the Company or Business
Unit Level. The Cash Flow Bonus Threshold has been established at the Cash Flow
Normative Bonus Goal less 25% of the EBIT Normative Bonus Goa1.(2)
Participant -- is an individual nominated by management for participation
and approved by the Committee.
Pay -- is the sum of the monthly base salary rate times each month of
participation. It does not include prior period bonuses, signing bonuses,
Presidential Awards, moving expenses, car allowances, or foreign service
allowances.
Personal Objectives -- are specific goals or accomplishments set by
Management for an individual Participant.
- ---------------
(2) Cash Flow Normative Goals may be negative or zero (0), in which case the
resulting changes in Cash Flow expressed as percentages would be
meaningless. Therefore, changes in Cash Flow are divided by the appropriate
Business Unit or Corporate EBIT Normative Goals to establish the percentage
that the achieved Cash Flow is above or below the Cash Flow Normative Bonus
Goal.
A-2
<PAGE> 27
Change in Control -- A Change in Control shall be deemed to have occurred
if Management, prior to a change in Management due to one of the following
events, deems that a Change in Control has occurred. Such events include:
a) an acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) of 14(d)(2) of the Securities Exchange Act of
1934, as amended);
b) the reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
Business Combination); or
c) the change of the majority of the Board of Directors of the
Company.
SECTION 7
NORMATIVE BONUS PERCENTAGES AND NOTIFICATION OF STATUS
The Company maintains six bonus classifications under the Plan. They are
identified as CEO, Executive Group, Group I, Group II, Group III and Group IV.
The CEO normative bonus rate is 100%; the Executive Group normative bonus rate
is 50 to 60% as determined by the Committee at the beginning of each Plan Year;
the Group I normative bonus rate is 35% to 40%(3); the Group II normative bonus
rate is 21%; the Group III normative bonus rate is 13%(4); and the Group IV
normative bonus rate is 10%. The Committee may change these bonus percentages at
the beginning of each Plan Year.
The Committee shall establish the Cash Flow and EBIT Normative Bonus Goals
for both the Corporate and Business Unit portions of the bonus award. Such Goals
shall be based on the Company's Budget, as adjusted by the Committee.
Participants will be notified as to the classification in which they will
participate for the coming Plan Year. Such notification will be made as soon as
possible in the new Plan Year but in no case later than April 1. This
notification will also include the EBIT and Cash Flow Normative Goals for the
upcoming year, the extent to which the participant's bonus is based on Cash
Flow, EBIT or a combination thereof and, if applicable, the EBIT and Cash Flow
Bonus Thresholds. Personal Objectives for the Plan Year are communicated at this
time as well.
SECTION 8
CALCULATION OF CASH FLOW AND EBIT AND PERSONAL OBJECTIVES
At the end of each Plan Year, the Company shall generate a report detailing
the calculation of Cash Flow and EBIT for each Business Unit as well as the
total Corporation. Such report shall reflect the findings of the external
auditors and shall be approved by the Committee. In addition, management shall
review the attainment of the Personal Objectives with the participant. The Chief
Executive Officer's (CEO's) Personal Objectives results are reviewed by the
Committee. The CEO reviews the Personal Objective results of the Business Unit
Presidents, Staff Vice Presidents, and their direct reports. All remaining
Participant Personal Objectives are reviewed and approved by the appropriate
Business Unit President or Staff Vice President.
These amounts shall be used in determining each participant's bonus award.
SECTION 9
INDIVIDUAL AWARDS
- ---------------
(3) Plant Manager normative bonus rate is 40%; all other Group I participants
have a normative bonus rate of 35%.
(4) Effective February 1, 1998, no new participants will enter Group III.
A-3
<PAGE> 28
An individual's annual award is calculated using the following allocations:
CEO, CFO 40% Corporate EBIT, 40% Corporate Cash Flow, 20% Personal
Objectives.
Business Units 20% Corporate EBIT, 20% Business Unit EBIT, 20% Corporate
Cash Flow, 20% Business Unit Cash Flow, 20% Personal
Objectives.
Corporate Staff 40% Corporate EBIT, 40% Corporate Cash Flow, 20% Personal
Objectives.(4)
Each component shall be reduced by 1% for each percentage that the
component's result is below the Normative Bonus Goal. If a component's results
achieved are below the threshold for that component, that component's percentage
shall be zero.
Each component shall be increased by 2% for each percentage that the
component's results exceed the Normative Bonus Goal. If a component's results
achieved are greater than 200%, that component's percentage shall equal 200%.
Each component percentage of the annual award is multiplied by:
a) the percentage achieved (above or below) the Normative Bonus Goal for
that component;
b) the normative bonus rate for the Participant's classification; and
c) Pay.
The total of product for each component is the Participant's annual award.
Participants that change classification or Business Unit during the Plan
Year shall have their annual award calculated separately for each period.
SECTION 10
TIME AND METHOD OF PAYMENT
Bonus payments shall be made in cash. Bonus payout will be made when
possible following the audit of financial results for the fiscal year to which
bonuses apply and in no case shall be paid later than the filing of the
Company's Form 10-K. Payments shall be made to Participants who are employed by
the Company on February 28 following the end of the Plan Year. Prior to payment,
the CEO will obtain from either the internal or external auditors (at his sole
discretion) a letter of compliance stating their concurrence that payments to be
made under this Plan are in accordance with its provisions.
SECTION 11
SEPARATIONS
In case of separation from the Company for any reason (excluding death,
disability or retirement) the separated Participant shall immediately cease to
be a Participant and no bonus shall be payable. However, if the Participant is
separated due to death, disability or retirement, the Participant shall receive
incentive compensation covering the period of time that he was employed and was
a participant in the Plan during the fiscal year in which the death, disability
or retirement occurs. Such payments shall be made at the time and in the manner
they would have been made had the death, disability or retirement not occurred.
The Participant shall cease to be a participant in the Plan Year following
separation, death, or the commencement of disability or retirement.
- ---------------
(4) Prior to the fiscal year commencing February 1, 1998, corporate staff
bonuses were based on 30% Corporate EBIT, 30% Corporate Cash Flow, and 40%
Personal Objectives.
A-4
<PAGE> 29
SECTION 12
REVISION OR DISCONTINUANCE OF THE PLAN
This Plan shall not create any rights of future participation therein of
any employee nor limit in any way the right of the Committee to modify or to
rescind the Plan in whole or in part at any time. No person eligible to receive
any payments shall have any right to pledge, assign, or otherwise dispose of any
unpaid portion of such payments.
In the event of a Change in Control of the Company, any unpaid amounts in
the Plan become due and payable immediately. In addition, a Stub Year bonus,
paid at the Normative rate shall be paid. Such Stub Year bonus shall be
calculated as if the Participant had achieved 100% of the Normative Bonus Goals
(EBIT, BUEBIT, Cash Flow, BU Cash Flow, and Personal Objectives). Pay used for
calculating such Stub Year Bonus shall be the Pay earned through the pay period
coinciding with or next following the date of the Change in Control.
A-5
<PAGE> 30
[HAYES LEMMERZ LOGO]
<PAGE> 31
HAYES LEMMERZ INTERNATIONAL, INC.
38481 HURON RIVER DRIVE
ROMULUS, MICHIGAN 48174
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON THURSDAY, JUNE 11, 1998
The undersigned holder of shares of Common Stock of Hayes Lemmerz
International, Inc. hereby appoints Daniel M. Sandberg and Patrick B. Carey,
and each of them, with full power of substitution, as proxies to vote all
shares owned by the undersigned at the Annual Meeting of Stockholders to be
held at the Ritz-Carlton, 300 Town Center Drive, Dearborn, Michigan on any
substitute or substitutes, who shall be present and act at the meeting (or if
only one shall be present and act, then that one) shall have all the powers of
said proxies hereunder.
Please mark, date and sign the proxy and return it promptly in the accompanying
business reply envelope, which requires no postage if mailed in the United
States. If you plan to attend the meeting, please so indicate in the space
provided on the reverse side.
This Proxy, if signed and returned, will be voted as specified on the reverse
side. If no specification is made, your shares will be voted FOR approval of
all matters listed on the reverse side of this Proxy Card.
IMPORTANT: PLEASE MARK AND SIGN ON THE REVERSE SIDE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ALL MATTERS LISTED ON
THE REVERSE SIDE OF THIS PROXY CARD.
(SEE REVERSE SIDE)
<PAGE> 32
<TABLE>
<S><C>
[X] Please mark your
vote as in this
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL ITEMS 1 THROUGH 3.
FOR WITHHELD
1. To elect the following three (3) nominees as Class 2 directors of the
Company, each to serve for a term of three years: RANKO "RON" CUCUZ,
ANDREW R. HEYER AND DAVID YING. (AUTHORITY TO VOTE FOR ANY OF THE [ ] [ ]
NOMINEES LISTED ABOVE MAY BE WITHHELD BY STRIKING OUT THE NAME OF SUCH
NOMINEE(S))
FOR AGAINST ABSTAIN
2. To approve the adoption of the Company's Annual Performance Plan; [ ] [ ] [ ]
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's [ ] [ ] [ ]
independent auditors for the fiscal year ending January 31, 1999; and
4. To transact such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders to be held on Thursday, June 11, 1998 and the related Proxy
Statement.
Please sign exactly as name(s) appear hereon. Joint owners should each sign.
Executors, administrators, trustees, etc., should give full title as such. If
signer is a corporation, please sign full corporate name by duly authorized officer.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY whether or not you expect to
attend the meeting. You may nevertheless vote in person if you do attend.
SIGNATURE(S)____________________________________________________________________________ DATE _________________
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